Hammond Lumber Co. v. Adams

WASTE, C. J. Plaintiff appeals from a judgment entered for defendants upon the sustaining of a demurrer to the complaint without leave to amend. This case presents a [25]factual situation similar to that outlined in the opinion in the case of Fox-Woodsum Lumber Co. v. Bank of America, ante, p. 14 [59 Pac. (2d) 1019]), this day filed, and presents for determination the issue as to the validity of certain so-called participating certificates issued without first procuring a permit from the commissioner of corporations. Upon the authority of our decision in the cited case, and for the reasons therein announced, we are of the view that the procurement of such a permit was not a necessary prerequisite to the valid issuance óf said certificates.

By an amended complaint a count was added, not present in the Fox-Woodsum Lumber Company case, supra, wherein it was alleged that the participating certificates were void as having been issued in contravention of section 11 of article XII of our state Constitution and of section 359 of the Civil Code, as these laws then read, to the effect that the bonded indebtedness of a corporation shall not be increased without the consent of the persons holding at least two-thirds of the amount in value of the stock. At the time of granting a hearing herein after decision in the District Court of Appeal of the Second Appellate District, Division Two, we were satisfied with that court’s disposition of this phase of the litigation and took the cause over solely because of the issue first above mentioned and here decided upon the authority of the Fox-Woodsum Lumber Company case.

As to the “bonded indebtedness” issue, we therefore adopt as a part of our decision herein that portion of the opinion prepared by Mr. Presiding Justice Grail, reading as follows:

“The . . . count alleges that no such consent was obtained and that no meeting of the stockholders was held as required by said section 359. Defendants, on the other hand, contend the certificates do not constitute ‘bonded indebtedness’ within the purview of the Constitution, and that even if the certificates did represent bonded indebtedness they would not be either void or voidable.

“ The law is meager in California as to what constitutes ‘bonded indebtedness’ . . . plaintiff takes it for granted, largely, that the certificates before us constitute bonded indebtedness and contents itself with the following assertion in that behalf: ‘The rules of law, as to what constitutes a bonded indebtedness of a corporation, are so generally known and settled that we feel justified in referring to,