or regulation by by-laws providing otherwise, the power to appoint inspectors of election lies with the stockholders alone.1

§ 91. Power to hold Meetings for the Election of Directors without the Domiciliary State. The general rule unquestionably is that in the absence of statute or unanimous consent of all the stockholders no election of directors by the stockholders can be legal, so as to make them directors de jure, when had at a meeting called without the limits of the State under whose laws the corporation is created.2

Twelve of the Commonwealths have statutes expressly authorizing the holding of stockholders' meetings without the domiciliary State. In any event, it seems to be now well settled that where all the stockholders meet without the State and transact business thereat, even though such business be the annual election of directors, the stockholders present at such meeting are estopped to question the validity of the proceedings had thereat.1 An excellent method of validating any action taken by stockholders at meetings held without the domiciliary State is to have subsequent action taken by the stockholders at a meeting called within the State ratifying what has been previously done by them without the State. This, it has been held, cures all previous defects.

§ 92. Voting by Proxy. At common law, voting of stockholders at annual meetings or special meetings was required to be done in person. In the absence of statute, charter provision, or valid by-law giving stockholders this right, the same rule would apply at the present day.7

1 State v. Merchant, 37 O. St. 251. 2 Harding v. American Glucose Co., 182 Ill. 551; 55 N. E. 577. See Hodgson v. Company, 46 Minn. 454; 49 N. W. 197; Freeman v. Company, 38 Me. 343; Smith v. Silver Valley Min. Co., 64 Md. 85; 20 Atl. 1032; Aspinwall et al. v. Ohio & M. R. R. Co., 20 Ind. 492; W. H. & H. Mining Co. v. King, 45 Ga. 34; Hiles v. Parrish, 24 N. J. Eq. 380; Arms v. Connant, 36 Vt. 750; Bellows v. Todd, 39 Iowa, 209; Franco-Texas Land Co. v. Laigle, 59 Tex. 339; Mack v. De Bardelben, etc. Co., 90 Ala. 396; 8 So. 150; Duke v. Taylor, 37 Fla. 64; 19 So. 172; Camp v. Byrne, 41 Mo. 525; Mitchell v. Vt. Copper Min. Co., 40 N. Y. Sup. Ct. 406; Galveston, etc. Ry. Co. v. Cowdrey,

11 Wall. 459; 20 Law Ed. 199. The principle of estoppel may be applied here. Handley v. Stutz, 139 U. S. 417; 11 Sup. Ct. 530.

4 T. M. Co. v. Goodhue, 18 N. Car. 981; Handley v. Stutz, 139 U. S. 417; 11 Sup. Ct. 530.

5 G. I. & E. Co. v. Toler, 80 Md. 278; 30 Atl. 657.

Perry v. Company, 93 Ala. 364; 9 So. Rep. 217.

7 Phillips v. Wickham, 1 Paige (N. Y.), 590; Taylor v. Griswold, 14 N. J. L. 222; P. H. S. Bank v. Superior Court, 104 Cal. 649; 38 Pac. 452; State v. Tudor, 5 Day, 329; People v. Crossley, 69 Ill. 195; Perry v. Company, 93 Ala. 364; 9 So. 217.

Owing to the unquestioned right of a corporation to adopt a valid by-law permitting voting by proxy, even in the absence of a statute authorizing it, the question has ceased to be one of any great practical importance in the country to-day. Besides this, statutes exist in all of the States and Territories, except Arizona and Georgia, expressly authorizing the voting of stock by proxy. It should be observed, however, that where the right to vote by proxy is given by statute without restriction it cannot be qualified by by-law.1

Proxies may be issued in blank and lawfully filled in by the holder.2 It has been held that stockholders cannot give an irrevocable proxy to secure the payment of a debt. It is against the settled rules governing the control of corporations that an irrevocable power of attorney which directs the vote on stock, should be vested in a person who has no interest in the stock or is not a representative of a person interested therein.1

The foregoing suggests the question as to whether or not voting trusts, so common at the present time, are valid. A "voting trust" may be defined to be an agreement of stockholders to give any designated trustee the right to vote at his discretion through stockholders for a given period of time. It may be said that such voting trust is valid where neither the purposes nor the means used contravene any constitutional or statutory provision or well-recognized principles of public policy, and are within the scope of the powers of the contracting parties.

§ 93. First Directors' Meeting. The principal business to be transacted at the first meeting of the board of directors of a corporation is (1) the election of the officers provided for in the by-laws; (2) the carrying into effect the resolutions passed at the organization meeting of the stockholders, if any, looking to the payment of the stock in property, or, in lieu thereof, the

1 Bank v. Superior Court, 104 Cal. 649; 38 Pac. 452.

2 Matter of White, 45 Hun, 580; Matter of Townsend, 46 N. Y. St. Rep. 135.

8 Matter of Germicide Co., 65 Hun, 606; 20 N. Y. Sup. 495.

* Clowes v. Miller, 60 N. J. Eq. 179; 47 Atl. 345.

5 M. & O. R. v. Nichols, 98 Ala. 92; 12 So. 723; Smith v. Company, 115 Cal. 584;

Kreisel v. Distilling Co., 61 N. J. Eq. 5; 47 Atl. 471; Brightman v. Bates, 175 Mass. 105; 55 N. E. 809; Moses v. Scott, 84 Ala. 608; 4 So. 742; Clowes v. Miller, 60 N. J. Eq. 179; 47 Atl. 345; Sullivan v. Parkes (N. Y.), 69 Ap. Div. 221; 74 N. Y. Sup. 786; Freon v. Company, 42 O. St. 30. See however Shepaug Voting Trust Case, 60 Conn. 553; 24 Atl. 32; Harvey v. Company, 118 N. C. 693; 24 S. E. 489.

passage of a resolution by the board of directors ordering an assessment, either in whole or in part, upon the par value of the capital stock. The general rule appears to be that unless the governing statute or a by-law of the corporation expressly provides that directors' meetings should be held within the domiciliary State, that such meetings may be held without the limits of such State if desired.1

Some courts, however, apparently distinguish in this regard between meetings of the board of directors for the election of officers and those meetings merely called for the transaction of routine business. Such courts hold that meetings of the first class must be held within the domiciliary State, while the others may be held without such State if desired.2 In nearly half of the States statutes exist authorizing the holding of directors' meetings without the State. It is unquestionably true that where incorporators can perform constituent acts outside of the domiciliary State directors can elect officers in like manner.1

When calling the directors together for their first meeting, the mode of notice provided for in the by-laws must be given. In the absence thereof personal notice must be given, or a waiver of notice must be had from each of the directors.5 It is hardly necessary to state in this connection that no director can lawfully delegate power to act for him to another person.

At common law a majority of the directors present and voting at a meeting was necessary to constitute a quorum of the full board. In some few of the States, notably Oregon, statutory provisions exist permitting less than a majority of the board of directors to constitute a quorum. Provisions in statutes and bylaws requiring the election of directors to be held on a specified date are ordinarily construed to be merely directory. The general rule is that a majority of the directors constitute a quorum

1 Thompson v. Company, 58 Miss. 423; Lead Co. v. Reinhard, 114 Mo. 218; 21 S. W. 488; Bassett v. Mining Co., 15 Nev. 293; Parsons v. Lent, 34 N. J. Eq. 67; Hanna v. Company, 23 O. St. 622.

2 Smith v. Mining Co., 64 Md. 85; 20 Atl. 1032; G. I. & E. Co. v. Toler, 80 Md. 278; 30 Atl. 651.

Ohio, etc. R. R. Co. v. McPherson, 35

Mo. 13.

5 Bank v. McCarthy, 55 Ark. 473; 18 S. W. 759; B. B. R. Co. v. Buck, 68 Me. 81; Library v. Association, 173 Pa. St. 30; 33 Atl. 744.

Perry v. Company, 93 Ala. 364; 9 So. 217; Craig Medicine Co. v. Merchants' Bank, 59 Hun, 661; 14 N. Y. Sup. 16.

7 Blackwell v. State, 36 Ark. 178.

8 Beardsley v. Johnson, 121 N. Y. 224; 24 N. E. 380.

for the transaction of business, and a majority of the quorum have power to bind the corporation by their votes.1

§ 91. Election of Corporate Officers. In nearly all of the States statutes exist designating certain officers that business corporations must have, and providing that such officers shall be elected by the board of directors duly convened for that purpose. Where, however, as is sometimes the case, this power is devolved upon the stockholders by statute, then directors have no power to elect such officers.2 In the absence of such statutes as are here referred to, giving the directors power to elect officers, it must be admitted that the current of authority is to the effect that the power then lies in the stockholders alone.3

The law implies that directors shall hold their office until their successors have been elected and qualified.* Where vacancies occur in the board of directors they must be filled, in the absence of statute, charter provision, or by-law giving the power to the directors, by the stockholders only, and even where the power to fill vacancies is lawfully bestowed upon the remaining directors, vacancies can then be filled only by action of a majority of the authorized number of directors.5

Questions of policy, or management, or expediency of contract or action, or consideration of gross misappropriation or unlawful appropriation of corporate funds to the detriment of corporate interests, are left generally to the decision of the directors if their powers are without limitation and free from restraint. To hold otherwise would be to substitute the judgment and discretion of others in place of those determined on by the scheme of incorporation. § 95. Appointment of Executive Committee. - The incorporation acts of Connecticut, Delaware, Massachusetts, Nevada, New Jersey, North Carolina, Virginia, and West Virginia all authorize the appointment by the board of directors from their own number of an executive committee to whom may be entrusted most of the ordinary duties that devolve upon the full board of directors.

1 Ten Eyck v. Company, 74 Mich. 226; 41 N. W. 905; see also Hoyt v. Thompson, 19 N. Y. 207.

2 See In re St. Helen Mill Co., 13 Saw. 92; Walsenberg Water Co. v. Moore, 5 Col. App. 144; 38 Pac. 60.

8 Beardsley v.Johnson, 121 N. Y.224; 24 N. E. 380; In re A. A. G. Iron Co., 63 N. J. Law, 168, 357; 41 Atl. 931; 46 Atl. 1097.

People v. Runkle, 9 Johnson (N. Y.), 147; Huguenot Nat. Bank v. Studwell, 6 Daly (N. Y.), 713.

5 Moses v. Tompkins, 84 Ala. 613; 4 Sou. 763.

6 Ellerman v. Ry. Co., 49 N. J. Eq. 217; 23 Atl. 287; Ulmer v. Company, 98 Me. 579; 57 Atl. 1001.

It was at one time held that the performance of any duties by the board of directors involving the exercise of discretion and judgment could not be so delegated.1 The modern rule, even in the absence of statute, is that directors have the power to delegate to a part of their own number authority to perform any part of the ordinary business of the corporation, even though it involves the exercise of the broadest judgment and discretion.2

In any event, whenever a question is raised as to the validity of acts done by an executive committee, the ratification of their action by the full board will undoubtedly correct all defects in the act complained of which would have been valid in the first instance if performed by the board itself.3

§ 96. Stock Assessments. - Where the capital stock of a corporation is not all issued in the first instance in exchange for property, it is customary for the board of directors to pass a resolution at their first meeting, making an assessment upon the stock of stockholders either for its entire par value or some fractional part thereof. Generally speaking, in order to sustain a right of action on stock subscriptions, it is necessary to show that a valid call or assessment has been made. An assessment is a rating or fixing of the proportion by the board of directors or by the stockholders, which every subscriber is to pay of his subscription, of which notice is given, which notice is referred to as a "call." 5

While it is doubtless true that a "call" may be made either by the directors or the stockholders, nevertheless it is usually made by the directors. This of course necessitates the organization of the corporation as a preliminary to the making of a valid assessment. The purpose of the "call" is to fix the time for payment where that is not provided for either by statute, charter provisions, or by-law.7 The better rule seems to be that the

1 Gillis v. Bailey, 21 N. H. 149. 2 Hoyt v. Thompson, etc., 19 N. Y. 207; Burden v. Burden, 159 N. Y. 187; 54 N. E. 17; Jones v. Williams, 139 Mo. 1; 40 S. W. 383; Davis v. Company, 2 Utah, 74; Tempel v. Dodge, 89 Texas, 69; 32 S. W. 514; 33 S. W. 222; Metropolitan Telephone Co. v. Company, 44 N. J. Eq. 568; 14 Atl. 907; Sheridan Electric Light Co. v. Bank, 127 N. Y. 517; 28 N. E. 467.

3 U. P. Ry. Co. v. Company, 163 U. S. 564; 16 S. Ct. 1173.

4 Chandler v. Siddle, 5 Fed. Cases No. 2594; 3 Dillon, 477.

5 Spangler v. Company, 21 Ill. 276.

6 Williams v. Taylor, 120 N. Y. 244; 24 N. E. 288; Williams v. Company, 153 Ind. 496; 55 N. E. 425.

7 West v. Crawford, 80 Cal. 19; 21 Pac. 1123; W. S. Bank v. Bank, 107 Mo. 133; 17 S. W. 644; Champion Fire Kindler Co. v. Rischert, 74 Mo. Ap. 537.