Corporations – Watered Stock – Rejection of Statutory Obligation Theory

Plaintiff, a judgment creditor of a corporation in which defendant was a stockholder, sued for the difference between the aggregate par value of the defendant’s shares and the value of the consideration he paid to the corporation for them. After a verdict for plaintiff, the trial court granted a motion for a new trial. On appeal, held, affirmed. Liability of shareholders for watered stock is based on the misrepresentation theory in California, and there was no evidence that plaintiff relied on the stated capital in extending credit. Bing Crosby Minute Maid Corp. v. Eaton, (Cal. 1956) 297 P. (2d) 5.