the capital stock of plaintiff railroad company, the pendency of proceedings in quo warranto to oust the corporation from exereising corporate franchises is no defense.Oroville etc. R. Co. v. Plumas County Supervisors, 37 Cal. 354.

[b] A promissory note executed for the purchase of a certain number of shares of a homestead association about to be formed, under a name and with a number of shares agreed upon when the note is given, does not fail for want of consideration because the association when formed has a name or number of shares of stock different from that agreed on, provided the land is the same, and the lots are of the same value as the promisor had reason to expect. The giver of the note in such case is, however, at liberty to stand on the terms of his contract; and, if it was understood that the shares of stock he is to receive should not cost, in the aggregate, more than a certain sum per share, he is at liberty to refuse the stock, if it will cost more than that sum, and the note is then void for want of consideration.-Mahan v. Wood, 44 Cal. 462.

[c] Release of a subscription for stock may be proved as well by the acquiescence of the stockholders, and the fact that the corporation did not regard it as binding, as by the records. Tulare Sav. Bank v. Talbot, 131 Cal. 45, 63 Pac. 172.

FOR AUTHORITIES FROM OTHER STATES:

§ 98.

10 Cyc. 395-399, 460-484; 12 Cent. Dig., cols. 433-452, §§ 337-366.

By Notes or Checks.

[a] Treasurer of a company about to form a railroad corporation may receive from the subscribers payment of the ten per cent required by law, in bank checks drawn by the subscribers, and payable at once, provided they are drawn against a sufficient fund, and the banks will pay them on presentation, and they are drawn in good faith and with no intention to evade the law.-People v. Stockton etc. R. Co., 45 Cal. 306, 13 Am. Rep. 178. Cal. Digest, Vol. 2-72

[b] A note given by a subscriber in payment of a first assessment on a certificate which was thereupon issued is not void under act of April 1, 1876 (Stats. 1875-76, p. 729). requiring corporations to publish semi-annual statements of their paid-up capital, and that nothing shall be counted as capital except money.-(1886) Pacific Trust Co. v. Dorsey, 72 Cal. 55, 12 Pac. 49, 13 Pac. 148.

[c] A note given by a subscriber in payment of stock which was thereupon issued to the maker is not void under Constitution, article 12, section 11, providing that no corporation shall issue stock except for money paid.— (1886) Pacific Trust Co. v. Dorsey, 72 Cal. 55, 12 Pac. 49, 13 Pac. 148.

[d] A note given by a subscriber to the capital stock of a bank, in payment of a first assessment, the certificate for the stock being issued thereupon, is not void under Constitution, article 12, section 11, providing that no corporation shall issue stock except for money paid," etc., nor under Statutes of 1875-76, page 729, section 1, which prohibits promissory notes to be computed as paid-in capital, or Penal Code, section 560, making it a misdemeanor to receive notes in payment of installments actually called.Pacific Trust Co. v. Dorsey, 72 Cal. 55, 12 Pac. 49.

[e] The payment of a judgment obtained on the personal liability of a stockholder by a corporate creditor under Civil Code, section 322, cannot be considered as payment on unpaid corporate stock.-Union Sav. Bank v. Leiter, 145 Cal. 696, 79 Pac. 441.

[f] A note given by a subscriber in pay. ment of a certificate which was thereupon issued is not void under Penal Code, section 560, providing that any director of a corporation voting to receive a note in payment of assessment on stock subscriptions shall be guilty of a misdemeanor.-Pacific Trust Co. v. Dorsey, 13 Pac. 148.

an

§ 99.

Custody of Money Paid.

[a] Person to whom subscriptions of stock are payable is trustee of express trust and authorized to collect money agreed to be paid.-West v. Crawford, 80 Cal. 31, 21 Pac. 1123.

[b] Where, by a stock subscription contract, the subscribers agreed to pay a certain proportion of their stock before incorporation, and authorized defendants to draw on the person to whom such payments were made for property purchased for the corporation, defendants were not entitled to the custody of the money, nor to any part thereof, no property having been purchased by them prior to the organization of the company.-San. Joaquin Land etc. Co. v. West, 94 Cal. 399, 29 Pac. 785.

[c] When the agents appointed to draw and invest the funds repudiated their agency before any money was paid on the subscriptions, and refused to act under their appointment, and wholly abandoned the same, the corporation is entitled, as against their claim, to the custody of the money collected from

the subscribers, and may maintain an action to recover the same from the collecting agent. San Joaquin etc. Co. v. West, 94 Cal. 399, 29 Pac. 785.

[d] In an action by the corporation to recover the money which the agent had collected from the subscribers to the stock it is not necessary to make the parties named as agents of the corporation for the investment of the money in the purchase of land parties to the action, nor is the right of the corporation to recover the money in any respect affected by the substitution of two of such parties as defendants in place of the agent who collected it, and who has paid it into court, nor can such substituted defendants, after having repudiated their agency, claim that the presence of the third agent is essential to a determination of the plaintiff's right.-San Joaquin etc. Co. v. West, 94 Cal. 399, 29 Pac. 785.

§ 100. Actions on Subscriptions-Call or Assessment as Condition Precedent.

[a] Call made by chancery court has same effect as call made by president and directors. Glenn v. Sexton, 68 Cal. 358, 9 Pac. 420. [b] Where persons subscribe for a certain number of shares of stock in a corporation, and agree to pay one hundred dollars for each share, in such installments and at such times as, under the laws of the state, they may be required to pay the same, a decree in chancery or an assessment by the board of directors is not necessary in order to sustain an action to recover on the contract of subscription against nonresidents.-Kohler v. Agassiz, 99 Cal. 9, 33 Pac. 741.

on

[b] Corporation may maintain action contract of subscription against a subscriber to its stock to recover calls made in pursuance to the terms of the contract; and it is not necessary that such calls should be made in the mode prescribed by the Civil Code for the levy of assessments upon the stock.-California Southern Hotel Co. v. Callender, 94 Cal. 120, 28 Am. St. Rep. 99, 28 Pac. 859.

[c] In an action by an opera house company to recover a subscription to its capital stock, it appeared that a "prospectus" recited in detail the objects of the intended corporation, the amount of stock, etc., and that the subscriptions were to be called in on installments; that defendants signed the prospectus for a certain number of shares; that four calls had been ordered by the board of directors, and payment demanded; and that defendant had failed to pay. Held, that plaintiff was entitled to recover.-Auburn Opera House etc. Assn. v. Hill, 32 Pac. 587.

[a] Fraudulent representations as to the value of the mine of a corporation, made by the seller of the stock of the company to the purchaser, as an inducement for the purchaser to buy, may be given in evidence, under a proper state of the pleadings, to defeat the collection of a promissory note given for the stock.-Gifford v. Carvill, 29 Cal. 589.

[b] In order that delay in the completion of the road may be available as a defense to a promissory note given upon a subscription for shares, the time of completion must be shown to have been a condition agreed upon by the parties as a term of the subscription.Jefferson v. Hewitt, 95 Cal. 535, 30 Pac. 772. Time to Sue and Limitations.

§ 103.

[a] In an action by a corporation to enforce an agreement to subscribe to its capital stock, entered into before its organization, a complaint which does not show that the articles of incorporation failed to state that defendant was a subscriber to the capital stock, or the amount of such subscription, is good against a general demurrer.-Marysville Electric Light etc. Co. v. Johnson, 93 Cal. 538, 27 Am. St. Rep. 215, 29 Pac. 126.

[b] An action against the subscriber to stock upon his subscription, according to its terms, is not an action, under the statute, to recover assessments upon the subscribed capital stock, and the complaint need not aver an equal demand upon all of the subscribers, nor show a liability to an assessment under the statute, and any averments in regard to assessment or calls by the corporation upon the subscribers to its stock may be disregarded as surplusage.-Marysville Electric Light etc. Co. v. Johnson, 93 Cal. 538, 29 Pac. 126.

contract is unsecured by any lien or pledge, an attachment will lie in an action by a corporation to recover an unpaid call on defendant's subscription to the capital stock, though a paid-up certificate to the stock had not been issued to him, and remained in the possession of the corporation, it not having a lien thereon.-Lankershin Ranch Land tc. Co. v. Herberger, 82 Cal. 600, 23 Pac. 134.

§ 107. Action to Set Aside Subscription.

[a] In an action to set aside a stock subscription, held not error to permit defendant to amend its answer to conform to the proof. Bell v. Standard Quicksilver Co., 146 Cal. 699, 81 Pac. 17.

§ 108. Forfeiture of Stock for Nonpayment. [a] A stipulation in the agreement in this case that C., who was to superintend the erection of a sugar refinery for the contemplated business of the corporation, should continue his services for five years at a certain annual salary, was held not to be a condition precedent to the vesting of his title to his shares of stock; and the fact that, from paralysis, he was rendered unable to discharge his duties as superintendent, exeept for a limited period, was held not to forfeit his stock.-Chater v. San Francisco etc. Co., 19 Cal. 219.

FOR AUTHORITIES FROM OTHER STATES:

When subscription for stock becomes void by nonpayment: 11 Am. Dec. 609, note; 27 L. R. A. 305, note. See, also, 10 Cyc. 499-509; 12 Cent. Dig., cols. 485491, §§ 396-402.

§ 109. Subscription Book.

[a] The code does not require that there shall be a subscription book kept by the corporation, nor direct how subscriptions shall be made, and, where it does not appear that the corporation had any other book showing who the subscribers were than the stock books offered in evidence, and the suit is by strangers of the corporation against its stockholders, the books kept by the corporation, together with the testimony of the secretary, that they contained the names of all the stockholders, are sufficient proof of the stock subscribed and outstanding.-Knowles v. Sandercock, 107 Cal. 629, 40 Pac. 1047.

FOR AUTHORITIES FROM OTHER STATES:

Conclusiveness of records of corporations and power to amend: 13 Am. St. Rep. 550, note.

C. ASSESSMENT OF STOCK.

POWER TO LEVY, § 110.

DE FACTO DIRECTORS, § 111.
BEFORE PAYMENT OF PREVIOUS AS-
SESSMENT, § 112.

[a] The trustees of a mining company have power to levy and collect for the purpose of paying the legal and proper expenses of the company assessments on the capital stock thereof, even though the amount of such assessments is greater than the sum to which they are limited by the by-laws of the company in incurring indebtedness, if the assessment does not exceed the amount allowed by law. Sullivan v. Triunfo etc. Min. Co., 29 Cal. 585.

[b] Statutory phrase, "proper and legal expenses" of a corporation, for which assessments are authorized to be made, includes debts incurred in the transaction of ordinary business. Sullivan v. Triunfo Gold etc. Min. Co., 39 Cal. 459.

[c] In the absence of fraud, a 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, such expenses not being inseparably connected with the main act. Being liable for such money, the corporation could levy an assessment to pay it.-Taylor v. North Star Gold Min. Co., 79 Cal. 285.

[d] Assessment for repairs to machinery without which company would be unable to meet business demands upon it is clearly authorized by section 331. of the Civil Code. Younglove v. Steinman, 80 Cal. 377, 378, 22 Pac. 189.

[e] It is no defense to an action against a stockholder by a corporation authorized to levy assessments to meet outstanding obligations, and whose directors were given discretion to require assessments or to resort to the corporate property in payment of such obligations, that the corporation had sufficient property to meet the obligations forming the basis of the assessment.-Visalia etc. R. Co. v. Hyde, 110 Cal. 632, 43 Pac. 10. FOR AUTHORITIES FROM OTHER STATES: 10 Cyc. 484-498; 12 Cent. Dig., cols. 452470, §§ 367-382.

BEFORE ONE-FOURTH OF CAPITAL STOCK IS SUBSCRIBED, § 113. ASSESSABLE STOCK-PAID-UP STOCK, § 114. PERSONS LIABLE, § 115.

§ 111.

De Facto Directors.

[a] Where the board of directors of a corporation have been nominally elected, organ

[a] In the absence of any provision to the contrary, a corporation cannot levy an assessment upon its capital stock until after the whole amount thereof has been subscribed; but, under section 331 of the Civil Code, the subscription of one-fourth of the capital stock is a condition precedent in this state to the exercise of the power given by the statute to levy an assessment.-San Bernardino Investment Co. v. Merrill, 108 Cal. 490, 41 Pac. 487.

[b] A mere agreement to "subscribe and take" the amount of capital stock set opposite the subscriber's name does not bind him to pay an assessment levied before onefourth of the capital stock has been subscribed, in violation of Civil Code, section 331.Ventura etc. Ry. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65.

8 114.

Assessable Stock-Paid-up Stock. [a] Corporation may levy assessments for corporate purposes on paid-up stock.-Santa Cruz R. Co. v. Spreckles, 65 Cal. 193, 3 Pac. 661.

[b] Act of March 26, 1866, authorized assessment of full-paid stock.-Sayre v. Gaslight Co., 69 Cal. 208, 7 Pac. 437, 10 Pac. 408. [c] Where all the stock of a corporation is fully paid up it is assessable; and as between stockholders who have obtained paid-up shares at one-fourth of their par value in exchange for property conveyed to the corporation, and those who have obtained paidup shares at the same rate by purchase, for cash, of stock reserved for working capital, the effect of an assessment upon all the stockholders is equal and just.-Green v. Abietine Medical Co., 96 Cal. 322, 31 Pac. 100.

§ 115. Persons Liable.

[a] Under code, sections 290-293, requiring articles of incorporation to state the amount of stock subscribed, the names of the subscribers, and the amount actually paid by each, a subscriber does not incur liability for

assessments levied after incorporation by merely signing a prior agreement to take stock in the corporation.-Monterey etc. R. Co. v. Hildreth, 53 Cal. 123. .

[b] Under code, sections 290-293, requiring articles of incorporation to state the amount of stock subscribed, the names of the subscribers, and the amount actually paid by each, only the subscribers whose names were contained in the articles filed are liable for assessments levied after incorporation.Monterey etc. R. Co. v. Hildreth, 53 Cal. 123. [c] Defendant sold a manufacturing plant to plaintiff corporation, taking in part payment four hundred shares of the corporation's stock, at fifty dollars per share, There was no indorsement on the certificate that the stock was fully paid and nonassessable, nor was there such an agreement between the parties. At the time of the transaction, fifty dollars a share had been paid on the stock. Held, that defendant's stock was subject to the same assessments to which it would have been subject in the hands of an original subscriber.-Stockton Combined Harvester etc. Works v. Houser, 109 Cal. 1, 41 Pac. 809.

[d] One who purchases unpaid stock in a corporation, and causes a transfer thereof to himself to be entered upon the books of the corporation, is substituted for the original subscriber of the stock 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 prior to the transfer; and he is liable for an assessment upon the unpaid shares, of which liability he cannot devest himself by an assignment of the shares subsequent to the levy of the assessment.-Visalia etc. R. R. Co. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.

[e] For the purpose of ascertaining those who are liable to the corporation for the amount of an assessment, the corporation may look only to the list of stockholders as their names are registered upon its books.Visalia etc. R. R. Co. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.

[f] In an action to recover an assessment on corporate stock, evidence that the assessment was made on the same day that defendant purchased the stock is sufficient to show that it was made while defendant was the owner of the stock, as it will not be presumed that the assessment was made a fraction of a day before the purchase.-San Gabriel Valley Land etc. Co. v. Dennis, 34 Pac. 441.

§ 116. Notice of Assessment.

[a] Under Civil Code, section 331, authorizing directors, when one-fourth of the stock is subscribed, to levy and collect assessments on the subscribed capital stock," a notice describing the assessment, in conformance with section 335, as "levied upon the capital stock,'' will sustain a collection on the stock subscribed.-San Joaquin Land etc. Co. v. Beecher, 101 Cal. 70, 35 Pac. 349; San Joaquin Land etc. Co. v. Belding, 35 Pac. 353;

§ 119. Sale for Delinquent Assessment.

[a] Levying of an assessment on mining stock to pay a debt which the company does not owe is not of itself fraud, so as to invalidate a sale of stock made thereunder, where it was not shown that the money was used for such purpose.-Johnson v. Kirby, 65 Cal. 482, 4 Pac. 458.

[b] Where a stockholder fails to pay an assessment lawfully made, and his stock is advertised for sale, a complaint setting forth that the company refused to show plaintiff its bills and vouchers, as required by Civil Code, section 377, and that it was a worthless concern, and desired to get plaintiff's stock for the assessment, shows no ground for an injunction on the sale.-Burnham V. San Francisco Fuse Mfg. Co., 76 Cal. 24, 17 Pae. 940.

[c] Section 346 of the Civil Code makes irregular proceedings to collect delinquent assessment void only as against owner who tenders assessment.-Burnham v. San Francisco Fuse Mfg. Co., 76 Cal. 28, 17 Pac. 939. [d] Proceedings herein for sale of stock for unpaid assessment held to comply with code.-Burnham v. San Francisco Fuse Mfg. Co., 76 Cal. 25, 17 Pac. 940.

[e] 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 stockholders to the corporation.-Whitehead v. Sweet, 126 Cal. 67, 58 Pac. 376.

[f] Corporation cannot waive right to sell delinquent stock and sue stockholder.-National P. O. Co. v. Chappellett (Cal. App.), 88 Pac. 506.

thorized by section 346 of the Civil Code.San Bernardino Investment Co. v. Merrill, 108 Cal. 490, 41 Pac. 487.

[b] Under Civil Code, section 337, which provides that, if any portion of the assessment levied against the capital stock of a corporation shall remain unpaid on the day specified in the assessment notice, the secretary must, unless otherwise ordered by the board of directors, cause to be published, "in the same papers" in which the notice of assessment was published, a notice of sale, etc., the board may order such notice of sale to be published in a paper other than that in which the notice of assessment appeared.— Stockton Combined Harvester etc. Works v. Houser, 109 Cal. 1, 41 Pac. 809.

§ 121.

Remedies for Wrongful Sale.

[a] One whose stock is improperly sold may maintain suit for its recovery.-Smith v. Maine Boys Tunnel Co., 18 Cal. 111. [b] Whether a stockholder, whose stock is about to be sold under an assessment which he alleges to be illegal and void, would suffer such injury by the sale of his stock as would entitle him to relief by injunction in a court of equity, not decided.--Sullivan v. Triunfo Min. Co., 39 Cal. 459.

[c] Complaint to set aside sale of stock for a fraudulent assessment must aver facts showing the fraud with certainty.-Johnson v. Kirby, 65 Cal. 487, 4 Pac. 458.

[d] Right to set aside sale of stock for nonpayment of assessment may be barred by delay and acquiescence.-Sayre v. Gaslight Co., 69 Cal. 213, 7 Pac. 437, 10 Pac. 408.

[e] A stockholder wrongfully deprived of his shares under a void assessment may either sue the corporation in trover for the value of the shares, or may apply for a mandamus to the corporation to compel it to open its books and allow the registry, 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, and for other relief. 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.

[f] A complaint in a suit to restrain the sale of corporate stock for nonpayment of an assessment levied by three directors held fatally defective for failure to aver that defendant was a corporation organized for profit within Civil Code, section 290, subdivision 5.-Humphrey v. Buena Vista Water Co. (Cal. App.), 84 Pac. 296.

§ 122. Action to Recover Assessment.

[a] Civil Code, section 332, providing for the recovery of assessments on the subscribed stock of a corporation, does not apply to an action brought by a corporation on an agreement to subscribe for its stock, entered into before its organization.-Marysville Electric Light etc. Co. v. Johnson, 93 Cal. 538, 29 Pac. 126, distinguishing California Sugar Mfg. Co. v. Schafer (1881), 57 Cal. 396.