CHAPTER XIII. ASSESSMENTS AND DIVIDENDS. SEC. 112.- ASSESSMENTS-DISTINGUISHED SEC. 113. RIGHT TO LEVY ASSESSMENTS. SEC. 114.-METHOD AND PROCEDURE. SEC. 115.-DELINQUENT SALE. SEC. 116.-SAME. SEC. 117.-SAME. FROM CALLS. SEC. 118.-COLLECTION BY ACTION AT LAW. SEC. 120,- NATURE OF DIVIDENDS. SECTION 112-ASSESSMENTS FROM CALLS. -DISTINGUISHED The power of the directors of a corporation to levy and collect assessments is wholly statutory [Santa Cruz etc. Co. v. Spreckels, 65 Cal 193, 3 Pac. 661, 802], but the power to make calls, as distinguished from assessments, exists in corporations at common law. The unpaid part of the purchase price of stock is a simple contract debt owing to the corporation. Arroyo Co. v. Superior Court, 92 Cal. 47, 28 Pac. 54; Santa Cruz etc. Co. v. Spreckels, supra. If demands by the corporation for the unpaid purchase price of its stock were always designated as "calls" and the word "assessment" only used to cover demands by the corporation on its stockholders for a fund with which to pay expenses, conduct business or pay debts, much confusion would be obvi ated. Unfortunately the statute [C. C. 331] giving corporations the power to raise such a fund and prescribing the conditions and mode of levy, provides a similar demand and mode of collection for the unpaid part of the purchase price of stock and terms both demands "assessments." C. C. 332. That this nomenclature does not destroy the fundamental distinction between calls and assessments is clear. Assessments can only be levied and collected after one-fourth of the capital stock has been subscribed,' there is no such condition precedent to the collection of a call. It is always a defense to an assessment, that the corporation has no debts, liabilities or obligations; such a defense is of no avail in an action to collect a call. Assessments can only be collected in the mode prescribed by statute. In some cases a simple contract action lies to collect a call. Again, when a corporation contracts to sell its stock for less than par, and describes the stock as "fully paid and unassessable," such description is taken to mean that there is no liability for calls, but will not be construed to mean that assessments to pay debts or expenses cannot be levied. Green . Abietine Co., 96 Cal. 322, 31 Pac. 100. C. C. 331; San Bernardino Co. v. Merrill, 108 Cal. 490, 41 Pac. Ventura R. R. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65. 1. 487. 2. 3. C. C. 331; Sullivan v. Triunfo M. etc. Co., 39 Cal. 459. 5. Santa Cruz etc. Co. v. Spreckels, 65 Cal. 193, 3 Pac, 661, 802. 6. See Chap. XI, supra, for the statutory method of eollecting calls where no absolute contract to pay is made. See also C. C. 332. sub. 1. SECTION 113-RIGHT TO LEVY ASSESSMENTS. The directors' of any corporation formed or existing under the laws of this state, after one-fourth of the 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. [C. C. 331.] This power to levy is subject to two limitations: (a) that no one assessment must exceed ten per cent. of the amount of the capital stock named in the articles of incorporation; (b) that no assessment must be levied while any portion of a previous one remains unpaid. [C. C. 333.] To these limitations there are again exceptions; railroad companies and fire and marine insurance companies are excepted from both limitations, while the second one does not apply if the corporation has already exercised its power to collect the previous assessment, or such assessment has been enjoined. C. C. 333. That one-fourth the capital stock has been subscribed is a condition precedent to the right of the directors to levy assessments, and except to pay debts or expenses, or conduct business, 1 The directors of a state bank, after the bank is insolvent and after the Bank Commissioners have taken charge, but before an adjudication of insolveney, have no power to levy assessments, and an assessment then levied is void. Bank of Nat. City v. Johnson, 65 Pac. 383 (Cal., June, 1901). 2. C. C. 332. It is in making an exception to this limitation that the legislature provided that calls could be for the full amount unpaid. 3. San Bernardino Co. v. Merrill, 108 Cal. 490, 41 Pac. 487 no assessment can ever be levied. "Debts" include all liabilities of a corporation. If the liability arises because of benefits received under an ultra vires contract, an assessment is leviable to pay it. Taylor v. North Star etc. Co., 79 Cal. 285, 21 Pac. 753; Sullivan v. Triunfo etc. Co., 29 Cal. 586. Santa Cruz R. R. Co. v. Spreckels, 65 Cal. 193, 3 Pac. 661, 802, decided that assessments would lie under these sections of the code [C. C. 331-3] on stock, the purchase price or par value of which had been fully paid. The decision was by a divided court [4 to 3] but has been accepted as law by the subsequent cases. Green v. Abietine Med. Co., 96 Cal, 322, 31 Pac. 100. The question who are liable for assessments, as between parties to a transfer of stock, has already been discussed. Chapter XII, supra; see also Gay v. Dare, 103 Cal. 454, 37 Pac. 466. SECTION 114-METHOD AND PROCEDURE. Section 331 of the Civil Code giving to the directors the power to levy assessments declares that such power can only be exercised as therein provided, and sets out in detail the acts necessary to be performed in order to create a valid assessment and collect the same. Such mode is therefore exclusive. [Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 1. Sullivan v. Triunfo etc. Co., 29 Cal. 586; Sullivan v. Triunfo etc. Co., 39 Cal. 459; Taylor v. North Star etc. Co., 79 Cal. 285, 21 Pac. 754. Younglove v. Steinman, 80 Cal. 375, 22 Pac. 189. 2. Sullivan v. Triunfo Co., 39 Cal. 459. 3. An assessment upon the shares of certain stockholders, and not upon all, is void. Kohler v. Agassiz, 99 Cal. 15, 33 Pac. 741; Herbert Craft Co. Bank v. Bank of Orland, 65 Pac. 143 (Cal., May, 1901). Pac. 542. See Chap. VII, supra.] It is as follows: Every order levying an assessment must specify the amount thereof, when, to whom, and where payable; fix a day, subsequent to the full term of publication of the assessment notice, on which the unpaid assessments shall be delinquent, not less than thirty nor more than sixty days from the time of making the order levying the assessment, and a day for the sale of delinquent stock, not less than fifteen nor more than sixty from the day the stock is declared delinquent. C.C. 334. Upon the making of the order, the secretary shall cause to be published a notice thereof; in the following form: (Name of corporation in full. Location of principal place of business). Notice is hereby given that at a meeting of the directors, held on the (date), an assessment of (amount) per share was levied upon the capital stock of the corporation payable (when, to whom, and where). Any stock upon which this assessment shall remain unpaid on the (day fixed) will be delinquent and advertised for sale at public auction, and, unless payment is made before, will be sold on the (day appointed) to pay the delinquent assessment, together with cost of advertising and expenses of sale. C. C. 335. The notice must be personally served upon each stockholder, or, in lieu of personal service, must be sent through the mail, addressed to each stockholder at his place of residence, if known, and if not known, at the place |