clause. It also supports its conclusion by the statement that the constitution "fixes the liability" while the code section provides "the manner of enforcing the rights,'' ignoring the fact that the construction put upon the code section (while not disturbing the rights of the stockholder as to the total amount of his liability) may disturb, enormously change, increase or diminish the substantive rights of the individual creditor, and for practical and remedial purposes render them almost worthless, as it did in that particular case. If the constitution "fixes the liability" the legislature may provide the means of collecting the claims but, under the guise of such legislation, may not change the measure of them. For that reason the code section ought not (really can not) be considered in determining the meaning of the constitution, as to the amount which a particular creditor may recover of a particular stockholder.

CORPORATIONS WITHOUT STOCK

In corporations of this character the measure of the liability of each member is fixed by this statute at his proportionate share of the total debts (probably of only those contracted while he was a member).

If a member pays more of the debts than he is liable for under the provisions of this section, without authority therefor from the corporation, it is a voluntary payment on his part and he can not recover the excess from the corporation.56

CONTRIBUTION

In Larrabee v. Baldwin it was also said that the stockholder may sue his co-stockholders for contribution, if they also have not discharged their liability by themselves paying the necessary amount of the debts 56 Upton v. Woman's Club of Kern, 19 Cal. App. 127, 124 Pac. 858.

of the corporation.57 It has also been held that when a stockholder pays not only the whole of his liability to a creditor but a still further sum in order to satisfy the debt, in a legitimate and fair effort to protect his own interest as a stockholder in the corporate property, he is entitled to contribution from the other stockholders to the extent of their liability for the debt paid, and also to be subrogated to the rights and remedies of the creditor as a necessary means of enforcing such contribution.58 Without citation, or consideration of the above case, the court of appeals, in a case of a corporation without capital stock, where one of the members paid the whole debt and brought suit against other members for contribution, held that the plaintiff was not entitled to contribution on the ground that she was liable for her share only and not for the whole debt.59 But if the corporation possessed property which might be taken on execution (as most of such clubs do) it would seem to come within the principles of the above case; and, further, a judgment upon the corporation debt would prevent the corporation acquiring the property usually found convenient and necessary for carrying on its affairs, until the whole debt was paid.

An action by one stockholder against another to compel him to contribute upon a note of the corporation upon which both were sureties which the former has paid does not arise out of the relation of suretyship, but is purely statutory, under section 322 of the Civil Code.60

But where the corporation is indebted at the time stock is transferred on the books of the corporation to

57 Larrabee v. Baldwin, 35 Cal. 155.

58 Redington v. Cornwell, 90 Cal. 49, 27 Pac. 40.

59 Upton v. Woman's Club, 19 Cal. App. 127, 124 Pac. 858.

60 Myers v. Sierra Val. Stock etc. Ass'n, 122 Cal. 669, 672, 55 Pac.

the purchaser, if the purchaser pay those debts, not being liable therefor, it is a voluntary payment, and he can not recover the amount so paid from his vendor."1

A payment of a judgment against the corporation by a stockholder will not satisfy a liability of the stockholder for unpaid portions on the capital stock owned or subscribed for by him.62

RELEASE OF LIABILITY

From very early times it has been declared in this state that persons contracting with a corporation may waive the right to hold the stockholders to their constitutional and statutory liability. The court said that liability was no more a matter of public policy or public concern than the liability of partners, and is only for the benefit of persons dealing with the corporation. In a later case,64 citing that case as authority, the court said, "that this may be done there can be no question.

Citing these decisions as authority on principle, it has quite recently been decided by the supreme court that an agreement contained in the Articles of Incorporation that the stock shall not be assessed after it is paid in full is valid between the stockholders and the corporation, no rights of creditors being involved.65 It is possible that this decision enables stockholders in

61 Danielson v. Yoakum, 116 Cal. 382-384, 48 Pac. 322.

62 Union Sav. Bank v. Leiter, 145 Cal. 696-710, 79 Pac. 441.

63 French v. Teschemaker, 24 Cal. 518-558. It was said in Prince v. Lynch, 38 Cal. 528, 532, 99 Am. Dec. 427, that a release of the stockholder released the corporation, but this case has never been cited or approved on that point.

64 Wells v. Black, 117 Cal. 157, 161, 59 Am. St. Rep. 162, 37 L. R. A. 619, 48 Pac. 1090; Kohn v. Sacramento etc. R. Co., 168 Cal. 1, 141 Pac. 626.

65 Lum v. American Wheel etc. Co., 165 Cal. 657, Ann. Cas. 1915A, 816, 133 Pac. 303.

this manner to remove all liability to assessment for any purpose (except where the stock is not full-paid), thus leaving creditors only the personal liability of stockholders provided by the constitution in addition to the assets of the corporation. But if the stock is not "full-paid" it may be assessed up to par for the benefit of creditors."

Following this decision, the district court of appeals held that a representation that the stock was not assessable, made by an agent in selling the stock, bound the corporation, and that if such representations were not true in point of fact the purchaser could rescind his purchase.67

The above decisions are applicable to both domestic and foreign corporations doing business in this state. It is likely that a large part of all corporations hereafter organized in this state will make their stock nonassessable, and those already organized can do so by amending their charters.

The court of appeals, in another recent case, has gone to the extent of saying that a corporation may release or compromise with subscribers for stock, if they are of doubtful solvency, without the authority of any by-law giving that power, or the unanimous consent of all the stockholders, which action will be valid, both as to the corporation and all other stockholders and future creditors, but will not affect existing creditors. The supreme court denied a rehearing by a divided court.

66 Citing O'Dea v. Hollywood etc. Ass'n, 154 Cal. 53, 55, 97 Pac. 1; Union Sav. Bank v. Leiter, 145 Cal. 696, 79 Pac. 441, and cases cited.

67 Browne v. San Gabriel River etc. Co., 22 Cal. App. 682, 136 Pac. 542, 544.

68 Thomas v. Wentworth Hotel Co., 16 Cal. App. 403, 117 Pac. 1041,

FOREIGN CORPORATIONS, LIABILITY OF CALIFORNIA

STOCKHOLDERS

If the liability of a stockholder for the debts of the company under the laws of another state are simple and not inseparably connected with the remedy, it may be enforced in this state, as was done with the former Kansas "double-liability" provision, but it will not be enforced if that remedy is exclusive and the same remedy is not provided in this state.70

In the absence of any statement in the pleadings as to the provisions of the laws of another state in regard to the liability of stockholders for the debts of the corporation, it will be presumed that they are the same as in this state. An action may be brought in this state against the stockholders of a foreign corporation to subject unpaid subscriptions to the payment of a debt of the corporation, the presumption being, in the absence of proof, that the laws of the foreign state are the same as the laws of this state, and no call or assessment by the directors is necessary."1

Where the Articles of Incorporation declare that it is the purpose of the corporation to do business in California, the stockholders are liable for the debts of the corporation incurred in the state of California. The court rests its decision entirely upon Pinney v. Nelson, 183 U. S. 144, 145, 46 L. Ed. 125, 22 Sup. Ct. 52. The latter case (a Colorado corporation) rested upon the California constitutional provision that no foreign corporation shall be allowed to transact business within this state "on more favorable conditions than are pre69 Ferguson v. Sherman, 116 Cal. 169, 37 L. R. A. 622, 47 Pac. 1023. 70 Russell v. Pacific Ry. Co., 113 Cal. 258, 34 L. R. A. 747, 45 Pac. 323; see Miller v. Lane, 160 Cal. 90, 116 Pac. 58.

11 Daggett v. Southwest Packing Co., 155 Cal. 762, 103 Pac. 204; Rideout v. National Homestead Assn., 14 Cal. App. 349, 112 Pac. 192.