Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/667

 CHAP. X.] CORPORATION AND OFFICERS. [§ 645. they were contracting with themselves. When a transaction is a fraud in law, it is unnecessary to prove a fraud in fact, nor is it permissible to show that the transaction was an honest one. The justness of the contracts made with them- selves, and of the votes they passed as directors of the Concord Eailroad, for their own benefit, does not impart any validity or legality to those contracts or votes. If such contracts were to stand until shown to be fraudulent and corrupt, the result, as a general rule, would be that they must be enforced in spite of fraud and corruption. ... In the making of these con- tracts and in the settlement of these claims, the stockhold- ers of the Concord have the legal right to the services of di- rectors whose interests are not hostile to their interests. A director or stockholder in the Northern company is not such a director. It may, for some purposes, be convenient and desira- ble that the same person or persons should act as directors of two or more roads forming part of a continuous line. For many purposes their interests are not adverse. The harmoni- ous working of the several parts, when a large portion of its business is the transportation of goods and passengers over the whole line, requires unity of purpose and management. But, however this may be, the right of the stockholders of a single road, that it shall be operated primarily in their own interest, cannot be overridden or displaced by directors occu- pying inconsistent relations." ' It is, however, held that contracts made by boards of direct- ors where a majority are common to the two corporations are only voidable, and may be ratified by a majority vote at a shareholders' meeting. 2 § 645. So far the discussion has been of the duties of directors. They have, however, certain rights : and, in the first ~. J ', ° Directors' place, the right or authority, within the scope of their authority; ...., „ . their right discretionary powers, to manage the corporate affairs toindemni- in accordance with their sound discretion, exempt from catlon - any interference, except perhaps the controlling action of a ma- jority of shareholders in a corporate meeting. 3 Further, they 1 Pearson v. Concord R. R. Co., 62 N. H. 537, 545, etc. But see xeiuble contra, Evansville, etc., Co. v. Bauk, 144 Ind. 34. 2 San Diego, etc., R. R. Co. v. Pac. Beach Co., 112 Cal. 53; Burden v. Bur- den. 159 N. Y. 287. 3 See Railway Co. v. Ailing. 99 U. S. 647