Martin v. Palmer Union Oil Co.

OLNEY, J.

This is an appeal by the plaintiff from a judgment against him rendered on demurrer to his complaint. The action is one to compel the defendant company to recognize the plaintiff as the owner of three thousand two hundred shares of its capital stock, although such shares have been sold by the defendant to pay an assessment levied by it. The sole question is as to the validity of the assessment.

[387]

The assessment is attacked on the ground that it was levied in violation of an express contract by the defendant. It appears from the complaint that the stock of the defendant is divided into preferred and common shares, that stock of both kinds was issued, that in this situation the defendant sold six hundred thousand shares of its common stock, presumably treasury stock, under a contract that such shares should not be assessable and caused an indorsement to that effect to be placed upon the certificates issued to evidence such shares, that the plaintiff bought his shares direct from the company under this contract and received a certificate indorsed in accordance with it, and that the company nevertheless subsequently levied an assessment, sold the plaintiff’s stock under it, and has since refused to recognize him as a stockholder. The complaint also sets forth, undoubtedly for the purpose of presenting the question of law in dispute between the parties, that neither the articles of incorporation nor the by-laws of the company contain any provision for the issuance of nonassessable stock.

It is apparent at once that the validity of the assessment depends upon the invalidity of the company’s contract that the stock it was selling and of which the plaintiff bought a part should be nonassessable. The plaintiff relies upon the authority of

Lum

v.

American Wheel Co.,

165 Cal. 657, [Ann.. Cas. 1916Al, 816, 133 Pac. 303]. It was there held that a contract between a corporation and a stockholder that the shares of the latter were not assessable was valid. It is not certain on the face of the opinion whether it was intended to hold that such a contract is valid when a provision permitting it is found in the articles of incorporation, or that it is valid even if such provision were not found in the articles of incorporation. An examination of the record in the case, however, discloses that it nowhere appears that the articles of the defendant corporation contained any such provision. The record likewise discloses that, so far as appears, the contract involved was particular to the plaintiff and not common to all the stockholders, so that the effect of it would be at once to make a distinction between the shares of the plaintiff and the other shares of the corporation. The case decided, therefore, was exactly the one now presented.