ordinarily can be no effective ratification, unless with knowledge of the facts. Ratification is to be implied if the corporation accepts or retains the benefit of the transaction (assuming, of course, that it can do otherwise), with knowledge of the facts; and it may be implied from acquiescence. Thus, where an officer leased certain ground belonging to the corporation to a company in which he was the principal stockholder, but the lessor company, with knowledge thereof, permitted the lessee to make extensive improvements on the land, and also retained the royalties provided for in the lease, it could not thereafter attack it as one made by an officer for his own benefit. So the renewal of indebtedness by a new board of directors entirely disconnected with the other corporation which was a party to the transaction is a ratification of indebtedness incurred when the parties were represented by common directors in part. But if the corporation, by the terms of a contract, was to receive no benefit whatever from a contract made in its name by its directors who were adversely interested, acquiescence in the expenditure of money thereunder by the other party to the contract does not estop the corporation from seeking to enjoin its performance.9 What constitutes ratification, who may ratify, and other general rules relating to ratification not only of voidable dealings between corporate officers and the corporation or in relation to corporate property, but also of other unauthorized acts or contracts of corporate officers, is considered at length in a preceding subdivision.10 § 2400. - Effect of ratification. If ratified, the transaction cannot be impeached by creditors unless it is actually in fraud of creditors.11 § 2401. Laches as precluding attack on transaction-In general. It is well settled that the corporation and the stockholders may and will lose the right to have the contract or transaction set aside by laches in exercising their option to disaffirm it.12 Whether the delay 5 See § 2182 et seq., supra. 6 Foster v. Bear Valley Irrigation Co., 65 Fed. 836; Stetson v. Northern Inv. Co., 104 Iowa 393, 73 N. W. 869. 7 Providence Mining & Milling Co. v. Nicholson, 178 Fed. 29. 8 Gould Copper Mining Co. v. Walker, 17 Ariz. 332, 152 Pac. 853. 9 Goodell v. Verdugo Canon Water Co., 138 Cal. 308, 71 Pac. 354. IV Priv. Corp.-19 10 See §§ 2177-2210, supra. 11 Sanford Fork & Tool Co. v. Howe, Brown & Co., 157 U. S. 312, 39 L. Ed. 713. 12 United States. Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. Ed. 328; Streight v. Junk, 59 Fed. 321; Jesup v. Illinois Cent. R. Co., 43 Fed. 483; Squair v. Lookout Mountain Co., 42 Fed. 729. in electing to set the transaction aside constitutes laches, so as to bar the right to relief, will depend upon the circumstances, and not merely upon the length of time which has elapsed. It was said by Mr. Justice Miller in a leading case in the Supreme Court of the United States, in which a director had purchased property of a corporation at a sale under a deed of trust: "The doctrine is well settled that the option. to avoid such a sale must be exercised within a reasonable time. This has never been held to be any determined number of days or years as applied to every case, like the statute of limitations, but must be decided in each case upon all the elements of it which affect that question. These are generally the presence or absence of the parties at the place of the transaction, their knowledge or ignorance of the sale and of the facts which render it voidable, the permanent or fluctuating character of the subject-matter of the transaction as affecting its value, and the actual rise or fall of the property in value during the period within which this option might have been exercised." 13 The delay is not fatal unless so long as to amount to an unreasonable time under all the circumstances, 14 and there is no laches Alabama. O'Conner Min. & Mfg. Co. v. Coosa Furnace Co., 95 Ala. 614, 36 Am. St. Rep. 251, 10 So. 290. Illinois. Higgins v. Lansingh, 154 Ill. 301, 40 N. E. 362. Iowa. Stetson v. Northern Inv. Co., 104 Iowa 393, 73 N. W. 869. Kentucky. Osborne's Adm'x V. Monks, 14 Ky. L. Rep. 606, 21 S. W. 101. Louisiana. Raymond v. Palmer, 41 La. Ann. 425, 17 Am. St. Rep. 398, 6 So. 692; Hancock v. Holbrook, 40 La. Ann. 53, 3 So. 351. Massachusetts. Warren V. Para Rubber Shoe Co., 166 Mass. 97, 44 N. E. 112; Snow v. Boston Blank Book Mfg. Co., 158 Mass. 325, 33 N. E. 588; Dunphy v. Traveller Newspaper Ass'n, 146 Mass. 495, 16 N. E. 426. Michigan. Keeney v. Converse, 99 Mich. 316, 58 N. W. 325. Missouri. Burgess v. St. Louis County R. Co., 99 Mo. 496, 12 S. W. 1050. Montana. Coombs v. Barker, 31 Mont. 526, 79 Pac. 1. Nebraska. Horbach v. Marsh, 38 Neb. 22, 55 N. W. 286. Ohio. United States Rolling Stock Co. v. Atlantic & G. W. R. Co., 34 Ohio St. 450, 32 Am. Rep. 380. Tennessee. Cullen v. Coal Creek Min. & Mfg. Co. (Tenn. Ch. App.), 42 S. W. 693. Compare Davis & Co. v. Gemmell, 70 Md. 356, 17 Atl. 259; Fitzgerald v. Fitzgerald & Mallory Const. Co., 41 Neb. 374, 59 N. W. 838. In order that a corporation may avoid a contract entered into by the directors in behalf of the corporation with a concern in which the directors have a personal interest, it must act within a reasonable time after discovery of the interest of the directors adverse to that of the corporation. Hodge v. United States Steel Corporation (N. J. Err. & App.), 54 Atl. 1. 13 Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. Ed. 328. 14 Mallory v. Mallory Wheeler Co., 61 Conn. 131, 23 Atl. 708. where the complaining party had no actual or constructive knowledge of the unfairness or bad faith connected with the transaction, until shortly before the action was commenced or the defense interposed.15 The option to set aside the contract must be exercised within a "reasonable time after those in whom the power of avoidance, or repudiation, is lodged, acquired a knowledge of the existence and terms of the contract, or should, in the ordinary course of business, have acquired such knowledge." 16 Laches may also bar the right of a corporation or its stockholders to maintain a suit to compel directors to account for secret profits.17 A delay of twenty months in attacking a sale to a director has been held not fatal,18 as has a delay of nine months in attacking a deposit of funds in a bank.19 On the other hand, twenty years has been held a bar.20 Ratification by acquiescence is practically the same thing as laches, and reference should be made to the law relating thereto.21 If an action is brought by a stockholder to set aside a sale by the corporation to an officer, the limitation applicable is not the one applicable to fraud in general, but is the provision limiting the time for actions based on the existence of a trust.22 § 2402. Laches and estoppel of individual stockholders. Individual stockholders may be estopped to attack a contract or other transaction on behalf of the corporation on the ground that directors or other officers were personally interested. If they participated or consented, or if they have ratified the transaction with knowledge of the facts, they are clearly estopped.23 Stockholders will not be 15 Morgan v. King, 27 Colo. 539, 63 Pac. 416; Hicks v. Steel, 126 Mich. 408, 85 N. W. 1121. As a defense to an action by a stockholder to set aside a contract between the corporation and a third party, however, the laches of the directors who caused the corporation to enter into the contract, they having a personal interest therein, cannot of course be set up. Goodell v. Verdugo Canon Water Co., 138 Cal. 308, 71 Pac. 354. 16 City Nat. Bank v. Merchants' & Planters' Nat. Bank (Tex. Civ. App.), 105 S. W. 338. 17 Warren v. Para Rubber Shoe Co., 166 Mass. 97, 44 N. E. 112; Keeney v. Converse, 99 Mich. 316, 58 N. W. 325; Cullen v. Coal Creek Min. & Mfg. Co. (Tenn. Ch. App.), 42 S. W. 693. 18 Wing v. Dillingham, 239 Fed. 54. 19 City Nat. Bank v. Merchants' & Planters' Nat. Bank (Tex. Civ. App.), 105 S. W. 338. 20 Jesup v. Illinois Cent. R. Co., 43 Fed. 483. 21 See $2394 et seq., supra. 22 Morgan v. King, 27 Colo. 539, 63 Pac. 416. 23 Ten Eyck v. Pontiac, O. & P. A. R. Co., 74 Mich. 226, 3 L. R. A. 378, 16 Am. St. Rep. 633, 41 N. W. 905. Stockholders who are parties to whatever agreement other stockholders and officers have with the cor heard to complain of their own acts as directors.24 The right of individual stockholders to complain may also be barred by laches; 25 but it has been held that inasmuch as less than all the stockholders can ratify such a contract only in a stockholders' meeting, "any presumption of ratification by the corporation arising from mere lapse of time becomes impotent when it affirmatively appears that no stockholders' meeting has ever been apprised of the transaction." 26 Laches in suing to set aside transfers of property to corporate officers often depends upon whether the stockholder who sues is chargeable with knowledge of the transfer. As to this matter, it is generally held in this country that means of knowledge plainly within the reach of stockholders by the exercise of the slightest diligence is, in legal effect, the equivalent of knowledge. However, as well stated by Justice Jones in a federal decision, there is "no presumption of law that an absent stockholder, on an issue of laches between him and his fiduciary, either knew or did not know what was done at a regular or adjourned meeting of stockholders, which he did not attend, or as to the disposition the managers of his corporation have made of parts of corporate property in the conduct of its business. Such issues are to be solved as inferences of fact, in view of the comparative magnitude or insignificance of the transactions complained of, the openness and publicity attending it, the volume and nature of the business of the corporation, the extent of the territory in which its operations are carried on, the place where the transaction occurred, the value of the poration, and secure a like agreement for themselves, are estopped to question the validity of the contract with the others because made with a corporation by its officers. Clark v. Pittsburg Natural Gas Co., 184 Pa. 188, 39 Atl. 86. 24 Ten Eyck v. Pontiac, O. & P. A. R. Co., 74 Mich. 226, 3 L. R. A. 378, 16 Am. St. Rep. 633, 41 N. W. 905. 25 United States. Streight v. Junk, 59 Fed. 321; Jesup v. Illinois Cent. R. Co., 43 Fed. 483; Squair v. Lookout Mountain Co., 42 Fed. 729. Illinois. Higgins v. Lansingh, 154 Ill. 301, 40 N. E. 362. Kentucky. Osborne's Adm'x V. Monks, 14 Ky. L. Rep. 606, 21 S. W. 101. Louisiana. Hancock v. Holbrook, 40 La. Ann. 53, 3 So. 351. Massachusetts. Warren V. Para Rubber Shoe Co., 166 Mass. 97, 44 N. Michigan. Keeney v. Converse, 99 Nebraska. Horbach v. Marsh, 37 Tennessee. Cullen V. A stockholder is not chargeable with laches unless he knew or ought to have known of the fraud. Morgan v. King, 27 Colo. 539, 63 Pac. 416. 26 Endicott v. Marvel, 81 N. J. Eq. 378, 87 Atl. 230. stockholder's interest in the corporation, his presence or absence from its home, the nature of his own pursuits, and all the surrounding circumstances which throw light upon the question." 27 The lapse of three years has been held in a particular case such laches as to prevent a stockholder from seeking to set aside a foreclosure sale of corporate property on the ground that the purchaser was a director or trustee of the corporation.28 Four years' delay in suing to set aside a sale to a director, during which time great improvements were made, bars the suit where knowledge of all the facts was accessible to the stockholders, and the value of the property had greatly increased by reason of the acts of the purchaser.29 In connection with this subject, reference should be made to a succeeding volume wherein the question of laches as precluding stockholders' suits in general is considered at length.30 § 2403. Return of consideration or payment for benefits received, as condition precedent to the right to rescind. As a general rule, if a corporation repudiates or sues to set aside a contract, conveyance or other transaction between it and its directors or other officers, alone or with others, it is bound to return the consideration, if any, which it has received, if it can do so, just as in any other case of rescission. If it cannot return the consideration, whether it was in money, labor or services, and the contract is repudiated, it will, at the least, be liable to the extent of the money or other benefit which it has actually received and enjoyed.31 If the corporation becomes insclvent and 27 Kessler & Co. v. Ensley Co., 129 Fed. 397, 417. 28 Buchler v. Black, 213 Fed. 880, 886. 29 Kessler & Co. v. Ensley Co., 141 Fed. 130, aff'd 148 Fed. 1019 (mem. dec.). 30 Infra, chapter on Stockholders. 31 Thomas v. Brownville, Ft. K. & P. R. Co., 109 U. S. 522, 27 L. Ed. 1018, rev'g 2 Fed. 877 (where a railroad company, which had received the benefit of work under a construction contract with a company in which some of its directors were interested, was liable on bonds issued to the construction company to the extent of such benefit). Wing v. Dillingham, 239 Fed. 54; Wyman v. Bowman, 127 Fed. 257, 272; Pauly v. Pauly, 107 Cal. 8, 48 Am. St. Rep. 98, 40 Pac. 29; Stockholders will not be permitted to stand back while an officer advances money and takes risk upon the successful outcome of the corporate enterprise, and after the enterprise has proved a success take the benefits thereof without reimbursing such of ficer for his outlays and expenses. Bramblet v. Commonwealth Land & Lumber Co., 26 Ky: L. Rep. 1176, 83 S. W. 599. But where the president of a corporation, by fraud, effected a sale of property by him to the corporation at an excessive price, it was held that |