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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 Cal. 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 Lot 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.

Pac. 792, 29 Pac. 51.)

(Wickersham v. Brittan, 93 Cal. 39, 28

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. 363.)

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 company 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.)

DIRECTORS MUST BE ELECTED AND BY-LAWS ADOPTED AT FIRST MEETING. (Repealed.)

Sec. 306, C. C. En. March 21, 1872. Amd. 1873-74, 202. Rep. 1889, 365.

RIGHT OF STOCKHOLDERS TO VOTE.

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

multiplied by the number of his shares of stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit.

The provisions of this section, so far as it relates to cumulative voting, shall apply to all corporations and associations doing business in this state, having a capital stock or shares of stock, and electing directors by a meeting of stockholders held in this state, whether such corporations or associations are organized under the laws of this state or not, and no election for directors of any corporation or association, doing business in this state, and electing directors in this state, shall be valid, if the right of a stockholder to cumulate his shares as herein provided shall be denied.

In corporations having no capital stock, each member of the corporation may cast as many votes for one director as there are directors to be elected, or may distribute the same among any or all of the candidates.

In any case the director receiving the highest number of votes shall be declared elected.

The provisions of this section, so far as it relates to cumulative voting, shall not apply to literary, religious, scientific, social or benevolent societies, having no capital stock or shares unless it shall be so provided in their by-laws or rules. En. March 21, 1872. Amd. 1873-74, 202; 1877-78, 78; 1887, 95; 1903, 253.

Election, how conducted: See secs. 312, 315, C. C., note, and sec. 12, art. XII, Const. and notes.

Legislative History.

The election of directors was provided for in the corporation act of 1850, page 347; in the corporation act of 1853, page 87; in the railroad act of 1861, page 607; and the amendatory act of 1870, page 577.

The original section read as follows: "307. All elections must be by ballot, and unless otherwise prescribed by the by-laws, a majority of the subscribed capital or of the members is necessary to a choice." The section as amended in 1873-74 read: "All elections of directors must be by ballot, and a vote of stockholders representing a majority of the subscribed capital stock, or of a majority of the members is necessary to a choice. If there be capital stock in the corporation, each stockholder is entitled to one vote for each share held by him

at all such elections, and also at all elections at other meetings of stockholders."'

The section as amended in 1877-78 was the same as the above, with the exception of the second and last paragraphs. The last paragraph above was added by the amendment of 1887 and the second paragraph above by the amendment of 1903.

Section Cited.

Wickersham v. Brittan, 93 Cal. 36, 28 Pac. 792, 29 Pac. 51; Dulin v. Pacific etc. Co., 103 Cal. 363, 28 Pac. 792, 29 Pac. 51; Market St. Ry. Co. v. Hellman, 109 Cal. 589, 597, 42 Pac. 225; Smith v. S. F. & N. P. Ry. Co., 115 Cal. 590, 609, 56 Am. St. Rep. 119, 47 Pac. 582; Krause v. Durbrow, 127 Cal. 683, 60 Pac. 438.

Annotation.

Right to Vote.-Every qualified stockholder present at an election has a right to vote, at one time, the number of shares owned by him for the whole number of directors to be elected, or to cumulate his shares upon one candidate, or distribute them among as many candi. dates as he may see fit. A corporation has no power to adopt any other mode of election. (Wright v. C. C. etc. Co., 67 Cal. 532, 8 Pac. 70. To same effect: Dulin v. Pacific etc. Co., 103 Cal. 357, 35 Pac. 1045, 37 Pac. 207; Smith v. S. F. & N. P. Ry., 115 Cal. 590, 56 Am. St. Rep. 119, 47 Pac. 582.)

The right of stockholders to elect directors, when given by statute, cannot be taken away by act of the corporation. (Brewster v. Hartley, 37 Cal. 15, 99 Am. Dec. 237.)

A court has no power to relieve stockholder of his error in failing to vote his stock for his own interest. (Dulin v. Pacific etc. Co., 103

Cal. 357, 35 Pac. 1045, 37 Pac. 207.)

A trustee of stock is the legal owner of the stock, and as against the corporation and all the world, except his cestui que trust, he may vote the stock for all purposes. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

But the pledgor of stock has the right to vote it, where the pledgee does not claim right to vote it under an agreement with pledgor. (Dulin v. Pacific etc. Co., 103 Cal. 357, 35 Pac. 1045, 37 Pac. 207.)

Stock belonging to corporation cannot be voted by any person, even if held in the name of such person as trustee. And certificates of stock issued as a pledge to secure a creditor (of the corporation) are illegally issued and cannot be voted by any person. (Brewster v. Hartley, 37 Cal. 15, 99 Am. Dec. 237. To same effect: Smith v. S. F. & N. P. Ry. Co., 115 Cal. 592, 56 Am. St. Rep. 119, 47 Pac. 582. Distinguished: Illinois etc. Bank v. Pacific Ry. Co., 117 Cal. 344, 49 Pac. 197. Note citation: 34 Am. St. Rep. 644.)

Pooling Agreements.-An agreement between three persons for purCorporation Laws-11

chase, as an entirety, of certain stock to be sold in course of administration of estate of a deceased person, and that, in order to secure control and management of business policy of the company, they would combine the stock purchased so that it would be voted as a unit for five years, the vote to be determined by ballot between them, is not void as against public policy, and is to be construed as giving the majority authority to vote the stock of the third owner by proxy, and such agreement having been made in consideration of the purchase of the stock, the proxy is in the nature of a power coupled with an interest which cannot be revoked at the pleasure of either of the parties. (Smith v. S. F. & N. P. Ry., 115 Cal. 584, 56 Am. St. Rep. 119, 47 Pac. 582.)

And an injunction will issue, in a proper case, to prevent stockholders from voting their stock in violation of an agreement to vote it together in accordance with the ballot of a majority of them. (Foster v. Smith, 115 Cal. 611, 47 Pac. 591.)

Proxies. A stockholder may vote his stock as he pleases, at an election of directors, and, while he may give a proxy to another stockholder, the court cannot compel him to do so in the absence of an agreement upon a valuable consideration that he would give such proxy. (Dulin v. Pacific etc. Co., 103 Cal. 357, 35 Pac. 1045, 37 Pac. 207.)

And stockbrokers, who have purchased stock of a corporation upon margins for others, if authorized to vote the stock at all, are bound to vote it in the interest of those for whom they have purchased it. (Fox v. Hale & Norcross etc. Co., 108 Cal. 369, 41 Pac. 308. See notes to subd. 3, sec. 303, C. C.)

ORGANIZATION OF BOARD OF DIRECTORS, ETC.

Sec. 308, C. C. Immediately after their election, the directors must organize by the election of a president, who must be one of their number, a secretary and treasurer. They must perform the duties enjoined on them by law and the by-laws of the corporation. A majority of the directors is a sufficient number to form a board for the transaction of business, and every decision of a majority of the directors forming such board, made when duly assembled, is valid as a corporate act. En. March 21, 1872.

Quorum necessary for valid action: See sec. 305, C. C., ante and notes.

Section Cited.

Smith v. Immigration etc. Assn., 78 Cal. 292, 12 Am. St. Rep. 53, 20 Pac. 677; Alta Silver Mining Co. v. Mining Co., 78 Cal. 632, 21

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