Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/668

 § 645.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. have a right to be indemnified by the corporation from any per- sonal liability which may attach to them by reason of proper acts on their part ; or which they may have with propriety assumed on its behalf while acting within their authority. 1 The English courts have gone further. In Exparte Chippendale 2 it was decided that when directors who had no authority to borrow money on behalf of the company did in fact borrow money and make advances themselves in good faith, and apply it all to the benefit of the company, they were entitled, having themselves repaid the money borrowed, to be reimbursed by the shareholders the whole amount borrowed and advanced. The equities of the directors w r ere very strong in this case ; the money was urgently needed to prevent great loss to the company, and the share- holders were kept informed of the transactions. This decision, however, was used as a precedent in cases going beyond it, 3 till the danger of extending its principles was recognized by the courts, and their application restricted to cases where money had been applied to the discharge of debts for which the company was liable. 4 It is obvious that any extension of the doctrine of Ex parte Chippendale is incompatible with the security of persons interested in the corporate funds ; for the liability of these funds to the directors for moneys expended or liability assumed by them would thereby become measured not by the authority which the directors had received, but only by their discretion. It is certainly safer to adhere to the " sensible rule that agents are not entitled to any indemnity 463; Elkins v. Camden, etc., R. R. Co., 36 N. J. Eq. 241; § 684. When the mauagement of the business is by statute confided to the directors, the corporation cannot by a vote join another officer who is not a director with them, or compel them to act with liim in managing its business. Charleston Boot, etc., Co. u. Duns- more, 60 N. H. 85. 1 See In re Court Grange M'g Co., Ex parte Sedgwick, 2 Jur. N. S. 494. "As members they [directors] are entitled to contribution in respect of such debts and liabilities of the com- pany as they may be compellable or 648 have been compelled to pay; and aa agents and trustees they are entitled to be indemnified by the company from all losses and expenses bona fide sustained and incurred by them in the exercise of the trust imposed on them." 2 Lindley on Part., 760. 2 4 De G., M. & G. 19. 8 See In re Norwich Yarn Co., Ex parte Bignold, 22 Beav. 143; In re Nat. Patent Fuel Co., Baker's Case, 1 Dr. & Sm. 54; Troup's Case, 29 Beav. 353; Hoare's Case, 30 Beav. 225. 4 See In re Natl. Bldg. Soc'y, Ex parte Williamson, L. R. 5 Ch. 309.