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shall combine with any other corporation or person for the creation of a monopoly or the unlawful restraint of trade or for the prevention of competition in any necessary of life. [Am'd, ch. 384 of 1897.]

Former section 7 amended.

Combination of corporations to prevent competition and control prices subjects franchises to forfeiture. People v. North R. S. R. Co., 19 N. Y. St. Rep., 853. Corporations can not consolidate their funds or form partnership. Id. Corporate acts, defined. Id.

Transaction between defendant and central association was held trust and violation of its charter, and failure in performance of its corporate duties, so material and important as to justify judgment of dissolution. People v. N. R. S. R. Co., 121 N. Y., 582.

When combination constitutes legal monopoly.


Monopoly may be created, in legal sense, in article, whether supply is restricted by nature or susceptible of indefinite production. Id.

Any combination, the tendency of which is to prevent competition in its broad and general sense, and to control, and thus, at will, enhance prices to the detriment of the public, is a legal monopoly. People v. North R. §. R. Co., 22 Abb. N. C., 164.

Receiver of one member of trust can not maintain action for accounting or dissolution. Gray v. Oxnard Bros. Co., 31 N. Y. St. Rep., 968.

Rights of such receiver defined. Id.

Receiver of one member of trust can not maintain action for accounting of profits. Gray v. Oxnard Bros. Co., 59 Hun, 387.

He has no right to fruits of illegal combination. Id.

Receiver of corporation belonging to trust is entitled, as between him and corporation, to assets. Pittsburgh C. Co. v. McMillin, 119 N. Y., 46.

In this state, there can be no partnership of separate and independent corpora tions, either directly or indirectly, through medium of trust. People v. N. R. S. R. Co., 121 N. Y., 582.

It is a violation of law for corporations to enter into a partnership. Id.; N. Y. & S. C. Co. v. F. Bk., 7 Wend., 412; Clearwater v. Meredith, 1 Wall., 29; Wheetenton Mills v. Upton, 10 Gray, 596.

The consolidation of corporations engaged in the same general line of business is not against public policy. Cameron v. N. Y. & Mt. Vernon W. Co., 62 Hun, 269. The combination between two existing corporations for the prevention of competition is condemned. Id. Their consolidation into one corporation is

permitted. Id.

Two or more new corporations, organized under chap. 567 of 1890, for the purpose of carrying on any kind of business of the same or of a similar nature may consolidate, but they can not maintain their separate existence and combine to prevent competition between them, or between themselves and other corporations. Cameron v. N. Y. & Mt. Vernon W. Co., 62 Hun, 269; N. Y. & Sharon C. Co. v. Fulton Bk., 7 Wend., 412; Wheetenton Mills v. Upton, 10 Gray, 582; Marine Bk. v. Ogden, 29 Ill., 428.



21. Change of number of directors.

22. When acts of directors void.

23. Liability of directors for making unauthorized dividends.

24. Liability of directors for contracting unauthorized debts and over

issue of bonds.

25. Liability of directors for loans to stockholders.

26. Transfers of stock by stockholders indebted to corporation.

27. Officers.

28. Inspectors and their oath.

29. Books to be kept.

30. Annual report.

31. Liability of officers for false certificates, reports or public notices. 32. Alteration or extension of business.

§ 20. Directors.-The directors of every stock corporation shall be chosen from the stockholders at the time and place fixed by the by-laws of the corporation by a plurality of the votes of the stockholders voting at such election. Vacancies in the board of directors shall be filled in the manner prescribed in the by-laws, and if a director shall cease to be a stockholder his office shall become vacant. Notice of the time and place of holding any election of directors shall be given by publication thereof, at least once in each week for two successive weeks immediately preceding such election, in a newspaper published in the county where such election is to be held, and in such other manner as may be prescribed in the by-laws. Policy holders of an insurance corporation shall be eligible to election as directors. At least one-fourth in number of the directors of every stock corporation shall be elected annually.

Former section 20 amended.

See sections 10, 26, chap. 611 of 1875, section 1, chap. 422 of 1881, section 1, chap. 232 of 1883, and section 2, chap. 23 of 1890, now repealed.

The powers vested in a corporation aggregate, which has a board of trustees, reside, for all purposes of practical administration, in the board as a governing body. People's Bank v. St. Anthony's R. C. Church, 109 N. Y., 512. The corporation can only act through instrumentalities and by delegation. Id. When the methods and agencies by which it may act are designated in the statute creating it, such designation operates as a limitation and excludes other modes of

action. Id.

The collective authority of the trustees acting as a board is essential, in order to bind the corporation by the action of the trustees. Id. They have no separate or individual authority to bind the corporation, though the majority, or the whole number, acting singly and not collectively as a board, should assent to the particular transaction. Id.; Cammeyer v. The Churches, 2 Sandf. Ch., 186; Constant v. Rector, etc., 4 Daly, 305.

The business of a corporation must be carried on by a board of trustees. Sheridan E. L. Co. v. Chatham N. Bk., 40 N. Y. St. Rep., 311. They may appoint an executive committee of their own members, investing it with power to transact the business of the company during the interval between the meetings of the board of trustees. Id.; Olcott v. Tioga R. R. Co., 27 N. Y., 546. Such committee can delegate power to indorse checks received in pursuance of its contract. Id.

Directors are authorized to manage and conduct the business of the company, to audit and pay its debts and make such contracts as are within the ordinary scope and business of the corporation. Kelsey v. Sargent, 40 Hun, 150.

They are not authorized to vote away the funds of the stockholders upon claims known by them to be fictitious or unfounded. Id. This would be a breach of their trust. Id. Nor have they the power to mortgage or consolidate the company with any other corporation, or to compel the stockholders to surrender up the stock owned by them, or to accept stock in another company. Id.; Blatchford v. Ross, 54 Barb., 42. Nor have they the power to bind the stockholders to pay such salaries as they by resolution see fit to vote themselves. Id.; Manx F G. R. Co. v. Branegan, 40 Ind., 361; Holder v. L. F. & B. & M. R. R. Co., 71 Ill., 106. The board may delegate its power to agents, or to a quorum of less than a majority of the trustees. Hoyt v. Thompson's executors, 19 N. Y., 207. They may ratify the unauthorized acts of their agents. Id.; F. & M. Bk. v. Empire S. D. Co., 5 Bosw., 284; see 6 Robt., 208. A formal resolution is not necessary for the appointment of an agent. Com. Bk. v. Kortright, 22 Wend., 348; N. P. Bk. v. G. A. W. Co., 53 Supr., 367; Negley v. C. R. Co., 1 N. Y. St. Rep., 298; Kelsey 1. Sargent, 40 Hun, 150; MacNaughton v. Osgood, 41 id., 109; Munson v. S., etc., R. R. Co., 4 Cent. Rep., 191.

Authority may be inferred from the general manner in which an officer is

allowed, without interference for a period sufficiently long to establish a settled conrse of business, to conduct the affairs of the company. Martin v. Webb, 110 U. S., 7; Martin v. Niagara F. P. Mfg. Co., 44 Hun, 130.

The stockholders can ratify the unauthorized act of the president in making, or agreeing to make, the notes of the company. Kent v. Quicksilver M. Co., 78 N. Y., 159; Sheldon H. B. Co. v. Eickmeyer H. B. Co., 90 id., 607; Martin v. Niagara F. P. Mfg. Co., 44 Hun, 130.

A by-law which requires the notes and mortgages of the company to be signed by the secretary does not prohibit the performance of such duty by the president or other officer to whom, by law or usage, it ordinarily appertains. Martin v. Niagara F. P. Mfg. Co., ante; see also Jansen v. Otto Stietz, etc., Co., 16 N. Y. St. Rep., 905.

A corporation may borrow money to meet its financial necessities and execute and deliver its note for such purpose. Jansen v. Otto Stietz, etc., Co., ante.

Directors, acting as directors and composing a majority of the board, can not make a bargain with themselves binding upon the company. Coleman v. Second Ave. R. R. Co., 38 N. Y., 201.

Trustees are not permitted to exercise their powers and manage or appropriate the property of which they have control for their own profit or emolument, nor take advantage of their position to obtain any personal benefit to themselves at the expense of the stockholders, Ogden v. Murray, 39 N. Y., 202.

The directors can not lawfully so control the corporation as to make it a party to a contract with themselves, wherein their personal interests are involved upon one, and the interests of the corporation on the other, side. MacNaughton v. Osgood, 41 Hun, 109; Hoyle v. Plattsburgh & M. R. R. Co., 54 N. Y., 314; Blake v. Buffalo C. R. R. Co., 56 id., 486; Met. E. R. Co. v. Man. R. Co., 14 Abb. N. C., 103; Duncomb v. N. Y., H. & N. R. R. Co., 84 N. Y., 190; Gardner v. Ogden, 22 id., 327; Smith v. Lansing, id., 531; Barnes v. Brown, SO id., 527; Risley v. Q., B. & W. R. R. Co., 62 id., 240; Butts v. Wood, 37 id., 317.

Such contract is not absolutely void, but it is void or valid as the corporation, when freed from the control of its interested directors, may elect. Barnes v. Brown, 80 N. Y., 527; MacNaughton v. Osgood, 41 Hun, 109; Met. E R. Co. v Man. E. Co., 14 Abb. N. C., 103; Martín v. Niagara F. P. Mfg. Co., 44 Hun, 130.

Though the corporation may avoid a resolution of the board of trustees fixing the amount of salary to be paid to any of their number for his services, it can not do so except upon equitable terms, and must restore to him what it receives from him. Duncomb v. N. Y., H. & N. R. R. Co., 84 N. Y., 190; MacNaughton v. Osgood, 41 Hun, 109; Met. E. R. Co. v. Man. R. Co., 14 Abb. N. C., 103. It ought upon rescinding, to pay the reasonable value of such services. Id.

Trustees voting themselves an increase of salary. McNab v. McNab & H. Mfg. Co., 62 Hun, 18.;

This rule, which excludes compensation, applies to the president, chosen by the directors from their own number, and also to a treasurer, when a director. See Kelsey v. Sargent, 40 Hun, 150.

Officers and agents, who are not directors, are entitled to recover on a quantum meruit, where no price is fixed. See Kelsey v. Sargent, 40 Hun, 150.

Trustee may recover for services rendered to inanufacturing company. McDowell v. Sheehan, 36 N. Y. St. Rep., 104.

In such case, judgment against company must be proved. Id.

When director, trustee or executive officer of corporation may enter into contract with himself and for his individual benefit. Matter of N. F. P. Mfg. Co., 122 N.

Y., 177.

When stockholder may sue directors in his own name.

N. Y. St. Rep., 194.

Averill v. Barber, 25

Directors, who acquire for themselves certain patents belonging to corporation must account for, and pay over all profits realized by them. Id.

But assignee, without notice, can not be made to account for profits of such patents. Id.

Beveridge v. N. Y. E. R. R. Co, 112 N. Y., I; Leslie v. Lorillard, 110 id., 536; Hoyt v. Thompson's Exrs, 19 id., 216; Barr v. N. Y., L. E. & W. R. R. Co, 52 Hun, 755; Munson v. Syracuse, etc., R. R. Co., 103 N. Y., 58; Wardell v. R. R. Co., 103 U. S., 651; Bell v. Leggett, 7 N. Y., 176; Sedgwick v. Stanton, 14 id., 289; Rudolph v. Southern B. League, 23 Abb. N. C., 199.

§ 21. Change of number of directors.-The number of directors

of any stock corporation may be increased or reduced, but not above the maximum nor below the minimum number prescribed by law, when the stockholders owning a majority of the stock of the corporation shall so determine, at a meeting to be held at the usual place of meeting of the directors, on two weeks' notice in writing to each stockholder of record. Such notice shall be served personally or by mail, directed to each stockholder at his last known postoffice address. Proof of the service of such notice shall be filed in the office of the corporation at or before the time of such meeting. The proceedings of such meeting shall be entered in the minutes of the corporation and a transcript thereof, verified by the president and secretary of the meeting shall be filed in the offices where the original certificates of incorporation were filed. If a corporation formed under or subject to the banking law, the consent of the superintendent of banks, and if an insurance corporation, the consent of the superintendent of insurance, shall be first obtained to such increase or reduction of the number of directors.

Former section 21 amended.

See section 2, chap. 248, of 1867; section 10, chap. 611, of 1875; section 1, chap. 422, of 1881, and section 1, chap. 23, of 1890, now repealed.

This section was re-enacted in chap. 57 of 1891.

§ 22. When acts of directors void. When the directors of any corporation for the first year of its corporate existence shall hold over and continue to be directors after the first year, because of their neglect or refusal to adopt the by-laws required to enable the stockholders to hold the annual election for directors, all their acts and proceedings while so holding over, done for and in the name of the corporation, designed to charge upon it any liability or obligation for the services of any such director, or any officer, or attorney or counsel appointed by them, and every such liability or obligation shall be held to be fraudulent and void.

Former section 22 without change.

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§ 23. Liability of directors for making unauthorized dividends. The directors of a stock corporation shall not make dividends, except from the surplus profits arising from the business of such corporation; nor divide, withdraw or in any way pay to the stockholders, or any of them, any part of the capital of such corporation, or reduce its capital stock, except as authorized by law. In case of any violation of the provisions of this section, the directors under whose administration the same may have happened, except those who may have caused their dissent therefrom to be entered at large upon the minutes of such directors at the time, or were not present when the same happened, shall jointly and severally be liable to such corpora

tion and to the creditors thereof to the full amount of the capital of such corporation so divided, withdrawn, paid out or reduced. But this section shall not prevent a division and distribution of the assets of any such corporation remaining after the payment of all its debts and liabilities upon the dissolution of such corporation or the expiration of its charter.

See section 2, title 4, chap. 18, part 1, R. S., section 13, chap. 40 of 1848, and section 19, chap. 611 of 1875, now repealed.

It is made a misdemeanor, by section 594 of the Penal Code, for a director of a stock corporation to concur in any vote or act, by which it is intended to make a dividend, except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law.

See chap. XI of the Penal Code for the criminal liability of directors in such corporations.

The term "capital stock," as used in this section, means the property of the corporation, contributed by the stockholders or otherwise obtained, to the extent required by its charter. Williams v. Western U. T. Co., 93 N. Y, 162; Burrall v. Bushwick R. R. Co., 75 id., 211; Barry v. Merchants' Ex. Co., 1 Sandf. Ch., 280. When its property exceeds this limit, the excess is surplus. Id. Such surplus may be divided among the stockholders, either in money or property. Id. Where a stock dividend does not exceed, in amount, the amount or value of such surplus, it is not in conflict with any principles of public policy. Id.

The object of this section is to prevent the dissipation of the fund designed for the benefit of creditors. Rorke v. Thomas, 56 N. Y., 553. Though a clear case must be established, still the substance, and not the mere form, of the provision must be the test of liability. Id.

The object of the provisions of this section was to prevent a withdrawal of the property which would reduce the value of its assets below the sum limited for its capital in its articles of association. Williams v. West. U. T. Co., 93 N. Y., 162. By this section, the legislature designed to provide substantially for the cases in which individual liability should result from the acts prohibited. Excelsior P. Co. v. Embury, 4 Hun, 648; aff'd 63 N. Y., 422; Rochester v. Baines, 26 Barb., 657. The trustees are not liable under this section for the costs in a judgment against the company perfected after they have ceased to be trustees. Rorke v. Thomas, ante.

There is no rule of law which imposes upon the officers of corporations the duty of requiring the production of the certificate of stock before the payment of dividends on the same. Brisbane v. D., L. & W. R. R. Co., 94 N. Y., 204; aff 'g 25 Hun, 438. The corporation is justified in being governed, in paying dividends, by the books containing the lists of the stockholders until proof of notice is given showing that other parties than those named therein are the owners of the stock.


A person's title to dividends upon stock standing in his name upon the company's books, is conclusive until impeached or impaired by the certificate itself with a transfer, or other evidence, showing that the stock belongs to some other party. The corporation is bound to pay it to him, or his personal representatives, unless it has some notice of a change of the title, or of a transfer of the stock, or such knowledge or information as will put it upon inquiry as to the ownership thereof. Id.

The rate of dividend to be paid, and the amount of surplus to be retained, by a corporation must rest in the fair and honest discretion of its trustees. McNab v. McNab & H. Mfg. Co., 62 Hun, 18. When such discretion has been exercised, the courts do not undertake to control such action, even though they might differ in their views of the proper management to be adopted and followed. Id.; Williams v. W. U. T. Co., 93 N. Y., 162; Scott v. Eagle F. Co., 7 Paige, 198.

A corporation is authorized, by law, to issue a scrip dividend, to represent its surplus earnings. Williams v. W. U. T. Co., 93 N. Y., 162; Hatch v. Same, id., 195. See Strong v. Brooklyn Cross-Town R. R. Co., id., 426.

See also Bank of Niagara v. Johnson, 8 Wend., 645; Northern R. R. Co. v. Miller, 10 Barb., 260; Williams v. W. U. T. Co, 9 Abb. N. C., 437.

Dividends must be made out of surplus profits which exist in presenti. Williams.

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