[b] A subscriber to stock becomes liable to suit for delinquent assessment thereon by the directors, under Civil Code, section 349, where a majority of the subscribers have met and organized for the objects and with the capital and number of shares specified in the subscription agreement, and have elected the directors who levy the assessment.-San Joaquin Land etc. Co. v. Beecher, 101 Cal. 70, 35 Pac. 349; San Joaquin Land etc. Co. v. Belding, 35 Pac. 353; San Joaquin Land etc. Co. v. Hewlett, 35 Pac. 353; San Joaquin Land etc. Co. v. Hitchcock, 35 Pac. 353. [c] A subscription for shares of the capital stock of a corporation, subsequently to be formed, will sustain an action by the company on its complete incorporation against the subscribers to recover calls duly made upon the stock.-San Joaquin Land etc. Co. v. Beecher, 101 Cal. 70, 35 Pac. 349. [d] Where a corporation seeks to recover the amount of an assessment levied, not by virtue of any contract of subscription on the part of the defendant, but solely by virtue of the obligation against him which is created by the estate, a strict observance of the statutory mode and provision is essential to its recovery.-San Bernardino Investment Co. v. Merrill, 108 Cal. 490, 41 Pac. 487. [e] Where the board of directors has lost jurisdiction to take further proceedings for the collection of a delinquent assessment by failure to make publication of the delinquent sale, the condition under which the statute authorizes it to elect to proceed by action to collect the delinquent assessment does not exist, and there are no further proceedings which the board can waive under section 349 of the Civil Code, and there can be no cause of action to recover an assessment in such case.-San Bernardino Investment Co. v. Merrill, 108 Cal. 490, 41 Pac. 487. [f] A resolution by the board of directors that the president and secretary are hereby ordered to commence suit for the collection of assessment'' on stock sufficiently shows a waiver of further proceedings under the chapter for the collection of delinquent assessments to entitle the corporation to sue for them.-San Gabriel Valley Land etc. Co. v. Dennis, 34 Pac. 441. of the par value made upon a creditor's bill against the original stockholders.-Vermont Marble Co. v. Declez Granite Co., 135 Cal. 579, 87 Am. St. Rep. 143, 67 Pac. 1057. [b] Statute of limitation does not commence to run against an action to enforce the liability of corporate stockholders on unpaid stock, under Civil Code, section 332, subdivision 1, until levy of an assessment.— Union Sav. Bank v. Leiter, 145 Cal. 696, 79 Pac. 441. [e] The levy of an assessment on unpaid corporate stock, and notice thereof to the stockholder, which was afterward rescinded, did not commence the running of limitation against the liability of the stockholder, so as to prevent the enforcement of a subsequent assessment.-Union Sav. Bank v. Leiter, 145 Cal. 696, 79 Pac. 441. § 125. "a Pleading. [a] Civil Code, section 331, provides that corporation. . . . after one-fourth of its capital stock has been subscribed, may levy and collect assessments' thereon. Held that, in an action to collect an assessment on certain shares of stock, a complaint that does not show one-fourth of the capital stock to have been subscribed is demurrable as failing to show a cause of action.-San Bernardino Inv. Co. v. Merrill, 108 Cal. 490, 41 Pac. 487. [b] Allegations and findings that certain persons owned stated amounts of stock, that an assessment of a given amount was levied on such stock and not paid, and that said owners were indebted to the corporation in the amount of said assessment, were not sufficient to show a personal liability of such owners for the amount of the assessment, since none of the facts required by statute to constitute a personal liability for the assessment were alleged or found.-Shively v. Eureka T. G. M. Co., 129 Cal. 293, 61 Pac. 939. [a] In action by private corporation organized in this state for commercial and manufacturing purposes, to recover an assessment which exceeds ten per cent of capital stock, burden of proving valid assessment is on plaintiff; and where there is no evidence to prove that its subscribed capital stock had not been fully paid, an assessment exceeding ten per cent of the amount of the capital stock named in the articles of incorporation must be presumed to be void, and cannot be enforced.-Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 Pac. 542. § 128. Action to Set Aside Assessment. [a] In an action to set aside a stock assess- [b] In an action to vacate a corporate stock § 129. Necessity for Issue of Certificates. [b] The issuance of a certificate of corpor- FOR AUTHORITIES FROM OTHER STATES: 10 Cyc. 588-593; 12 Cent. Dig., cols. 521- § 130. Power to Issue Stock. [a] The question whether corporations can [b] First clause of article 11, section 12, of § 133. Contract to Issue Stock. [a] Where an agreement between a corpora- [b] In an action against a corporation and § 134. Issuance for Unauthorized Considera- [a] Under Civil Code, section 359, prohibiting [b] Public policy is not violated by organ- [d] Where directors of a corporation pur- of one million two hundred thousand dollars, and in payment therefor issued to themselves twenty-four thousand seven hundred and fifty shares of stock, of the par value of two million four hundred and seventy-five thousand dollars, and assumed an indebtedness of one million fifty thousand dollars, a stockholder of the former corporation is not entitled to have such issue of stock declared void and fictitious, without setting aside the whole transaction. By divided court.-Smith v. Ferries etc. Ry. Co., 51 Pac. 710. FOR AUTHORITIES FROM OTHER STATES: 38 L. R. A. 490, note; 12 Cent. Dig., cols. 534-539, §§ 444-446. § 135. Issue for Less than Par Value. [a] When by consent of all the stockholders of a corporation reserved stock is sold by the corporation for less than its par value it is to be considered as fully paid-up stock; and when the equitable owners of all the unsold stock, who are the legal owners of all the stock issued, and who control the board of directors, procure the sale by the corporation of the reserved stock for one-fourth of its par value, and the issuance of certificates, in accordance with the by-laws, certifying to the purchasers that the price paid was full payment, and that the stock purchased was fully paid stock, the stockholders who are the real sellers, as well as the corporation, are estopped from denying that the stock sold was fully paid-up stock, and from claiming that any sum is due or owing from the purchasers or holders thereof to the corporation. Green v. Abietine Medical Co., 96 Cal. 322, 31 Pac. 100. [b] Contract for sale of reserved stock below par as paid-up stock is not unlawful, and is not in violation of section 323 of the Civil Code, which does not prohibit the issuing of certificates before the stock is fully paid up, but enjoins the duty of issuing certificates for fully paid-up stock, and authorizes the stockholders to enact by-laws in accordance with which the corporation may issue certificates before full payment.-Green v. Abietine Medical Co., 96 Cal. 322, 31 Pac. 100. § 136. Estoppel to Deny Sufficiency of Consideration. [a] Plaintiffs held a majority of the stock of a corporation, which they had taken at the rate of fifty cents a share, in return for property turned into the hands of the corporation. Afterward the board of directors, which plaintiffs controlled, sold the balance of the stock, to raise working capital, at the same rate per share which plaintiffs had paid, and gave certificates which stated that the stock so sold was fully paid and unassessable, being the same kind which plaintiff's held. After having acquiesced for three years in this sale, plaintiffs claimed that the shares so sold for working capital were subscribed for at the par value of two dollars a share, and that the difference between that and the price paid was still due. Held, that plaintiffs were estopped from denying that the price paid was full payment.-Green v. Abietine Medical Co., 96 Cal. 322, 31 Pac. 100. § 137. Fictitious Issue of Stock. [a] Complainant alleged that a corporation purchased property of another corporation worth at least one million two hundred thousand dollars, and as the price assumed an indebtedness of one million fifty thousand dollars, and issued to the latter corporation's stockholders twenty-four thousand seven hundred and fifty shares of stock, of the par value of two million four hundred and seventyfive thousand dollars. He did not allege that the former corporation had any property before such purchase. Held, that there was no fictitious issue of stock, within Constitution, article 12, section 11, providing that all fictitious" issues of stock shall be void.-Smith v. Ferries etc. Ry. Co., 51 Pac. 710. § 138. Overissue. [a] There is not an overissue of stock where there was to be five hundred shares of stock, and no more than this was issued, though when the articles of incorporation were drawn, all the stock subscription lists not being at hand, L., the organizer, put himself down in the articles for one hundred and eighty-three shares, to make up the full total of five hundred, he in so doing regarding himself as the agent of the subscribers whose names were not at hand, and the sum of the subscription lists and the amounts set down in the articles exceeded five hundred shares, the shares being issued to such subscribers from the amount put down to L., with the acquiescence of him and all the other stockholders.-Tulare Sav. Bank v. Talbot, 131 Cal. 45, 63 Pac. 172. FOR AUTHORITIES FROM OTHER STATES: Overissued stock: 87 Am. St. Rep. 847, note. See, also, 10 Cyc. 373, 443-449; 12 Cent. Dig., cols. 549-552, § 452. § 139. Ratification of Unauthorized Issue. [a] Though the unanimous consent of stockholders cannot cure the illegality of issuing certificates in violation of law, yet they may ratify an unauthorized issuance of certifi cates.-Green v. Abietine Medical Co., 96 Cal. 322, 31 Pac. 100. FOR AUTHORITIES FROM OTHER STATES: 12 Cent. Dig., cols. 552, 553, § 453. § 140. Estoppel to Allege Invalidity. [a] Where a corporation issues capital stock, and represents it as fully paid, and causes it to be so listed on the stock and bond exchange, it is estopped to claim that the stock is invalid, as against a bona fide purchaser, even if the stock was in fact issued without consideration.-Smith v. Martin, 135 Cal. 247, 67 Pac. 779. FOR AUTHORITIES FROM OTHER STATES: See 12 Cent. Dig., cols. 553-555, § 454. § 141. Rights and Liabilities of Persons Receiving Invalid Stock. [a] Parties receiving void stock do not become stockholders of corporation nor make themselves liable to creditors for unpaid subscriptions.-Kellerman v. Maier, 116 Cal. 424, 48 Pac. 377. FOR AUTHORITIES FROM OTHER STATES: 10 Cyc. 437-442; 12 Cent. Dig., cols. 556563, §§ 456-460. E. TRANSFER OF SHARES. FORMAL REQUISITES IN GENERAL, § 144. LIABILITY OF PLEDGEE TO PLEDGOR, SALE. 148. EXECUTION SALE-RIGHTS AND LIABILITIES OF PURCHASER, § 149. REGISTRATION OR TRANSFER ON CORPORATE BOOKS-NECESSITY, § 150. NECESSITY TO CREATION OR VALIDITY DUTY TO MAKE OR ALLOW, § 153. MAKING AND SUFFICIENCY, § 156. LIABILITIES AND REMEDIES FOR ER- LIABILITY OF OWNER OF STOCK REGIS- [c] Certificate of stock is transferable by delivery. Moore v. Boyd, 74 Cal. 170, 15 Pac. 670. [d] Stock certificates are not negotiable in commercial sense or within definition of Civil Code. Graves v. Mono Lake Hydraulic Min. Co., 81 Cal. 325, 22 Pac. 665. FOR AUTHORITIES FROM OTHER STATES: 12 Cent. Dig., cols. 568, 569, §§ 464, 465. § 143. Law Governing. [a] If a contract for the assignment of corporate stock is entered into in one state, but the certificates are afterward delivered in another state, the validity of the contract will be determined by the law of the state where the stock is delivered.-Dow v. Gould & Curry Silver Min. Co., 31 Cal. 629. § 144. Formal Requisites in General. [a] Placing certificates of stock indorsed in blank in envelope directed to assignor, in safe of assignee, will not revest title.-O'Neil v. Donahue, 57 Cal. 226. [b] When shares in a corporation belonging to decedent are sold by his executor or his administrator, the title of the purchaser is complete when the certificate has been indorsed and delivered.-Brown v. San Francisco Gaslight Co., 58 Cal. 426. [c] Certificates of stock indorsed in blank by owner pass by mere delivery without further indorsement.-Graves V. Mono Lake Hydraulic Min. Co., 81 Cal. 325, 22 Pac. 665. [d] Stock can only be transferred by indorsement by signature of owner or his attorney or representative.-Taft v. Presidio etc. R. R. Co., 84 Cal. 137, 18 Am. St. Rep. 166, 24 Pac. 436. [e] Stock cannot be transferred or canceled by indorsement by signature of agent without stating name of principal.-Taft v. Presidio etc. R. R. Co., 84 Cal. 138, 18 Am. St. Rep. 166, 24 Pac. 436. [f] The lack of the owner's indorsement on the certificate was not inconsistent with the right of his attorney in fact, empowered to deal generally with corporate stock, and in possession of the certificate, to cause the stock to be transferred to himself.-Taft v. Presidio etc. R. Co., 22 Pac. 485. FOR AUTHORITIES FROM OTHER STATES: 10 Cyc. 593-597; 12 Cent. Dig., cols. 576585, §§ 470-478. § 145. Assignment of Certificate. [a] Delivery of a certificate of stock, with a blank assignment signed and indorsed on the back thereof, is a good assignment. Order (1896), 44 Pac. 339, 112 Cal. 1, affirmed.Brittan v. Oakland Bank of Savings, 124 Cal. 282, 71 Am. St. Rep. 58, 57 Pac. 84. FOR AUTHORITIES FROM OTHER STATES: 10 Cyc. 594, 595, 597; 12 Cent. Dig., cols. 576-585, §§ 470-478. § 146. Pledge. [a] Pledgee of stock after transfer on books of company must be regarded as owner as to third parties.-Strout v. Natoma W. & M. Co., 9 Cal. 80. [b] If one who holds mining stocks in secret trust for another pledges the same for his debt, without notice to the pledgee of the interest of the cestui que trust, and the pledgee sells the stock without previous demand and notice, the right of action for the conversion is in the pledgor, and not in the cestui que trust. If the cestui que trust has a cause of action outside of the contract of pledge, he must first pay or tender the money for which the stocks were pledged.-Thompson v. Toland, 48 Cal. 99. [c] Rule that shares of stock cannot be pledged without written transfer of title applies only where rights of third parties are involved.-Hall v. Cayot, 141 Cal. 17, 18, 74 Pac. 299. [d] Delivery of certificate of stock, by way of pledge without indorsement vests equitable title in pledgee enforceable between the parties. Hall v. Cayot, 141 Cal. 18, 74 Pac. 299. [e] Under Civil Code, section 2889, one to whom a certificate of shares of corporate stock is issued as security for a debt does not, as against the pledgor, obtain the legal title to the stock.-Cross v. Reid, 14 Pac. 885. § 147. Liability of Pledgee to Pledgor. [a] Where corporate stock was pledged to secure a debt, and remained in the hands of the pledgee until he had received from dividends more than enough to pay the debt, the pledgor is entitled to an accounting and a decree directing a retransfer and delivery of the stock.-Smith v. '49 & '56 Quartz Min. Co., 14 Cal. 242. [b] B held A's shares of mining stock as collateral for a loan. A charged B with having sold the shares without A's knowledge or consent, and with afterward obtaining from him a power of attorney to sell-A being ignorant that the shares then had been soldand then selling an equal number of shares, which he claimed to be A's, for a less price than that for which the earlier sale made. B denied this, and contended that the shares last sold were the identical shares pledged. Held that if B was at all times ready and willing to transfer shares to A on payment of the loan, he was not liable for the higher price obtained for the shares first sold. Hayward v. Rogers, 62 Cal. 348. was [c] Where a bailee unlawfully sold pledged stock, he may be compelled to convey to the bailor similar stock owned by himself in the same corporation.-Krouse v. Woodward, 110 Cal. 638, 42 Pac. 1084. § 148. Sale. [a] Where one is entitled to a certain number of shares of stock issued to another, a demand is satisfied by a transfer of the requisite number of shares of the same corporation, though not the identical stock demanded, the shares transferred being of the same value and serving the same purposes.— Hardenbergh v. Bacon, 33 Cal. 356. [b] By a contract for the sale of stock the seller warranted that the stock should be worth two hundred dollars a share in one year from the date of the sale, and the buyer agreed to keep said stock until that time." Held, that a transfer of the stock on the books of the company, and the issue of new certificates to the buyer on the surrender of the old certificates which stood in the name of the seller, was not a breach of the buyer's contract to keep the stock.-Hawley Brumagim, 33 Cal. 394. V. [c] If one delivers number of shares of stock to another upon the consideration of the performance of certain acts by the other, and such other does not comply with his contract, and refuses to comply, he is bound to reassign the stock, and becomes a trustee as to such stock.-Johnson v. Kirby, 65 Cal. 482, 486, 4 Pac. 458. [d] The right of a seller of corporate stock to recover the purchase price held unaffected by the buyer's use of the stock of the corporation. Kennedy v. Lee, 147 Cal. 596, 82 Pac. 257. [e] A contract of sale of corporate stock held a contract for the conditional sale thereof. Kennedy v. Lee, 147 Cal. 596, 82 Pac. 257. FOR AUTHORITIES FROM OTHER STATES: 53 L. R. A. 153, note; 12 Cent. Dig., cols. 615-627, §§ 493-506. § 149. Execution Sale-Rights and Liabilities of Purchaser. [a] A party who purchases, at sheriff's sale, stock of an incorporation, knowing that the certificates of such stock have been previously hypothecated, is chargeable with notice of the fact, and takes subject to the claim of the pledgee.-Weston v. Bear River etc. Min. Co., 6 Cal. 425. [b] Execution purchaser without notice of pledge of untransferred stock takes it discharged of lien.-Farmers' etc. Bank v. Wilson, 58 Cal. 600. [c] One who purchases at execution sale shares of a corporation standing on the books of the corporation in the name of the judgment debtor is entitled to have the certificate of such shares reissued to him as such purchaser, if, at the time of the purchase, he acts in good faith, and without notice that the outstanding certificate has been assigned or pledged to some person other than the judg ment debtor.-West Coast Safety Faucet Co. v. Wulff, 133 Cal. 315, 85 Am. St. Rep. 171, 65 Pac. 622. § 150. Registration or Transfer on Corporate Books-Necessity. [a] Under the twelfth section of the act concerning corporations, passed April 22, 1850, |