"the members of the board, severally, could not ratify the assignment, because they could not, in the first place, have made it in their individual capacity, but only as a board, and not otherwise, could they ratify it." 61 A like rule has been laid down in Kansas 62 and, it seems, in Massachusetts. And in Alabama, the signatures by six of the nine directors at separate times, and not at a meeting of the directors, of a ratification was held, "though not a ratification by the directory," to be "evidence of a knowledge and approval of the act and of a determination not to disaffirm it." 64 In any event, consent of a majority of the directors individually to an act of the manager, where the custom was for the manager to consult the directors individually instead of their holding meetings, constituted a ratification.65

If express ratification by the board of directors at a regular meeting is relied on, it is necessary that notice thereof be given, if notice is necessary, that a quorum be present, and that the ratification be by a majority vote, as in the case of any other corporate business.66 Thus, when notes or other instruments have been executed by an officer without authority, and ratification by the directors is necessary to render them binding, an attempted ratification at a special meeting of the board, held without notice and at which all of the directors are not present, is not sufficient. 67 So the board cannot ratify at a meeting at which there is no quorum.68 It follows that ratification by the board of directors where one of the board necessary to a quorum is interested may be repudiated.69

§ 2189. Officers or agents other than directors. The president or other like officer of a corporation may ratify a contract which he

61 Calumet Paper Co. v. Haskell Show Printing Co., 144 Mo. 331, 338, 66 Am. St. Rep. 425, 45 S. W. 1115.

62 First Nat. Bank v. Drake, 35 Kan. 564, 57 Am. Rep. 193, 11 Pac. 445.

63 Commercial Brewing Co. v. McCormick, 225 Mass. 504, 114 N. E. 812. 64 Bibb v. Hall, 101 Ala. 79, 95, 14 So. 98.

65 Indiana Die-Casting Development Co. v. Newcomb, 184 Ind. 250, 111 N. E. 16.

66 Cupit v. Park City Bank, 20 Utah 292, 58 Pac. 839.

67 Pauly v. Pauly, 107 Cal. 8, 48 Am. St. Rep. 98, 40 Pac. 29. See also

Cupit v. Park City Bank, 20 Utah 292, 58 Pac. 839.

"As to the attempted express ratification, it appearing affirmatively that the meeting was special, and that the directors were not all notified, the meeting was not duly assembled, and its action did not bind the corporation as a valid corporate act." Pauly v. Pauly, 107 Cal. 8, 40 Am. St. Rep. 98, 40 Pac. 29.

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

69 Flanagan v. Flanagan Coal Co., W. Va. -, 88 S. E. 397.

has authority to make; 70 but he cannot ratify a contract executed by himself without authority, unless he is given authority to do so.71 So the general manager of a corporation may ratify acts of subordinates either by assenting thereto or by declining to interfere, where these acts pertain to the ordinary business of the corporation.72 And a general agent of a corporation who has power to institute a suit for the corporation has power to ratify the act of another agent in instituting it.73 But a secretary of a corporation who has no power to make any contracts cannot ratify a contract made by a corporate agent.74

§ 2190. Stockholders. The stockholders of a corporation may ratify and render valid acts done or authorized by the board of directors, but which were beyond the powers of the directors, or acts done or authorized by the directors at an illegal meeting, or unauthorized acts of others than the directors, provided the acts are such as may be done or authorized by the stockholders.75 But the stockholders

70 White v. Elgin Creamery Co., 108 Iowa 522, 79 N. W. 283.

71 See 2187, supra.

72 Conklin v. Consolidated R. Co., 198 Mass. 302, 82 N. E. 23; White v. Apsley Rubber Co., 194 Mass. 97, 8 L. R. A. (N. S.) 484, 80 N. E. 500. 73 Cascarella Co., 151 Mich. 15, 114 N. W. 857, 14 Det. L. N. 838.

V. National Grocer

74 Reid v. Alaska Packing Co., 47 Ore. 215, 83 Pac. 139.

75 United States. Pneumatic Gas Co. v. Berry, 113 U. S. 322, 28 L. Ed. 1003; Bensiek v. Thomas, 66 Fed. 104; Venner v. Atchison, T. & S. F. R. Co., 28 Fed. 581; Samuel v. Holladay, Woolw. 400, Fed. Cas. No. 12,288; Payson v. Stoever, 2 Dill. 427, Fed. Cas. No. 10,863.

California. Sausalito Bay Land Co. v. Sausalito Imp. Co., 166 Cal. 302, 136 Pac. 57; Bassett v. Fairchild, 61 Pac. 791, rev'd on other grounds 132 Cal. 637, 52 L. R. A. 611, 64 Pac. 1082. Illinois. Ashley Wire Co. v. Illinois Steel Co., 164 Ill. 149, 56 Am. St. Rep. 187, 45 N. E. 410, aff'g 60 Ill. App. 179; Reichwald v. Commercial Hotel

Co., 106 Ill. 439; Aurora Agricultural & Horticultural Soc. of Aurora v. Paddock, 80 Ill. 263; Eidman v. Bowman, 58 Ill. 444, 11 Am. Rep. 90; Robertson v. H. E. Bucklen & Co., 107 Ill. App. 369.

Kansas. Morisette v. Howard, 62 Kan. 463, 63 Pac. 756.

Louisiana. Robinson Mineral Spring Co. v. De Bautte, 50 La. Ann. 1281, 23 So. 865.

Minnesota. Lindeke v. Scott County Co-op. Co., 126 Minn. 464, 148 N. W. 459.

New York. Brooklyn Heights R. Co. v. Brooklyn City R. Co., 151 App. Div. 465, 135 N. Y. Supp. 990; H. Remington & Son Pulp & Paper Co. v. Caswell, 126 App. Div. 142, 110 N. Y. Supp. 556; First Nat. Bank of Binghamton V. Commercial Travellers' Home Ass'n of America, 108 App. Div. 78, 95 N. Y. Supp. 454, aff'd 185 N. Y. 575, 78 N. E. 1103.

Pennsylvania. Moller v. Keystone Fibre Co., 187 Pa. St. 553, 41 Atl. 478; Johnson Co. v. Miller, 174 Pa. St. 605, 52 Am. St. Rep. 833, 34 Atl. 316; Balliet v. Brown, 103 Pa. St. 546.

cannot bind the corporation by ratification of an act which, under the charter of the corporation, is within the exclusive authority of the directors.76 However, the fact that the statutes provide that "the corporate powers of the corporation shall be exercised by a board of" trustees does not prevent a ratification by the stockholders of a contract made by a corporate agent, since the power to contract is not lodged exclusively in the board.77 So the fact that a by-law prohibits corporate officers and agents from creating any debt or obligation except by direct authority of the board of directors does not preclude ratification of a contract by the corporation, although the contract was not directly authorized in the first instance by the board of directors.78 In any event, unauthorized acts of directors of a corporation can only be ratified by bona fide stockholders.79

Void acts or contracts of corporate officers or agents, however, cannot be ratified. This includes acts which are ultra vires in the strict sense of the term, 80 as already noted in a preceding chapter,81 as well as acts or contracts expressly prohibited by statute or which are invalid as against public policy.82

Tennessee. Stainback v. Junk Bros. Lumber & Manufacturing Co., 98 Tenn. 306, 39 S. W. 530.

Texas. Steger v. Davis, 8 Tex. Civ. App. 23, 27 S. W. 1068.

Vermont. State v. Smith, 48 Vt.

266.

Washington. Parker v. Hill, 68 Wash. 134, 122 Pac. 618.

England. Sewell's Case, 3 Ch. App.

131.

Stockholders of a corporation may subsequently ratify the acts and validate the originally unauthorized transactions of its officers. First Nat. Bank of Binghamton V. Commercial Travellers' Home Ass'n of America, 108 N. Y. App. Div. 78, 95 N. Y. Supp. 454, aff'd without decision in 185 N. Y. 575, 78 N. E. 1103.

It is well settled that any act of a board of directors may be ratified by the stockholders where they might originally have authorized the act. Russell v. Henry C. Patterson Co., 232 Pa. 113, 120, 36 L. R. A. (N. S.) 199, 81 Atl. 136.

"Such recognized authority

The rule is well stated by Justice

stockholders to ratify and confirm the acts of board of directors is confined to acts voidable by reason of irregularities in the make up of the board or otherwise or by reason of the directors or some of them being personally interested in the subjectmatter of the contract or act, or for some other similar reason which makes the action of the directors voidable." Continental Securities Co. v. Belmont, 206 N. Y. 7, 18, Ann. Cas. 1914 A 777, 99 N. E. 138.

76 Union Gold Min. Co. v. Rocky Mountain Nat. Bank, 2 Colo. 565.

77 Kirwin v. Washington Match Co., 37 Wash. 285, 79 Pac. 928.

78 Lake St. El. R. Co. v. Carmichael, 184 Ill. 348, 56 N. E. 372, aff 'g 82 Ill. App. 344.

in

79 McNulta v. Corn Belt Bank, 164 Ill. 427, 56 Am. St. Rep. 203, 45 N. E. 954, aff 'g 63 Ill. App. 593.

80 See § 2196, infra.

81 See § 1511 et seq., supra.

82 Continental Securities Co. v. Belmont, 206 N. Y. 7, 18, 51 L. R. A. (N. S.) 112, Ann. Cas. 1914 A 777, 99 N.

$

Harrison in a recent Virginia decision as follows: "It was not competent for the stockholders, by subsequent ratification, to validate an act of its board of directors which was illegal and void at the time it was done. A void act cannot be validated by subsequent ratification. The act to be ratified must be voidable merely and not absolutely void. This well-settled principle of the law of agency is as applicable to corporations as to individuals."83 Thus, stockholders cannot ratify a void acceptance of charter amendments by the board of directors.84 Likewise, where the directors undertake to act at a meeting which is illegal, so that their action is absolutely void, it cannot be rendered valid by the ratification of the stockholders alone, where the charter or a general statute requires, for the validity of such act, formal action or consent on the part of both the stockholders and the directors.85 On the other hand, the act of directors in increasing the salaries of some of their number is not void but merely voidable, and may be ratified by the stockholders, at least where the increase is reasonable.86 So, also, the stockholders may ratify action taken at a meeting irregularly called by their action in voting down, at a meeting regularly called, a resolution to withdraw action taken at the prior meeting.87

The stockholders may ratify unauthorized or irregular acts of the directors or of other corporate officers or agents in two ways, viz.: (1) by vote at a stockholders' meeting, or (2) by implication by accepting the benefits, affirmative acts which can be accounted for only on the theory of adoption of the unauthorized or irregular acts, or by acquiescence. "It is not necessary that a meeting of the stockholders be held in order to ratify an illegal act of the board of managers. "'88 Stockholders may ratify unauthorized or defective acts of the directors either by unanimous acquiescence or by a majority vote in a corporate meeting.89

Stockholders cannot ratify a fraudulent corporate contract, however,

E. 138, aff'g 150 N. Y. App. Div. 298, 134 N. Y. Supp. 635.

83 Com. v. Richmond, F. & P. R. Co., 111 Va. 611, 621, 69 S. E. 1070.

84 Com, v. Richmond, F. & P. R. Co., 111 Va. 611, 621, 69 S. E. 1070.

85 Curtin v. Salmon River Hydrau lic Gold Mining & Ditch Co., 130 Cal. 345, 80 Am. St. Rep. 132, 62 Pac. 552.

86 Russell v. Henry C. Patterson Co., 232 Pa. 113, 120, 36 L. R. A. (N. S.) 199, 81 Atl. 136.

87 Hill v. Atlantic & N. C. R. Co., 143 N. C. 539, 9 L. R. A. (N. S.) 606, 55 S. E. 854.

88 Rosehill Cemetery Co. v. Dempster, 121 Ill. App. 143, aff'd 223 Ill. 567, 79 N. E. 276.

89 Kidd v. New York Security & Trust Co., 75 N. H. 154, 71 Atl. 878.

Express ratification at a stockholders' meeting binds minority stockholders. McAlpin v. Universal Tobacco Co. (N. J. Ch.), 57 Atl. 802.

except by their unanimous act.90 In any case where action is taken by stockholders confirming and ratifying a fraud and a misapplication of the funds of the corporation by the directors or others, the action is binding only by way of estoppel upon such stockholders as vote in favor of such approval.91 The direct or indirect misappropriation of corporate assets to his own use or benefit by an officer thereof is incapable of being ratified by a vote or by any act or omission of a majority of the stockholders; 92 but a contract which is not fraudulent, but which is voidable because violating the rule that directors cannot lawfully enter into a contract in the benefit of which they or one of them participate without the knowledge and consent of the stockholders may be ratified by a majority of the stockholders.93

Ordinarily stockholders may ratify contracts made without their consent, where their consent is necessary.94 For instance, a transfer of all the corporate property by the board of directors may be made binding, although beyond the powers of such board, by subsequent ratification by the stockholders, provided of course the stockholders originally had power to make such a transfer.95 However, a federal court has held that noncompliance with the New York statute requiring certain corporate mortgages to be authorized by at least twothirds of the capital stock of the corporation by a written consent or a vote at a special meeting of the stockholders, and requiring the filing of a certificate showing such consent or vote, cannot be cured by subsequent ratification of the mortgage by the stockholders.96

§ 2191. Withdrawal by the other party before ratification. It has been held in England, and there is dictum to the same effect in this country in some of the cases, that where a person assumes to enter into a contract for another without authority, the other party to the contract cannot withdraw so as to prevent a subsequent ratification by the person for whom the pretended agent acts.97 But this view

90 Dana v. Morgan, 219 Fed. 313. 91 Continental Securities Co. v. Belmont, 206 N. Y. 7, 18, 51 L. R. A. (N. S.) 112, Ann. Cas. 1914 A 777, 99 N. E. 138.

92 Pollitz v. Wabash R. Co., 207 N. Y. 113, 127, 100 N. E. 721.

93 Pollitz v. Wabash R. Co., 207 N. Y. 113, 127, 100 N. E. 721, aff'g 150 N. Y. App. Div. 715, 135 N. Y. Supp. 789.

94 West Michigan Park Ass'n v.

Pere Marquette R. Co., 172 Mich. 179, 137 N. W. 799.

95 Metcalf v. American School Furniture Co., 122 Fed. 115.

96 In re Post & Davis Co., 219 Fed. 171, criticising Black v. Ellis, 129 N. Y. App. Div. 140, 113 N. Y. Supp. 558.

97 In re Portuguese Consol. Copper Mines, 45 Ch. Div. 16. See also Andrews v. Aetna Life Ins. Co., 92 N. Y. 596.