Court Opinion

ID: 6737272
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:19:27.984369+00
Date Added: 2024-06-11T16:01:49.985795
License: Public Domain

BueKb, J.
The defendant is a domestic corporation of $50,000 common stock, par value $100 each. Of this common stock, $36,000 has, and $14,000 has not, been subscribed and issued. Plaintiff is the holder of 100, and the defendants Guild are the owners of 260, shares. Plaintiff’s stock was marked “fully paid” upon its face at the time it was issued. The defendants Guild are in control of the board of directors and of the management of the corporation. In August, 1914, such board of directors attempted to levy an assessment against the issued stock for the gross sum of $4,996.80, or $13.88 upon each share actually issued. Plaintiff applied to the district court of Cass county for a permanent injunction against said assessment, claiming (a) that his stock was not subject to any assessment whatever under the laws of this state, and (b) that in case any assessments were proper, the assessment exceeded the 10 per cent limitation subscribed by § 4571, Comp. Laws 1913. The trial court denied such relief and this appeal followed. It is conceded that unless authorized by statute, no assessment can be made upon paid-up stock, and that if there is any authority for the position in question, it must be in the following sections of the Compiled Laws of 1913, of which §§ 4570-4572 read as follows:
*390Assessment of stock.
§ 4570. When levied. — The directors of any corporation formed or existing under the laws of this state, after one fourth of its capital stock has been subscribed, may, for the purposes of paying expenses, conducting business or paying debts, levy and collect assessments upon the subscribed capital stock thereof in the manner and form and to the extent provided herein.
§ 4571. Limitation of. — No assessment must exceed 10 per cent of the amount of the capital stock named in the articles of incorporation, except in the cases in this section otherwise provided for, as follows:
1. If-the whole capital of a corporation has not been paid up, and the corporation is unable to meet its liabilities, or to satisfy the claims of its creditors, the assessment may be for the full amount unpaid upon the capital stock; or, if a less amount is sufficient, then it may be for such a percentage as will raise that amount.
2. The directors of railway corporations may assess the capital stock in instalments of not more than 10 per cent per month, unless in the articles of incorporation it is otherwise provided.
3. The directors of fire or marine insurance corporations may as-, sess such a percentage of the capital stock as they deem proper.
§ 4572. When new assessment can be levied. — No assessment must be levied while any portion of a previous one remains unpaid, unless:
1. The power of the corporation has been exercised in accordance with the provisions of this article for the purpose of collecting such previous assessment.
2. The collection of the previous assessment has been enjoined; or,
3. The assessment falls within the provisions of either the first, second or third subdivisions of § 4571.
Referring to those sections, the appellant in his brief says: “Is there any room for doubt that the ‘subscribed capital stoch’ referred to in § 4570, upon which only assessments may be levied and collected, is the same subscribed capital stock referred to in the other sections ? Clearly the same thing is referred to. That being so, it plainly follows that the subscribed capital stock referred to in said § 4570 does not include fully paid capital stoch.” In other words, it is their con*391tention that because their stock is marked “fully paid” it can under no circumstances be assessed.
As nearly as we can learn, this class of legislation was first enacted in California about the year 1853, but contained a positive declaration that no assessment could be made upon fully paid-up stock. Later, and in 1864, the legislature of that state changed the law and made provision for such assessment. Minor changes were made in 1866 and the whole was incorporated in the California Code of 1872. The California courts passed upon the statute of 1864 in Sullivan v. Triunfo Gold & S. Min. Co. 39 Cal. 465, and after further amendment the statute was again construed in Santa Cruz R. Co. v. Spreckles, 65 Cal. 193, 3 Pac. 661, 802. In this later case, which was decided in 1884, the identical question arose which confronts us in the case at bar. The California court says, after reviewing the history of the legislation: “The conclusion is, to our minds, irresistible, that, in enacting the sections of the Code in question, it [the legislature] not only did, but clearly intended to, authorize, for the purposes and subject to the limitations prescribed, assessments upon stock fully paid for, as well as assessments for the amount unpaid thereon.” It is true, this opinion was concurred in by four justices and -dissented to by three, but many sessions of the California legislature intervened from that.time to this, and no effort has been made to change the statute as construed, while the courts of that state have repeatedly recognized the correctness of such holding. See: Sayre v. Citizens’ Gaslight & Heat Co. 69 Cal. 207, 10 Pac. 408; Bottle Min. & Mill. Co. v. Kern, 154 Cal. 96, 97 Pac. 25, 9 Cal. App. 527, 99 Pac. 994; Lum v. American Wheel & Vehicle Co. 165 Cal. 657, 133 Pac. 303, Ann. Cas. 1915A, 816; Younglove v. Steinman, 80 Cal. 375, 22 Pac. 189; San Bernardino Invest. Co. v. Merrill, 108 Cal. 490, 41 Pac. 487; Ventura & O. V. R. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65; Kohler v. Agassiz, 99 Cal. 9, 33 Pac. 741.
During said time, the Hnited States circuit court for the district of California, in Von Horst v. American Hop & Barley Co. 177 Fed. 979, not only followed the California ruling, but approved the same, saying: “My own views as to the proper interpretation of the provisions of the Code are in full accord with those expressed by Judge Boss (the Santa Cruz Case).” And in the meantime the statute had *392been adopted in other states, and had been construed in Idaho in Weber v. Della Mountain Min. Co. 14 Idaho, 410, 94 Pac. 441, and Wall v. Basin Min. Co. 16 Idaho, 313, 22 L.R.A.(N.S.) 1013, 101 Pac. 733, and by the supreme court of Utah in Gary v. York Min. Co. 9 Utah, 464, 35 Pac. 494, and in Nelson v. Keith-O’Brien Co. 32 Utah, 396, 91 Pac. 30. In each of the above-named cases, California’s ruling was followed. No decision has been called to our attention to the contrary.
The statute was adopted in Dakota territory in 1877 after the Sullivan v. Triunfo Gold & S. Min. Co. decision and before the Sprecldes decision. While not absolutely bound by the construction given by the California courts, yet, under the circumstances, those decisions should be given great weight in this state.
It is desirable to have all of the states in accord in construing the same statute, and we might rest our decision in this case upon that ground alone; but, on the other hand, we would not hesitate to announce a contrary decision if we believe the California case wrong in principle, and for this reason we have investigated carefully the arguments advanced by both parties to this appeal, and have reached the conclusion that the respondent is supported by the better reasoning. We will notice only a few of the more persuasive arguments advanced by the respondent. First, it is customary where the stockholders wish to avoid such further assessment, to have incorporated in the by-laws of the corporation a positive provision that the stock shall be nonasses-sable, and this is thereupon printed upon the face of the certificates. If appellant’s construction of the statute is correct, this would be an idle act. • And again, all through article 10, which contains the section above enumerated, the expression “subscribed capital stock” is used in referring to the entire stock of the corporation, and not, as contended by appellant, to only those subscribers who are in arrears upon their initial payment. For instance, § 4534 provides that the assent of all stockholders representing a majority of all the “subscribed capital stock” is necessary to adopt by-laws. It cannot be meant that only those members who are in arrears in paying for the capital stock can vote upon this important question; and in § 4537 it is provided that the by-laws may be amended or repealed in a like manner. Section 4547 provides that “at all elections or votes had for any purpose there must *393be a majority of the subscribed capital stock . . . represented either in person or by proxy.” Can it be that this term applies only to members who have not paid in full for their stock? And in § 4563 provision is made for changing the corporate name upon the written assent of the holders of three fourths of the “subscribed capital stock.” As is said in respondent’s brief, in order to sustain appellant’s contention, it would be necessary to write into the statute the words: “Subscribed capital stock upon which subscriptions have not been paid in fullNo hardship can come from this construction. No person is obliged to buy stock in a corporation, and if he wishes to limit his liability and to protect himself from assessment he can have that provision inserted in his contract with the corporation, which is the bylaws. If the by-laws provide that the stock is nonassessable, he cannot be assessed. If they do not so provide, under the authority of § 4510, Comp. Laws 1913, they may, provided the assessment is in all other particulars legal. We do not understand that the assessment is challenged in any other particular in this litigation.
(2) This brings us to the second proposition of the appellant; namely, that even if an assessment is authorized by our statutes, it is limited to 10 per cent of the par value of the stock owned. We have already set forth § 45Y1, under which this limitation is claimed, and it is apparent that no assessment must exceed 10 per cent of the amount of the capital stock named in the articles of incorporation, except in cases otherwise provided., Upon this proposition we are cited by appellant to but one case, Gary v. York Min. Co. 9 Utah, 464, 35 Pac. 494, which, upon a casual reading, seems to support their contention, but upon a closer examination is found to turn upon another point, and not discuss such question. ^Respondent states no authorities upon this proposition. We have, therefore, to place the construction upon the statutes without the aid of any prior adjudication. The words: “No assessment must exceed 10 per cent of the amount of the capital stock named in the articles of incorporation” seem to be susceptible to but one meaning. The amount of the capital stock named in the articles of incorporation of the Courier-News Company is $50,000. The assessment in question does not exceed that. While the legislature might have provided that the assessment should not exceed 10 per cent of the paid-in capital stock, it has not done so.
*394There being no valid objection presented to the assessment aforesaid, the trial court did not abuse its discretion in refusing them a temporary injunction.