by-laws,1 and shall hold their office until others are chosen and qualified in their stead; the manner of such choice and of the choice or appointment of all other agents and officers of the company, shall be prescribed by the by-laws. The number of directors or trustees shall not be less than three; one of them shall be chosen president by the directors, or by the members of the corporation, as the by-laws shall direct. The members of said corporation may, at a meeting to be called for that purpose, determine, fix or change the number of directors or trustees that shall thereafter govern its affairs; and a major 2 1 Mandamus lies to compel such annual election: Com. v. Keim, 38 Leg. Int. 32; The People v. Town of Fairbury, 51 III. 149; The People v. Albany Hospital, 61 Barbour, 397. 2 By the Act of 1860 it is provided: "It shall not be lawful for any councilman, burgess, trustee, manager or director of any corporation, municipality or public institution, to be, at the same time, a treasurer, secretary or other officer, subordinate to the president and directors, who shall receive a salary therefrom, or be the surety of such officer, nor shall any member of any corporation or public institution, or any officer or agent thereof, be in anywise interested in any contract for the sale or furnishing of any supplies, or materials to be furnished to, or for the use of any corporation, municipality or public institution of which he shall be a member or officer, or for which he shall be an agent, nor directly nor indirectly interested therein, nor receive any reward or gratuity from any person interested in such contract or sale; and any person violating these provisions, or either of them, shall forfeit his membership in such corporation, municipality or institution, and his office or appointment thereunder, and shall be held guilty of a misdemeanor, and on conviction thereof, be sentenced to pay a fine, not exceeding five hundred dollars: Provided, That nothing in this section contained, shall prevent a vice-president of any bank from being a director of such bank, or of receiving a salary as vice-president:" Act 31 March, 1860, § 66; P. L. 400. See Com. v. Christian, 9 Phila. Rep. 557; Borough of Milford v. Milford Water Co., 23 Weekly Notes Cas. 413; Com. v. Baldwin, 5 Pa. C. Ct. Rep. 509. And by the Act of 1868 it is further provided: "It shall and may be lawful for any and all companies incorporated or organized under the laws of this commonwealth, including those authorized thereby to transport merchandise or other property, and also for the directors, managers or trustees thereof, with the approval of the stockholders, to invest the surplus or other funds or earnings of such companies, in mortgages on improved real estate, in ground rents, in the loans of the United States, in the purchase from holders thereof of any (of) the shares of the capital stock of the respective company, and also in the public debt of the state of Pennsylvania, or of the city of Philadelphia, or in other good stocks or securities, and to sell and transfer the same, and to re-invest the proceeds of such sales in securities or stocks of like kind, and to prescribe, by resolution of the directors, or by the by-laws of the company, or otherwise, the mode of making such investments, purchases and sales, with the approval of the stockholders, and the amount or amounts thereof to be purchased, and the price or prices to be paid or received therefor, and the re-investment of the proceeds thereof, and to make such compensation, as the said directors, managers or trustees may deem proper, to any director, manager, trustee, treasurer or other agent or officer of such company, for the keeping, receiving, paying, investing or re-investing of any of the moneys belonging to the said company, or for any other services performed by him or them, as agents of the company or otherwise; and any such companies may change and fix the time of holding their annual election for directors to such a day as they may select, a certificate of such change, duly authenticated by the proper officers of the company, shall be filed with the auditor-general of this commonwealth, within thirty days after such change shall have been made:" Act 31 March, 1868, § 1; P. L. 50. 3 Directors who are merely invested with the ordinary powers of executive management cannot radically affect the chartered rights of stockholders: Baker's Ap., 16 Weekly Notes Cas. 445; 42 Leg. Int. 226; and hence have no authority to dispose of the corporate plant by lease, sale or otherwise: Martin v. Continental Railway Co., 14 Phila. Rep. 10; Cass v. Iron and Steel Co.. 9 Federal Reporter, 640: and they are moreover liable to both creditors and stockholders for mismanagement of the corporate assets: Warren v. Hopkins, 111 Pa. 328; Watts' Ap., 78 Pa. 370. ity of the whole number of such directors or trustees shall be necessary to constitute a quorum.1 NUMBER, ELECTION AND RESIDENCE OF DIRECTORS.2-It shall be lawful, from and after the passage of this act, for any corporation, chartered or existing by or under any law of this state, to determine, by the vote of its stockholders holding a majority in interest of all of its stock, at a meeting duly called for the purpose, the time of holding the annual meeting for the election of officers of the corporation, and the number of directors that shall thereafter govern its affairs: Provided, That the number of directors so determined shall not be less than three nor more than fifteen, and that at least one-third of the directors of every corporation shall be and remain, during their term of service, residents of the state of Pennsylvania: and provided further, That this act shall not apply to any company heretofore incorporated, unless such company shall file, in the office of the secretary of the commonwealth, a certificate of the acceptance of this act, and also of the provisions of the constitution of this commonwealth, which acceptance shall be made by resolution, adopted at a regular or called meeting of the directors, trustees or other proper officer of such corporation, certified under the seal of the corporation, and a copy of which resolution, certified under the seal of the office of the secretary of the commonwealth, shall be evidence for all purposes. All acts, or parts of acts, inconsistent herewith, shall be and the same are, in so far as they are inconsistent herewith, hereby repealed. CLASSIFICATION OF DIRECTORS. - Whenever the stockholders of any corporation incorporated under the Act of April twenty-ninth, one thousand eight hundred and seventy-four, or any other law of this commonwealth, shall, at a meeting called for the purpose, decide, by a majority vote of those present either in person or by proxy, to elect a portion of their directors for a term or terms longer than one year, it may and shall be lawful for such corporations, at the next ensuing election, to divide the directors or managers, which are to be chosen, into two, three or four classes, and to elect the first class to serve for the term of one year, and the second, third or fourth to serve for two, three or four years, respectively, and at all ensuing elections of said corporations, the stockholders shall only elect the number of directors necessary to take the place of those whose term of office shall then expire, and such directors shall be elected for the longest term for which any class may have been elected as hereinbefore provided. 1 Collective action as a board and not individual action as members of the board is necessary to bind the corporation: Allegheny County Workhouse v. Moore, 95 Pa. 408; Twelfth St. Market v. Jackson, 102 Pa. 273; and if the board meeting be specially convened the general rule is that notice must be served upon every member entitled to be present: Pike County v. Rowland, 94 Pa. 241. 2 Act 31 May, 1887, 81; P. L. 281. 3 Id, 2. 4 Act 17 June, 1887, § 1; P. L. 411. 1 Such classification, where already made by charter, is hereby declared valid. CLERK SECRETARY. 2 - The clerk shall be sworn and shall record all the votes of the corporation, and the minutes of its transactions, in a book to be kept for that purpose.3 TREASURER. The treasurer shall give bond in such sum and with such sureties as shall be required by the by-laws, for the faithful discharge of his duties, and he shall keep the moneys of the corporation in a separate book account, to his credit as treasurer, and if he shall neglect or refuse so to do, he shall be liable to a penalty of fifty dollars for every day he shall fail to do so, to be recovered at the suit of any informer in an action of debt.5 VACANCIES. In case of the death, removal or resignation of the president or any of the directors, treasurer or other officer of any such company, the remaining directors may supply the vacancy thus created until the next election. 7. Quorum of Stockholders. - Every such corporation may determine, by its by-laws, what number of stockholders shall attend, either in person or by proxy, or what number of shares or amount of interest shall be represented at any meeting to constitute a quorum; if the quorum is not so determined, a majority in interest of the stockholders shall constitute a quorum. 1 Act 17 June, 1887, 82; P. L. 411. * Act 29 April, 1874, 85; P. L. 77. Under the Act of 1860 (supra, p. 26, n. 2) the offices of secretary and director are incompatible. 3 A stockholder has the right at reasonable times to inspect the corporate books and papers and take minutes thereof for a definite and proper purpose, such as to obtain information necessary to prepare a stockholder's bill for alleged fraudulent corporate management, and such right if denied will be enforced by by mandamus: Phoenix Iron Co., v. Com., 113 Pa. 563; s. c. 105 Pa. 112; s. c. 44 Leg. Int. 5. 4 Act 29 April, 1874, 85; P. L. 77. A director cannot be the treasurer, supra, p. 20, n. 1. 5 Under a somewhat similar statute it has been held that as the treasurer is the recognized responsible custodian of the funds, the directors have no power to deposit them elsewhere: Pearson v. Tower, 55 N. H. 215. Act 29 April, 1874, 89; P. L. 78. *Act 29 April, 1874, § 6; P. L. 77. 8. Certificates of Stock-Transfers. -The directors of such corporation shall procure certificates or evidences of stock, and shall deliver them signed by the president, countersigned by the treasurer, and sealed with the common seal of the corporation, to each person or party entitled to receive the same, according to the number of shares by him, her or them respectively held, which certificates or evidences of stock shall be transferable at the pleasure of the holder, in person or by attorney duly authorized, as the by-laws may prescribe,3 subject, however, to all payments due, or to become due thereon; 4 and the assignee or party to whom the same shall have been so transferred, shall be a member of said corporation, and have and enjoy all the immunities, privileges and franchises, and be subject to all the liabilities, conditions and penalties incident thereto, in the same manner as the original subscriber or holder would have been, 1 Act 29 April, 1874, 87; P. L. 78. 2 The corporation is liable to bona fide holders of certificates fraudulently issued by its officers: Willis v. Philadelphia & Darby R. R. Co., 6 Weekly Notes Cas. 461; Tome v. Railroad Co., 39 Md. 36. 3 Section 11 of Act 29 April, 1874, provides for transfers on the books of the company, and by section 12 thereof no transfer can be made until all previous calls have been paid, or the stock forfeited for non-payment thereof: infra, p. 35. Between vendor and purchaser the title to stock passes by delivery without actual transfer on the corporate books, subject to the claims of the corporation; and by commercial usage a certificate of stock accompanied by an irrevocable power of attorney, either filled up or in blank, is, in the hands of third parties, presumptive evidence of ownership in the holder: Wood's Appeal, 92 Pa. 379; Com. v. Watmough, 6 Wh. 117; Building Ass'n v. Sendmeyer, 50 Pa. 67; Finney's Appeal, 59 Pa. 398; Prall v. Tilt, 28 N. J. Eq. 480; McNeil McNeil v. Bank, 46 N. Y. 325; Holbrook v. Zinc Co., 57 Id. 623. But as between the members and the corporation, the primary evidence of their relation is the records of the company, by which alone are the corporate rights determined: Bank of Commerce's Appeal, 73 Pa. 59; Farrar v. Walker, 3 Dillon, 506, n.; Hoppin v. Buffum, 9 R. I. 513; Ex parte Willcocks, 7 Cowen, 511; Bank v. Cook, 4 Pick. 406; McDaniels v. Flower Brook Co., 22 Vt. 284. 4 The object being to secure all liabilities without regard to the time they mature: Pittsburgh R. R. Co. v. Clarke, 29 Pa. 153. 5 An assignee to whom stock has been transferred upon the corporation books is thereafter liable for future calls, as long as he continues to be the registered owner of the stock: Lane's Ap., 105 Pa. 49; Bell's Ap., 115 Pa. 88; Reimer Co. v. Rosenberger, 40 Leg. Int. 383. And this liability is not discharged by a sale of the stock unless followed by transfer to the purchaser upon the corporate books: Miller v. Peabody Bank, 15 Weekly Notes Cas. 76; aliter, when so followed by transfer: West Phila. Canal Co. v. Innes, 3 Wharton, 198. The liability of an original subscriber, however, depends on different grounds, and in a common law action on the contract for subscription an original subscriber is not discharged from liability by reason of having assigned his stock to a third party, although followed by transfer on the books of the company: Messersmith v. Bank, 96 Pa. 440; Pittsburgh R. R. Co. v. Clarke, 29 Pa. 153. In the case last cited there was indeed an express statutory provision that such transfer should not discharge the subscriber's liability, but the court said, apart from such provision (and construing the Act of 1849, 87 (1 7 (P. L. 82), from which the above section is abridged): "The clause which gives to the assignee the advantages, and subjects him to the disadvantages, of a member of the corporation, 'in the same manner as the original subscriber would have been,' was intended to fix the extent of the assignee's liability, and not to limit or release that of the assignor. The words 'would have been,' are, therefore, altogether insuffi but no certificate shall be transferred so long as the holder thereof is indebted to said company,1 unless the board of directors shall consent thereto.2 9. Oath of Officers Holding Elections.3-No person acting as judge or officer holding an election for any such corporation, shall enter on the duties of his office or appointment until he take and subscribe an oath or affirmation before a judge, alderman, justice of the peace or other person qualified by law to administer oaths, that he will discharge the duties of his office or appointment with fidelity, that he will not receive any vote but such as he verily believes to be legal; and if any such judge or officer shall, knowingly and willfully, violate his oath or affirmation, he shall be subject to all the penalties imposed by law upon the officers of the general election of this commonwealth violating their duties, and shall be proceeded against in like manner and with like effect. cient, in the connection in which they stand, to perform the important office of releasing the original subscriber from his contract." But whether, upon insolvency of the company, a creditor's bill to collect unpaid and uncalled stock subscriptions can be maintained against an original subscriber after a bona fide recorded transfer of his stock, and the original subscriber be compelled to resort to his transferee's implied contract of indemnity does not seem to have been directly decided under this section. In Bell's Ap., 115 Pa. 93, the court referred to the cases sustaining such liability of the original subscriber as "exceptional instances," and said that "the obligation to make good the unpaid portions of capital stock when the necessities of creditors required it is a charge upon the stock which passes with it to the holders of it. It is an equitable obligation, founded upon no statute, and rests upon those who are the owners of the stock at the time of insolvency," and the court approved the statement in Angell & Ames on Corporations, & 534, that "the liability to pay up installments is shifted from the outgoing to the incoming shareholder." The case itself, however, did not raise the precise question. See, also, West Phila, Canal Co. v. Innes, 3 Wharton, 202; Thompson's Liability of Stockholders, 88 210-227. 1 Mount Holly Paper Co.'s Ap., 99 Pa. 513; Waln v. Bank, 8 S. &. R. 73. The liability of an original subscriber for an unpaid and uncalled balance of subscription is an indebtedness within this clause: Pittsburgh R. R. Co. v. Clarke, 29 Pa. 146; In re Bachman, 12 Bank Reg. 223. But the liability of an officer to his company for fraudulently issuing its stock in excess of the authorized capital is no for withholding withholding con compensation by the company to third persons who have suffered from the fraud; Willis v. Phila. and Darby R. R. Co., 6 Weekly Notes Cas. 461. There is no common law lien on stock in favor of the corporation for a debt due it by a shareholder: The Steamship Dock Co. v. Heron, 52 Pa. 280; 102 Pa. reason 492. 2 "The proper evidence of their [the directors] assent to a transfer is a recorded resolution adopted when the board was in session. Where the transfer is made by a director it ought further to appear that the resolution of assent was carried without his vote. If the resolution was adopted and entered on the minutes, the loss or destruction of the entry might be supplied by parol proof. But in no other case can parol evidence be received to show that an assignee has been admitted as a member of the corporation in the place of the assignor:" Pittsburgh, etc., R. R. v. Clarke, 29 Pa. 152. * Act 29 April, 1874, § 8; P. L. 78. |