Tatum v. Rosenthal
Before: Foote
Synopsis
Corporations—Subscriptions to Stock—Creditor’s Bill—Pleading — Indebtedness of Corporation — Conclusiveness of Judgment.—A judgment against a corporation establishes its liability conclusively until reversed in a direct proceeding, and concludes the stockholders in an action against them in the nature of a creditor’s bill, to compel them to pay in the unpaid portion of their subscriptions to the capital stock, toward the satisfaction of the judgment obtained; and it is not necessary that the complaint in such action should allege the indebtedness upon which the judgment was recovered.
Ed.—Insolvency of Corporation — Sufficiency of Complaint—Nonjoinder of Creditors — General Demurrer — Answer. — A complaint in an action in the nature of a creditor’s bill to compel the subscribers to the capital stock of an insolvent corporation to account for and pay in the unpaid portion of their subscriptions to the satisfaction of a judgment obtained against the corporation, which alleges the existence of the judgment debt, the insolvency of the corporation, that the subscribers owe on their unpaid subscriptions, and that the execution issuing on the judgment has been returned wholly unsatisfied, but which does not show upon its face that there are any other creditors of the corporation, states a cause of action, although it does not state that the proceedings are for the benefit of all the creditors; and the question of defect in the pleading, or of non-joinder of other creditors, cannot be raised upon general demurrer to such complaint, hut can only be pleaded by answer.
Id.—Right of Judgment Creditor.—A judgment creditor who has exhausted his legal remedy by an execution returned nulla bona may, alone or with other judgment creditors, file a bill against persons hold, ing property of the debtor which cannot he reached by execution.
Id. — Division of Fund — Action by Single Creditor —• Decree for Benefit of All. — Where a fund can only be divided satisfactorily among a certain class of persons, the decree must be so framed that all of them may be brought in for their distributive shares, but even then the bill may often be filed by any one of them on his own behalf. It is only when it subsequently appears to the court that a distribution must be made that a decree will be made for the benefit of all.
Foote, C. This action is in the nature of a creditor’s bill to compel certain subscribers to the capital stock of an insolvent corporation to account for and pay in the •unpaid portion of their subscriptions, to the satisfaction, as far as it may, of a judgment obtained against the corporation, upon v/hich execution had been returned wholly unsatisfied.
Demurrers were filed to the complaint, which alleged, among other matters, that the complaint did not state facts sufficient to show a cause of action. The deij?ur= [132]rers were overruled and answers were filed. A trial was had, which resulted in a judgment for plaintiffs against certain of the defendants. Some of the latter have appealed from the judgment, and the only points made in their briefs for its reversal are: —
1. That the complaint does not allege the indebtedness-upon which the judgment set out in the complaint was recovered. As to this, it can be said that when this judgment was rendered against the corporation, it established its liability conclusively, so far as any judgment can, to pay the debt. It concluded the stockholder, in a case like this, who was in privity with the corporation, and is valid until reversed in a direct proceeding. (Thompson on Liability of Stockholders, sec. 329.)
This being so; we can perceive no good reason why it should be alleged that this valid and subsisting judgment was also founded upon a valid and subsisting debt.
2. It is claimed that in all bills of the kind here involved, it is essential that it should be alleged in the complaint that the proceedings are for the benefit of all the creditors of the insolvent coporation.
It is true that in actions of this sort, the fund realized from the payments by the subscribers to the capital stock was, in equity, equally a fund belonging to all the credi ■ tors, and in the distribution of it, if it appeared to the court that there were other creditors than those instituting the suit, it would be the duty of that tribunal to distribute, to them their pro rata share of the fund.
And this rule proceeds upon the idea that no one creditor can secure the payment of his debt to the exclusion of other creditors. (Handley v. Stutz, 137 U. S. 369.)
But we do not think that under our statute, where the facts are as stated here, viz., that the judgment debt exists, that the corporation is insolvent, that the subscribers owe a certain sum on their unpaid subscriptions, that the execution issuing on the judgment has been returned wholly unsatisfied, and it does not appear from , the complaint that there are anj'- other creditors of the corporation, that it should be held, because of the defect
More from California Supreme Court
- People v. Wende (1979)
- People v. Watson (1956)
- People v. Superior Court (Romero) (1996)
- People v. Kelly (2006)
- Auto Equity Sales, Inc. v. Superior Court (1962)
- Aguilar v. Atlantic Richfield Co. (2001)
- People v. Lewis (2021)
- In Re Estrada (1965)
- Denham v. Superior Court (1970)
- People v. Marsden (1970)