More v. Courier-News

• Decision Date: 10 February 1915
• Citation: 151 N.W. 2,29 N.D. 385
• Parties: MORE v. COURIER-NEWS et al.
• Court: North Dakota Supreme Court

29 N.D. 385

151 N.W. 2

MORE

v.COURIER-NEWS et al.

Supreme Court of North Dakota.

Jan. 15, 1915.

Rehearing Denied Feb. 10, 1915.

Syllabus by the Court.

Under sections 4570-4572, Comp. Laws 1913, an assessment may be made upon capital stock of a corporation issued and paid for, unless the by-laws of the corporation make the same nonassessable.

Such assessment is limited to 10 per cent. of the capital stock named in the articles of incorporation, which in the case at bar is $50,000, and authorizes an assessment of $5,000.

Appeal from District Court, Cass County; Pollock, Judge.

Action by A. Y. More against the Courier-News, a corporation, and others. From denial of a temporary injunction, plaintiff appeals. Affirmed.A. W. Fowler and Pollock & Pollock, all of Fargo, for appellant. Watson & Young and E. T. Conmy, all of Fargo, for respondents.

BURKE, 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 section 4571, C. L. 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 sections 4570-4572 read as follows:

“Assessment 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 ten 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 stock of the 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 installments of not more than ten per cent. per month, unless in the articles of incorporation it is otherwise provided.

(3) The directors of fire or marine insurance corporations may assess 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:

First, the power of the corporation has been exercised in accordance with the provisions of this article for the purpose of collecting such previous assessment.

Second, the collection of the previous assessment has been enjoined; or,

Third, the assessment falls within the provisions of either the first, second or third subdivisions of section 4571.”

[1] Referring to those sections, the appellant in his brief says:

“Is there any room for doubt that the ‘subscribed capital stock’ referred to in section 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 section 4570 does not include fully paid capital stock.”

In other words, it is their contention 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 in 1864 in Sullivan v. Triunfo Mining Co., 39 Cal. 465, and after the further amendment the statute was again construed in Santa Cruz Railroad Co. v. Spreckles, 65 Cal. 193, 3 Pac. 661. 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 section 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. Gas Co., 69 Cal. 207, 10 Pac. 408;Bottle Mining & Milling Co. v. Kern, 154 Cal. 96, 97 Pac. 25;Id., 9 Cal. App. 527, 99 Pac. 994;Lum v. American Wheel Co., 165 Cal. 657, 133 Pac. 303;Younglove v. Steinman, 80 Cal. 375, 22 Pac. 189;San Bernardino v. Merrill, 108 Cal. 490, 41 Pac. 487;Ventura R. Co. v. Hartman, 116 Cal. 260, 48 Pac. 65;Kohler v. Agassiz, 99 Cal. 9, 33 Pac. 741.

During said time the United 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 Ross [the Santa Cruz Case].”

And in the meantime the statute had been adopted in other states, and had been construedin Idaho in Weber v. Della Mountain Mining Co., 14...