Title Insurance & Trust Co. v. Torrance

EDMONDS, J.,

pro tem.

This action is upon stockholders’ liability. Recovery is sought upon an indebtedness incurred by Calangeles Corporation for money borrowed by it and evidenced by a promissory note secured by a deed of trust on real estate. The defense set up by the stockholders is that at the time this action was filed the real estate had not been sold under the provisions of the deed of trust. In other words, the defendants insist that the stockholders of a corporation are only liable upon a secured indebtedness for any deficiency remaining after the security is exhausted. The defendants also alleged a payment of $4,500 on the indebtedness.

Judgment of the trial court was entered in favor of plaintiff against each defendant for one-eighth of the original principal sum of the note and interest thereon. The appeal therefrom is upon the judgment roll alone.

The case was tried upon a stipulation of facts. It appears that plaintiff loaned $30,000 to Calangeles Corporation, in consideration of which the latter gave its promissory note secured by a deed of trust. At the time of this transaction the debtor corporation had eight stockholders, each of whom owned ten shares of its capital stock. When this action was commenced all of the principal of the note and interest thereon for almost two years was unpaid and in default. Before the suit was filed plaintiff had executed its notice of default and election to sell the real property under the provisions of the deed of trust and had placed this notice of record. However, no sale of the property had been made by the trustee.

The payment of $4,500 was made by three of the stockholders to the plaintiff after the complaint was filed and" in full satisfaction of their liability as stockholders upon the note in question.

In

Knowles

v.

Sandercock,

107 Cal. 629 [40 Pac. 1047], it was held that the fact that a note given by a corporation is

[418]

secured by a mortgage, which has not been foreclosed is no defense in. an action against a stockholder for his proportionate part of the debt of the corporation. The court said: “He is not injured nor is he benefited by the fact that the corporation has given security.”