board of directors. The power, when delegated, may be revoked by a similar vote, at any regular meeting of the stockholders or members.

Whenever any amendment or new by-law is adopted, it must be copied in the book of by-laws with the original by-laws, and immediately after them.

If any by-law is repealed, the fact of repeal, with the date of the meeting at which the repeal was enacted, or written assent was filed, must be stated in said book.

Until copied or stated as hereinbefore required, no by-law, nor any amendment or repeal thereof, can be enforced against any person, other than the corporation, not having actual notice thereof. (Amended March 21, 1905; Stats. 1905, p. 557.)

Unt" the amendment of 1905, p. 557, this section provided that no by-law, or amendment thereto, should take effect until copied in the book of by-laws. This provision was found to work so badly that it was repealed, and the last sentence of the above section was enacted, making the by-laws effective against the corporation and all who have actual knowledge of their existence, even if not copied into the book of by-laws. Apparently such a by-law would not bind a stockholder who had no actual notice of its existence; but this must be taken in connection with the decision that stockholders can not avoid responsibility for unauthorized acts by abstaining from inquiry into the affairs of the corporation, or absenting themselves from meetings.36

CERTIFICATION

The by-laws must be certified by a majority of the board of directors and the secretary of the corporation. This must be done in all cases, whether they are adopted

86 Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 312, 28 Pac. 1049; San Diego etc. R. Co. v. Pacific Beach Co., 112 Cal. 53, 62-64, 33 L. R. A. 788, 44 Pac. 333; Lady Washington etc. Co. v. Wood, 113 Cal. 482, 489, 45 Pac. 809.

at a meeting or by the assent of two-thirds of the stockholders. There is then no question as to what they are, or of notice of their contents to all concerned. The practice, not uncommon, of keeping them, especially amendments, on loose sheets is thoroughly bad, and is liable at any time to give rise to serious questions as to their effect, and to loss of rights by the corporation.

INSPECTION

The book of by-laws must be kept open to the inspection of the public during office hours of every day, except holidays. Making them open to the inspection of the general public, whether interested or not, is a novel provision. No penalty, however, seems to have been provided for failure to do so, except as to stockholders; refusal of any officer or agent of a corporation to give inspection and an opportunity to a stockholder to copy any book, paper, or document of the corporation is a misdemeanor. (Penal Code, section 565, post.)

AMENDING BY-LAWS AS AFFECTING VESTED RIGHTS

It was also held in a class of cases that where the by-laws of the society required all claims to be submitted first to the lodge, with right of appeal to the grand lodge, a member must exhaust all remedies afforded by the society before he can appeal to the courts, and that members of such societies may waive the right to sue in the courts and agree in advance to submit all controversies to arbitration, but, if the society does not give the member notice and an opportunity to produce testimony before making an adverse

37

87 Robinson v. Templar Lodge, 117 Cal. 370, 59 Am. St. Rep. 193, 49 Pac. 170; Grimbley v. Harrold, 125 Cal. 24, 30, 73 Am. St. Rep. 19, 57 Pac. 558.

decision, a court has jurisdiction to hear and determine the controversy.38

Corporations which are societies paying benefits to their members constitute, really, a class by themselves, and rules concerning the interpretation and force and effect of their by-laws differ materially from those governing business corporations.

In the case of a business corporation the courts have said that a by-law is a creation of the stockholders and is generally for their benefit alone, and the same authority which made it may repeal it, and if a course of action contrary to a by-law is acquiesced in by the shareholders, the by-law is thereby waived as to third persons, dealing with the corporation in good faith."

Without doubt a provision in by-laws that they could not be amended would be void, for the statute declares that upon a certain vote they may be amended; corporations are organized with those conditions and any person becoming a stockholder enters the corporation under those conditions.

Some cases have arisen, however, where the by-laws became a part of a contract between the corporation and its members, a pecuniary contract; one in which the member occupies substantially the same position as if he were an outsider dealing with the corporation, still, however, subject to a limited power over him and the contract by the corporation. Such are mutual benefit societies.

In such cases it has been held that the rights to a sick benefit can not be taken away by an amendment to the by-laws for the time elapsed before the amendment is adopted; as to such time it is a vested right. But as to time following the amendment, the rule of the 38 Schou v. Sotoyome Tribe, 140 Cal. 254, 73 Pac. 996.

89 Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 311, 28 Pac. 1049.

amendment governs.40 In the cases cited the by-laws themselves expressly provided that they could be amended at any time, and on the strength of that provision it was held the corporation (society) could amend the by-laws limiting the rights to benefits to six months which theretofore had not been limited; such amendment, however, not cutting off rights to benefits for time already elapsed in excess of the six months.

MANNER OF AMENDING, ETC.

Under this section by-laws may be either repealed, amended, or new ones adopted, and the methods provided are both simple and clear; being so the courts do not appear to have been vexed with difficult, or indeed any, questions on that branch of the section.

MAY BE WAIVED

A by-law which required both the president and secretary to sign all obligations is waived by the corporation acquiescing in the president only signing them.11

40 Stohr v. San Francisco Musical Fund Society, 82 Cal. 557, 22 Pac. 1125; Bowie v. Grand Lodge, 99 Cal. 392, 34 Pac. 103; Robinson v. Templar Lodge, 117 Cal. 370, 59 Am. St. Rep. 193, 49 Pac. 170. 41 Illinois Trust etc. Bank v. Pacific Ry. Co., 117 Cal. 332-346, 49 Pac. 197; Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 311, 28 Pac. 1049; see Curtin v. Salmon River etc. Co., 141 Cal. 308, 99 Am. St. Rep. 75, 74 Pac. 851.

CHAPTER IX

STOCKHOLDERS' MEETING ELECTION OF DIRECTORS

CUMULATIVE VOTING,

Article 12, section 12 of the constitution is as follows: At all elections for directors or managers every stockholder shall have the right to vote, in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors or managers to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them, on the same principle, among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner, except that members of co-operative societies formed for agricultural, mercantile, and manufacturing purposes may vote on all questions affecting such societies in manner prescribed by law.

This section is not found in the constitution of 1849. Of course, the term "manager" of a corporation has a very clear, definite and certain meaning in the administration of the affairs and business of a corporation, and also in the decisions of the courts, and that meaning is very different from the meaning of the term "director." It can not have been contemplated that such minor officer should be chosen only by the stockholders; the term "manager" was evidently used as a synonym of "director."

Section 307 of the Civil Code is as follows:

§ 307. All elections must be by ballot, and every stockholder shall have the right to vote in person or by proxy the number of shares standing in his name, as provided in section 312 of this code, for as many