directors, if it could be authorized by them. If it is consented to or ratified, with full knowledge of the facts, it is finally and absolutely binding, and neither the corporation nor individual stockholders nor strangers can afterwards sue to set it aside, or otherwise attack its validity.79 "It is not accurate to say, in such a case," it was re

marked in a Massachusetts case, "that the contract becomes valid by reason of the ratification by the corporation. No ratification is necessary. The contract stands, unless avoided or repudiated.” 80 The corporation is estopped to attack the transaction where it has been ratified.81

This is also true of contracts and other transactions between two corporations having directors or other officers in common. They are generally not absolutely void, but, at the most, merely voidable, and may be rendered binding by ratification or acquiescence on the part of the stockholders.8 82

If the deal is expressly prohibited by statute, it cannot be ratified by stockholders.83 Thus, loans to officers or stockholders, where prohibited by statute, cannot be ratified.84

§ 2395. - Prior authorization at stockholders' meeting. In any event, contracts between a corporation and one or more of its officers are valid if duly authorized at a stockholders' meeting, with actual S. W. 865; Alexander v. Williams, 14 Mo. App. 13.

80 Union Pac. Ry. Co. v. Credit Mobilier, 135 Mass. 367, 377.

81 C. S. Goss & Co. v. Goss, 147 N. Y. App. Div. 698, 132 N. Y. Supp. 76.

82 United States. Coe v. East & W. R. Co. of Alabama, 52 Fed. 531; Augusta, T. & G. R. Co. v. Kittel, 52 Fed. 63.

California. San Diego, O. T. & P. Beach R. Co. v. Pacific Beach Co., 112 Cal. 53, 33 L. R. A. 788, 44 Pac. 333; Pauly v. Pauly, 107 Cal. 8, 48 Am. St. Rep. 98, 40 Pac. 29.

Georgia. Griffin v. Inman, 57 Ga.

370.

Louisiana. Leathers v. Janney, 41 La. Ann. 1120, 6 L. R. A. 661, 6 So. 884.

Maryland. Shaw v. Davis, 78 Md. 308, 23 L. R. A. 294, 28 Atl. 619; Davis v. United States Elec. Power & Light Co., 77 Md. 35, 25 Atl. 982; Booth v. Robinson, 55 Md. 419.

Michigan. Michigan Slate Co. v. Iron Range & H. B. R. Co., 101 Mich. 14, 59 N. W. 646.

Missouri. Hill v. Gould, 129 Mo. 106, 30 S. W. 181; Manufacturers' Sav. Bank v. O'Reilly, 97 Mo. 38, 10

Nebraska. Fitzgerald v. Fitzgerald & Mallory Const. Co., 44 Neb. 463, 62 N. W. 899.

New York. Hart v. Ogdensburg & L. C. R. Co., 89 Hun 316, 35 N. Y. Supp. 566; Wallace v. Long Island R. Co., 12 Hun 460; Langan v. Francklyn, 29 Abb. N. Cas. 102, 20 N. Y. Supp. 404.

Ohio. United States Rolling Stock Co. v. Atlantic & G. W. R. Co., 34 Ohio St. 450, 32 Am. Rep. 390; Goodin v. Cincinnati & W. Canal Co., 18 Ohio St. 169, 98 Am. Dec. 95.

Washington. Roberts v. Washington Nat. Bank, 11 Wash. 550, 40 Pac. 225.

Compare Knabe v. Ternot, 16 La. Ann. 13; Greenwood Ice & Coal Co. v. Georgia Home Ins. Co., 72 Miss. 46, 17 So. 83; Cole v. Millerton Iron Co., 59 Hun (N. Y.) 217, 13 N. Y. Supp. 851.

83 Murray v. Smith, 166 N. Y. App. Div. 528, 152 N. Y. Supp. 102. See also $2178, supra.

84 Murray v. Smith, 166 N. Y. App. Div. 528, 152 N. Y. Supp. 102.

or constructive notice of the interest of the officers as adverse parties to the contract.85

§ 2396. Power of board of directors to ratify. The board of directors may ratify a transaction if they could have authorized it, but not otherwise.86 When they do undertake to ratify, a majority must be disinterested.87 The board of directors, where not composing all the stockholders, cannot, it seems, ratify a sale made by less than a quorum of disinterested directors to co-directors.88 Ratification of a secret conveyance of corporate property by an officer to himself must. be at a meeting of directors duly called, notice of the purpose of the corporate meeting having been given, and upon a majority vote of the directors.89

§ 2397. Ratification by majority of stockholders as binding on minority stockholders. In a subsequent chapter, in connection with the statement of the law as to powers of a majority of the stockholders, and the corresponding rights of minority stockholders, 90 the well-settled rule is stated that the majority of the stockholders must act in good faith, in order to bind the minority stockholders. Furthermore, a majority of the stockholders cannot ratify acts of corporate officers, so as to cut off the rights of minority stockholders, where such acts are a fraud or abuse of the trust confided to the officers.91 Ordinarily, it is for the corporation-the stockholders collectively

85 United States Steel Corporation v. Hodge, 64 N. J. Eq. 807, 60 L. R. A. 742, 54 Atl. 1.

The stockholders are chargeable with the knowledge as to such interest that they could have acquired by proper inquiry. United States Steel Corporation v. Hodge, 64 N. J. Eq. 807, 60 L. R. A. 742, 54 Atl. 1.

86 Minor v. Mechanics' Bank of Alexandria, 1 Pet. (U. S.) 46, 7 L. Ed. 47; Gumaer v. Cripple Creek Tunnel, Transportation & Mining Co., 40 Colo. 1, 122 Am. St. Rep. 1024, 13 Ann. Cas. 781, 90 Pac. 81; Bank of Washington v. Barrington, 2 Pen. & W. (Pa.) 27.

A corporation is not estopped to recover secret profits made by its treasurer or secretary in corporate transactions by the fact that the directors knew of his course, and assented to

it. Moore v. Waco Bldg. Ass'n, 19 Tex. Civ. App. 68, 45 S. W. 974.

87 A resolution of the board of directors or trustees of a corporation, carried by the casting vote of the president, ratifying an unauthorized act of the president, in a matter in which he was personally interested, is void. Chamberlain v. Pacific WoolGrowing Co., 54 Cal. 103. See also § 2188, supra.

88 Nueces Valley Irrigation Co. v. Davis (Tex. Civ. App.), 116 S. W. 633, rev'd on other grounds 103 Tex. 243, 126 S. W. 4.

89 First Nat. Bank of Omaha v. East Omaha Box Co. (Neb.), 90 N. W. 223.

90 Infra, chapter on Stockholders. 91 Brewer v. Boston Theater, 104 Mass. 378, 395.

-to ratify or disaffirm the transaction, and individual stockholders cannot object.92 The transaction may be ratified by a majority of the stockholders at a meeting of the stockholders,93 or by all the stockholders independent of any meeting.94 Of course, ratification or acquiescence by a majority of the stockholders cannot bind a dissenting stockholder where the transaction is a fraud upon his rights, or beyond the powers of the corporation, and cannot prevent the dissenting stockholder from suing in a proper case to set the transaction aside, and obtain redress for the benefit of the corporation,95 according to the general rule more fully stated in a succeeding chapter.96 But where the transaction is of such a character that it might lawfully have been authorized by the majority, it may lawfully be ratified or acquiesced in by them, and their ratification or acquiescence will bar an action by a dissenting minority to set it aside.97

92 Urner v. Sollenberger, 89 Md. 316, 43 Atl. 810; Nye v. Storer, 168 Mass. 53, 46 N. E. 402; McAleer v. McMurray, 58 Pa. St. 126; Foss v. Harbottle, 2 Hare 461.

In an action by a corporation or its trustee on a subscription for stock, it is no defense that it is sought to collect the subscription for the payment of money due under a voidable contract between the company and its directors, since the right to disaffirm the contract can only be exercised by the stockholders collectively. Urner v. Sollenberger, 89 Md. 316, 43 Atl. 810.

93 San Diego, O. T. & P. B. R. Co. v. Pacific Beach Co., 112 Cal. 53, 33 L. R. A. 788, 44 Pac. 333; Endicott v. Marvel, 81 N. J. Eq. 378, 87 Atl. 230.

94 Endicott v. Marvel, 81 N. J. Eq. 378, 87 Atl. 230.

95 United States. Meeker v. Winthrop Iron Co., 17 Fed. 48.

Alabama. Memphis & C. R. Co. v. Woods, 88 Ala. 630, 7 L. R. A. 605, 16 Am. St. Rep. 81, 7 So. 108.

Illinois. Chicago Hansom Cab Co. v. Yerkes, 141 Ill. 320, 33 Am. St. Rep. 315, 30 N. E. 667.

Louisiana. Knabe v. Ternot, 16 La. Ann. 13.

England. Mason v. Harris, 11 Ch. Div. 97; Atwool v. Merryweather, L. R. 5 Eq. Cas. 464, note.

"Even if a majority of the stockholders consented to ratify an illegal use of its funds, their assent would not bind a protesting minority, or prevent them from obtaining appropriate equitable relief." Von Arnim v. American Tube Works, 188 Mass. 515, 518, 74 N. E. 680.

96 Infra, chapter on Stockholders. 97 United States. Foster v. Bear Valley Irrigation Co., 65 Fed. 836.

Maryland. Urner v. Sollenberger, 89 Md. 316, 43 Atl. 810; Shaw v. Davis, 78 Md. 308, 23 L. R. A. 294.

Massachusetts. Nye v. Storer, 168 Mass. 53, 46 N. E. 402.

New York. Hart v. Ogdensburg & L. C. R. Co., 89 Hun 316, 35 N. Y. Supp. 566; Wallace v. Long Island R. Co., 12 Hun 460.

England. Foss v. Harbottle, 2 Hare

461.

It has been held that the board of directors and a majority of the stockholders may ratify a sale of corporate property to an officer of the corporation although such sale was accomplished by actual fraud of such officers.98

Ratification by a majority of the stockholders "is conclusive upon the parties unless the action of the majority of the stockholders was dictated by fraud or was procured by concealment and in ignorance of the true state of the facts." 99 "Where the directors of a corporation enter into a contract with the corporation, which contract is voidable at the instance of an innocent.stockholder, and it is made to appear that the conduct of the directors in negotiating such contract was actuated by fraudulent motives and the contract is unfair, unjust and oppressive, a ratification of such contract by a majority of the stockholders will not preclude a court of equity from setting aside the same at the instance of any innocent minority stockholder.” 1 Whether dealings between a corporation and its officers have been ratified by the corporation through its stockholders depends upon the general rules governing ratification as set forth in a preceding subdivision of this chapter.2

§ 2398. Right of interested officers to vote as stockholders. The better rule is that if the corporate officers adversely interested to the corporation own a majority of the stock, they cannot, as stockholders, ratify a contract with themselves so as to bind a minority stockholder.3

-

§ 2399. What constitutes ratification. As already stated in a preceding subdivision, ratification of acts in general of corporate officers may be express or implied, and if implied it may be evidenced by mere acquiescence, acceptance of benefits, affirmative acts recognizing the validity of the act, etc.

98 Kessler & Co. v. Ensley Co., 129 Fed. 397, 400, where question is discussed at length.

99 Continental Ins. Co. v. New York & H. R. Co., 187 N. Y. 225, 238, 79 N. E. 1026.

1 Bingham v. Bell & Zoller Coal Co., 175 Ill. App. 469, 481.

2 See § 2190, supra.

3 Booth v. Land Filling & Improvement Co., 68 N. J. Eq. 536, 59 Atl. 767.

See also § 2187, supra.

As in case of other acts, there

Dealings by a majority of the directors with themselves cannot be ratified by a stockholders' meeting at which a majority of the votes cast in favor of the ratification were cast by or under the control of the directors alleged to be guilty of the wrongdoing. Klein v. Independent Brewing Ass'n, 231 Ill. 594, 83 N. E. 434. Contra, see Green v. Felton, 42 Ind. App. 675, 84 N. E. 166.

4 See § 2193 et seq., supra.