Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/709

 CHAP. XII.] SHAREHOLDERS AND OFFICERS. [§ 695. be brought by the latter under the conditions heretofore dis- cussed. 1 § 694:. As corporate officers acting in good faith within their authority are not liable to the corporation for a mere mistake in judgment, 2 so, for such mistakes, they will binty of otiicBrs for not be liable to individual shareholders. 3 Neither errors; will they be liable to shareholders for the frauds of J°uot te ° f other officers under circumstances which do not ren- officers - cler them liable to the corporation. 4 But, whenever directors incur liability to the corporation for the frauds of other officers which the negligence of the directors renders possible, the di- rectors will be liable to the shareholders if the corporation fails to bring suit against them. 5 § 695. Directors have been held not to be liable to share- holders for improper or illegal acts which are author- ized by a shareholders' meeting. 6 And a bill in equity filed by shareholders against directors alleg- ing illegal acts on the part of the latter, is demurra- Acts au- thorized by sharehold- ers' meet- ings. v. Black River Falls Iron Co., 2 Black, 715. Directors will be liable to share- holders if they fraudulently misman- age the corporate affairs in the in- terests of a rival corporation. Booth v. Robinson, 55 Md. 419. The salary of a director was increased improp- erly. Some of the shareholders acquiesced; others did not. Held that the non-consenting shareholders were entitled to recover their propor- tion of the improper excess of salary from the officer receiving it; but said officer can retain the balance, as against the shareholders who have acquiesced with knowledge. Brown v. De Young, 167 111. 549; cf. Eaton v. Robinson, 19 R. I. 146; Blair v. Telegram News Co., 172 Mass. 201. 1 Shareholders may, however, lose their right to object by acquiescence or a long delay; and they are charge- able with knowledge of the records of the corporation. Kitchen v. St. Louis, etc., R'y Co., 69 Mo. 224; see 44 Watts's Appeal, 78 Pa. St. 370; Fos- ter v. Mansfield, etc., R. R. Co., 146 U. S. 88; Ware v. Galveston City Co., 146 U. S. 102; Skinner i>. Smith, 134 N. Y. 240. 2 See § 620. 3 Smith v. Prattville M'f'g Co., 29 Ala. 503; Watts's Appeal, 78 Pa. St. 370; Booth v. Robinson, 55 Md. 419. 4 Dunn v. Kyle, 14 Bush (Ky.), 134; Bloom v. Nat. Saving Co., 152 N. Y. 114. See §§ 624-626. A director is not liable to a shareholder for mis- representations in the articles of as- sociation made before the election of the board, of which he was a mem- ber; and a person cannot maintain an action against directors for the violation of a statute and the conse- quent depreciation of the stock, when the acts complained of were commit- ted before he became a shareholder. Mabey v. Adams, 3 Bos. (N. Y.) 346. 6 Ackerman v. Halsey, 37 N. J. Eq. 356; aff'd 38 N. J. Eq. 501. 6 International, etc., R. R. Co. 689