ANNOTATION. Validity and reasonableness of rules and regulations of cemetery company or association as to improvement or care of lots. [Cemeteries, § 2.] The present annotation is supplemental to that in 32 A.L.R. 1406, where the earlier cases may be found. Exercise of power generally. (Supplementing annotation in 32 A.L.R. 1407.) Where the owner of a lot in a cemetery has only an easement in the lot, it has been held that the cemetery may pass a by-law providing that "no person shall engage or permit any hired labor to make improvements upon any lot, but may arrange with the company to improve, beautify, and care for the same upon such terms as are hereinafter set out" (the charges listed being reasonable), and that such a by-law is a reasonable regulation. Strathcona Cemetery Co. v. Taylor (1924) 20 Alberta L. R. 466, [1924] 3 D. L. R. 625, reversing (1924) 20 Alberta L. R. 459, [1924] 2 D. L. R. 1075. Said the court: "Although the by-law is obviously intended to be the means of supplementing what I take to be the meager income of the company, and with a view of providing the company with a little more funds to enable them to maintain, improve, beautify, and protect the cemetery as a whole, I think under the circumstances that this is a very reasonable purpose; it is one which is for the benefit of every plot holder." The decision, it will be noted, is squarely in accord with that in Cedar Hill Cemetery Co. v. Lees (1903) 22 Pa. Super. Ct. 405, as set out on p. 1408 of the earlier annotation in 32 A.L.R. On the other hand, and in accordance with the great weight of authority in this country, as pointed out at page 1409 of the earlier annotation in 32 A.L.R., it has been held that a lot owner in a public cemetery has the right to have the graves thereon cared for and decorated by persons chosen by himself, and that a rule of the association requiring him to employ only employees of the association to do such work is unreasonable, and an unlawful restriction upon his rights. SCOTT v. LAKEWOOD CEMETERY ASSo. (reported herewith) ante, 64. The lot was conveyed for burial purposes only, it is to be noted. That the deed conveying the lot was subject to the condition that the premises and the use thereof should at all times be subject to the rules, regulations, limitations, and restrictions prescribed by the association, did not authorize the rule adopted by the association. Ibid. As stated by the court, and as will be found by reference to the earlier annotation, in many of the earlier cases denying the validity of such a rule the conveyance was subject to conditions which limited and restricted the rights of the lot holder to fully as great an extent. and The association may require, however, that the improvements decorations conform to the general plan for improving and beautifying the cemetery, be made by competent persons, and comply with all reasonable rules regulating the character of the work and the manner of doing it. Ibid. A cemetery company may not prohibit lot owners from themselves cutting grass and weeds, and otherwise beautifying their lots subject to reasonable regulations. Strachcona Cemetery Co. v. Taylor (Alberta) supra. The by-law did not attempt to do so, it will be noted. The court was of the opinion that, notwithstanding the wide words of the by-law, a lot owner or one entitled to an interest in the lot would be at liberty to send or take with him a person in order to do without remuneration the manual labor which he is entitled to do by his own hands; in this statement, it is not clear whether the court was construing the by-law in question, or laying down a rule of law which could not be violated by the company. With respect to headstones, it has been said that the following rules and (- Wash. 245 Pac. 753.) Corporations, § 72- validity of mortgage. 1926. 1. A mortgage given by a corporation without express statutory authority, to secure payment of a note signed by it and one of its stockholders for the price of its stock purchased by him, is not enforceable against the rights of creditors, whether they become such prior or subsequent to the execution of the mortgage. [See annotation on this question beginning on page 78.] Trusts, § 126 corporation right - to recover money paid out of capital. 2. A receiver of a corporation cannot recover money paid by the sole stockholder, out of his private bank account, for stock of the corporation while it was a going concern and apparently in a flourishing condition, on the ground that the account was composed of capital of the corporation which he had, without right, transferred to his account. Corporations, § 179 right of receiver to attack reduction of capital. 3. The receiver of an insolvent corporation cannot attack a reduction of its capital stock made at a time when it was in sound condition, in strict accordance with the provisions of the statute, with nothing to show that it was not in entire good faith, or that the capital was diminished to an amount less than the existing debts and liabilities. APPEAL by plaintiff from a judgment of the Superior Court for Snohomish County (Alston, J.), in his favor in part only, in an action brought to recover on two unpaid promissory notes and to foreclose a mortgage given to secure them. Reversed. The facts are stated in the opinion of the court. Messrs. Herr, Bayley, & Croson, for appellant: Ultra vires acts of a private corporation are valid as between parties, if assented to or acquiesced in by all of the stockholders. Hill Syrup Co. v. Frederick & Nelson, 133 Wash. 155, 233 Pac. 663; Tefft V. Schaeffer, 136 Wash. 302, 239 Pac. 837, 1119; Roy & Co. v. Scott, II. & Co. 11 Wash. 399, 39 Pac. 679; Steeple v. Max Kuner Co. 121 Wash. 47, 208 Pac. 44. A corporation entirely owned and controlled by an individual, there being no other stockholders, will be identified with the individual and bound by his acts. V. Montello Colonial Trust Co. 310; Clark v. Schwaegler, 104 Wash. 12, 175 Pac. 300; Platt v. Bradner Co. 131 Wash. 573, 230 Pac. 633; Roberts v. Hilton Land Co. 45 Wash. 464, 88 Pac. 946; Cole v. Price, 22 Wash. 18, 60 Pac. 153. Where all of the stock of a corporation is sold to a vendee who then takes possession of the corporate assets and ignores the corporate existence, the court may construe this as a sale of the corporate assets. Cusick v. Bartlett, 91 Me. 153, 39 Atl. 497; Roberts v. Hilton Land Co. 45 Wash. 464, 88 Pac. 946. The validity of the notes and mortgage must be determined as of the date they were executed. Boyes v. Turk Min. Co. 56 Wash. 515, 106 Pac. 475; Roy & Co. v. Scott, H. & Co. 11 Wash. 399, 39 Pac. 679. Subsequent creditors of the company were charged with notice of plaintiff's rights under his mortgage. Farmers' & M. Bank v. Small, 131 Wash. 197, 229 Pac. 531. None of the creditors represented by the receiver were creditors of the company until nearly two years after the instruments in question executed. were Roy & Co. v. Scott, H. & Co. supra; Colville Valley Coal Co. v. Rogers, 123 Wash. 360, 212 Pac. 732; Marsters v. Umpqua Valley Oil Co. 49 Or. 374, 12 L.R.A. (N.S.) 825, 90 Pac. 151; Osborn v. Montelac Park, 89 Hun, 167, 35 N. Y. Supp. 610; First Nat. Bank v. Winchester, 119 Ala. 168, 72 Am. St. Rep. 904, 24 So. 351; Swift v. Smith, 65 Md. 428, 57 Am. Rep. 336, 5 Atl. 534. The notes and mortgage did not work a preference in favor of the plaintiff as against other creditors. Thompson v. Huron Lumber Co. 4 Wash. 600, 30 Pac. 741, 31 Pac. 25; Conover v. Hull, 10 Wash. 673, 45 Am. St. Rep. 810, 39 Pac. 166; Terhune v. Weise, 132 Wash. 208, 38 A.L.R. 94, 231 Pac. 954. Messrs. Marion A. Butler and Horan & Mulvihill, for respondents. Fullerton, J., delivered the opinion of the court: The Cedarhome Lumber Company is a corporation organized under the laws of the state of Washington. It was originally incorporated with a capital stock of $75,000, divided into 750 shares of the par value of $100 each. Of these shares, the appellant, F. H. Hess, subscribed for 5624 shares, and the defendant, George A. Bell, for 187 shares. At the time of the organization of the corporation, Hess paid on his stock subscription $15,000, and 75 of the shares were issued to him and 75 to his wife, J. E. Hess. Bell at the same time paid on his subscription $5,000, and 50 shares were issued to him. Neither of the subscribers thereafter paid anything more on their subscriptions, and no more of the capital stock was ever issued. The corporation engaged in the lumber business at East Stanwood, in Snohomish county. Its business proved profitable. By October 14, 1921, it had acquired property estimated by Bell to be of the net worth of $110.000, and by F. H. Hess of $90,000. Its obligations at that time amounted to approximately $10,000, owing to the respondent First National Bank of Everett. On the date above given, the trustees of the corporation were F. H. Hess, J. E. Hess, and George A. Bell, and on that date held a meeting duly called for the purpose of reducing the capital stock of the corporation to $20,000, the amount of the capital stock paid in, and for which shares were issued and outstanding. By a unanimous vote of the stockholders the stock was so reduced. On their face, the proceedings had in this behalf were regular and in compliance with the statute. On October 14, 1921, Hess and wife sold and assigned their shares of the stock in the corporation to Bell. The purchase price agreed to be paid therefor was $51,900. On the purchase price Bell paid $11,000 in cash, and for the remainder gave to F. H. Hess three promissory notes the first for the sum of $15,900, due on or before two years after date; the second for the sum of $12,000, due on or before three years after date; and the third for the sum of $13,000, due on or before ten years after date. Each of the notes bore interest at the rate of 6 per centum per annum, payable an (Wash., 245 Pac. 758.) nually, and contained an accelerating clause to the effect that the holder could at his option declare the same due on the nonpayment of interest when due. The notes were executed by George A. Bell, Mabel S. Bell, and by the corporation as makers; the corporation signing by George A. Bell as its president and Mabel S. Bell, as its secretary. As security for the notes, a mortgage was executed to F. H. Hess by the corporation, covering all, or principally all, of its property, both real and personal. After the transfer of the stock, Bell assumed the sole management of the corporation. For the following two years its business continued to be prosperous. Bell withdrew from the business during this period $51,100 and deposited it in a bank to his private account. From the sum so deposited he paid to Hess the first of the notes above mentioned and the accrued interest on the others, the total amounting to $17.574. In June, 1923, Bell moved the business of the corporation to Berrydale, in King county. At this time Bell secured a credit from the respondent bank, and thereafter incurred other obligations, so that by January 28, 1925, the corporation became insolvent, and on that day the respondent Oscar G. Heaton was appointed its receiver. The record shows, and the trial court found, that all of the indebtedness owing by the corporation at the time of the execution of the notes and mortgage was thereafter fully paid. The record does not disclose with any definiteness whether the corporation became free of debt subsequent to that time, but it is probable that it at all times had outstanding current obligations arising from the necessities of its business. It is clear, however, that none of the creditors filing claims with the receiver became such prior to the removal of the business to King county. In a statement made orally at the conclusion of the evidence, although it does not appear in the formal findings, the trial judge expressed the view that the corporation was solvent at the time of the sale of the stock to Bell, that the transaction was entered into in good faith by both of the parties, and that the mortgage was also executed in good faith; saying that he did not think there was "anything in the evidence that arouses a suspicion to the contrary." This, we may add, is in accord with our view of the evidence. In the present action, F. H. Hess sought to recover against George A. Bell, Mabel S. Bell, and the corporation, on the unpaid notes, and sought to foreclose the mortgage given by the corporation to secure the notes. The receiver and the First National Bank of Everett appeared and defended. The other defendants defaulted. The defendants appearing, while admitting the execution of the notes and the mortgage by the corporation, contended that, because they were not executed for an indebtedness owing by the corporation but for the individual obligation of Bell, they were executed without consideration, were beyond the powers of the corporation, and void as to creditors of the corporation, whether existing or subsequent. The lower court sustained the contention, and refused charge the corporation with liability on the notes or allow a foreclosure of the mortgage. It also found that the sums withdrawn by Bell from the corporation prior to its removal to King county were withdrawn largely from the assets of the corporation and not from its earnings, and that the appellant, Hess, at the time he received the sums paid on the notes, "had knowledge of such facts as would have conveyed to an ordinarily careful man knowledge of the fact that the money which he received was coming out of the assets of said corporation," and entered a judgment in to favor of the receiver and against Hess for the amount so received, namely, $17,574. It entered a judgment in favor of Hess and against George A. Bell and Mabel S. Bell, as individuals and as a community, for $29,805, the amount unpaid upon the notes. Hess appeals from so much of the judgment as is adverse to him. The powers of the defendant corporation, as set forth in its articles of incorporation, are: To engage in logging and lumbering; to engage in the manufacture and sale of lumber and timber, and all products incidental thereto; to buy, own, sell, mortgage, and otherwise deal in real estate; to buy, own, sell, mortgage, and otherwise deal in all forms of personal property; to borrow money, to issue bills and notes and other forms of indebtedness, including bonds, mortgages, and trust deeds securing the same; and to do any and all other things not herein specifically enumerated which may be necessary and appropriate to the performance of the special powers herein before set forth. In its articles it is given no special power to become surety for another, or to pledge its property to secure the payment of an obligation of another. Nor does the statutory enumeration of the powers belonging to corporations organized for the purposes for which this corporation is organized include these powers. It is provided therein, among other things, that such a corporation has power to purchase, hold, mortgage, sell, and convey real and personal property, and to carry on all kinds of business within the objects and purposes of its incorporation as expressed in its articles of incorporation, but it is given no express authority to become surety, or pledge its property as security, for the debt or obligation of another. Since, therefore, the obligation assumed in this instance by the corporation was not an obligation of its own, or an obligation in any way connected with its business, but was an obligation solely that of its principal stockholder, the question is, Has it implied powers so to do? The general rule applicable to such a situation is stated in 14a C J. p. 732, § 2781, as follows: "In the absence of express statu tory authorization, a corporation has no implied power to lend its credit to another by issuing or indorsing bills or notes for his accommodation, where the transaction is not related to the business activity authorized by its charter as a necessary or usual incident thereto, and such a prohibition is contained within an express statutory provision that no corporation shall employ its assets for any purpose other than to accomplish the objects of its creation and shall not create any indebtedness except for money paid or labor done or for property actually received. And not having the power itself, a corporation cannot authorize its officers to bind it by making or indorsing such paper. This rule is universal as to banking and insurance companies, building and loan associations, municipal corporations, railroad and plank road companies, and manufacturing and trading companies. It applies, however, only to transactions which are, in substance, a signing for the accommodation of another, and has no application to a transaction which, while it may be in form a signing for accommodation of another, is really a transaction based upon a valid consideration, and within the charter powers of the corporation." In the case of Re Romadka Bros. Co. 132 C. C. A. 357, 216 Fed. 113 (circuit court of appeals, seventh circuit), the suit was upon a promissory note, signed by the corporation as guarantor. The consideration for the note did not move to the corporation, nor was it executed for its benefit, but was the personal indebtedness of its stockholders to the payee of the note. Speaking of the aspect of the corporation as guarantor, the court said: "In this aspect of the claim, the corporation appears as an accommodation guarantor of the indebtedness of the makers, and the doctrine is well settled that a corporation cannot ordinarily |