San Bernardino Investment Co. v. Merrill
Before: Harrison
Synopsis
Corporation—Levy of Assessment—Subscription to Stock—Condition Precedent—Pleading.—In the absence of any provision to the contrary, a corporation cannot levy an assessment upon its capital stock until after thewhole amount thereof has been subscribed; but, under section 331 of the Civil Code, which provides that assessments may be levied after one-fourth of the capital stock has been subscribed, for the purpose of paying expenses, conducting business, or paying debts, the subscription of one-fourth of the capital stock is a condition precedent in this state to the exercise of the power given by the statute to levy an assessment, and, in order that a complaint by the corporation to collect an assessment should show a right to recover, it is necessary to allege that one-fourth of the capital stock has been subscribed.
Id,—Action to Recover Assessment — Strict Compliance with Statute.—Where á 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 statute, a strict observance of the statutory mode and provision is essential to its recovery.
Id.—Failure to Publish Notice of Delinquent Sale—Loss of Jurisdiction.—-Where the secretary of a corporation is not otherwise ordered by the board of directors, it is his duty to publish the notice of sale for delinquent assessments at least fifteen days prior to the day appointed by the board of directors for such sale, and, by failure to make publication of a delinquent sale for such period, the board loses all jurisdiction to sell the stock for the delinquent assessment, unless they shall begin anew all previous proceedings and publication subsequent to the levy of an assessment as authorized by section 346 of the Civil Code.
Id.—Election to Waive Further Proceedings other than by Action. 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.
Id.—Nature of Waiver—Lost Right.—Waiver is a voluntary act, and implies an election by the party to dispense with some thing of value, or to forego some advantage which he might at his option have demanded or insisted upon, and there can be no waiver of a right that has been lost.
Id.—Election of Remedies.—A right to elect between remedies which is conferred upon the condition of relinquishing one of the remedies by some positive act must be.exercised while both of the remedies are open, and, unless there is a remedy to relinquish, there is no place for an election.
Harrison, J. The plaintiff made an order March 11, .1892, by which it levied an assessment of $1.50 per share upon its capital stock, payable on or before the 18th of April, and providing that any stock upon which such assessment should remain unpaid on that day should be delinquent and sold at public auction May 7,1892. Under the directions of the secretary this notice was published in a newspaper of general circulation, in the county of San Bernardino, once a week for four successive weeks, commencing March 18,1892, and on the same day a copy thereof was sent by him by mail to each stockholder. On April 25th the board of directors of the plaintiff passed a resolution, by which it elected to waive further proceedings for the sale of the stock on account of any delinquency in paying the assessment, and to proceed by action to recover the amount thereof. The defendant was the owner of 1,025 shares of the capital stock of the plaintiff standing in his name upon its books, [492]and the assessment upon this stock not having been paid, the plaintiff brought this action and recovered judgment for the amount of the assessment.
1. The defendant demurred to the complaint upon the ground that it does not state a cause of action against him.
The complaint alleges that the amount of the capital stock of the plaintiff is $500,000, divided into 5,000 shares of the par value of $100 each, and that during all the time mentioned in the complaint the defendant was the owner of 1,025 shares of such capital stock. There is no allegation of the amount of its capital stock that had been subscribed or that had been issued, or any allegation that any of its capital stock, other than that of the defendant, had been subscribed or issued. The rule is well established that, in the absence of any provision to the contrary, a corporation cannot levy an assessment upon its capital stock until after the whole amount thereof has been subscribed. (Angelí and Ames on Corporations, sec. 146; Topeka Bridge Co. v. Cummings, 3 Kan. 55; Livesey v. Omaha Hotel Co., 5 Neb. 50; Stoneham Branch R. R. Co. v. Gould, 2 Gray, 277; Contoocook Valley R. R. Co. v. Berber, 32 N. H. 363.) This rule has been modified in this state by section 331 of the Civil Code, which provides: “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 paying 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.” Unless, therefore, one-fourth of its capital stock had been subscribed, the directors had no authority to levy the assessment upon which this action is brought. This was a condition precedent to the exercise of the power given by the statute, and, in order that the complaint should show a right of recovery in the plaintiff, it was necessary to allege the existence of the condition under which the power might be exercised. (See Boone on Code Pleading, sec. 203.) The
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