Pacific Trust Co. v. Dorsey

Belcher,. C. C. This is an appeal by defendant from a judgment in favor of plaintiff, and from an order denying a motion for a new trial.

The action was based upon a promissory note, and the contention of appellant is, that the contract, in the execution of which the note was given, was against public policy and prohibited by law; and so the note was void.

The facts as shown by the record are as follows: —

In August, 1883, the Pacific Trust Company, plaintiff herein, was organized as a corporation to do a banking business at the city of Stockton. Its capital stock was fixed at five hundred thousand dollars, divided into five thousand shares of the par value of one hundred dollars each. The defendant subscribed for one hundred shares of the capital stock.

After the corporation was fully organized the subscribers for stock were called upon to pay an assessment of ten per cent upon the amounts severally subscribed by them.

[56]The defendant paid nothing upon his subscription till the third day of December, 1883, when he made the note in question for the amount of his assessment, payable to the plaintiff, or order, one day after date, with interest at the rate of 'ten per cent per annum. The note was delivered to the president of the company, and thereupon a certificate for one hundred shares of stock, properly signed and sealed, was delivered to the defendant, and by him indorsed and delivered back to the president, to be held by the company till his note should be paid. The note was not paid, and on the- 4th of September, 1884, this action was commenced to recover the amount due upon it.

Was the note void ? In support of their claim that it was, counsel for appellant cite section 11 of article 12 of the constitution, section 1 of “An act concerning- corporations and persons engaged in the business of banking,” approved April 1,1876 (Stats. 1875-76, p. 729), and section 560 of the Penal Code.

The section of the constitution referred to reads as follows: —

“ No corporation shall issue stock or bonds except for money paid, labor done, or property actually received, and all fictitious increase of stock or indebtedness shall be void. The stock or bonded indebtedness of corporations shall not be increased except in pursuance of general law, nor without the consent of the persons holding the larger amount in value of the stock, at a meeting called for that purpose, giving sixty days’ public notice, as may be provided by law.”