[b] By section 288 of the Civil Code the provisions of the act of April 22, 1850, relating to corporations were continued in force as to. corporations created under them.-Estate of Eastman, 60 Cal. 308.

[c] Corporations can only be formed under general laws.-California Central Ry. Co. v. Hooper, 76 Cal. 406, 18 Pac. 599.

[d] Provisions of Civil Code, regarding organization of corporations apply to all corporations.-West v. Crawford, 80 Cal. 30, 21 Pac. 1123.

[e] Legislature cannot confer benefit or impose duty on one or more corporations formed under general law not conferred or imposed on all other corporations formed under same law. People v. Central etc. R. R. Co., 83 Cal. 413, 23 Pac. 303.

[f] Corporation organized for the purpose of transacting such real business as natural person can is not organized under 639 of the Civil Code, but under general provisions of title 1, part 4 of the Civil Code.-Vercoutere v. Golden State L. Co., 116 Cal. 412, 48 Pac. 375.

[g] General operation of statute is not affected if it gives to all corporations of its kind or class opportunity to adopt either of two different provisions.-Murphy v. Pacific Bank, 119 Cal. 341, 51 Pac. 317.

FOR AUTHORITIES FROM OTHER STATES:

10 Cyc. 219-235; 12 Cent. Dig., cols. 3661, §§ 16-27; cols. 78-110, §§ 48-69.

§ 15. What Constitutes Corporate Charter. Amendment or repeal of charter. See post, § 58. Charters of municipal corporations. See Municipal Corporations, §§ 6-8.

[a] In this state the charter is the statute or statutes granting and defining the powers of the corporation under which it is constituted and exists, together with the instruments required to be executed by the provisions of such statute or statutes. These are sometimes called the constating instruments. Such franchises are legal estates, not mere naked powers, and are powers coupled with an interest, which vest in the corporation by virtue of its charter or constating instruments.-Spring Valley W. W. v. Schottler, 62 Cal. 69.

FOR AUTHORITIES FROM OTHER STATES:

10 Cyc. 201-205; 12 Cent. Dig., cols. 55-77, §§ 27-47.

§ 16. Acceptance of Charter.

[a] Where corporation is organized under a general law, no acceptance of charter is requisite. Spring Valley W. W. v. City of San Francisco, 22 Cal. 434.

FOR AUTHORITIES FROM OTHER STATES:

10 Cyc. 203-205; 12 Cent. Dig., cols. 6976, §§ 39-45.

§ 17. Construction of Charter.

[a] Charters should be strictly constructed, and nothing allowed by implication.-Bartram v. Central Turnpike Co., 25 Cal. 283.

[b] Charter must be reasonably construed so as to promote its object.-Vandall v. South etc. Co., 40 Cal. 89.

[c] Where a corporation is formed "to buy, improve, lease or sell, and otherwise dispose of real estate," etc., the term "improve" includes the performance of any act, whether on or off the land, the direct and proximate tendency of which is to benefit the property or enhance its value.-Vandall v. South San Francisco Dock Co., 40 Cal. 83.

[d] No infallible rule can be laid down defining accurately the point at which the benefit to be derived from a proposed work would cease to be direct and proximate, but each case must be determined on its own circumstances.-Vandall v. South San Francisco Dock Co., 40 Cal. 83.

[e] Ambiguous words in the charter of a corporation are to be construed most strongly against the corporation.-Spring Valley W. W. v. City of San Francisco, 52 Cal. 111.

§ 18. Articles or Certificates of Incorporation.

[a] Where certificate of incorporation states that San Francisco is "the place of business,'' instead of "the principal place of business,' it is a mere technical error, not invalidating the charter. Spring Valley W. W., Ex parte, 17 Cal. 132.

[b] A statute requiring a certificate of incorporation to state the names of the city or town and county in which the principal place of business is to be located is not complied with by a certificate which states that the operations of the corporation are to be carried on in the county of Calaveras, state of California.-Harris v. McGregor, 29 Cal.

124.

[c] Under act of May 20, 1861 (Stats. 1861, p. 607), providing that there shall be annexed to the articles of incorporation an affidavit setting forth in substance that the stock has been subscribed, and that ten per cent in cash thereon has been actually and in good faith a certificate of incorporation complypaid," ing substantially with the statute is not void merely because the affidavit omits the words "'in good faith" in that portion of the affidavit relating to the payment of ten per cent. People v. Stockton etc. R. Co., 45 Cal. 306, 13 Am. Rep. 178.

[d] Under Statutes of 1850, pages 273, 274, authorizing the formation of moral, beneficial, literary, or scientific associations by such methods as their rules or regulations may direct, on the appointment of not less than three nor more than nine trustees to take charge of the estate and property belonging thereto, a certificate of incorporation, showing the appointment of nine trustees, is sufficient to bring such corporation into existence, though it does not show that the corporation had previously organized, adopted rules and

regulations, and that the trustees were chosen in accordance with such rules and regulations. Roman Catholic Orphan Asylum v. Abrams, 49 Cal. 455.

[e] If the articles of incorporation do not state that a majority of the members of the association were present and voted at the election of directors, the certificate does not constitute the association a corporation; nor can evidence be admitted that a majority were present and voted.-People v. Selfridge, 52 Cal. 331.

[f] Defective certificate of incorporation is not proof of corporation in esse.-McCallon v. Hibernia etc. Soc., 70 Cal. 168, 12 Pac. 114.

[g] Certificate or articles of incorporation not conforming to statutory requirements is ineffectual.-McCallon v. Hibernia etc. Soc., 70 Cal. 167, 12 Pac. 114.

[h] The articles of incorporation of a manufacturing company formed to own and run a sawmill and to manufacture lumber and articles made of wood, are not vitiated by including therein power to operate, construct, maintain, and deal in railroads, tramways, and rights of way, it being frequently necessary in such business to have tramways and railroads as part of the manufacturing plant though such a corporation could not exercise the right of eminent domain to acquire rights of way. People ex rel. Loy v. Mount Shasta Mfg. Co., 107 Cal. 256, 40 Pac. 391.

[i] Corporation has no de jure existence until the Secretary of State has issued the certificate required by Civil Code, section 296.-— Wall v. Mines, 130 Cal. 27, 62 Pac. 386. § 19.

Signature and Acknowledgment.

[a] The certificate of incorporation of a company claiming in good faith to be a corporation under the laws of this state, and doing business as such corporation, is admissible in evidence in a private suit to which the company is a party, as evidence of its right to act as a corporation, although it is not acknowledged by all the corporators.-Dannebroge Mining Co. v. Allment, 26 Cal. 286.

[b] Stockholder is bound by articles of corporation, whether he has signed them or not. McFadden v. Los Angeles County, 74 Cal. 571, 16 Pac. 397.

[e] Civil Code, section 292, provides that articles of incorporation must be subscribed by five or more persons, and acknowledged by each. Held, in an action by the state to forfeit a charter, that a complaint showing that the articles of incorporation were signed by five persons, and acknowledged by four only, stated a cause of action.-People v. Montecito Water Co., 97 Cal. 276, 33 Am. St. Rep. 172, 32 Pac. 236.

[d] It is not necessary to the validity of the corporation or to the subscribers who agreed to its formation becoming stockholders, that they should all sign the articles of incorporation.-San Joaquin Land etc. Co. v. Beecher, 101 Cal. 70, 35 Pac. 349.

[e] The articles of incorporation of benevolent or social associations organized without profit under sections 593 and 594 of the Civil Code must be subscribed and acknowledged by at least five persons, in accordance with section 292 of the Civil Code, in addition to the verification required by section 594 of that code. People ex rel. Weatherly v. Golden Gate Lodge, 128 Cal. 257, 60 Pac. 865.

§ 20.

Authentication and Verification.

[a] Effect must be given so far as possible to the consistent provisions of the Civil Code relating to the formation of corporations; and the fact that section 594 provides for the contents of articles of incorporation of the associations mentioned in section 593, in addition to the requirements of section 290, and further provides a mode of verification of such articles, cannot be construed as providing a complete scheme for their authentication, or as dispensing with the additional authentication required by section 292, which is not inconsistent with sections 290, 593, and 594. People ex rel. v. Golden Gate Lodge, 128 Cal. 257, 60 Pac. 865.

[b] Section 290 of the Civil Code applies to associations organized for benevolent and social purposes, and hence such a corporation, the articles of which were verified by only two persons, was not duly organized.-People. v. Golden Gate Lodge, No. 6, Benevolent and Protective Order of Elks of United States of America, 128 Cal. 257, 60 Pac. 865.

[c] The verification required by Civil Code, section 594, requiring that the articles of incorporation of a benevolent association must set forth certain facts relating to the election of directors, "which facts must be verified by the officers conducting the same," is an essential prerequisite to the assumption of corporate powers by the association as a de jure corporation.-Wall v. Mines, 130 Cal. 27, 62 Pac. 386.

Necessity that foreign corporation file articles. See post, 479.

[a] The statute provides that a certificate of incorporation shall be filed with the county clerk, and a duplicate with the Secretary of State, and that when a certificate is filed the persons shall be a corporation. Held that, as to third persons, the filing in the clerk's office was all that was required.-Mokelumne Hill Canal etc. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658.

[b] That a duplicate certificate is not filed in the office of the Secretary of State on the organization of a corporation, as provided by the statute, is a matter between the corporation and the state, and not necessary to be shown, on the issue of corporation and incorporation, in suits against third persons.Mokelumne Hill Canal etc. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658.

[c] Where articles of incorporation state one county to be the principal place of business, and instead of being filed in that county,

as required by the statute, are filed in another county, the corporation does not become one de jure.-Martin v. Deetz, 102 Cal. 55, 41 Am. St. Rep. 151, 36 Pac. 368.

[d] Civil Code, section 296, requires every corporation to file its articles of incorporation in the county of its principal place of business, and a certified copy in the office of the Secretary of State. Section 299 provides that it shall file "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 clerk of any county in which it holds any property, and, further, that it shall not maintain or defend any action in relation to such property "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." Held, that a certified copy of the copy on file with the Secretary of State was the only one required by section 299 to be filed in counties because property was there situated.-California Savings etc. Soc. v. Harris, 111 Cal. 133, 43 Pac. 525. § 22.

Amended Articles.

[a] Where amended articles of incorporation of a railroad company have not been filed with the Secretary of State, the corporation can claim no rights thereunder as to the condemnation of a right of way.-Boca etc. R. Co. v. Sierra Valleys Ry. Co. (Cal. App.), 84 Pac. 298.

§ 23.

Proof of Issuance and Filing.

[a] When the fact of the issuance of a certificate of incorporation by the Secretary of State as directed by Civil Code, section 296, is in issue, the presumption "that official duty has been regularly performed," as declared by Code of Civil Procedure, section 1963, cannot dispense with legal proof that such certificate was issued.-Wall v. Mines, 130 Cal. 27, 62 Pac. 386.

[b] Articles of incorporation of plaintiff with filing marks thereon held evidence of proper filing of articles and due incorporation. Sierra Land etc. Co. v. Bricker (Cal. App.), 85 Pac. 665.

[a] A change of the laws of a mutual benefit association in regard to the payment of benefit certificates is not an amendment of its certificate of incorporation or articles of association, within the meaning of Civil Code, section 362, providing the method for making such amendments.-Bowie v. Grand Lodge of Legion of the West, 99 Cal. 392, 34 Pac. 103.

[b] Under Civil Code, section 362, amended articles of incorporation need not be acknowledged.-Boca etc. R. Co. v. Sierra Valleys Ry. Co. (Cal. App.), 84 Pac. 298.

§ 27.

Defective formation of corporation and its consequences: 33 Am. St. Rep. 176, note. See, also, 10 Cyc. 251; 12 Cent. Dig., cols. 110-166, §§ 70-96.

Property Rights of Organizers.

[a] Where certain persons associated themselves in a corporation for the development of land for irrigation purposes, and each conveyed land to the corporation, and two of them contracted to pay a third the difference in the proportionate value of the land conveyed by him, and no stock was ever issued in the corporation, it will be treated as a trustee for the associates in an action between them for an accounting, and its capital stock treated as partnership assets sold, and the proceeds distributed among them in proportion to the value of the property contributed by each.-Shorb v. Beaudry, 56 Cal.

446.

§ 28. Effect of Fraudulent Organization.

[a] A corporation fraudulently organized to avoid payment of mining royalties under a lease held liable for such royalties.-Higgins v. California Petroleum etc. Co., 147 Cal. 363, 81 Pac. 1070.

§ 29. Official Recognition of Invalid Corporation.

[a] Where the constitution of the state forbids corporations to be created except by general laws, the mere recognition of a corporate body, as an existing corporation, in acts of the legislature, cannot operate to give the organization validity.-Oroville etc. R. Co. v. Plumas County Supervisors, 37 Cal. 354.

FOR AUTHORITIES FROM OTHER STATES:

10 Cyc. 241; 12 Cent. Dig., cols. 115-118, $ 72.

§ 30. Unauthorized Assumption of Corporate Existence.

[a] Where persons knowingly and fraudulently assume or pretend to have a corporate existence, they may be held liable as individuals; but where they are acting in good faith, supposing that they are stockholders or members in a valid corporation, and where the corporation assumes to transact business for a number of years, and the assumed corporate existence is not challenged by the state, they cannot be held liable as individuals. The principle that shields the members from claims of persons dealing with the corporation under such circumstances is equally efficacious to protect the members as between themselves.Perkins v. Fish, 121 Cal. 317, 53 Pac. 901.

doing

[a] Preliminary organization, and business in good faith, is sufficient to make company a corporation de facto.-Stockton etc. Co. v. Stockton etc. Co., 45 Cal. 680.

[b] Body acting as corporation in good faith is de facto corporation.-Lakeside Ditch Co. v. Crane, 80 Cal. 186, 22 Pac. 76.

[c] Corporation de facto exists where a number of persons have organized and acted as a corporation; and where the directors named in the articles never met nor acted, and no stock is issued, nor by-laws passed, nor seal adopted, or any election held, nor any other corporate act done by an intended corporation, it is not a corporation de facto, and its right to exist as a corporation may be collaterally attacked in a private action.-Martin v. Deetz, 102 Cal. 55, 41 Am. St. Rep. 151, 36 Cal. 368.

§ 34. Proof of Existence.

[a] On an indictment for arson committed with intent to defraud an insurance company, testimony of a witness that he was acting as the agent of the company, and effected the insurance on the property and delivered the policy, which was received by the defendant, is sufficient to warrant a finding that the corporation had a de facto existence.-People v. Hughes, 29 Cal. 257.

[b] The de facto existence of a corporation may be proved by parol, but the proof must be of reputation, and not by a direct statement of a witness, so that a witness cannot testify that a certain bank is a corporation. Judgment (1898), 51 Pac. 945, reversed.People v. Dole, 122 Cal. 486, 68 Am. St. Rep. 50, 55 Pac. 581.

[c] In a suit involving the corporate existence of a benevolent association, evidence that there were no meetings of the members or trustees, no election of officers, no by-laws adopted, no certificate of shares issued, no seal adopted or used, no records kept, and that the institution was managed after the attempted incorporation as it had been before, was sufficient to sustain a finding that it was not a corporation de facto.-Wall v. Mines, 130 Cal. 27, 62 Pac. 386.

§ 35. Corporate Powers.

[a] Corporation de facto may legally do and perform every act and thing which the same entity could do or perform were it a de jure corporation. As to all the world, except the paramount authority under which it acts and from which it receives its charter, it occupies the same position as though in all respects valid, and even as against the state, except in direct proceedings to arrest its surpation of power, its acts are binding.-People v. La Rue, 67 Cal. 526, 8 Pac. 84.

§ 36. Rights in Franchise or Property.

[a] A de facto corporation can be deprived of its franchise or property only in a direct proceeding by the state.-Los Angeles Holiness Band v. Spires, 126 Cal. 541, 58 Pac. 1049.

§ 37. Attacking Validity of Incorporation— Persons Entitled.

Attack on existence of de jure corporation. See post, 51-53.

[a] Question whether a de facto corporation was organized strictly according to law can only be inquired into at the suit of the state, or on information by the attorney general.Rondell v. Fay, 32 Cal. 354.

[b] A mere trespasser cannot justify his entry on the ground that plaintiff was only corporation de facto, and was not de jure entitled to a franchise.-Stockton etc. R. Co. v. Stockton etc. R. Co., 45 Cal. 680.

FOR AUTHORITIES FROM OTHER STATES:

See 10 Cyc. 256-261, 1086-1088; 12 Cent.
Dig., cols. 122-136, §§ 77-80.

[a] The corporate existence of a corporation de facto cannot be inquired into collaterally. It is, as to all who contract with it, to be assumed to be a corporation de jure. The legality of its corporate existence may be inquired into by the state, but not by anyone else. And this is equally true where the corporation is formed under a general law as under a special charter.-Spring Valley W. W. v. City of San Francisco, 22 Cal. 434; Pacific Bank v. De Ro, 37 Cal. 538; Bakersfield Town Hall Assn. v. Chester, 55 Cal. 99.

[b] Right of company, doing business as a corporation de facto, and claiming in good faith to be a corporation under laws of state, to act as corporation, cannot be inquired into collaterally in a private action to which the corporation de facto may be a party.-Dannebroge Mining Co. v. Allment, 26 Cal. 286.

[c] Where it appears that plaintiff was recognized in the community as a corporation, and its records show that it was acting as such, and in all its dealings was so styled, and that it had held corporate meetings, and pursued corporate forms of action, sufficient is shown to bring it within Civil Code, section 358, which declares that "the due incorporation of any company claiming in good faith to be a corporation, and doing business as such, shall not be inquired into collaterally in any private suit to which such de facto corporation may be a party."-Lakeside Ditch Co. v. Crane, 30 Cal. 181, 22 Pac. 76.

[d] The validity of the incorporation of a body, which is de facto existing and acting, cannot be questioned collaterally, but only in a direct proceeding in behalf of the people.Dean v. Davis, 51 Cal. 406.

[e] Due incorporation of a company claiming in good faith to be a corporation under the laws of the state cannot be collaterally attacked, where the incorporators signed and acknowledged the articles stating the object, name, duration, amount of stock, place of business, and number of trustees, and attempted to file the articles, but by mistake filed them with the wrong officer, and took possession of its property, and did business named in the articles.-Bakersfield Town Hall Assn. v. Chester, 55 Cal. 98.

[f] Corporate existence of a plaintiff in ejectment may be established by evidence that it was a corporation de facto.-Oakland Gaslight Co. v. Dameron, 67 Cal. 663, 8 Pac. 595.

[g] Validity of the incorporation of a corporation which had properly signed and acknowledged its articles could not be collaterally attacked on the ground that the articles were erroneously filed with the county recorder, instead of the county clerk.-San Diego Gas Co. v. Frame, 137 Cal. 441, 70 Pac. 295.

D. PROMOTERS.

AGREEMENT TO FORM CORPORATION, § 39.
PROMOTER DEFINED, § 40.

FIDUCIARY RELATION TO CORPORATION, § 41.
PROMOTER'S AGENTS, § 42.

DUTY IN SELLING PROPERTY TO CORPORA.
TION, 43.
LIABILITY OF CORPORATION FOR PRO-
MOTER'S ACTS AND CONTRACTS, $ 44.
FRAUD AND RATIFICATION OR WAIVER
THEREOF, § 45.

§ 39. Agreement to Form Corporation. Contracts of promoters before incorporation. See post, 375.

[a] An agreement to form a corporation for certain specified purposes, and to make a part payment on the shares of stock subscribed by the contracting parties within a specified time after the filing of the articles of incorporation, to a person therein designated as agent, inures, with its advantages and rights, to the benefit of the corporation upon its formation, irrespective of any agreement, or want of agreement, to that effect, and notwithstanding it may contain special provisions for carrying its own terms into execution.-San Joaquin Land etc. Co. v. West, 94 Cal. 399, 29 Pac. 785.

[b] Where a street railroad franchise was granted to two persons, and they thereupon organized a corporation for the express purpose of constructing and operating a railroad under the franchise, and so declared in the articles of incorporation, an assignment of the franchise by said persons to the corporation was not necessary to vest the latter with any right relating thereto.-Santa Rosa City R. Co. v. Central St. Ry. Co., 38 Pac. 986. FOR AUTHORITIES FROM OTHER STATES:

Promoters of corporations and their relations thereto: 17 Am. St. Rep. 161, note.

Misrepresentations by promoters: 85 Am. St. Rep. 385, note; 46 C. C. A., note; 25 L. R. A. 90, note. See, also, 10 Cye. 262-280; 12 Cent. Dig., cols. 166-179, § 97-100.

§ 40. Promoter Defined.

[a] A promoter of a corporation is a person who, by his active endeavors, assists in procuring the formation of the company and the subscription of its shares, whether he afterward becomes connected with the company or not, and he is considered in law as occupying a fiduciary relation to the corporation and to its shareholders who subscribe upon the trust that the promoters will control the enterprise for the benefit of the company.-ExMission Land etc. Co. v. Flash, 97 Cal. 610, 32 Pac. 600.

§ 41. Fiduciary Relation to Corporation.

[a] Promoter of corporation who brings about its organization and aids in procuring subscriptions thereto is considered in law as occupying a fiduciary relationship toward the corporation and its stockholders.-Burbank v. Dennis, 101 Cal. 90, 35 Pac. 444.

§ 42. Promoter's Agents.

[a] Authority to agents of promoters of corporation to sell land of the promoters to the