16, 17. Enforcement of liability.
18. Foreign corporations.
19, 20. Liability attaches, when.
21-25. Nature of liability.

1. Amount of liability.-Where stock is sold for money and the purchase price is less than the par value, the difference between the par value and the amount actually paid is the measure of the stockholder's liability. Where, however, the stock is not sold for cash, but issued in return for real or personal property having no defined value, the rule is that where the corporation and stockholder have agreed upon a given valuation for the property transferred, such valuation is binding and conclusive unless it is fraudulent in purpose and effect; and if the parties have put upon the property a valuation in excess of what they believed to be its true value, this is constructive fraud upon the creditors, and the stock will be deemed paid only to the extent of the actual value of the property received in exchange for it.-Harrison v. Armour, 169 Cal. 787, 147 Pac. 1166.

2. Where the stock of a corporation is issued without being fully paid up, the amount remaining unpaid is, so far as its creditors are concerned, deemed to be money due to the corporation from its stockholders, and resort to such fund may be had by the creditors.-Harrison v. Armour, 169 Cal. 787, 147 Pac. 1166.

3. Collateral agreements as to stock subscriptions. An agreement made by a fully organized corporation with a subscriber for certain shares of its capital stock, that the subscriber should have the right at any time within ten months to cancel his subscription and to recall his promissory note given therefor, is enforceable against the corporation, in the absence of any showing that any later subscriber had been defrauded by his reliance upon such subscription, or that any subsequent creditor had relied upon such subscription in dealing with the corporation.--Tidewater Southern R. Co. V. Vance, 31 Cal. App. 503, 160 Pac. 1097.

4. Agreement made by a fully organized corporation with a subscriber to its capital stock that the subscriber should within ten months have the right to cancel his subscription and recall his note given therefor is not void because not indorsed on the contract of subscription, and the note is not enforceable by an assignee of the corporation where no one was injured by the failure to indorse the agreement on the subscription and no secrecy was connived at by the subscriber in making the collateral agreement.Tidewater Southern R. Co. v. Vance, 31 Cal. App. 503, 160 Pac. 1097.

stock subscriptions by which the subscriber gains an advantage over other subscribers are void, for the reason that such secret advantages are in the nature of a fraud upon subsequent subscribers and upon persons who afterward become creditors of the corporation.-Tidewater Southern R. Co. v. Vance, 31 Cal. App. 503, 160 Pac. 1097.

6. In an action brought by a corporation to recover on a promissory note given in payment of a subscription for shares of its stock, the defendant may show by parol that the sale was made upon the agreement that the corporation would, if the defendant so wished, take the stock off his hands at the purchase price, at any time within ten months from the date of the note.-Tidewater Southern R. Co. v. Harney, 32 Cal. App. 253, 162 Pac. 664.

7.

Where such agreement is made by an agent of the corporation who was authorized to sell stock, and had the blank subscription book, the corporation is not permitted to deny the authority of the agent to enter into such a conditional agreement.Tidewater Southern R. Co. v. Harney, 32 Cal. App. 253, 162 Pac. 664.

8. Where the agent of the corporation indorses such agreement on the back of the duplicate subscription agreement retained by the defendant, but omits to make such indorsement on the original retained by the corporation, the corporation must suffer for the fraud of its agent.-Tidewater Southern R. Co. v. Harney, 32 Cal. App. 253, 162 Pac. 664.

9.

Under such circumstances the defendant is not chargeable with negligence in failing to discover the omission and to insist that the agent make the proper indorsement on the original subscription, as such subscriber had the right to rely upon the agent's promise and representations.--Tidewater Southern R. Co. v. Harney, 32 Cal. App. 253, 162 Pac. 664.

10. Under such circumstances the defendant is not required to resort to an independent action for damages to enforce her claims under the contract.-Tidewater Southern R. Co. v. Harney, 32 Cal. App. 253, 162 Pac. 664.

A

11. Complaint in action to enforce. complaint in an action against stockholders to recover the amount of their respective liabilities arising out of an alleged indebtedness of the corporation to the assignor of the plaintiff, which avers that the corporation "within three years last past became and now is indebted to the plaintiff for a balance due upon an open book account," sufficiently shows that the defendants were stockholders at the time of the creation of the original account, in the absence of a special demurrer.-Cutting v. Oliphant, 27 Cal. App. 120, 148 Pac. 940.

5. Secret collateral agreements as to

voluntarily accepts ownership thereof and is sui generis. The idea appears to have been to enlarge the term so as to make it include persons who might not otherwise be held to be included.-Western Pac. R. Co. v. Godfrey, 166 Cal. 346, Ann. Cas. 1915B 825, 136 Pac. 284.

V.

13. The words "stock" and "shares" are not interchangeable. Film Producers Jordan, 171 Cal. 664, 154 Pac. 604. 14.

The liability of the stockholders is a primary and statutory liability which is in nowise affected by actions against the corporation of which they are stockholders to recover upon its contractual obligations. -Union Trust Co. v. Journeay, 29 Cal. App. 502, 156 Pac. 999.

15. An action brought upon the statutory liability of the defendants as stockholders of a corporation to recover the balance due on the corporation's promissory note is not abated by the pendency of a prior action against the corporation to recover judgment upon the note, nor by the pendency of a prior action against five of the nine defendants in the present action to recover judgment against such defendants upon their contractual liability as general guarantors of such indebtedness of the corporation.Union Trust Co. v. Journeay, 29 Cal. App. 502, 156 Pac. 999.

16. Enforcement of liability.-The state superintendent of banks is not authorized, under the banking act of 1909, to enforce the constitutional liability of the stockholders of a bank which he has taken over for the purpose of liquidation, to the creditors; such right is personal to the creditors, and no part of the business of banking.-Williams v. Carver, 171 Cal. 658, 154 Pac. 472.

17. A judgment creditor who has exhausted his legal remedies against a corporation may maintain an action in equity against a stockholder who is indebted on an unpaid stock subscription.-Llewellyn Iron Works v. Abbott Kinney Co., 172 Cal. 210, 155 Pac. 986.

18. Foreign corporations.-Where a corporation is formed outside of California for the purpose of doing business in this state, the stockholders so far as concerns business transacted here are liable in accordance with our statutes. It is not necessary to the stockholders' liability that the articles of incorporation contain language showing the specific purpose of transacting business here. It is enough that the articles authorize the doing of business in any state or country which the directors may select. The stockholder impliedly consents that when the directors select a place for the transaction of corporate business that they shall have power to bind him so far as the laws of that place may require.-Provident Gold Min. Co. v. Haynes, 173 Cal. 44, 159 Pac. 155. 19. Liability attaches, when.-The liability of the stockholders to pay their proportionate parts of a debt arising out of an executory agreement of the corporation to purchase goods at an agreed price, which

goods were later delivered and accepted, attached to the stockholders owning stock at the time the contract was made and not to those who were stockholders at the time the goods were delivered. Coulter Dry Goods Co. v. Wentworth, 171 Cal. 500, 153 Pac. 939.

20. Each stockholder of a corporation is individually liable under article XI, section 3, of the constitution and section 322 of the Civil Code, not only for all "debts," but for all "liabilities" contracted while he is a stockholder, and a liability is created when a contract binding on it is made by the corporation, independently of any question as to when the right to enforce it may accrue. Coulter Dry Goods Co. v. Wentworth, 171 Cal. 500, 153 Pac. 939.

21. Nature of liability.-The liability of a stockholder to the corporation for the amount of his unpaid assessment is one arising from contract.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

22. The liability of a paid-up stockholder to the corporation for the amount of his assessment does not differ from the liability of a stockholder who is assessed upon his unpaid subscription for stock, so far as the question of garnishment is concerned.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

23. A corporation when created becomes the agent of the stockholders to make such contracts and incur such liabilities as are authorized by law and its articles of incorporation, and its contracts thus made bind its stockholders to the extent named.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

24. The liability of a stockholder of a corporation to the corporation for the amount of an assessment is one arising upon an implied contract, and subject to garnishment.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

25. Stockholders in a corporation are personally liable for the payment of a note which they sign.-Miller & Lux v. Dunlap, 28 Cal. App. 313, 152 Pac. 309.

§ 324.

1. Pledge or transfer of stock.-The delivery of the certificate with assignment and power indorsed, passes the entire title in the shares, both legal and equitable.-Fowles v. Nat. Bank of California, 167 Cal. 653, 140 Pac. 271.

2. A pledge of stock, not recorded in the books of the corporation, is valid as between the parties, and the issuance of a new certificate for such stock can not be called in question by third persons.-Manning v. App Consolidated Gold Min. Co., 171 Cal. 611, 154 Pac. 301.

3. Title to stock may be transferred by delivery of certificates.-Stowe v. Harvey, 241 U. S. 199, 60 L. Ed. 953, 36 Sup. Ct. Rep. 541, affirming 134 C. C. A. 635, 219 Fed. 17.

4. A transfer of corporate stock is good as against creditors where the certificate, properly indorsed, is delivered to the purchaser, although the stock remains on the

books of the company in the name of the seller. Stowe v. Harvey, 241 U. S. 199, 60 L. Ed. 953, 36 Sup. Ct. Rep. 541, affirming 134 C. C. A. 635, 219 Fed. 17.

§ 325.

1. Stock held in name of married woman. -One is not called upon to make any inquiries in taking stock standing on the books of a corporation in the name of a woman, married or single, and he has the right to assume, in the absence of something reasonably sufficient to create a suspicion to the contrary, that she is the sole owner and empowered to transfer the same. -Fowles v. Nat. Bank of California, 167 Cal. 653, 140 Pac. 271.

§ 331.

1. Levy of assessment. — Ordinarily the board may levy assessments upon the capital stock after as well as before the par value of the stock has been fully paid. This section is in the nature of a grant of power, and authorizes a corporation to make a levy and collect the assessments for certain purposes, but it is not compulsory that the corporation do so.-Lum v. American Wheel & Veh. Co., 165 Cal. 657, Ann. Cas. 1915A 816, 133 Pac. 303.

2. Where the stock subscription contract is silent upon the question this and the following sections of the code become part of the contract, with the result that calls or assessments for unpaid subscriptions can be made only upon the terms and in the manner and form prescribed in those sections.-Los Angeles Athletic Club v. Spires, 166 Cal. 173, 135 Pac. 298.

3. In an action to recover on a subscription to corporate stock the subscriber can not contend that such subscription is only collectible by assessments levied under this and the following sections.-Beedy v. San Mateo Hotel Co., 27 Cal. App. 653, 150 Pac. 810.

4. The only difference between the liability of a paid-up stockholder to the corporation for the amount of his assessment and the liability of a stockholder who is assessed upon his unpaid subscription, if any, is that the one might be founded upon an express contract to pay, the other upon one implied. Either would be a "debt."Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

1. Action to enforce assessment.-Section 349 of the Civil Code gives the board of directors the right to proceed against a stockholder personally to collect any assessment remaining unpaid and impose upon him the correlative duty of paying it. To all this he assented by accepting the stock and there was an implied contract on his part to abide by the action of the board of directors in those particulars and to pay assessments when legally called upon by them to do so.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

2. When one acquires stock and becomes a member of the corporation, all the provisions of the Civil Code declaring under what circumstances, for what purposes and how the directors may levy assessments and the methods they may pursue in collecting them, enter into and become a part of his contract relation with it.-Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244.

1.

As to generally.-In an action on a promissory note, brought by a national bank, it can not be urged as a defense that the term of its corporate existence had expired, where there is evidence that the plaintiff was carrying on its business as a national bank when the transaction occurred and when the action was commenced and for fourteen years prior thereto, as such corporation was at least a de facto corporation and entitled to maintain the action.First Bank v. Pennig, 28 Cal. App. 267, 151 Pac. 1153.

2. The directors of every corporation, whether it has forfeited its charter or not, are the real persons and actors in actions begun by it or for its benefit, and this being So, it does not seem to be So material in what name they begin their action so long as the identity of their act as the act of the corporation is undeniable.-KehrleinSwinerton Construction Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

3. Forfeiture of corporate charter-Sufficiency of pleading of. In an action by a corporation, an allegation in the answer of the incapacity of the plaintiff to begin