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3. The fact that the father of such plaintiffs was an alien and domiciled outside of California does not render ineffectual the

acts claimed to constitute legitimation.Wolf v. Gall, 32 Cal. App. 286, 163 Pac. 346.

TITLE III.

GUARDIAN AND WARD.

$ 242. Appointment by will or deed of guardian (new).

§ 242. APPOINTMENT BY WILL OR DEED OF GUARDIAN. A guardian of the person or estate, or of both, of an insane or incompentent person may be appointed by will or deed, to take effect upon the death of the person appointing:

1. If the insane or incompetent person be unmarried, or be a person whose marriage has been annulled or dissolved by death or divorce, by the father, with the written consent of the mother, or by either parent if the other be dead or incapable of consent.

2. If the insane or incompetent person be married and a person whose marriage has not been annulled or dissolved by divorce, then by the spouse.

History: Original section relating to guardian of estate, enacted
March 21, 1872; repealed by Code Commission, Act March 16, 1901,
Stats. and Amdts. 1900-1, p. 340; act held unconstitutional, see history,
Kerr's Cyc. C. C., $ 4; re-repealed March 21, 1905, Stats. and Amdts.
1905, p. 728; present section approved May 17, 1917, Stats. and Amdts.

1917, p. 645. In effect July 27, 1917. $ 246.

This section limits the discretion of the 1. Awarding custody of minor--To father

court by subdivision 1, referring to the best

interests of the child. when (subd. 3 (1)).-Where the father of a

A judge can not use minor child is a man of good and indus

an infant child for the purpose of reforming trious habits, and is able and willing to

the mother.-Matter of Lee, 165 Cal. 279, 45

L. R. *A. (N. S.) 91, 131 Pac. 749. care for the child, and is a fit and competent person to have its custody, he is en

$ 285. titled thereto rather than a guardian who has been appointed without his consent.

1. De facto corporation.--A concern In re Schwartz, 171 Cal. 633, 154 Pac. 304.

claiming in good faith to be a legally organ2. -Welfare of child (subd. 1).- A judg

ized corporation, and doing business as such ment wherein the mother was awarded the under the corporate name designated in its custody of a two year old child, although

certificate of incorporation, is at least a de she was found to be a woman of dissolute

facto corporation whose existence can not habits and immoral life, as against the aunt

be attacked collaterally.—Vallejo & N. R. and petitioner in whose custody it had been

Co. v. Reed Orchard Co., 169 Cal. 545, 147 confided by the mother, can not be upheld.

Pac. 238.

PART IV.

CORPORATIONS.

TITLE I.

GENERAL PROVISIONS APPLICABLE TO ALL CORPORATIONS.

CHAPTER I.

FORMATION OF CORPORATIONS.

ARTICLE I.

CORPORATION DEFINED AND HOW ORGANIZED.

$ 290a. Certificate of approval of superintendent of banks.

8 290.

1. Incorporation—Amount of capital stock (subd. 6).-Articles of incorporation which set forth the capital stock of the corporation as being one million dollars, divided into fifty thousand shares of common stock at the par value of one dollar each, and forty-seven thousand five hundred shares of preferred stock the par value of twenty dollars each, offend subdivision 6 of section 290 of the Civil Code, which provides "that no preference shall be granted nor shall any distinction be made between the classes of stock either as to voting power or as to the statutory or constitutional liability of the holders thereof to the creditors of the corporation," and the secretary of state is justified in refusing to file the same.-Film Producers v. Jordan, 171 Cal. 664, 154 Pac. 605.

2. Our statutes were framed, and our decisions under them based, upon a capitaliza

tion represented by shares of a single par value. The market trading in and the market value of these shares can have no bearing upon the construction of the stat. utes.-Film Producers v. Jordan, 171 Cal. 664, 154 Pac. 605.

3. -Number of directors (subd. 5).The words of this subdivision before amendment, "provided, also, that at any time during the existence of corporations for profit, other than those of the character last hereinabove provided for, the number of the directors may, by a majority of the stockholders of the corporation, be increased or diminished to any number not less than three, who must be members of the corporation" means a majority in interest of the stockholders and not a majority in number only. Sections 312 and 362 do not change that construction and do not require more than a majority in interest.-Bank of Los Banos v. Jordan, 167 Cal. 327, 139 Pac. 691.

$ 290a. CERTIFICATE OF APPROVAL OF SUPERINTENDENT OF BANKS. Before any, corporation, authorized in its articles of incorporation to conduct the business of acting as executor, administrator, guardian of estates, assignee, receiver, depositary, or trustee under appointment of any court or by authority of any law of this state, or as trustee for any purpose permitted by law, or to engage in the business of banking, or of receiving the money of others on deposit, may file with the secretary of state a certified copy of its articles of incorporation, or of a certificate of extension of its term of existence, or of a certificate increasing or decreasing the number of its directors, or of a certificate increasing or decreasing its capital stock, or of its amended articles of incorporation, or of its articles of incorporation and consolidation, there must be attached thereto the certificate of approval of the superintendent of banks;

[Exception as to escrow holders.] provided, that this section shall not apply to any corporation authorized to engage in the business of receiving and holding in escrow money or its equivalent, pending investment in real estate or securities for or on account of its principal, or to act as trustee under deeds of trust given solely for the purpose of securing obligations for the repayment of money other than corporation bonds, nor shall such corporations be subject to the supervision of the superintendent of banks.

History: Enacted March 21, 1907, Stats, and Amdts. 1907, p. 482,
Kerr's Stats. and Amdts. 1906-7, p. 402; amended March 13, 1909, Stats.
and Amdts. 1909, p. 300; May 1913, Stats, and Amdts. 1913, p. 201;
June 3, 1915, Stats, and Amdts. 1915, p. 1136; May 17, 1917, Stats, and
Amdts. 1917, p. 621. In effect July 27, 1917.

$ 298.

1. “Stockholder" defined. The word "stockholder" in section 3 of article XII of the constitution is synonymous with the

term "owner of shares" as used in this section.-Western Pac. R. Co. v. Godfrey, 166 Cal. 346, Ann. Cas. 1915B 825, 136 Pac. 284.

ARTICLE II.

BY-LAWS, DIRECTORS, ELECTIONS, AND MEETINGS.

8 309. Dividends from surplus profits. Penalty for violation of provision.
$ 321a. Change of principal place of business, procedure.

ern

8 302.

El Dora Oil Co., 27 Cal. App. 516, 150 Pac.

643. Annual meeting of stockholders-Mandatory provision.—The duty of the president

$ 305. of a corporation to call an annual meeting

1. of the stockholders, under a by-law pro

Powers of directors-Liability to corviding that "the annual meeting of the poration.-A director and president of a stockholders may be held in the first week corporation is liable to the corporation for of December in each year and shall be called the percentage of net profits received by as the directors may direct, or by a notice him from the profits earned by a firm emin writing by the president, delivered or

ployed by the directors of the corporation mailed to each stockholder personally,” is to assist them in selling the capital stock, mandatory, not merely permissive.—Pen

where such net profits were received purnington v. Pennington, 170 Cal. 114, 148 Pac.

suant to the terms of a secret agreement 790.

made between such officer and the firm, by 2. -By-law providing “may” be held on the terms of which the former was to give specified day, mandatory.-A by-law of a his assistance and co-operation to the latter corporation providing that the annual meet- in selling the stock; and it is immaterial ing of the stockholders "may" be held on a that such official gave up another position certain day, and shall be called by notice, is the better to enable him to carry out his to be construed as mandatory, and not undertaking, or that such firm could not merely optional or permissive.-Stapler V. have completed their contract with the corEl Dora Oil Co., 27 Cal. App. 516, 150 Pac. poration without the aid of such official, or 643.

that his services were reasonably worth to 3. -Mandamus to compel calling meet

the corporation the amount received.-Westing.-Mandamus will lie at the instance of

States Life Ins. Co. v. Lockwood, 173 stockholders of a corporation to compel a

Cal. 734, 161 Pac. 498. recalcitrant board of directors to call an 2. The power of the board of directors annual meeting of the corporation for the of a corporation to transact corporate busipurpose of electing a board of directors.- ness is neither diminished nor defeated by Stapler v. El Dora Oil Co., 27 Cal. App. 516, the fact of a vacancy in the board, unless 150 Pac. 643.

the number of statutory directors is reduced 4. Where the claim to the writ of man

below the required quorum, and the number date is based upon a by-law of the corpora

of directors necessary to be present in order tion which provides for the time of annual to constitute a quorum for the transaction meeting, it is immaterial whether or not the

of corporate business remains the same, statutes of the state under which the for- even though there are unfilled vacancies in eign corporation was created contain

the board.—Pennington v. Pennington Sons,

no provision similar to section 302 of the Civil 27 Cal. App. 57, 148 Pac. 947. Code to the effect that where no time is 3. Directors as trustees.-Directors of a fixed in the by-laws for the election of di- corporation are trustees and subject to the rectors the same must be held on the first requirements and obligations of persons ocTuesday in June.-Stapler v. El Dora Oil cupying that relation as defined in the Civil Co., 27 Cal. App. 516, 150 Pac. 643.

Code.--Highland Park In. Co. v. List, 27 5. Such rule is applicable to a foreign

Cal. App. 961, 151 Pac. 162. corporation, where all the members of the 4. A fundamental obligation of trusteeboard of directors reside in this state, ship is that a trustee may not obtain any wherein all its property is situate and all benefit or advantage over his cestui que its corporate business, including that of its trust; the law looks with strictness amountboard of directors, transacted.-Stapler v. ing to suspicion upon all transactions had

by a trustee respecting the trust property, and the burden is generally cast upon the trustee in such a case to make a clear showing in the absence of fraud and lack of good faith.-Highland Park In. Co. v. List, 27 Cal. App. 961, 151 Pac. 162.

selves in securing votes for any contesting candidate, nevertheless the fact that they suggest and advise stockholders to cumulate their votes in favor of a successful candidate, furnishes no legal cause for setting aside such election.-Clopton v. Chandler, 27 Cal. App. 595, 150 Pac. 1012.

4. Where the act done is not illegal, the motive which prompts the doing thereof is immaterial.-Clopton v. Chandler, 27 Cal. App. 595, 150 Pac. 1012.

8 307.

1. Election of directors.—Where a by-law of a corporation designates the secretary, treasurer and auditor as a committee on elections with power to make all arrangements therefor and to determine all questions touching the qualification of voters, validity of proxies and the acceptance and rejection of votes, they, and not the board of directors, possess the sole right to determine as to how long the polls shall be kept open to enable the shareholders to vote their stock, and in the absence of an abuse of discretion their action in such regard will not be disturbed by the courts.-Clopton v. Chandler, 27 Cal. App. 595, 150 Pac. 1012.

2. It is not an abuse of discretion for such an election committee to keep the polls open for an election of directors of the corporation from 10 o'clock a. m., January 14th, to 12 o'clock noon, January 15th, pursuant to an announcement publicly made hours before the time when the polls were closed, notwithstanding the recital in the published notice of election by the board of directors that the polls would close at 6 o'clock p. m., and notwithstanding that by their action they were enabled to cumulate enough votes on a certain candidate as to secure his election.-Clopton v. Chandler, 27 Cal. App. 595, 150 Pac. 1012.

3. While propriety dictates that such offi. cers of election should not interest them

$ 308.

1. Organization—Vacancy in board.-The power of a board of directors to transact corporate business is neither diminished nor defeated by the fact of a vacancy in the board, unless the number of statutory directors be reduced below the required quorum, and the number of directors necessary to be present in order to constitute a quorum for the transaction of corporate business remains the same, even though there be unfilled vacancies in the board of directors.Pennington v. Pennington Sons, 27 Cal. App. 57, 148 Pac. 947.

President - Appointment and authority.-The president of a corporation engaged in the business of selling real property for commissions has authority to employ salesmen on a percentage basis and to bind the corporation by his contracts, where he is also shown to be the actual general manager of the business.-Hoffman v. Rush Co., 27 Cal. App. 167, 149 Pac. 177.

3. It is not essential that any resolution should be passed appointing the president of a corporation as its general manager, but it is sufficient if it be shown that such offcer was manager de facto.-Hoffman v. Rush Co., 27 Cal. App. 167, 149 Pac. 177.

$ 309. DIVIDENDS FROM SURPLUS PROFITS. PENALTY FOR VIO. LATION OF PROVISION. Unless they shall have been first permitted or authorized so to do by the commissioner of corporations, directors of corporations must not make dividends except from the surplus profits arising from the business thereof; nor must they create any debts beyond their subscribed capital stock; nor must they divide, withdraw, or pay to the stockholders, or any of them, any part of the capital stock, except as hereinafter provided, nor reduce or increase the capital stock, except as provided in section three hundred fifty-nine of this code.' For a violation of the provisions of this section, the directors under whose administration the same may have happened (except those who may have caused their dissent therefrom to be entered at large on the minutes of the directors at the time, or were not present when the same did happen) are, in their individual or private capacity, jointly and severally liable to the corporation, and to the creditors thereof, to the full amount of the capital stock so divided, withdrawn, paid out, or reduced or debt contracted. Nothing herein prohibits a division and distribution of the capital stock of any corporation which remains after the payment of all its debts, upon its dissolution, or the expiration of Its term of existence.

[Pending rights not affected.] Sec. 2. No right, cause of action, or liability now existing or any action or proceeding now pending, shall be affected by this act and such right, cause of action or liability may be enforced and such action or proceeding may be prosecuted in the same manner and with the same effect as if this act had not been passed; excepting only the liability of a director of a corporation heretofore incurred shall not exist in any case where, all of the debts and liabilities of the corporation to creditors having been paid, the capital stock divided, withdrawn, or paid out constituted all of the capital stock of the corporation and the same was paid out, withdrawn, or divided with the consent of all of the stockholders to or among themselves.

History: Enacted March 21, 1872; amended March 31, 1891, Stats.
and Amdts. 1891, p. 468; by Code Commission, Act March 16, 1901,
Stats. and Amdts. 1900-1, p. 346; act held unconstitutional, see Kerr's
Cyc. C. C., § 4; amended March 21, 1905, Stats, and Amdts. 1905, p. 558;
May 18, 1917, Stats. and Amdts. 1917, p. 657. In effect July 27, 1917.

1. Dividends-Purpose of section.-Transactions whereby a corporation creates debts in excess of the amount of its subscribed capital stock are for that reason neither void nor voidable. They are within the powers of the corporation, and this section was merely designed to provide a remedy in favor of the corporation and its creditors against those members of the board of directors by whose improvident or fraudulent exercise of the powers of a corporation debts are created disproportionately to the subscribed capital stock, and beyond the ability of the corporation to pay.--Hawke v. California Realty & Const, Co., 28 Cal. App. 377, 152 Pac. 959.

2. -Repealed in part.-The part of this section imposing a liability for corporation debts in excess of its subscribed capital stock on the participating directors was repealed as to public utility corporations by sections 525 and 52e of the Public Utilities Act which went into effect March 23, 1912. (Stats. Ex. Sess. 1911, p. 18.)-Moss v. Smith, 171 Cal. 777, 155 Pac. 90.

4. Want of the required notice is not waived by attendance at such meeting and nonparticipation in the election.-Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

5. -Vacancy in board.--A resolution of the board of directors of a corporation removing from office the superintendent of the corporation (also a director) and depriving him of all authority to sign checks and documents for or in the name of the corporation, adopted by the affirmative vote of two out of the three qualified electors present at the meeting, which was regularly called, is a valid resolution, notwithstanding there was at the time of the meeting a vacancy in the board of directors created by the death of the fifth director.–Pennington v. Pennington Sons, 27 Cal. App. 57, 148 Pac. 947.

8 312.

1. Construction.-A majority of stockholders means a majority in interest and not a majority in numbers and this is not changed under section 362,--Bank of Los Banos v. Jordan, 167 Cal. 327, 139 Pac. 691.

§ 310.

1. Removal of directors-Notice of purpose of meeting.--A special meeting will not be authorized to elect directors in the absence of a notice specifying that such election is one of the purposes of the meeting, and a notice stating that the purpose of the meeting is "to transact such business as may come before the said meeting," is not a notice that the election of directors, or any other specific matter is to be taken up.Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

2. An election of directors at a special meeting of the stockholders thereof is void, where the meeting was called at the request of stockholders holding less than one-half of the votes, and the notice thereof simply recited that the purpose of the meeting was "to transact such business as may come before the said meeting.”—Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

3. In the absence of statutory provision the stockholders are, under the general principles governing corporations, entitled to specific notice of the purpose of a meeting which is to elect directors at a time other than that fixed by statute or by law.Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

§ 314.

1. Construction.--This section in authorizing the stockholders to call a meeting for the election of directors "as provided in section 310" incorporates not only the provisions prescribing the preliminary steps of directing a call to the secretary, but also those requiring the subsequent notice "of the time, place, and object of the meeting."Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

2. A meeting of directors called "to transact such business as may come before said meeting" is insufficient to authorize the election of directors.—Dolbear v. Wilkinson, 172 Cal. 366, 156 Pac. 488.

315. 1. Action to set aside election.—To entitle one to be heard the party must show himself to be aggrieved, that is prejudiced in his substantial rights.-Clopton v. Chandler, 27 Cal. App. 595, 150 Pac, 1012.

2. In a proceeding brought under section 315 of the Civil Code to set aside the election of director of a corporation, the sufficiency of the complaint may be raised by general demurrer.—Clopton v. Chandler, 27 Cal. App. 595, 150 Pac. 1012.

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