on a designated officer brings the corporation and not the individual into court. Apperson v. Insurance Co., 38 N. J. Law, 272.

The fact that two individuals who own practically all the stock of a corporation treat the corporation as a mere agency in carrying out a partnership agreement, ignoring corporate forms, does not give a court of equity power to take the corporate property under its control as upon the dissolution of a copartnership. The rights of the parties must be administered as shareholders in a corporation. Jackson v. Hooper, 76 N. J. Eq., 592.

10a.* Certificates and other corporate papers to be recorded.

It shall be the duty of the secretary of state to record in books for that purpose, all certificates and other papers relating to and in any way affecting corporations, now on file in his office and such as are required by any law of this state to be filed therein, excepting annual reports; such recording to be done upon typewriter with record ribbon of permanent color, on paper of approved durability; such records to be kept in a vault separate and away from the vault or place wherein the originals are filed; for this service the secretary of state shall, at the time of the filing of each certificate or other paper, charge a fee of ten cents per folio of one hundred words (with a minimum charge of one dollar), for the use of the state.

"An Act respecting the recording of certificates and other papers relating to and affecting corporations," approved March 28, 1904; P. L. 1904, p. 282.

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

*Arbitrary number. Section inserted here merely for convenient

reference.

directors; by-laws made by the directors under power so conferred may be altered or repealed by the stockholders.

Act of 1875, $45.

Whether the stockholders may exercise the power conferred by this section at an annual meeting in the absence of notice, does not seem to have been decided. It is therefore advisable in most cases to provide in the by-laws expressly for this.

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

The powers of the stockholders to amend the by-laws cannot be curtailed by a delegation of such power to the directors. In re A. A. Griffing Iron Co., 63 N. J. Law, 168; aff'd Id., 357.

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. The right of a stockholder to inspect the books of a corporation cannot be limited or prohibited by a by-law or provision in the certificate of incorporation. Hodgens v. United Copper Company, 67 Atl. Rep., 756.

For further cases as to by-laws see notes to Section 1.

12. Directors; Classes of; Voting for, how restricted.

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 placet 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

The place must be the registered office of the company in New Jersey. (Sec. 44.)

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 in 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.

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. 413; 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. The court said in Loewenthal v. Rubber Reclaiming Co., 52 N. J. Eq., 440:

"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 conduct of the business of the company."

The purely discretionary powers of a board of directors of a corporation concerning its internal affairs, fairly and honestly exercised, are not reviewable or controllable by a court of law or equity. Siegman v. Electric Vehicle Co., 140 Fed. Rep., 117.

But acts of a corporation which are ultra vires do not come within this rule. Id., 72 N. J. Eq., 403.

An agreement by which a corporation surrenders the management and control of its affairs and business to another corporation is ultra vires. The purpose of a grant of power as contained in this section is that the corporation shall exercise its powers and carry on its business through its own officers and agents. Holt v. California Development Co., 161 Fed. Rep., 3.

Liabilities of directors who do not direct.

For an article collating the authorities on this subject, see "The Bench and Bar," Vol. 18, p. 100. Kavanaugh v. Commonwealth Trust Co., 64 Misc. (N. Y.), 303.

A provision by which the directors of a corporation abdicate their duty of management and turn it over to an alien body is in direct violation of the words and meaning of the statute. McCarter, AttorneyGeneral, v. Firemen's Insurance Co., 73 Atl. Rep., 80, at p. 85.

In Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq., 219, at p. 238, the court said:

"It may sometimes become necessary in the transaction of the business of a corporation to have the consent of all the stockholders, or of a certain proportion of them, and resolutions giving such consent 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 statute."

"If stockholders in a corporation disapprove of the company's management, 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." 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 corporation, 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 contracts or action, of adequacy of consideration not grossly disproportionate, 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." Ellerman v. Chicago Junction Rys., &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. See Booth v. Land Filling & Imp. Co., 68 N. J. Eq., 536.

It is repugnant to the well-settled judicial policy of this state to permit the continuance in control, directly or indirectly, of directors or officers of a corporation against whom is made out a prima facie case of malfeasance in office, or who appear under the proofs to have used their official positions to their own advantage and to the resulting injury of the corporation and its shareholders. Fitzgerald v. State Mutual Building & Loan Ass'n, 69 Atl. Rep., 564. See also Michigan Law Review, Vol. 7, p. 53.

An agreement between shareholders controlling the stock of a corporation that certain directors shall act as dummies subservient

to the will of the parties is illegal and cannot be enforced in a court of equity. Jackson v. Hooper, 75 Atl. Rep., 568.

In a suit by a receiver of a corporation against non-resident directors to recover money lost by their negligence, the court acquired no jurisdiction in personam by service by publication and mailing. Lanning v. Twining, 64 Atl. Rep., 466.

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 & Fulton R. R. Co., 37 N. J. Law, 98. See Demarest v. Spiral Riveted Tube Co., 71 N. J. Law, 14; Audenried v. East Coast Milling Co., 68 N. J. Eq., 450; Clement v. Young-McShea Amusement Co., 70 N. J. Eq., 677.

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; Metropolitan Telephone Co. v. Domestic Telegraph Co., 44 N. J. Eq., 568; Cadmus v. Farr, 47 N. J. Law, 208.

Stockholders may not waive a method of corporate action which is provided by law, neither can they dispense with proper action by the board of directors. Audenried v. East Coast Milling Co., 68 N. J. Eq., 450, 468.

And a provision in the certificate of incorporation that the directors may act by a resolution signed by all without a vote at a duly called meeting amounts to legislation by the corporation, and is therefore invalid. Nor is it sustained by Section 8, subdivision 7, of the General Corporation Act. Id.

A resolution by the board of directors, giving authority to take a deed of property on which the corporation holds a mortgage, may be valid although not recorded in the minutes. McMichael v. Brennan, 31 N. J. Eq., 496.

The validity of resolutions attacked in a suit must be determined by the laws of the state of incorporation. Central Consumers' Wine and Liquor Co. v. Madden, 68 Atl. Rep., 777.

Minutes of board of directors as evidence of contract. Fleming v. Reed, 77 N. J. Law, 563.

A board of directors is not chargeable where one of the directors acts without either the knowledge or the authority of the board. Lanning v. Johnson, 69 Atl. Rep., 490.

An injunction against the persons who compose the board of directors of a corporation enjoining them individually in respect to corporate affairs, is an injunction against the corporation. Jackson v. Hooper, 76 N. J. Eq., 592.