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8 321a. CHANGE OF PRINCIPAL PLACE OF BUSINESS, PROCEDURE. Every corporation that has been or may be created under the general laws of this state may change its principal place of business from one place to another in the same county, or from one city or county to another city or county within this state. Before such change is made, the consent in writing, of the holders of two-thirds of the capital stock of the corporation must be obtained and filed in its office; or if the corporation has no capital stock, then the consent in writing of two-thirds of the members thereof, must be obtained and filed in its office. When such consent is obtained and filed, notice of the intended removal or change must be published, at least once a week, for three successive weeks, in some newspaper published in the county, wherein said principal place of business is situated, if there is one published therein; if not, in a newspaper of an adjoining county, giving the name of the county or city where it is situated and that to which it is intended to remove it. Whenever any such change is made, a copy of the resolution or action of the board of directors authorizing the same together with a copy of an affidavit of the publication above required, all duly certified by the president and secretary of the corporation with the corporate seal affixed shall be filed in each office where the original articles of incorporation are, or any copy thereof is required to be filed. This section shall not be construed to require such consent, notice or publication in the case of any such removal from one location to another in the same city, town or village.

History: Enactment approved April 3, 1876, as sec. 321, Code Amdts. 1875-6, p. 73; amended by Code Commission, Act March 16, 1901, Stats. and Amdts. 1900-1, p. 348; act held unconstitutional, see Kerr's Cyc. C. C., $ 4; amended March 20, 1903, Stats. and Amdts. 1903, p. 254; May 5, 1917, Stats. and Amdts. 1917, p. 252. In effect July 27, 1917.

CHAPTER II.

CORPORATE STOCK.

ARTICLE I.

STOCK AND STOCKHOLDERS.

$ 322. Liability of stockholders. § 322.

LIABILITY OF STOCKHOLDERS. Stockholders of corporations shall be liable for the payment of corporate debts and liabilities as follows:

1. Each stockholder of a corporation, other than a corporation hereafter organized under the laws of this state which shall adopt and use as the last word of its corporate name the word “Limited,” or its abbreviation, "Ltd.,” is individually and personally liable for such proportion of all its debts and liabilities contracted or incurred during the time he was a stockholder as the amount of stock or shares owned by him at the time the debt or liability was incurred bears to the whole of the subscribed capital stock or shares of the corporation; and such liability is not released by any subsequent transfer of stock. If any stockholder pays his proportion of any debt due from the corporation, incurred while he was such stockholder, he is relieved from any further personal liability for such debt; and if an action has been brought against him upon such debt, it must be dismissed as to him upon his paying the costs or such proportion thereof as may be properly chargeable against him.

2. In a corporation having no capital stock, each member is individually and personally liable for an equal share of its debts and liabilities.

3. ["Limited" corporation.] In a corporation hereafter organized under the laws of this state, having a capital stock, and which shall adopt and use as the last word of its corporate name, the word “Limited,” or its abbreviation, "Ltd.,” if its subscribed and issued shares have not been fully paid, in money paid, labor done, or property actually received by the corporation, and the capital paid in shall be insufficient to satisfy its debts and obligations, each stockholder shall be liable to the creditors of the corporation for an amount equal to that not paid up on the shares held by him, or such proportion of that sum as shall be required to satisfy such debts and obligations; provided, that no judgment upon such liability shall be satisfied out of the property of such stockholder until judgment upon the debt or obligation upon which such liability is founded shall have been first entered against the corporation, and an execution thereon shall have been returned unsatisfied in whole or in part; and the enforcement of any judgment against the stockholder, and of any execution levied thereunder, shall be stayed until such return shall have been made. Any stockholder in such corporation who shall pay any debt or obligation for which he is made liable by the provisions of this subdivision of this section, may recover the amount so paid in an 'action against the corporation, in which action only the property of the corporation shall be taken in satisfaction of any judgment obtained therein, and not the property of any stockholder. Any amount so paid by such stockholder, and not repaid to hin by the corporation or recovered in such action, shall be considered as having been paid on his shares.

4. [Foreign corporation.] The liability of each stockholder of a corporation formed under the laws of any other state or territory of the United States, or of any foreign country, and doing business within this state, is the same as the liability of a stockholder of a corporation created under the constitution and laws of this state.

[Joint or several actions by creditor.] Any creditor of a corporation may commence joint or several actions against any of its stockholders or members for the amount or proportion of his claim payable. by each; and in such action the court must ascertain the amount or the proportion of the claim or debt for which each defendant is liable, and a several judgment must be rendered against each, in conformity therewith.

[Application of "stockholder" and "member."] The terms “stockholder" and "member," as used in this section, applies[y] not only to such persons as appear by the books of the corporation to be such, but also to every equitable owner of stock or of a membership, although the same appears on the books in the name of another; and also to every person who has advanced the installments or purchase money of stock or a membership in the name of a minor, so long as the latter remains a minor; and also to every guardian, or other trustee, who voluntarily invests any trust funds in the stock or membership.

Trust funds in the hands of a guardian, or trustee, are not liable under the provisions of this section by reason of any such investment; nor must the person for whose benefit the investment is made be responsible in respect to the stock until he becomes competent and able to control the same; but the responsibility of the guardian or trustee making the investment continues until that period. Stock held as collateral security, or by a trustee, or in any other representative capacity, does not make the holder thereof a stockholder within the meaning of this section, except in the cases above mentioned, so as to charge him with any proportion of the debts or liabilities of the corporation; but the pledgor, or person or estate represented, is to be deemed the stockholder, as respects such liability.

[In effect, when.) Sec. 2. This act shall take effect and be in force upon the approval and ratification by the people of an amendment to section three of article twelve of the constitution of this state submitted by the forty-second session of the legislature to the people; and if such amendment so submitted shall not be so approved and ratified, this act shall thereafter be void.

History: Enacted March 21, 1872; amended March 30, 1874, Code Amdts. 1873-4, p. 203; March 15, 1876, Code Amdts. 1875-6, p. 73; by Code Commission, Act March 16, 1901, Stats, and Amdts. 1900-1, p. 349; act held unconstitutional, see Kerr's Cyc. C. C., $ 4; amendment re-enacted March 20, 1905, Stats. and Amdts. 1905, p. 396; May 21, 1917, Stats, and Amdts. 1917, p. 786. In effect on approval and ratification by people of constitutional amendments as provided in sec. 2 of Act.

LIABILITY OF STOCKHOLDERS. stock subscriptions by which the subscriber 1, 2. Amount of liability.

gains an advantage over other subscribers 3-10. Collateral agreements as to stock are void, for the reason that such secret subscriptions.

advantages are in the nature of a fraud 11. Complaint in action to enforce.

upon subsequent subscribers and upon per12–15. Construction-"Stock" and "shares"

sons who afterward become creditors of the Liability.

corporation.-Tidewater Southern R. Co. v. 16, 17. Enforcement of liability.

Vance, 31 Cal. App. 503, 160 Pac. 1097. 18. Foreign corporations.

6. In an action brought by a corporation 19, 20. Liability attaches, when.

to recover on 21-25. Nature of liability.

a promissory note given in

payment of a subscription for shares of its 1. Amount of liability. Where stock is stock, the defendant may show by parol sold for money and the purchase price is that the sale was made upon the agreement less than the par value, the difference be- that the corporation would, if the defendant tween the par value and the amount actually So wished, take the stock off his hands at paid is the measure of the stockholder's lia- the purchase price, at any time within ten bility. Where, however, the stock is not months from the date of the note.-Tidesold for cash, but issued in return for real water Southern R. Co. v. Harney, 32 Cal. or personal property having no defined value, App. 253, 162 Pac. 664. the rule is that where the corporation and 7. Where such agreement is made by an stockholder have agreed upon a given valu

agent of the corporation who was authoration for the property transferred, such val- ized to sell stock, and had the blank subuation is binding and conclusive unless it is

scription book, the corporation is not perfraudulent in purpose and effect; and if the mitted to deny the authority of the agent parties have put upon the property a valua- to enter into such a conditional agreement. tion in excess of what they believed to be Tidewater Southern R. Co. v. Harney, 32 its true value, this is constructive fraud Cal. App. 253, 162 Pac. 664. upon the creditors, and the stock will be

8. Where the agent of the corporation deemed paid only to the extent of the actual

indorses such agreement on the back of the value of the property received in exchange duplicate subscription agreement retained for it.--Harrison V. Armour, 169 Cal. 787,

by the defendant, but omits to make such 147 Pac. 1166.

indorsement on the original retained by the 2. Where the stock of a corporation is corporation, the corporation must suffer for issued without being fully paid up, the the fraud of its agent.—Tidewater Southern amount remaining unpaid is, so far as its R.: Co. v. Harney, 32 Cal. App. 253, 162 Pac. creditors are concerned, deemed to be money 664. due to the corporation from its stockholders, 9. Under such circumstances the defenand resort to such fund may be had by the dant is not chargeable with negligence in creditors.--Harrison v. Armour, 169 Cal. 787, failing to discover the omission and to insist 147 Pac. 1166.

that the agent make the proper indorsement 3. Collateral agreements as to stock sub- on the original subscription, as such subscriptions.-An agreement made by a fully scriber had the right to rely upon the organized corporation with a subscriber for agent's promise and representations.—Tidecertain shares of its capital stock, that the water Southern R. Co. v. Harney, 32 Cal. subscriber should have the right at any time App. 253, 162 Pac. 664. within ten months to cancel his subscrip- 10. Under such circumstances the defention and to recall his promissory note given dant is not required to resort to an indetherefor, is enforceable against the corpo- pendent action for damages to enforce her ration, in the absence of any showing that claims under the contract.-Tidewater Southany later subscriber had been defrauded by ern R. Co. v. Harney, 32 Cal. App. 253, 162 his reliance upon such subscription, or that Pac. 664. any subsequent creditor had relied upon 11. Complaint in action to enforce. - A such subscription in dealing with the cor- complaint in an action against stockholders poration.--Tidewater Southern R. Co. V.

to recover the amount of their respective Vance, 31 Cal. App. 503, 160 Pac. 1097.

liabilities arising out of an alleged indebt4. Agreement made by a fully organized edness of the corporation to the assignor corporation with a subscriber to its capital of the plaintiff, which avers that the corstock that the subscriber should within ten poration "within three years last past bemonths have the right to cancel his sub- came and now is indebted to the plaintiff scription and recall his note given therefor for a balance due upon an open book acis not void because not indorsed on the con- count," sufficiently shows that the defentract of subscription, and the note is not dants were stockholders at the time of the enforceable by an assignee of the corpora- creation of the original account, in the tion where no one was injured by the failure absence of a special demurrer.-Cutting v. to indorse the agreement on the subscription Oliphant, 27 Cal. App. 120, 148 Pac. 940. and no secrecy was connived at by the sub- 12. Construction—"Stock” and “ghares" scriber in making the collateral agreement.- Liability.There is no basis for a concluTidewater Southern R. Co. v. Vance, 31 Cal. sion that the legislature designed to restrict App. 503, 160 Pac. 1097.

the meaning of the term "stockholder" so 5. Secret collateral agreements

as to as to exclude from liability any person who 15.

voluntarily accepts ownership thereof and goods were later delivered and accepted, is sui generis. The idea appears to have attached to the stockholders owning stock been to enlarge the term so as to make at the time the contract was made and not it include persons who might not otherwise

to those who were stockholders at the be held to be included.—Western Pac. R. Co.

time the goods were delivered. -- Coulter v. Godfrey, 166 Cal. 346, Ann. Cas. 1915B

Dry Goods Co. v. Wentworth, 171 Cal. 500,

153 Pac. 939. 825, 136 Pac. 284.

20. Each stockholder of a corporation is 13. The words "stock" and "shares" are

individually liable under article XI, secnot interchangeable. Film Producers V.

tion 3, of the constitution and section 322 Jordan, 171 Cal. 664, 154 Pac. 604.

of the Civil Code, not only for all "debts," 14. The liability of the stockholders is but for all "liabilities" contracted while a primary and statutory liability which is he is a stockholder, and a liability is created in nowise affected by actions against the when a contract binding on it is made by corporation of which they are stockholders the corporation, independently of any questo recover upon its contractual obligations. tion as to when the right to enforce it may -Union Trust Co. v. Journeay, 29 Cal. App. accrue.--Coulter Dry Goods Co. v. Went502, 156 Pac. 999.

worth, 171 Cal. 500, 153 Pac. 939. An action brought upon the statutory

21. Nature of liability. The liability of liability of the defendants as stockholders a stockholder to the corporation for the of a corporation to recover the balance due amount of his unpaid assessment is one on the corporation's promissory note is not arising from contract.-Marshall v. Wentz, abated by the pendency of a prior action 28 Cal. App. 540, 153 Pac. 244. against the corporation to recover judgment 22. The liability of a paid-up stockupon the note, nor by the pendency of a holder to the corporation for the amount prior action against five of the nine defen- of his assessment does not differ from the dants in the present action to recover judg- liability of a stockholder who is assessed ment against such defendants upon their upon his unpaid subscription for stock, so contractual liability as general guarantors far as the question of garnishment is conof such indebtedness of the corporation.- cerned.—Marshall v. Wentz, 28 Cal. App. Union Trust Co. v. Journeay, 29 Cal. App. 502, 540, 153 Pac. 244. 156 Pac. 999.

23. A corporation when created becomes 16. Enforcement of liability. The state the agent of the stockholders to make such superintendent of banks is not authorized, contracts and incur such liabilities as are under the banking act of 1909, to enforce authorized by law and its articles of incorthe constitutional liability of the stockhold- poration, and its contracts thus made bind ers of a bank which he has taken over for its stockholders to the extent named.-Marthe purpose of liquidation, to the creditors; shall v. Wentz, 28 Cal. App. 540, 153 Pac. 214. such right is personal to the creditors, and

24.

The liability of a stockholder of a no part of the business of banking.-Will- corporation to the corporation for the iams v. Carver, 171 Cal. 658, 154 Pac. 472. amount of an assessment is one arising upon

17. A judgment creditor who has an implied contract, and subject to garhausted his legal remedies against a cor- nishment.--Marshall v. Wentz, 28 Cal. App. poration may maintain an action in equity 540, 153 Pac. 244. against a stockholder who is indebted on an 25. Stockholders in a corporation are perunpaid stock subscription.-Llewellyn Iron sonally liable for the payment of a note Works V. Abbott Kinney Co., 172 Cal. 210, which they sign.-Miller & Lux v. Dunlap, 155 Pac. 986.

28 Cal. App. 313, 152 Pac. 309. 18. Foreign corporations.—Where a corporation is formed outside of California for

8 324. the purpose of doing business in this state, 1. Pledge or transfer of stock.The dethe stockholders so far as concerns business livery of the certificate with assignment and transacted here are liable in accordance power indorsed, passes the entire title in with our statutes. It is not necessary to the shares, both legal and equitable.-Fowles the stockholders' liability that the articles v. Nat. Bank of California, 167 Cal. 653, 140 of incorporation contain language showing Pac. 271. the specific purpose of transacting business 2. A pledge of stock, not recorded in the here. It is enough that the articles author- books of the corporation, is valid as beize the doing of business in any state or tween the parties, and the issuance of a country which the directors may select. The new certificate for such stock can not be stockholder impliedly consents that when called in question by third persons.--Manthe directors select a place for the transac- ning v. App Consolidated Gold Min. Co., 171 tion of corporate business that they shall Cal. 611, 154 Pac. 301. have power to bind him so far as the laws 3. Title to stock may be transferred by of that place may require.-Provident Gold delivery of certificates.Stowe V. Harvey, Min. Co. v. Haynes, 173 Cal. 44, 159 Pac. 155. 241 U. S. 199, 60 L. Ed. 953, 36 Sup. Ct. Rep.

19. Llability attaches, when.-The liabil- 541, affirming 134 C. C. A. 635, 219 Fed. 17. ity of the stockholders to pay their pro- 4. A transfer of corporate stock is good portionate parts of a debt arising out of an as against creditors where the certificate, executory agreement of the corporation to properly indorsed, is delivered to the purpurchase goods at an agreed price, which chaser, although the stock remains on the

ex

books of the company in the name of the ery of the stock. Where the tender of the seller.-Stowe v. Harvey, 241 U. S. 199, 60 amounts was alleged in the complaint and L. Ed. 953, 36 Sup. Ct. Rep. 541, affirming denied in the answer a finding by the court 134 C. C. A. 635, 219 Fed. 17.

on conflicting evidence that no tender was

made is conclusive on the appellate court. $325.

The tender must be made in such unequivo1. Stock held in name of married woman.

cal terms that no bona fide dispute or -One is not called upon to make any in- misunderstanding could arise regarding it. quiries in taking stock standing on the -Shannon v. Tooker, 167 Cal. 484, 140 Pac. books of a corporation in the name of a

10. woman, married or single, and he has the right to assume, in the absence of some

8 349. thing reasonably sufficient to create a sus

1. Action to enforce assessment.-Section picion to the contrary, that she is the sole

349 of the Civil Code gives the board of owner and empowered to transfer the same. directors the right to proceed against a -Fowles v. Nat. Bank of California, 167

stockholder personally to collect any assessCal. 653, 140 Pac. 271.

ment remaining unpaid and impose upon

him the correlative duty of paying it. To all 8 331.

this he assented by accepting the stock 1. Levy of assessment. - Ordinarily the and there was an implied contract on his board may levy assessments upon the cap- part to abide by the action of the board of ital stock after as well as before the par directors in those particulars and to pay value of the stock has been fully paid. assessments when legally called upon by This section is in the nature of a grant them to do so.—Marshall v. Wentz, 28 Cal. of power, and authorizes a corporation to App. 540, 153 Pac. 244. make a levy and collect the assessments 2. When one acquires stock and becomes for certain purposes, but it is not com- a member of the corporation, all the provipulsory that the corporation do so.-Lum v. sions of the Civil Code declaring under what American Wheel & Veh. Co., 165 Cal. 657, circumstances, for what purposes and how Ann. Cas. 1915A 816, 133 Pac. 303.

the directors may levy assessments and the 2. Where the

stock subscription con- methods they may pursue in collecting them, tract is silent upon the question this and enter into and become a part of his contract the following sections of the code become relation with it.—Marshall v. Wentz, 28 Cal. part of the contract, with the result that App. 540, 153 Pac. 244. calls or assessments for unpaid subscriptions can be made only upon the terms

$ 354. and in the manner and form prescribed in

SUITS BY CORPORATIONS. those sections.- Los Angeles Athletic Club v. Spires, 166 Cal. 173, 135 Pac. 298.

1, 2. As to generally.

3. Forfeiture of corporate charter-Suff3. In an action to recover on a subscription to corporate stock the subscriber can

ciency of pleading of.

4, 5. not contend that such subscription is only

-Proof of forfeiture-Admissibility of

evidence. collectible by assessments levied under this and the following sections.-Beedy v. San

6, 7. —Substitution of trustees. Mateo Hotel Co., 27 Cal. App. 653, 150 Pac.

1. As to generally.-In an action on 810.

promissory note, brought by a national 4. The only difference between the lia- bank, it can not be urged as a defense that bility of a paid-up stockholder to the cor

the term of its corporate existence had poration for the amount of his assessment

expired, where there is evidence that the and the liability of a stockholder who is plaintiff was carrying on its business as a assessed upon his unpaid subscription, if

national bank when the transaction occurred any, is that the one might be founded upon

and when the action was commenced and an express contract to pay, the other upon for fourteen years prior thereto, as such one implied. Either would be a "debt."- corporation was at least a de facto corporaMarshall v. Wentz, 28 Cal. App. 540, 153 Pac.

tion and entitled to maintain the action.244.

First Bank v. Pennig, 28 Cal. App. 267, 151 5. The corporation is the agent

of

Pac. 1153. stockholder to carry on its business, incur 2. The directors of

every corporation, liabilities and call on him for his proper whether it has forfeited its charter or not, proportion of the money needed to meet are the real persons and actors in actions its current expenses and other obligations. begun by it or for its benefit, and this being There exists an implied contract upon his

so, it does not seem to be so material part to pay to it money whenever for the in what name they begin their action so proper purposes of the corporation the di- long as the identity of their act as the act rectors by legal assessments call upon him of the corporation is undeniable.-Kehrleinfor it.Marshall v. Wentz, 28 Cal. App. 540, Swinerton Construction Co. v. Rapken, 30 153 Pac. 244.

Cal. App. 11, 156 Pac. 972.

3. Forfeiture of corporate charter-Sufi§ 347.

ciency of pleading of.-In an action by a 1. Action for recovery of stock.A con- corporation, an allegation in the answer of dition precedent is imposed upon the recov- the incapacity of the plaintiff to begin

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