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Mandatory Section. This requirement of the code is absolute and peremptory. The articles must set forth the amount subscribed, and by whom. The instrument from which the corporation derives its being must be held to limit the power of the corporation, so that it can bind as stockholders as of the date of its filing only those named in the articles, and to the amounts therein mentioned. (M. & S. V. R. R. v. Hildreth, 53 Cal. 128. To same effect generally: San Joaquin etc. Co. v. Beecher, 101 Cal. 79, 35 Pac. 349; Marysville etc. Co. v. Johnson, 109 Cal. 195, 50 Am. St. Rep. 35, 41 Pac. 1016; Marysville etc. Co. v. Johnson, 93 Cal. 551, 27 Am. St. Rep. 221, 29 Pac. 126. Note citations: 43 Am. Dec. 697; 81 Am. Dec. 395.)
[This section should be read and construed in connection with sections 291, 294, 295, and titles III, IV, V, and VII of the Civil Code, relating to such corporations. See, also, notes under such sections and titles.-Eds.)
PREREQUISITE TO FILING ARTICLES OF CORPORATIONS FOR
PROFIT. Sec. 294, C. C. Before the articles of incorporation of any corporation referred to in the preceding section are filed, there must be paid for the benefit of the corporation, to a treasurer elected by the subscribers, ten per cent of the amount subscribed. En. March 21, 1872.
This requirement is based on section 1 of the railroad act of 1861 (Stats. 1861, p. 607), and section 11 of the plank-road and turnpike act of 1853 (Stats. 1853, p. 160).
Section 157 of the corporation act of 1850, relating to bridge companies, contained a similar requirement.
The requirement of the railroad act of 1861 was that stock to the amount of at least one thousand dollars per mile of the proposed road shall be subscribed, and ten per cent in cash so required to be subscribed shall be actually and in good faith paid to a treasurer to be named and appointed by said subscribers from their number.
Payment of Subscription. The requirement that ten per cent of the amount to be subscribed per mile be paid in cash is not merely directory, but is a condition precedent, without which subscribers to a company have no power to incorporate, and an attempted in. corporation without such payment is invalid, and should be so declared in quo warranto. (People v. Chambers, 42 Cal. 201.)
And under similar requirements of section 1 of the railroad act of 1861, that subscriptions be paid in cash, it is held a check on a bank does not constitute a payment in cash. (People v. Chambers, 42 Cal. 201.)
But People v. Chambers, supra, has been distinguished, and it is held that the treasurer of a company about to form a railroad corporation may receive from subscribers payment of the ten per cent, required by law to be paid to him, in bank checks drawn by subscriber, and payable in praesenti, provided they are drawn against a sufficient fund, and the banks will pay the checks on presentation, and the same were drawn in good faith, and with no intention to evade the law. (People v. Stockton etc. R. R. Co., 45 Cal. 306, 13 Am. Rep. 178. Note citation: 81 Am. Dec. 398; 25 Am. Rep. 162.)
"Without a substantial compliance with this provision, the subscribers acquire no jurisdiction to organize themselves into a corporate body, and this view of the law is supported by the following authorities: Eaton v. Aspinwall, 19 N. Y. 119; People v. Troy House Co., 44 Barb. 634; Haviland v. Chase, 39 Barb. 283; Taggart v. Western etc. Co., 24 Md. 588, 89 Am. Dec. 760; People v. Insurance Co., 38 Barb. 323; Patterson v. Arnold, 45 Pa. St. 415." (People v. Chambers, 42 Cal. 209.)
OATH OF OFFICER TO SUBSCRIPTION OF STOCK AND PAY
MENT OF TEN PER CENT. Sec. 295, C. C. Before the Secretary of State issues to any such corporation a certificate of the filing of articles of incorporation, there must be filed in his office an affidavit of the president, secretary, or treasurer named in the articles, that the required amount of the capital stock thereof has been actually subscribed, and ten per cent thereof actually paid to a treasurer for the benefit of the corporation. En. March 21, 1872.
Signing fictitious name: Pen. Code, sec. 557.
A similar requirement was prescribed by railroad corporations by section 2 of the railroad act of 1861 (Stats. 1861, p. 607), post, Appendix,
The Affidavit must be read in connection with the articles of incorporation; and unsubstantial defects in the affidavit may be cured by statements in the articles. The language of the statute need not be employed, a literal compliance in such cases never being required. (Mokelumne Hill etc. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658; Ex parte S. V. W. W., 17 Cal, 136; 8. V. W. W. v. San Francisco, 22 Cal. 440; Thompson v. People, 23 Wend. 537; People 1. Stockton & V. R. R. Co., 45 Cal. 313, 13 Am. Rep. 178. To same effect: People v. Montecito Water Co., 97 Cal. 278, 33 Am. St. Rep. 173, 174, 32 Pac. 236. Note citation: 33 Am. St. Rep. 178. See notes to sections 293, 294.)
TO FILE ARTICLES WITH COUNTY CLERK AND SECRETARY
OF STATE, AND RECEIVE CERTIFICATE-TERM OF EXISTENCE. Sec. 296, C. C. Upon filing the articles of incorporation in the office of the county clerk of the county in which the principal business of the company is to be transacted, and a copy thereof certified by the county clerk with the Secretary of State, and the affidavit mentioned in the last section where such affidavit is required, the Secretary of State must issue to the corporation, over the great seal of the state, a certificate that a copy of the articles containing the required statement of facts has been filed in his office, and thereupon the persons signing the articles and their associates and successors shall be a body politic and corporate by the name stated in the certificate, and for the term of fifty years, unless it is, in the articles of incorporation, otherwise stated, or in this code otherwise specially provided; provided, however, that the Secretary of State shall not file any copy of the copy of any articles, or issue any certificate of incorporation to any corporation, which articles set forth the corporate name of any corporation heretofore organized in this state, or file any copy of any articles, or issue any certificate of incorporation to any corporation existing at the time of filing said articles, which articles set forth a name so closely resembling the name of such corporation as will tend to deceive. En. March 21, 1872. Amd. 1873-74, 199; 1901, 629.
Filing copy of copy of articles in different counties: Sec. 299, C. C.
The original section was as follows: "Sec. 296. Upon the filing of the articles of incorporation, in the office of the county clerk of
the county in which the business of the company is to be transacted, and a copy thereof with the Secretary of State, the Secretary of State must issue to the corporation, over the great seal of the state, a certificate that such articles, containing the required statement of facts, have been filed in his office; and thereafter the persons signing the same, and their associates and assigns, are a body politic and corporate, by the name stated in the certificate, and for the term of fifty years, unless it is in the articles of incorporation otherwise stated, or in this part otherwise specially provided.”
The amendment of 1873-74 made the section read as now down to the proviso; the proviso was added by the amendment of 1901.
As the law stood prior to the adoption of the Civil Code, corporations had a legal existence from the date of filing the certificate of incorporation in the county clerk's office. (Mokelumne Hill Mining Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658.)
Fresno Canal etc. Co. v. Warner, 72 Cal. 382, 14 Pac. 37; Wickersham v. Brittan, 93 Cal. 39, 28 Pac. 792, 29 Pac. 51; Martin v. Teetz, 102 Cal. 63, 41 Am. St. Rep. 151, 36 Pac. 368; Calif. S. & L. Society v. Harris, 111 Cal. 135, 43 Pac. 525; People v. G. G. Lodge No. 6, 128 Cal. 267, 60 Pac. 865; Wall v. Mines, 130 Cal. 38, 62 Pac. 386.
Filing of Articles.- A failure to file articles of incorporation in the clerk's office of the county where the principal place of business is prevents a corporation from being a corporation de jure. (Martin v. Deetz, 102 Cal. 55, 41 Am. St. Rep. 151, 36 Pac. 368.)
But where articles of incorporation were delivered to a county clerk, who was ex-officio recorder, and who erroneously marked them as filed in the recorder's office, and, upon the filing of a duplicate thereof, with the Secretary of State, a certificate of incorporation was issued by him, the law was substantially complied with, and the legality of its organization cannot be collaterally attacked. (San Diego Gas Co. v. Frame, 137 Cal. 441, 70 Pac. 295.).
The articles of incorporation must be filed with the county clerk, and a certified copy thereof with the Secretary of State, be. fore a corporation can in fact become a body politic and corporate. After this is done, the corporation comes into existence. (People v. G. G. Lodge, 128 Cal. 262, 60 Pac. 865.)
Issuance of Certificate.- The Secretary of State has no authority to issue a certificate of incorporation without first receiving a copy of the articles of incorporation, certified by the county clerk, show. ing that the steps prerequisite to the assumption of corporate powers have been complied with. The certificate is requisite to give the in. corporation a de jure existence. A second certificate merely reciting that articles of incorporation were filed in office of Secretary of State, on a certain date, on which a certificate of incorporation thereof was issued by him, is not admissible proof of the first cer tificate, and fails to prove a compliance with the law. (Wall v. Mines, 130 Cal. 27, 62 Pac. 386.)
Corporate Existence Begins When.- Prior to the code, it was held the filing of duplicate articles in the office of the Secretary of State is not necessary to establish corporate existence as against parties other than the state, and such failure can be objected to only by the state. A corporation exists from the date of filing their articles in county clerk's office. (Mok. etc. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658. To same effect: Humphreys v. Mooney, 5 Colo. 295; Granby Min. Co. v. Richards, 95 Mo. 111, 8 S. W. 246; Hyde v. Doe, 4 Saw. 135, Fed. Cas. No. 6969; Cross v. Pinckneyville Man. Co., 17 Ill. 54; S. V. W. W. v. San Francisco, 22 Cal. 440-441. Note citation: 79 Am. Dec. 437.)
This holding was announced under section 123 of the act of 1850 (Stats. 1850, p. 366), which declared the persons executing the art. icles a body corporate “when the certificate shall be filed.” The language of the code contemplates the filing of both the original articles and the duplicate, and thereupon the persons signing the articles
... shall be a body politic and corporate," etc. How far this change in the statute would change the rule announced in the Woodbury case has not been determined. [See, however, People v. G. G. Lodge, 128 Cal. 262, 60 Pac. 865; Wall v. Mines, 130 Cal. 38, 62 Pac. 386.-Eds.]
“The persons signing the articles, and their associates and successors” are by the statute declared to be a "body politic and corporate." These persons and not the directors constitute the corporation. (Wickersham v. Brittan, 93 Cal. 39, 28 Pac. 792, 29 Pac. 51.)
The Corporate Name.- Where an individual would not be allowed to use the trade name under the same circumstances, a corporation may not take it as a part of its corporate name, and thus by indirection accomplish ends otherwise forbidden by law. (Hainque v. Cyclops Iron Works, 136 Cal. 351, 68 Pac. 1014.)
But persons entitled to use a trade name may incorporate and embody the trade name in the name of the corporation, and such corporation may sue to enjoin an infringement of the trade name. The use of the trade name for two years prior to the incorporation in the same firm is no fraud on the public. (Nolan Bros. Shoe Co. v. Nolan, 131 Cal. 271, 82 Am. St. Rep. 63 Pac. 480.)