522. Sale to be Made to Satisfy Liens.13

If judgment is rendered in favor of any lienor, the sheriff must, after ten days' publication of a notice of sale containing a statement of the measurement and tonnage of the steamer, vessel, or boat, and a general description. of her condition,14 sell at public auction the steamer, vessel, or boat, with its tackle, apparel, and furniture, or such interest therein as may be necessary.

person having charge of the steamer, vessel, or boat against which the action is brought.'

13 Compare Code Civ. Proc., sec. 824, Practice Act, sec. 328.

14 Code of Civil Procedure, section 827 (Praetice Act, sec. 331): "The notice of sale published by the sheriff must contain a statement of the measurement and tonnage of the steamer, vessel, or boat, and a general description of her condition."

CHAPTER 5.

LIEN OF CORPORATION ON ITS OWN

STOCK.1

523. Lien conferred for assessments levied.

1 Corporation does not Have Seller's Lien.—A corporation, after issuing a certificate to a stockholder prior to full payment for the stock, does not have a seller's lien thereon, as the certificate gives the stockholder complete possession of the shares: Anglo-Californian Bank v. Grangers' Bank, 63 Cal. 359, 364; Lankershim Ranch Land etc. Co. v. Herberger, 82 Cal. 600, 603, 23 Pac. 134.

Lien Created by By-law.-A lien, independent of the possession of the certificate of stock of a corporation, created thereon by a by-law of the corporation providing that the stock is not transferable until after the satisfaction of any demand due the corporation from the person in whose name the stock stands, even if valid at all, is not valid as against a purchaser of the stock for value without notice of the by-law: Anglo-Californian Bank v. Grangers' Bank, 63 Cal. 359.

Lien Created by Contract.-"A lien not dependent upon possession of the certificate of stock may, by a contract between a corporation and its stockholders, be created in favor of the corporation, to secure the indebtedness of the stockholders to the corporation": Lankershim Ranch Land etc. Co. v. Herberger, 82 Cal. 600, 603, 23 Pac. 134; Jennings v. Bank of California, 79 Cal. 323, 12 Am. St. Rep. 145, 21 Pac. 852. In a number of cases it has been held that under

Civil Code, section 324, and former statutes which were substantially the same as section 324" (Winter V. Belmont Min. Co., 53 Cal. 428, 431), that "transfers of stock which have not been entered in the books of the company, as provided in the statute, are nevertheless valid as against all the world, except subsequent purchasers in good faith, without notice": People v. Elmore, 35 Cal. 653; Weston v. Bear River etc. Min. Co., 6 Cal. 425; Naglee v. Pacific Wharf Co., 20 Cal. 529; Parrott v. Byers, 40 Cal. 614, 625; Winter v. Belmont Min. Co., 53 Cal. 428, 431; Brown v. San Francisco Gas Light Co., 58 Cal. 426.

The statement, then, in the Jennings case, that under Civil Code, section 324, the assignee of stock before the transfer thereof on the books of the corporation has "a mere equity" seems to rest upon a misconception of the scope of the section of the Civil Code. Subject to a single limitation, the assignee has full ownership of the stock, and the lien in favor of the corporation should not have been sustained. Moreover the lien sustained in the Jennings case seems to come within the class of liens conclusively deemed to be fraudulent under Civil Code, section 3440 (see section 201, above).

Yet until the transfer is entered upon the books of the corporation the transferor may vote the stock: People v. Robinson, 64 Cal. 373, 375, 1 Pac. 156 (in which case the court also said that the transfer until entered had no validity outside the parties).

The acceptance, without objection, of a certificate of stock with the condition written thereon, that the stock is not transferable, at the option of the corporation, until after the payment of all indebtedness due the corporation by the person in whose name the stock stands upon the books of the corporation, coupled with the subsequent borrowing of money from the corporation by the holder of such certificate, without anything to exclude the idea that the condition was to be binding, gives rise to an equitable lien upon the stock, valid as against all third persons for the amount of such indebtedness, on the

523. Lien Conferred for Assessments Levied."2 A corporation for profit has a lien upon each share of its subscribed capital stock, independent of the possession of the certificate thereof,+ ground that the conduct of the holder of the certificate amounts to an assent to its conditions so far as the particular loan was concerned: Jennings v. Bank of California, 79 Cal. 323, 12 Am. St. Rep. 145, 21 Pac. 852, in department (the court saying (p. 331): "The case of the Anglo-Californian Bank v. Grangers' Bank, 63 Cal. [359] 362, is not in conflict with this''); Ralston v. Bank of California, 112 Cal. 208, 214, 44 Pac. 476.

But the mere acceptance by a stockholder of a certificate of stock with the condition written thereon as above is not held to constitute a contract for such lien in the absence of subsequent dealings with reference thereto: Jennings v. Bank of California, 79 Cal. 323, 326, 12 Am. St. Rep. 145, 21 Pac. 852.

2 The only lien given to corporations for profit upon their subscribed capital stock, and which does not depend upon the possession of the certificate of stock, is to secure the payment of assessments levied for the purpose of paying expenses, conducting business, and paying debts': Lankershim Ranch Land etc. Co. v. Herberger, 82 Cal. 600, 603, 23 Pac. 134.

The enforcement of this lien, as regulated by Civil Code, sections 331-349, directly concerns the law of corporations, and hence is not here set forth.

3 The lien of a corporation is upon the shares, and not upon the certificate: Craig v. Hesperia Land etc. Co., 113 Cal. 7, 12, 54 Am. St. Rep. 316, 45 Pac. 10.

4 "I can discover no difference between the right of a corporation to collect a valid assessment, and its right to collect a stipulated part of a subscription to stock, nor how the nonpossession of the certificate affects the right in either case": Craig v. Hesperia Land etc. Co., 113 Cal. 7, 13, 54 Am. St. Rep. 316, 45 Pac. 10.

valid as against all persons, to secure the payment of any valid assessment which may be levied thereon. Notwithstanding the existence of any such lien, the corporation must, upon demand, enter a transfer upon its books of the stock affected by the lien.

5 Valid Against All Persons.-A purchaser of stock subject to a lien takes it subject to all the equities in favor of the corporation. He can inform himself from the stock-book whether the shares are free from liens or liabilities in favor of the corporation: Craig v. Hesperia Land etc. Co., 113 Cal. 7, 12, 13, 54 Am. St. Rep. 316, 45 Pac. 10.

Whether a transferee upon the books would take his stock discharged of any lien undisclosed by the corporation at the time of the transfer and the issuance of a new certificate to him-query: Craig v. Hesperia Land etc. Co., 113 Cal. 7, 13, 54 Am. St. Rep. 316, 45 Pac. 10.

6 Must Transfer Liened Stock upon Demand.-As the transfer of shares upon the books of a corporation and the issuance of a new certificate does not affect the power of the corporation to collect a delinquent assessment on such shares by the sale thereof, such delinquency does not justify a refusal to make a transfer (p. 13). By such refusal "the holder of stock may not only be deprived of the benefit of an advantageous sale, which he would desire to make under any circumstances, but he would be denied the right to dispose of his stock to avoid personal liability for debts about to be incurred which he did not approve, and which in his judgment would be ruinous not only to the corporation, but to himself as a stockholder" (p. 14): Craig v. Hesperia Land etc. Co., 113 Cal. 7, 54 Am. St. Rep. 316, 45 Pac. 10.

Thus a refusal to make such a transfer amounts to a conversion: Craig v. Hesperia Land etc. Co., 113 Cal. 7, 54 Am. St. Rep. 316, 45 Pac. 10.