California cannot tax.

State of Cal. v. Central Pac. R. R. Co., 127 U. S. 1, 8 Sup. Ct. Rep. 1073.

The right to be a corporation is a franchise. and therefore is taxable; it is property that cannot be taken without due compensation. [Spring Valley W. W. v. Schottler, 62 Cal. 69.] The law leaves to the assessor and the board of equalization the power to fix values, and with the valuation determined by them, the courts cannot interfere except for fraud. Thus, the courts refuse to restrain an assessor from collecting a tax from a gas company where he had fixed the value of its franchises at the difference between the market value of its shares and the value of all the property owned by it, and had determined the value of its gas-mains by adding to the cost of the iron the cost of putting it down in the streets. [San Jose Gas. Co. v. January, 57 Cal. 614.] It should be remarked that the franchises thus taxed were not only the right to exist as a corporation, but also the right to use the streets for the purposes of the gas business, which latter franchise is by far the more valuable. Indeed, as incorporation is a matter of right in California, the taxable value of the corporate franchise would appear to be nominal, especially as it has been held that a corporation has no "good will." Spring Valley W. W. v. Schottler. 62 Cal. 69.

1. Constitution Art. XIII, Sec. 1; Spring Valley W. W. v. Schottler, 62 Cal. 69; San Jose Gas Co. v. January, 57 Cal. 614.

SECTION 45-TAXATION OF SHARES.

The "stock" of a corporation consists of its property, i. e., its corporate franchise as well as all else it owns or possesses. The constitution, artiele XIII, section 1, provides that "stock" may be taxed, but it also provides, in the same section, that all property shall be taxed in accordance with its value. An attempt was made to tax the owners of shares of stock in addition to the tax paid by the corporation on its property, which attempt was defeated in the celebrated case of Burke v. Badlam, 57 Cal. 594. The court there said: "Shares of stock are an interest in the capital or stock of the corporation; they are an undivided interest therein and to tax them also would be double taxation. As far as its property is concerned the corporation is a trustee for the shareholders." This decision is now incorporated in section 3608, Political Code, which provides that the stock, not the shares. of stock, should be taxed, except in the case of national banks doing business in California. [Pol. C. 3609, 3610.] It will be noted that Burke v. Badlam (supra) decides that shares of stock are property, that capital stock is property; that either may be taxed, but not both. Accord, Spring Valley W. W. v. Schottler, 62 Cal. 69.

CHAPTER VII.

POWERS AND LIABILITIES OF CORPORATIONS.

SEC. 46.-POWERS IN GENERAL.

SEC. 47.-SOURCE OF POWER TO CONTRACT.

SEC. 48.-MODE OF EXERCISE.

SEC. 49.-POWER TO TAKE OR HOLD STOCK.

SEC. 50.-TO CONTRACT DEBTS AND ISSUE EVIDENCES THEREOF.

SEC. 51.--BONDS-FOR WHAT ISSUED.

SEC. 52.-MODE OF ISSUE.

SEC. 53.

CERTAIN CHARTERS INTERPRETED.

SEC. 54.-WHO CAN EXERCISE CORPORATE POWERS.

SEC. 55.-PLEADING AND PROOF.

SEC. 56. RATIFICATION AND

DEFINED.

SEC. 57.-SAME.

ESTOPPEL

SEC. 58. RATIFICATION-(CASES).
SEC. 59.

ESTOPPEL-(CASES).

SEC. 60.-PROPERTY-POWER TO TAKE.
SEC. 61.

SAME-INHERENT RESTRICTIONS.

SEC. 62.- SAME-STATUTORY RESTRICTIONS.
SEC. 63.-PROPERTY-POWER TO HOLD.
SEC. 64. SAME-POWER TO ALIENATE.
SEC. 65.-FRANCHISES-AS PROPERTY.
SEC. 66.-SAME-POWER TO ACQUIRE.

DOCTRINES

SECTION 46-POWER IN GENERAL.

It was a rule of interpretation at common law that corporations possess only such corporate powers as are expressly given by statute or by their charter, and such as shall be necessary to the exercise of the powers

enumerated and given. [Dunbar v. Alcalde of S. F., 1 Cal. 355; Smith v. Dunbar, 2 Cal. 524.] This rule is part of our present constitution [Art. XII, Sec. 9] and has been expressed in every general corporation statute that has ever been enacted in California. The Civil Code states it as follows [C. C. 354, 355]: "Every corporation, as such, has power:

"1. Of succession by its corporate name, for the period limited, and when no period is limited, perpetually;

"2. To sue and be sued in any court;

"3. To make and use a common seal, and alter the same at pleasure;

"4. To purchase, hold and convey such real and personal estate as the purposes of the corporation may require, not exceeding the amount limited (by law). See Secs. 63, 64,

post;

"5. To appoint such subordinate officers or agents as the business of the corporation may require and to allow them suitable compensation;

"6. To make by-laws, not inconsistent with any existing law, for the management of its property, the regulation of its affairs and for the transfer of its stock;

"7. To admit stockholders or members, and to sell their stock or shares for the payment of assessments or installments;

"8. To enter into any obligations or contracts essential to the transaction of its ordinary affairs or for the purposes of the corporation." C. C. 354.

"In addition to these enumerated powers, and to those expressly given in that title of the code under which it is incorporated' no corporation shall possess or exercise any corporate powers, except such as are necessary to the exercise of the powers so enumerated and given. C. C. 355.

In construing the similar provision of an earlier statute [Compiled Laws of Cal., 1850-53 p. 280, Sec. 2], it was said that this section is to be construed, in each case, as will tend to promote rather than to defeat or obstruct the end for which the corporation was organized. Vandall v. So. S. F. etc. Co., 40 Cal. 83.

SECTION 47-SOURCE OF POWER TO CONTRACT.

The power to make such contracts and incur such contract obligations as are necessary and usual in the course of its business to obtain the objects for which it was created is one of the powers expressly enumerated. [Sec. 46, supra.] This power is so far inherent and implied in every corporation [Unio n Co. v. Murphy's Flat Co., 22 Cal. 621] that a contract not upon its face necessarily beyond the scope of the corporation's powers will be deemed valid. Thus a corporation organized to buy, improve and sell land has power to build or subscribe to a railroad that shall run to a point near its lands, the construction of

1. The purposes expressed in the articles of incorporation determine under what title of the code the corporation is formed. Sec. 2, supra.

2. Brown v. Board of Education, 103 Cal. 531, 37 Pac. 503; Evans Bailey, 66 Cal. 112, 4 Pac. 1089.