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District Court of Appeal, Second District, Division 1, California.


Civ. 12053

Decided: September 20, 1940

Freston & Files and Ralph E. Lewis, all of Los Angeles, for appellant. Claire T. Van Etten, of Los Angeles, for respondent.

This action comes before us on appeal from a judgment of dismissal entered after demurrer to an amended complaint was sustained without leave to amend. Except as to dates, the variation of which does not materially change or affect the various periods of time which are herein relevant, the factual situation here involved is the same as that presented by the case of Bates v. Blake, 105 P.2d 940, in which we have this day filed an opinion. Our decision in the cited case is determinative of all issues involved in this appeal, with the exception of the question of whether the respondent is liable, either as executrix of the will of a deceased stockholder or in her individual capacity as sole beneficiary under his will.

It is established by the record that David E. Spangler became a stockholder of the Cedar Rapids Savings Bank & Trust Company in 1909, at which time he held 52 shares of stock, which number was increased by a stock dividend in 1914, so that thereafter and at the time of his death he was the owner of 104 shares of such bank stock, each share having a par value of $100. No transfer was ever made from the name of David E. Spangler on the stock records of the bank. Mr. Spangler died testate on January 7, 1933. The will was offered for probate, and the defendant, Adelaide F. Spangler, became the executrix thereunder. By the will all property of the deceased was bequeathed in equal shares to the widow, Adelaide F. Spangler, and to a daughter, Catherine K. Smithers. The daughter, however, assigned all her right, title and interest in the estate to her mother.

Notice to creditors in the estate was first published on or about February 8, 1933. Consequently, the time within which to file claims against the estate expired about August 8, 1933. In July of that year an inventory and appraisement was filed, setting forth the value of the estate as in excess of $126,000, in which inventory was included the stock of the above-mentioned bank. On June 29, 1934, the executrix filed a final account and petition for distribution of the estate, in which she alleged that all claims which had been allowed and filed against the estate had been paid and that all tax obligations were likewise satisfied. Distribution of the entire estate to Adelaide F. Spangler was requested, except with respect to the 104 shares of bank stock here involved. In regard to that item the executrix in her petition alleged that the stock was apparently worthless, that its status was uncertain, and for that reason she did not desire to take distribution thereof. On August 6, 1934, after due notice, the Superior Court of Los Angeles County, sitting in probate, made its order settling such account and directing partial distribution of the estate. No further proceedings, so far as the estate is concerned, are reflected in the record, and it does not appear therefrom whether any actual partial distribution was made as authorized, but the estate proceedings were not terminated. The complaint filed herein by the banking superintendent alleged that the assets of the estate were in possession of Adelaide F. Spangler, either individually or as executrix.

Concerning the assessment upon which the present action is predicated, the amended complaint alleged that on January 24, 1933, the Cedar Rapids Savings Bank and Trust Company was taken over by the banking superintendent of the state of Iowa, pursuant to the terms of an Iowa moratorium statute known as Senate File No. 111, Code Iowa 1935, §§ 9283–e1 to 9283–e6, and that such banking superintendent continued to administer the affairs of the bank thereunder until May 3, 1934, on which date he closed the bank and instituted an action in equity in the district court of the county in which the bank was situated for the appointment of himself as receiver for the purpose of winding up its affairs. Such appointment was made by the court and letters of receivership issued on May 4, 1934. On or about April 27, 1935, the banking superintendent, as receiver, filed an action in equity in the Iowa court for the assessment of the stockholders of the bank, in which action Adelaide F. Spangler, defendant herein, was joined as a defendant in her capacity as executrix of the Estate of David E. Spangler, deceased. On July 25, 1935, summons in the cause was personally served on Adelaide F. Spangler in Los Angeles. She made no appearance in the Iowa action, and on February 20, 1936, the Iowa court entered its decree adjudging that proper service had been made upon her in the state of California; that she had had sufficient time to appear and defend, but had not done so; that it was necessary to levy an assessment of 100 per cent on each share of stock, and that Adelaide F. Spangler, executrix of the will of David E. Spangler, deceased, was a stockholder and owned and held 104 shares of stock of the par value of $100 each. Such decree further directed that a 100 per cent assessment should be and was thereby levied against each share of stock and that the amount of the assessment against Adelaide F. Spangler as such executrix was $10,400. The amended complaint further alleged that Adelaide F. Spangler, executrix of her husband's estate, well knowing the situation in Iowa with respect to the bank, had filed the aforesaid account and petition for distribution in an endeavor to prevent the filing of a claim against the estate and to prevent the assets of the estate from being applied in favor of any anticipated assessment, and that she not only failed to reserve from distribution assets sufficient to pay the assessment which might be levied against the stock, but failed to disclose to the probate court in California that she had been advised that the bank had been closed and that a 100 per cent assessment on the stock was then probable and imminent. The amended complaint further alleged that said executrix, contrary to the provisions of section 323 of the Civil Code of the state of California, did not apply for any order delaying distribution of the estate, notwithstanding that the assets of the estate were liable to such assessment. There was a further averment that the estate was at all times solvent and able to pay all just claims, including such assessment.

We entertain no doubt that the method of service herein upon the defendant executrix clothed the Iowa court with jurisdiction. The action in Iowa to determine the necessity for levying an assessment and the amount thereof was a proceeding in rem. Our reasons for the conclusion just stated are contained in the case of Bates v. Blake, supra.

Concerning the liability of defendant Adelaide F. Spangler as executrix of the estate of a deceased stockholder, it should be borne in mind that on July 25, 1935, when summons in the Iowa action was served upon her, as well as upon February 20, 1936, when the Iowa court determined the necessity for and amount of the assessment, the estate of the deceased stockholder was in process of probate. The amended complaint alleges, at the time the California probate court made its order for distribution, which order distributed to Mrs. Spangler the entire estate save and except the Iowa bank stock, knowledge on her part of the impending assessment and avers that the petition for distribution was designedly filed in order to avoid the liability created by such assessment. Without doubt the action in California to enforce the stockholder's liability could have been maintained against the decedent stockholder had he been living. Owning as he did the stock in question at the time of his death, the action was maintainable against his executrix. Read v. Johnson, 213 Cal. 432, 436, 2 P.2d 377, because during all times herein pertinent the estate in the person of the executrix was the stockholder.

We are satisfied that under the law the assets of the decedent may be followed into the hands of respondent, who received the entire estate, and which estate the amended complaint alleges was greatly in excess of the assessment made. Luce v. Thompson, 8 Cir., 36 F.2d 183, 185. The sole beneficiary took the estate burdened with the liability of this assessment, and such would be the case even though distribution be made prior to insolvency of the bank and before imposition of the assessment on shareholders therein by decree of the Iowa court. Jack v. Forrest, 10 Cir., 71 F.2d 264.

There is a further ground upon which this action against respondent executrix and beneficiary under the will may be sustained. As heretofore pointed out, the amended complaint alleged that respondent executrix speeded up the distribution to her of the entire estate except the bank stock in order to avoid the liability imposed upon such stock; and that in pursuance of such plan she relinquished her right to the impoverished bank stock. Were the court to find upon the trial that the foregoing was true, then recovery could be had against her as executrix for such wrongful act. As was said in Luce v. Thompson, supra [36 F.2d 186]: “The rule thus announced has still more pointed application, where the executor is at the same time sole devisee and beneficiary under the will.” It follows, therefore, that if the assets of the estate were actually received by respondent as beneficiary under the terms of the order of distribution, then she is liable in her individual capacity by reason of the general principles heretofore stated and the authorities cited in support thereof. If, however, the assets of the estate have not been distributed pursuant to the order of partial distribution and are held by respondent as executrix, then the stockholder's liability herein may be impressed upon the funds and assets of such estate. Respondent was properly sued in both her representative and individual capacity.

For the reasons given in Bates v. Blake, supra, as well as for the additional reasons herein advanced, the judgment is reversed and the cause remanded with directions to the court below to overrule the demurrer.

WHITE, Justice.

We concur: YORK, P.J.; DORAN, J.