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TITLE II.

INSURANCE CORPORATIONS.

CHAPTER I.

GENERAL PROVISIONS.

§ 421. Investment of capital, surplus, and accumulations.

§ 421. INVESTMENT OF CAPITAL, SURPLUS, AND ACCUMULATIONS. Corporations organized under the laws of this state for the transaction of any kind of insurance business authorized by such laws may invest their capital, surplus and accumulations in the purchase of, or loans upon any of the securities specified in subdivisions one to five inclusive of this section.

1. [United States bonds.] Bonds or interest-bearing notes or obligations of the United States or those for which the faith and credit of the United States are pledged for the payment of principal and interest.

2. [State bonds.] Bonds of this state or those for which the faith and credit of the State of California are pledged for the payment of principal and interest and bonds of any other state in the United States that has not, within five years next preceding such investment by such insurance company, defaulted in payment of any part of either principal or interest due upon any legally authorized bond issue.

3. [County, etc., bonds.] Bonds or interest-bearing notes or obligations issued under authority of law by any county, municipality or school district in this state, or in any other state or territory of the United States; provided, that said county, municipality or school district or the state or territory in which it is located has not, within two years next preceding such investment by such insurance company, defaulted in payment of any part of either principal or interest due upon any legally authorized bond issue.

4. [Road division, etc., bonds.] Bonds of any permanent road division in this state, and any irrigation district bonds which the law may now or hereafter authorize as legal investments for insurance companies; provided, that the total amount of bonds issued by any such irrigation district does not exceed sixty per centum of the aggregate market value of the lands within such district, and of the water, water rights, canals, reservoirs, reservoir sites and irrigation works owned or to be acquired or constructed with the proceeds of any such bonds, by such district, such facts in reference to bonds of irrigation districts to be determined by a commission now or hereafter authorized by law to ascertain and report upon such facts.

5. [First mortgage notes.] (a) Notes or bonds secured by first mortgage or deed of trust or other first lien upon real estate, improved or unimproved; provided, that the principal so loaned or the entire note or bond issue so secured shall not exceed sixty per centum of the market value of such real estate, or of such real estate with improvements taken as security at the date of investment; provided, also, in case said loan is made, or said note or bond issue created for a building loan on real estate, that at no time shall the principal so loaned or the entire outstanding note or bond issue exceed sixty per centum of the market value of the real estate and the actual cost of the improvements thereon taken as security; or

[Notes guaranteed by policy of mortgage insurance.] (b) Notes or bonds secured by mortgage or deed of trust, payment of which is guaranteed by a policy of mortgage insurance, and mortgage participation certificates, issued by a mortgage insurance company in accordance with the provisions of chapter eight of title two of part four of division first of the Civil Code; provided, that no insurance corporation shall make any investment in any of the securities specified in subdivisions one, two, three, four and five of this section in an amount exceeding the market value of such security, at the date of such investment.

6. [Investment of balance of capital.] Corporations organized for and engaged in the business of fire, life or marine insurance, may, after the investment of two hundred thousand dollars, and corporations organized for and engaged in the business of transacting any other kind of insurance authorized by law, except mortgage insurance, may also, after the investment of one hundred thousand dollars in any of the securities specified in subdivisions one, two, three, four and five of this section, invest the balance of their capital, surplus and any accumulations in the purchase of or loans upon the stock of any corporation (except a mining corporation) organized and carrying on business under the laws of this state, or the laws of the United States, which stocks have, at the date of such investment, a market value of not less than their paid-in value, or in the purchase of, or loans upon, interest-bearing bonds issued by a corporation organized under the laws of any state or territory in the United States, which corporation has not, within five years next preceding the date of such investment, defaulted in payment of any part of either principal or interest of any bond of the issue of which the bonds which comprise such investment form a part, and which stocks or bonds must, in each case, be rated as first-class securities; provided, that any investment made, under the provisions of this subdivision of this section shall be approved by vote of two-thirds of all the directors of the investing corporation. Such approval shall be entered upon the records or minutes of such corporation. [Record of investment.] Such entry must show the fact of making such investment, the amount thereof, the name of each director voting to approve the same, the amount, character and value of the security purchased or taken as collateral, and if the investment be a loan, the name of the borrower, the rate of interest thereon, and the date when the loan will become due or payable. It shall be the duty of the secretary of any such investing corporation to report in writing during the months of January and July of each year to the insurance commissioner, the data above set forth respecting each such investment, and the insurance commissioner may, if any such investment is not approved by him, require the corporation to sell or dispose of the same.

7. [Policy loans.] Life insurance companies may also loan upon their own policies; provided, that the amount so loaned upon each policy shall not exceed the reserve against said policy at the time said loan is made; provided, further, that no policy loans whatever shall ever be used as security which may be deposited with the insurance commissioner under section six hundred thirty-four of the Political Code; and provided, further, that whenever any such loan in any amount is made on a policy registered with the insurance commissioner under said section six hundred thirty-four of the Political Code, such registration shall be forthwith canceled.

8. [Securities issued in foreign country.] Any insurance company of this state doing business in any foreign country may invest so much of its funds as are required to meet its obligation incurred in such foreign country and in conformity to the laws thereof, in the same kind of securities issued in such foreign country that such com-' pany is by law allowed to invest in this state, and subject to the limitations imposed by law in this state.

History: Added by Code Commission, Act March 16, 1901, Stats. and Amdts. 1900-1, p. 355; held unconstitutional, see History, § 4, C. C.; re-enacted March 3, 1905, Stats. and Amdts. 1905, p. 34; also re-enacted March 21, 1905, with slight variations which latter enactment is given in Kerr's Cyc. Codes, Pocket Codes of 1909, and Cumulative Supplement 1906-1913 as § 421[a]; repeal enacted March 18, 1907, Stats, and Amdts. 1907, p. 597, Kerr's Stats. and Amdts. 1906-7, p. 411; the re-enactment approved March 21, 1905, and retained as No. § 421[a], as above indicated, was amended by Act of June 6, 1913, and numbered § 421, Stats. and Amdts. 1913, p. 488; June 12, 1915, Stats. and Amdts., 1915, p. 1532; May 26, 1917, Stats. and Amdts. 1917, p. 976. In effect July 27, 1917.

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CHAPTER VI.

LIFE, HEALTH, ACCIDENT, AND ANNUITY OR ENDOWMENT INSURANCE ON THE ASSESSMENT PLAN.

§ 453e. Formation of corporations; issuing of contracts; investments.

§ 453e. FORMATION OF CORPORATIONS; ISSUING OF CONTRACTS; INVESTMENTS. Corporations may be formed to carry on the business of mutual insurance upon the assessment plan, and are subject only to the provisions of this chapter. No such corporation may issue contracts of insurance until at least five hundred persons have applied, in writing, to the insurance commissioner, for membership or insurance therein, and have paid to the treasurer of such corporation the sum of twenty-five thousand dollars. This sum must be invested in bonds or securities, approved by the insurance commissioner of this state, or deposited in some bank in this state where it will earn interest. Said bonds or securities, or evidences of such deposit, must be placed, through the insurance commissioner of this state, with the state treasurer, and the principal sum must be held in trust for the contract holders of such corporation, with the right in the corporation to exchange said bonds, securities, or evidence of bank deposit for others of like value.

[Certificate of insurance commissioner.] Such corporation must also, as a condition precedent to issuing any contracts of insurance, obtain the written certificate of the insurance commissioner that it has complied with the requirements of this chapter; and that the name of the corporation is not the same as that of any other corporation of this or other states, as indicated by the insurance department reports in his office; nor must the commissioner approve any name or title so closely resembling another as to mislead the public. No corporation formed hereunder has legal existence after one year from the date of its articles, unless its organization has been completed and business commenced; nor shall any corporation or individual solicit, or cause to be solicited, any business, until such corporation has complied with the provisions of section six hundred thirty-three of the Political Code. Nothing contained in this chapter shall be construed to exempt any corporation from the provisions of sections two hundred ninety-six and two hundred ninety-nine of this code.

§ 456.

1.

History: Enactment approved March 20, 1905, Stats. and Amdts. 1905, p. 418; a codification of § 2 Act March 19, 1891, Stats. and Amdts. 1891, p. 126; amended May 26, 1917, Stats. and Amdts. 1917, p. 955. In effect July 27, 1917.

Construction.-This section has no effect on certain public utility corporations, inasmuch as it was repealed as to them by sections 52b 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.

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authorize turnouts or sidings in a street or elsewhere.-San Pedro, L. A. & S. L. R. Co. v. Long Beach, 172 Cal. 631, 158 Pac. 204. 3. Laying out road (subd. 4). This section merely gives power to construct and maintain a railroad, and does not purport to grant franchises.-San Pedro, L. A. & S. L. R. Co. v. Long Beach, 172 Cal. 631, 158 Pac. 204.

4. Land for freight-wharves and sheds.— A railroad corporation has the right to condemn land for freight-wharves and sheds, as being land reasonably "necessary to successfully work and conduct the business of the road" and as a necessary appendage or adjunct thereto, within the meaning of section 465 of the Civil Code, where the railroad extends to a navigable river through a large area of highly productive land and upon such river there is a heavy steamboat traffic engaged in carrying the products of such land.-Vallejo & N. R. Co. v. Reed Orchard Co., 169 Cal. 545, 147 Pac. 238.

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Forfeiture of franchise-Construction. -The term "road" was intended to include the main line and all branches of the railroad company, and this applies both to original and to consolidated companies. There is nothing in section 473 as amended in 1901 to indicate an intention to change this.-Northwestern Pac. R. Co. v. Lambert, 166 Cal. 749, 137 Pac. 1116.

2. The purpose of this section is to secure the due completion and full operation of the road from one end to the other and also of the intermediate branches, and the first sentence thereof does not apply to the construction of tracks over land subsequently acquired at a terminus to increase its facilities and ability to accommodate the traffic.-People v. Southern Pacific Co., 172 Cal. 692, 158 Pac. 177.

3. Section 468 of the Civil Code, which provides that "every railroad corporation must, within two years after filing its original articles of incorporation, begin the construction of its road, and must every year thereafter complete and put in full operation at least five miles of its road, until the same is fully completed; and upon its failure so to do, for the period of one year, its right to extend its road beyond the point then completed is forfeited," has no logical relation to the construction tracks over lands subsequently acquired at one terminus for the purpose of increasing its facilities and capacity to accommodate the traffic to be handled at that end of the line. People v. Southern Pacific Co., 172 Cal. 692, 158 Pac. 177.

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4. Such code provision refers to the original articles of incorporation, which are provided for in section 291 of the Civil Code, and its purpose is to secure the performance of the promise implied from the part of the articles requiring due completion and full operation of the road from one end to the other and also of the intermediate

branches. - People v. Southern Pacific Co., 172 Cal. 692, 158 Pac. 177.

5. Purpose of section.-The main object of this section is to provide for a forfeiture of the right to operate a railroad, in case of failure to keep it in "full operation." It was not intended to apply and has no application to the determination of whether or not the property of a railroad or other public service corporation is "operative" within the meaning of section 14 of article XIII of the constitution and the act of April 1, 1911 (Stats. 1911, p. 530). The clause merely defines what shall be deemed "full operation" sufficient to escape forfeiture.-San Diego & Ariz. R. Co. v. State Board, 165 Cal. 560, 132 Pac. 1044.

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1. Construction.-There is nothing herein to indicate an intention to change the law in holding that the term "road" as used in section 468 included the main line and all branches of both the original and consolidated railroad companies. - Northwestern Pac. R. Co. v. Lambert, 166 Cal. 749, 137 Pac. 1116.

§ 474.

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1. Construction. The words "swamp, overflowed, or other public lands of the state" include tide lands and submerged lands. People v. Southern Pac. Co., 172 Cal. 692, 158 Pac. 177.

2. The grant made by this section is a direct grant to each company accepting it. It is general and unlocated, but becomes defined and complete when the corporation selects the land, files a plat thereof, records the selection and it is approved by the surveyor-general, and his permit to use the same is duly issued to the corporation. This permit together with the statutory grant give the grantees an easement or franchise over the land described for the use of the corporation and for all necessary adjuncts thereon.-People v. Southern Pac. Co., 172 Cal. 692, 158 Pac. 177.

§ 483.

1. Construction.-Under the provisions of section 510 this section governs the duty of street railroad companies.-Kelly v. Santa Barbara Consol. R. Co., 171 Cal. 415, 153 Pac. 903.

2. Greater precaution necessary when passenger obliged to ride on steps.-Where a passenger on a street-car is obliged, by reason of the crowded condition, to ride upon the step of the car, a new contract and relationship springs into existence between him and the carrier, making it incumbent upon the former to take greater precautions for his own safety, and upon the

latter to use greater precautions in the operation of the car.-Kelly v. Santa Barbara Consol. R. Co., 171 Cal. 415, 153 Pac. 903.

§ 485,

1. Duty to fence-Killing of stock.-The provisions of section 485 of the Civil Code as that section existed prior to the amendment of 1915, that railroad corporations must make and maintain a good and sufficient fence on either side or both sides of their track and property, and that in case they do not do so, if their engine or cars shall kill or maim any cattle or other domestic animals upon their line of road which passes through or along the property thereof, they must pay to the owner of such cattle or other domestic animals a fair market price for the same, unless it occurred through the fault or neglect of the owner of the animal so killed or maimed, were not intended to be for the benefit of owners of stock running at large, but the right of action thereby given existed only in favor of one having some interest in the land adjoining the right of way of a railroad.Wills v. Southern Pac. Co., 31 Cal. App. 723, 161 Pac. 501.

2. The interest of a lessee in the land constitutes a sufficient ownership under the statute.-Wills v. Southern Pac. Co., 31 Cal. App. 723, 161 Pac. 501.

3. In an action against a railroad company for damages for the loss of certain horses which were killed by collision with one of the defendant's trains, by reason of the negligence of the defendant in permitting the gate in its fence inclosing its right of way to be left open and the animals to stray upon the track, the right of the plaintiff in or to the land on which she was keeping the horses is not established, by proof that she leased the premises from a third party, without any further proof that such party owned the land or owned any interest therein, or that he was in possession of it, or that plaintiff obtained possession through him.-Wills v. Southern Pac. Co., 31 Cal. App. 723, 161 Pac. 501.

4. An instruction "that the laws of this state require railroads to maintain fences beside their tracks, and if they make a gate in the fence, it is a part of the fence, and when there is a road across their track with a gate in the fence across it, they are under the same duty to keep it in repair when erected as it is regarding any other part of the fence, and also it is their duty to keep such gate closed at all proper occasions to prevent stock from adjoining lands from passing upon the right of way of said roadbed," is erroneous, in that it imposes upon the defendant the absolute duty to keep the gate closed, whereas in fact its only duty was to use reasonable care to keep it closed.-Wills v. Southern Pac. Co., 31 Cal. App. 723, 161 Pac. 501.

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railroad or other utility in the street is to be strictly construed, and, in cases of a fair doubt, in favor of the public as against those claiming under the grant.-City of Sacramento v. Pacific Gas & Electric Co., 173 Cal. 787, 161 Pac. 978.

§ 498.

1. Construction.-Section 20 of the Vrooman Act should be read in connection with this section.-Barber Asphalt Pav. Co. v. Jurgens, 170 Cal. 273, 149 Pac. 560.

§ 501.

1. Rates of fare-Construction of amendment of 1903.-The act of 1878 limiting and fixing the rates of fares on street railroads in cities of more than 100,000 inhabitants and providing a penalty for its violation, was superseded by the amendment of 1903 to section 501 of the Civil Code, which consists in adding to the original section which provided that the rates of fare should not exceed ten cents for one fare for any distance under three miles, the words "and in municipal corporations of the first class must not exceed five cents for each passenger per trip of any distance in one direction, either going or coming, along any part of the whole length of the road or its connections."-Suydam v. Los Angeles R. Co., 27 Cal. App. 157, 149 Pac. 55.

§ 502.

1.

Time for commencing and completing -Limitation by ordinance granting franchise. Where a municipal ordinance granting a street railway corporation a franchise to build and operate a railway along a certain route and fixes a shorter time for the commencement and completion than that fixed by this section, and which furthermore provides for the forfeiting of the franchise as to the uncompleted portion, there is an abandonment thereof in writing by the grantee and a consent by the city within the meaning of this section.-People v. LoS Angeles Ry. Co., 168 Cal. 406, 143 Pac. 739.

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1. Construction. Sections 528, 529, 530 and 531 are to be construed in connection with Title III relating to railroad corporations exclusively, and in which title section 465 is found. When SO construed it is apparent these sections were not intended to apply to corporations formed for the purpose of constructing and operating rail

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