Miller & Lux, Inc. v. Katz

California Court of Appeal May 11, 1909 No. Civ. No. 577.Published

Before: Kerrigan

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Holding. An estate is liable as a stockholder for corporate indebtedness incurred while the estate holds title to the stock, and such liability arising after the decedent's death does not require presentation as a formal claim against the estate.

Issues

Whether an estate is liable for corporate indebtedness incurred while the estate holds title to stock, despite the executrix lacking physical possession or knowledge of the stock.
Whether a liability arising after the death of the testator must be presented as a claim against the estate for allowance.
Whether an action to enforce such liability against an executrix requires the joinder of the heirs.

Disposition. affirmed

Quotations verified verbatim against the opinion

“the estate is liable as a stockholder.”

“The liability here arose after the testator’s death, and therefore did not constitute a claim against the estate which was required to be presented for allowance.”

“That the liability in its nature is contractual is well established in this state.”

Synopsis

APPEAL from a judgment of the Superior Court of the City and County of San Francisco, and from an order denying a new trial. John Hunt, Judge.

The facts are stated in the opinion of the court.

KERRIGAN, J.

This action is brought against the executrix of the estate of a deceased person to enforce a stockholder’s liability upon an indebtedness incurred by the corporation during the ownership by the estate of shares of stock in such corporation. Plaintiff obtained judgment, and defendant appeals from the judgment and from an order denying her motion for a new trial.

The facts of the case are, briefly, that one Alfred Katz, the appellant’s testator, at the time of his death in 1900, was the owner of one-fourth of the capital stock of Katz

Sons, a corporation. About five years thereafter, to wit, in April, 1906, and while the estate of Alfred Katz was still the owner of said shares of stock, the corporation Katz

Sons became indebted to the plaintiff to the amount of $15,309.99; and it is to recover one-fourth of this sum (the proportion for which the estate is alleged to be liable) that the action is brought.

It is objected by the executrix that she never had the actual or physical possession of the stock, and never exercised any act of ownership over it, and did not even know of its existence until after the creation of the indebtedness sued upon herein. It is undisputed, however, that decedent owned the stock at the time of his death; and we think, under the provisions of section 322, Civil Code, and upon general principles of law, it became the property of the estate, and that the estate is liable as a stockholder.

In this jurisdiction the law has recognized estates as stockholders in several ways. Thus in the ease of

Market St. Ry. Co.

Hellman,

109 Cal. 571, [42 Pac. 225], it is said that “In ease of the death of a stockholder, his administrator becomes, by operation of law, vested with the legal title to the stock, and is entitled to vote it at all elections without a transfer upon the stock book.”

In the case of

Ashton

Zeila Min. Co.,

134 Cal. 408, [66 Pac. 494], the executors were permitted to recover dividends on stock not registered in their names, and the court there

Miller & Lux, Inc. v. Katz

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Synopsis

KERRIGAN, J.

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