board the fact that it was really they who were lending the company the money, the corporation sustaining no detriment nor the directors obtaining any undue advantage over the corporation. Even if the interested directors had voted for the transaction, if there were enough not interested who voted for it, its validity would not be affected.22 A director may purchase stock at an assessment sale for his own personal benefit, and no presumption arises that he is purchasing for the benefit of the corporation.23 Directors may purchase corporate property at judicial sale on valid judgments held by them against the corporation.24 A contract between a corporation and one of its directors by which the director obtains some property or advantage to himself is not absolutely void, but is voidable only at the instance of the corporation or of its stockholders. The corporation, however, may be estopped by acquiescences or laches from questioning its validity, and the right to avoid the contract must be exercised by the corporation itself, or a stockholder acting for it; it can not be transferred to another.25 And in a mortgage foreclosure sale where the trustees sold the property to a bank in which they were interested, the bank being the highest bidder, some injury must be shown by the stockholders in order to set the sale aside.26 See President and Officers, post.

22 Ibid, citing Porter v. Lassen etc. Co., 127 Cal. 261, 59 Pac. 563. 23 Stephens v. Lemoore etc. Co., 22 Cal. App. 579, 135 Pac. 707.

24 Snediker v. Ayers, 146 Cal. 407, 80 Pac. 511.

25 Fudickar v. East Riverside etc. Dist., 109 Cal. 29-41, 41 Pac. 1024, Graves v. Mono Lake etc. Co., 81 Cal. 303, 22 Pac. 665; Lacken bach v. Finn, 26 Cal. App. 482, 147 Pac. 471.

20 Copsey v. Sacramento Bank, 133 Cal. 659, 85 Am. St. Rep. 238 66 Pac. 204; Herbert Kraft Co. v. Bryan, 140 Cal. 73, 79, 73 Pac

RATIFICATION BY STOCKHOLDERS INEFFECTIVE

In a case where the vote of a salary to a vice president and general manager was made at a directors' meeting where the presence of the vice president was necessary to make a quorum, not only was the action of the board void, but it was assumed in the dissenting opinion that a ratification of the acts of the board of directors by the stockholders did not cure it because this vote was not an "act" of the board, and because it was not within the power of the stockholders to vote away any of the funds of the corporation against the protest of the minority of the stockholders;27 still the officer was entitled to a quantum meruit compensation for his services, and receiving and retaining the benefits of a note executed without proper authority estops the corporation from disputing its validity.28 But if an act is contrary to law it is incapable of ratification, and equity will not enforce any rights claimed under such an act.29

Even if a stockholders' meeting increasing the number of directors is subject to attack as to its validity, yet the additional directors being elected and exercising the duties of that office for a long time, covering later stockholders' meetings, without objection by any of the stockholders, they are estopped from questioning the acts of such directors otherwise legal.30 The court says further that the increased board were de facto directors and, so far as third persons are concerned, their acts are as valid and binding on the corporation as if they were de jure officers, and deny the application of the rule (as in public offices) that there can be no

27 Bassett v. Fairchild, 132 Cal. 637-647, 651, 652, 52 L. R. A. 611, 64 Pac. 1082.

28 Curtin v. Salmon River etc. Co., 141 Cal. 308, 99 Am. St. Rep. 75, 74 Pac. 851.

29 Martin v. Zellerbach, 38 Cal. 300, 311, 99 Am. Dec. 365.

80 Chandler v. Hart, 161 Cal. 405, Ann. Cas. 1913B, 1094, 119 Pac. 516.

de facto officer where there is no de jure office, in cases like this.

The fact that two corporations have some directors in common does not make the transaction void if the relation has not been abused.31 Such transactions can be avoided for fraud, but may be acquiesced in until benefits are received which can not be returned, when they can not be repudiated.32

In the Sausalito case, however, the court makes a quotation from an Alabama case, saying that "the correct doctrine is well stated" therein, which quotation goes much further than any of the previous California cases. It is briefly as follows: "Such a transaction may be avoided by either company, or at the instance of a stockholder of either company, without regard to the question of advantage or detriment to either company. Both the corporations are armed with the right to repudiate such a transaction, no matter how fair or open it may be. . . . The general rule is that such dealings are not absolutely void, but are voidable, ... they become binding if acquiesced in by the corporations and their stockholders." But it was held that a contract by the president of a corporation, in the name of the corporation, with a partnership of which he is a member is invalid, although if there is no fraud, a quantum meruit may be recovered.33 But later it was said a contract between the president of the corporation with the corporation is voidable and will

31 Pauly v. Pauly, 107 Cal. 8, 48 Am. St. Rep. 98, 40 Pac. 29; Smith v. Ferries etc. R. Co., 5 Cal. Unrep. 889, 51 Pac. 710; Sausalito Bay etc. Co. v. Sausalito Imp. Co., 166 Cal. 302, 306, 136 Pac. 57; Reclamation Dist. v. Birks, 159 Cal. 233, 237, 113 Pac. 170; Manning v. App etc. Min. Co., 171 Cal. - 154 Pac. 301.

32 San Diego etc. R. Co. v. Pacific etc. Co., 112 Cal. 53-58, 33 L. R. A. 788, 44 Pac. 333, and cases in following note.

33 Sims v. Petaluma etc. Co., 131 Cal. 656, 63 Pac. 1011; reversing s. c. 6 Cal. Unrep. 540, 62 Pac. 300.

be set aside irrespective of its fairness.84 The directors of an insolvent corporation can not secure any preference for themselves by buying its notes at a discount. But if the agent purchased with authority, the corporation would owe to him the amount paid by him for the claims.86

HAVING SAME STOCKHOLDERS

The fact that two corporations, one engaged in one kind of business and the other in another kind, although they have the same stockholders, is not sufficient in itself alone to impute liability of one corporation for the act of the other.37

RESIGNATIONS AND SUCCESSORS

If a director tenders his resignation as such "to take effect upon acceptance," the resignation is not effective until it is accepted, and he may attend all meetings of the board and vote therein, in the meantime.38 The resignation being accepted, the court says "it can not be questioned that the board had power to accept the resignation of a director and to elect his successor."

INJUNCTIONS

The supreme court has said that injunctions affecting the course of proceedings of a corporation is the exercise of a delicate power, requiring great caution

34 Pacific Vinegar etc. Works v. Smith, 145 Cal. 352, 104 Am. St. Rep. 42, 78 Pac. 550.

35 Bonney v. Tilley, 109 Cal. 346, 42 Pac. 439; Davis v. Rock Creek etc. Co., 55 Cal. 359, 361, 36 Am. Rep. 40.

36 Sullivan v. Triunfo etc. Co., 39 Cal. 459-468.

37 Collom v. Roos Bros., 25 Cal. App. 73, 142 Pac. 858; Atkinson v. Western etc. Syndicate, 170 Cal. 503, 150 Pac. 360, 363.

88 Seal of Gold Min. Co. v. Slater, 161 Cal. 621, 626, 120 Pac. 15.

and sound discretion, and rarely, if ever, should be exercised in a doubtful case, and in the case before them refused to restrain the payment of dividends or interfere with the voting at elections.3

MUST BE ASSEMBLED

Another rule very rigidly adhered to in this state, although widely departed from in other states by virtue of statutes or regulations contained in their Articles, is that the board of directors can do nothing except when duly assembled.40 It is said that "the question when they shall be considered duly assembled is not settled by the statute."40 See Civil Code, sec. 308, post.

The fact that a director who had tendered his resignation "to take effect upon acceptance," the same not having been accepted, stated that he would not attend the meeting, but actually did so, is not a fraud upon the corporation, and will not affect the legality of the meeting, although his presence was necessary to make a quorum. And this was held to be true, although another director failed to attend on account of that statement, thinking there would be no quorum present without him.41

VACANCIES

The fact that one or more vacancies exist in the board does not affect the validity of a mortgage authorized by a majority of the full board.42 In this case the

39 Willis v. Lauridson, 161 Cal. 106, 118 Pac. 530.

40 Harding v. Vandewater, 40 Cal. 77, 83; Salfield v. Sutter County etc. Co., 94 Cal. 546, 29 Pac. 1105; Smith v. Dorn, 96 Cal. 73, 83, 30 Pac. 1024; Curtin v. Salmon River etc. Co., 130 Cal. 345, 348, 80 Am. St. Rep. 132, 62 Pac. 552; Citizens' Security Co. v. Hammel, 14 Cal. App. 564, 112 Pac. 731.

41 Seal of Gold Min. Co. v. Slater, 161 Cal. 621, 626, 120 Pac. 15. 42 Porter v. Lassen County etc. Co., 127 Cal. 261, 59 Pac. 563.