## Facts

- Penasquitos, Inc. developed and finished residential lots for tract home construction.
- In 1974, Pacific Scene, Inc. purchased lots from Penasquitos and in 1975 sold tract homes built on those lots.
- Penasquitos dissolved in 1979 and distributed its corporate assets to its shareholders.
- In 1982, homeowners discovered property damage allegedly caused by subsidence of the lots and sued Pacific on theories including strict products liability, negligence, and breach of warranty.
- Pacific filed a cross-complaint seeking indemnity and contribution from Penasquitos and, later, its former shareholders.

## Issues

1. Whether a post-dissolution claim based on later-manifesting injury may proceed against former shareholders under the equitable “trust fund” doctrine, limited to distributed assets.
2. Whether the Corporations Code dissolution provisions, including Corporations Code section 2011, occupy the field and bar common-law shareholder-liability remedies for such post-dissolution claims.

## Decision

- The California Supreme Court reversed the Court of Appeal to the extent it allowed Pacific to sue Penasquitos’s former shareholders under the trust fund theory.
- The court held that the Legislature, through the Corporations Code’s dissolution and post-dissolution liability provisions (including § 2011), barred Pacific’s post-dissolution trust fund claim.
- The court concluded the statutory scheme generally occupies the field of remedies against former shareholders of dissolved corporations and preempts inconsistent antecedent common-law theories.

## Legal Principles

- California’s dissolution statutes constitute a comprehensive scheme that defines and limits post-dissolution remedies against dissolved corporations and their former shareholders.
- Where the Corporations Code provides defined remedies and limits, courts may not expand shareholder exposure through common-law doctrines that conflict with the statutory framework.
- The equitable “trust fund” doctrine is not an available vehicle to impose shareholder liability for claims arising after dissolution when such liability is not authorized within the statutory limits.
- Statutory limits reflect legislative policy favoring finality and certainty in corporate dissolution and a bounded period and scope of potential shareholder exposure.

## Conclusion

The court held that a cross-complainant could not pursue former shareholders of a dissolved corporation under the trust fund doctrine for latent defect-related injuries discovered after dissolution because the Corporations Code’s dissolution provisions preempt and bar that common-law remedy.


Pacific Scene, Inc. v. Penasquitos, Inc., 46 Cal. 3d 407 (Cal. 1988)