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and sealed and signed and verified and filed, as in this section provided, a separate certificate.
Eighth-In all cases the certificate shall state the total number of subscribed or issued shares of the capital stock of the corporation, or of each corporation respectively acting in the premises, and shall be verified by the oath of the said president and secretary, or of the said respective presidents and secretaries. Such consolidated bonded indebtedness may be created or increased to an amount equal to the par or face value of the aggregate amount of the subscribed or issued capital stocks of said two or more corporations, but shall not exceed such aggregate amount. In each and every case the certificate must be filed in the office of the clerk in the county or city and county where the original articles of incorporation of the corporation or corporations acting hereunder are filed and a certified copy thereof, certified by such clerk, shall be filed in the office of the Secretary of State: and thereupon the capital stock shall be so increased or diminished, or the bonded indebtedness or consolidated bonded indebtedness shall be created or increased accordingly, and such certificate or certificates so filed shall be, when said certified copy or copies are so filed, conclusive proof of such increase or diminution of capital stock or such creation or increase of bonded or consolidated bonded indebtedness and the validity of each thereof. When the by-laws of a corporation prescribe the paper in which notices of meetings of directors or trustees or stockholders are to be published the notices of publication herein provided for shall be published in such paper, unless publication thereof shall have ceased. En. March 21, 1872. Amd. 1873-74, 207; 1883, 31; 1885, 141; 1889, 364; 1893, 191; 1903, 347.
See sec. 354, C. C., ante.
The original section reads as follows: “Every corporation may increase or diminish its capital stock as in this section provided:
“1. By a majority vote of the directors there may be called a meeting of the stockholders, to be convened for the purpose of increasing or of diminishing the capital stock;
“2. Personal notice of the time and place of such meeting, and the object thereof, must be served on each stockholder resident in this state; or, in lieu thereof, the notice must be published in every issue of a newspaper published in the county where the principal place of business is located, for four weeks successively;
"3. The notice must also contain the amount to which it is proposed to increase or diminish the capital stock;
"4. The capital stock must in no case be diminished to an amount less than the indebtedness of the corporation or the estimated cost of the works which it may be the object or purpose of the corporation to construct;
“5. At least four-fifths of all the capital stock must be represented at such meeting, and at least two-thirds of the entire capital stock must vote in favor of such increase or diminution before the same is effected.
“6. A certificate signed and verified by the chairman and secretary of the meeting must be made, showing a strict compliance with all the requirements of this section, the amount to which the capital stock has been increased or diminished, the amount of stock (and by whom held) represented at the meeting, the vote by which the object was acco
ccomplished, the amount of capital stock actually paid in, and the amount of all debts and liabilities of the corporation, and how secured.
“7. This certificate must be subscribed by a majority of the directors and duplicates made, one to be filed in the office of the county clerk, and one in the office of the Secretary of State, as provided for original articles of incorporation, and thereupon the capital stock is so increaseil or diminished.”
For amendments of 1873-74, 1883, 1885, 1889, and 1893, see Appendix.
Ewing v. Oroville Min. Co., 56 Cal. 651, 653; Stein v. Howard, 65 Cal. 617, 4 Pac. 662; Harvey v. Dale, 96 Cal. 161, 31 Pac. 14; Jefferson v. Hewitt, 103 Cal. 630, 37 Pac. 638; Market St. Ry. Co. v. Hellman, 109 Cal. 594, 597, 600, 42 Pac. 225; Ralston v. Bank of California, 112 Cal. 213, 44 Pac. 476; Kellerman v. Maier, 116 Cal. 424, 48 Pac. 377; Boyd v. Hewn, 125 Cal. 45, 58 Pac. 64; Vermont etc. Co. v. Declez etc. Co., 135 Cal. 583, 87 Am. St. Rep. 143, 67 Pac. 1057.
Original Section.-Section 359 conflicts with section 11, article XII of the Constitution of 1879, and is annulled. First clause of section 11, article XII of the Constitution, providing that no corporation shall issue stock, except for certain purposes, is prohibitory. The last clause providing for increase of capital stock of corporation is not self-executing. (Ewing v. Oroville M. Co., 56 Cal. 649.)
Issuance of Stock.- Agreement to perform services in return for stock vests title to stock at once and prior to the rendition of the services. (Chatter v. S. F. Sugar Co., 19 Cal. 219.)
Section 359 of the Civil Code renders void a certificate of stock issued upon credit, but does not render void a condition as to the payment of a non-negotiable note given therefor. (Jefferson s. Hewitt, 103 Cal. 624, 37 Pac. 638.)
Where market value of stock sold fails, the issuance of an additional number of shares, without consideration, merely to equalize the price to that at which it was sold so that the stock already purchased should cost no more than that to be purchased at the reduced price, is in violation of section 359, Civil Code, providing that “No corporation shall issue stock or bonds except for money paid, labor done, or property actually received," and the certificates for such additional number of shares issued to present stockholders, without any new consideration, are void, and the parties receiving them do not thereby become stockholders, nor make themselves liable to creditors of the corporation for an unpaid subscription. (Kellerman v. Maier, 116 Cal. 416, 48 Pac. 377.)
Fictitious Increase. Increase of capital stock of corporation, and the issuance of additional shares to be sold at a price less than nominal par value of the stock, to supply a fund actually required for the use of the corporation, is not a “fictitious increase of the stock,” within the meaning of article XII, section 2, of the Con. stitution. (Stein v. Howard, 65 Cal. 616, 4 Pac. 662.)
Purchase and Reissuance by Corporation. The purchase of stock by a corporation reduces the amount of subscribed capital stock, and though ultra vires, does not extinguish the stock, and the corporation has power to reissue stock to the same amount. (Bank etc. v. Wickersham, 99 Cal. 655, 34 Pac. 444.)
The fact that a bank becomes the owner of shares of stock converted by it, where a recovery is had for the conversion, is no ground for refusing the remedy for such recovery, as the authorized capital is not reduced by such ownership, and the shares are not extinguished and may be reissued by the bank. (Ralston v. Bank of Cal., 112 Cal. 208, 44 Pac. 476.)
Definition of Capital Stock.–By capital stock is meant the capital of the corporation on which it transacts business, whether such capital consists of money, property, or other valuable commodities, (Martin v. Zellerbach, 38 Cal. 300, 99 Am. Dec, 365. To same effect; S. F. v. S. V. W. W., 63 Cal. 531; Kohl v. Lilienthal, 81 Cal. 385, 20 Pac. 401, 22 Pac. 689.)
Withdrawal of Capital Stock.- Any arrangement which will have the effect to withdraw the capital of an incorporated company, and turn it over to the stockholders, except in the manner provided by law is void, as to any creditor of a corporation, either prior or subsequent, who had no notice of the arrangement at the time of giving credit. (Martin v. Zellerbach, 38 Cal. 300, 99 Am. Dec. 365. To same effect: S. F. etc. Co. v. Bee, 48 Cal. 404; Kohl v. Lilienthal, 81 Cal. 385, 20 Pac, 401, 22 Pac. 689. Note citation: 57 Am. St. Rep. 72.)
Increase of Indebtedness.—This section provides the method by which the bonded indebtedness of corporations is to be created or increased. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)
Stockholders may be represented by proxies at a meeting at which a bonded indebtedness is authorized, where the by-laws provide that the stockholders may vote by proxy at any meeting of the stockholders. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)
Section 456 of the Civil Code must be construed in connection with this section, and the bonds issued by a street railroad corporation in part payment for the construction of its road are for the creation of a bonded indebtedness, within the provisions of this section requiring the approval of two-thirds of the entire capital stock, and in default of such approval no liability is created upon such bonds against the stockholders. (Boyd v. Heron, 125 Cal. 453, 58 Pac. 64.)
CORPORATIONS MAY ACQUIRE REAL PROPERTY, AND HOW
MUCH. Sec. 360, C. C. No corporation shall acquire or hold any more real property than may be reasonably necessary for the transaction of its business, or the construction of its works, except as otherwise specially provided. A corporation may acquire real property, as provided in title VII, part III, Code of Civil Procedure, when needed for any of the uses and purposes mentioned in said title. En. March 21, 1872. Amd. 187374, 208.
Power of insusance corporations to acquire land: See post, sec. 415, C. C.
Power of railroad corporation to acquire land: See post, sec. 465, C. C.
The original section has “absolutely necessary" instead of “ reason. ably necessary." The second sentence in the original is as follows: “A corporation organized for any purpose specified in subdivisions 3, 4, 5, 6, 7, 8, and 15, of section 286, may acquire real property as provided in title VII, part III, Code of Civil Procedure, when needed for the uses and purposes therein mentioned."
Power to Acquire and Hold Real Property.- Every corporation is presumed to have power to purchase and hold land; anything abridging this power must be shown affirmatively. (People v. Larue, 67 Cal. 526, 8 Pac. 84; Stockton Savings Bank v. Staples, 98 Cal. 189, 32 Pac. 936.)
The acquisition of more land than the law allows is an abuse of power that can be inquired into only by the state, and not by a trespasser. (California etc. Co. v. Alta Telegraph Co., 22 Cal. 398; Union Water Co. v. Murphy's Flat etc. Co., 22 Cal. 620.)
A corporation can purchase neither a legal nor an equitable estate for an unauthorized purpose. (Coleman v. San Rafael etc. Co., 49 Cal. 517.)
CONSOLIDATION OF MINING CORPORATIONS OWNING AD
JOINING CLAIMS. Sec. 361, C. C. It shall be lawful for two or more corporations formed, or that may hereafter be formed, under the laws of this state, for mining purposes, which own or possess mining claims or lands adjoining each other, or lying in the same vicinity, to consolidate their capital stock, debts, property, assets and franchises, in such manner and upon such terms as may be agreed upon by the respective boards of directors or trustees of such companies so desiring to consolidate their interests; but no such consolidation shall take place without the written consent of the stockholders representing two-thirds of the capital stock of each company; and no such consolidation shall, in any way, relieve such companies, or the stockholders thereof, from any and all just liabilities; and in case of such consolidation, due notice of the same shall be given, by advertising, for one month, in at least one newspaper in the county and state where the said mining property is situated, if there be one published therein and also in newspaper published in the county, or city and county, where the principal place of business of any of said companies shall be. And when the said consolidation is completed, a certificate thereof, containing the manner and terms of said consolidation, shall be filed in the office of the county clerk of the county in which the original