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250, 67 Pae. 779; Vermont etc. Co. v. De Clez etc. Co., 135 Cal. 582, 87 Am. St. Rep. 143, 67 Pac. 1057.

Annotation.

Increase of Stock and Bonds.- Bonded indebtedness does not embrace a non-negotiable note and mortgage executed by a private corporation to secure its indebtedness for money loaned, money paid, property purchased, or labor performed in the ordinary course of its authorized business, and actually received and used in such business. (Underhill v. Santa Barbara etc. Co., 93 Cal. 308, 28 Pac. 1049.)

Fictitious increase does not mean an increase of the capital stock of the corporation and the issuing of additional shares to be sold at a price less than the nominal par value, to supply a fund actually required for the use of the corporation. Such an increase under such circumstances is not prohibited. (Stein v. Howard, 65 Cal. 616, 4 Pac. 662.)

Section 359 of the Civil Code, at the time of the adoption of the Constitution, was inconsistent therewith, and was annulled. The first clause of section 11, article XII, Constitution, as to issuing stock except for certain purposes, is prohibitory, and the second clause requires the enactment of a general law and is not self-exeenting. (McDonald v. Patterson, 54 Cal. 245. Distinguished: Ewing v. Oroville M. Co., 56 Cal. 649.)

A promissory note, given in payment of a subscription to stock of a corporation, constitutes the receipt of “property' on which the stock may be issued. (Pacific Trust Co. v. Dorsey, 72 Cal. 55, 12 Pac. 49.)

This section does not prevent a corporation from pledging its bonds as collateral security. (Illinois etc. Bank v. Pacific Ry. Co., 117 Cal. 332, 49 Pac. 197.)

Stock issued in exchange for labor or property is upon lawful consideration, and is neither fictitious nor void as to the public. (Smith v. Martin, 135 Cal. 47, 67 Pac. 779.)

Stockholders purchasing stock at less than par are liable to the collection of the unpaid residue of the par value of the stock upon a creditor's bill filed for that purpose. (Vermont etc. Co. v. Declez, ete. Co., 135 Cal. 579, 87 Am. St. Rep. 143, 67 Pac. 1057. Distinguishing Stein v. Howard, 65 Cal. 616, 4 Pac. 662.).

ELECTION OF DIRECTORS-CUMULATIVE OR DISTRIBUTIVE

VOTES. Sec. 12, Art. XII. In all elections for directors or managers of corporations every stockholder shall have the right to vote, in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors or managers to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them, ch the same principle, among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner, except that members of co-operative societies formed for agricultural, mercantile, and manufacturing purposes, may vote on all questions affecting such societies in manner prescribed by law.

See sections 307, 312, Civil Code, post, as to corporate elections.

Legislative History.

This section has no parallel in the Constitution of 1849. Its purpose was to secure representation on the board of directors by minority stockholders. (Constitutional Debates, p. 442; Wright v. Central Water Co., 67 Cal. 532, 8 Pac. 70.)

Section Cited.

Wright v. Central Water Co., 67 Cal. 535, 8 Pac. 70.

Annotation.

Directors.- Under this section all the directors must be elected on one ballot. (Wright v. Central etc. Water Co., 67 Cal. 532, 8 Pac. 70.)

STATE NOT TO LOAN ITS CREDIT NOR SUBSCRIBE TO STOCK

OF CORPORATIONS. Sec. 13, Art. XII. The state shall not in any manner loan its credit nor shall it subscribe to, or be interested in the stock of any company, association, or corporation.

See sections 22 and 31, article IV, Constitution, ante.

Legislative History.

The similar provision in the Constitution of 1849 is section 10 of article XI, for which see section 31 of article IV of the Constitution, ante.

Section Cited.

There are no citations of this section.

Annotation.

State Credit. This section prohibits the loaning of public credit for private purposes under any circumstances. (Stockton etc. R. R. Co. v. Stockton, 41 Cal. 147; Ramsey v. Haeger, 76 Ill. 432.)

It does not prohibit the appropriation of public funds to aid a corporation in the construction of a railroad to be used for military purposes. (People v. Pacheco, 27 Cal. 175.)

CORPORATIONS TO HAVE OFFICE FOR TRANSACTION OF

BUSINESS IN STOCKS. Sec. 14, Art. XII. Every corporation other than religious, educational, or benevolent, organized or doing business in this state, shall have and maintain an office or place in this state for the transaction of its business, where transfers of stock shall be made, and in which shall be kept, for inspection by every person having an interest therein, and legislative committees, books in which shall be recorded the amount of capital stock subscribed, and by whom; the names of the owners of its stock, and the amounts owned by them respectively; the amount of stock paid in, and by whom; the transfers of stock; the amount of its assets and liabilities, and the names and place of residence of its officers.

For principal place of business, see sections 290, 321a, Civil Code
For transfer of shares, see section 324, Civil Code.
For records of corporations, see sections 377, 378, Civil Code.

Legislative History.

This section has no parallel in the Constitution of 1849. Its purpose was to give the stockholder a constitutional right to examine the corporate stock-books and to afford an opportunity for legislative investigation if necessary. (Constitutional Debates, p. 444.)

Section Cited.

Vermont etc. Co. v. Declez etc. Co., 135 Cal. 584, 87 Am. St. Rep. 143, 67 Pac, 1057; Johnson v. Langdon, 135 Cal. 625, 87 Am. St. Rep. 156, 67 Pac. 1050.

Annotation.

Inspection of Books.-A stockholder has the right to inspect the books, records and journals of the corporation; and mandamus will lie to compel the secretary who is custodian to allow his inspection thereof. (Johnson v. Langdon, 135 Cal. 624, 87 Am. St. Rep. 156, 67 Pac. 1050.)

FOREIGN CORPORATIONS, CONDITIONS.

Sec. 15, Art. XII. No corporation organized outside the limits of this state shall be allowed to transact business within this state on more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state.

See index, “Foreign Corporations."

Legislative History.

This section has no parallel in the Constitution of 1849. It was adopted without debate.

Section Cited.

Bank of British N. A. v. Madison, 99 Cal. 133, 33 Pac. 762; Miles v. Woodward, 115 Cal. 311, 46 Pac. 1076.

Annotation.

Foreign Corporations. The act of 1880, providing for a penalty for failure of the directors of a domestic mining corporation to post weekly reports, etc., is not in violation of this section, and does not relate to the business of the corporation. (Miles v. Woodward, 115 Cal. 308, 46 Pac. 1076.)

This section was not designed to limit the powers of the legisla. ture when dealing with the organization and government of corforations which are created by its own will and act. (Miles v. Wood. ward, 115 Cal. 308, 46 Pac. 1076.)

The act of 1876, requiring banking corporations to publish and file statements of their assets and liabilities, applies to foreign corporations. (Bank of British North America v. Madison, 99 Cal. 125, 133, 33 Pac. 762.)

A foreign banking corporation's right to do business in this state is taxable under this section. (London etc. Bank v. Block, 117 Fed. 900.)

Condition to Doing Business. The legislature, in attempting to impose a condition upon which foreign corporation shall be permitted to do business in this state, cannot exercise a power denied it by the Constitution of the state. A condition so attempted to be imposed is void, and the act of March 3, 1885 (Stats. 1885, p. 13), is unconstitutional. (San Francisco v. Liverpool etc. Ins. Co., 74 Cal. 113, 15 Pac. 380, 5 Am. St. Rep. 425, note, 432.)

Waiver of Unconstitutional Conditions.- A foreign corporation by continuing to do business in this state, after the passage of an act attempting to impose an unconstitutional condition upon its right to do business, does not waive the right to object to the unconstitutionality of the condition. (San Francisco v. Liverpool etc. Ins. Co., 74 Cal. 113, 15 Pac. 380, 5 Am. St. Rep. 425, note, 432.)

Act of March 3, 1885, imposing a tax upon foreign insurance companies for municipal purposes is void as being in conflict with section 12, article XI of the Constitution. (San Francisco v. Liver. pool ete. Ins. Co., 74 Cal. 113, 15 Pac. 380, 5 Am. St. Rep. 425, note. Note citations: Phoenix etc. Co. v. Commonwealth, 96 Am. Dec. 344; Kansas City v. Whipple, 58 Am. St. Rep. 662.)

CORPORATIONS, WHERE TO BE SUED.

Sec. 16, Art. XII. A corporation or association may be sued in the county where the contract is made or is to be performed, or where the obligation or liability arises, or the breach occurs; or in the county where the principal place of business of such corporation is situated, subject to the power of the court to change the place of trial as in other cases. For principal place of business, see section 290, Civil Code, post.

Legislative History.

This section has no parallel in the Constitution of 1849. In Miller & Lux v. Kern Co. Land Co., 134 Cal. at p. 590, 66 Pac. 856, it is said that this section, though broad enough to include actions arising upon contract, was undoubtedly mainly designed to apply to actions against railroad companies for damages. That such actions were removed to a distant county, where the corporation had its principal place of business, was the grievance to be redressed and that is why it was made a constitutional rule of procedure, with which the legislature could not tamper.

Section Cited.

Lewis v. S. P. R. R. Co., 66 Cal. 209, 5 Pac. 79; Cohn v. C. P. R. R. Co., 71 Cal. 488, 12 Pac. 498; Baker v. Firemen's Fund Ins. Co., 73 Cal. 183, 41 Pac. 686; Chase v. S. P. R. R. Co., 83 Cal. 469, 23 Pac. 532; Fresno Nat. Bank v. Superior Ct., 83 Cal. 493, 24 Pac. 157; Yore v. Bankers' etc. Co., 88 Cal, 611, 26 Pac. 514; Kendrick v. Diamond etc. Min. Co., 94 Cal. 137, 29 Pac. 324; Bush v. City of Eureka, 97 Cal. 138, 31 Pac. 845; McSherry v. Penn. etc. G. M. Co., 97 Cal. 643, 32 Pac. 711; White v. Fresno Nat. Bank, 98

Corporation Laws-4

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