Page images

In action by stockholders against the trustees, proof that any one of the plaintiffs is a stockholder is sufficient to maintain the action. (Parrott v. Byers, 40 Cal. 614.)

The right of a creditor to sue the directors for misappropriated funds does not depend upon others. The court can order the necessary parties brought in. The stockholders are proper parties, but, for most purposes, they may be represented in the action by the corporation. (Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)

The consent of all the stockholders to a misappropriation would not bar the creditors, or prevent any creditor from instituting proceedings to enforce the liability of the directors. (Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)

An assignee of depositors can maintain an action against the directors of a savings bank in the interest of all the creditors. The debt of a depositor is assignable, and the action is to enforce the obligation of suretyship of the directors. (Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)

The claim of a creditor need not be reduced to a judgment before he can sue the directors on their liability for misappropriated funds. Although the action can be maintained only in equity, it is not such a creditor's bill as must first exhaust all legal remedies, before suing in equity. A specific demand for an accounting is not required in such action against directors. (Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.)

Under section 3, article XII, of the Constitution, conceding it to be self-executing, an action at law on behalf of one or more of the creditors of the corporation cannot be sustained, but the only proper remedy, on behalf of the creditors, is a bill in equity, where all the creditors are parties, or are represented, and in which there can be an accounting and adjustment of equities, after ascertainment of all the facts. (Winchester v. Maybury, '122 Cal. 522, 55 Pac. 393.)

Action for fraud against directors of corporation, either by corporation or by stockholders, is barred in three years where evidence of fraud is matter of public record and entered upon the books of the corporation. (Lady Washington etc. Co. v. Wood, 113 Cal. 482, 45 Pac. 809.)

Distribution of Property on Dissolution.-Stockholders have no legal title to the property of the corporation. That remains in the corporation, and the shares simply represent the right of the shareholders to share in the distribution of the profits of the corporation, and in the final distribution of its estate when it shall cease to exist, and its estate shall have been finally adnrinistered. In advance of such final distribution, stockholders cannot even imously agree to a distribution or division of any part of the capital stock which directors are forbidden to make. (Kohl v. Lilienthal, 81 Cal. 378, 20 Pac. 401, 22 Pac. 689. To same effect: Richter v. Henningsan, 110 Cal. 534, 42 Pac. 1077; Vercoutere v. Land Co., 116 Cal. 416, 48 Pac. 375.)


But, when corporation ceases to exist, from whatever cause, its property is left to be disposed of according to law; and upon dissolution of a trading corporation by judgment of forfeiture, its property neither reverts to the grantors, nor escheats to the state, but belongs, after payment of its debts, to those who were stockholders at the date of its dissolution. (Havemeyer v. Superior Court, 84 Cal. 327, 18 Am. St. Rep. 192, 24 Pac. 121. Note citations: 40 Am. St. Rep. 158; 58 Am. St. Rep. 781.)

The people of the state have no interest to be affected by appointment of receiver of the property of a dissolved corporation which has forfeited its franchise for the purpose of distributing it among the stockholders and members of the corporation. (Havemeyer v. Superior Court, 84 Cal. 327, 18 Am. St. Rep. 192, 24 Pac. 121. Cited: Yore v. Superior Court, 108 Cal. 436, 41 Pac. 477.)

The prethod prescribed by code for dissolution of corporation is exclusive, and there can be no distribution of its capital stock under any other circumstances. (Kohl v. Lilienthal, 81 Cal. 378, 20 Pac. 401, 22 Pac. 689.

Dissolution, Procedure: See sec. 1228 et seq., C. C. P., post.


Sec. 310, C. C. No director shall be removed from office, unless by a vote of two-thirds of the members, or of stockholders holding two-thirds of the capital stock, at a general meeting held after previous notice of the time and place, and of the intention to propose such removal. Meetings of stockholders for this purpose may be called by the president, or by a majority of the directors, or by members or stockholders holding at least one-half of the votes. Such calls must be in writing, and addressed to the secretary, who must thereupon give notice of the time, place, and object of the meeting, and by whose order it is called. If the secretary refuse to give the notice, or if there is none, the call may be addressed directly to the members or stockholders, and be served as a notice, in which case it must specify the time and place of meeting. The notice must be given in the manner provided in section 301 of this title, unless other express provision has been made therefor in the by-laws. In case of removal, the vacancy may be filled by election at the same meeting. En. March 21, 1872. Act to protect stockholders and persons dealing with corporations from misrepresentations of officers: See post, Appendix.

Provision was made in the act of 1872 (Stats. 1871-72, p. 443), for removal on petition by the court. Constitutionality of the act ques. tioned in Chollar Min. Co. v. Wilson, 66 Cal. 376, 5 Pac. 670.

Section Cited.

Ex-Mission L. & W. Co. v. Flash, 97 Cal. 630, 32 Pac. 600.


Removal of Directors.- No director can be ousted except by a vote of the stockholders owning two-thirds of the capital stock. (ExMission L. & W. Co. v. Flash, 97 Cal. 630, 32 Pac. 600.)

The power of amotion is incident to every corporation, and the removal of the mere private or ministerial officers of a corporation is a right which belongs to the corporation alone. The assistance cf the courts can only be invoked against such officers as are in. trusted by law with the management of the affairs of the corporation; and, as against these, the remedy is purely legal. It is well settled that there is no jurisdiction in equity with regard to the removal of corporate officers of any description. (Neall v. Hill, 16 Cal. 149, 76 Am. Dec. 508. Citing Atty. Gen. v. Clarendon, 17 Ves. 491; Bayless v. Orne, 1 Fre. Ch. R. 171.)

Where, however, special jurisdiction is conferred upon a court (vide Stats. 1871-72, p. 443, sec. 1), to remove corporate officers upon petition, to invest the court with jurisdiction the requirements of the act must be complied with, and it must so appear on the face of the record. And when a statute requires such petition to be signed by a majority of the shareholders, a signing by a majority of the stock is not sufficient. (Chollar Min. Co. v. Wilson, 66 Cal. 374, 5 Pac. 670. Note citation: 62 Am. Dec. 792.)


Sec. 311, C. C. Whenever, from any cause, there is no person authorized to call or to preside at a meeting of a corporation, any justice of the peace of the county where such corporation is established may, on written application of three or inore of the stockholders or of the members thereof, issue a warrant to one of the stockholders or members, directing him to call a meeting of the corporation, by giving the notice required, and the justice may in the same warrant direct such person to preside at such meeting until a clerk is chosen and

qualified, if there is no other officer present legally authorized to preside thereat. En. March 21, 1872.


Sec. 312, C. C. At all elections or votes had for any purpose there must be a majority of the subscribed capital stock, or of the members, represented, either in person or by proxy in writing. Every person acting therein (in person or by proxy or representative), must be a member thereof or a bona fide stockholder, having stock in his own name on the stock-books of the corporation at least ten days prior to the election. Any vote or election had other than in accordance with the provisions of this article is voidable at the instance of absent (or any) stockholders or members, and may be set aside by petition to the district court of the county where the same was held. Any regular or called meeting of the stockholders or members may adjourn from day to day, or from time to time, if for any reason there is not present a majority of the subscribed stock or members, or no election had, such adjournment and the reasons therefor being recorded in the journal of proceedings of the board of directors. En. March 21, 1872. Amd. 187778, 79.

Notice of meeting: See ante, sec. 302, C. C.
Postponement: See sec. 314, C. C., post.

Rights of stockholders to vote: See section 307, C. C., ante, ana notes.

Setting aside election: See section 315, C. C., post.

Legislative History.

The original section did not contain the words “or any” following the word "absent” in the section as above. Prior to the code, the matter of corporate elections was left almost entirely to be regulated and provided for in the by-laws.

The act in relation to corporations passed at the first session of the legislature of this state (Stats. 1850, p. 347) made different provisions for different kinds of corporations, and also different requirements on the part of the stockholders for the election of directors. The provision generally made in this respect was that the directors should be elected by the stockholders, and that "each stockholder should be entitled to as many votes as he owns shares of stock in the com


pany." (Stats. 1850, secs. 35, 105, 124, 187.) The chapter relating to railroad companies provided (Stats. 1850, sec. 59) that the stockholder must have owned his stock for thirty days next preceding the election in order to entitle him to vote, and that “no stockholder shall vote at any such election upon any stock except such as he shall have owned for such thirty days''; and the chapter relating to bridge companies provided (Stats. 1850, sec. 159) that the stockholder could vote only upon such stock as he had “owned absolutely, or as executor, administrator, or guardian, for thirty days previous to such election.” The act authorizing the incorporation of mining and manufacturing companies, passed in 1853 (Stats. 1853, sec. 5, p. 87), provided that "each stockholder, either in per

or by proxy, shall be entitled to as many votes as he owns shares of stock," and further provided (Stats. 1853, sec. 11): “Whenever any stock is held by any person as executor, admin. istrator, guardian, or trustee, he shall represent such stock at all meetings of the company, and may vote accordingly as a stock holder.' The statute, so far as it related to the incorporation of railroad companies was revised and re-enacted in 1861 (Stats. 1861, ]). 607), and section 5 of that act provided that directors should be elected “by a majority of the votes of the stockholders being present in person or by written proxy; and every stockholder being so present, either in person or by proxy, at any election for directors, shall be entitled to give one vote for every share of stock which he may have owned for ten days next preceding such election; but no stockholder shall vote at any such election upon any stock ex. cept such as he shall have owned for ten days." In none of these statutes was it provided that the stock owned by the stockholder should stand in his name upon the books of the corporation.

Section Cited.

Stewart v. Mahoney Min. Co., 54 Cal. 149; Wright v. Central Cal. etc. Co., 67 Cal. 533, 8 Pac. 70; Wickersham v. Brittan, 93 Cal. 36, 39, 28 Pac. 792, 29 Pac. 51; Dulin v. Pacific W. & C. Co., 103 Cal. 263, 35 Pac. 1045, 37 Pac. 207; People's Bank v. Superior Court, 104 Cal. 652, 43 Am. St. Rep. 147, 38 Pac. 452; Market St. Ry, Co. v. Hellman, 109 Cal. 588, 589, 599, 42 Pac. 225; San Diego v. Pacific Beach Co., 112 Cal. 63, 44 Pac. 333; Smith v. S. F. & N. P. Ry. Co., 115 Cal. 589, 590, 594, 609, 56 Am. St. Rep. 119, and note, 47 Pac. 582; Krouse v. Dushow, 127 Cal. 683, 60 Pac. 438; Neale v. Head, 133 Cal. 47, 65 Pac. 131, 576.


Manner of Electing Directors. This section, read in connection with section 307 of the same code, provides the manner in which the annual election of directors may be held. (Wickersham v. Brittan, 93 Cal. 36, 28 Pac. 792, 29 Pac. 51.)

« PreviousContinue »