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Legislative History.

Sections 354 to 356, inclusive, of this article are taken from the corporation act of 1850, page 347, sections 1, 2, 3, 4, 5, 6, and the corporation act of 1853, page 87, section 4. The telegraph act of 1861, page 84, the savings and loan society act of 1862, page 199, and the insurance act of 1866, page 747, contain provisions regulating the general powers of those corporations.

Section Cited.

Low v. Central Pacific R. R. Co., 52 Cal. 59, 28 Am. Rep. 629; McKiernan v. Lenzen, 56 Cal. 63; Seeley v. San Jose I. M. & L. Co., 59 Cal. 24; Spring Valley W. W. v. Schottler, 62 Cal. 104; Anglo-Cal. Bank v. Grangers' Bank, 63 Cal. 363; Underhill v. Santa Barbara etc. Co., 93 Cal. 309, 28 Pac. 1049; San Diego Water Co. v. Flume Co., 108 Cal. 558, 41 Pac. 495; Bates v. Coronado Beach Co., 109 Cal. 163, 41 Pac. 855; Vercoutere v. Golden St. L. Co., 116 Cal. 414, 48 Pac. 375; San Luis Water Co. v. Estrado, 117 Cal. 177, 48 Pac. 1075; Granite Gold Mining Co. v. Maginness, 118 Cal. 138, 50 Pac. 269; Savings Bank etc. v. Barrett, 126 Cal. 416, 58 Pac. 914.


General Powers.-All corporations organized under laws of this state are by general law vested with certain powers by express grant. They are invested with further powers by the particular act under which they are incorporated, or by the title of the code under which they are incorporated. (S. V. W. W. v. Schottler, 62 Cal. 69.)

When persons organize themselves into corporation under general laws, the corporation possesses no powers or privileges except such as are conferred by general laws. (S. F. v. S. V. W. W., 48 Cal. 493.)

A corporation can exercise no other powers than such as are speeifically granted, or such as are necessary for carrying into effect the powers granted. (Vandall v. S. F. Dock Co., 40 Cal. 83; Dunbar v. Alcalde etc., 1 Cal. 355; Argenti v. S. F., 16 Cal, 255; Union Water Co. v. Fluming Co., 22 Cal. 627; McKiernan v. Lenzen, 56 Cal. 61; Smith v. Morse, 2 Cal. 524; Smith v. Eureka Flour Mills, 6 Cal. 1; Neal v. Hill, 16 Cal. 145, 76 Am. Dec. 508; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543, 99 Am. Dec. 300; People v. President etc., 38 Cal. 166.)

Corporations are bound to follow strictly the letter of their charter, and can exercise no power unless granted to them or absolutely necessary to carry out the power so granted. (Smith v. Morse, 2 Cal. 524. To same effect: Union Water Co. v. Fluming Co., 22 Cal. 627.)


A given act is within the power of a corporation first if it falls within the powers expressly enumerated in its certificate, or, second, if it is necessary to the exercise of one of such enumerated pow.

(Vandall v. South S. F. Dock Co., 40 Cal. 83. To same effect: Temple Street etc. R. R. v. Hellman, 103 Cal. 640, 37 Pac. 530; San Diego v. Pacific Beach Company, 112 Cal. 58, 44 Pac. 333.)

Powers, How Exercised.—The express powers of a corporation must be exercised in the manner pointed out by the statute, but the powers merely incident thereto may be exercised by its officers and igents. (Smith v. Eureka Flour Mills, 6 Cal. 1; Carey v. Philadelphia etc. Co., 33 Cal. 696; Union Water Co. v. Murphy's Flat Co., 22 Cal. 627.)

Legislative ġrants of corporate power must be exercised and enjoyed in the mode, manner and upon the conditions prescribed. (French v. Teschemaker, 24 Cal. 518. To same effect: McCoy v. Briant, 53 Cal. 250, 21 Am. Rep. 704. Note citation: 81 Am. Dec. 107.)

When a statute defines the mode in which corporate powers are to be exercised, the corporation cannot by by-laws, resolutions, or contracts change mode of exercise of such powers or the person by whom they are to be exercised. (Brewster v. Hartley, 37 Cal. 15, 99 Am. Dec. 237. Note citations: 85 Am. Dec. 621; 43 Am. St. Rep. 154.)

A corporation must confine its functions to the limits prescribed for its actions, and if the law expressly inhibits it from doing a given thing it is powerless to do that thing, and if it can do it only in a given manner, the prescribed nrethod becomes the measure of power. (Griffith v. New York etc. Ins. Co., 101 Cal. 642, 40 Am. St. Rep. 96, 36 Pac. 113.)

The corporate powers of a corporation can be exercised by trustees only when duly assembled and acting as a board. (Gashwiler v. Willis, 33 Cal. 11, 91 Am. Dec. 607.)

Subd. 1. Period Limited: See secs. 290, 401, 557, C. C.

Consolidated Corporations-New Corporations.-Consolidated cor. porations become new corporations, and as such may exist for fifty years irrespective of the term of existence of the constituent corporations. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

A corporation duly organized and having done business, has the full term of life prescribed by law, and does not become dissolved or cease to exist by cessation thereafter to transact business. (San Diego Gas Co. v. Frame, 137 Cal. 441, 70 Pac. 295.)

Subd. 2. Power to Sue and be Sued.-A corporation represents and binds its stockholders in all matters within its corporate pow. ers so long as it acts in good faith and without fraud; and in suing

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and being sued upon its rights and obligations it binds the stockholders who cannot interfere in its right to maintain and defend such actions except where the directors refuse to act or are guilty of fraud in the maintenance or defense of the action. (Baines v. Babcock, 95 Cal. 581, 29 Am. St. Rep. 158, 27 Pac. 674, 30 Pac. 776.)

Venue: See sec. 16, art. XII, Const., ante, and sec. 395, C. C. P. Filing articles of incorporation: See sec. 399, C. C., ante.

Parties.- A corporation cannot be made a defendant in an action where its existence is questioned. (People v. Stanford, 77 Cal. 360, 18 Pac. 85, 19 Pac. 693. To same effect: State v. Webb, 38 Am. St. Rep. 159.)

Writ of prohibition to prohibit court from further proceeding in matter of removal of such officers may be brought in the name of the corporation. As representing the stockholders it is a party beneficially interested. (Chollar Mining Co. v. Wilson, 66 Cal. 374, 5 Pac. 670.)

In action to compel corporation to transfer stock sold under foreclosure of mortgage thereon, mortgagor is not necessary party. He is to be treated as vendor of plaintiff, who sold his stock througb the sheriff as agent. Failure to join him in complaint is not ground for demurrer. (Tregear v. Etiwanda Water Co., 76 Cal. 537, 9 Am. St. Rep. 245, 18 Pac. 658.)

In an action for accounting against two corporations and the stockholders of the first, brought by parties who had assigned rights to the first corporation which had been fraudulently transferred to the second corporation in consideration of the issuance of stock in the second corporation to certain stockholders of the first, such stockholders and the second corporation are proper parties defendant. The other stockholders are not proper parties defendant. (Schaak v. Eagle Automatic Can Co., 135 Cal. 472, 63 Pac. 1025, 67 Pac. 759.)

In insolvency proceeding against corporation neither president, secretary, individual directors, nor stockholders are parties; nor does the president become a party by verifying the pleadings. (Ex parte Hollis, 59 Cal. 405.)

Pleading.– A corporation is recognized in law by its corporate name and must sue and be sued in such name. (Curtiss v. Murry, 26 Cal. 633.)

Allegation that plaintiff is an association duly organized under an act of the legislature of Pennsylvania, entitled “An act authorizing the formation of partnership associations,” held insufficient in failing to allege that laws of Pennsylvania gave plaintiff power to sue, or any other corporate powers. (Parks Canal etc. Co. v. Hoyt, 57 Cal. 44.)

When corporation is sued in complaint for taxes, there must be averment of fact of incorporation, and where and under what law, so that court may determine where jurisdiction of its person lies. (People v. C. P. R. R. Co., 83 Cal. 393, 23 Pac. 303.)

The omission in a complaint and proceedings upon attachment against à corporation defendant of the word “company” from its corporate name does not affect the attachment lien, and the error is waived by an appearance and answer of the corporation in its true name without objection. (Hammond v. Starr, 79 Cal. 556, 21 Pac. 971.)

In action against corporation for services, allegation that plaintiff was employed by defendant, through its secretary, is sufficient allegation of employment by corporation, though it is better pieading to omit reference to the secretary. (Sullivan v. Grass Valley ete. Co., 77 Cal. 418, 19 Pac. 757. Note citation: Orlando v. Pragg, 34 Am. St. Rep. 29.)

An averment that a corporation made and entered into an agreement by its president is sufficient, as against a general demurrer, If president, as such, had no authority to enter into the contract, it is a matter of defense. (Malone v. Crescent City etc. Co., 77 Cal. 38, 18 Pac. 858. Note citation: Orlando v. Pragg, 34 Am. St. Rep. 29.)

A written acknowledgment of debt signed by the president of a corporation as such does not constitute a cause of action against a corporation. (Curtiss v. Murry, 26 Cal. 633.)

A corporation cannot avail itself of the defense of a material alteration of a note as to place of payment, when such alteration was made by the agent of the corporation before delivery of the note to the payee. (Pelton v. Lumber Co., 113 Cal. 21, 45 Pac. 12.)

Stockholder's Right to Sue Corporation.— A stockholder's right to sue the corporation of which he is a member is undoubted. (Barnstead v. Empire Mining Co., 5 Cal. 299.) The corporation being a legal entity distinct from


in. dividuals composing it, can sue the stockholders or be sued by them. (Barnstead v. Empire Mining Co., 5 Cal. 299.)

The corporation is the proper person to institute proceedings for the redress of corporate injuries. Where, however, the corporation or its manager or directors refuse or are unable to bring suit, a stockholder may, upon such showing, sue in his own name on behalf of the stockholders making the corporation a party defendant. (Cogswell v. Bull, 39 Cal. 320; Chetwood v. Nat. Bank, 113 Cai. 414, 45 Pac. 704; Baines v. Babcock, 95 Cal. 581, 29 Am. St. Rep. 158, 27 Pac. 674, 30 Pac. 776; Donohoe v. Mariposa etc. Co., 66 Cal. 317, 5 Pac. 495.)

Every stockholder or member of a corporation has right to sue in equity to prevent any departure from chartered purposes of a cor

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poration by the action of the majority. (Ashton v. Dashaway Assn., 84 Cal. 61, 22 Pac. 660, 23 Pac. 1091.)

Demand that Corporation Sue.- Demand in good faith that action be brought by corporation must be made by stockholders before he can sue because of refusal of corporation to sue. (Morrison v. Stone, 103 Cal. 94, 37 Pac. 142; Bacon v. Irvine, 70 Cal. 221, 11 Pac. 646.).

But where demand is useless it is unnecessary. (Wickersham v. Crittenden, 93 Cal. 17, 28 Pac. 788, 106 Cal. 329, 39 Pac. 603; Ashton v. Dashaway Assn., 84 Cal. 61, 22 Pac. 660, 23 Pac. 1091; Smith v. Dorn, 96 Cal. 73, 30 Pac. 1024.)

When, upon proper demand, corporation wrongfully refuses to institute appropriate action, or when it appears such demand by stockholders would be unavailing and fruitless, action may be instituted and prosecuted by stockholders for direct and immediate benefit of corporation, and for the incidental benefit of the stockholders. (Neal v. Hill, 16 Cal. 145, 76 Am. Dec. 508; Cogswell v. Bull, 39 Cal. 320; Wickersham v. Crittenden, 93 Cal. 17, 28 Pac. 788; Waymire v. Ry. Co., 112 Cal. 646, 44 Pac. 1086.)

And the general rule that member or stockholder of corporation cannot have redress for any money or injury to corporation until he has made an earnest effort to secure proper action by board of trustees does not apply where it would be futile and useless to make a demand or such effort. (Ashton v. Dashaway Assn., 84 Cal. 61, 22 Pac. 660, 23 Pac. 1091. To same effect: Smith v. Dorn, 96 Cal. 79, 30 Pac. 1024. Note citations: 24 Am. St. Rep. 644; 57 Am. St. Rep. 71.)

But when a stockholder's demand upon a corporation to bring an action and its refusal to do so are simulated and not in good faith, the stockholder cannot maintain the action. (Morrison V. Stone, 103 Cal. 94, 37 Pac. 142.)

And a stockholder may intervene to assert the rights of the corporation against the plaintiff, and need not aver a request to the corporation officers to defend the action where the action is brought against the corporation by an assignee for the use and benefit of the president and two directors thereof, constituting a majority of the board in which the answer of the corporation admits all the causes of action alleged. (Shively v. Gold Min. Co., 129 Cal. 293, 61 Pac. 939.)

Character of Action.— Action by stockholder to enforce corporate rights must be regarded as a suit brought on behalf of the corporation, and the stockholder can enforce only such claims as the corporation could enforce; and the essential character of the cause remains the same, whether the suit be brought by the corporation or a stockholder. (Chetwood v. Cal. Nat. Bank, 113 Cal. 414, 45 Pac.

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