Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/665

 CHAP. X.] CORPORATION AND OFFICERS. [§ 644. § 643. In United States Rolling Stock Co. v. Atlantic and Gt. Western R. R. Co., it was said by Judge Boynton, giving the opinion of the Supreme Court of Ohio : * " We have not, upon the most diligent research, been able to find a case hold- ing a contract made between two corporations by their respec- tive boards of directors invalid, or voidable at the election of one of the parties thereto, from the mere circumstance that a minority of its board of directors are also directors of the other company, nor do we think such a rule ought to be adopted. There is no just reason, where a quorum of directors, sustain- ing no relation of trust or duty to the other corporation, are present participating in the action of the board, why such action should not be binding upon the company, in the absence of such fraud as would lead a court of equity to undo or set aside the transaction. If the mere fact that a minority of one board are members of the other gives the company an option to avoid the contract without respect to its fairness, the same result would follow where such minority consisted of but one person, and notwithstanding the board might consist of twenty or more. In our judgment, where a majority of the board are not adversely interested, and have no adverse employment, the right to avoid the contract or transaction does not exist with- out proof of fraud or unfairness ; and hence the fact that five of the defendant's board of directors were members of the plaintiff's board, whatever may have been its effect on the defendant's right to disaffirm or repudiate the contract, if exercised within a reasonable time, did not disable the de- fendant from subsequently affirming the contract if satisfied with its terms, or rejecting it if not, nor did it relieve it from the duty to exercise its election to avoid or rescind within a reasonable time, if not willing to abide by its terms." § 644. On the other hand, it may be said that common Salina Nat. B'k v. Prescott, 60 Kas. 490. Contra, Metropolitan El. R. R. Co. v. Manhattan El. R. R. Co., 11 Daly (N. Y.), 373, 503, and semble contra, San Diego v. San Diego, etc., R. R. Co., 44 Cal. 106, a case in which, it seems to the writer, the personal interests of the common agent decidedly leaned towards one of his adversely interested principals; also Bill v. Western Un. Tel. Co., 16 Fed. Rep. 14; Ashnelot R. R. Co. v. Elliot, 57 N. H. 397. i 34 Ohio St. 450, 466. 645