§ 268. Duplicate Certificates.-Section 365 of the Civil Code provides a method for the restoration of certificates of stock lost or destroyed by conflagration or other public calamity or certificates wrongfully withheld.16

Civ. Code, § 328. "Whenever a certificate of stock or of shares in a corporation organized under the laws of this state has been lost, destroyed or wrongfully withheld, the owner thereof may bring an action against such corporation in the superior court of the county in which is located its principal place of business, for the purpose of obtaining a new or duplicate certificate. If by the books of the corporation the stock stands in the name of a person other than the plaintiff, or if by such books it appears that some other person claims or has some right, title, or interest in, or lien upon, such stock, all such persons must be made parties defendant with the corporation. Summons must be issued and served as in other civil actions, and in addition thereto, the court must direct its clerk to issue and cause to be published, at least once a week for four successive weeks, in some newspaper published in the county, a notice setting forth the pendency of the action, the names of the parties thereto, the court in which it is pending, the name of the corporation issuing the stock, the number of the certificate and the number of the shares, the name of the person mentioned as stockholder in the certificate, and notifying all persons claiming said shares, or any of them, or any interest or lien therein or thereupon, to be and appear before the court at a time and place to be designated in the notice not less than thirty days from the first publication thereof, then and there to show cause why a new certificate should not be directed to be issued to the plaintiff, and to set forth their rights in or claim to such shares.

If anyone appears and answers or intervenes in the action, it must proceed to trial as in other civil cases, and the court must enter judgment as from the facts established may be proper; but if no one appears within the time designated in such notice, nor within the time allowed by law after the services of such summons, the court must hear such evidence as may be offered in support of the allegations of the complaint, and make and file its decision thereon, and thereupon may enter its judgment canceling the lost, destroyed or wrongfully withheld certificate and directing the corpora

16. See supra, § 157.

tion, upon payment to it of all costs incurred by it in the premises and without costs against the corporation, to issue to the plaintiff a new or duplicate certificate.

After the issuing of a new certificate by the corporation pursuant to any judgment in such action, no action can ever be maintained by any person against the corporation in reference to said lost or destroyed certificate or the shares represented thereby, and thereafter any such action is forever barred as against the corporation."

Even if the provision of section 328 as to the place where the action may be brought is in conflict with section 16 of Article XII of the Constitution, this does not invalidate the rest of the section.17 The words "wrongfully withheld" in this provision refer to a wrongful withholding by a person other than the corporation.18 The corporation is a necessary party to an action based on a wrongful withholding. 19

d. Increase or Reduction of Stock

$269. In General.

Const., Art. XII, § 11, as Amended November, 1926. "The stock. . . of corporations shall not be increased except in pursuance of general law, nor without the consent of the persons holding at least two-thirds of the amount in value of the stock.”’20

This provision, as it existed prior to the amendment, was not self-executing,1 and the legislature then had an undoubted right within the limitations imposed by said section to prescribe the terms upon which and the method by which an increase or re

17. Winterburn v. Sheriff, 61 Cal. App. 531, 215 Pac. 406. 18. Winterburn v. Sheriff, 61 Cal. App. 531, 215 Pac. 406. 19. Winterburn v. Sheriff, 61 Cal. App. 531, 215 Pac. 406.

20. Prior to its amendment this provision required the consent to be given at a meeting called for that purpose, giving sixty days' published notice, as may be provided by law. And it was held that an increase attempted at a stockholders' meeting held by unanimous consent, and to which all of the stockholders consented, was void where the required notice was not given. Navajo Min. & Dev. Co. v. Curry, 147 Cal. 581, 109 Am. St. Rep. 176, 82 Pac. 247.

1. Dominguez Land Corp. v. Daugherty, 196 Cal. 453, 44 A. L. R. 1, 238 Pac. 697; Ewing v. Oroville Min. Co., 56 Cal. 649.

duction of stock might be effected. And it would seem that these propositions are equally true in respect of the amended provision, although this has not been decided.

Civ. Code, § 359, as Amended by Stats. 1927, Chap. 710, Approved May 23, 1927. "By complying with the following provisions, any corporation formed under the laws of this state whose shares have a par value may increase its capital stock, or diminish the same to an amount which is not less than its outstanding indebtedness. . . 113

Civ. Code, § 309. "Unless they shall have been first authorized to do so by the commissioner of corporations, directors of corporations must not . . . reduce or increase the capital stock, except as provided in section three hundred fifty-nine of this code . . .

The effect of a purchase by a corporation of shares of its own stock is to reduce its stock, at least temporarily. And a plan for the issuance by an existing corporation of profit-sharing certificates entitling the holder to a certain percentage of the profits before payment of dividends to the stockholders, and to share in any surplus after payment to the stockholders of dividends of an equal percentage, is one for increasing the capital stock of the corporation, without complying with the laws relating to such increases.

§ 270. Increase or Reduction by Amending Articles of Incorporation.

Civ. Code, § 362. "Any corporation organized under the laws of this state may amend its articles of incorporation (6) To state the amount of its capital stock as increased

...

2. Dominguez Land Corp. v. Daugherty, 196 Cal. 453, 44 A. L. R. 1, 238 Pac. 697.

3. As to the procedure for effecting an increase or reduction, see infra, §§ 271-274.

4. This section also makes the directors personally liable to the full amount of the capital stock reduced in case of a reduction in violation of its provisions. See supra, §§ 232–237.

5. Tulare Irr. Dist. v. Kaweah Consol. etc. Co., 5 Cal. Unrep. 330, 44 Pac. 662. As to the right of a corporation to purchase shares of its own stock, see infra, § 471.

6. Apartment Bldg. Co. v. Daugherty, 190 Cal. 521, 213 Pac. 983.

or diminished and the number of shares and the par value thereof, . . . (8) . . . Nothing appearing herein shall be construed as permitting a corporation to . . . increase or diminish . . . its capital stock, by amending its articles of incorporation.""

Sections 290e and 290f of the Civil Code, however, provide that any corporation having shares without nominal or par value may increase or diminish the number of shares which may be issued by amending its articles of incorporation in accordance with section 362 of that code, or may provide by the amendment for such number of shares of capital stock having a par value as it may desire to issue, and that any corporation authorized to issue shares having a par value may amend its articles so as to provide for such number of shares of stock without any nominal or par value as it may desire to issue.8

In cases not coming within sections 290e and 290f an increase or reduction cannot be effected by such an amendment; the amendment can only "state" the new amount as it has been legally increased or reduced, that is, otherwise than by amending the articles. But an amendment which merely classifies or divides the existing capital stock into two or more kinds, without any change in the number of shares, as one dividing stock originally all of one class into common and preferred stock, does not amount to, and is not equivalent to, the act of increasing or diminishing the stock within the meaning of this provision.9

§ 271. Statutory Procedure.-As we have seen, the Constitution provides that the stock of a corporation cannot be increased without the consent of the persons holding at least two-thirds of the amount in value of the stock,10

Civ. Code, § 359, as Amended by Laws 1927, Chap. 710, Approved May 23, 1927. ". . . (1) A resolution authoriz ing such increase or reduction in capital stock. . . and

7. As to amendment generally, see supra, §§ 66-69.

8. See supra, § 263.

9. California Telephone & Light Co. v. Jordan, 19 Cal. App. 536, 126 Pac. 598.

10. See supra, § 269.

stating among other things the amount to which the capital stock is to be increased or diminished and the number of shares into which the capital stock as increased or diminished is to be divided and the par value thereof . . ., shall be adopted by the affirmative vote of at least a majority of the directors or trustees of such corporation, at a regular or special meeting, which resolution must be approved by the vote or written assent or assents of stockholders representing at least two-thirds of the subscribed shares of each class of stock of the corporation, . . . ; if approved by a vote of the stockholders . . . such vote may be had at a regular meeting or a special meeting, and a resolution, containing a copy of the resolution adopted by the board of directors and setting forth the fact of the approval thereof by the stockholders. . ., must be adopted by the votes of stockholders either present in person or represented by proxy at said meeting. and representing at least two-thirds of the subscribed shares of each class of stock of the corporation, . . . in lieu of the approval of such resolution at a meeting of stockholders . . ., such resolution may be approved by the written assent or assents of stockholders representing at least two-thirds of the subscribed shares of each class of stock of the corporation..., which assent or assents shall contain a copy of such resolution and shall state the fact of the approval thereof by the stockholders . . . and shall be filed with the secretary of the corporation; provided, that such assent may be executed and filed by the attorney-in-fact of any stockholder . . . with the same effect as if executed and filed by his principal; provided, further, that where the articles of incorporation or amended articles of incorporation provide for two or more kinds or classes of capital stock, the resolution of the board of directors shall identify the particular class or classes of stock to be increased or diminished and the amount by which the particular class or classes of stock is increased or diminished.”11

...

§ 272. Forms of Resolution of Directors and Assent of Stockholders. The following is a form of resolution of the board of directors providing for an increase of stock:

Resolved, that the capital stock [or the common or the preferred capital stock] of this corporation be increased from dollars ($ -), divided

11. For first part of this section, see supra, § 269.