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Majority of Subscribed Capital Stock.- A majority of the subscribed capital stock must be represented at all elections, and, where a majority of the stock is not represented at a meeting for the election of trustees, the election is void. (Stewart v. Mahoney Min. Co., 54 Cal. 149.)
When shares of a corporation or a majority of shares are spoken of in a statute it usually refers to the subscribed or issued or outstanding shares. (Market St. Ry. v. Hellman, 109 Cal. 588, 42 Pac. 225.)
And in ratification as in the grant of original authority the rule is that the majority governs, and every stockholder contracts that such shall be the rule. (San Diego v. Beach Co., 112 Cal. 63, 44 Pac, 333.)
Bona Fide Stockholder.- A person to whom stock has been issued as trustee, without the knowledge or consent of the owners, is not a bona fide stockholder within the meaning of this section. (Stewart v. Mahoney Min. Co., 54 Cal. 149. To same effect: Smith v. S. F. etc. Ry. Co., 115 Cal. 594, 56 Am. St. Rep. 126, 47 Pac. 582.)
Under this section, only those who are bona fide stockholders, having their names on the stock-book of the corporation at least ten days prior to the election of directors, are entitled to vote at such election. Holders of stock standing in their own names, who do not hold it in a representative capacity, or as trustees of an express trust, or as pledgees, and who have no interest in the stock, and are only dummies for the real owners, are not bona fide stockholders within the meaning of the section, and can neither vote the stock nor give proxies therefor. (Smith v. S. F. & N. P. Ry., 115 Cal. 584, 56 Am. St. Rep. 119, 47 Pac. 582.)
Certificates of stock issued to a creditor of a corporation, or to a trustee for him as a pledge to secure his debt, are illegally issued and cannot be voted by any person. (Brewster v. Hartley, 37 Cal. 15, 90 Am. Dec. 237. To same effect: Smith v. S. F. etc. Ry., 115 Cal. 592, 56 Am. St. Rep. 126, 47 Pac. 582. Distinguished: Illinois Trust etc. Bank v. Pacific Ry. Co., 117 Cal. 344, 49 Pac. 197.)
The election of directors of all corporations having a capital stock, including mining corporations, is regulated by sections 307 and 312, Civil Code; and no person is qualified to vote at such an election, unless he is a bona fide stockholder, having stock registered in his name on the stock-books of the corporation at least ten days prior to the election. (Krause v. Deerbrow, 127 Cal. 681, 60 l'ac. 438.)
But the real owner of stock may vote it, although it stands on the books in another's name. (People v. Hill, 16 Cal. 113. To same effect: Smith v. S. F. etc. Co., 115 Cal. 591, 56 Am. St. Rep. 119, note, 47 Pac. 582.)
And an election is not void because determined by the vote of a person who appeared in books of company as owning certain stock which he had personally transferred by assignment of certificate. Appearing on books of corporation as owner of shares he was the proper person to vote them. (People v. Robinson, 64 Cal. 373, 1 Pac. 156. To same effect: Smith v. Railway Co., 115 Cal. 594, 36 Am. St. Rep. 119, and note, 47 Pac. 582.)
Held, Before the Code, that a surviving partner was privileged to vote stock kelonging to the partnership. The real owner of stock is entitled to represent it at the meetings of the corporation, and the nzere fact that he does not appear as the owner upon the books of the company should not exclude him from so doing. The New York cases, establishing a different doctrine, are based upon a statute making the books of the corporation the only evidence as to ownership. (Allen v. Hill, 16 Cal. 114. To same effect: Smith v. Railway Co., 115 Cal. 591, 56 Am. St. Rep. 123, 47 Pac. 582.)
So, also, a trustee of stock is the legal owner thereof, and as against the corporation and all the world, except his cestui que trust, he may vote the stock for all purposes, including the purpose of consolidating the corporation. (Market Street Ry. v. Hellman, 109 Cal. 571, 42 Pac. 225.)
And an attempt to prescribe a qualification for voting stockholders in particular corporations, different from that prescribed for corporations generally is special legislation and void. (Krause v. Durbrow, 127 Cal. 681, 60 Pac. 438.)
Proxies: See title “Proxies,” in notes to sec. 307, C. (., ante.
Under this section, stockholders of a corporation may be represented at all elections by proxies of their own selection; and a by. law of a banking corporation providing that no proxy should be voted by anyone not a stockholder of the corporation is void, as being an infringement upon the statute; the substantial rights of a stockholder cannot be taken from him, or be abridged by by-laws. (People's etc. Bank v. Superior Court, 104 Cal. 649, 43 Am. St. Rep. 147, 38 Pac. 452. To same effect: Smith v. Railway Co., 115 Cal. 606, 56 Am. St. Rep. 119, 47 Pac. 582. Note citation: Bloede Co. v. Bloede, 57 Am. St. Rep. 384.)
And it is not illegal to separate the voting power from the own. ership of stock, by an irrevocable proxy given upon a sufficient consideration, when it is not appointed for an unlawful purpose, or where no unlawful end is attempted to be effected by the exercise of the roting power. (Smith v. S. F. & N. P. Ry., 115 Cal. 584, 56 Am. St. Rep. 119, 47 Pac. 582.)
It is the legal right of every stockholder to vote his stock as he pleases in the election of directors, and, though he may confer upon another stockholder the right to vote his stock by a written proxy for that purpose, yet the court cannot compel him to do so in the absence of an agreement upon or for a valuable consideration that he would give such proxy. (Dulin v. Pacific W. & C. Co., 103 Cal. 357, 35 Pac. 1045, 37 Pac. 207.)
And under this section every stockholder may be represented at all elections by a proxy of his own selection; and a by-law of a corporation providing that no proxy should be voted by anyone not a stockholder of the corporation is void, as an infringement upon the statute. The substantial rights of a stockholder cannot be taken from him or even abridged by a by-law. (People's Bank v. Superior Court, 104 Cal. 649, 43 Am. St. Rep. 147, 38 Pac. 452. To same effect: Smith v. Railway Co., 115 Cal. 606, 56 Am. St. Rep. 135, 47 Pac. 582. Note citation: 57 Am. St. Rep. 384.)
Setting Aside Election.- While a petitioner may have been disqualified from voting at an election, he is not prevented from instituting proceedings to set aside such election, if it was voidable. “Any absent or other stockholder” may institute such a proceeding. And the jurisdiction to entertain such a proceeding has been transferred from the district to the superior court, which court has jurisdiction as a court of equity to set it aside if not made in conformity with law. (Wright v. Central etc. Co., 67 Cal. 532, 8 Pac. 70. To same effect: Wickersham v. Brittan, 93 Cal. 39, 28 Pac. 792, 29 Pac. 51.)
STOCK, HOW REPRESENTED.
Sec. 313, C. C. The shares of stock of an estate of a minor, or insane person, may be represented by his guardian, and of a deceased person by his executor or administrator. En. March 21, 1872. Amd. 1873-74, 203.
The original section reads thus: “The shares of an estate of a ininor, insane or deceased person, may be represented at all elections and meetings of the corporation by the legal representative of the person holding the same." The incorporation acts of 1850, section 159, and of 1853, page 89, contain a like provision.
Market St. Ry. Co. v. Hellman, 109 Cal. 590; Smith v. S. F. & N. P. Ry. Co., 115 Cal. 590, 56 Am. St. Rep. 119, 47 Pac. 582.
No Transfer on Books Necessary.- The provision of this section that the shares of stock may be “represented'' - that is, voted, by å guardian or executor or administrator-indicates that these of. ficers would be entitled to vote the stock without having it transferred to their own name. (Smith v. Railway Co., 115 Cal. 591, 5€ Am. St. Rep. 119, 47 Pac. 582.)
The executors of a deceased person may represent and vote the stock standing in his name without the necessity of a transfer of the stock to them. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)
ELECTION MAY BE POSTPONED.
Sec. 314, C. C. If from any cause an election does not take place on the day appointed in the by-laws, it may be held on any day thereafter as is provided for in such by-laws, or to which such election may be adjourned or ordered by the directors. If an election has not been held at the appointed time, and no adjourned or other meeting for the purpose has been ordered by the directors, a meeting may be called by the stockholders as provided in section 310 of this article. En. March 21, 1872.
Provision for postponed elections are found in the corporation act of 1850, page 347, section 168; the incorporation act of 1853, page 88; the railroad act of 1861, page 610; the savings and loan act of 1862, page 200; and the library act of 1863, page 624.
Adjournment. It is too well settled to require comment that all corporations, whether municipal or private, may transact any business at an adjourned meeting which they could have done at the criginal meeting. Whether the meeting is continued without interruption for many days, or by adjournment from day to day, or from time to time, many days intervening, it is evident it must be considered the same meeting, without any loss or accumulation of powers. (Warner v. Mower, 11 Vt. 385, 391; Schoff v. Bloomfield, 8 Vt. 472; Smith v. Law, 21 N. Y. 296; People v. Batchelor, 22 N. Y. 128.)
COMPLAINTS AND PROCEEDINGS REGARDING ELECTIONS.
Sec. 315, C. C. Upon the application of any person or body corporate aggrieved by any election held by any corporate body, the district court of the district in which such election is held must proceed forthwith to hear the allegations and proofs of the parties, or otherwise inquire into the matters of complaint, and thereupon confirm the election, order a new one, or direct such other relief in the premises as accords with right and
justice. Upon filing the petition, and before any further proceedings are had under this section, five days' notice of the hearing must be given, under the direction of the court or the judge thereof, to the adverse party or those to be affected therebv. En. March 21, 1872. Amd. 1877-78, 79.
The original section contains the words “or any proceedings thereof,'' following the words "any corporate body," and the word "summarily” after the words “must proceed forthwith.”
The corporation act of 1850, page 348, section 15, contains a provision similar to the above.
Wickersham v. Brittan, 93 Cal. 35, 36, 39, 42, 28 Pac. 792, 29 Pac. 51; Dulin v. Pacific W. & C. Co., 98 Cal. 305, 33 Pac. 123; Dulin v. Pacific W. & C. Co., 103 Cal. 364, 35 Pac. 1045, 37 Pac. 207; Foster v. Superior Ct., 115 Cal. 281, 47 Pac. 58; Smith v. S. F. & N. P. Ry. Co., 115 Cal. 587, 594, 609, 56 Anr. St. Rep. 119, 47 Pac. 582; Whitehead v. Sweet, 126 Cal. 72, 58 Pac. 376.
Setting Aside Election of Directors - Action to.-In general, a court of equity has no inherent jurisdiction to review a corporate election, and oust the officers who claim to have been elected, but, in this state, under section 315, Civil Code, the superior courts bave jurisdiction, as courts of equity, to inquire into the validity of the election of directors of a corporation, and to set it aside if not in conformity with law. (Whitehead v. Sweet, 126 Cal. 67, 58 Pac. 376. To same effect: Wright v. C. C. etc. Co., 67 Cal. 532, 8 Pac. 70.)
The superior court has no jurisdiction, however, after proceedings have been stayed by appeal from judgment determining contest for election of directors of corporation to punish any of the other directors for contempt for refusal to recognize the director adjudged to have been elected, or to permit him to act as a director, in disobedience to the judgment. (Foster v. Superior Court, 115 Cal. 279, 47 Pac. 58.)
On the other hand, a writ of supersedeas will not be granted pending an appeal by the defeated party to restrain the party in whose favor the judgment was rendered from acting as a director, under the recognition of his fellow-directors, where no proceeding has been had or attempted upon the judgment. (Dulin v. Pacific etc. Co., 68 Cal. 304, 33 Pac. 123.)
And the abolition of the district court does not affect the right to invalidate a voidable election. The remedy still exists in favor of