do within the scope of the objects and powers of the corporation, the corporation does. They have a general power to make and modify contracts, and the stockholders can not control that power when it is exercised in good faith. The law does not authorize directors to bind their companies by contracts foreign to the purposes for which they were established, but it does hold companies bound by contracts duly entered into by their directors for purposes which they have treated as within the objects of their acts, and which can not clearly be shown not to fall within them; and they further hold companies to be bound by a continued course of dealing by their directors with third persons. Where it is provided by the charter, or the enabling act under which the corporation is organized, that the directors shall "manage its affairs," the provision is construed to vest in them full authority to act for the corporation in all ordinary matters within the scope of its charter powers." And a stockholder's resolution "that it is not deemed necessary to adopt by-laws, for the reason that the articles of incorporation provide that the control and management of the corporation shall be in the hands of the board of directors," has been held to leave the entire control of the corporate business with the directory with full power to do any 1 "Directors of Corporations," by Joseph A. Joyce, 19 Cent. L. J. 305, citing Leavitt v. Oxford &c. Co., 3 Utah, 265. all the powers of the company, except as to such matters as are directed by that act or the special act of incorporation, to be transacted 2 Flagg v. Manhattan Ry. Co., 20 by a general meeting of the comBlatchf. C. C. 142. 3 Eastern Counties Ry. Co. v. Hawkes, (1855) 5 H. L. Cas. 331, 381; National Exch. Co. v. Drew, 2 Macq. 103; Bargate v. Shortridge, 5 H. L. Cas. 297. 4 Aa in the General Railroad Act of New York, (N. Y. Laws of 1850, ch. 140, § 5) or that "the powers of the corporation shall be exercised by a board of directors." The English Companies Clauses Act of 1845 provides that the directors shall have the management and superintendence of the affairs of the company, and that they may lawfully exercise pany; but that all the powers so to be exercised shall be exercised in accordance with and subject to the provisions of the act and of the special act of incorporation; and shall be subject also to the control and regulation of any general meeting specially convened for the purpose, but not so as to render invalid any act done by the directors prior to any resolution passed by the general meeting. 8 Vict. ch. 16, § 90. 5 Bank of United States v. Dandridge, 12 Wheat. 113, per Marshall. C. J.; Hoyt v. Thompson, 19 N. Y. 207, 216; Tripp v. Swanzey Paper thing the stockholders themselves or the corporation might do.' Under their general power to manage the corporate affairs, conferred upon them by the charter or by-laws, the directors may sign checks, borrow money, issue notes and execute mortgages to secure the same; they may make the company liable Co., 13 Pick. 291; Sims v. Street Railroad Co., 37 Ohio St. 556; Wood v. Whelen, 93 Ill. 53; Dana v. Bank of United States, 5 Watts & S., 243, 246; Bank of Kentucky v. Schuylkill Bank, 1 Parson's Sel. Cas. 236; Burrill v. Nahant Bank, 2 Met. 163; s. c. 35 Am. Dec. 395; Wright v. Orrville Manuf. Co., 40 Cal. 20. Cf. Beaty v. Knowler's Lessee, 4 Pet. 152; Bargate v. Shortridge, 5 H. L. Cas. 297. usual in Massachusetts; and it was decided that the mortgage was valid, notwithstanding Gen. Laws N. H. c. 135, §2, provides that corporations authorized to hold real estate may convey the same by an agent appointed for that purpose, there being no express prohibition of other modes of conveyance. Where a board of directors approve of a sale of the corporation property under mortgages executed under the seal 1 Reichwald v. Commercial Hotel by the president (the mortgage notes Co., (1883) 106 Ill. 439. 2 Under laws authorizing a mining company "to enter into any obligations or contracts essential to the transaction of its ordinary affairs, or for the purposes for which it was created," and empowering the directors to exert its corporate powers, it was held, that the directors might borrow money for its purposes, negotiate loans, execute notes, and sign checks. Mahoney Mining Co. v. Anglo-Californian Bank, (1881) 104 U. S. 192; Saltmarsh v. Spaulding, (1888) 147 Mass. 244; s. c. 4 Ry. & Corp. L. J. 151. The circumstances of this case, more fully, were these: The directors of a New Hampshire corporation, by vote passed in Massachusetts, authorized the execution of a certain mortgage on land in Massachusetts, the directors having by by-law the management and control of the business of the corporation, and authority to appoint all necessary agents, and the mortgage, pursuant to the vote, was executed in the name of the corporation, as was having been duly entered on the books and included in the yearly report of liabilities), this confirms the notes and mortgages as valid obligations of the corporation. Reichwald v. Commercial Hotel Co., (1883) 106 Ill. 439. And where a mortgage given by a corporation to secure a loan represents upon its face that it was duly authorized by the board of directors, the mortgagee, knowing the corporation had power to borrow money, and advancing it in good faith, upon the security of the mortgage, is not bound to look beyond the mortgage for the authority for its execution. Manhattan Hardware Co. v. Phalen, (1889) 128 Pa. St. 110; Manhattan Hardware Co. v. Boland, (1889) 128 Pa. St. 119. And, even acts of an Iowa corporation in acquiring property in Illinois, and in giving notes and mortgages therefor, are not "corporate acts," but such as may be done by the directors in the exercise of their powers as agents, and may be performed in Illinois. Reichwald v. Commercial Hotel Co., (1883) 106 Ill. 439. 1 for items of account against which the statute of limitations might otherwise have been effectually interposed as a bar to recovery; they may bind their stockholders by a settlement of a pending action, although it subsequently appear that they failed to secure the best terms to which the corporation might have been entitled; may make assessments, without showing that the business of the corporation requires them to be made, and this whether the statute expressly confers such power or not, and they may make an assignment of all the property of an insolvent company for the benefit of creditors." The latter power, however, has been questioned. The directors have authority to amend by-laws adopted by themselves." The trustees of a secret society vested with general power to manage its property may lease the lodge room to another society for one night in each week.' Directors are not necessarily bound to keep corporate property insured.R § 228. Powers of railway directors. The directors of railway companies have power to regulate rates and to enter into contracts to carry upon certain terms for a specified time. And such an agreement may be enforced against the company although the time designated extend beyond the term of office of the directors making it.10 It is within the powers 1 Bliss v. Kaweah Canal &c. Co., 65 Cal. 502; Leavitt v. Oxford &c. Silver Mining Co., 3 Utah, 265. 2 Donohoe v. Mariposa &c. Co., (1885) 66 Cal. 317. Budd v. Multnomah Street R. Co., (1887) 15 Oregon, 413; s. c. 3 Am. St. Rep. 169. 4 Duncomb v. New York &c. R. Co., 88 N. Y. 1; s. c. 84 N. Y. 190; Chamberlain v. Bromberg, (1888) 83 Ala. 576. And a quorum of the directors will suffice for the purpose. Chase v. Tuttle, (1887) 55 Conn. 455; s. c. 3 Am. St. Rep. 64. A corporation's assignment for benefit of creditors made by the board of directors without consent of the stockholders, is void as against the stockholders, but not as against a mere creditor. Eppright v. Nickerson, (1885) 78 Mo. 482. 6 Heintzelman v. Druids Relief Assoc. (1888) 30 Minn. 138, where the articles of association provided for a board of directors and their meetings, and the management of the corporation by them, but made no provision for corporate meetings. 7 Phillip v. Aurora Lodge, (1883) 87 Ind. 505. 8 Charlestown Boot & Shoe Co. v. Dunsmore, (1884) 60 N. H. 85.. Beach on Railways, § 469; Railroad Co. v. Furnace Co., (1881) 37 Ohio St. 321; s. c. 41 Am. Rep. 509. 10 Railroad Co. v. Furnace Co., (1881) 37 Ohio St. 321, the time being for ten years. of directors of railways to enter into traffic agreements with connecting lines,' and when the pooling of earnings with other companies is recognized as valid under existing laws, the directors have authority to make contracts of that character.' So also the directors have been held not to have exceeded their powers in sharing with another company the expenses of a depot constructed by the latter for the accommodation of their joint traffic. But the board of directors of a railroad company have no authority, without the sanction of a lawful meeting of the stockholders, to make a lease for years of the road and property of the company, with authority to the' lessees to operate the road and to charge for carrying upon it. This is so especially of a lease for a term of years long enough to make the lease practically a sale. And, even a majority of the board of directors of a passenger railway company, though controlling a majority of the stock, have no power, without special authority in their charter, to execute a lease of the road and property without first submitting the question to the stockholders at a meeting called in accordance with their charter." $229. Limits of the directors' powers.-The power to elect directors does not devolve upon the directors, but that power is reserved to the shareholders. The power to sell, and transfer the charter and franchises, is not granted to them; the power to dissolve the body is not within the scope of their authority. The power is not possessed by them to effect great and radical changes in the organization of the body without the consent of the shareholders. They can not, at pleasure, and without the consent of the shareholders, increase or diminish the capital stock of the company and thus materially affect the value of the shares and the amount of dividends. The directors have no authority to sell its stock below Elkins v. Camden & A. R. Co., (1882) 36 N. J. Eq. 241. 5 Metropolitan Elevated Ry. Co. v. Manhattan Elevated Ry. Co., 11 2 Elkins v. Camden &c. R. Co., 36 Daly, 373; s. c. 14 Abb. N. Cas. 103. N. J. Eq. 241. 6 Martin v. Continental Pass. Ry. 3 Nashua &c. R. Co. v. Boston &c. Co., 14 Phila. (Pa.) 10. R. Co., 27 Fed. Rep. 821. 4 Stevens v. Davison, (1868) 18 Gratt. 819; s. c. 98 Am. Dec. 692. 7 Eidman v. Bowman, (1871) 58 III. 444; s. c. 11 Am. Rep. 90; Railway Co. v. Allerton, (1873) 18 Wall. 233. par, under a charter authorizing them to sell the property of the company or notes or bonds belonging to it. And therefore the issuing by the directors of a bond convertible into stock, which is the same thing in effect as the sale of so much stock, and the sale of such a bond at a discount, is unlawful and void. The board of directors can not by resolution release a large number of the stock subscribers from their liability, when such act is tantamount to destroying the company. The executive board of a voluntary association can not convert it into a corporation unless the power is conferred on it by the constitution and by-laws, or by an express resolution of the association. And on the other hand the officers of a corporation of Free Masons composed of several integral parts or lodges, can not dissolve the corporation without the full assent of the great body of the society. Directors have no right to pay the expenses of a suit brought for a libel of themselves individually out of the funds of the company." Nor can the directors authorize the expenses of sending out proxy forms with stamps for their return, to be paid out of the funds of the company. § 230. How far directors may delegate their powers.According to a general rule of the law of agency directors can not delegate to others those of their powers which require the exercise of judgment and discretion. Thus the making of calls is a matter of discretion and, therefore, can not be delegated by them to the treasurer. So the directors can not make the president and treasurer a committee to order sales of shares to obtain unpaid assessments thereon. For the same reason the directors can not delegate the power of allot 1 Sturges v. Stetson, (1858) 1 Biss. 246. 2 Bedford R. Co. v. Bowser, (1864) 48 Pa. St. 29, 37. 3 Rudolph v. Southern Beneficial League, (1889) 6 Ry. & Corp. L. J. 402; s. c. 7 N. Y. Supl. 135. 4 Smith v. Smith, (1813) 3 Desaus. 557. 5 Studdert v. Grosvenor, (1886) 33 Ch. Div. 528. 6 Studdert v. Grosvenor, (1886) 33Ch. Div. 528. 7 Silver Hook Road v. Greene, (1878) 12 R. I. 164; York &c. R. Co. v. Ritchie, (1856) 40 Me. 425. 8 Silver Hook Road v. Greene, (1878) 12 R. I. 164. 9 York &c. R. Co. v. Ritchie, (1856) 40 Me. 425. |