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voluntarily accepts ownership thereof and goods were later delivered and accepted, is sui generis. The idea appears to have attached to the stockholders owning stock been to enlarge the term so as to make at the time the contract was made and not it include persons who might not otherwise

to those who were stockholders at the be held to be included.-Western Pac. R. Co.

time the goods were delivered. - Coulter v. Godfrey, 166 Cal. 346, Ann. Can. 1915B

Dry Goods Co. v. Wentworth, 171 Cal. 500,

153 Pac. 939. 825, 136 Pac. 284.

20. Each stockholder of a corporation is 13. The words "stock" and "shares” are individually liable under article XI, secnot interchangeable. — Film Producers v. tion 3. of the constitution and section 322 Jordan, 171 Cal. 664, 154 Pac. 604.

of the Civil Code, not only for all "debts," 14. The liability of the stockholders is but for all "liabilities" contracted while a primary and statutory liability which is he is a stockholder, and a liability is created in nowise affected by actions against the when a contract binding on it is made by corporation of which they are stockholders the corporation, independently of any questo recover upon its contractual obligations. tion as to when the right to enforce it may -Union Trust Co. v. Journeay, 29 Cal. App. accrue.-Coulter Dry Goods Co. v. Went502, 156 Pac. 999.

worth, 171 Cal. 500, 153 Pac. 939. 15. An action brought upon the statutory 21. Nature of liability.—The liability of liability of the defendants as stockholders a stockholder to the corporation for the of a corporation to recover the balance due amount of his unpaid assessment is one on the corporation's promissory note is not arising from contract.-Marshall v. Wentz, abated by the pendency of a prior action 28 Cal. App. 540, 153 Pac. 244. against the corporation to recover judgment 22. The liability of a paid-up stockupon the note, nor by the pendency of a holder to the corporation for the amount prior action against five of the nine defen of his assessment does not differ from the dants in the present action to recover judg- liability of a stockholder who is assessed ment against such defendants upon their upon his unpaid subscription for stock, so contractual lia bility as general guarantors far as the question of garnishment is conof 'such indebtedness of the corporation. cerned.—Marshall v. Wentz, 28 Cal. App. Union Trust Co. v. Journeay, 29 Cal. App. 502, 540, 153 Pac. 244. 156 Pac. 999.

23. A corporation when created becomes 16. Enforcement of llability. The state the agent of the stockholders to make such superintendent of banks is not authorized, contracts and incur such liabilities as are under the banking act of 1909, to enforce authorized by law and its articles of incorthe constitutional liability of the stockhold- poration, and its contracts thus made bind ers of a bank which he has taken over for its stockholders to the extent named.-Marthe purpose of liquidation, to the creditors; shall v. Wentz, 28 Cal. App. 540, 153 Pac. 244. such right is personal to the creditors, and 24. The liability of a stockholder of a no part of the business of banking.-Will corporation to the corporation for the iams v. Carver, 171 Cal. 658, 154 Pac. 472. amount of an assessment is one arising upon

17. A judgment creditor who has ex an implied contract, and subject to garhausted his legal remedies against a cor nishment.—Marshall v. Wentz, 28 Cal. App. poration may maintain an action in equity

540. 153 Pac. 244. against a stockholder who is indebted on an 25. Stockholders in a corporation are perunpaid stock subscription.-Llewellyn Iron sonally liable for the payment of a note Works V. Abbott Kinney Co., 172 Cal. 210, which they sign.-Miller & Lux v. Dunlap, 155 Pac. 986.

28 Cal. App. 313, 152 Pac. 309. 18. Foreign corporations.—Where a corporation is formed outside of California for the purpose of doing business in this state, 1. Pledge or transfer of stock.-The dethe stockholders so far as concerns business livery of the certificate with assignment and transacted here are liable in accordance power indorsed, passes the entire title in with our statutes. It is not necessary to the shares, both legal and equitable.-Fowles the stockholders' liability that the articles v. Nat. Bank of California, 167 Cal. 653, 140 of incorporation contain language showing Pac. 271. the specific purpose of transacting business 2. A pledge of stock, not recorded in the here. It is enough that the articles author- books of the corporation, is valid as beize the doing of business in any state or tween the parties, and the issuance of a country which the directors may select. The new certificate for such stock can not be stockholder impliedly consents that when called in question by third persons.-Manthe directors select a place for the transac- ning v. App Consolidated Gold Min. Co., 171 tion of corporate business that they shall Cal. 611, 154 Pac. 301. have power to bind him so far as the laws 3. Title to stock may be transferred by of that place may require.—Provident Gold delivery of certificates.Stowe v. Harvey, Min. Co. v. Haynes, 173 Cal. 44, 159 Pac. 155. 241 U. S. 199, 60 L. Ed. 953, 36 Sup. Ct. Rep.

19. Liability attaches, when.—The liabil. 541, affirming 134 C. C. A. 635, 219 Fed. 17. ity of the stockholders to pay their pro 4. A transfer of corporate stock is good portionate parts of a debt arising out of an as against creditors where the certificate, executory agreement of the corporation to properly indorsed, is delivered to the purpurchase goods at an agreed price, which chaser, although the stock remains on the

3 324.

$ 349.

books of the company in the name of the ery of the stock. Where the tender of the seller. -Stowe v. Harvey, 241 U. S. 199, 60 amounts was alleged in the complaint and L. Ed. 953, 36 Sup. Ct. Rep. 541, affirming denied in the answer a finding by the court 134 C. C. A. 635, 219 Fed. 17.

on conflicting evidence that no tender was

made is conclusive on the appellate court. 8 325.

The tender must be made in such unequivo1. Stock held in name of married woman. cal terms that no bona fide dispute or -One is not called upon to make any in

misunderstanding could arise regarding it. quiries in taking stock standing on the - Shannon v. Tooker, 167 Cal. 484, 140 Pac. books of a corporation in the name of a 10. woman, married or single, and he has the right to assume, in the absence of something reasonably sufficient to create a sus 1. Action to enforce assessment.-Section picion to the contrary, that she is the sole 349 of the Civil Code gives the board of owner and empowered to transfer the same. directors the right to proceed against a Fowles v. Nat. Bank of California. 167

stockholder personally to collect any assessCal. 653, 140 Pac. 271.

ment remaining unpaid and impose upon

him the correlative duty of paying it. To all 8 331.

this he assented by accepting the stock 1. Levy of assessment. - Ordinarily the and there was an implied contract on his board may levy assessments upon the cap part to abide by the action of the board of ital stock after as well as before the par directors in those particulars and to pay value of the stock has been fully paid. assessments when legally called upon by This section is in the nature of a grant them to do so.—Marshall v. Wentz, 28 Cal. of power, and authorizes a corporation to App. 540, 153 Pac. 244. make a levy and collect the assessments 2. When one acquires stock and becomes for certain purposes, but it is not com a member of the corporation, all the provipulsory that the corporation do so.-Lum v. sions of the Civil Code declaring under what American Wheel & Veh. Co., 165 Cal. 657, circumstances, for what purposes and how Ann. Cas. 1915 A 816, 133 Pac. 303.

the directors may levy assessments and the 2. Where the stock subscription con methods they may pursue in collecting them, tract is silent upon the question this and enter into and become a part of his contract the following sections of the code become relation with it.-Marshall v. Wentz, 28 Cal. part of the contract, with the result that App. 540, 153 Pac. 244. calls or assessments for unpaid subscriptions can be made only upon the terms

$ 354. and in the manner and form prescribed in

SUITS BY CORPORATIONS. those sections.-Los Angeles Athletic Club v. Spires, 166 Cal. 173, 135 Pac. 298.

1, 2. As to generally. 3. In an action to recover on a subscrip

3. Forfeiture of corporate charter-Suff

ciency of pleading of. tion to corporate stock the subscriber can

4, 5. —Proof of forfeiture-Admissibility of not contend that such subscription is only

evidence. collectible by assessments levied under this

6, 7. —Substitution of trustees. and the following sections.-Beedy V. San Mateo Hotel Co., 27 Cal. App. 653, 150 Pac.

1. As to generally.-In an action on a 810.

promissory note, brought by a national 4. The only difference between the lia

bank. it can not be urged as a defense that bility of a paid-up stockholder to the cor

the term
the term of its cor

of its corporate existence had poration for the amount of his assessment expired, where there is evidence that the and the liability of a stockholder who is plaintiff was carrying on its business as a assessed upon his unpaid subscription. if national bank when the transaction occurred any, is that the one might be founded upon

and when the action was commenced and an express contract to pay, the other upon

for fourteen years prior thereto, as such one implied. Either would be a "debt."

corporation was at least a de facto corporaMarshall v. Wentz, 28 Cal. App. 540, 153 Pac.

tion and entitled to maintain the action.244.

First Bank v. Pennig, 28 Cal. App. 267, 151 5. The corporation is the agent of a Pac. 1153. stockholder to carry on its business, incur 2. The directors of every corporation, liabilities and call on him for his proper whether it has forfeited its charter or not, proportion of the money needed to meet are the real persons and actors in actions its current expenses and other obligations. begun by it or for its benefit, and this being There exists an implied contract upon his so, it does not seem to be so material part to pay to it money whenever for the in what name they begin their action so proper purposes of the corporation the di long as the identity of their act as the act rectors by legal assessments call upon him of the corporation is undeniable.-Kehrleinfor it.-Marshall v. Wentz, 28 Cal. App. 540, Swinerton Construction Co. v. Rapken, 30 153 Pac. 244.

Cal. App. 11, 156 Pac. 972.

3. Forfeiture of corporate charter-Suffl$ 347.

ciency of pleading of.--In an action by a 1. Action for recovery of stock.-A con- corporation, an allegation in the answer of dition precedent is imposed upon the recov. the incapacity of the plaintiff to begin

of contract, it is proper to grant plaintiff's motion for a substitution of the names of the trustees of the corporation as party plaintiff, — Kehrlein-Swinerton Construction Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

or maintain the action because of the prior forfeiture of its charter, "that the plaintiff is not now, or was at the time of the filing of the complaint, a corporation organized or existing under or by virtue of the laws of the state of California, or of any state, and that prior to the commencement of the action the said plaintiff, after due and regular proceedings for that purpose, had forfeited its charter as a corporation and as such ceased to exist, and ever since said time has ceased to be a corporation,” while loosely and inartificially drawn, sufficiently puts in issue, in the absence of a special demurrer. the forfeiture of the plaintiff's charter. — Kehrlein-Swinerton Construction

on Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

4. -Proof of forfeitureAdmissibility of evidence.-In such an action, the certificate of the secretary of state is not sufficient to prove the forfeiture of the plaintiff's charter for the nonpayment of its license tax, as the governor's proclamation declaring such forfeiture, or a certified copy thereof, is the only competent proof.--Kehrlein-Swinerton Construction Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

5. The proclamation of the governor is an essential step in proceedings to forfeit the charter of a corporation for failure to pay its license tax; and the only proof that can be received of such proclamation is the orig. inal, or a certified copy thereof.-KehrleinSwinerton Construction Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

6. Substitution of trustees.-In such an action, the plaintiff has the right during the trial to have the names of its directors as trustees substituted for its own name as party plaintiff, upon proof or suggestion of the forfeiture of its charter prior to the commencement of the action. — KehrleinSwinerton Construction Co. v. Rapken, 30 Cal. App. 11, 156 Pac. 972.

7. Where a corporation which has for feited its charter through failure to pay its license tax brings an action for breach

$ 359. ISSUANCE OF STOCK FOR OTHER THAN

MONEY, 1. For patent-rights. 2. For promissory note. 3. To be paid out of dividends.

1. For patent-rights. — The issuance of stock of a corporation in exchange for patent-rights of unascertained value, where it is not shown that such rights were overvalued knowingly or otherwise, does not render the stockholders to whom the stock was issued liable to the creditors of the corporation for any unpaid subscription on the stock, because of the fact that a few days prior to the exchange other stock of the corporation was authorized to be sold at a value less than par.—Harrison v. Armour, 169 Cal. 787, 148 Pac. 1166.

2. For promissory note.-A corporation is not prohibited from issuing its stock for the promissory note of the purchaser, as a promissory note is included within the word "property," as used in section 359 of the Civil Code, which prohibits corporations from issuing its stock “except for money paid, labor done, or property actually received."-Quartz Glass & Mfg. Co. v. Joyce, 27 Cal. App. 523, 150 Pac. 648.

3. To be paid out of dividends.--A secret agreement between a corporation and a purchaser of its stock that the stock shall be paid for out of dividends to be declared upon the stock is invalid, since the effect thereof is to make a gift of the stock, with the corporation reserving the right to dividends thereon in a sum equal to the amount of the note, and constitutes no defense to an action brought by the corporation on the note.-Quartz Glass & Mfg. Co. v. Joyce, 27 Cal. App. 523, 150 Pac. 648.

CHAPTER III.

CORPORATE POWERS.

ARTICLE I.

GENERAL POWERS.

8 361. Changing number of directors of corporation. 8 361. CHANGING NUMBER OF DIRECTORS OF CORPORATION. Any corporation or association may increase or diminish the number of its directors or trustees by the vote or written assent of stockholders representing a majority of its subscribed capital stock, or, if it has no capital stock, by the vote or written assent of a majority of the members. A certificate over the corporate seal, setting forth the action taken by the stockholders, or members, and stating the new number of

hoche o Arceruncate over the directors, shall be signed by the president and secretary of such corporation or association, and filed in the office of the county clerk of the county where its original articles of incorporation were filed, and a copy of said certificate, certified by such county clerk, shall be filed in the office of the secretary of state, whereupon the number of directors or trustees shall be changed as stated in said certificate. This section shall apply to all corporations existing under the laws of the State of California, whether organized and incorporated prior to the enactment of this code, or subsequent thereto.

History: Original section, relating to consolidation of mining companies on joining claims, enacted March 21, 1872; amended March 20, 1876, Code Amdts. 1875-6, p. 75; repealed by .Code Commission, Act March 18, 1901, Stats. and Amdts. 1900-1, p. 351; act held unconstitutional, see History, g 4, C. C.; re-repealed March 22, 1905, Stats, and Amdts. 1905, p. 775; present section enacted as a new section and given the same number June 11, 1915, Stats, and Amdts. 1915, p. 1456; May 10, 1917, Stats. and Amdts. 1917, p. 327. In effect July 27, 1917.

authorizing the filing of a voluntary petition in bankruptcy.-Bell v. Blessing. 225 Fed. 750.

4. -Consent need not be filed.—Where the consent of stockholders is given in writing to a conveyance of real property of the corporation, the failure to file the same does not invalidate the deed.-Buxton V. Pennsylvania Lumber Co., 221 Fed. 718.

5. The stockholders only can take advantage of the failure to comply with the statute requiring their consent to the conveyance to be filed; the statutory provisions are for their protection, not for the protection of creditors.--Buxton v. Pennsylvania Lumber Co., 221 Fed. 718.

§ 361a.

1. Consent to transfer of corporate franchise - Construction. — Whether or not a franchise must be included in order to render a sale invalid is not clear, but it is certain, that if a corporation be engaged in business, such business must be included in the sale before such sale can be brought within either the terms or the meaning of this section. A corporation whose sole tangible asset was a piece of real estate, and whose business was the conduct of running a race track, holding fairs and exhibitions of live stock thereon, and farming a part thereof, may sell the entire property, excluding the business, without complying with this section.-Shaw v. Hollister Land & Imp. Co., 166 Cal. 257, 135 Pac, 965.

2. This section makes no reference to option contracts to purchase real estate, the inhibition being as to the "sale, lease, assignment, transfer or conveyance of the business, franchise, and property" as a whole unless the prescribed conditions are complied with.--Bradford v. Sunset Land & Water Co., 30 Cal. App. 87, 157 Pac. 20.

3. The rule forbidding an assignment of the business, franchise and property of a corporation without the consent of stock holders holding not less than two-thirds of the stock, does not preclude a board of directors, one of whom owns practically all of the stock of the corporation, from

8362.

1. Construction.This section gives the right to curtail the corporate term by an amendment to its articles of incorporation.Tognazzini v. Jordan, 165 Cal. 19, Ann, Cas. 1914C, 655, 130 Pac. 879.

2. This section contained originally a proviso against corporate extension. The act as originally passed said "provided that the time of the existence of such corporation shall not be by such amendment extended beyond the time fixed in the original articles or certificates of incorporation." In the amendments of 1893 and 1903 this proviso is substantially repeated (Stats. 1893, p. 131; Stats. 1903, p. 411).- Tognazzini v. Jordan, 165 Cal, 19, Ann. Cas. 1914C 655, 130 Pac. 879.

ARTICLE II.

RECORDS. 8 377. Records-of what, and how kept. $ 378. Other records to be kept by corporations for profit, and others. [Stock and transfer

book.]

8 377. RECORDS OF WHAT, AND HOW KEPT. All corporations for profit are required to keep a record of all their business transactions; a journal of all meetings of their directors, members, or stockholders, with the time and place of holding the same, whether regular or special, and if special, its object, how authorized, and the notice thereof given.

The record must embrace every act done or ordered to be done; who were present, and who absent; and, if requested by any director, member, or stockholder, the time shall be noted when he entered the meeting or obtained leave of absence therefrom.

On a similar request, the ayes and noes must be taken on any proposition, and a record thereof made. On similar request, the protest of any director, member, or stockholder, to any action or proposed action, must be entered in full. Such records shall be open to the inspection of any legislative committee, board, commission, or officer of the State of California whose duty it is to inspect or examine the same, and of any director, member, or bona fide stockholder thereof;

(Examination and inspection, denied when.] provided, however, the board of directors may, by unanimous vote, deny such examination or inspection to a stockholder who demands the same with intent to use to the injury of the corporation the information to be acquired thereby, and a satisfactory showing of such intent shall be a complete defense to any action or proceeding brought by any such person to compel the officers of any such corporation to submit any of such records for his inspection or examination.

History: Enacted March 21, 1872; amended May 31, 1917, Stats, and

Amdts. 1917, p. 1407. In effect July 30, 1917. 1. Minute-book-Competent as evidence. executed by the officers of the corporation -Inasmuch as the code requires the keeping by authority of the directors, duly authentiof books of the minutes of the proceedings cated by a resolution adopted by the board of directors, the minute-book of the corpo. of directors.-Union Trust Co. v. Dickinson, ration is admissible as evidence to show that 30 Cal. App. 91, 157 Pac, 615. a certain promissory note in question was

8 378. OTHER RECORDS TO BE KEPT BY CORPORATIONS FOR PROFIT. AND OTHERS. (STOCK AND TRANSFER BOOK.] In addition to the records required to be kept by the preceding section, corporations for profit must keep a book, to be known as the "stock and transfer book," in which must be kept a record of all stock; the names of the stockholders or members, alphabetically arranged; installments paid or unpaid; assessments levied and paid or unpaid; a statement of every alienation, sale, or transfer of stock made, the date thereof, and by and to whom; and all such other records as the by-laws prescribe.

Corporations for religious and benevolent purposes must provide in their by-laws for such records to be kept as may be necessary.

Such stock and transfer book shall be open to the inspection of any officer, bona fide stockholder, member, or creditor of the corporation.

History: Enacted March 21, 1872; amended May 31, 1917, Stats, and
Amdts. 1917, p. 1407. In effect July 30, 1917.

1. Inspection of corporate books and rec. ords.-A stockholder of a corporation has the right to inspect a record showing the names and postoffice addresses of the stock holders prepared by the board of directors, and it is no defense to a proceeding in mandamus to compel inspection that such record is not one required by law to be kept by the officers, or that the purpose of the

inspection is not to benefit the corporation, but to injure and embarrass it in the transaction of its business.-Poor v. Yarnell, 28 Cal. App. 714, 153 Pac. 976.

2. Corporate books are not for public information.-Stowe v. Harvey, 241 U. S. 199, 60 L. Ed. 953, 36 Sup. Ct. Rep. 541, affirming 134 C. C. A. 635, 219 Fed. 17.

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