Shaw v. Hollister Land & Improvement Co.

SHAW, J.

The plaintiffs have appealed from the judgment in the court below in favor of the defendants. Upon the trial, the Hon. M. T. Dooling, then judge of the superior court, delivered an opinion covering the questions involved upon this appeal. The discussion of the points involved in that opinion is satisfactory to us, and we adopt the portions thereof relating to the points on appeal as the opinion of this court. They are as follows:

“This action involves the validity of a sale, and the deeds made pursuant thereto by the defendant Hollister Land and Improvement Company, a corporation, to defendants E. E. Holbrook and James P. Mehlwood, of the real property familiarly known as the Hollister race track.

“The plaintiffs are stockholders of the defendant corporation, and bring this action in their own behalf and in behalf of said corporation and its other stockholders. The action is based upon section 361a of the Civil Code of this state,-the provisions of which are as follows:

“ ‘No sale, lease, assignment, transfer or conveyance of the business, franchise and property, as a whole, of any corporation now existing, or hereafter to be formed in this state, shall

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be valid without the consent of stockholders thereof, holding of record at least two-thirds of the issued capital stock of such corporation ; such consent to be either expressed in writing, executed and acknowledged by such stockholders, and attached to such sale, lease, assignment, transfer or conveyance, or by a vote at a stockholders’ meeting of such corporation called for that purpose; but with such assent, so expressed, such sale, lease, assignment, transfer or conveyance shall be valid; provided, however, that nothing herein contained shall be construed to limit the power of the directors Of such corporation to make sales, leases, assignments, transfers or conveyances of corporate property other than those hereinabove set forth. ’

“It is an established fact that stockholders holding two-thirds of the capital stock of the defendant corporation did not express their consent to the sale in question in either of the methods provided for in the foregoing section.

“It is urged by defendants that no sale falls within the inhibition of the code unless it be a sale which embraces a franchise, the language being ‘business, franchise and property as a whole, ’ and that as the defendant corporation had no franchise, other than its corporate franchise to exist, which it neither could convey, nor attempted to convey, this sale, although it embraced all the tangible property of the corporation, was not prohibited by the code, and did not require the assent of the holders of two-thirds of the capital stock. The section in question is of comparatively recent enactment, and its meaning has not yet been judicially determined. Whether its proper construction is as counsel insists, that is whether a franchise must be included in order to render a sale invalid, or not, is not clear, but this much is certain, that if a corporation be engaged in business, such business must be included in the sale before such sale can be brought within either the terms or the meaning of the section upon which this action is based. The deed under consideration conveys only the real property, which indeed was the only tangible property owned by the corporation, and the complaint avers in order to bring the sale within the terms of the code section, ‘ That at all times herein mentioned said described real property constituted the business, franchise and property, as a whole, of said defendant corporation, Hollister Land and Improvement Company.’