Thomas

Action brought to enforce payment of two promissory notes executed by the Wentworth Hotel Company, a corporation, one being for the sum of $22,500, made in favor of the First National Bank of Pasadena, and the second for the sum of $25,000, made in favor of the Union Savings Bank of the same city. Appellants were joined as parties defendant because of the fact that they were owners of stock in the hotel company at the time the indebtedness sued on was incurred, and recovery was sought against them on their shareholders’ liability arising under the provisions of section 322 of the Civil Code. Judgment went against appellants for the amount prayed for, except that a deduction of 150 shares of stock was apportioned ‘as a credit among appellants Fleishhacker and Bachman, reducing the number of shares found by the court to be held by them at the time the indebtedness was incurred to the following totals, respectively; Mortimer and Herbert Fleishhacker, 137½ shares each; S. Bachman, 275 shares. The occasion for the making of this reduction is hereinafter referred to in connection with the mention of stock issued to Lewis C. Warner and C. Dana Warner. The appeal is from the judgment and…

I dissent from the order denying a rehearing. The directors of the corporation had no authority to release any portion of its subscribed capital except by way of a bona fide compromise with an insolvent subscriber, and the recitals in their records are not competent evidence against either stockholders or creditors that Bachman or either of the Fleishhaekers was insolvent or believed to be insolvent on the twenty-third day of August, 1906—the date of the supposed compromise. Aside from these recitals there is no evidence that either of them was then- or has been since insolvent or suspected of insolvency. If, therefore, as I have no doubt is true, the burden of proving these essential facts was on the defendants, the resolution or agreement of August 23, 1906, was properly held to b.e ultra vires and ineffectual until duly ratified by the stockholders, and there is not the slightest pretense of even an implied ratification prior to the date of the first loan, the loan of the First National Bank of Pasadena, made on October 5, 1906. Conceding, then, that the officers of that bank are chargeable with knowledge of what appeared upon the records of the corporation and of other…