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An agreement for the sale of stock upon payment of the part of the agreed price, the stock to be retained by the vendor as security for the balance and only to be delivered upon such payment, with the right of the vendor to sell it at any time without notice to the vendee if it had so depreciated in the market as to be worth less than three times the unpaid balance, is a sale of stock on margin and for future delivery. (Sheehy v. Shinn, 103 Cal. 325, 37 Pac. 393.)

A broker cannot make and force sales of stock on margin and for future delivery and retain the payments made under such contracts by the evasion of going through the form of buying from a third party for account of the purchaser, as his attorney in fact, when by his contract he has made elaborate provision that the title to the shares shall remain in himself and never pass to the purchaser until full payment is made. (Sheehy v. Shinn, 103 Cal. 325, 37 Pac. 393.)

The rule against the sale of stock on margin does not prevent any legitimate transfer of stock, whether through the agency of a broker or otherwise, nor any legitimate and bona fide pledge of stock as security for borrowed money where borrowed for the purpose of paying off the stock or any other purpose; and where such is not only the form, but the substance of the contract, the inhibition of the Constitution does not apply. (Sheehy v. Shinn, 103 Cal. 325, 37 Pac. 393.)

The right of action of an insolvent debtor to recover moneys paid by the insolvent to the stock brokers for the purchase and sale of stocks on margin in violation of article IV of section 26 of the Constitution would survive in case of his death and pass as part of the estate of the insolvent to the assignee in insolvency. (Rued v. Cooper, 109 Cal. 682, 34 Pac. 98.)

A written contract to buy and sell stocks must be construed as referring to the stocks of incorporated companies. (Parker v. Otis, 130 Cal. 322, 92 Am. St. Rep. 56, 62 Pac. 571.)

If our Constitution fails on its face to distinguish between bona fide and gambling contracts, that does not render it the less a proper police regulation, if the question to be determined by the court in each case is whether the Constitution is violated and the court will always see that legitimate business transactions are not brought under this ban. (Parker v. Otis, 130 Cal. 322, 92 Am. 'St. Rep. 56, 62 Pac. 571.)

An action to recover the money paid in violation of this section of the Constitution is not barred within one year as being an action to recover penalty within the meaning of section 340 of the Code of Civil Procedure; but the action is for money due and received in which recovery cannot be had except after demand and refusal. (Parker v. Otis, 130 Cal. 322, 92 Am. St. Rep. 56, 62 Pac. 571.)

PUBLIC AID TO CORPORATIONS.

Sec. 31, Art. IV. The legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the state, or of any county, city and county, city, township, or other political corporation or subdivision of the state now existing, or that may be hereafter established, in aid of or to any person, association, or corporation, whether municipal or otherwise, or to pledge the credit thereof, in any manner whatever, for the payment of the liabilities of any individual, association, municipal or other corporation whatever; nor shall it have power to make any gift, or authorize the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever; provided, that nothing in this section shall prevent the legislature granting aid pursuant to section twenty-two of this article; and it shall not have power to authorize the state, or any political subdivision thereof, to subscribe for stock, or to become a stockholder in any corporation whatever.

See section 22, article IV, and section 13, article XII, Constitution.

Legislative History.

The similar provision in the old Constitution is as follows: Article XI, section 10: “The credit of the state shall not in any manner be given, or loaned to or in aid of any individual association, or corporation; nor shall the state, directly or indirectly, become a stockholder in any association or corporation."

Section Cited.

Constitution, 1849: People v. Pacheco, 27 Cal. 207. Constitution, 1879: Higgins v. San Diego W. Co., 118 Cal. 546, 45 Pac. 824, 50 Pac. 670. The other citations of this section do not relate to private corporations.

Annotation.

Aid to Private Enterprise.-An appropriation to a railroad company to aid in building a railroad, in consideration of valuable services, is not a gift or loan of the credit of the state. (People v. Pacheco, 27 Cal. 175.)

Under the former Constitution, the legislature might compel & county to become a subscriber to a railroad, and the legislature was the sole judge of the question as to whether the railroad was a public benefit, and the supervisors could be compelled by manda.

mius to make such subscription. (Napa Valley R. R. Co. v. Napa County, 30 Cal. 435.)

Under the former Constitution, aid, as fostering a public use, could be extended to the construction of a railroad by means of the power of eminent domain, by a tax in aid of the road, by a subscription to its capital stock, and by donation made by cities and other political subdivisions of the state, under the authority of the legislature. (S. & V. R. R. Co. v. Stockton, 41 Cal. 147.)

This section prohibits the loaning of public credit for private pur. poses under any circumstances. (Stockton etc. R. R. Co. v. Stockton, 41 Cal. 147.)

It does not prohibit the appropriation of public funds to aid a corporation in the construction of a railroad to be used for military Jourposes. (People v. Pacheco, 27 Cal. 175.)

The bonds issued by Central Pacific Railroad Company, under act of April 4, 1864, are valid and state is liable upon the interest coupons issued in accordance with provisions of that act. (Bank of California v. Dunn, 66 Cal. 38, 4 Pac. 916.)

It is assumed that a contract by a municipal corporation to pay money to any person or corporation to secure the construction of a railroad would be in violation of this section. (Higgins v. San Diego Water Co., 118 Cal. 524, 546, 45 Pac. 824, 50 Pac. 670.)

Municipal corporations have no power to subscribe to the stock of private corporations without being authorized so to do by the legislature, and such power when given must be exercised in the mode aud manner and upon the conditions prescribed by the act. (French vi Teschemaker, 24 Cal. 578.)

Aid to Railroads, Act 1870.-Under the railroad aid act of 1870 (Stats. 1869-70, p. 746), aid could be granted to a railroad company which had not been incorporated prior to the passage of the order of the supervisors calling an election to vote on such aid, and the supervisors could authorize a change of route in part after the election. (Coleman v. Board of Supervisors, 50 Cal. 493.)

A subsidy in bonds to a railroad is not defeated because the road purchases as part of its route a road already constructed or because of a slight departure from the prescribed route. (Stockton R. R. Co. v. Stockton, 51 Cal. 328.)

When road was constructed for only a portion of the distance between the termini specified in the proposition as voted upon, the supervisors could issue bonds to an amount corresponding to the number of miles of completed road, the subsidy being so much per mile. (Nevada Bank v. Steinmitz, 64 Cal. 301, 30 Pac. 970.)

REGULATION OF TELEGRAPH, GAS, STORAGE AND WHARF

AGE RATES.

Sec. 33, Art. IV. The legislature shall pass laws for the regulation and limitation of the charges for services performed and commodities furnished by telegraph and gas corporations, and the charges by corporations or individuals for storage and wharfage, in which there is a public use; and where laws shall provide for the selection of any person or officer to regulate and limit such rates, no such person or officer shall be selected by any corporation or individual interested in the business to be regulated, and no person shall be selected who is an officer or stockholder in any such corporation.

As to water and gas rates, see note to section 1, article XIV, and section 19, article XI. As to railroad rates, see section 22, article XII, post.

Legislative History.

There has been no legislation under the provision and no citation of it by the courts.

ARTICLE XI.

19. Use of streets by water and lighting companies.

USE OF STREETS BY WATER AND LIGHTING COMPANIES.

Sec. 19, Art. XI. In any city where there are no public works owned and controlled by the municipality for supplying the same with water or artificial light, any individual, or any company duly incorporated for such purpose, under and by authority of the laws of this state, shall, under the direction of the superintendent of streets, or other officer in control thereof, and under such general regulations as the municipality may prescribe, for damages and indemnity for damages, have the privilege of using the public streets and thoroughfares thereof, and of laying down pipes and conduits therein, and connections therewith, so far as may be necessary for introducing into and supplying such city and its inhabitants either with gaslight, or other illuminating light, or with fresh water for domestic and all other purposes, upon the condition that the municipal government shall have the right to regulate the charges thereof. [Ratification declared February 12, 1885.].

For water rates, see section 1, article XIV, post.

Legislative History.

The original section contains in addition to the above provision the following: “No public work or improvement of any description whatsoever shall be done or made in any city in, upon or about the streets thereof, or otherwise, the cost and expense of which is made chargeable or may be assessed upon private property by special assessment, unless an estimate of such cost and expense shall be made, and an assessment, in proportion to benefits, on the property to be affected or benefited, shall be levied, collected, and paid into the city treasury before such work or improvement shall be commenced, or any contract for · letting or doing the same authorized or performed." There is no parallel provision in the Constitution of 1849. Prior to the present Constitution the right of laying pipes in streets of cities or towns lay only in grant from the legislature.

Section Cited.

The section is cited as to the use of streets by gas and water companies in the following cases: San Jose Gas Co. v. January, 57 Cal. 616; S. V. W. W. v. S. F., 61 Cal. 24; S. V. W. W. v. Schottler, 62 Cal. 108; People v. Stephens, 62 Cal. 238; In re Madera Irr. Dis. trict, 92 Cal. 342, 27 Am. St. Rep. 106, 28 Pac. 272, 675; Mutual Electric Co. v. Ashworth, 118 Cal. 5, 50 Pac. 10; San Diego Water Co. v. San Diego, 18 Cal. 584, 62 Am. St. Rep. 261, 50 Pac. 633; Pereria v.

Wallace, 129 Cal. 402, 62 Pac. 61; In re Johnston, 137 Cal. 118, 69 Pac. 973.

Annotation.

Use of Streets.—The word "city,” used in this section, includes "town." (Pereria v. Wallace, 129 Cal. 397, 62 Pac. 61; People v. Stephens, 62 Cal. 209.)

The right to use the streets as provided in the section is a franchise subject to be taxed. (S. V. W. W. v. Schottler, 62 Cal. 10!8; San Jose Gas Co. v. January, 57 Cal. 614.) The provisions of this. section are mandatory and prohibitory, and exclude the right of a municipality to award the privileges therein granted to the highest bidder, and the act of 1897 (Stats. 1897, p. 135), for the sale of such franchise is unconstitutional. (Pereria v. Wallace, 129 Cal. 397, 62 Pac. 61.)

An ordinance requiring a special permission to be obtained from the board of supervisors, before streets can be obstructed, is reasonable. (Mutual Electric etc. Co. v. Ashworth, 118 Cal. 1, 50 Pac. 10.)

This section is a direct grant, the only conditions or limitations of which are those contained therein, and the regulations of the municipality must be uniform in their application to all who inay desire to exercise the privilege. The municipality has no other

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