tract is against public policy there is no estoppel, and no relief will be granted to either party, even to one who has performed his part of the contract. An instance was where a gas company, organized for and furnishing gas to a city, leases its property to an individual without the consent of the city, and suit was brought to recover moneys alleged to be due under the lease.96 Combinations and monopolies, methods of conducting business, contracts which abridge or infringe civil rights or the performance of public duties, may be prohibited by or be void as against public policy. In such cases the corporation is subject to the same rules as individuals. An attempt has been made to maintain that ultra vires acts or contracts are invalid, on the contention that they are against public policy; but that is carrying deductions too far, for violation of anything prohibited, or failure to comply with any requirement, is in a sense against public policy. Illegality, because the thing is ultra vires, is quite different and distinct from illegality because against public policy, and the consequences, and the rights and remedies of persons in such cases, are quite different. BANKING PROHIBITED "No corporation shall create or issue bills, or notes, or other evidences of debt, upon loans or otherwise, for circulation as money." (Civil Code, sec. 356.) The constitutional provision is as follows: No corporation or association, or individual shall issue or put in circulation, as money, anything but the lawful money of the United States. (Article 12, sec. 5.) 96 Visalia Gas etc. Co. v. Sims, 104 Cal. 326, 43 Am. St. Rep. 105, 37 Pac. 1042; cited in Gallagher v. Equitable Gas etc. Co., 141 Cal. 699, 706, 75 Pac. 329. No case has arisen where it was decided that a corporation or person had done such a thing; in two cases the charge was made, but the court held that the securities issued were not of that character, being simply obligations given for borrowed money. A similar prohibition was contained in the constitution of 1849, under which a case arose where a corporation had given notes or orders upon its treasurer for money borrowed. It was claimed, under the above language, that the evidences of debt issued by the corporation came within this provision and were void. The court said, "the clear object of the restriction is to prevent corporations, by any device, from carrying on the business of banking; or in other words, to prevent the formation of moneyed corporations. They are prohibited from issuing bills or notes 'upon loans' or [this "or" is not now in the statute] for circulation as money; that is, they shall not lend their credit. To issue their bills upon loans implies from the meaning of the language that they are the lenders; while to issue bills for money which they borrow places them in the opposite relation of borrowers; and no sound reason can be assigned why they should not be borrowers, 997 and the notes or orders were held to be valid. This case was affirmed the following year in a case where the corporation borrowed a large sum of money and issued a single promissory note therefor.98 97 Magee v. Mokelumne M. etc. Co., 5 Cal. 258. 98 Smith v. Eureka Flour Mills Co., 6 Cal. 1, 7. No limitation is made as to the size or denominations of these obligations. Large denominations would circulate with so much slowness and difficulty as to be impracticable, but small denominations might pass from hand to hand readily. The size of a loan does not affect its validity. The lender, not the borrower, would be the one putting them in circulation. Such a case would not be covered either by the constitution or the statute, and the language of neither conveys any clear meaning. "Upon loans" is so vague an expression as to convey no definite idea. Where The court said the exclusion of one purpose for which such obligations could be issued, the right to issue them for all other purposes, was implied. the corporation lends money to another person it receives notes or evidences of indebtedness; it does not issue them. Where it borrows money it issues them, which apparently comes within the meaning of the words in which the statute is expressed. If it should be said that it is prohibited from issuing its notes or orders pledging the securities received by it on loans made by it for their payment, a reply would be: That is not the method of banking; banks do not issue bills upon their loans. The intent that they shall circulate as money is difficult to prove and may not exist at all, although they do actually circulate by the action of the holder. The language of the court in the Magee case is confused, and the result declared by no means follows the reasons stated. How issuing such securities upon loans could be "lending its credit" it is impossible to see, or how in such a case they would be "lenders"; they would be borrowers. No case has arisen since the two cited. We must look to the national banking act for some prohibition, and it is doubtful if that would cover the case supposed above. CHAPTER V FICTITIOUS STOCK AND BONDS Article 12, section 11 of the constitution is 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 and 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.1 This provision first appeared in the constitution of 1879, there being nothing of that character in the constitution of 1849. If anything more was intended in the first paragraph of this section than to prohibit the disposition of corporate securities, without a valuable consideration, it is not expressed, either directly or indirectly. If par value, or actual value, were intended, it does not so state, nor does the context indicate that intention, or any intent whatever on those points. The clear intent is to prevent stock dividends, or the giving away of stock for any reason whatever; and fictitious stock or indebtedness means such as gives no moral right to the person receiving it to participate in the profits and the distribution of the estate of the corporation as between them and the other holders, or to take a part or all of the assets of the estate on a 1 The first clause of this section is repeated as the first clause of section 359 of the Civil Code, being added by an amendment in 1885. spurious claim of indebtedness. That the public is not concerned or affected is shown by the decisions,2 and such stock has no legal existence, and therefore is not subject to assessment for the debts of the corporation; the issue of fictitious stock would increase rather than diminish the resources to which creditors might resort. No matter what might be their par value, neither of these securities can be sold above its actual value, or indeed above its market value. It is well known that no corporation bonds, except of corporations long established and earning and paying dividends for a considerable number of years, can be sold at par. The same condition is even more marked in the case of stocks. Indeed, the stocks of some may be worth no more than one per cent, while others may be worth upwards of three thousand per cent of their par value. If these securities must be sold or exchanged at par, in the case of valuable securities, these provisions are no protection whatever; if the securities are worth less than par, or are of unknown value, these clauses would prevent doing any business whatever. It is a matter of common knowledge that seldom are purchases of such securities made except in ignorance of the original price paid. See post, subject of "Liability of Stockholders." 2 Kellerman v. Maier, 116 Cal. 424, 48 Pac. 371; Cortelyou v. Imperial Land Co., 156 Cal. 373, 376, 104 Pac. 695. But if the stock was purchased for a valuable consideration, although far below par, the purchase being legal, the purchasers become stockholders and liable to assessments to pay the debts of the corporation, Vermont Marble Co. v. Declez etc. Co., 135 Cal. 579, 87 Am. St. Rep. 143, 56 L. R. A. 728, 67 Pac. 1057; California Trona Co. v. Wilkinson, 20 Cal. App. 694, 130 Pac. 190; R. H. Herron Co. v. Shaw, 165 Cal. 668, Ann. Cas. 1915A, 1261, 133 Pac. 488. But the Herron case is distinguished in an issue of stock for patent rights, Harrison v. Armour, 169 Cal. 787, 147 Pac. |