Kennedy v. Cal. Sav. Bank

Harrison, J.— During the year 1891 the plaintiff deposited with the California Savings Bank, one of the defendants herein, different sums of money, for which the said defendant issued to him its several certificates of [497]deposit, amounting in the aggregate to forty-five thousand dollars. On the 12th of November, 1891, the plaintiff demanded of the savings bank payment of the amount of said certificates, and, upon its refusal, brought this action, making the' other defendants parties to the action, for the purpose of recovering from them their proportion of said indebtedness as stockholders in the California Savings Bank. Judgment was recovered against the savings bank for the full amount of the claim, and against the other defendants for their respective proportions thereof as such stockholders. The California National Bank, one of the defendants, has appealed upon the ground that by virtue of the statutes under which it is organized it had no power to become a stockholder in another corporation, and that its act in becoming such stockholder is so far ultra wires that it cannot be made liable for any portion of the indebtedness of the corporation. The California Savings Bank was organized January 13, 1890. September 10, 1890, nine hundred and ninety shares of its capital stock was issued to J. W. Collins, cashier of the California National Bank, and on January 2, 1891, the certificates representing these shares were canceled, and one certificate therefor was issued to the California National Bank, and was thereafter held by it until after the commencement of this action. During this period two dividends upon the stock were paid by the savings bank to the appellant.

The defense of ultra vires is looked upon by courts with disfavor whenever it is presented for the purpose of avoiding an obligation which a corporation has assumed merely in excess of the powers conferred upon it, and not in violation of some express prohibition of the statute. Courts are inclined to treat the corporation as estopped from setting up this defense in all cases where it has received and retains the benefit of the transaction, and seeks by this plea to avoid its correlative obligation.

In Evans v. Bailey, 66 Cal. 112, an action was brought [498]against the stockholders of the California Fruit and Meat Shipping Company to recover from them their respective proportions of certain indebtedness to the plaintiff of that corporation. One of these defendants was the People’s Ice Company, another corporation which held a thousand shares of the capital stock of the corporation debtor, and to its objection that it was ultra vires for it to hold stock in another corporation, it was held that as it did not appear that it was not within the scope of its power to hold stock in the defendant corporation under any circumstances, or for any purpose, and as the circumstances under which it had acquired the stock were not shown, the defense could not be maintained.