without authority.25 In other words, ratification must be by the officer or governing body having authority to make or to enter into the contract claimed to have been ratified.26 "Mere knowledge or unauthorized assurances on the part of individual members or officers of" a corporation cannot, it is said, "operate to effect a ratification against affirmative action of the board of directors by resolution to the contrary." 27

§ 2187. Ratification of one's own acts. A corporate officer or agent cannot ratify an unauthorized act or contract done or entered into by himself so as to bind the corporation.28 In other words, one who makes an unauthorized contract has no more right to ratify it than he has to make it.29 Thus directors cannot ratify their own unauthorized acts; 30 and a board of directors, the majority of which were the members of a preceding board which authorized or entered into an illegal contract cannot ratify it, since this would be in effect a ratification of one's own act.31 In like manner a de facto board of directors cannot ratify its own acts.32 However, notwithstanding this rule that an officer cannot ratify his own acts, it is settled that a stockholder may vote to ratify his own act as director, notwithstanding he has a personal interest in the ratification of such act or though he owns a majority of the stock-and his vote must be

25 Washington Times Co. v. Wilder, 12 App. Cas. (D. C.) 62; Hosteter v. Wear-U-Well Shoe Co., 171 Iowa 346, 152 N. W. 1; White v. Elgin Creamery Co., 108 Iowa 522, 79 N. W. 283; Pacific R. Co. v. Thomas, 19 Kan. 256. 26 Teeple v. Hawkeye Gold Dredging Co., 137 Iowa 206, 114 N. W. 906.

27 Lawrence v. Washington Detroit Theatre Co., 190 Mich. 44, 155 N. W. 738.

28 United States. In re Roanoke Furnace Co., 166 Fed. 944.

Illinois. Smeeth-Harwood Co. V. Hutchison, 175 Ill. App. 602.

Kentucky. Kenyon Realty Co. v. National Deposit Bank, 140 Ky. 133, 31 L. R. A. (N. S.) 169, 130 S. W. 965. New York. Giebler Mfg. Co. v. Kranenberg, 102 App. Div. 471, 92 N. Y. Supp. 843.

Washington. Mooney V. 0. P. Mooney Co., 71 Wash. 258, 128 Pac. 225.

But an agreement between a lessor and lessee railroad may be binding by ratification although the two corporations had a majority of the directors in common. Continental Ins. Co. v. New York & H. R. Co., 187 N. Y. 225, 79 N. E. 1026.

Part payment by, or other conduct of, the president of a corporation, not authorized or acquiesced in by the directors, is not a ratification of a note executed by him without authority. Porter v. Winona & D. Grain Co., 78 Minn. 210, 80 N. W. 965.

29 Marqusee v. Insurance Co. of North America, 211 Fed. 903, 906.

30 Oliver v. Rahway Ice Co., 64 N. J. Eq. 596, 54 Atl. 460; In re Crum's Appeal, 66 Pa. St. 474.

31 Oliver v. Rahway Ice Co., 64 N. J. Eq. 596, 54 Atl. 460.

32 Stratto n-Massachusetts Gold Mines Co. v. Davis, 222 Mass. 549, 111 N. E. 375.

counted although otherwise the resolution would not pass-provided, however, that the ratification will not be fraudulent as to minority stockholders; 33 but if the act is a wanton or fraudulent violation of the interests of minority stockholders, then it cannot be ratified by the votes of interested directors.34 Thus, the directors who own and control a majority of the corporate stock cannot ratify their fraudulent and unauthorized acts by calling a stockholders' meeting which they control as effectually as they do the board of directors and causing a majority of the stock to be voted in favor of the ratification.35

$2188. Directors. A single director, having no authority to act for the corporation otherwise than as a member of the board of directors, cannot bind it by ratification of an unauthorized contract.36

So a majority of the board of directors acting individually cannot ratify; 37 and knowledge and acquiescence of a minority of the board is not a ratification; 38 and a minority cannot expressly ratify an act unless they constitute a majority of a quorum. On the other hand, the board of directors or trustees of a corporation may ratify and render binding any act by a subordinate officer or agent which it could have authorized originally; 39 and the directors, at a regular and legal meeting, may ratify a contract or act done or authorized by them at an illegal meeting, and thus render it valid.40 So directors may ratify any act of one of their own number that they could have authorized in the first instance. A board may ratify acts of a former board. Thus contracts between interlocking boards of directors may be ratified by a subsequent board of directors having no common

37 Farrell v. Gold Flint Min. Co., 32 Mont. 416, 80 Pac. 1027.

38 Leggett v. New Jersey Manufacturing & Banking Co., 1 N. J. Eq. 541, 23 Am. Dec. 728.

39 United States. Indianapolis Rolling Mill v. St. Louis, Ft. S. & W. R. Co., 120 U. S. 256, 30 L. Ed. 639, 26 Fed. 140; Mahoney Min. Co. v. AngloCalifornian Bank, 104 U. S. 192, 26 L. Ed. 707; Nebraska & K. Farm Loan Co. v. Bell, 58 Fed. 326; Anglo-Californian Bank v. Mahoney Mining Co., 5 Sawy. 255, Fed. Cas. No. 392.

Alabama. Bibb v. Hall, 101 Ala. 79, 14 So. 98.

California. Shaver v. Bear River & A. Water & Mining Co., 10 Cal. 396. Illinois. Lemars Shoe Co. v. Lemars Shoe Mfg. Co., 89 Ill. App. 245.

Kentucky. Deposit Bank of Carlisle v. Fleming, 19 Ky. L. Rep. 1947, 44 S. W. 961.

Louisiana. Poche v. New Orleans Home Inv. Co., 52 La. Ann. 1287, 27 So. 797.

Maryland. Miller v. Matthews, 87 Md. 464, 40 Atl. 176.

Minnesota. Western Land Ass'n v. Ready, 24 Minn. 350.

Nebraska. First Nat. Bank of Omaha v. East Omaha Box Co., 90 N. W. 223.

IV Priv. Corp.-3

New Hampshire. Smith v. Bank of New England, 72 N. H. 4, 54 Atl. 385. New Jersey. See Audenried v. East Coast Milling Co., 68 N. J. Eq. 450, 59 Atl. 577.

Pennsylvania. Dallas v. Columbia Iron & Steel Co., 158 Pa. St. 444, 27 Atl. 1055.

West Virginia. Third Nat. Bank v. Laboringman's Mercantile & Manufacturing Co., 56 W. Va. 446, 49 S. E. 544.

Wisconsin. Northwestern Fuel Co. v. Lee, 102 Wis. 426, 78 N. W. 584.

Even though a corporate note be defective for irregularity in its execution or for want of authority in the officer by whom executed, a renewal thereof will not be deemed tainted by such irregularity where authorized by the board of directors at a regular meeting. Smith V. New Hartford Water Co., 73 Conn. 626, 48 Atl. 754.

40 Taylor County Court v. Baltimore & O. R. Co., 35 Fed. 161; Smith v. New Hartford Water Works, 73 Conn. 626, 48 Atl. 754; In re Portuguese Consol. Copper Mines, 45 Ch. Div. 16. 41 Guillaume v. K. S. D. Fruit Land Co., 48 Ore. 400, 88 Pac. 586, 86 Pac. 883.

42 Smith v. Hartford Water Works, 73 Conn. 626, 48 Atl. 754.

directors. Likewise, directors may ratify the acts of a stockholder who has represented the corporation as an agent. So an action of the corporation, irregular because done by the stockholders where it should have been done by the directors, may be validated by ratification or acquiescence on the part of the directors.45 An executive committee, at a regular meeting, may ratify individual acts of its members. But, of course, the directors cannot ratify their own "unauthorized" acts.47 So the approval of the minutes of a previous meeting of the directors as correct does not legalize the invalid acts of the previous meeting.48 And it has been held that the acts of trustees of a corporation whose terms of office have not commenced are not capable of ratification by the board of directors.49

46

When approval by a majority of the board of trustees or directors is necessary to confer authority to bind the corporation by a particular act, the act, if done by an officer without authority, cannot be ratified except by a majority of the trustees or directors.50

Ratification by directors may be by an express resolution or vote to that effect, or it may be implied from adoption of the act, acceptance of benefits or acquiescence.51 Ratification may be effected by a resolution or vote of the board of directors expressly ratifying previous acts either of corporate officers or agents; 52 but it is not necessary, ordinarily, to show a meeting and formal action by the board of directors, in order to establish a ratification. As a general rule, ratification of a contract or other act will be implied if the corporation, represented by the board of directors, who have knowledge of the facts, accepts and retains the benefits of the contract or act, or recognizes it as binding, or acquiesces in it.53 They may ratify by acquiescence,54 and need not act at a meeting regularly called, but

43 Gould Copper Min. Co. v. Walker, 17 Ariz. 332, 152 Pac. 853.

44 Dupignac v. Bernstrom, 76 N. Y. App. Div. 105, 78 N. Y. Supp. 705.

45 Kessler v. Ensley Co., 123 Fed. 546.

46 De Zavala v. Daughters of Republic of Texas, 58 Tex. Civ. App. 19, 124 S. W. 160.

47 See § 2187, supra.

48 R. T. Davis Mill Co. v. Bennett, 39 Mo. App. 460.

49 Ballard v. Audubon Nat. Bank, 222 Fed. 57.

50 Barcus v. Hannibal, R. C. & P.

may ratify without any formal action.55 Thus, it has been held that if the majority of the board of directors were advised individually of the terms of an unauthorized contract and took no measures to disaffirm it, such contract was ratified.56 An express resolution of ratification is not necessary but it is sufficient that the board of directors, as a board, received report or notice of the transaction requiring ratification, and, with knowledge, not only failed to repudiate it, but treated it the same as other obligations of like kind.57

If the ratification is express, there is some conflict of opinion as to whether the individual consent of a majority of the board, without a meeting of the directors, is sufficient. The affirmative has been held in some states.58 In a federal case, where the directors could not get a quorum of the board to hold a meeting, it was held that "the assent of the directors to its [a mortgage's] execution without a formal meeting of the board, with full knowledge on their part of all the facts, in advance of, and at the time of, its execution, ought, in equity, to be deemed the equivalent in law to a ratification thereof by the board." 59 In Colorado it was held that it could be shown that the president who did the act "told the members of the directory what he had done, and that those directors, when thus informed of it by the president, approved of his acts."60

On the other hand, in Missouri, it was held that the members of a board of directors could not severally ratify an assignment of the property of the corporation; and the court gave as the reason that

v. Laboringman's Mercantile & Manufacturing Co., 56 W. Va. 446, 49 S. E. 544.

Directors may ratify a contract of which they have knowledge by their acquiescence therein, therein, without expressly accepting it in terms by a resolution. Davis v. Brown County Coal Co., 21 S. D. 173, 110 N. W. 113.

55 Knowles v. Northern Texas Traction Co. (Tex. Civ. App.), 121 S. W. 232.

56 Brown v. Crown Gold Milling Co., 150 Cal. 376, 89 Pac. 86.

In California, however, under a statute, it seems to have been held in a later case that a ratification of the cancellation of a written contract can be accomplished only by a formal act of the board of directors, their mere

acquiescence being insufficient. Blair v. Brownstone Oil & Refining Co., 168 Cal. 632, 143 Pac. 1022.

57 Salem Iron Co. v. Lake Superior Consol. Iron Mines, 112 Fed. 239.

58 It is not necessary that the acts of an officer of the corporation be ratified by action of the board of directors at a regular meeting, but it is sufficient that there be separate assent of a majority of the board. Scott v. Superior Sunset Oil Co., 144 Cal. 140, 143, 77 Pac. 817; Anderson v. Wallace Lumber & Manufacturing Co., 30 Wash. 147, 70 Pac. 247.