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BANKING EXPRESSLY PROHIBITED.

Sec. 356, C. C. No corporation shall create or issue bills, notes, or other evidences of debt, upon loans or otherwise, for circulation as money. En. March 21, 1872.

Issuing or circulating paper money, except as authorized by the United States, punished by Penal Code, sec. 648.

Constitutional provisions to the same purpose: Const. Cal. 1879, art. XII, sec. 5.

That this limitation upon corporate powers does not prevent the execution of negotiable instruments, see sec. 354, subd. 8, C. C.

Annotation.

Act of 1850 concerning corporations prohibits them from issuing bill or notes for circulation as money. (Magee v. Mok. Hill Co., 5 Cal. 258. To same effect: Smith v. Eureka Flour Mill, 6 Cal. 7.)

The above provision of law does not prevent corporation from borrowing money and issuing usual evidence of debt therefor. (Magee v. Mokelumne Hill Co., 5 Cal. 258. Affirmed: Smith v. Eureka Flour Co., 6 Cal. 7. To same effect: Seeley v. Lumber Co., 59 Cal. 25.)

MISNOMER DOES NOT INVALIDATE INSTRUMENT.

Sec. 357, C. C. The misnomer of a corporation in any writ. ten instrument does not invalidate the instrument, if it can be reasonably ascertained from it what corporation is intended. En. March 21, 1872.

Section Cited.

Underhill v. Santa Barbara etc. Co., 93 Cal. 314, 28 Pac. 1049; Donohoe-Kelly Banking Co. v. S. P. Co., 138 Cal. 183, 94 Am. St. Rep. 28, 71 Pac. 93.

Annotation

Misnomer- Garnishment. - A notice of garnishment served upon the “Donohoe-Kelly Company" instead of the “Donohoe-Kelly Banking Company” is not void when there is no pretense that it was not served on the right party owing the debt, and it appears that the levy was made as required by law, and no question is made that the corporation intended to be reached was the “DonohoeKelly Banking Company.” (Donohoe-Kelly Banking Co. v. S. P. Co., 138 Cal. 183, 94 Am. St. Rep. 28, 71 Pac. 93.)

Execution of Mortgage.- Where mortgage was executed as that of the "Santa Barbara Land and Improvement Company," instead of

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the "Santa Barbara Land Building and Improvement Company,” the instrument is not invalid, where it appears that the execution was attested by the corporate seal and the note expressed the full name of the corporation. (Underhill v. Santa Barbara Co., 93 Cal. 301, 28 Pac. 1049.)

JORPORATION TO ORGANIZE WITHIN ONE YEAR.

Sec. 358, C. C. If a corporation does not organize and commence the transaction of its business, or the construction of its works within one year from the date of its incorporation, or if, after its organization and commencement of its business, it shall lose or dispose of all of its property, and shall fail for a period of two years to elect officers and transact, in regular order, the business of said corporation, its corporate powers shall cease, and the said corporation may be dissolved at the instance of any creditor of the said corporation, at the suit of the state, on the information of the attorney general, but the resumption of its business in good faith by such corporation prior to the commencement thereof shall be a bar to such suit. The due incorporation of any company claiming in good faith to be a corporation under this part, and doing business as such, or its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such de facto corporation may be a party; but such inquiry may be had at the suit of the state on information of the attorney general; provided, however, as to any company claiming in good faith to be, and which has been doing business for ten consecutive years as a corporation, no such inquiry shall be made either by the state or by any person whatsoever. En. March 21, 1872. Amended 1900-01, 632.

Same respecting street railroads: See post, sec. 502, C. C. Provision respecting railroad companies, two years: See post, sec. 468, C. c.

See sec. 285, C. C., ante, for formation of corporations.

Legislative History.

The original section reads as follows: “If a corporation does not organize and commence the transaction of its business or the construction of its works within one year from the date of its incorporation, its corporate powers cease. The due incorporation of any company claiming in good faith to be a corporation under this principle and doing business as such, or its right to exercise corpo. rate powers shall not be inquired into collaterally in any private suit of which such de facto corporation may be a party, but such inquiry may be had at the suit of the state on information of the attorney general.”

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Section Cited.

Weaverville W. R. Co. v. Board of Supervisors, 64 Cal. 72, 28 Pac. 496; People v. Standford, 77 Cal. 372, 18 Pac. 85, 19 Pae. 693; Lakeside Ditch Co. v. Crane, 80 Cal. 186, 22 Pac. 76; Mill ete. Co. v. Machine Works, 82 Cal. 186, 23 Pac. 45; People v. Montecito Water Co., 97 Cal. 277, 33 Anr. St. Rep. 172, 32 Pac. 236; Martin v. Deetz, 102 Cal. 64, 66, 67, 41 Am. St. Rep. 151, 36 Pac. 368; People v. Leonard, 106 Cal. 310, 39 Pac. 617; Market St. Ry. Co. v. Hellman, 109 Cal. 601, 42 Pac. 225; Los Angeles Holiness Band v. Spires, 126 Cal. 545, 58 Pac. 1049; People v. Rosenstein-Cohn Cigar Co., 131 Cal. 154, 63 Pac. 163; San Diego Gas Co. v. Frame, 137 Cal. (al. 445, 70 Pac. 295.

Annotation.

Organization Within One Year. The purchase of railroad iron and the expenditure of money in the construction and equipment of a railroad constitutes the commencement of business within the terms of this section. (People v. Stockton etc. R. R. Co., 45 Cal. 306, 13 Am. Rep. 178.)

If a franchise is granted by the state upon the condition that the corporation constructs certain works in a specified time, a failure so to do works a forfeiture without judgment at suit of state. (Oak. land R. R. Co. v. Oakland etc. R. R. Co., 45 Cal. 365, 13 Am. Rep. 181.)

Cessation of Business. - A corporation which has been organized in substantial compliance with law, has elected directors and adopted by-laws, and begun in good faith to transact business as a corporation, has the full ternr 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.)

De Facto Corporations—What are.- A corporation de facto is one acting as a corporation in good faith, and its existence is not subject to collateral attack. (Lakeside Ditch Co. v. Crane, 80 Cal. 181, 22 Pac. 76.)

A corporation de facto exists where a number of persons have organized and acted as a corporation; but where the directors named in the articles never met nor acted; and no stock is issued, nor by. laws passed, nor seal adopted nor election held, nor any other act done by an intended corporation, it is not a corporation de facto, and its right to exist may be collaterally attacked in a private

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action. (Martin v. Deetz, 102 Cal. 55, 41 Am. St. Rep. 151, 36 Pac. 368.)

Where there is no meeting of trustees or members, no election of officers, no by-laws adopted, no certificates of shares or membership issued, no seal adopted or used, no records or minutes kept, and no corporate acts of any character performed, and the institution was managed the same as before the attempt to incorporate, no corporation de facto exists. (Wall v. Mines, 130 Cal. 27, 62 Pac. 386.)

Individual as.-An individual cannot become a corporation de facto by assuming the name of a tollroad company, where there are no directors or officers, and no acts in corporate form. (People v. Volcano Canyon Toll Road Co., 100 Cal. 87, 34 Pac. 522.)

If a corporation effects a preliminary organization and adopts by. laws, and thereafter in good faith acts as a corporation, it becomes a corporation de facto, although a final organization is not effected, and its right to a franchise and to hold property cannot be inquired into by a mere trespasser on the property. (Stockton etc. Co. v. Stockton etc. R. R. Co., 45 Cal. 680. To same effect: Bakersfield etc. Assn. v. Chester, 55 Cal. 101. Note citation: 19 Am. Dec. 67.)

Where persons associate themselves into a corporation, and for upward of sixteen years carry on the business for which it was organized or attempted to be organized, they constitute a corporation de facto notwithstanding there were defects in the incorporation proceeding, and the validity of the corporation cannot be attacked in a collateral proceeding. (Holiness Band v. Spires, 126 Cal. 541, 58 Pac, 1049.)

Rights and Powers of.-A de facto corporation has all the rights of a de jure corporation until called into question by direct proceedings to arrest its usurpation of power. (B. T. H. Assn. v. Chester, 55 Cal. 98. To same effect: First Baptist Church v. Bran. ham, 90 Cal. 24, 27 Pac. 60. Note citations: Hildreth v. McEntire, 19 Am. Dec. 67, 68; People v. Montecito Water Co., 33 Am. St. Rep. 184.)

Corporation de facto may legally do and perform every act and thing which the same entity could do or perform were it a de jure corporation; as to all the world except the paramount authority un. der which it acts and from which it receives its charter, it occupies the same position as though in all respects valid, and even as against the state, except in direct proceedings to arrest its usurpation of power, its acts are binding. (People v. La Rue, 67 Cal. 526, 8 Pac. 84. To same effect: First etc. Church v. Branham, 90 Cal. 23; People v. Water Co., 97 Cal. 277, 33 Am. St. Rep. 173, 32 Pac. 236.)

Power of Trustees.—The trustees of a corporation de facto may sue in its corporate name, until its existence is called in question

Corporation Laws-18

by a direct proceeding upon information of the attorney general. (First Baptist Church v. Branham, 90 Cal. 22, 27 Pac. 60. Cited to the same effect: People v. Water Co., 97 Cal. 277, 33 Am. St. Rep. 173, 32 Pac, 236.)

Individual Rights and Liabilities.- No valid trust can be created in favor of third parties as members of an unincorporated society in a corporation which has no legal existence de facto or de jure; third parties cannot have an interest in property as members of an alleged corporation which has no interest in such property. (Wall v. Mines, 130 Cal. 27, 62 Pac. 386.)

Where persons knowingly and fraudulently assume or pretend to have a corporate existence, they may be held liable as individuals; but where they are acting in good faith, supposing that they are members in a valid corporation, and where the corporation assumes to transact business for a number of years, and the assumed incorporation is not challenged by the state, they cannot be held liable as individuals. The same is true as between the members themselves. (Perkins v. Fish, 121 Cal. 317, 53 Pac. 901.)

Evidence of Existence.- Articles of incorporation are evidence of the right to act as such, although they be not acknowledged by all the incorporators, and its right to exist as a de facto corporation cannot be collaterally attacked. (Dannebroge etc. Co. v. Allment, 26 Cal. 286. To same effect: People v. Frank, 28 Cal. 519; Oroville etc. Co. v. Plumas Co., 37 Cal. 361; Bakersfield etc. Co. v. Chester, 55 Cal. 101; Pacific Bank v. De Ro, 37 Cal. 541. Note citation: 19 Am. Dec. 67.)

The minute-book of the corporation, and testimony relating to the resolutions, meetings, adoption of by-laws, and as to who were the stockholders of each, are competent evidence to show that the cor. poration was organized and doing business, and to show the good faith of the corporation. (People v. Rosenstein-Cohn Cigar Co., 131 Cal. 153, 63 Pac. 163.)

It is erroneous to permit parol proof as to the corporate character of a bank; though it is competent and sufficient to prove by parol evidence of reputation, and not by direct statement, that the bank was a de facto corporation. (People v. Dole, 122 Cal. 486, 68 Am. St. Rep. 50, 55 Pac. 581.)

It is sufficient to sustain a finding that the plaintiff is a core poration to show that it is acting as such, and doing business as a corporation de facto. (Lakeside Ditch Co. v. Crane, 80 Cal. 181, 22 Pac. 76.)

In action of ejectment evidence that the plaintiff is a corporation de facto is admissible to establish the existence of a corporation as against the defendant. (Oakland Gaslight Co. v. Dameron, 67 Cal. 663, 8 Pac. 595. To same effect: People v. Leonard, 106 Cal. 310, 39 Pac. 617.)

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