Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/702

 § 687.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. Remedy. same is authorized or acquiesced in by the body corporate. Directors about to do an unauthorized act may be restrained no doubt. But how % % 686. Unquestionably action to restrain them should be taken b}^ and in the name of the corporation. For the corporation is the direct superior or principal of the board of directors. Moreover, if the unauthorized act of the directors is not improper and fraudulent in itself, and within the scope of the corporate powers, it does not follow that a minority of shareholders have an absolute right that the act should not be done ; for it may be that the majority, who have power to do the act in question, approve of it. Under such circumstances, for a minority of shareholders to allege a refusal on the part of the corporation to restrain the act — an essential allegation in a shareholder's bill to enjoin directors — would imply the corporate approval thereof, and demolish the plaintiff's case. Accordingly a minority of shareholders cannot ordinarily prevent directors from doing any act which, as done by the directors, the majority could competently ratify. 1 The proposed act should be manifestly improper, and the complaint should also show the impracticability of procur- ing action from the body corporate in time to prevent injury. 2 § 687. In many cases, however, the acts of directors which 1 Where to the validity of certain acts, original action on the part of the body corporate is required by statute to be taken in a certain man- ner, as, e. </., in regard to an increase of the capital stock, it is possible that to validate an unauthorized in- crease made by the directors, the majority of shareholders would have to go through the prescribed formal- ities, and that a simple ratification of the increase as made by the directors would not be sufficient. 2 In this connection, Foss v. Har- bottle, 2 Hare, 461, is the leading authority. See §§ 553 et seq., where the matter is discussed as coming under the right of the corporation 682 or corporate management, to man- age the corporate affairs. Here the matter is spoken of rather with ref- erence to the rights of shareholders against directors personally. See McNaughton v. Osgood, 41 Hun (N. Y.), 108. A bill was filed by shareholders against directors to compel the latter to assign to the corporation a lease which they had taken in their own name, the corporation being made a party defendant. It was held that all the shareholders should also have been made parties, as the corpora- tion had the right to take an as- signment or decline it. Bengley u. Wheeler, 45 Mich. 493.