LAWS OF THE STATE OF CALIFORNIA,

FOR THE FORMATION, GOVERNMENT, CONTROL, AND EXISTENCE OF BUILDING AND LOAN ASSOCIATIONS.

Compiled by WICKLIFFE MATTHEWS, Esq., Attorney-at-Law, and Secretary of the Commonwealth Mutual Building and Loan Association, of San Francisco, 402 Montgomery Street, rooms 18 and 19, San Francisco, California.

1. Corporation Defined.

A corporation is a creature of the law, having certain powers and duties of a natural person. Being created by the law, it may continue for any length of time which the law prescribes." (Section 283, Civil Code.)

2. A Building and Loan Association is a Private Corporation.

Private corporations may be formed by the voluntary association of any five or more persons in the manner prescribed in this article. A majority of such persons must be residents of this State. (Section 285, Civil Code.)

3. Name of Instrument Creating Corporation.

The instrument by which a private corporation is formed is called "Articles of Incorporation." (Section 289, Civil Code.)

4. Articles of Incorporation-What to Contain.

Articles of incorporation must be prepared, setting forth:
First-The name of the incorporation."

Second-The purpose for which it is framed.

Third-The place where its principal business is to be transacted." Fourth-The term for which it is to exist, not exceeding fifty years. Fifth-The number of its Directors or Trustees, which shall not be less than five nor more than eleven, and the names and residences of those

a The law limits the time to fifty years.

In all Building and Loan Associations organized after the 31st day of March, 1891, the words "Mutual Building and Loan Association" shall form part of the name of every such corporation. (Abstract from Section 633, Civil Code, and from the Act approved March 31, 1891.)

Of Building and Loan Associations organized prior to March 31, 1891, it is not necessary that the words "Mutual Building and Loan Association" shall form part of the name of such corporation.

In Building and Loan Associations organized after March 31, 1891, the articles of incorporation, in setting forth the purposes for which the corporation is formed [framed] shall state that it is formed to encourage industry, frugality, home building, and savings among the stockholders; the accumulation of savings; the loaning to its stockholders of the funds so accumulated, with the profits and earnings; and the repayment to each stockholder of his savings and profits when they have accumulated to a certain sum, or at any time when he shall desire the same, as provided in 'the by-laws or when the corporation shall desire to repay the same; and shall also state that it is formed for all the purposes specified in this title (Title XVI, Part IV, Division 1st, of the Civil Code). In Building and Loan Associations incorporated prior to March 31, 1891, it was not necessary that all of the foregoing should have been inserted.

In incorporating under a general law, a strict compliance with all the requirements of the statutes in matters of detail is not essential, and the proceedings will not be invalid for slight defects or omissions. (S. V. Waterworks vs. San Francisco, 22 Cal. 434;

who are appointed for the first year. * * And provided also, That any time during the existence of corporations for profit, the number of Directors may be increased or diminished by a majority of the stockholders of the corporation to any number not exceeding eleven nor less. than five, who must be members of the corporation, whereupon a certificate stating the number of Directors must be filed as provided for in Section 296, for the filing of the original articles of incorporation.

Sixth-The amount of its capital stock; and the number of shares into which it is divided.

b

Seventh-If there is a capital stock, the amount actually subscribed, and by whom. (Section 290, Civil Code.)

5. Articles of Incorporation to be Subscribed and Acknowledged.

The articles of incorporation must be subscribed by five or more persons, a majority of whom must be residents of this State, and acknowledged by each before some officer authorized to take and certify acknowledgments of conveyances of real property. (Section 292, Civil Code.)

6. Articles of Incorporation to be Filed with County Clerk and Secretary of State.

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, 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. (Abstract from Section 296, Civil Code.)

7. Certified Copy of Articles of Incorporation Prima Facie Evidence.

A copy of any articles of incorporation filed in pursuance of this chapter, and certified by the Secretary of State, must be received in all Ex Parte S. V. W. W., 17 Cal. 132; People vs. Stockton Railroad Company, 45 Cal. 306; Roman Catholic Orphan Asylum vs. Abrams, 49 Cal. 455.) But a substantial compliance with the requirements of the Act by the persons seeking to derive the benefits of incorporation must be observed, and the omission of essential steps will be fatal. (Mokelumne Hill Manufacturing Company vs. Woodberry, 14 Cal. 424; Harris vs. McGregor, 29 Cal. 124; People vs. Selfridge, 52 Cal. 331.) The omission to state the place where its principal place of business is to be transacted is fatal. (Harris vs. McGregor, 29 Cal. 124.)

a In Building and Loan Association corporations organized prior to March 31, 1891, the capital stock could be placed at any sum that was desired or named in the articles of incorporation. Those organized after the 31st day of March, 1891, cannot have a capital stock exceeding $2,000,000.

b Building and Loan Association corporations organized prior to the 31st day of March, 1891, could fix the value of their shares in any sum not exceeding $200 each, payable in periodical installments. (Section 639, Civil Code, amendment approved March 30, 1874. Amendments 1873-4, page 217; took effect July 1, 1874.)

Those organized after March 31, 1891, can only fix their shares of the par value of $100 or $200 each, as shall be provided in the articles of incorporation, and fixed by the by-laws. (Section 634, Civil Code, and the amendments of 1891, page 253; approved March 31, 1891.)

The statutes in regard to filing the articles of incorporation must be followed, in order to create the corporate existence of the association. (Bigelow vs. Gregory, 73 Illinois, 197.)

the Courts and other places as prima facie evidence of the facts therein. stated. (Section 297, Civil Code.)

8. Building and Loan Associations should file Certified Copies of their Articles of Incorporation, duly Certified thereto by the Secretary of State, in the Office of the County Clerk in each County in the State in which they hold any Property.

No corporation hereafter formed shall purchase, locate, or hold any property in any county of this State without filing a copy of the copy of its articles of incorporation, filed in the office of the Secretary of State, duly certified by such Secretary of State, in the office of the County Clerk of the county in which such property is situated, within sixty days after such purchase or location is made.

Every corporation now in existence, whether formed under the provisions of this Code or not, must, within ninety days after the passage of this section, file such certified copy of the copy of its articles of incorporation in the office of the County Clerk of every county in this State in which it holds any property (except the county where the original articles of incorporation are filed); and if any corporation hereafter acquires any property in any county other than that in which it now holds property, it must, within ninety days thereafter, file with the Clerk of such county such certified copy of the copy of its articles of incorporation. The copies so filed with the several County Clerks, and certified copies thereof, shall have the same force and effect in evidence as would the original.

Any corporation failing to comply with the provisions of this section. shall not maintain nor defend any action or proceeding in relation to such property, its rents, issues, or profits, until such articles of incorporation, and such certified copy of its articles of incorporation, and such certified copy of the copy of its articles of incorporation, shall be filed at the places directed by the general law and this section; provided, that all corporations shall be liable in damages for any and all loss that may arise by the failure of such corporation to perform any of the foregoing duties within the time mentioned in this section; and provided further, that the said damages may be recovered in an action brought in any Court of this State of competent jurisdiction, by any party or parties suffering the same. (Section 299, Civil Code.)

9. Adoption of By-Laws-When, How, and by Whom.

Every corporation, under this title, must, within one month after filing articles of incorporation, adopt a code of by-laws for its government, not inconsistent with the Constitution and laws of this State. The assent of stockholders representing a majority of all the subscribed capital stock, or a majority of the members, if there be no capital stock, is necessary to adopt by-laws, if they are adopted, at a meeting called for that purpose; and in the event of such meeting being called, two weeks' notice of the same by advertisement in some newspaper published in the county in which the principal place of business of the corporation is located, or if none is published therein, then in a paper published in an adjoining county, must be given by the order of the Acting President.

The written assent of the holders of two thirds of the stock, or of two thirds of the members, if there be no capital stock, shall be

effectual to adopt a code of by-laws, without a meeting for that purpose." (Section 301, Civil Code.)

10. Directors-Election thereof.

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. (Section 302, Civil Code.)

11. By-Laws-For What May Provide.

A corporation may, by its by-laws, where no other provision is specially made, provide for:

First-The time, place, and manner of calling and conducting its meetings, and may dispense with notice of all regular meetings of stockholders or Directors.

Second-The number of stockholders or members constituting a

quorum.

Third-The mode of voting by proxy.

Fourth-The qualifications and duties of Directors; also, the time. of their annual election, and the mode and manner of giving notice thereof.

Fifth-The compensation and duties of officers.

Sixth-The manner of election and tenure of office of all officers other than the Directors.

Seventh-Suitable penalties for the violation of by-laws, not exceeding in any case $100, for any offense; and

Eighth-The newspaper in which all notices of the meeting 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; if none is published therein, then in an adjoining county. (Section 303, Civil Code.)

By-laws must be reasonable and not oppressive or vexatious. (St. Luke's Church vs. Matthews, 6 Am. Dec. 619; Leggett vs. N. J. M., & B. Company, 23 Id. 728; Taylor vs. Griswold, 27 Id. 33; Kent vs. Quicksilver Mining Company, 78′ N. Y. 182-183; Carlan vs. Father Matthews Society, 3 Daly, 20.)

By-laws must be prospective (not retroactive). They cannot impair vested rights. (People vs. Crocker, 9 Cal. 112; Howard vs. Savannah T. U. P., Charlt. 173; Pulford vs. Fire Department, 31st Mich. 458; Kent vs. Quicksilver Mining Company, 78 New York, 159-183.)

A by-law good in part and bad in part will be sustained as to that which is good, if separable from that which is objectionable. (Amesbury vs. Bowditch Ins. Company, 6 Gray, 596; Rogers vs. Jones, 1st Wend. 237; Shelton vs. Mayor, 30 Ala. 540.)

A by-law void as to strangers and non-assenting members, may be good as a contract as to assenting members. (Slee vs. Bloom, 19 Johns. 456; Cooper vs. Frederick, 9th Ala. 738.)

See No. 9, post.

Under Subdivision 7, of Section 303, above quoted, Building and Loan Associations could unquestionably provide for fines for non-payment of dues, interest, or premium.