Classification of directors.

The classification provided for by the statute is twofold:

1. Classification by terms, the effect of which is to continue the directors in office for a longer term than one year and to cause the board to rotate in classes, so that in no one year can the personnel of the entire board be changed.

2. Classification by stock, by which one class of stock elects exclusively a certain number of directors. Thus it is possible to place the control of the company, to the extent of electing a majority of the directors, in any class of the stockholders, whether that class be a majority or a minority of the whole stock.

Either classification may be used without the other, or both may be combined.

Executive committee.-The power of directors of a corporation to delegate their authority to committees, in the absence of express power of delegation contained in the certificate of incorporation, is not yet fully settled in this State. The general rule is, that directors may not delegate authority in matters committed to their discretion and judg

ment.

It would seem from the case of the Metropolitan Telephone Co. v. Domestic Telegraph Co. (44 N. j. Ea., 568) that the courts are inclined to relax the rigor of the general rule and to recognize the power of directors to delegate current and ordinary business to a committee or committees. That is now not an uncommon practice among business corporations.

It was held in New York (Hoyt v. Thompson's Exr., 19 N. Y., 207) that a board of twenty-three directors may delegate to a quorum of any "five of their number authority to transact all ordinary business." (See also Olcott v. Tioga R. R. Co., 27 N. Y., 558; Sheridan Elec. Light Co. v. Bank, 127 N. Y., 522.)

Provision should be made in the certificate of incorporation for the appointment of an executive committee and its powers.

Such provision is sometimes made in the by-laws.

13. Officers.

Every corporation organized under this act shall have a president, secretary and treasurer, who shall be chosen either by the directors or stockholders, as the by-laws may direct, and shall hold their offices until others are chosen and qualified in their stead; the president shall be chosen from among the directors; the secretary shall be sworn to the faithful discharge of his duty, and shall record all the votes of the corporation and directors in a book to be kept for that purpose, and perform such other duties as shall be assigned to him; the treasurer shall give bond in such sum, and with such surety or sureties,

§ 13

§ 13 as shall be required by the by-laws, for the faithful discharge of

his duty.

P. L. 1846, p. 66; P. L. 1849, p. 302; Act of 1875, § 18.

Powers of officers.-The powers of the officers of a corporation over its business and property are strictly those of agents-powers either conferred by the charter, by-laws or delegated to them by the directors or managers. (Fifth Ward Savings Bank v. First Natl. Bank, 48 N. J. Law, 513, 525; Stokes v. N. J. Pottery Co., 46 N. J. Law, 237.)

Stokes v. N. J. Pottery Co., 46 N. J. Law, 237, held that the president is the chief executive officer, and by virtue of his office has authority to perform all acts of an ordinary nature which, by usage or necessity, are incident to his office, and may bind the corporation by contracts in the usual course of business. See also Beebe v. George H. Beebe Co., 46 Atl. Rep., 168, holding that the president has power by virtue of his office to take all steps necessary for the defense of his company in litigation, including the appointment of an attorney for this purpose.

"The doctrine that a corporation may act only by a resolution of its board, and under its corporate seal, has long been abandoned. In the conduct of its ordinary business a corporation acts by its agents, who may be appointed without formal action of its board, and not even in writing. (American Insurance Co. v. Oakley, 9 Paige, 500.) Corpora tions may be bound by acceptance and ratification of previously unau thorized acts of its agents, even when in the course of his principal's business he perpetrates a fraud. (Garrison v. Technic Electric Co., 10 Dick. Ch. Rep., 708.)" (Flaherty v. Atlantic Lumber Co., 58 N J. Eq., 467, 473.)

When an officer is clothed with apparent authority, although not inherent in his office, the general doctrine of agency applies, and the corporation may be liable for his acts. The authority of the officer does not depend so much on his title, or on the theoretical nature of his office, as on the duties he is in the habit of performing. (Fifth Ward Savings Bank v. First Natl. Bank, 48 N. J. Law, 513, 525; Taylor on Corporations, Sections 202, 236, 244; see also Blake v. Domestic Mfg. Co., 38 Atl. Rep., 241.)

Where a corporation repudiates unauthorized contract of officer it must put other party in statu quo. (Trenton Passenger Ry. Co. v. Wilson, 40 Atl. Rep., 597.)

As to acts of an extraordinary nature, an officer must have express authority from the board of directors. He cannot confess judgment against the company. (Stokes v. N. J. Pottery Co., 46 N. J. Law, 237.)

Nor has he power to execute a cognovit. (Raubv. Blairstown Creamery Ass'n, 56 N. J. Law, 262.) The president and cashier of a bank, as such, have no inherent power to execute, in the name and behalf of the corporation, a mortgage or conveyance of real estate. (Leggett v. N. J. Mfg. & Bk'g Co., 1 N. J. Eq., 541.)

As to when the corporation is charged with notice from its agent's

knowledge, see Willard v. topher, 40 N. J. Law, 435; Law, 134.

Denise, 50 N. J. Eq., 482; Bank v. Chris- § 13 Canada Mfg. Co. v. Woodbridge, 58 N. J.

De facto officers.-Lord Ellenborough's definition (King v. Bedford Level, 6 East., 350, 368) of a de facto officer as "one who has the reputation of being the officer he assumes to be, and yet is not a good officer in point of law," is followed in Mechanics' National Bank v. Burnett Mfg. Co., 32 N. J. Eq., 236.

The acts of a de facto officer of a corporation are valid-so far, at least as they create rights in favor of third persons. (Hackensack Water Co. v. De Kay, 36 N. J. Eq., 548.)

66

"If a body of men acting as a corporation permits certain persons to "act openly as corporate officers, or if it is permitted by the directors, assuming them to have had the power to appoint the officer in question, "the corporation will not, to the detriment of persons who in good faith "have acted on the assumption that the persons acting as officers were the "officers they assumed to be, be permitted to impeach the validity of their "acts and contracts on the ground that such persons were not legally corporate officers.' (Taylor on Corporations, Section 189.)

Ratification of acts of officers.-See Kountze v. Morris Aqueduct Co., 58 N. J. Law, 303, 695; In re West Jersey Traction Co., 45 Atl. Rep., 282. Contracts signed by officers.-The proper way to sign corporate contracts is: The Company,

by

President (or other officer as the case may be), and not merely the name of the officer followed by his official title. Such titles are sometimes held to be mere words of description. In New York where a bank discounted for a third party a negotiable promissory note reading "We promise to pay," etc., and signed by the individual names of the parties, with the addition of the words President" and "Secretary," it was held to be the note of the individuals signing.

The Court held that nothing short of notice, express or implied, brought home to the bank at the time of discounting it that the note was issued as the note of the corporation of which the signers were officers, and was not intended to bind the signers personally, could defeat, on the ground that it was a corporate obligation, the remedy of the bank against the individuals signing. Not only was the note in that case signed by the defendants with the addition of the words "President" and "Secretary," but the name of the company was printed across the end of the note. (First Natl. Bank v. Wallis, 150 N. Y., 455.)

In this State, however, the Court of Errors and Appeals held the rule to be that such a note is prima facie the note of the individual and not of the corporation, but that parol evidence may be introduced to show whether it really was the personal note of the officer or was the note of the corporation. (Kean v. Davis, 21 N. J. Law, 683; Reeve v. 1st Natl. Bk., 54 N. J. Law, 208; see also Dayton v. Warne, 43 N. J. Law, 659; Sheldon v. Dunlap, 16 N. J. Law, 245; Den v. Hay, 21 N. J. Law, 174; Brown ads. Combs, 29 N. J. Law, 36; Simanton v. Vliet, 61 N. J. Law, 595; Shotwell v. M'Kown, 5 N. J. Law, 973.)

§ 14-15

Secretary. It is the duty of the secretary to keep the minute book of the company. The minutes of a corporation need not be entered up in the handwriting of the secretary; it is sufficient if they are entered under his direction and approved by him. (Wells v. Rahway White Rubber Co., 19 N. J. Eq., 402.)

Liability of treasurer for corporate funds.-Where a treasurer, with the company's consent, deposited funds in a bank to his credit, he was held entitled to allowance for deposits lost by failure of the bank. It was also held that he was not liable for interest on funds of the company in his hands, unless he had used them so as to earn interest, or for his own purposes. (Laurel Springs Land Co. v. Fougeray, 41 Atl. Rep., 694.)

Removal of officers.-If there be a fixed term of office removal must be for cause; but otherwise, unless limited by statute or by-law, the power to remove ministerial officers is absolute, in the body that elects, subject only to a right of action if there be a breach of contract of employment. (Thompson on Corporations, Sections 804, 805, 820.) The president of a corporation has no securer tenure than any other ministerial officer. (Ibid, Section 4611.) Our statute (Section 13) simply provides that every corporation organized thereunder shall have a president, secretary and treasurer, who shall be chosen either by the directors or stockholders as the by-laws may direct and shall hold their offices until others are chosen and qualified in their stead. The by-laws of the Griffing Company directed that the directors shall choose these officers, but fixed no term of office, and at the meeting of November 23d were amended so as to give express power of removal. Such an amendment has been judicially upheld in this State. Weinburgh v. Union, &c., Advertising Co., 55 N. J. Eq, 640. The stockholders ratified the removal made under this authority. (In re A. A. Griffing Iron Co., 63 N. J. Law, 168.)

Torts committed by agents.—It is now thoroughly settled here as elsewhere that corporations are liable for torts which they may commit by agents, and that the pertinent inquiry when such liability is charged is (1) whether the act in question is one within the scope of the corporate powers, and (2) whether it was done by a person who was the agent of the corporation in doing it. (W. J. & Seashore R. R. Co. v. Welsh, 62 N. J. L., 655, 658, citing Mc Dermott v. Evening Journal, etc., 14 Vroom, 488; s. C., 15 Id., 430; Hoboken, etc., Co., v. Kahn, 30 Id., 218; Dock v. Elizabeth Steam, etc., Co., 5 Id., 312.

14. The corporation may have such other officers, agents and factors, who shall be chosen in such manner and hold their office for such terms as may be prescribed by the by-laws. P. L. 1846, p. 66; P. L. 1849, p. 302; Act of 1875, § 19.

15. Any vacancy occurring among the directors or in the office of president, secretary or treasurer by death, resignation, removal or otherwise, shall be filled in the manner provided for

To face p. 33, Dill on New Jersey Corporations, 3d cloth and 4th paper edition.

Amendment of 1902.

WAIVER OF NOTICE BY STOCKHOLDERS.

Section 16 of AN ACT CONCERNING CORPORATions (Revision of 1896) was amended to read as follows:

16. The first meeting of every corporation shall be called by a notice, signed by a majority of the incorporators, designating the time, place and purpose of the meeting, which notice shall be published at least two weeks before the meeting in some newspaper of the county where the corporation is established; or said first meeting may be called without publication if two days' notice be personally served on all the incorporators; or if all the incorporators shall, in writing, waive notice and fix a time and place of meeting, no notice or publication shall be required; whenever under any of the provisions of this act, or any amendment thereto, a corporation is authorized to take any action after notice to its members or stockholders, or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of any period of time, if such action be authorized or approved and such requirements be waived, in writing, by every member or stockholder of such corporation or by his attorney thereunto authorized. (Chap. 58, Laws of 1902, approved March 28, 1902, repealing inconsistent acts and taking effect immediately.)

The matter in bold face type is new.

This amendment is substantially the same as Section 38 of the General Corporation Law of New York. It is primarily intended to settle any doubt as to the power of stockholders to waive statutory provisions requiring notice to be published. The amendment also in express terms reaffirms to stockholders the right which undoubtedly they had prior to its enactment, of waiving notice of meetings, and authorizes immediate action to be taken where all the stockholders consent in cases where the statute requires a definite number of days' notice to be given.