paper published in an adjoining county. In the adoption of the by-laws, each stockholder has as many votes as he holds shares of stock. If there is no capital stock, each member has one vote. A majority of all the subscribed capital stock, or of the members, if there is no capital stock, is necessary to adopt the by-laws or any of them." Section Cited. McFadden v. Board of Supervisors of Los Angeles, 74 Cal. 574, 16 Pac. 397; Market St. Ry. Co. v. Hellman, 109 Cal. 588, 42 Pac. 225; Vercoutere v. Golden State L. Co., 116 Cal. 414, 415, 48 Pac. 375; Wells v. Black, 117 Cal. 162, 59 Am. St. Rep. 162, 48 Pac. 1090. Annotation. By-laws Defined.-By-laws are the body of rules laid down for the government of a corporation, its officers and stockholders, in the conduct of its affairs. (Wells v. Black, 117 Cal. 161, 59 Am. St. Rep. 162, 48 Pac. 1090.) Stockholders Bound by By-laws.—A stockholder is bound by the articles of incorporation and the by-laws adopted under this section, whether he has signed them or not. (McFadden v. Los Angeles County, 74 Cal. 574, 16 Pac. 397.) A corporation organized for the purpose of supplying water for the use of the owners or occupants of land within a particular district may adopt by-laws limiting the right to use the water of the corporation exclusively to its own stockholders on land owned by them. (McFadden v. Board of Supervisors, 74 Cal. 571, 16 Pac. 397. To same effect: Loud v. Pomona etc. Co., 153 U. S. 583, 14 Sup. Ct. Rep. 928. Distinguished: Combs v. Ditch Co., 31 Am. St. Rep. 279.) By-laws-Adoption and Effect. In adopting by-laws the assent of stockholders representing a majority of all the subscribed capital' stock is necessary. (Market Street Ry. v. Hellman, 109 Cal. 588, 42 Pac. 225.) The real owner of stock may vote it, although it stands on the books in another's name. (People v. Hill, 16 Cal. 113. To same effect: Smith v. S. F. etc. Co., 115 Cal. 591, 56 Am. St. Rep. 123, 47 Pac. 582.) The rule of stockholders' meetings is that the majority governs; and every stockholder contracts that such shall be the rule. (San Diego etc. Co. v. Pacific Beach Co., 112 Cal. 53, 44 Pac. 333.) Any regulation or rule that a corporation may adopt under the form of a by-law, which contravenes the provisions of any existing law is invalid and has none of the elements of a by-law. Held, accordingly, a corporation organized under title 1, part IV of this code, being forbidden to withdraw any part of its capital stock, except upon its dissolution, cannot make a valid by-law providing that a stockholder may surrender his stock and withdraw from the corporation by giving sixty days' notice, and that he may thereupon be entitled to receive the amount paid in upon the stock. (Vercoutere v. Land Co., 116 Cal. 410, 48 Pac. 375.) Where stockholders signed by-laws before organization of the company, such signatures constitute an agreement which the corporation thereafter formed in pursuance thereof can enforce; but the by-laws so agreed upon are not adopted regularly pursuant to this section, which provides for the adoption of by-laws after the organization of the corporation. (Vercoutere v. Land Co., 116 Cal. 410, 48 Pac. 375. Corporation has no power to pass retrospective by-laws. (People v. Crockett, 9 Cal. 112. Note citations: 57 Am. St. Rep. 388; 63 Am. Dec. 121; 85 Am. Dec. 619-621; 43 Am. St. Rep. 153, 154, 156.) A corporation may repeal or waive a by-law and an acquiescence by shareholders in a course of action contrary to a by-law is a waiver of the by-law, so as not to affect the rights of persons dealing with the corporation in good faith, if they had no actual notice of the by-law, even though they be stockholders. (Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 28 Pac. 1049.) Old by-laws not mentioned or referred to in amended by-laws are not continued in force. (Murphy v. Pacific Bank, 130 Cal. 542, 62 Pac. 1059.) A by-law adopted by a savings bank, whereby the liability of the stockholders was intended to be limited, is void as being in contravention of the laws of the state, and, although printed in the pass-book of each depositor, it carried no notice to and had no binding force upon depositors. (Wells v. Black, 117 Cal. 157, 59 Am. St. Rep. 162, 48 Pac. 1090.) By-laws which define the duties of officers of the corporation go into the contract of the sureties on their official bonds, and constitute a part of it. They must be considered as having been inserted in the bond. (Humboldt S. & L. Soc. v. Wennerhold, 81 Cal. 528, 22 Pac. 920. To same effect: San Pedro etc. Co. v. Reynolds, 121 Cal. 79, 53 Pac. 410, as to contract of employment.) A transfer of shares of stock of a corporation by the owner to a bona fide purchaser for value without notice vests the title in such purchaser free of equities between the seller and the corporation, though provided for by a by-law of the corporation. The existence of such a by-law is not enough to charge the purchaser with notice. (Anglo-Cal. Bank v. Grangers' Bank, 63 Cal. 359. Distinguished: Jennings v. Bank, 79 Cal. 331, 12 Am. St. Rep. 51, 21 Fac. 852. Note citations. 85 Am. Dec. 621; 6 Am. St. Rep. 839; 43 Am. St. Rep. 156; 57 Am. St. Rep. 393. See, also, sec. 324, C. C., and note.) Corporation Laws-9 A corporation cannot create or declare a lien upon its stock by a by-law, nor refuse to permit a transfer until the indebtedness of the stockholder to the corporation be paid. (Anglo-Cal. Bank V. Grangers' Bank, 63 Cal. 359. Citing Bullard v. Bank, 18 Wall. 589, and Driscoll v. C. M. Co., 59 N. Y. 96.) DIRECTORS, ELECTION OF, ETC. Sec. 302, C. C. The directors of a corporation must be elected annually by the stockholders or members, and if no provision is made in the by-laws for the time of election, the election must be held on the first Tuesday in June. Notice of such election must be given, and the right to vote determined as prescribed in section 301. En. March 21, 1872. Postponing election: Post, sec. 314, C. C. Section Cited. Wickersham v. Brittan, 93 Cal. 36, 28 Pac. 792, 29 Pac. 51. Annotation. Notice of Meeting.-Notice of day, hour and place of annual meeting of stockholders must be given to elect a board of directors, or such meeting cannot be legally held, unless the stockholders are all present, and consenting either in person or by proxy. (San Buena ventura Mfg. Co. v. Vassault, 50 Cal. 534. To same effect: Thompson v. Williams, 76 Cal. 155, 9 Am. St. Rep. 189, 18 Pac. 153; Smith v. Dorn, 96 Cal. 83, 30 Pac. 1024, with respect to directors' meetings.) Fact that by-laws fix day upon which such meeting shall be held is not sufficient notice of time and place of meeting. (Id.) Contest of Election.-An election of directors, made under this section, may be contested by a party aggrieved, in accordance with section 315, Civil Code. (Wickersham v. Brittan, 93 Cal. 34, 28 Pac. 792, 29 Pac. 51; and see sec. 315, C. C., and note.) BY-LAWS MAY PROVIDE FOR WHAT. Sec. 303, C. C. A corporation may, by its by-laws, where no other provision is specially made, provide for: 1. The time, place, and manner of calling and conducting its meetings, and may dispense with notice of all regular meetings of stockholders or directors. 2. The number of stockholders or members constituting a quorum. 3. The mode of voting by proxy. 4. The qualifications and duties of directors, and also the time of their annual election, and the mode and manner of giving notice thereof. 5. The compensation and duties of officers. 6. The manner of election and tenure of office of all officers other than the directors; and 7. Suitable penalties for violations of by-laws, not exceeding, in any case, one hundred dollars for any one offense. 8. The newspaper in which all notices of the meetings of stockholders or board of directors, notice of which is required, shall be published, which must be some newspaper published in the county where the principal place of business of the corporation is located, or if none is published therein, then in a newspaper published in an adjoining county; provided, that when the by-laws prescribe the newspaper in which said publication shall be made, if from any cause, at the time any publication is desired to be made, the publication of such newspaper shall have ceased, the board of directors may, by an order entered on the records of the corporation, direct the publication to be made in some other newspaper published in the county, or if none is published therein, then in an adjoining county. En. March 21, 1872. Amd. 1873-74, 201; 1889, 365. By-laws of: Post, secs. 305, 308, 323, 344, 599, C. C. Nature and effect of by-laws: See ante, sec. 201, C. C. Legislative History. This section is similar to section 7 of the incorporation act of 1850, page 347. The section as amended in 1873-74 did not contain the eighth subdivision above. Subdivision 1 ended with word "meetings," and subdivision 4 did not contain the words "the qualifications and duties of directors, and also." The original section as enacted in 1872, contained nine subdivisions, the first of which is the same as in the amended section of 1873-74. The second was as follows: "2. The number of stockholders or members, or the quantity of stock constituting a quorum." The third was as follows: "3. The number of shares which entitles the stockholders respectively to one or more votes." The fourth was the same as the third above. The fifth was the same as the fourth as amended in 1873-74, with the words "and place" after the word "time." The sixth was as follows: "6. The mode of selling shares for the nonpayment of assessments or installments." The seventh was the same as the fifth above. The eighth read: "8. The terms of office of subordinate officers." The ninth was the same as the seventh above. The number of shares a stockholder votes is now regulated by section 307 of the Civil Code; the place of meeting for election of directors is fixed by section 319 of the Civil Code; the sale of shares for delinquent assessments is regulated by sections 331-349, inclusive, of the Civil Code. Section Cited. Wickersham v. Brittan, 93 Cal. 38, 39, 28 Pac. 792, 29 Pac. 51; Smith v. Dorn, 96 Cal. 82, 30 Pac. 1024; People's Bank v. Superior Court, 104 Cal. 653, 43 Am. St. Rep. 147, 38 Pac. 452; Market Ry. Co. v. Hellman, 109 Cal. 599, 42 Pac. 225. Annotation. Subd. 1. Meeting-Notice of. In the absence of a different provision in the charter or by-laws of a corporation, formed under the general laws of this state, a special meeting of the trustees must be called by giving personal notice to each member of the board. (Harding v. Vandewater, 40 Cal. 77. Distinguished: Granger v. 0. E. M. & M. Co., 59 Cal. 682; Stockton etc. Works v. Houser, 109 Cal. 11, 41 Pac. 809.) And the fact that by-laws fix a time, upon which annual meeting of stockholders shall be held, is not sufficient notice of time and place of such meeting. (San Buenaventura Mfg. Co. v. Vassault, 50 Cal. 534.) So, also, where a regular meeting of directors of a corporation, from which some members are absent, is adjourned to a future day, the hour of which is not fixed, the meeting held on the day to which the adjournment was had is a special meeting of which notice is required to be given to the absentees at the regular meeting. If no such notice be given an assessment levied at the adjourned meeting, in the absence of former absentees, is invalid. (Thompson v. Williams, 76 Cal. 153, 9 Am. St. Rep. 187, 18 Pac. 153.) A recitation in a resolution, passed at a special meeting of board of directors, that notice had been served on each director, is insufficient to sustain action of board taken at such meeting. In the absence of proof to the contrary, notice of meeting will be presunred, though fact of giving such notice is not recited in record of meeting. (Granger v. M. & M. Co., 59 Cal. 678.) If rules of church require trustees to be elected on particular day in the year, after notice being given on preceding Sunday by pastor, board elected on different day without notice are not trustees de jure. (Zion M. E. Church v. Hillery, 51 Cal. 155.) |