Morrell v. Caldow

KNIGHT, J.

Defendants were stockholders in a corporation which, on October 16, 1922, executed and delivered to a payee therein named eight promissory notes in the sum of $1,000 each. In due course these notes were indorsed to plaintiff. The corporation became defunct, and plaintiff thereupon commenced this action to recover from these defendants as such stockholders their proportionate share of the indebtedness created by said notes. Judgment was given in favor of defendants, and plaintiff has appealed.

As frequently held, the liability of each stockholder in a corporation is to be measured by the proportion which the amount of his stock bears to the whole of the subscribed

[161]

capital stock of the corporation

(Thomas

v.

Wentworth Hotel Co.,

158 Cal. 275 [139 Am. St. Rep. 120, 110 Pac. 942]); and in an action to enforce the liability of the stockholders it is incumbent upon the plaintiff therein to prove the whole amount of the outstanding subscribed stock on the date the indebtedness was incurred, so as to enable the court to determine the proportionate liability of each stockholder

Knowles

v.

Sandercock,

107 Cal. 629 [40 Pac. 1047]). In the present case the trial court found that the total subscribed stock was not. 542 shares, as alleged in the complaint, and further found that “no competent evidence was admitted at the trial showing such number of subscribed and outstanding shares” at the time said notes were executed, and that consequently “the court had before it no evidence from which it could find the number of such subscribed and outstanding shares at the time alleged by plaintiff.” The sole question presented by this appeal is whether, as appellant contends, the evidence adduced at the trial is legally sufficient to warrant this court in nullifying said finding.

It appears that at the time of the general break-up of the corporation’s affairs the records which the law requires a corporation shall keep with reference to its capital stock were lost, and consequently plaintiff was obliged to resort to other evidence to prove the amount of the outstanding subscribed stock at the time said indebtedness was incurred. In this regard it was sought to have admitted in evidence the entries made in a book kept by said corporation, which covered various transactions and accounts of this and other corporations; but according to the testimony of the former secretary of said corporation, who was the only witness called to identify and explain said book, “the moneys of all these corporations were hodgepodged together and. all kept in one account”; and the witness further testified that said book was known to him to be incorrect, was not full and complete, and did not purport to set forth a correct account of the outstanding stock. The trial court therefore ruled that the book was not competent to prove the fact at issue. Plaintiff then tried to introduce in evidence a so-called financial statement issued by said corporation under its corporate seal purporting to show the assets and liabilities of said corporation as of November 15, 1922, but said statement was rejected by .the court because