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as they attempt to provide a mode of fixing rates to be charged by corporations in San Francisco differing from the mode provided for other corporations by general laws. (San Francisco v. Spring Val. ley W. W., 53 Cal. 608; Spring Valley W. W. v. Bryant, 52 Cal. 132; San Francisco v. Spring Valley W. W., 48 Cal. 493.)
An act which authorizes the board of supervisors of a county to grant certain privileges to a particular corporation is void. (Waterloo etc. Road Co. v. Cole, 51 Cal. 381.)
An act which grants to individuals powers and privileges, and provides that the act shall not take effect unless such persons incorporate within a given time, is a grant to the corporation, and void. (San Francisco v. Spring Valley W. W., 48 Cal. 493. California State Tel. Co. v. Alta Tel. Co., 22 Cal. 398, overruled.
Under this section the legislature cannot by special act change the name of a corporation, but may by general law provide for such change by the superior court upon application of the incorporators, (Matter of La Societe Francaise, etc., 123 Cal. 525, 56 Pac. 458. See also, Pacific Bank v. De Ro, 37 Cal. 538.)
An act granting to certain individuals the exclusive right to a line of telegraph does not violate this section. (California State Tel. Co. v. Alta Tel. Co., 22 Cal. 398. But see San Francisco v. Spring Valley W. W., 48 Cal. 493.)
This section does not prohibit the assignment of a franchise to a legally organized corporation, by persons having the lawful right to exercise and transfer the same—this section referring only to power directly conferred upon corporations by the legislature. (Peos ple v. Stanford, 77 Cal. 360, 18 Pac. 85, 19 Pac. 693.)
Where a franchise is conferred by the legislature to certain individuals to supply a town with water, and they afterward sell such franchise to a corporation, this section is not violated. (San Luis Water Co. v. Estrada, 117 Cal. 168, 48 Pac. 1075. San Francisca v. Spring Valley W. W., 48 Cal. 493, distinguished.)
A law providing a special method of assessment and collection of taxes against railroads situated in more than one county is not in: violation of this section. (People v. Central Pac. R. R. Co., 105 Cal. 576, 38 Pac. 905. People v. Central Pac. R. R. Co., 83 Cal. 393, 23 Pac. 303, overruled.)
An act conferring the power of appointing boards of examiners upon three named societies, which are said to be "existing corporations," held not to be in conflict with this section, as the power is not conferred upon them as corporations—the expression “exista ing corporations” being merely descriptio personarum. (Ex parte Frazer, 54 Cal. 94; Ex parte McNulty, 77 Cal. 164, 11 Am. St. Rep. 257, 19 Pac. 237; Ex parte Johnson, 62 Cal. 263.)
This provision continued in force section 359 of the Code of Civil Procedure, limiting the time within which an action can be brought to onforce the stockholders' personal liability. (Santa Rosa Nat. Bank v. Barnett, 125 Cal. 407, 58 Pac. 85.)
Alteration and Repeal of Charters.—The right to alter and repeal is not without limit; it must be reasonable. Sheer oppression and wrong cannot be inflicted under the guise of abandonment or alteration. (Spring Valley W. W. v. San Francisco, 61 Cal. 3.)
The power of the legislature to alter and amend under this section does not authorize the legislature, while the corporation exists, to deprive it of the rights guaranteed to it by the federal constitution, to due process of law, and to the equal protection of the laws, nor to alter the charter of foreign corporations doing business in this state. (Johnson v. Goodyear Min. Co., 127 Cal. 4, 78 Am. St. Rep. 17, 59 Pac. 304.)
A provision in the charter of a water company permitting it to name two out of five commissioners to fix water rates is simply a privilege, and not a contract with the company, and may be repealed at any time. (Spring Valley W. W. v. San Francisco, 61 Cal. 3; S. V. W. W. v. Schottler, 110 U. S. 347, 4 Sup. Ct. Rep. 48.)
The legislature may, under the reserved power, provide for the consolidation of corporations by a majority vote of the stockholders, without reference to the will of the dissenting stockholders. (Market Street Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)
Under this provision the people of the state have power to change the law as to the liability of stockholders. (McGowan v. McDonald, 111 Cal. 57, 52 Am. St. Rep. 149, 43 Pac. 418.)
The power of the legislature under this section is limited by the provisions of the federal Constitution inhibiting laws impairing the obligation of contracts, depriving persons of property without due process of law, or denying the equal protection of the laws. Rights acquired and capital invested by a corporation or its stockholders in the lawful exercise of powers conferred by general laws are within the protection of such constitutional provisions, and cannot be arbitrarily destroyed by subsequent state legislation. (San Joaquin etc. Co. v.
Stanislaus Co., 113 Fed. 930.) A statutory right embraced in the charter of a corporation must be reduced to possession to secure the constitutional protection against alteration or repeal. (San Joaquin etc. Co. v. Stanislaus Co., 113 Fed. 930.)
The constitutional rights of an irrigation company are not impaired by a statute authorizing county boards to fix rates below the minimum prescribed in the act under which the company incorporated. (San Joaquin etc. Co. v. Stanislaus Co., 113 Fed. 930.)
DUES TO BE SECURED BY INDIVIDUAL LIABILITY, ETC.
Sec. 2, Art. XII. Dues from corporations shall be secured by such individual liability of the corporators and other means as may be prescribed by law. See section 3 of this article, and section 322, Civil Code, post.
This section is the same as section 32 of article IV of the old Constitution. See, further, under section 3 of this article.
French v. Teschemaker, 24 Cal. 538; Larrabee v. Baldwin, 35 Cal. 166; Harmon v. Page, 62 Cal. 460, 461; McGowan v. McDonald, 111 Cal. 62, 52 Am. St. Rep. 149, 43 Pac. 418; Santa Rosa Nat. Bank v. Barnett, 125 Cal. 410, 58 Pac. 85.
Liability of Corporators. This section is a positive injunction requiring the legislature to provide security for corporate dues, by-laws imposing, in connection with other means, some degree of individual liability upon the members of the corporation, but leaving the extent of that liability to the wisdom and sound discretion of the legislature. (French v. Teschemaker, 24 Cal. 518.)
An act of the legislature making each stockholder liable for his share of all its debts contracted while he is a stockholder is sufficient to meet the requirements of the constitution. (Larrabee v. Baldwin, 35 Cal. 155.)
Neither section 32, nor section 36 of the Constitution of 1849, nor section 322 of the Civil Code, prevent a court of equity from compelling a stockholder of an insolvent corporation to pay in theamount of capital stock he has contracted to take. The remedies are concurrent. (Harmon v. Page, 62 Cal. 448.)
STOCKHOLDERS TO BE INDIVIDUALLY LIABLE.
Sec. 3, Art. XII. Each stockholder of a corporation, or joint-stock association, shall be individually and personally liable for such proportion of all its debts and liabilities contracted or incurred, during the time he was a stockholder, as the amount of stock or shares owned by him bears to the whole of the subscribed capital stock, or shares of the corporation or association. The directors or trustees of corporations and joint-stock associa
tions shall be jointly and severally liable to the creditors and stockholders for all moneys embezzled or misappropriated by the officers of such corporation, or joint-stock association, during the term of office of such director or trustee.
For stockholder's liability, see, further, section 322, Civil Code, post.
Director's liability, see, further, sections 300, 309, 316, Civil Code, and sections 504 and 560, Penal Code.
The provision of the Constitution of 1849, respecting stockholder's liability is section 36 of article IV, as follows: Each stockholder of a corporation or joint-stock association shall be individually and personally liable for his proportion of all its debts and liabilities.
The provisions of the Constitution of 1849 were held to be not self-executing in French v. Teschemaker, 24 Cal. 518, and to need legislation to make it effective. The deficiencies of the Constitution were not supplied by the common law, for the common law imposed no individual liability upon the stockholders, and the Constitution did not contemplate the common-law liability of partnerships. The supplemental legislation necessary was enacted in the corporation acts of 1850 and 1853, and in section 322 of the Civil Code, which was frequently amended. The section as adopted in the Constitution of 1879 was intended to remedy the deficiencies of the provisions of the Constitution of 1849, and to furnish a full and sufficient rule for the fixing of a stockholder's liability. (Constitutional Debates, p. 382, et seq.) The provision as to the director's liability has no parallel in the Constitution of 1849, and was adopted principally to protect bank depositors, because of some serious bank losses which had occurred recently before the constitutional convention. (Constitutional Debates, p. 396, et seq.)
Constitution, 1849: French v. Teschemaker, 24 Cal. 538; Larrabee v. Baldwin, 35 Cal. 166; Harmon v. Page, 62 Cal. 461; McGowan v. McDonald, 111 Cal. 62, 52 Am. St. Rep. 149, 43 Pac, 418. Constitution, 1879: Faymonville v. McCollough, 59 Cal. 286; Harmon v. Page, 62 Cal. 461; Bidwell v. Babcock, 87 Cal. 32, 25 Pac. 752; Kennedy v. California Saving Bank, 97 Cal. 95, 33 Am. St. Rep. 163, 31 Pac. 846; Fox v. Hale & Norcross S. M. Co., 108 Cal. 369, 41 Pac. 308; M'Gowan v. McDonald, 111 Cal. 63, 52 Am. St. Rep. 149, 43 Pac. 418; Danielson v. Yoakum, 116 Cal. 384, 48 Pac: 322; Winchester v. Mabury, 122 Cal. 523, 55 Pac. 393; Sacramento Bank v. Pacific Bank, 124 Cal. 150, 56 Pac. 787, 71 Am. St. Rep. 36, note; Santa Rosa Nat. Bank v. Barnett, 125 Cal. 410, 58 Paca 85; Winchester v. Howard, 136 Cal. 449, 89 Am. St. Rep. 153, 64 Pac. 692, 69 Pac. 77.
Stockholders' Liability-In General.--Under this section a stock. holder cannot be exempted by law from his individual liability. (McGowan v. McDonald, 111 Cal. 57, 52 Am. St. Rep. 149, 43 Pac. 418.)
A somewhat similar provision of the former Constitution was held not to be self-executing. (French v. Teschemaker, 24 Cal. 518.)
The former Constitution left it to the legislature to prescribe the rule by which each stockholder's proportion should be ascertained. (Larrabee v. Baldwin, 35 Cal. 155.)
Under the former Constitution, it was held that any one creditor, whose debt was sufficient, might collect from one particular stockholder the entire amount of his liability on all the corporate debts, leaving him to seek contribution out of his costockholders. (Lar. rabeo v. Baldwin, 35 Cal. 155.)
While it has never been decided whether or not this rule applies under the present Constitution, it has been said that “all” the debts means every debt of the company; and, therefore, every creditor is entitled to sue any stockholder for his proportion of the indebtedness of the company to such creditor, without reference to the other debts of the corporation. (Morrow v. Superior Court, 64 Cal. 383, 1 Pac. 354.)
An act authorizing the formation of corporations, without attaching to the stockholders an individual liability would be unconstitutional, and the persons organized under such an act would acquire none of the rights of a corporation. (French v. Teschemaker, 24 (al. 518.)
But the creditors of a corporation may waive the personal liability v of the stockholders at the time of contracting with the corporation. (French v. Teschemaker, 24 Cal. 518.)
A depositor in a savings bank does not waive the personal liability of the stockholders by an unsigned agreement printed in the book of each depositor, nor by a printed release of liability inserted in the signature-book, to which no special subscription was made by the depositors. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 43 Pac. 1090.)
A by-law of a corporation that the stockholders shall not be personally liable for the debts of the corporation is void. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 48 Pac. 1090.)
A law limiting the time within which an action can be brought under this section to three years from the creation of the liability is valid. (Santa Rosa Nat. Bank v. Barnett, 125 Cal. 407, 58 Pac. 85.)
An act authorizing a city to subscribe to the stock of a corporation, provided the corporation should make it a condition of all contracts entered into by it that the city should not be liabie as a