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Summary of Opinion

Factual and Procedural Background

This matter is an information in the nature of a quo warranto seeking a judicial declaration that the defendant is exercising corporate functions without right and an injunction against so doing. The complaint alleges the defendant is doing business as a corporation, has a board of directors, a president, and a corporate seal, has capital stock upon which it has levied an assessment, is transacting business in corporate form, and claims in good faith to be a corporation. The corporators executed, acknowledged, and filed articles of incorporation (the articles are not set out at large in the complaint).

The articles were executed in the manner and are in substance and form as required by the general provisions of the code for the creation of private corporations, but the plaintiff contended the articles were defective because they included, among the purposes of the corporation, authority "to buy, lease, sell, mortgage, and otherwise deal in ... railroads, tramways, and rights of way; to buy, lease, sell, mortgage, operate, construct, and maintain railroads, tramways," etc., while the incorporation was not constituted as the code requires railroad corporations to be constituted.

The court below sustained the defendant's demurrer and refused to allow the plaintiff to amend the complaint. On appeal, the judgment of the Superior Court of the City and County of San Francisco was affirmed. The opinion is authored by Judge Temple, with Judges Henshaw and McFarland concurring. Counsel of record included Attorney General W. H. H. Hart, P. O. Chilstrom, and T. V. Cator for appellant, and James Alva Watt for respondent.

Legal Issues Presented

  1. Whether the inclusion in the articles of incorporation of authority relating to railroads and tramways (when the incorporation was not constituted as a railroad corporation under the code) rendered the articles defective and invalidated the corporate existence.
  2. Whether the articles, as drafted, authorized the corporation to buy, lease, or operate a railway for traffic.
  3. Whether such an incorporation (formed primarily to manufacture lumber and operate a sawmill) could exercise the power of eminent domain to acquire rights of way.
  4. Whether the trial court properly sustained the demurrer to the complaint.
  5. Whether the trial court properly refused to allow the plaintiff to amend the complaint.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court first observed that the articles of incorporation were executed in the manner and were in substance and form as required by the general provisions of the code for private corporations. The plaintiff's contention was that the articles were defective because one of the stated purposes included dealing in and operating railroads and tramways while the incorporation had not been constituted in the manner required of railroad corporations.

The court noted that the corporation's general stated purpose was to manufacture lumber and all articles made of wood, i.e., to own and run a sawmill. It acknowledged that in such manufacturing businesses it is frequently necessary to have tramways and railroads as parts of the manufacturing plant. The court concluded that the articles, as written, would not authorize the corporation to buy, lease, or operate a railway for public traffic.

The court explained that the incidental mention of tramways or similar appliances as part of the manufacturing plant did not vitiate the incorporation; however, the incorporation thus formed could not exercise the power of eminent domain to acquire rights of way.

Regarding amendment of the complaint, the court recognized that leave to amend is generally a matter of absolute right, and that refusal requires the court to be able to see that the complaint cannot be amended so as to state a good cause of action. Although such a determination is not often possible, the court concluded that here the trial court properly determined the complaint could not be so amended.

On these bases, the court found the trial court properly sustained the demurrer and properly refused leave to amend.

Holding and Implications

Judgment affirmed.

The direct effect of the decision is that the trial court's ruling sustaining the demurrer to the plaintiff's quo warranto information and its refusal to permit amendment were upheld. The court held that the inclusion of references to railroads and tramways in the articles did not authorize the corporation to operate a railway for traffic and did not invalidate the incorporation as to its primary purpose of manufacturing lumber; nonetheless, such incorporation could not exercise eminent domain powers. The opinion does not announce any broader legal rule beyond its application to the facts presented, and it does not set forth or rely upon cited precedents.

THE PEOPLE ex rel. M. LOY, Appellant, v. MOUNT SHASTA MANUFACTURING COMPANY, Respondent

         JUDGES: Temple, J. Henshaw, J., and McFarland, J., concurred.

         OPINION

          TEMPLE, Judge

         This is an information in the nature of a quo warranto to have it adjudged that the defendant is exercising corporate functions without right, and to enjoin it from doing so.

         The complaint states that the defendant is doing business as a corporation; that it has a board of directors, a president, and a corporate seal; that it has capital stock upon which it has levied an assessment, is transacting business in corporate form, and claims in good faith to be a corporation; that the corporators have executed, acknowledged, and filed articles of incorporation, which are not set out at large in the complaint.

         The articles of incorporation are executed in the manner, and are in substance and form as required by the general provisions of the code for the creation of private corporations, but it is contended that the articles are defective because one of the purposes for which it was formed is expressed as being: "To buy, lease, sell, mortgage, and otherwise deal in. .. . railroads, tramways, and rights of way; to buy, lease, sell, mortgage, operate, construct, and maintain railroads, tramways," etc., and the incorporation was not constituted as the code requires railroad corporations to be.

         The general purposes for which the company was formed was to manufacture lumber and all articles made of wood -- in other words, to own and run a sawmill. In such business it is frequently necessary to have tramways and railroads as parts of the manufacturing plant. The articles in question would not authorize the corporation to buy, lease, or operate a railway for traffic. Perhaps it was not necessary to make special mention of this part of the manufacturing appliances, but such mention cannot vitiate the incorporation. Such an incorporation could not use the right of eminent domain to acquire rights of way.

         We think the court properly sustained the demurrer.

         The court refused to allow the plaintiff to amend the complaint. This is generally a matter of absolute right, and when it is refused the court must be able to see that the complaint cannot be so amended as to state a good cause of action. This the court will not often be able to do, but I think it was properly so determined here.

         The judgment is affirmed.

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People ex rel. Loy v. Mount Shasta Manufacturing Co.
(May 22, 1895)