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Collateral Attack on.—The organization and existence of a corporation must be shown by at least a substantial compliance with statute, and the omission of the essential steps is fatal in a col. lateral proceeding, although mere irregularities cannot be collaterally assailed, and for such irregularities the corporation is responsible only to the government in a direct action for forfeiture. (Mok. etc. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658; Spring V. W. W. v. S. F., 22 Cal. 440; Harris v. McGregor, 29 Cal. 127; People v. Stockton ete. R. R. Co., 45 Cal. 413, 13 Am. Rep. 190; McCallon v. Hibernia S. & L. S., 70 Cal. 168, 12 Pac. 114; Fresno etc. Co. v. Warner, 72 Cal. 384, 14 Pac. 37. Note citation: 19 Am. Dec. 67; 78 Am. Dec. 732; 79 Am. Dec. 437; 29 Am. St. Rep. 607; 33 Am. St. Rep. 177, 359; 41 Am. St. Rep. 162.)
A substantial compliance with the statute is all that is required in the formation of a corporation. Irregular or defective performance of acts relating to organization can only be investigated on direct proceedings by the state, and the existence cannot be collaterally attacked on such grounds. The same is true of those aets which are not made prerequisites to the exercise of corporate powers. (S. V. W. W. v. S. F., 22 Cal. 434; People v. Frank, 28 Cal. 519; Oroville Co. v. Plumas Co., 37 Cal. 361. Note citations: 19 Am. Dec. 67; 73 Am. Dec. 661.)
If a corporation claims in good faith to be a corporation under the laws of this state, and to be doing business as such, its existence cannot be questioned in a private action. (Pacific Bank v. De Ro, 37 Cal. 538. Note citations: 24 Am. Dec. 59; 33 Am. St. Rep. 185.)
The existence de jure or de facto may be denied in a private suit, and the company claiming to be such must show that it claims in good faith to be a corporation under the laws of this state, and is doing business as such corporation. (Oroville etc. Co. v. Plumas Co., 37 Cal. 354; Fresno Canal Co. v. Warner, 72 Cal. 384, 14 Pac. 37; Martin v. Deetz, 102 Cal. 64, 41 Am. St. Rep. 158, 36 Pac. 368.)
A de facto corporation can only be deprived of a franchise or property in a direct proceeding on behalf of the state. (Holiness Band v. Spires, 126 Cal. 541, 58 Pac. 1049.)
Proof that a corporation is a de facto corporation dispenses with strict proof of its corporate character and precludes party from disputing company's right to act as a corporation. (Randell v. Fay, 32 Cal. 354.)
In action by corporation de facto, claiming in good faith to ex. ist, defendant, who is mere trespasser, cannot question corporate existence of plaintiff or its capacity to take and hold property. (Golden Gate etc. Co. v. Joshua Hendy etc. Co., 82 Cal. 184, 23 Pac. 45.)
In an action to enforce an assessment levied by a reclamation district, if its organization is denied, the question is not whether the district has so acted as to become a corporation de facto, but whether there has been in fact a substantial compliance with the law in its organization. (Reclamation Dist. v. Burger, 122 Cal. 442, 55 Pac. 156.)
In action by corporation in which issue is raised as to corporate existence of plaintiff, court may direct jury to find specially upon such issue in addition to their general verdict. (Fresno ete. Co. v. Warner, 72 Cal. 379, 14 Pac. 37.)
A levee district formed under an unconstitutional act has no rights, and is not entitled to protection from collateral attacks as a corporation de facto. (Brandenstein v. Hoke, 101 Cal. 131, 35 Pac. 562.)
Where articles of incorporation were delivered to a county clerk, who was ex-officio recorder, and who erroneously marked them as filed in the recorder's office, and upon the filing of a duplicate thereof with the Secretary of State a certificate of incorporation was issued by him, the law was substantially complied with, and the legality of its organization cannot be collaterally attacked. (San Diego Gas Co. v. Frame, 137 Cal. 441, 70 Pac. 295.)
The ownership of a wagon road in the possession of a corporation cannot be inquired into by a board of supervisors on an application to fix rates of toll, or in a proceeding by mandamus to compel the board to fix rates. (Weaverville W. R. Co. v. Board of Supervisors, 64 Cal. 69, 28 Pac. 496.)
Existence-Estoppel to Question.-One who has dealt with a corporation as such cannot question its existence. (Fresno etc. Co. v. Warner, 72 Cal. 379, 14 Pac. 37. To same effect: Camp v. Land, 122 Cal. 169, 54 Pac. 839. Note citations: Schloss v. Trade Co., 13 Am. St. Rep. 55; People v. Water Co., 33 Am. St. Rep. 185.)
In an action by corporation to foreclose mortgage given by defendant for money loaned him by corporation, defendant is estopped to Ceny regularity of organization of corporation, and its power to enter into the contract. (Grangers' etc. Assn. v. Clark, 67 Cal. 634, 8 Pac. 445. To same effect: Bank v. Boyd, 99 Cal. 605, 34 Pac. 337; Camp v. Land, 122 Cal. 169, 54 Pac. 839.)
Contract With Apparent Corporation-Estoppel.-One who has contracted with an apparent corporation as such is estopped, in an action on the contract, from denying the existence of the corporation. (Fresno Canal etc. Co. v. Warner, 72 Cal. 379, 14 Pac. 37.)
INCREASING AND DIMINISHING CAPITAL STOCK, HOW.
Sec. 359, C. C. No corporation shall issue stocks or bonds except for money paid, labor done or property actually received, and all fictitious increase of stock or indebtedness is void. Ev. ery corporation may increase or diminish its capital stock, and every corporation or two or more corporations, may create or increase its or their bonded indebtedness, subject to the following provisions :
First—The capital stock of a corporation may be increased or diminished at a meeting of the stockholders by a vote representing at least two-thirds of the subscribed or issued capital stock, or in the manner otherwise in this section provided; when by meeting as aforesaid, then such meeting must be called by the board of directors or trustees and notice must be given by publication in a newspaper published in the county or city and county where the principal place of business of such corporation is located, or if there be none published in said county or city and county, then in a newspaper published in an adjoining county, or city and county, such paper to be designated by the board of directors or trustees in the order calling for the meeting.
Second—The notice must specify the object of the meeting and the amount to which it is proposed to increase or diminish the capital stock, the time and place of holding the meeting, which latter must be at the principal place of business of the corporation and at the building where the board of directors or trustees usually meet. The notice herein provided must be published once a week for at least sixty days. The capital stock cannot be diminished to an amount less than the indebtedness of the corporation.
Third—The bonded indebtedness of a corporation may be created or increased by a vote of the stockholders representing at least two-thirds of the subscribed or issued capital stock at a meeting called by the board of directors or trustees, and after notice of the time and place of the meeting published in the same manner and for the time prescribed, which notice shall state the amount of the bonded indebtedness which it is proposed to create, or the amount to which it is proposed to increase such indebtedness, and shall in all other respects contain the same matters as are above provided and set forth in the notice of meeting to increase or diminish the capital stock; or Euch original creation of bonded indebtedness may be made as otherwise in this section provided.
Fourth-In addition to the notice by publication, when proceedings are to be had hereunder at a meeting of stockholders, the secretary of the corporation shall also address a notice to each of the stockholders whose names appear on the company's books as sufficiently addressed or identified, at his place of residence, if known, and if not known, then at the place in which the principal place of business of the corporation is situate, which notice shall be so mailed to such stockholders at least thirty days before the day appointed for such meeting.
Fifth-In lieu of such call for meeting of stockholders and of such notice and publication of the same and of a stockholders' meeting held in pursuance thereof and of said vote thereat representing at least two-thirds of the subscribed capital stock, any corporation may diminish its capital stock and also originally create its bonded indebtedness by a resolution adopted by the unanimous vote of its board of directors or trustees at a regular meeting or at a special meeting called for that purpose and approved by the written assent or assents of the stockholders holding two-thirds of the subscribed or issued capital stock, which assent or assents must be filed with the secretary of the corporation; but the secretary of the corporation must address by mail, postage fully prepaid, a copy of such resolution to each of the stockholders whose names appear upon the company's books as sufficiently addressed or identified, at his place of residence, if known, and if not known, then at the place in which the principal place of business of the corporation is situate, which notice shall be so mailed to such stockholders at least thirty days before the certificate hereinafter provided is made and signed or file [d] as hereinafter provided, and within that time any stockholder may file with such secretary his dissent in writing; but it is further provided that if at any time within said thirty days such written assent or assents of the stockholders holding all of the subscribed or issued capital stock be so filed with said secretary, then and at once and without further delay the certificate hereinafter provided for may be so made, signed and filed as hereinafter provided and with the same effect, but such capital stock cannot be diminished to an amount less than the indebtedness of the corporation, and no increase of capital stock or bonded indebtedness can be made, except at a meeting of stockholders as in this section provided.
Sixth-Any two or more corporations may by a separate compliance by each corporation with the provisions of this section applicable in the premises in respect to creating or increasing bonded indebtedness, create or increase a consolidated bonded indebtedness of such corporations, to be binding jointly and severally on such corporations, and which may be secured by a consolidated mortgage or deed of trust executed by all such corporations, mortgaging or conveying in trust all or any of the properties of all such corporations, acquired or to be acquired.
Seventh-Upon such increase or diminution of the capital stock or creation or increase of the bonded indebtedness being made in accordance with the provisions of this section there shall be made, if proceedings are had under subdivisions first, second, third and fourth above, a certificate under the corporate seal and signed by the president and secretary of the corporation, or of each corporation acting in the premises, and a majority of the directors or trustees of such corporation, or each corporation so acting, showing a compliance by such corporation, or each corporation so acting, with the requirements of said last-named subdivisions and the amount to which the capital stock has been increased or diminished or the amount of the bonded indebtedness created, or to which the bonded indebtedness may have been increased, and the amount of stock represented at the meeting and the total vote in the affirmative by which the same was accomplished and the total vote in the negative; or if such proceedings be had and taken under subdivision fifth of this section as to diminution of capital stock or original creation of bonded indebtedness a like certificate shall be made and sealed and signed, as aforesaid, showing a compliance by such corporation, and by each corporation acting in the premises, with the requirements of said subdivision fifth, and the amount to which the capital stock has been diminished or the amount of bonded indebtedness so originally created, and the total amount of the stock' represented by the said written assent or assents so filed with the secretary and the total amount of stock represented by the said written dissent or dissents so filed. In case of a consolidated bonded indebtedness each corporation which is a party thereto shall cause to be made