Visalia & Tulare Railroad v. Hyde
Before: Harrison
Synopsis
Corporations—Assessment for Unpaid Shares — Liability of Transferee of Stock.—One who purchases unpaid stock in a corporation, and causes a transfer thereof to himself to be entered upon the books of the corporation, is substituted for the original subscriber of the stock as a stockholder of the corporation, and thereafter holds the stock on the same conditions and subject to the same obligations as the original stockholder prior to the transfer; and he is liable for an assessment upon the unpaid shares, of which liability he cannot divest himself by an assignment of the shares subsequent to the levy of the assessment.
Id.—Liability for Assessment Determined by Books.—For the purpose of ascertaining those who are liable to the corporation for the amount of an assessment, the corporation may look only to the list of stockholders as their names are registered upon its books.
Id.—Defense to Assessment—Time of’ Incurring of Liability—Sufficiency of Property of Corporation—Discretion of Directors.—It is no defense to an action to recover the amount of an assessment that it is required to meet outstanding obligations which were contracted before the defendant became a stockholder, nor is it any defense that the corporation has sufficient property with which to meet its obligations; but the liability of the stockholder for the unpaid portion of a subscription rests upon the contract of subscription, and the propriety or necessity of requiring him to pay it, for the purpose of meeting the corporate liabilities, rather than to resort to property in the hands of the corpora- . tion to meet such liabilities, is in the discretion of the board of direct-
Harrison, J. The plaintiff is a corporation under the laws of this state, for the purpose of constructing and operating a railroad between the city of Visalia [635]and the town of Tulare, and was incorporated November 1, 1887, with a capital stock of one hundred thousand dollars, divided into one thousand shares of one hundred dollars each, all of which was subscribed for, and upon each share of which stock there had been paid into the corporation the sum of fifty dollars. On March 28, 1894, the directors of the corporation levied an assessment of ten dollars upon each share of the capital stock, and in the order levying the assessment fixed a day on which the stock would be delinquent, and also a day for the sale of the delinquent stock. After the day specified for declaring the stock delinquent, and before the sale, the board of directors, by an order in that behalf, elected to waive and abandon further proceedings for the collection of the assessment by a sale of the stock, and to proceed by action to recover the amount that should be delinquent. November 29, 1890, the defendant became the owner of one hundred shares of the capital stock which had been originally subscribed for by Thomas Creighton, and on that day a certificate for said one hundred shares of stock was issued to and received by him, and he was then registered on the books of the plaintiff as the owner thereof, and has since remained registered as such stockholder. The present action is brought to recover from him the amount of the assessment, by virtue of the provisions of section-349 of the Civil Code. The answer to the complaint does not question the regularity of the steps taken in levying the assessment, or in the election of the plaintiff to proceed by action to collect the same, or that the plaintiff was indebted in an amount greater than the amount of the assessment; but sets up as special defenses that, at the time the plaintiff incurred the liability for which he alleges the assessment was levied, he was not a stockholder; that prior to the commencement of the action he had sold, indorsed, and delivered the shares of stock to another person; and that at the time of levying the assessment the plaintiff had sufficient property with which to meet all of its obligations, [636]without levying an assessment therefor. The plaintiff had judgment and the defendant has appealed.
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