owner of the corporate stock." In another case1 where it was sought to establish the validity of certain transactions on the ground that one of the parties to the same owned all the stock of the corporation the court says, "If we assume that her ownership of all the stock be a material factor, the trouble is that the record does not warrant the conclusion that the stock is so owned,' and then proceeds at some length to demonstrate that the party did not own all the stock. It will be observed that both these cases fell short only on the proof of such ownership. But in the next case the ownership appears to have been satisfactorily shown, and the court says that "Relley v. Campbell (supra) is authority for the statement that where one individual owns all of the stock of a corporation the same is but the corporate double of the owner of the stock, and such proof destroys the separate entity of the corporation" and held the stockholder liable for the contract of the corporation. No authorities from other courts are cited, and the conclusions reached are a little remarkable.

Under a law which required the consent of two-thirds of the stockholders to the sale of mining ground, though that consent be given, a resolution of the board of directors to sell the same is indispensable; the law only superadds a requirement of such assent by the stockholders. A mortgage executed by the officers pursuant to a resolution passed at a preliminary meeting of

4 Black v. Harrison Home Co., 155 Cal. 121-128, 99 Pac. 494; contra, see Lynch v. McDonald, 155 Cal. 704, 102 Pac. 918, when the party knowing the fact of such ownership accepts the corporation's obligation.

5 Rutz v. O'Bear, 15 Cal. App. 435, 436, 115 Pac. 67; Deming v. Maas, 18 Cal. App. 330, 337, 123 Pac. 204. See Llewellyn Iron Works v. Albert Kinney Co., 171 Cal.

• Alta Silver Mining Co. v. Alta Placer Mining Co., 78 Cal. 629, 21 Pac. 373.

stockholders is not valid; it was not fully executed, and such a mortgage could be ratified only in the manner required to confer the original authority, that is, by resolution of the board of directors. While, speaking generally, the distinction between ratification and estoppel in pais has not been clearly marked in the decisions, yet in this state, on account of the fact that ratification is governed by statute, there is an important distinction. Section 2310 of the Civil Code requir

ing the ratification of an act to be by the same authority and in the mode required to confer original authority, in a suit brought by a corporation to recover the balance due upon a contract not authorized by the board of directors the defendant was not estopped by his part performance from pleading an election before such suit was brought to rescind the contract. As the corporation could have elected not to be bound, the same privilege must be accorded to the other party."

It will be presumed that a corporation's Articles provide for the required number of directors, in the absence of contrary evidence.10

7 Blood v. La Serena etc. Co., 113 Cal. 221, 41 Pac. 1017, 45 Pac. 252; cited with approval in Pacific Bank v. Stone, 121 Cal. 202, 206, 53 Pac. 634.

Ibid, and Curtin v. Salmon River etc. Co., 141 Cal. 308, 312, 99 Am. St. Rep. 75, 74 Pac. 851, and cases cited in these cases. Ratification by the board of "all transactions, payments and agreements" theretofore made by the officers (the one in question being known to the directors) considered as one element in binding the corporation, Allen v. Central Counties Land Co., 21 Cal. App. 163, 166, 131 Pac. 78.

⚫ Salfield v. Sutter County etc. Co., 94 Cal. 546, 29 Pac. 1105. It is necessary that the full board act formally in order to ratify a promoter's contract intended to be for the benefit of the corporation, Rideout v. National Homestead Ass'n, 14 Cal. App. 349, 112 Pac. 192; Blair v. Brownstone etc. Co., 168 Cal. 632, 143 Pac. 1022.

10 Barrell v. Lake View Land Co., 122 Cal. 129, 133, 54 Pac. 594. Cal. Corp.-14

The directors have no power to ratify a note given by the officers for a debt not owing by the corporation,11 nor can the stockholders do what the directors can not do,12 such as selling its property and taking stock in another corporation in payment and distributing the shares received among themselves. And, notwithstanding a corporation will be bound by its general usage and practice with reference to the acts of its agents, a settlement of a defalcation to a bank by the acceptance of a deed of real estate is not an ordinary transaction and the power to do so must be conferred by the board of directors.18 The directors are the only body which can hire employees (in the absence of a delegation of that power to the president or other person); the stockholders can not do so.14

REAL ESTATE CONTRACTS

The authority to sell real estate being required by the statute to be in writing, no one has or can acquire such authority from the corporation except by virtue of a resolution of the board of directors, duly passed and recorded.15 It was also said that acceptance by the corporation of part of the purchase price of the property was not sufficient part performance to authorize a

11 Hall v. Auburn etc. Co., 27 Cal. 255, 256, 87 Am. Dec. 75; distinguished in case of advances of money to the corporation, Seeley v. San Jose etc. Co., 59 Cal. 22, 24.

12 Vercoutere v. Golden State etc. Co., 116 Cal. 410, 415, 48 Pac. 375; Kohl v. Lilienthal, 81 Cal. 378, 387, 6 L. R. A. 520, 20 Pac. 101, 22 Pac. 689.

13 Bank of Healdsburg v. Bailhache, 65 Cal. 327, 331, 332, 4 Pac. 106. 14 Brown v. Valley View etc. Co., 127 Cal. 630, 60 Pac. 424; Bassett v. Fairchild, 132 Cal. 637, 652, 52 L. R. A. 611, 64 Pac. 1082, in dissenting opinion.

15 Salfield v. Sutter County etc. Co., 94 Cal. 546, 29 Pac. 1105; Blood v. La Serena etc. Co., 113 Cal. 221-229, 41 Pac. 1017, 45 Pac. 252, cited in Nason v. Lingle, 143 Cal. 363, 366, 77 Pac. 71.

decree for specific performance of an oral agreement to convey real estate.

OWNING STOCK

A person who owns no stock when he is elected a director never becomes a de jure director and, although stock is afterwards given him, if he never accepts the office nor takes part in the proceedings or acts of the directors he never becomes a de facto director.16 An interesting distinction is drawn in this case between a director de facto as to third persons and as to the corporation itself. A director who ceases to be a stockholder during his term, but continues to act is a de facto director until he is ousted in a direct proceeding for that purpose, and his acts are valid as to third persons,1 and a director holding over is a de facto director.18 If the by-laws do not fix the amount of stock which qualifies a person to be a director he must, notwithstanding, own some stock.18

QUORUM

A quorum of directors must be present, and also acting, otherwise the proceedings of the board will be void.19 This subject will be further considered under section 308 of the Civil Code, and in the following paragraph.

16 Rozecrans Gold M. Co. v. Morey, 111 Cal. 114, 116, 43 Pac. 595. See, also, Waterbury v. Temescal W. Co., 11 Cal. App. 632, 105 Pac. 940.

17 San Jose Sav. Bank v. Sierra etc. Co., 63 Cal. 179; Robinson v. Blood, 151 Cal. 504, 506, 507, 91 Pac. 258, and even so as to dealing, themselves, with the corporation. See Shively v. Eureka etc. Co., 5 Cal. App. 236-244, 89 Pac. 1073; Seal of Gold Min. Co. v. Slater, 161 Cal. 621, 629, 120 Pac. 15.

18 Kinard v. Ward, 21 Cal. App. 92, 130 Pac. 1194.

19 Curtin v. Salmon River etc. Co., 130 Cal. 345, 349, 80 Am. St. Rep. 132, 62 Pac. 552.

PERSONALLY INTERESTED

A director can not vote on any question in which he has a personal interest, nor can he be counted to make a quorum of the board.20 It is said that the court will not inquire whether he acted fairly or unfairly; he must not be subjected to temptation to advance his own interests. This rule was, however, greatly relaxed in a lafer case,21 where it was said that a director is "not absolutely precluded from dealing with the corporation of which he is a director. Any transaction between them is subject to rigid scrutiny, and is voidable at the instance of the beneficiary for any violation of his duty as trustee, but is not ipso facto void. The mere fact that the creditor was a director of the company does not render the transaction fraudulent." The court said, however, that there was previous authority of the board to make the contract, a sufficient number of directors voting therefor, excluding the two directors who were personally interested in the matter, and also that it was no fraud for these two directors to conceal from the

20 Shakespear v. Smith, 77 Cal. 638, 640, 11 Am. St. Rep. 327, 20 Pac. 294; Smith v. Los Angeles etc. Ass'n, 78 Cal. 289, 12 Am. St. Rep. 53, 20 Pac. 677; Davis v. Rock Creek etc. Co., 55 Cal. 359, 36 Am. Rep. 40; Blood v. La Serena etc. Co., 113 Cal. 221, 41 Pac. 1017, 45 Pac. 252; Wickersham v. Crittenden, 93 Cal. 17, 28 Pac. 788; Curtin v. Salmon River etc. Co., 130 Cal. 345, 348, 80 Am. St. Rep. 132, 62 Pac. 552; Smith v. Los Angeles Immigration etc. Ass'n, 78 Cal. 289, 292, 12 Am. St. Rep. 53, 20 Pac. 677; Pacific Vinegar etc. Works v. Smith, 145 Cal. 352, 364, 104 Am. St. Rep. 42, 78 Pac. 550; Goodell v. Verdugo etc. Co., 138 Cal. 308, 71 Pac. 354; Bassett v. Fairchild, 132 Cal. 637-647, 52 L. R. A. 611, 64 Pac. 1082; by a divided court, overruling same case in department (6 Cal. Unrep. 458, 61 Pac. 791), where it was held that, the meeting being legally assembled, a majority of those present could pass any lawful resolution, Lowe v. Los Angeles etc. Co., 24 Cal. App. 367, 141 Pac. 399.

21 Schnittger v. Old Home etc. Mining Co., 144 Cal. 603, 606, 78 Pac. 9. See, also, California etc. Co. v. Cuddeback, 27 Cal. App. 450, 150 Pac. 379.