competent Board for the transaction of any corporate business. By reason of the disqualification of Wells from taking any part in passing the resolution for executing the note and mortgage to himself, he could neither vote in favor of the resolution, nor by his presence help to create a quorum by which the other two Directors could adopt it. For the purpose of any action upon this resolution, he was as much a stranger to the Board as if he had never been elected a Director; and, although he may have been physically present in the room with the other two Directors, he was not for that purpose a competent part of the Board, any more than would have been any other bystander, and there was not, therefore, a quorum of the Board 'present and acting' at the time the resolution was adopted." (Decided by the Supreme Court in the case of Curtin vs. Salmon River Hydraulic Gold Mining Company, which decision is printed in Volume 130 of the California Reports, page 345.)

Section 863.-REGULAR AND SPECIAL MEETINGS. The time of holding the meetings of the Board of Directors may be fixed in the By-Laws, and the ByLaws may provide that no notice be given of regular meetings. Where a special meeting is called, for any purpose, all of the Directors must be notified by the Secretary in the proper manner. If the meeting is special, and the Directors are not all notified, the meeting is not duly assembled, and its action does not bind the corporation as a valid corporate act.

Section 864.-PUBLICITY CANNOT MAKE ILLEGAL ACT OF DIRECTORS VALID. The publicity alone of an illegal and unauthorized act of the Directors of a corporation does not make it valid; and Directors charged with doing an illegal act cannot defend it by saying that their act was open, and not secret.

Section 865.-VACANCY IN BOARD OF DIRECTORS. The By-Laws of a corporation may provide the manner in which a vacancy in the Board of Directors shall

be filled. If the By-Laws make no provision for filling a vacancy, the Board of Directors must appoint a member to fill the vacancy.

Civil Code, Section 305.

Section 866.-CAN A CORPORATION PERFORM CORPORATE ACTS, SUCH AS THE MORTGAGING OF ITS REAL PROPERTY, WHILE THERE IS A VACANCY IN ITS BOARD OF DIRECTORS?-This question was a new one in the United States prior to the year 1899. In that year the Supreme Court of California made a decision in a case where this question was directly raised, (where there was a vacancy in a Board of five, and the remaining four members, without filling the vacancy, undertook to authorize a mortgage of the corporation's real estate), holding that a vacancy in the Board does not prevent it from acting so as to bind the corporation, if there is a majority of a full Board remaining. Chief Justice Beatty, giving the decision of the Court, said on this subject: "The By-Laws of this corporation, and, I suppose, its Articles of Incorporation, provided for a Board of five Directors, and the question is whether during a vacancy in one of these directorships the four remaining Directors could lawfully assemble for the transaction of any business except the filling of such vacancy. Counsel have not cited any case decided in this State or any other in the United States in which this question has been directly decided. It is no doubt true that Directors owe to their constituents the duty of keeping the Board full, by promptly filling vacancies as they occur; and this for the reason that shareholders are entitled to the benefit of the experience and advice of all the members of a full Board in the transaction of all its business. When the Directors violate this duty, there may be sound reasons for holding that they should not be allowed to take any advantage, as against the shareholders, of acts or resolutions passed when a full Board was not in existence. But when the corporation is dealing with a stranger, who, acting in good faith and in

ignorance of the existence of a vacancy in the Board of Directors, parts with his property on the faith of what he is induced to believe is a valid corporate obligation, the case is certainly very different in its substantial merits. The votes of a majority of a full Board may authorize a corporate act, although there may be a vacancy in the Board." (Decided by the Supreme Court in the case of Porter vs. Lassen County Land and Cattle Company, which decision is printed in Volume 127 of the California Reports, page 661.)

Section 867.-SERVICES OF DIRECTOR OUTSIDE OF HIS DUTIES AS SUCH.-Where a Director of a corporation performs services as its manager, or in any other legitimate way, not pertaining to his duties as Director, he is entitled to recover from the corporation the reasonable value of such services, though no rate of compensation was fixed by the Board of Directors prior to performance of the services. (Decided by the Supreme Court in the case of Bassett vs. Fairchild, which decision is printed in Volume 132 of the California Reports, page 631.)

Section 868.-LIABILITY OF DIRECTORS FOR MONEY EMBEZZLED.-The Directors of a corporation are individually and personally liable to its creditors for money embezzled by any of the officers of the corporation. This the Constitution of the State declares. But they are liable only to all the creditors, and one creditor cannot sue alone to recover his debt by reason of failure to pay when the funds of a corporation have been embezzled. All the creditors must be joined in such a suit, and the money recovered to the corporation from the Directors will constitute a trust fund to be paid to all the creditors.

Section 869.-ADVANCES OF MONEY BY DIRECTOR. Where money is advanced to a corporation by a Director, when the corporation is in debt and unable to

obtain money from other sources, and such money is received and made use of in the business of the corporation, it will be liable to him for the repayment of the sum advanced.

Section 870.-DIRECTORS IN TWO CORPORATIONS. The fact that two corporations have the same Directors, or that some of the Directors in one are also Directors in the other, does not prevent the two corporations from dealing with each other. Where two corporations, through their Boards of Directors, make a contract with each other, the Directors who are common to both are not within the rule which prohibits one who acts in a fiduciary capacity from dealing with himself. Two corporations have the right, within the scope of their chartered powers, to deal with each other; and this right is not destroyed by the fact that some, or even a majority, of the Directors are common to both. Of course, if such Directors should wrongfully use their powers to the prejudice of one of the corporations, their action could be set aside for fraud. But common Directors owe the same fidelity to both corporations, and there is no presumption that they will deal unfairly with either; and therefore their acts as such common Directors are not void.

Section 871.-AUTHORITY OF PRESIDENT.-The President of a corporation may have more extensive powers conferred upon him than a strict interpretation of the law would show. The Directors of a business corporation have power, by resolution, to give the President general authority to incur debts, negotiate loans, enter into contracts, and otherwise act as the agent of the corporation; and where a resolution of this kind is passed at a meeting of the Directors, unless it is in direct conflict with the By-Laws, the President will have authority to do all such acts on behalf of the corporation as are mentioned in the resolution. (Decided by the Supreme Court in the case of McCormick

vs. Stockton and Tuolumne County R. R. Company, which decision is printed in Volume 130 of the California Reports, page 100.)

Section 872.-PRESIDENT MAY EMPLOY ATTORNEY.-The President of a corporation has power to employ an attorney, when the exigencies of his company require it. He need not obtain the consent of the Directors or stockholders to do this. By virtue of his position as official head of the corporation he has the power to do so.

Section 873.-DIVIDENDS.-The Directors of a corporation cannot make dividends, except from the surplus profits arising from the business. The Directors cannot withdraw, divide, or pay to the stockholders, or any of them, any part of the capital stock, while the corporation is a going concern.

Civil Code, Section 309.

Section 874.-AGREEMENT TO DIVIDE CAPITAL STOCK AMONG STOCKHOLDERS VOID.-An agreement upon the part of a corporation to divide its whole capital stock among its stockholders, prior to its dissolution, is void.

Where a corporation wrongfully pays to some of its stockholders their proportionate share of the money received from the sale of the entire property of the corporation, the remedy of a stockholder who has not been paid is to compel the restoration of the funds illegally distributed.

(Decided by the Supreme Court of California, in the case of Tapscott vs. Mexican Colorado River Land Company, which decision is printed in California Decisions, Volume 35, page 598.)

Section 875.-EXTENT OF DEBTS TO BE CREATED. The Directors of a corporation have no power to create debts beyond the amount of the subscribed capital stock. If they create debts beyond the capital stock, the Directors are individually, jointly, and severally liable to