CHAPTER XIII. Fraudulent Insolvencies by Corporations, and Other Frauds in Their § 557. $ 558. § 559. $560. § 561. Management. Fraud in subscriptions for stock of corporations. Frauds in procuring organization of corporation or increasing Unauthorized use of name in prospectus, etc. § 561a. Bank officer, etc., abstracting or willfully misapplying money. § 561b. Frauds by director of bank. § 561c. Guaranty in sum beyond legal amount. § 561d. Loan to director. Deposit with corporation to make loan. Concealing amounts or loans. $562. Receiving deposits in insolvent banks. § 563. Frauds in keeping accounts in books of corporations. § 563a. False entry. § 563b. Circulating false rumors regarding bank. § 564. $565. § 566. § 567. § 568. § 569. § 570. Officer of corporation publishing false reports, etc. Officer of railroad company contracting debt in its behalf ex- Debt contracted in violation of last section not invalid. Director a corporation presumed to have knowledge of its affairs. Director present at meeting, when presumed to have assented to proceedings. Director absent from meeting, when presumed to have assented to proceedings. § 571. Foreign corporations. § 573. Officer may not borrow cemetery corporation funds. Code commissioners' note to Chapter XIII. "Most of the provisions of this chapter, which are taken from the New York Penal Code [Field's Draft] (§§ 645 to 668), are new to our laws. The great importance that corporations are assuming in the country, the almost absolute power of the directors over the property of the corporation, and the numerous frauds that are perpetrated upon the community as well as upon shareholders, point the necessity for stringent penal enactments." § 557. Fraud in subscriptions for stock of corporations. Every person who signs the name of a fictitious person to any subscription for or agreement to take stock in any corporation existing or proposed, and every person who signs to any subscription or agreement the name of any person, knowing that such person has not means or does not intend in good faith to comply with all the terms thereof, or under any understanding or agreement that the terms of such subscription or agreement are not to be complied with or enforced, is guilty of a misdemeanor. Subscription to articles of incorporation: Civ. Code, § 292. California Jurisprudence: See article Corporations, vol. 7, p. 45. Legislation § 557. Enacted February 14, 1872; identical with Field's Draft, § 645. The code commissioners say: "This section is intended to reach a species of fraud frequently practiced in the organization of corporations. (See Palmer v. Lawrence, 3 Sandf. 161; 1 Seld. 389.)" § 558. Frauds in procuring organization of corporation, or increasing its capital. Every officer, agent, or clerk of any corporation, or of any persons proposing to organize a corporation, or to increase the capital stock of any corporation, who knowingly exhibits any false, forged, or altered book, paper, voucher, security, or other instrument of evidence to any public officer or board authorized by law to examine the organization of such corporation, or to investigate its affairs, or to be allowed an increase of its capital, with intent to deceive such officer or board in respect thereto, is punishable by imprisonment in the state prison not less than three nor more than ten years. False certificate, report, or notice. Civil liability of officers: See Civ. Code, § 316. Corporations, organization of: Civ Code, §§ 283 et seq. Increasing stock: Civ. Code, § 359. California Jurisprudence: See articles Banks, vol. 1, p. 170; Corporations, vol. 7, p. 46. Legislation § 558. Enacted February 14, 1872; based on Field's Draft, § 645, N. Y. Pen. Code, § 592. § 559. Unauthorized use of name in prospectus, etc. Every person who, without being authorized so to do, subscribes the name of another to or inserts the name of another in any prospectus, circular, or other advertisement, or announcement of any corporation or joint-stock association, existing or intended to be formed, with intent to permit the same to be published, and thereby to lead persons to believe that the person whose name is so subscribed is an officer, agent, member or promoter of such corporation or association, is guilty of a misdemeanor. Frauds in procuring organization, etc., of corporation: See ante, § 558. California Jurisprudence: See article Corporations, vol. 7, p. 46. Legislation § 559. Enacted February 14, 1872; identical with Field's Draft, § 647. § 560. Misconduct of directors of stock corporations. Every director of any stock corporation who concurs in any vote or act of the directors of such corporation or any of them, by which it is intended, either: 1. To make any dividend, except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law; or, 2. To divide, withdraw, or in any manner, except as provided by law, pay to the stockholders, or any of them, any part of the capital stock of the corporation; or, 3. To discount or receive any note or other evidence of debt in payment of any installment actually called in and required to be paid, or with the intent to provide the means of making such payment; or, 4. To receive or discount any note or other evidence of debt, with the intent to enable any stockholder to withdraw any part of the money paid in by him, or his stock; or, 5. To receive from any other stock corporation, in exchange for the shares, notes, bonds, or other evidences of debt of their own corporation, shares of the capital stock of such other corporation, or notes, bonds, or other evidences of debt issued by such other corporation; -Is guilty of a misdemeanor. Dividends to be made from surplus profits: Civ. Code, § 309. Officers of bank making illegal loans or investments: See Civ. Code, § 581. Officer of bank advertising or making statement as to capital stock without showing amount paid up: See Civ. Code, § 583a. Persons engaged in banking, guilty of misdemeanor, unless true name shown: See Civ. Code, § 582. California Jurisprudence: See article Corporations, vol. 7, p. 47. Legislation § 560. Enacted February 14, 1872; based on Field's Draft, § 648, N. Y. Pen. Code, § 594. § 561. Frauds by bank officers, etc. An officer, director, agent, teller, clerk or employee of any bank, who, either, 1. Knowingly overdraws his account with such bank and thereby obtains the money, notes or funds of any such bank; or 2. Asks for, receives, or consents or agrees to receive, any commission, emolument, gratuity or reward, or any promise of any commission, emolument, gratuity or reward, or any money, property or thing of value or of personal advantage for procuring or endeavoring to procure for any person, firm or corporation, any loan from, or the purchase or discount of any paper, note, draft, check or bill of exchange by any such bank, or for permitting any person, firm or corporation to withdraw any account with such bank, is guilty of a felony. [Amendment approved May 17, 1917; Stats. 1917, p. 579.] California Jurisprudence: See article Banks, vol. 4, p. 171. Legislation § 561. 1. Enacted February 14, 1872, and then read: "Every officer, agent, teller, or clerk of any savings bank, who knowingly overdraws his account with such bank, and thereby wrongfully obtains the money, note, or funds of such bank, is guilty of a misdemeanor." The section was based on Field's Draft, § 654, N. Y. Pen. Code, § 600. 2. Amendment by Stats. 1901, p. 468; unconstitutional. See note, § 5, ante. 3. Amended by Stats. 1917, p. 579, recasting the section. § 561a. Bank officer, etc., abstracting or willfully misapplying money. Any officer, director, trustee, employee or agent of any bank in this state, who abstracts or willfully misapplies any of the money, funds or property of such bank, or willfully misapplies its credit, is guilty of a felony. Nothing in this section shall be deemed or construed to repeal, amend or impair any existing provision of law prescribing a punishment for any such offense. California Jurisprudence: See article Banks, vol. 4, p. 171. § 561b. Frauds by director of bank. Every director of a bank in this state who 1. In case of the fraudulent insolvency of such bank, shall have participated in such fraud; or 2. Willfully does any act as such director which is expressly forbidden by law or willfully omits to perform any duty imposed upon him as such director by law, is guilty of a misdemeanor. The insolvency of a bank is deemed fraudulent unless its affairs appear upon investigation to have been administered clearly, legally and with the same care and diligence that agents receiving a compensation for their services are bound, by law, to observe. California Jurisprudence: See article Banks, vol. 4, p. 171. § 561c. Guaranty in sum beyond legal amount. An officer or agent of any bank in this state, who makes or delivers any guaranty or indorsement on behalf of such bank. whereby it may become liable upon any of its discounted notes, bills or obligations, in a sum beyond the amount of loans and discounts which such bank may legally make, is guilty of a misdemeanor. California Jurisprudence: See article Banks, vol. 4, p. 171. § 561d. Loan to director. Deposit with corporation to make loan. Concealing accounts or loans. A director of a bank, organized under the laws of this state, who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended to make a loan or discount to any director of such corporation, or upon paper Pt. 1, Tit. 13, Ch. 13 upon which any such director is liable or responsible to an amount exceeding the amount allowed by the statutes; or Any director, trustee, officer or employee of any such bank who makes or maintains, or attempts to make or maintain, a deposit of such bank's funds with any other corporation on condition, or with the understanding, express or implied, that the corporation receiving such deposit make a loan or advance, directly or indirectly, to any director, trustee, officer or employee of the corporation so making or maintaining or attempting to make or maintain such deposit; or Any officer or employee of any such bank who intentionally conceals from the directors or trustees of such bank any discounts or loans made by it between the regular meetings of its board of directors or trustees, or the purchase of any securities or the sale of its securities during the same period, or knowingly fails to report to the board of directors or trustees when required to do so by law, all discounts or loans made by it and all securities purchased or sold by it between the regular meetings of its board of directors or trustees, is guilty of a misdemeanor. Nothing in this section shall render any loan made by the directors of any bank, in violation thereof, invalid. California Jurisprudence: See article Banks, vol. 4, p. 171. § 562. Receiving deposits in insolvent banks. Every officer, agent, teller, or clerk of any bank, and every individual banker, or agent, teller, or clerk of any individual banker, who receives any deposits, knowing that such bank, or association, or banker is insolvent, is guilty of a misdemeanor. California Jurisprudence: See article Banks, vol. 4, p. 171. Legislation § 562. 1. Enacted February 14, 1872; based on Field's Draft, § 655, N. Y. Pen. Code, § 601. 2. Amendment by Stats. 1901, p. 468; unconstitutional. See note, § 5, ante. § 563. Frauds in keeping accounts in books of corporations. Every director, officer, or agent of any corporation or joint-stock association, who knowingly receives or possesses himself of any property of such corporation or association, otherwise than in payment of a just demand, and who, with intent to defraud, omits to make, or to cause or direct to be made, a full and true entry thereof in the books or accounts of such corporation or association, and every director, officer, agent, or member of any corporation or joint-stock association who, with intent to defraud, destroys, alters, mutilates, or falsifies any of the books, papers, writings, or securities belonging to such corporation or association, or makes, or concurs in making, any false entries, or |