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Pac. 1105. Note citations: 99 Am. Dec. 333; 13 Am. St. Rep. 582; 16 Am. St. Rep. 639; 12 Am. St. Rep. 55.)

When duly assembled to transact corporate business a decision of the majority of the board shall be valid. (Harding v. Vandewater, 40 Cal. 77. To same effect: Alta etc. Co. v. Mining Co., 78 Cal. 632, 21 Pac. 373; Salfield v. Sutter etc. Co., 94 Cal. 549, 29 Pac. 1105.)

But no decision or act made or done by any number of directors, while not duly assembled as a board, is a valid corporate act; and a conveyance executed by trustees individually, without any authority from the board of trustees, as a board, is void for want of authority to execute. (Miners' etc. Co. v. Zellerbach, 37 Cal. 543, 99 Am. Dec. 300. To same effect: Smith v. Dorn, 6 Cal. 83, 30 Pac. 1024; Blood v. Water Co., 113 Cal. 226, 41 Pac, 1017, 45 Pac. 252.)

It is not necessary, however, that a board of directors should act in session when merely directing the labor of an employee. (Bee v. 8. F. etc. R. R., 46 Cal. 248.)

The provisions of sections 305 and 308 of the Civil Code with re gard to quorums at directors' meetings are limited by the principle that a director shall not participate in any act in which his personal interest is antagonistic to that of the corporation, and a majority of the directors cannot authorize the execution of a note and mortgage to one of the directors present and constituting the quorum, even if such director did not vote for the resolution authorizing such action. (Curtin v. Salmon River etc. Ditch Co., 130 Cal. 545, 80 Am. St. Rep. 132, 62 Pac. 552.)

Neither can a legal quorum be formed by the presence of an interested director, so as to authorize or ratify any action taken in his favor as general manager. (Basset v. Fairchild, 132 Cal. 637, 64 Pac. 1082.)

And where, out of seven directors, only quorum of four are present, and two of them are interested in a resolution that all notes to each of them be renewed at a certain rate of interest, such resolution is void, and the vote of neither of them can have the effect to authorize renewal of notes to the other. (Smith v. Los Angeles etc. Co., 78 Cal. 289, 12 Am. St. Rep. 53, 20 Pac. 677. Note citations: Daly v. R. R. Co., 12 Am. St. Rep. 294; Ten Eyck v. R. R. Co., 16 Am. St. Rep. 638, 639; Beach v. Miller, 17 Am. St. Rep. 300; and Conover v. Hull, 45 Am. St. Rep. 833.)

But, notwithstanding a vacancy in the board of directors of a corporation organized under the laws of the state, it seems that the vote of a majority of the full board is valid, as a corporate act, to sanction the execution of a mortgage upon property conveyed to the corporation by mortgagee. (Porter v. Land Co., 127 Cal. 261, 49 Pac. 563.)

And a resolution of directors, authorizing the execution of the pote, is not defective, merely because it recites the absence of one of the directors. If there is not sufficient evidence to the contrary, it will be presumed that proper notice of the meeting was given the absent director. (Mills v. Boyle Mining Co., 132 Cal. 95, 64 Pac. 122.)

And it is held a copy of a resolution of the directors, duly certified by its seal, cannot be attacked by it, although no such resolution in fact passed. (Hawley v. Gray Bros. etc. Co., 106 Cal. 337, 32 Pac. 609. To same effect: Purser v. Eagle Lake etc. Co., 111 Cal, 142, 43 Pac. 523.)

Ratification-By Directors.– For ratification, see, also, annotation to section 303, subd. 5, ante.

Under 2314, Civil Code, ratification can only be made in the manner required, in order to confer original authority for the act ratified; and a note and mortgage which could only be authorized by resolution of the board of directors can only be ratified by such resolution. (Blood v. Water Co., 113 Cal. 221, 41 Pac. 1017, 45 Pac. 252.)

But a resolution of a board of directors which is void by reason of being carried by the vote of a director benefited thereby, may be ratified by a subsequent resolution of the board passed without the necessary concurrence of such director, and when so ratified will be effective from the date of original adoption. (Wickersham v. Crittenden, 110 Cal. 332, 42 Pac. 893.)

So, also, the ratification, by board of directors, of action of president and secretary of corporation in executing mortgage of property purchased by corporation, is equivalent to previous authority; and such ratification may be proved under general issue, on execution of mortgage. (Boggs v. Lakeport etc. Assn., 111 Cal. 354, 43 Pac. 1106.)

And a vote of directors, ratifying the acts of the president, may be presumed from the acts of the board, although there is no record of such vote on the corporate records. (Pixley v. R. R., 33 Cal. 183, 91 Am. Dec. 623.)

Also the action of the board of directors in requiring a mortgages to make additional advances on the security of his mortgage, and recognizing its validity in a resolution authorizing a second mortgage upon the property, is a full ratification of the first mortgage. (Porter v. Land Co., 127 Cal. 261, 59 Pac. 563.)

So the expenditure of money by treasurer of corporation for purposes other than those for which it was appropriated, when made for benefit of corporation, may be ratified by board of directors, and when so ratified, the treasurer cannot be held responsible for the money. (Bay View Assn. v. Williams, 50 Cal. 353; Forbes v. San Rafael T. Co., 50 Cal. 340.)

But where a deed purports to be sealed by the private seals of the trustees of a corporation for the alleged reason that the corporation has no seal, ratification cannot be inferred from delivery of possession to the grantee, where there is no proof that the persons who executed the deed were trustees of the corporation, and no proof other than that recited in the deed, that any consideration was received by the corporation. (Barney v. Pforr, 117 Cal. 56, 48 Pac. 987.)

And the admission of the genuineness of a note, not purporting to have been made by a corporation does not involve an admission that it was a corporate note, and it may be shown that it was not authorized by the directors of the corporation and was without con. sideration. (Myers v. Agricultural Assn., 122 Cal. 66, 55 Pac. 689.)

A ratification of an imperfect assignment, made by board of directors of corporation after an action has been commenced on the account of the assignee, is too late to be availing to the assignee. (Read v. Buffum, 79 Cal. 77, 21 Pac. 555.)

Where the consideration of the note was money loaned the corporation and retained and used by it, and the transaction appeared fully on the books of the company, it must be presumed that a director absent when the note was authorized, acquired knowledge of it; and the retention of the proceeds, with full knowledge, operated as a ratification of the authority of the agents who made the note. (Mills v. Boyle Mining Co., 132 Cal. 95, 64 Pac. 122.)

Ratification by Stockholders. For ratification, see, also, annotation to sec. 303, subd. 5, ante.

Ratification by shareholders of an unauthorized violation by the directors of a by-law of a corporation is equivalent to original authority. Such ratification need not be formally made at a meeting of the stockholders, but may be presumed from long acquiescence in acts beneficial to the corporations, with knowledge of all the material facts. (Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 28 Pac: 1049.)

An unauthorized agreement of directors, that lands purchased should be used for a public highway, is valid if subsequently approved and ratified by the corporation. (People v. Eel River etc. R. R. Co., 98 Cal. 665, 33 Pac. 728.)

And ratification by stockholders, of unauthorized acts of directors, may be made either expressly or by implication. (Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 28 Pac. 1049. To same effect: San Diego v. Pacific etc. Co., 112 Cal. 64, 44 Pac. 333; Lady Washington etc. Co. v. Wood, 113 Cal. 489, 45 Pac. 809; Illinois etc. Bank v. Railway Co., 117 Cal. 347, 49 Pac. 197; Pacific Bank v. Stone, 121 Cal. 206, 53 Pac. 634. Note citations: Savings Bank v. Bank, 28 Am. St. Rep. 413.)

And shareholders cannot avoid responsibility for the unauthorized acts of the directors by abstaining from inquiry into the affairs of the corporation, or by absenting themselves from the company's meetings. (Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 28 Pac. The presumption is that stockholders acquire knowledge of the passage of a resolution immediately thereafter. (Wills v. Porter, 132 Cal. 516, 64 Pac. 896.)

Ratification of contract entered into by corporation by majority action of stockholders cannot be objected to by corporation on ground that some stockholders may have acted without knowledge of facts, when they were chargeable with notice of facts, and there is no showing that they were wanting in knowledge. (San Diego v. Beach Co., 112 Cal. 53, 44 Pac. 333.)

Directors' Liability. The directors of a corporation are liable for loss caused by negligence or improper conduct. (Neall v. Hill, 16 (al. 145, 76 Am. Dec. 508. Note citation: 53 Am. Dec. 640; 17 Am. St. Rep. 97.)

And the directors of a corporation who sign certificate of incorporation and accepted office are estopped to deny validity of incorporation. (Parrott v. Byers, 40 Cal. 614.)

Held, prior to the code, that the statute making directors of a corporation liable for the debts of the corporation, where they are guilty of certain official delinquencies, is penal in its nature, and is to be strictly construed. And to render a director liable for the debts of the corporation, it must be proved that he was present at the meeting when the debt was created and passed upon. (Moore v. Lent, 88 Cal. 506, 22 Pac. 875. To same effect: Savings & Loan Soc. v. McKoon, 120 Cal. 179, 52 Pac. 305. Note citation: 53 Am. Dec. 651.)

So directors of a corporation not parties to a fraudulent combination and agreement for the payment of an excessive price for work performed for the corporation, but who are negligent in the performance of their duties, are chargeable only with negligence, and rot with fraud. (Fox v. Hale & Norcross etc. Co., 108 Cal. 427, 41 Pac. 308.)

Where directors have no power except such as are given by the stockholders in their resolutions and by-laws, they are not liable personally on a contract made by them, and which by its terms binds the corporation, unless the stockholders have adopted by-laws and the contracts have been made in violation of the by-laws. (Hall v. Crandell, 29 Cal. 567, 89 Am. Dec. 64.)

Directors of a corporation who make and sign notes as such directors, with the intention of not binding themselves personally are not personally liable, even if they had no authority of the corporation to make the note. (Blanchard v. Kaull, 44 Cal. 440. To same effect: Bean v. Pioneer etc. Co., 66 Cal. 455, 56 Am. Rep. 108. Note citations: 17 Am. St. Rep. 162; 29 Am. St. Rep. 601; 33 Am. St. Rep. 186; 48 Am. St. Rep. 914.)

Vacancy in Board of Directors. The provisions of section 315 of the Civil Code do not apply to an appointment made by a board of

directors to fill a vacancy. (Wickersham v. Brittan, 93 Cal. 39, 28 Pae. 792, 29 Pac. 51.)

And notwithstanding a vacancy in the board, it seems that a vote of a majority of the full board is valid as a corporate act to sanction the execution of a mortgage. (Porter v. Lassen County etc. Co., 127 Cal. 261, 59 Pac. 563.)

Directors Common to Different Corporations.- Directors who are common to both corporations, are not within the rule that he who acts in a fiduciary capacity cannot deal with himself in his individual capacity, but they owe the same fidelity to both corporations, and there is no presumption that they will deal unfairly with either of them. (San Diego etc. Co. v. Pacific Beach Co., 112 Cal. 53, 44 Pac. 333.)

The mere fact that two contracting corporations have common directors does not render the contract between the corporations invalid, or incapable of ratification, where there is no actual fraud alleged or found, and where the contract is within the chartered powers of both corporations. (San Diego etc. Co. v. Pacific Beach Co., 112 Cal. 53, 44 Pac. 333.)

A contract between a railroad company and a real estate company having common directors may be ratified by the acquiescence of one company in its dealing with the other, and the ratifying conrpany cannot thereafter defend an action to enforce obligations growing out of the contract, upon the ground that the contract was made by the common directors of two corporations. (San Diego etc. Co. v. Beach Co., 112 Cal. 53, 44 Pac. 333. To same effect: Illinois etc. Bank v. Pacific Railway Co., 117 Cal. 346, 49 Pac. 197.)

And contracts between corporations having common directors are not per se invalid. (Pauly v. Pauly, 107 Cal. 8, 48 Am. St. Rep. 98, 40 Pac. 29.)


FIRST MEETING. (Repealed.) Sec. 306, C. C. En. March 21, 1872. Amd. 1873-74, 202. Rep. 1889, 365.


Sec. 307, C. C. 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 three hundred and twelve of this code, for as many persons as there are directors to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors

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