Who is Liable.-Agreement to take stock in railroad company before incorporation thereof does not constitute the subscriber a stockholder in the sense to make him liable for assessments subsequently levied. (R. R. Co. v. Hildreth, 53 Cal. 123. To same effect: San Joaquin etc. Water Co. v. Beecher, 101 Cal. 79, 35 Pac. 349; Marysville etc. Co. v. Johnson, 109 Cal. 195, 50 Am. St. Rep. 25, 41 Pac. 1016; Same v. Same, 93 Cal. 551, 27 Am. St. Rep. 221, 29 Pac. 126. Note citations: 43 Am. Dec. 697; 81 Am. Dec. 395.) For purpose of ascertaining those who are liable to corporation for the amount of an assessment the corporation may look only to the list of stockholders as their names are upon its books, and the transferee of unpaid shares is liable. (V. & T. R. R. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.)

The issuance of a certificate of stock is not necessarily preliminary to the ownership or assessability of stock. (Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 Pac. 542.)

For What Purposes.-Assessment by light company for necessary repairs to engine and machinery, without which it cannot answer demands upon it for supply of electric light, is clearly authorized by section 331 of Civil Code. (Younglove v. Steinman, 80 Cal. 375, 22 Pac. 189.)

The payment by a corporation, of an assessment for the construction of a tunnel run for the purpose of working the mines of another mining company of which the corporation was holder, is an investment of capital, and not of current expenses. (Excelsior W. & M. Co. v. Pierce, 90 Cal. 131, 27 Pac. 44.)

a stock

Levying assessments for debt which corporation does not owe and selling stock for such purpose is not in itself a fraud, especially when it does not appear that the money was so used. (Johnson v. Kirby, 65 Cal. 482, 4 Pac. 258.)

In absence of fraud, corporation is liable for money borrowed from one of its stockholders for the payment of expenses which were collateral, and but incidental to an act which may have been ultra vires. Being liable for such money, corporation can levy an assessment to pay it. (Taylor v. North Star etc. Co., 79 Cal. 285, 21 Pac. 753. To same effect: Illinois Trust etc. Bank v. Ry. Co., 117 Cal. 343, 49 Pac. 197. Note citation: Carson etc. Bank v. Elevator Co., 30 Am. St. Rep. 458.)

One-fourth Subscription.-If one-fourth of the capital stock has not been subscribed, its directors have no power to levy an assessment; and an assessment levied upon certain of the shareholders, and not upon others is invalid. (Herbert Kraft Co. Bank v. Bank 143.)

of Orland, 133 Cal. 64, 65 Pac. A corporation cannot levy an assessment upon its eapital stock until after the whole amount has been subscribed, except as otherwise provided by law, and the assessment provided for in section 331 of the Civil Code is invalid, unless the condition precedent

of a subscription of one-fourth of the capital stock is complied with, and an allegation to that effect is necessary in a complaint in an action to collect such assessment. (San Bernardino etc. Co. v. Merrill, 108 Cal. 490, 41 Pac. 487. To same effect: Ventura etc. Co. v. Hartman, 116 Cal. 263, 48 Pac. 65.)

A corporation cannot levy an assessment until after one-fourth of its capital stock is subscribed, where the terms of the agreement of the subscription do not otherwise provide. (Ventura etc. Ry. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65.)

Where an agreement to subscribe to stock of a corporation shows a mere subscription to the shares set opposite the names of the subscribers, and to pay ten per cent in cash to the treasurer of the corporation, which payment appears to have been made, the legal effect is to make further payments depend upon legal assessments levied upon the stock, and such assessments can be levied only upon twenty-five per cent of the corporation's stock being subscribed. (Ventura etc. Ry. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65.)

Liability of Stockholder-When Attaches.-Under section 331, Civil Code, stockholders become liable for the debts of the corporation when one-fourth the capital stock is subscribed. (Walter v. Academy Assn., 126 Cal. 582, 59 Pac. 136.)

Validity of Assessment.-A strict observance of the statutory mode and provisions is essential to a recovery by action of assessments. (San Bernardino etc. Co. v. Merrill, 108 Cal. 490, 41 Pac. 487.)

A sale of stock as delinquent, by a board of directors illegally elected, and under an invalid assessment made in violation of law, is ineffective to determine the relations of the stockholder to the corporation. (Whitehead v. Sweet, 126 Cal. 67, 58 Pac. 376.)

If no notice of an adjourned meeting be given, an assessment levied at such meeting in the absence of directors absent at the former meeting is invalid. (Thompson v. Williams, 76 Cal. 153, 9 Am. St. Rep. 187, 18 Pac. 153.)

In action on short assessments the bids, assignments or contracts signed or executed by the officer of the corporation who customarily performed such acts are prima facie evidence of the regularity of such bids, assignments or contracts, and the authorization for such acts will be presumed. (S. F. Paving Co. v. Bates, 134 Cal. 39, 66 Pac. 2; Reid v. Clay, 134 Cal. 207, 66 Pac. 262.)

The acts of the de facto directors of a corporation in levying an assessment upon the subscribed capital stock are valid. The notice of assessment prescribed by section 335 of the Civil Code is not defective because it describes the assessment as upon the capital stock instead upon the subscribed capital stock. (San Joaquin etc. Co. v. Beecher, 101 Cal. 70, 35 Pac. 349.)

A showing that written notices were sent to all the directors of a corporation of a meeting of the board at which an assessment was levied upon the stock, and minutes show other facts necessary to prove meeting was regularly and legally held, and that assessment was properly levied, is sufficient. (Younglove v. Steinman, 80 Cal. 375, 22 Pac. 189. To same effect: Stockton etc. Works v. Houser, 109 Cal. 10.)

Remedies of Stockholders Against Void Assessments.-A stockholder wrongfully deprived of his shares under a void assessment may either sue the corporation in trover for the value of his shares, or may mandamus the corporation to allow the registry of his shares, or to pay damages if registry is impossible, or he may sue in equity to vacate the sale, and to have the shares sold ordered to be delivered up and canceled. A court of equity has jurisdiction to give full relief to the stockholder in such case. (Herbert Kraft Co. Bank v. Bank of Orland, 133 Cal. 64, 65 Pac. 143.)

LIMITATION-HOW LEVIED.

Sec. 332, C. C. No one assessment must exceed ten per cent of the amount of the capital stock named in the articles of incorporation, except in the cases in this section otherwise provided for, as follows:

1. If the whole capital of a corporation has not been paid up, and the corporation is unable to meet its liabilities or to satisfy the claims of its creditors, the assessment may be for the full amount unpaid upon the capital stock; or if a less amount is sufficient, then it may be for such a percentage as will raise that amount;

2. The directors of railroad corporations may assess the capital stock in installments of not more than ten per cent per month, unless in the articles of incorporation it is otherwise provided;

3. The directors of fire or marine insurance corporations may assess such a percentage of the capital stock as they deem proper. En. March 21, 1872.

See sec. 331, C. C., ante.

Legislative History.

See "Subscription Agreements," pp. 120-126, ante.

Section Cited.

Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 194, 199, 200, 202, 201, 209, 210, 3 Pac. 661, 802; Marysville etc. v. Johnson, 93 Cal. 549, 550, 27 Am. St. Rep. 215, 29 Pac. 126; Kohler v. Agassiz, 99 Cal. 14, 33 Pac. 741; Pacific Fruit Co. v. Coon, 107 Cal. 451, 40 Pac. 542.

Assessments Exceeding Ten Per Cent.-An action will not lie by a commercial and manufacturing corporation to enforce an assessment exceeding ten per cent of the capital stock, unless it is shown by the corporation that the subscribed capital stock had not been fully paid. (Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 Pac. 542.) Unpaid Subscriptions.-Agreement to subscribe to stock prior to incorporation, and to pay twenty per cent of the amount subscribed to designated person five days after filing of acts of incorporation to be by such person paid to agents of the corporation for investment, is valid, and binds such subscriber regardless of his refusal to participate in final organization of incorporation, and regardless of the limits of the power of the corporation to levy assessments in excess of ten per cent of value of stock. (West v. Crawford, 80 Cal. 19, 12 Pac. 1123.)

An agreement by a subscriber to the stock of a proposed corporation to pay the amount of his subscription upon the formation of the company, and the issuance of its stock, and not as the same might be called for under section 332, Civil Code, is valid, and the measure of his liability is not fixed by that section of the code, but by the term of his subscription. (Marysville etc. Co. v. Johnson, 93 Cal. 538, 27 Am. St. Rep. 215, 29 Pac. 126.)

A stockholder may be lawfully called upon and required to pay assessments upon his stock to the extent of ten per cent of the par value thereof, except where the whole capital is not paid up, in which case he may be required, if the liabilities of the corporation demand it, to pay by way of assessment the full amount unpaid upon the capital stock. (Kohler v. Agassiz, 99 Cal. 9, 33 Pac. 741.)

Purchaser and transferee of unpaid stock is substituted for original subscriber as a stockholder of the corporation, and thereafter holds the stock on the same conditions, and subject to the same obligations as the original stockholder; and is liable for an assessment upon the unpaid shares, of which liability he cannot devest himself by assignment of shares subsequent to the levy of the assessment. (V. & T. R. R. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.)

Assessment is valid against stockholder, notwithstanding obligations which it is levied to meet were incurred before he became such, and corporation has sufficient property to meet such obliga

tions. The liability of a stockholder for unpaid portion of a subscription rests upon the contract of subscription, and the necessity or propriety of requiring him to pay it rests in the discretion of the board of directors. (V. & T. R. R. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.)

Subscriber for shares of stock of corporation is responsible as a stockholder, although he has not paid for his stock or received certificate therefor. A corporation may give subscriber credit for his stock, as for any other property. Certificates of stock are mere evidences of property. The property may exist without the certificates. (Mitchell v. Beckman, 64 Cal. 117, 28 Pac. 110. To same effect: Lankershim Ranch etc. Co. v. Herberger, 82 Cal. 603, 23 Pac. 134; California etc. Co. v. Callender, 94 Cal. 127, 28 Am. St. Rep. 104, 29 Pac. 859; San Joaquin etc. Co. v. Beecher, 101 Cal. 79, 35 Pac. 349; Pacific etc. Co. v. Coon, 107 Cal. 452, 40 Pac. 542.) Stockholder in an insolvent corporation cannot avoid his liability for an unpaid subscription upon stock held by him by assignment without consideration to an insolvent person; and a judgment creditor, who has had execution issued against the corporation and returned nulla bona, may attack the bona fides of such assignment, and enforce the subscription. (National etc. Co. v. Story etc. Co., 111 Cal. 531, 44 Pac. 157.)

Creditor's Bill.-A creditor's bill may be filed against one or any number of the stockholders upon insolvent corporation to compel payment of their unpaid subscription to stock. Ordinarily, such a bill is brought for the benefit of all the creditors who may choose to come in, and the court will, without formality of a call not made by the corporation, order the payments to be made to a receiver for the benefit of the creditors, and the fund realized therefrom is distributed ratably among the crditors. (Welch v. Sargent, 127 Cal. 72, 59 Pac. 319.)

LEVY OF ASSESSMENT-OLD ASSESSMENT REMAINING UNPAID.

Sec. 333, C. C. No assessment must be levied while any portion of a previous one remains unpaid, unless:

1. The power of the corporation has been exercised in accordance with the provisions of this article for the purpose of collecting such previous assessment;

2. The collection of the previous assessment has been enjoined; or

3. The assessment falls within the provisions of either the first, second, or third subdivision of section 332. En. March 21, 1872.