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CHAPTER IV.
EXTENSION AND DISSOLUTION OF CORPORATIONS.

$ 400. Directors of corporation are trustees of creditors, on dissolution. 8 400. DIRECTORS OF CORPORATION ARE TRUSTEES OF CREDITORS, ON DISSOLUTION. Unless other persons are appointed by the court, the directors or managers of the affairs of a coporation at the time of its dissolution are trustees of the creditors and stockholders or members of the corporation dissolved, and have full powers to settle the affairs of the corporation, collect and pay outstanding debts, sell the assets thereof in such manner as the court shall direct, and distribute the proceeds of such sales and all other assets to the stockholders. Such trustees shall have authority to sue for and recover the debts and property of the corporation, and shall be jointly and severally personally liable to its creditors and stockholders or members, to the extent of its property and effects that shall come into their hands. Death, resignation or failure or inability to act shall constitute a vacancy in the position of trustee, which vacancy shall be filled by appointment by the superior court upon petition of any person or creditor interested in the property of such corporation. Such trustees may be sued in any court in this state by any person having a claim against such corporation or its property. Trustees of corporations heretofore dissolved or whose charters have heretofore been forfeited by law shall have and discharge in the same manner and under the same obligations, all the powers and duties herein prescribed. Vacancies in the office of trustees of such corporations shall be filled as herein before provided.

History: Enacted March 21, 1872; amended by Code Commission, Act March 16, 1901, Stats. and Amdts. 1900-1, p. 352; act held unconstitutional, see Kerr's Cyc. C. C., § 4; amendment re-enacted March 21, 1905, Stats, and Amdts. 1905, p. 563; May 11, 1917, Stats, and Amdts.

1917, p. 380. In effect July 27, 1917. 1. Construction.—This section does not and can not, without being guilty of fraud, have the effect of continuing the existence secure to themselves advantages not comof the corporation as cestui que trust or mon to the latter.-Poor v. Yarnell, 28 Cal. otherwise so as to render it capable of App. 714, 153 Pac. 976. defending actions in its own name.-Lowe 4. The provisions of this section and secv. Superior Court, 165 Cal. 708, 134 Pac. 190. tion 565 of the Code of Civil Procedure

2. Section 10a, added to the Corporation were not intended to apply in case of disso. License Act (Stats. Ex. Sess. 1906, p. 22), is lution of a corporation by and according substantially similar to this section. — to any particular method. It is the fact Brandon v. Umpqua Lumber & Timber Co., of dissolution, the termination of the ex166 Cal. 322, 136 Pac. 62.

istence of the corporation as such that the 3. The board of directors as officers of the statute contemplates.-Henderson v. Palmer corporation are trustees of the stockholders, Union Oil Co., 29 Cal. App. 451, 156 Pac. 65.

CHAPTER VI.

FOREIGN CORPORATIONS.

$ 405. Designation of person on whom process may be served. Service on secretary of state

valid, when (repealed). $ 406. Foreign corporations, statute of limitations in favor of. Proof of corporate existence.

Change of designation [repealed). $ 408. Foreign corporations to file certified copies of articles of incorporation [repealed). § 409. Foreign corporations, fees to be paid by, on filing certified copies of articles of incor

poration [repealed]. $ 410. Foreign corporations, penalty for failure to file certified copies of articles of incorpora

tion [repealed). 8 405. DESIGNATION OF PERSON ON WHOM PROCESS MAY BE SERVED. SERVICE ON SECRETARY OF STATE VALID, WHEN [repealed].

History: Amended by Code Commission, Act March 21, 1901, Stats. and Amdts. 1900-1, p. 553; act held unconstitutional, see Kerr's Cyc. C. C., § 4; re-enacted March 21, 1905, Stats, and Amdts. 1905, p. 630, a codification of § 1 Act March 17, 1899 (see introductory note to chapter); amended March 18, 1907, Stats. and Amdts, 1907, p. 558, Kerr's Stats. and Amdts. 1906-7, p. 410; repealed May 11, 1917, Stats. and Amdts. 1917, p. 381. In effect July 27, 1917.

8 406. FOREIGN CORPORATIONS, STATUTE OF LIMITATIONS IN FAVOR OF. PROOF OF CORPORATE EXISTENCE. CHANGE OF DESIGNATION [repealed).

History: Enacted by Code Commission, Act March 16, 1901, Stats. and Amdts. 1900-1, p. 553; act held unconstitutional, see Kerr's Cyc. C. C., $ 4; re-enacted March 21, 1905, Stats. and Amdts. 1905, p. 630 (see introductory note to this chapter); repealed May 11, 1917, Stats. and Amdts. 1917, p. 381. In effect July 27, 1917.

$ 408. FOREIGN CORPORATIONS TO FILE CERTIFIED COPIES OF ARTICLES OF INCORPORATION (repealed).

History: Enactment approved March 21, 1905, Stats. and Amdts. 1905, p. 631; amended March 18, 1907, Stats. and Amdts. 1907, p. 559, Kerr's Stats. and Amdts. 1906-7, p. 411; repealed May 11, 1917, Stats. and Amdts. 1917, p. 381. In effect July 27, 1917.

$ 409. FOREIGN CORPORATIONS, FEES TO BE PAID BY, ON FILING CERTIFIED COPIES OF ARTICLES OF INCORPORATION [repealed].

History: Enactment approved March 21, 1905, Stats, and Amdts. 1905, p. 631; repealed May 11, 1917, Stats. and Amdts. 1917, p. 381. In effect July 27, 1917.

8 410. FOREIGN CORPORATIONS, PENALTY FOR FAILURE TO FILE CERTIFIED COPIES OF ARTICLES OF INCORPORATION [repealed).

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History: Enactment approved March 21, 1905, Stats. and Amdts. 1905, p. 631; amended April 26, 1911, Stats. and Amdts. 1911, p. 1113; repealed May 11, 1917, Stats. and Amdts. 1917, p. 381. In effect July 27, 1917.

TITLE II.
INSURANCE CORPORATIONS.

CHAPTER 1.

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

8 421. INVESTMENT OF CAPITAL SURPLUS, AND ACCUMULA. TIONS. 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.

CHAPTER VI.

LIFE, HEALTH, ACCIDENT, AND ANNUITY OR ENDOWMENT INSURANCE

ON THE ASSESSMENT PLAN. $ 453e. Formation of corporations; issuing of contracts; investments. 8 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.

History: Enactment approved March 20, 1905, Stats, and Amdts. 1905, p. 418; a codification of g 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. $ 456.

authorize turnouts or sidings in a street

or elsewhere.-San Pedro, L. A. & S. L. R. 1. Construction.-This section has no ef

Co. v. Long Beach, 172 Cal. 631, 158 Pac. 204. fect on certain public utility corporations, inasmuch as it was repealed as to them

was repealed as to them 3. –Laying out road (subd. 4). — This by sections 52b and 52e of the Public Utili section merely gives power to construct and ties Act, which went into effect March 23, maintain a railroad, and does not purport 1912 (Stats. Ex. Sess. 1911, p. 18).-Moss v. to grant franchises. San Pedro, L. A. & Smith. 171 Cal. 777. 155 Pac. 90.

S. L. R. Co. v. Long Beach, 172 Cal. 631, 158

Pac, 204. § 465.

4. Land for freight-wharves and sheds. POWERS OF RAILROAD CORPORATIONS. A railroad corporation has the right to con1, 2. Construction-As to constructing road

demn land for freight-wharves and sheds, across or along streams, roads, etc.

as being land reasonably “necessary to suc(subd. 5).

cessfully work and conduct the business

of the road" and as a necessary appendage 3. -Laying out road (subd. 4).

or adjunct thereto, within the meaning of 4, 5. Land for freight-wharves and sheds.

section 465 of the Civil Code, where the 1. Construction-As to constructing road railroad extends to a navigable river across or along streams, roads, etc. (subd. 5). through a large area of highly productive -This section is qualified and limited by land and upon such river there is a heavy section 470.–San Pedro, L. A. & S. L. R. Co. steamboat traffic engaged in carrying the v. Long Beach, 172 Cal. 631, 158 Pac. 204. products of such land.- Vallejo & N. R. Co.

2. While this subdivision authorizes the v. Reed Orchard Co., 169 Cal. 545, 147 Pac. construction along any street, it does not 238.

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