as trustee for another, and it is not actually trust funds so invested by him, but under section 331 of the Civil Code he is liable to be assessed by the directors to pay the debts of the corporation.

A stockholder appeared upon the books of the company as "M. Williard, Trustee for Alfred Williard." The court says that the nature of the trust between the parties is not disclosed, that M. Williard is the one entitled to recognition as a stockholder by the company, and by the other stockholders for voting purposes and to receive dividends, and he is the legal owner of the stock, and the legal owner of the stock is liable for assessments levied to pay up the stock in full. The action was not one upon the statutory liability of a stockholder to the creditor of a corporation which the court says rests upon different principles.11

The term stockholder applies not only to all persons who appear by the books to be such, but to any equitable owner of stock, although the stock appears on the books in the name of another; also to all persons who have advanced the purchase money of stock in the name of a minor, so long as the latter remains a minor; also to every guardian or trustee who voluntarily invests any trust funds in the stock, and the trust funds in the hands of such persons are not liable.

But a person who holds stock as collateral security (if he does not transfer it to his own name), or a trustee or representative in any other capacity, except as above stated, is not such a stockholder, but a pledgor or the person or estate represented is such stockholder.

A suit against a number of stockholders on their statutory liability may develop many diverse issues and

41 Union Savings Bank v. Willard, 4 Cal. App. 690, 693, 88 Pac. 1098. In a very early case it was said that the trust must be something more than implied; it must be an express trust, Wolf v. St. Louis etc. Water Co., 15 Cal. 319.

as many trials may be had, and entering default and judgment against one defendant does not operate as a dismissal to the defendants who have answered.42 The superior court has no jurisdiction of a case where the amount recoverable against the stockholder is less than $300.43

The courts have also said "it has been determined by the decisions of this court interpreting these provisions (Civil Code, sec. 324) that, even without entry upon the books of the corporation, such a transfer is valid against all but innocent purchasers and transferees in good faith, for value and without notice," and concerning the necessity of the transfer on the books of the corporation, probably dictum only, “but, ordinarily, the rule goes no further than to protect the corporation in paying dividends to a recorded stockholder, in the absence of notice of transfer or other right."45 It can not be said that a party owns stock which he has sold and indorsed and delivered, although certain consequences adverse to him may result from failure to transfer the same on the books of the corporation.

It was said that the signing of an agreement before the corporation is organized to take stock does not constitute a person a stockholder in the sense of making him liable for assessments levied after the corporation is organized, but, without overruling this case, it was

46

42 Grimwood v. Barry, 118 Cal. 274, 50 Pac. 430.

43 Myers v. Sierra Val. etc. Ass'n, 122 Cal. 669, 672, 55 Pac. 689; Derby v. Stevens, 64 Cal. 287, 30 Pac. 820.

44 Spreckels v. Nevada Bank, 113 Cal. 272, 276, 54 Am. St. Rep. 348, 33 L. R. A. 459, 45 Pac. 329, and cases cited; Manning v. App Consol. etc. Min. Co., 171 Cal. -; 154 Pac. 301.

48 Ashton v. Zeila Mining Co., 134 Cal. 408, 410, 66 Pac. 494.

46 Monterey & S. V. R. Co. v. Hildreth, 53 Cal. 123.

later said such an agreement was enforceable, but not if the corporation subsequently formed differed materially from the one proposed in the agreement of subscription. Nor is it necessary that the stockholders be original subscribers, or indeed subscribers at all if they own the stock, in order to make them liable.18

But, as between the corporation and the stockholder, the relationship does not arise until, under section 324, the stock has been transferred on the books of the corporation to the stockholder. An heir of a stockholder to whom the court distributes a stock of a deceased stockholder does not become a stockholder for the purposes of assessment by the corporation until the stock has been transferred to him under section 334;49 but a different rule applies under section 322 as to the liability of stockholders to the creditors of the corporation.

WHAT STOCKHOLDERS LIABLE?

This topic is so much involved in the questions of "Who Are Stockholders?" (supra) and of "Limitations of Actions," (infra) of this general subject of "Liability of Stockholders," that reference is made to them for many decisions on this question.

47 Marysville Electric L. etc. Co. v. Johnson, 93 Cal. 538, 27 Am. St. Rep. 215, 29 Pac. 126, s. c. 109 Cal. 192, 50 Am. St. Rep. 34, 41 Pac. 1016; California Sugar Mfg. Co. v. Schafer, 57 Cal. 396; Hanford Mercantile Store v. Sowlveere, 11 Cal. App. 261, 104 Pac. 708, in which case it was said a subscription to a corporation to be organized to do a "merchandising business, etc.," is not binding if the powers of the corporation when organized included also the right to deal in real estate, and that "etc." is meaningless in the absence of proof of what was intended by the term.

48 Tulare Savings Bank v. Talbot, 131 Cal. 45, 63 Pac. 172.

49 People's Home Sav. Bank v. Stadtmuller, 150 Cal. 106, 88 Pac. 280; Western Pacific R. Co. v. Godfrey, 166 Cal. 346, Ann. Cas. 1915B, 825, 136 Pac. 284.

Much importance is attached to the definition of the word "liability"; and it is now settled law that those who were stockholders at the time the liability was incurred (that is, at the time of the making of the contract) are the only ones who are liable, although other persons may constitute the stockholders at the time the debt is created (that is, at the time of the actual delivery of the goods).50 This conclusion is made to rest on the principles announced in Hunt v. Ward1 and the definition of the word "liability."

But the language of both the constitution and the code is "debts and liabilities"-in the conjunctive, not the disjunctive. The Johnson case52 limited this liability to one class, and the later Wentworth case to another-both in the disjunctive. There is, however, no difficulty in interpreting the constitution in accordance with the simplicity of its language-that is, by declaring all of both classes liable, one on the "liability" and the other on the "debt." This would avoid the statute of limitations operating as a release of every one when the performance was deferred more than three years, and new stockholders could not complain, for they would become such, knowing of the existence of the executory contract. There could be no double liability, for "each stockholder" pays in the proportion which the stock owned by him bears to the total subscribed stock; if other stockholders do not pay, or pay less than their proportion, or he pays more, he

50 Coulter Dry Goods Co. v. Wentworth, 171 Cal. - 153 Pac. 939. Overruling same case in district court of appeal, 18 Cal. App. Dec. 161, and their own decision in bank of April 10, 1915, where an effort was made to save the doctrine of the Johnson v. Bank case, but by a divided court.

51 Hunt v. Ward, 99 Cal. 612, 37 Am. St. Rep. 87, 34 Pac. 335.

$2 Johnson v. Bank of Lake, 125 Cal. 6, 73 Am. St. Rep. 17, 57 Pac.

has the right to call upon them for contribution as will be seen under that heading, infra.

If two-thirds of the stockholders did not assent to the creation of a bonded indebtedness, as required by Civil Code, section 359, the stockholders are not liable for such bonded indebtedness,53 although, if the corporation received a bona fide valuable consideration for them, the bonds are valid as to the corporation.54

MEASURE OF LIABILITY

It will also be observed that the constitutional provision makes the stockholder liable for the debts of the corporation in the proportion which the amount of stock "owned by him" bears to the whole of the subscribed stock.

55

While the stockholder is liable for such a proportion of the total debts of the corporation, incurred while he was a stockholder, as his stock bears to the total subscribed stock, the extent of his liability to the vigilant creditor who sues him to recover the amount due upon this liability for many years had never been free from doubt. This question has been put finally to rest in a recent case where the supreme court holds that each stockholder is liable for that fraction of each separate debt of the corporation, incurred while he was a stockholder, which his stock bears to the whole of the subscribed capital. In reaching this decision, the court ignores the fact that the legislature in 1873 added to the first sentence of Civil Code, section 322, the words "and for a like proportion only of each debt or claim against the corporation," and in 1905 repealed that 53 Boyd v. Heron, 125 Cal. 453, 58 Pac. 64. This section does not apply to Public Utility Corporations. Moss v. Smith, 172 Cal. 155 Pac. 90; but this case has been appealed to the U. S. Supreme Court where it is now pending.

54 McKee v. Title Ins, etc. Co., 159 Cal. 206, 223, 113 Pac. 140.

55 Gardiner v. Bank of Napa, 160 Cal. 577, 117 Pac. 667.