corporation; or, if not so satisfactory, then one approved by a judge of the superior court of the county in which the principal office of the corporation is situated, conditioned to protect the corporation against any liability to the legal representatives of the owner of the shares, in case of his or her death before the transfer; and if such affidavit or other evidence or bond be not furnished when required, as herein provided, neither the corporation, nor any officer thereof, shall be liable for refusing to enter the transfer on the books of the corporation. En. March 21, 1872. Amd. 1873-74, 205; 1883, 4.

Legislative History.

This section is based on section 12 of the corporation act of 1850, as amended April 8, 1862, Statutes 1862, page 111.

The text is the same as the section as amended in 1873-74, except that it has "judge of the superior court" where the former section had district judge or county judge.'

The original section as enacted in 1872 was as follows: "In all transfers of shares of stock in corporations, on behalf of owners residing out of the state, the president, secretary, or directors of such corporation, before entering such transfer on the books of the corporation or issuing the certificate therefor to the transferee, must require from such attorney, or from the person claiming under such transfer, a bond of indemnity with two sureties, satisfactory to the officers of the corporation, or if not so satisfactory, then approved by the district judge of the district in which the principal office of the corporation is situated, conditioned to protect such corporation against any liability to the legal representatives of the owner of such stock, in case of his or her death before such transfer; and in case of refusal to furnish such bonds upon request, such transfer is utterly void as against the corporation.

Section Cited.

Brown v. S. F. Gas Light Co., 58 Cal. 428.

Annotation.

Where the executor under a will probated in New York was given power to sell stock of a California corporation constituting part of the estate, upon indorsement and delivery of such stock the corporation is required to enter the transfer on its books without issue of letters of administration in California and without the bond provided for in this section. (Brown v. Gas Light Co., 58 Cal. 428.)

ACT TO RELIEVE DIRECTORS VOID.

Sec. 327, C. C. Any contract or contracts, verbal or written, hereafter made, whereby it is sought directly or indirectly to relieve any director or trustee of any corporation or joint stock association from any liability imposed by section three of article twelve of the Constitution of California, are hereby declared to be and shall be null and void. En. Stats. 1880, 9. See sec. 3, art. XII, Const., ante.

§ 333.

§ 334.

Levy of assessment-Old assessment remaining unpaid.
What order shall contain.

3 347.

Action for recovery of stock, and limitation thereof.

§ 348. Affidavits of publication-Affidavits of sale-To be filed.

§ 349. Waiver of sale-Action to recover assessment.

DIRECTORS MAY LEVY ASSESSMENTS.

Sec. 331, C. C. The directors of any corporation formed or existing under the laws of this state, after one-fourth of its capital stock has been subscribed, may, for the purpose of pay

ing expenses, conducting business, or paying debts, levy and collect assessments upon the subscribed capital stock thereof, in the manner and form, and to the extent provided herein. En. March 21, 1872. Amd. 1873-74, 206.

Legislative History.

The act of March 5, 1861, page 41, provided for assessments by mining corporations mining outside of the state. The act of April 4, 1864 (Stats. 1863-64, p. 404), provided for assessments by all corporations. This act was repealed March 26, 1866, by a similar act (Stats. 1865-66, p. 458), which was supplemented by act of March 9, 1870, page 229. These acts form the basis of the provisions of the article. The original section is as follows: "The directors of any corporation formed under the laws of this state, for the purpose of paying expenses, conducting business or paying debts, may levy and collect assessments upon the capital stock thereof in the manner and form, and to the extent provided herein. (See, also, Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 193-200, 3 Pac. 661, 802.)

Section Cited.

Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 194, 3 Pac. 661, 802; Younglove v. Steinman, 80 Cal. 377, 22 Pac. 189; Lankershim Ranch Land etc. Co. v. Herberger, 82 Cal. 603, 23 Pac. 134; Arroyo D. & W. Co. v. Superior Court, 92 Cal. 50, 27 Am. St. Rep. 91, 28 Pac. 54; San Joaquin L. & W. Co. v. Beecher, 101 Cal. 80, 35 Pac. 349; San Bernardino etc. Co. v. Merrill, 108 Cal. 492, 41 Pac. 487; Market St. Ry. Co. v. Hellman, 109 Cal. 588, 42 Pac. 225; Ventura etc. Ry. Co. v. Hartman, 116 Cal. 263, 48 Pac. 65; Walter v. Merced etc. Assn., 126 Cal. 586, 59 Pac. 136; Welch v. Sargent, 127 Cal. 82, 59 Pac. 319; Shively v. Eureka etc. Min. Co., 129 Cal. 296, 61 Pac. 939; Herbert Craft Co. v. Bank of Orland, 133 Cal. 66, 65 Pac. 143; Union Sav. Bank v. Dunlap, 135 Cal. 632, 67 Pac. 1084.

Annotation.

Necessity for Assessment.-The propriety of levying an assessment vests in the discretion of the directors. (Visalia etc. R. R. Co. v. Hyde, 110 Cal. 632, 52 Am. St. Rep. 136, 43 Pac. 10.)

Assessment-Construction of Term.-The term "assessment" used in section 5, article VI of the Constitution, conferring jurisdiction upon the superior court in all cases at law, which involve the legality of any tax, impost, assessment, etc., does not include assessments made under section 331 of the Civil Code by a private corporation upon its stockholders. (Arroyo Ditch etc. Co. v. Superior Court, 92 Cal. 47, 27 Am. St. Rep. 91, 28 Pac. 54.)

Corporation Laws-15

Assessments-Act of 1864.-The act of 1864, empowering trustees to levy assessments upon the capital stock of corporations, held applicable to all corporations formed under the general laws of the state. (Sullivan v. Triunfo etc. Co., 39 Cal. 459. To same effect: Santa Cruz Co. v. Spreckels, 65 Cal. 197, 3 Pac. 661, 802.)

Assessments-Power of Trustees to Levy.-The trustees of a corporation have the power to levy and collect, for purpose of paying the proper and legal expenses of the company, assessments in excess of the amount of indebtedness allowed by the by-laws. (Sullivan v. Mining Co., 29 Cal. 585.)

Trustees will not be enjoined from selling stock for assessments levied to pay proper and legal expenses of the company if the assessment does not exceed the amount allowed by law. (Sullivan v. Mining Co., 29 Cal. 585.)

Corporation has no power to recover from stockholders any amount other than amounts of assessments duly levied. (California Sugar Mfg. Co. v. Schafer, 57 Cal. 396.)

A corporation can enforce its delinquent assessments upon the shares liable therefor, no matter how many transfers have been mrade subsequent to the assessments. (Craig v. Hesperia etc. Co., 113 Cal. 7, 54 Am. St. Rep. 316, 45 Pac. 10.)

There are but two limitations to the power conferred by section 331-the first being that no one assessment must exceed ten per cent of the amount of the capital stock named in the articles of incorporation; and the second, that no assessment must be levied while any portion of a previous one remains unpaid. But to each of these limitations certain exceptions are made. One of the exceptions to the first limitation is, that 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, one assessment may be for the full amount unpaid upon the capital stock, even though it exceed ten per cent of the amount of the capital stock named in the articles of incorporation; or if a less amount is sufficient, then it may be for such a percentage as will raise that amount. And one of the exceptions to the second limitation, which prohibits the levy of any assessment while any portion of a previous one remains unpaid, is when the previous assessment "falls within the provisions of either the first, second, or third subdivision of section 332." In other words, when the previous assessment falls within the provisions of either the first, second, or third subdivision of section 332, another assessment may be levied while the previous one remains unpaid. (Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 195, 3 Pac. 661, 802.)

Assessment of Paid-up Stock.-Corporation formed and existing under laws of this state may levy and collect assessments for corporate purposes on shares upon which the subscriptions have been

fully paid-up. (Santa Cruz R. R. v. Spreckels, 65 Cal. 193, 3 Pac. 661, 802. To same effect: Green v. Abietine etc. Co., 96 Cal. 328, 31 Pac. 100.)

Under act of March 26, 1866, the capital stock of a corporation which has been fully paid for is assessable. (Sayre v. Citizens' Gaslight & H. Co., 69 Cal. 208, 7 Pac. 437, 10 Pac. 408.)

Corporate stock is assessable when fully paid up, and the rule applies equally on paid-up stock issued below par for property conveyed as on such stock purchased at the same rate for cash, and the holders of such stock are estopped to deny that the stock is paid up. (Green v. Abietine Med. Co., 96 Cal. 322, 31 Pac. 100.) Stock purchased at a discount without a certificate showing it to be fully paid up or nonassessable stock or without proof that it was agreed that it should be nonassessable is liable to be assessed up to its par value. (Stockton C. H. & A. Works v. Houser, 109 Cal. 1, 14 Pac. 809.)

Terms of Subscription-Measure of Liability.-A subscriber to the stock of a corporation may, by the terms of his subscription, vary his liability to calls or assessments from that imposed by the statute, but the liability of the subscriber in such case is measured by the terms of his agreement, and is to be determined by a construction of the language used in the agreen.ent. (Ventura etc. R. R. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65; West v. Crawford, 80 Cal. 19, 21 Pac. 1123; Marysville etc. Co. v. Johnson, 93 Cal. 538, 27 Am. St. Rep. 215, 29 Pac. 126.)

Subscribers for corporate stock may become liable under terms of contract to corporation when organized, although assessments are not levied according to the code, or stock certificate issued. (California etc. Hotel Co. v. Callender, 94 Cal. 120, 28 Am. St. Rep. 99, and note 105, 29 Pac. 859. To same effect: Kohler v. Agassiz, 99 Cal. 17, 33 Pac. 741; San Joaquin etc. Co. v. Beecher, 101 Cal. 79, 35 Pac. 349; Pacific Fruit Co. v. Coon, 107 Cal. 452, 40 Pac. 542.)

An agreement on the stub certificate that each shareholder when the stock was issued was to pay one dollar a month for thirtyfour months, in the absence of proof of authority in the directors to sell the stock at less than par, must be construed not to be a contract of purchase, but an agreement merely to relieve the corporation from the necessity of making calls and assessments upon the stock. (Tulare etc. Bank v. Talbot, 131 Cal. 45, 63 Pac. 172.)

Agreement to Purchase Stock After Incorporation, and to pay for it in installments at regular intervals, in case it is required, is an agreement to pay assessments. (California Sugar Co. v. Schafer, 57 Cal. 396. Distinguished: Marysville etc. Co. v. Johnson, 93 Cal. 550, 27 Am. St. Rep. 220, 29 Pac. 126.)