sponsible transferee. National etc. Co. v. Story, etc. Co., 111 Cal. 531, 44 Pac. 157.

After the corporation is insolvent, a stockholder cannot voluntarily pay his unpaid subscription price to the corporation or to any creditor, so as to relieve himself from further liability thereon. Only at a call by the corporation or its assignee in insolvency or of a court of competent jurisdiction will a payment extinguish the liability; otherwise the full debt remains, and amounts voluntarily paid cannot be set-off against any creditor. Welch v. Sargent, 127 Cal. 72, 59 Pac. 319.] To allow payments voluntarily made to one creditor to be set off against another, would be to allow a stockholder to prefer any credi tor he might select. This the law does not permit. Richardson v. Chicago Packing Co., 63 Pac. 74 (Cal. 1900).

The creditor of a corporation has two debtors, one the corporation, the other the stockholders, and the amount he may prove against the estate of either is not affected by any dividend he may receive from the estate of the other, except that the amount received from both shall not exceed the aggregate of his debt. Sacramento Bank v. Pacific Bank, 124 Cal. 147, 56 Pac. 787.

SECTION 173-SAME.

When stockholders who are indebted to the corporation for part or all of the purchase price of their stock, are also creditors of the corporation, a question of priority arises. A

creditor is not deprived of his rights as a creditor because he is also a stockholder,' but he is postponed in certain cases, to non-stockholding creditors. [Richardson v. Chicago Packing Co., 63 Pac. 74, (Cal. 1900).] The creditor, in such case, recovers the difference between what he owes the corporation for unpaid stock and the amount of his judgment. [Id.] If the amount he owes to the corporation is greater than the amount of its debt to him, he is postponed, as a creditor, to nonstockholding creditors, but as a debtor to the corporation he can set off the amount due to him from it. Kimball v. Richardson-Kimball Co., 111 Cal. 386, 43 Pac. 1111.

If the creditor-stockholder and the corporation are both insolvent, the insolvent creditor's estate is not allowed to recover from the corporation, but such insolvent must pay his debt to the corporation in the same pro rata that all his other creditors are paid, and then such estate receives on the full amount of its claim the pro rata dividena declared by the corporation's assignee. Kimball v. Richardson-Kimball Co., 111 Cal. 386, 43 Pac. 1111.

The statute of limitations against calls begins to run either from the time the corporation makes such a call or openly ceases to do business or dissolves. Harman v. Page, 62 Cal. 448.

1 Bonney v. Tilley, 109 Cal. 346, 42 Pac. 439.

SECTION 174--RIGHTS AGAINST DIRECTORS FOR BREACH OF TRUST.

There is no privity between the directors of a corporation and its creditors because of debts or contracts between the corporation and creditors. If the directors waste the funds of the corporation or misappropriate the same or create debts beyond the limit allowed by law, the directors are liable for all damages the creditors of the corporation sustain thereby. Such liability cannot be enforced by an action for damages by any single creditor, but the remedy is a creditor's bill in behalf of all creditors [see Sec. 170 supra], and all the tort-feasors and the corporation must be joined as defendants. The court can then compel an accounting and decree damages to the creditors. Reed v. Goldstein, 53 Cal. 296. The theory of such an action is that all the assets of a corporation are a fund upon which its business is to be done and upon which its credit rests, and that the subscribed capital stock is a guaranty to creditors that all obligations up to that amount will be met. Moore v. Lent, 81 Cal. 502, 22 Pac. 875. See Sec.

169, supra.

The remedy provided by the constitution, [Art. XII, Sec. 3] and the code [C. C. 327] for misappropriation of funds or embezzlement is a cumulative remedy [see Chap. XVI supra]; it does not take away or abrogate the remedy against directors for breach of trust. Hiller v. Collins, 63 Cal. 235.

Directors of an insolvent corporation, who

are also creditors of the corporation, cannot secure to themselves any preferences or advantages over other creditors. Tilley, 109 Cal. 346, 42 Pac. 439.

Bonney v.

CHAPTER XX.

STOCKHOLDER'S STATUTORY LIABILITY.

SEC. 175-NATURE OF THE LIABILITY.

SEC. 176-SAME-A TERM OF THE STOCKHOLDER'S CONTRACT.

SEC. 177-SAME-PRIMARY, NOT SECONDARY.

SEC. 178-SAME-SEVERAL, NOT JOINT.

SEC. 179-SAME-WHEN IT ARISES.

SEC. 180-SAME-BARRED IN THREE YEARS.

SEC. 181-SAME-CANNOT BE EXTENDED BY ANY ACTS OF THE CORPORATION.

SEC. 182-EXTENT OF LIABILITY.

SEC. 183-SAME-SUBROGATION.

SEC. 184-PERSONS LIABLE.

SEC. 185-DEFENSES-PAYMENT AND SET-OFF.
SEC. 186-SAME-WAIVER.

SECTION 175--NATURE OF THE LIABILITY.

The individual liability of the stockholders for the debts of the corporation is wholly statutory. It is a liability imposed upon one person for debts contracted by another, and was unknown at common law. Hunt v. Ward, 99 Cal. 612, 34 Pac. 335.

The present constitution, the constitution of 1849, and every general corporation statute that has ever been enacted in California, have made the stockholders liable for the debts of the corporation. It is the settled public policy of the state. Const. 1849, Art. VI, Secs. 32, 36; Const. 1879, Art. XII, Sec. 23; Stats.