Schroeder

The plaintiff is a corporation organized and existing under the laws of the state of California. It was charged by the complaint in this action that during the years 1911 and 1912, while the defendants were members of the board of directors of the plaintiff, and with the knowledge and consent of the defendants, the said board of directors declared and paid to the stockholders of the corporation eight quarterly dividends, amounting in all to the sum of thirty-four thousand dollars; that said dividends were not made from the surplus profits arising from the business of the corporation, but were paid out of the proceeds of the sale of its capital stock; that the corporation has never at any time during its existence engaged in any business from which it derived a profit, and that it did not have, during said years of 1911 and 1912, a surplus on hand out of which to pay dividends. Judgment was demanded against the defendants, and each of them, for the amount of dividends so paid. The liability sought to be imposed upon the defendants arises from the provisions of section 309 of the Civil Code. According to that section, where directors of a corporation are guilty of the acts there…