Court Opinion

ID: 6810385
Source: CourtListenerOpinion
Date Created: 2022-07-23 18:53:07.828139+00
Date Added: 2024-06-11T16:03:38.014885
License: Public Domain

Dissenting opinion by
Judge John A. Buchanan:
I concur in the opinion of the court, except in so far as it holds that the president of the company was entitled to a salary for the year 1890-’91 for services rendered by him. Upon that question I feel compelled to dissent. Section 1119 of the Code provides that no compensation shall be paid for services rendered by. the president or director of such company unless allowed by the stockholders. The salary in question was not allowed by the stockholders before its payment. This is not claimed, but it is insisted that at a subsequent meeting of the stockholders the action of the directors in allowing it was ratified and approved. I do not think that the record shows this. A corporation cannot be charged with the unauthorized act of its agents on the ground that the act has been ratified by the shareholders unless the shareholders had full knowledge of the act. See 2 Morawetz on Corp., sec. 628; 2 Cook on Stockholders; Halsey v. Monteiro, 92 Va. 381. It is no part of the duty of the shareholders as between them and the directors to look into the management of the company. They have the right to leave the management of its affairs in the hands of those to' whom the law has confided it,- and to assume that they have not exceeded their authority nor done things prohibited by law. See Stanhope’s Case, 1 Chy. App. (L. R.) 161, 169; Houldsworth v. Evans, 3 Eng. & Irish Appeals (L. R.) 276.
If, in the conduct of the business of the corporation, the directors have done an unauthorized act intended -to bind the company or its stockholders, they should report their action *101specifically and fully to the stockholders for their ratification. They cannot, as it seems to me, make an allowance, as was done in this case, out of corporate funds to the president of the company, not only without authority, but in violation of the express provisions of the statute, and report generally to the stockholders the receipts and disbursements for the year in which such allowance was made, without calling the attention of the stockholders to the unauthorized and prohibited act, and then claim that a resolution passed by the stockholders in a general meeting, ratifying and confirming the actions and proceedings of the Board of Directors for the year in which the allowance was made, was a ratification of the act.
The record does not show, as I understand it, that the stockholders were fully informed, or informed at all, of the act in question when the resolution relied on as a ratification was passed. Section 1119 of the Oode is a very wise provision for the protection of both stockholders and creditors of a corporation, and should be rigidly enforced and upheld.

Affirmed.