National City Bank v. Chubb

California Court of Appeal

National City Bank v. Chubb

199 P. 537, 52 Cal. App. 655, 1921 Cal. App. LEXIS 202

CourtCalifornia Court of Appeal

DecidedMay 19, 1921

DocketCiv. No. 3276.

StatusPublished

Cited by3 cases

This text of 199 P. 537 (National City Bank v. Chubb) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

National City Bank v. Chubb, 199 P. 537, 52 Cal. App. 655, 1921 Cal. App. LEXIS 202 (Cal. Ct. App. 1921).

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Opinion

CRAIG, J.

This is an action to enforce the liability of certain stockholders in the Mont P. Chubb Drug Company. A general demurrer was interposed by the defendant, Mont P. Chubb, which was overruled. Thereupon an answer was filed. On the trial, the defendant introduced no *656 evidence. The appeal is based upon the judgment-roll alone.

The action is upon two promissory notes. The complaint alleges that the plaintiff purchased them for a valuable consideration and before maturity, and it states the date upon which the notes were made but contains no allegation as to the date on which the original indebtedness was incurred. There is ample authority for the proposition that in an action under section 322 of the Civil Code, it is necessary to allege the date upon which the debt or liability was incurred. (J. I. Case Plow Works v. Montgomery, 115 Cal. 380, [47 Pac. 108]; Winona Wagon Co. v. Bull, 108 Cal. 1, [40 Pac. 1077]; Hunt v. Ward, 99 Cal. 612, [37 Am. St. Rep. 87, 34 Pac. 335].) Section 322 of the Civil Code provides that the “liability of each stockholder is determined by the amount of stock or shares owned by him at the time the debt or liability was incurred.” In Hunt v. Ward, the action was on a promissory note and was brought by the payee. The date of the making of the note was alleged but not the date on which the original indebtedness was incurred. The court there pointed out that a promissory note might not represent the original debt or liability which might have been contracted before the defendant became a stockholder. In both of the other cases, supra (the respective notes were sued upon), the decisions are based upon Himt v. Ward, supra, and its reasoning.

[1] In the case at bar, the plaintiff is not the payee but a tona fide holder in due course. Appellant insists that therefore, as to him, the note, being negotiable, is the primary obligation. This might be true as against the corporation, although it is not necessary for us to decide that point here because the action is one’ against the defendants as stockholders. As such, they are not parties to the notes executed by the corporation and have no responsibility thereon. {Winona Wagon Co. v. Bull, supra.) Their liability exists only by reason of the statute. In order that the complaint may state a cause of action against the defendants under the statute, it must allege that the defendants were members of the corporation when the debt was incurred, for the stockholder’s liability is upon the debt and not upon the promise of the corporation as evidenced by the notes.

*657 The judgment is reversed, and the superior court instructed to sustain the demurrer with permission to plaintiff to amend the complaint.

Finlayson, P. J., and Works, J., concurred.

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CRAIG, J.

This is an action to enforce the liability of certain stockholders in the Mont P. Chubb Drug Company. A general demurrer was interposed by the defendant, Mont P. Chubb, which was overruled. Thereupon an answer was filed. On the trial, the defendant introduced no *656 evidence. The appeal is based upon the judgment-roll alone.

The action is upon two promissory notes. The complaint alleges that the plaintiff purchased them for a valuable consideration and before maturity, and it states the date upon which the notes were made but contains no allegation as to the date on which the original indebtedness was incurred. There is ample authority for the proposition that in an action under section 322 of the Civil Code, it is necessary to allege the date upon which the debt or liability was incurred. (J. I. Case Plow Works v. Montgomery, 115 Cal. 380, [47 Pac. 108]; Winona Wagon Co. v. Bull, 108 Cal. 1, [40 Pac. 1077]; Hunt v. Ward, 99 Cal. 612, [37 Am. St. Rep. 87, 34 Pac. 335].) Section 322 of the Civil Code provides that the “liability of each stockholder is determined by the amount of stock or shares owned by him at the time the debt or liability was incurred.” In Hunt v. Ward, the action was on a promissory note and was brought by the payee. The date of the making of the note was alleged but not the date on which the original indebtedness was incurred. The court there pointed out that a promissory note might not represent the original debt or liability which might have been contracted before the defendant became a stockholder. In both of the other cases, supra (the respective notes were sued upon), the decisions are based upon Himt v. Ward, supra, and its reasoning.

[1] In the case at bar, the plaintiff is not the payee but a tona fide holder in due course. Appellant insists that therefore, as to him, the note, being negotiable, is the primary obligation. This might be true as against the corporation, although it is not necessary for us to decide that point here because the action is one’ against the defendants as stockholders. As such, they are not parties to the notes executed by the corporation and have no responsibility thereon. {Winona Wagon Co. v. Bull, supra.) Their liability exists only by reason of the statute. In order that the complaint may state a cause of action against the defendants under the statute, it must allege that the defendants were members of the corporation when the debt was incurred, for the stockholder’s liability is upon the debt and not upon the promise of the corporation as evidenced by the notes.

*657 The judgment is reversed, and the superior court instructed to sustain the demurrer with permission to plaintiff to amend the complaint.

Finlayson, P. J., and Works, J., concurred.

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199 P. 537, 52 Cal. App. 655, 1921 Cal. App. LEXIS 202, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-city-bank-v-chubb-calctapp-1921.

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