Imágenes de páginas
PDF
EPUB

§ 10 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.

This section 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 Vanneman v. Young in that particular.

In Stevens v. Borough of Merchantville (62 N. J. Law, 167) it was held that an ordinance by which a muncipality makes a grant to a private corporation is void if such corporation was non-existent at the time the ordinance was introduced and passed upon second reading. (See also Lake v. Ocean City, 62 N. J. Law, 160, 162).

66

66

64

De facto corporations.

The law on this subject 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 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 or "der to charge its shareholders individually as partners. * ** Where "it is shown that there is a charter or a law under which a corporation "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 existence of 66 a corporation is established.

66

[ocr errors]

* *

[ocr errors]

“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 legal. "ity 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; Vanneman v. Young, 52 N. J. Law, 403; Stockton v. American Tobacco Co., 55 N. J. Eq., 352; In re Trenton St. Ry. Co., 47 Atl. Rep., 819.)

[ocr errors]

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. (See cases cited, p. 18, ante.)

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.

Can the stockholders exercise the power conferred by this section at an annual meeting in the absence of notice? This question does not seem to have been decided. It is therefore advisable in most cases to provide in the by-laws expressly as to this.

The powers of the corporation cannot be enlarged by a by-law. (Stewart v. Odd Fellows' Mutual Life Ins. Co., 12 N. J. L. J., 110.)

Construction.-A provision in the by-laws of a corporation that at special meetings of the stockholders questions should be determined by the vote of a majority of stockholders" was construed to mean a majority in interest of the stockholders, the by-laws providing that all questions as to elections should be governed by the Corporation Act of 1896. (Weinburgh v. Union Street Railway Advertising Co., 55 N. J. Eq., 640.) For further cases as to by-laws see 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 shall 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.

§ 11-12

§ 12

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 Lowenthal 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 used the following language:

"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

66

[ocr errors]

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.)

44

[ocr errors]

"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 dispropor"tionate, 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; Hunt v. American Grocery Co., 80 Fed. Rep., 70.)

46

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.)

An express contract between a director and the corporation is not § 12

*

*

*

void, but voidable, to be avoided at the option of the corporation, 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 mind of the director, or trustee is the forum in which he and his cestui que trust are urging "their rival claims, and when his opposing litigant appeals from the “judgment there pronounced that judgment must fall. It matters not "that the contract seems a fair one. Fraud is too cunning and evasive "for courts to establish a rule that invites its presence nor is "it proper for one of a board of directors to support his contract with "his company upon the ground that he abstained from participating as "director in the negotiation for and final adoption of the bargain by his co-directors; the very words in which he asserts his right declares the wrong; he ought to have participated, and in the interest of the stockholders, and if he did not, and they have thereby suffered loss, of which they shall be the judges, he must restore the rights he has "obtained—he must hold against them no advantage that he has got through neglect of his duty toward them." (See also Guild, Ex'r, v. Parker, Rec'r, 43 N. J. Law, 430; Elkins v. Camden & Atl. R. R. Co., 36 N. J. Eq., 467, at p. 470; Gardner v. Butler, 30 N. J. Eq., 702; Stroud v. Consumers Water Co., 56 N. J. Law, 422, 427; Hickman v. Hickman Hose Co., 13 N. J. L. J., 111; but see Twin Lick Oil Co. v. Marbury, 91 U. S., 587; Barr v. Pittsburgh Plate Glass Co., 57 Fed. Rep., 86.)

[ocr errors]
[ocr errors]
[ocr errors]

This rule, however, is for the benefit of the corporation, and as to others the contract is valid and enforceable. (Barnes v. Trenton Gas Light Co., 27 N. J. Eq., 33; Stratton v. Allen, 16 N. J. Eq., 229.) And so where the director of a bank, who was also a member of a firm, offered a note belonging to the firm to the bank, for discount, which was procured from the maker by fraud, of which he as a member of the firm had notice, it was held that the knowledge of the director was not constructive notice to the bank, such director not having acted with the board in making the discount and not having communicated his knowledge to any of the officers of the bank. He was regarded in the transaction as a stranger. (First Nat. Bank of Hightstown v. Christopher, 40 N. J. Law, 435; see also Sudbury v. Merchantville Building & Loan Association, 57 N. J. Eq., 342, 345.)

A director of two corporations which contract with each other is incapacitated to take part in settling the terms of the contract. (Met. Tel. Co. v. Dom. Tel. Co., 44 N. J. Eq., 568, 573.)

Where the corporation is insolvent the directors are trustees for the creditors. (See Section 64 and notes.)

By statute (P. L., 1895, p. 166, Section 64 of the Revision of 1896) corporations are prohibited from conveying or assigning any of their assets after they have become insolvent or suspended their ordinary business for want of funds to carry on the same. But even before the

§ 12 passage of this statute a board of directors of an insolvent company

could not prefer one of its own members. "The weight of authority is

[ocr errors][ocr errors]

in support of the wholesome rule that the directors of an insolvent corporation are trustees of its funds for its creditors

*

* * by no act

"of such director can he obtain a position superior to that of the other "creditors for whose benefit he holds the trust assets." (Montgomery v. Phillips, 53 N. J. Eq., 203, 2!7. Wilkinson v. Bauerle, 41 N. J. Eq., 635; Savage v. Miller, 56 N. J. Eq., 432.)

[ocr errors]

Equity regards the property of a corporation as a fund held in "trust for the payment of its debts, and if other than bona fide creditors "of the corporation, or purchasers, possess themselves of it, they take it charged with this trust, which a court of equity will enforce against "them. This is now a well-recognized rule of equity jurisprudence.” (Natl. Trust Co. v. Miller, 33 N. J. Eq., 155, 163.)

"The directors of an incorporated company cannot speculate with "the funds or credit of the company, and appropriate to themselves the profits of such speculations. They cannot, in making sales or pur"chases for the company, take advantage of their position as directors, "and either directly or indirectly speculate upon the company. If they "are the only persons interested as stockholders, yet, if such specula"tions impair the capital stock, and have a tendency to substitute a fictitious for a real value, such transactions are opposed to the policy of "their act of incorporation, and cannot, in any manner, be countenanced by a court of equity." (Redmond v. Dickerson et al., 9 N. J. Eq., 507, 516.)

[ocr errors]

Qualification of directors.-See note to Section 39.

Resignation of director.-A director of an ordinary business corporation can resign orally or in writing, unless there is some provision to the contrary in the charter or by-laws. (Fearing v. Glenn, 73 Fed. Rep., 116.) A written resignation takes effect on delivery to the president; acceptance by the board is not necessary. (Bank of St. Louis v. Faber, 86 Fed. Rep., 443.)

*

Annual elections.-"That provision of the charter, which declares that "annual meetings of the stockholders shall be held for the election of "directors, grants to the stockholders a highly important and valuable right, which the directors can neither defeat nor impair * The right, therefore, to change the day for the annual meeting is one which, "from its very nature, can alone be exercised by the stockholders. No "board of directors can, without the stockholders' consent, hold office "for a period longer than one year." (Elkins v. Camden & Atl. R. R. Co., 36 N. J. Eq., 467; Archer v. American Water Works Co., 50 N. J. Eq., 33.)

Chancellor Green, in Hilles v. Parrish, 14 N. J. Eq., 380, declared that any action by the directors of a corporation, which was designed to retain themselves in office, and thus perpetuate their control over the affairs of the corporation, against the will of the holders of a majority of the stock, was illegal and void, and that the injured sfockholders, in such a case, were entitled to relief by injunction.

For further cases as to elections, see notes to §§ 34, 36 and 42.

« AnteriorContinuar »