corporation. Where the president was also general manager, but he signed the contract only as president, it was held that he was acting in both capacities.10

A corporation is not estopped to deny the authority of the president to make a contract which is still executory and from which it has derived no benefit;11 in such a case the by-laws may be introduced in evidence to show the extent of the power of the president.

A promissory note executed by the president of a corporation to himself, and assigned before maturity to a third party without previous authority of the directors to execute the same, is invalid, and the fact that a note was executed in this manner was held to be sufficient to charge the assignee with notice of want of authority to execute it.12 Nor do both the president and secretary, nor any other person, have authority to execute a mortgage on the property of the corporation in the absence of a legal resolution of the board of directors; the consent of the stockholders is merely an additional requirement.13 Neither is a contract executed by both the president and secretary, but not bearing the seal, admissible in evidence without proof of the genuineness of the signatures of the officers and

• Union Collection Co. v. Oliver, 23 Cal. App. 318, 137 Pac. 1082. 10 California etc. Land Co. v. Cuddeback, 27 Cal. App. 450, 150 Pac. 379.

11 Northwestern Packing Co. v. Whitney, 5 Cal. App. 105, 89 Pac. 981; Bliss v. Kaweah Canal etc. Co., 65 Cal. 502, 4 Pac. 507.

12 Smith v. Los Angeles etc. Ass'n, 78 Cal. 289, 12 Am. St. Rep. 53, 20 Pac. 677.

13 Alta Silver Min. Co. v. Alta Placer etc. Co., 78 Cal. 629, 21 Pac. 373. Nor is the consent of the majority of the directors not in meeting assembled to the taking of personal property as security for rent valid, Citizens' Securities Co. v. Hammel, 14 Cal. App. 564, 112 Pac. 731. But if seal is attached, see Burnett v. Lyford, 93 Cal. 114, 28 Pac. 855.

that they were authorized to execute the contract.11 Nor are a note and mortgage executed by the authority only of a preliminary meeting of the stockholders, before the organization of the board of directors, valid.15

SEAL GENERALLY UNNECESSARY

The common law rule that a corporation was incapable of making contracts, or of appointing agents or attorneys, except by deed or power in writing under the corporate seal, has been so far relaxed by the demands of business that the courts have said that "there was a period in the history of corporations when the most ordinary transactions were required to be authorized by solemn resolution of the board of trustees, duly entered in their records, and authenticated by the corporate seal. With the multiplication of corporations having for their object nearly every business pursuit known to modern times, the formalities previously regarded as necessary, and which were illy adapted to pursuits requiring prompt action, have been greatly abridged. . . . They must act as individuals may act, through agents, and within the general scope of their ordinary business their managing agents can bind their principals, as can those of an individual, and if their agents transcend their powers, the corporations having knowledge thereof and not specially repudiating the act are equally bound as individuals

14 Fontana v. Pacific Can Co., 129 Cal. 51, 61 Pac. 580; Fudickar v. East Riverside Irr. Dist., 109 Cal. 29, 41 Pac. 1024; Barney v. Pforr, 117 Cal. 56-58, 48 Pac. 987. See brief discussion of a case where the letter was signed only in the name of the corporation without the addition of the name of the officer or person acting for the corporation, in In re Balfour etc., 14 Cal. App. 261, 268, 111 Pac. 615.

18 Blood v. La Serena Land etc. Co., 113 Cal. 221, 41 Pac. 1017, 45 Pac. 252.

would be under like circumstances.""16 This is an enlightened view of the situation. In another case the court said, that "the authority of the president, or other head of the corporation, to employ an attorney when the exigencies of his company require it has been repeatedly recognized. ''17 But this case was distinguished, if not doubted, in a later one where it was said that in the absence of proof of a general course of business in which such contracts made by the president were recognized, a president could not employ special counsel when the corporation had regular attorneys.18 But in a still later case, without citing the above case, the court said the secretary and acting manager could employ a physician to attend the employees of the corporation in case of injuries, this employment being sanctioned by a majority of the directors separately given but not acted on by the board in meeting

16 Greig v. Riordan, 99 Cal. 316-321, 322, 323, 33 Pac. 913. But without referring to this language, although the case was referred to, a very narrow construction was put on these powers in Rigby v. Lowe, infra. See, also, Shaver v. Bear River etc. Co., 10 Cal. 396; Mills v. Boyle Min. Co., 132 Cal. 95-98, 64 Pac. 122; see Hamilton v. Bates, 4 Cal. Unrep. 371, 35 Pac. 304. So a lease of land in the name of the corporation, made by the officers without the authority of a resolution of the board of directors, was upheld on the ground that the corporation was estopped to repudiate it, McQuaide v. Enterprise etc. Co., 14 Cal. App. 315, 111 Pac. 927. It was competent for the president, who had full charge of the affairs of the corporation, to make, file, and verify a claim for mechanic's lien, Coghlan v. Salvatore Quartararo, 15 Cal. App. 662, 668, 115 Pac. 664. Neither is a seal nor a resolution of the board necessary to show the authority of a secretary to assign a claim for collection, Leitch v. Marx, 21 Cal. App. 208, 131 Pac. 328.

17 Streeten v. Robinson, 102 Cal. 542, 36 Pac. 946; Crowley v. Genesee Min. Co., 55 Cal. 273.

18 Pacific Bank v. Stone, 121 Cal. 202, 53 Pac. 634; itself distinguished in Hoffman v. Guy M. Rush Co., 27 Cal. App. 167, 149 Pac. 177.

assembled.19 The latter statement is novel in view of the very strict declarations of the California decisions that the directors can do nothing except when in meeting. The power of the president to employ a physician under such circumstances was declared where no showing was made as to the assent of the directors either separately or in meeting.20 We do not find that Pacific Bank v. Stone, supra, has ever been cited or approved, on the point of employment of attorneys, and we think it may be safely said that its statements are too broad. It was also held that a by-law that "It shall be the duty of the president to execute with the secretary except when otherwise directed by the board of directors, all contracts . . . that may be executed or issued by this corporation" does not restrict the president's powers to the making of written contracts only; it required simply that he should execute them if they were in writing, and the validity of an oral contract by the president was sustained.21

IF BENEFITED BY THE CONTRACT

The rule that all contracts with a president or a director are absolutely void without regard to their fairness has been somewhat relaxed. A contract be

19 Scott v. Superior Sunset Oil Co., 144 Cal. 140, 77 Pac. 817; Scott v. Monte Cristo Oil etc. Co., 15 Cal. App. 453, 115 Pac. 64; Rich v. Edison etc. Co., 18 Cal. App. 354, 123 Pac. 230.

20 Fraser v. San Francisco Bridge Co., 103 Cal. 79, 36 Pac. 1037; and if the employment was ultra vires, that fact must be shown; it will not be presumed. In this case, however, in the agreement, the corporation reserved the right to determine what was reasonable, and the court held that the physician was entitled to no more than the corporation offered, which was going to a remarkable length, making the corporation both the court and the jury as to the amount, and we do not think good law, Deane v. Gray Bros. etc. Pav. Co., 109 Cal. 433, 42 Pac. 443. See Trenor v. Central Pac. R. Co., 50 Cal. 222; Smith v. Sinbad Dev. Co., 15 Cal. App. 166, 113 Pac. 701.

21 Freyberg v. Los Angeles Brewing Co., 4 Cal. App. 403, 88 Pac. 378; E. W. McLellan Co. v. East San Mateo Land Co., 166 Cal. 736, 739, 137 Pac. 1145.

tween the corporation and one of its directors by which the latter gains some benefit has been held not absolutely void but voidable only, at the instance of the corporation or its stockholders, and they may be estopped from questioning it by ratification, laches, or acquiescence.22 See post, Ratification, etc. But the president, who is also a large creditor of an insolvent corporation, resigning, can not take a conveyance of the property of the corporation to secure his claims; such a transaction is in fraud of the other creditors.23

Nor can he vote on any question in which he is personally interested, nor can he be counted in making a quorum, nor will the courts inquire whether he acted fairly or not; he must not be subjected to temptation to advance his own interests. See subject "Directors," ante, for the cases on this subject.

Nor can the president or a director make any secret profits out of a contract with third parties for selling the stock of a corporation.24

(See chapters on Directors, ante, and on Promoters, post).

CREDITOR IN CONTROL OF CORPORATION

The same rule has been applied, with great strictness, to a creditor being benefited by proceedings of a corpo

22 Fudickar v. East Riverside Irr. Dist., 109 Cal. 29, 41 Pac. 1024, and Balfour v. Fresno Canal etc. Co., 123 Cal. 395, 55 Pac. 1062. Nor can directors renew a note of the corporation upon which they are endorsers, and, by subsequently paying the renewed note, hold the corporation, the original debt being more than three years old. O'Neill v. Quarnstrom, 6 Cal. App. 469, 92 Pac. 391. For an interesting case, see McQuaide v. Enterprise etc. Co., 14 Cal. App. 315, 111 Pac. 927; Lackenbach v. Finn, 26 Cal. App. 482, 147 Pac. 471, as to conversion by sheriff.

23 Nixon v. Goodwin, 3 Cal. App. 358, 85 Pac. 169; Bonney v. Tilley, 109 Cal. 346, 42 Pac. 439.

24 Western States Life Ins. Co. v. Lockwood, 166 Cal. 185, 135 Pac.