Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/644

 § 622.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. The by-laws of a corporation provided that the directors should elect a secretary, whose terra of office should be twelve months, or until his successor was elected ; and provided further that the secretary should give a bond with sureties for the faithful performance of his duties. The board elected a secretaiw, took the prescribed bond, and afterwards re-elected the same person for the two following years, but took no new bond, deciding without legal advice and erroneously, though after a discussion of the matter, that the bond already taken was a continuing security. In the third year the secretary became a defaulter, and it was held that the directors having acted in good faith were not liable to make good the loss. 1 § 622. If, however, directors do an act even honestly, which is clearly beyond their powers, or ultra vires the cor- poration, they will be liable to the corporation for any damages resulting. 2 As Baron Lindley says : " Directors are responsible for the loss of the company's assets if that loss is attributable to the employment of the assets in a manner and for purposes not warranted by the constitution." 1 Thus, a director of a savings bank, who acts with its president in making a loan on security palpably worth less than double Liability for ultra vires acts. 1 Vance v. Phoenix Ins. Co., 4 Lea (Tenn.), 385. - As where directors without au- thority return deposits to subscrib- ers; Williams v. P;ige, 25 Beav. 654; or cancel subscriptions irregularly and purchase shares (in England) in the stock of the corporation with corporate funds. Hodgkinson v. National Live Stock Ins. Co., 26 Beav. 473; Joint Stock Discount Co. v. Brown, L. R. 3 Eq. 139; S. C, L. R. 8 Eq. 381; or, against the pro- visions of the statute allot shares to infants. In re Crenver, etc., M'g Co., Ex parte Wilson, L. R. 8 Ch. 45. See Lester v. Howard Bank, 33 Md. 558. Trustees of a savings bank are liable to the receiver for dividends paid by them which were not earned. 624 Van Dyck o. McQuade, 45 N. Y. Super. Ct. 620; 2 Lindley on Part., 794; Evans v. Coventry, 8DeC, M. & G. 835; see the decree, clause 4. But see Excelsior Petroleum Co. v. Lacy, 63 N. Y. 422. Compare Tur- quand v. Marshall, L. R. 4 Ch. 376; Stringer's Case, L. R. 4 Ch. 475; Ranee's Case, L. R. 6 Ch. 104. It is competent for a corporation to re- lease a director from its claims against him on account of an ultra vires act of his done on its behalf. Pneumatic Gas Co. v. Berry, 113 U. S. 322. See Holmes v. Willard, 125 N. Y. 75. 3 2 Lindley on Part., 592. Com- pare Pickering v. Stephenson, L. R. 14 Eq. 322, 342.