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§ 9 "and regulating the powers of the corporation," &c. The words "creating

"and defining" are new, and it is believed go a step beyond all other enabling acts in this respect. They carry to its logical result the principle laid down in Ellerman v. Chicago Junc. Ry., &c., Co., 49 N. J. Eq., 217, that the certificate of incorporation is equivalent to a special act of the Legislature.

This practically puts it in the power of the incorporators to decide for themselves the powers which the corporation shall have in addition to the powers expressly given by the act and is in effect a delegation to them of the lawmaking power of the Legislature. It is conceived that under this section provision may be made for cumulative voting, or for any other power which though not expressly permitted by the act is not inconsistent with it. Can power to form voting trusts be thus given? (See p. 51, post.) This provision may also be construed as meaning that whereas incorporators are enabled to create and define the powers which the corporation shall possess, in addition to those given by Section 1, that the certificate of incorporation shall then become the measure of the company's powers, and that powers not expressly or impliedly given by it are excluded.

Various limitations and regulations of the powers of the corporation, the stockholders and the directors may be made; power may be given to the directors to make and alter by-laws (Sec. 11); directors may be classified (Sec. 12); right to choose a class of directors may be conferred on any class of stockholders (Sec. 12); the amount of interest required to be represented at any meeting in order to constitute a quorum may be prescribed, provided it is not more than a majority of shares (Sec. 17); power to the directors to sell or mortgage any or all of the corporate property without the assent of the stockholders or with the assent of a májority or two-thirds of the stockholders; restrictions on the power of stockholders to examine the corporate books of account; it may be provided that each stockholder should have one vote for each five shares of stock held by him instead of one vote for each share (Sec. 37). Other similar limitations and regulations might be made.

Authentication and record of certificate. Copy evidence. The certificate of incorporation shall be proved or acknowledged as required for deeds of real estate, and recorded in a book to be kept for that purpose in the office of the clerk of the county where the principal office of such corporation in this state shall be established, and, after being so recorded, shall be filed in the office of the secretary of state; said certificate, or a copy thereof, duly certified by the secretary of state, shall be evidence in all courts and places.

P. L. 1846, p. 65; P. L. 1849, pp. 300, 301; Act of 1875, § 12.

Within the State of New Jersey the acknowledgment may be taken by § 10

the Chancellor, a Justice of the Supreme Court, a Master in Chancery, a Judge of any Court of Common Pleas, a Commissioner of Deeds, a clerk of the Court of Common Pleas of any county, a Deputy County Clerk, a Surrogate or Deputy Surrogate of any county, or a Register of Deeds of any county. ("An Act respecting conveyances [Revision of 1898]." § 22, P. L. 1898, pp. 670, 678.)

All acknowledgments must be in the form prescribed by the New Jersey statute (see form post).

A Notary Public in New Jersey has no authority to take an acknowl edgment.

Acknowledgments out of New Jersey should, if practicable, be taken by a Master in Chancery of New Jersey or by a Foreign Commissioner of Deeds for New Jersey residing in the place where the acknowledgment is taken. If a Master in Chancery or Commissioner is not available the acknowledgment may be taken by a Notary Public or other officer, but in such case it is necessary to attach to the certificate of acknowledgment a certificate of the County Clerk officer performing similar duties, substantially as follows (“An Act respecting conveyances [Revision of 1898]," § 23).

State of
County of

I,

of the

ss.

Clerk of the County of

or other

and also Clerk

Court for the said County, the same being a Court of Record, DO HEREBY CERTIFY, That whose name is subscribed to the Certificate of the proof or acknowledgment of the annexed instrument, and thereon written, was, at the time of taking such proof and acknowledgment, a Notary Public in and for said County, duly commissioned and sworn, and authorized by the laws of said State to take the acknowledgments and proofs of deeds or conveyances for lands, tenements or hereditaments in said State of And further, that

I am well acquainted with the handwriting of such Notary Public, and verily believe that the signature to said certificate of proof or acknowledg ment is genuine.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the seal of the said Court and County, the

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189

day of
Clerk.

See further as to taking acknowledgments out of the State, P. L. 1898, pp. 678-9.

The omission of an immaterial part of the acknowledgment by an incorporator, as a failure to state that the contents of the certificate were made known to him and the omission of a certificate of Notaryship to state that the Notary was authorized by the laws of his State to take acknowledgments and proof of deeds do not render the incorporators liable as partners. (Stout v. Zulick. 48 N. J. Law, 599.)

10. Corporate existence begins on filing certificate.

Upon making the certificate of incorporation and causing the same to be recorded and filed as aforesaid the persons so asso

§ 10 ciating, their successors and assigns, shall from the date of such filing be and constitute a body corporate by the name set forth in said certificate, subject to dissolution as in this act elsewhere provided.

P. L. 1846, p. 65; P. L. 1849, p. 301; Act of 1875, § 13.

Under this section of the Revision of 1896, the corporate existence begins on filing the certificate, and it is not lawful to insert in the certificate any other or different date as to beginning of corporate existence.

This Section 10 is a substitution for Section 13 of the Act of 1875, which provided that the incorporators might insert the time when the company would begin business. Reference is made to the case of Vanneman v. Young (52 N. J. Law, 403) because that case is often cited as authority for the proposition that a corporation may begin business before the recording and filing of its certificate in the office of the Secretary of State. Section 10, in the Revision, repealing Section 13 of the Law of 1875, did away with the effect of l'anneman v. Young in that particular.

De facto corporations.

The law on this point is stated in the case of Stout v. Zulick (48 N. J. Law, 599, 601) as follows: "In the absence of a statutory provision "making shareholders liable in case of failure to comply with the require"ments of the charter, or with the requirements of the act under which "the company is incorporated, persons who have contracted with a de "facto corporation, as a corporation, cannot deny its corporate existence "in order to charge its shareholders individually as partners. "Where it is shown that there is a charter or a law under which a cor"poration with the powers assumed might lawfully be incorporated, and "there is a colorable compliance with the requirements of the charter or "law and a user of the rights claimed under the charter or law, the exist"ence of a corporation is established.

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"And it is entirely settled that the corporate existence of such cor"poration de facto cannot be inquired into collaterally. It is, as to all "who contract with it, to be assumed to be a corporation de jure. The "legality of its corporate existence may be inquired into by the State, "but not by any one else. And this is as true where the corporation is "formed under a general law as it is where the corporate existence is "claimed under a special charter. Had this suit been brought "against the company it could not have denied its corporate existence, "neither can the plaintiffs, who contracted with it as a corporation, do so." (See also Hackensack Water Co. v. De Kay, 36 N. J. Eq., 548; Rafferty Rec'r v. Bank of Jersey City 33 N. J. Law, 368; Stockton v. American Tobacco Co., 55 N. J. Eq., 352.)

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As pointed out above (p. 18), a Court of Equity is not the proper tribunal to inquire into the validity of such organization. The action must be brought in a Court of Law, on quo warranto, or information in the nature of quo warranto, by the Attorney-General in behalf of the State.

11. By-laws.

The power to make and alter by-laws shall be in the stockholders, but any corporation may, in the certificate of incorporation, confer that power upon the directors; by-laws made by the directors under power so conferred may be altered or repealed by the stockholders

New. Cf. Act of 1875, $ 45.

See note to Section 1, p. 4 ante.

12. The business of every corporation shall be managed by its directors, who shall respectively be shareholders therein; they shall be not less than three in number, and, except as hereinafter provided, they shall be chosen annually by the stockholders at the time and place provided in the by-laws, and shall hold office for one year and until others are chosen and qualified in their stead; but by so providing in its certificate of incorporation, any corporation organized under this act may classify its directors in respect to the time for which they shall severally hold office, the several classes to be elected for different terms; provided, that no class shall be elected for a shorter period than one year or for a longer period than five years, and that the term of office of at least one class shall expire in each year; any corporation which shall have more than one kind of stock, may, by so providing in its certificate of incorporation, confer the right to choose the directors of any class upon the stockholders of any class or classes, to the exclusion of the others; one director of every corporation of this state shail be an actual resident of this state, and it shall not be necessary for more than one director to be a resident of this state, notwithstanding the provisions of any special charter or other act.

P. L. 1846, pp. 65, 66; P. L. 1849, p. 302; P. L. 1872, p. 89: Act of 1875, 16; P. L. 1881, p. 122; P. L. 1889, p. 412; P. L. 1892, p. 90; P. L. 1893, P. 444.

Unless the certificate of incorporation contains limitations upon the powers of the directors, the executive power of the corporation is vested in the board of directors. Vice-Chancellor Pitney said in Loewenthal v. Rubber Reclaiming Co. (52 N. J. Eq., 445):

"In this connection it is worthy of remark that the stockholders, as "such, have no power to make any contract or execute any work. Their "power is confined to electing directors and advising them in their con"duct of the business of the company."

In Plaquemines Tropical Fruit Co. v. Buck (52 N. J. Eq., 219, at p. 238) Vice-Chancellor Green uses the following language:

§ 11-12

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"It may sometimes become necessary in the transaction of some kind "of business of a corporation to have the consent of all the stockholders, "or of a certain proportion of them, and resolutions giving such consent "or advice have the effect of empowering the directors to act. But the board of directors is the legal executive, recognized as such not only "in practice and on principle, but by the statute."

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"If stockholders in a corporation disapprove of the company's man"agement, conducted without fraud or gross abuse of trust, or consider "their speculation a bad one, their remedy is to elect new officers or sell "their shares and withdraw." (McGill, C., in Benedict v. Columbus Construction Co., 49 N. J. Eq., 23.)

"Individual stockholders cannot question, in judicial proceedings, "corporate acts of directors if the same are within the powers of the cor"poration, and, in furtherance of its purposes, are not unlawful or against "good morals, and are done in good faith and in the exercise of an honest "judgment. Questions of policy of management, of expediency of con'tracts or action, of adequacy of consideration not grossly disproportion"ate, of lawful appropriation of corporate funds, are left solely to the "honest decision of the directors if their powers are without limitation "and free from restraint. To hold otherwise would be to substitute the "judgment and discretion of others in the place of those determined "on by the scheme of incorporation." (Green, V.-C., in Ellerman v. Chicago Junction, &c., Co., 49 N. J. Eq., 217, 232. See also Edison v. Edison United Phonograph Co., 52 N. J. Eq., 620.)

The board of directors must act as a board. A single director has no power merely by virtue of his office. For any power he undertakes to exercise he must get authority from the board. (Titus v. Cairo and Fulton R. R. Co., 37 N. J. Law, 98.)

A majority of the directors of a corporation, in the absence of any regulation in the charter, is a quorum, and a majority of such quorum when convened can do any act within the power of the directors. (Wells v. Rahway White Rubber Co., 19 N. J. Eq, 402; Barnert v. Paterson, 48 N. J. Law, 400; Met. Tel. Co. v. Dom. Tel. Co., 44 N. J. Eq., 573; Cadmus v. Farr, 47 N. J. Law, 208.)

Beyond the powers conferred upon them by the charter and the powers of the corporation itself the directors cannot go. Within that scope their discretion is controlling, and a court of equity will not interfere at the instance of dissatisfied stockholders with the exercise of their judgment. But while they have these broad powers they must exercise them for the benefit of the company, and not for their own benefit. They are trustees for the stockholders, and being trustees they can make no binding contracts with the company. An express contract between a director and the corporation is not void, but voidable, to be avoided at the option of the cestui que trust, exercised within a reasonable time. It matters not whether the contract be fair and honest and to the advantage of the company. Said Mr. Justice Dixon, in the case of Stewart v. Lehigh Valley R. R. Co. (38 N. J. Law, 505, at p. 522): “The vice which inheres in "the judgment of a judge in his own cause contaminates the contract; the

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