Pritchard v. Whitelock

BARNARD, P. J. This is an appeal from a judgment holding that section 7.24 of the bylaws of Crestline Village Mutual Service Company is invalid; decreeing that an “assessment, or maintenance charge,1 ’ of $17 per lot levied against each lot in the district is void and unenforceable; and enjoining the defendants, individually and as directors of that corporation, from collecting or attempting to collect “said assessment or levy” or any part thereof.

This action involves the same corporation as does the case of Pritchard v. Crestline Village Mutual Service Company, post, p. 151, this day decided. The three defendants herein were all of the directors of that corporation. Of the 6,150 issued shares of stock the defendant Whitelock owned 3,773 shares, only two of which were “attached” to any lot within the district served by the company. Two thousand three hundred and sixty-nine [146]issued shares were attached to lots within the district, but 1,500 of these lots had no actual water connection. There were also other lots within the district which had no share attached and no service connection.

The bylaws of the corporation authorized the directors to levy assessments upon all the issued shares of stock provided that the same amount should be assessed against each share; authorized the corporation to levy and collect from the shareholders water tolls and charges and to make such tolls and charges a lien against the shares; authorized the directors to fix the charges or tolls payable for water furnished, for other services rendered, and to levy, collect and enforce assessments against the shares of stock; provided that all charges are made a lien upon the shares and may be foreclosed if the charges are not paid; and provided that before delivery of water should be made to any lot, a share of stock must be designated for that purpose, and that the share is then deemed ‘ ‘ attached” to the lot so designated.

In June, 1947, the defendant Whiteloek mailed to each stockholder a letter stating that “We have 2369 shares of outstanding stock that is assessable,” and suggesting that “if an assessment of $30.00 per share were levied” this would bring in an amount sufficient to pay the company’s debts, make certain improvements and pay operating expenses, with a small surplus. At a meeting of the stockholders of the company on July 26, 1947, a motion that the directors be instructed to levy an assessment of $30 per share on the entire issued stock was opposed by Mr. Whiteloek, who owned the unattached shares, and defeated by votes representing a majority of the stock. Thereupon a motion was made to instruct the directors to provide for a $17 assessment against each lot instead of against shares of stock. This motion was carried.