Berkeley Hillside Properties Co. v. Kelly

TYLER, P. J.

This action was brought under the provisions of section 349 of the Civil Code to collect by personal judgment the amount of a stock assessment.

The complaint alleges that the certificate was made out in the name of A. S. Kelly, and was fully paid for, though never delivered to him; that Kelly died and after his death the stock came into the hands of his executor; that Elizabeth P. Kelly was the sole devisee and legatee of the estate of A. S. Kelly and upon distribution thereof the executor of the estate delivered to her and she signed a receipt for all the property so distributed, including the stock in question; that at all times since said distribution defendant has been and still is the owner and holder thereof; that she has never demanded transfer of the certificate on the books of the corporation and the stock still stands of record in the name of the original owner A. S. Kelly. The complaint proceeding then recites that on March 16, 1922, and about two years after defendant acquired the stock in the manner mentioned, plaintiff corporation was and for more than six months prior thereto has been indebted in a certain sum and was on said day unable to pay its said indebtedness, or any portion thereof, in the ordinary course of business, for which reason it levied an assessment of ten dollars per share on each of the shares of its capital stock. The complaint contains recitals of the steps taken under the statute relating to

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the levy, and the election by the plaintiff to proceed by-suit rather than by sale of the stock to collect the amount. No question is raised as to the regularity of the proceedings leading up to the assessment.

A demurrer was interposed to the complaint on the ground that it did not state a cause of action. The trial court sustained the demurrer upon the theory that as the stock had never been- transferred to defendant she could not become liable on a personal judgment for the amount of the assessment. We are of the opinion that the demurrer was properly sustained.

Only those who have entered into a contractual relationship with a corporation are personally liable under an assessment. Such relationship and the liability incident thereto are limited and confined to those who are registered on the books of the corporation as stockholders. The relation between stockholders and corporation is one of contract, and can arise only when a party has consented to become a stockholder.