directors has been held merely directory. Sampson v. Bowdoinham Steam Mill Corporation, 36 Me. 78. While the rules above stated are correct as general rules, and an agent can not bind a corporation by executing a mortgage on its property without its authority, unless it ratifies the act, yet the fact that the authority to make a chattel mortgage is not conferred by formal vote at a regular meeting will not in all cases render it void; especially where there has been a practice on the part of the company to transact business otherwise. 1 Jones on Chat. Mges. (4th ed.), § 51; Ping. Chat. Mges., § 106; 1 Cob. Chat. Mges., § 431; Kraft v. Freeman, etc., Pub. Asso., 87 N. Y. 625. Where a corporation loosely committed all its business affairs to a superintendent or general manager, and by a settled course of business he acted for it in all matters, including buying and selling property, and all of the directors and stockholders, with full knowledge of this, held no meetings and took no action, but acquiesced for a considerable length of time in his exercise of authority, if he borrowed money for the company and gave a chattel mortgage on its property, and no objection was made thereto, but his action was acquiesced in, authority to execute a mortgage might be inferred, or, if not original authority, ratification, as against the corporation or its stockholders who so acquiesced. See, on this subject, 10 Cyc. 1200; Martin v. Niagara Falls Co., 44 Hun 131; Estes v. German Bank, 62 Ark. 7; Sprangler v. Butterfield, 6 Col. 356 (4); Bank of Middlebury v. Rutland R. Co., 30 Vt. 160; Wood v. Corry Waterworks Co., 44 Fed. 146, 12 L. R. A. 168; Foot v. Rutland R. Co., 32 Vt. 633; Longmont Supply Co. v. Coffman, 11 Col. 551; Poole v. West Point Asso., 30 Fed. 513. Some of these authorities are not in accord with the case of Monroe Mercantile Co. v. Arnold, supra, but they are cited to show the trend of adjudication in the direction of holding that while action on the part of directors or stockholders may not be performed in the regular and proper method, nevertheless where an officer is entrusted with the performance of the entire functions of the corporation, and this has become a settled policy, his act in executing a mortgage, acquiesced in by all the directors and stockholders, will be held binding. This is especially true in equity. Judge Thompson, in his article on "Corporations," in the Cyclopedia of Law and Procedure, says: "Where the shareholders of a corporation, by their direct act or acquiescence, invest the executive officers of the company with the powers and functions of the board of directors as a continuous and permanent arrangement, the board being entirely inactive, and the officers discharging all its duties, a mortgage on the property of the corporation, made and executed in its behalf by such officers, is valid, although not authorized by any vote of the shareholders or directors. * * * But in the absence of circumstances of assent and acquiescence such as may afford circumstantial or presumptive evidence of a precedent authorization, then, on principles already discussed, the directors can give a valid authorization of so important a measure as the mortgage of the property of the corporation, only when acting and consulting together as a board, duly assembled." 10 Cyc. 1199;

Cunningham v. German Ins. Bank, 101 Fed. 977 (3); Palmer v. Toms, 96 Wis. 367, 71 N. W. 654; Miller v. Matthews, 87 Md. 464, 40 Atl. 176. This affords a reconciliation between what might otherwise seem to be conflicting authority, the general rule being laid down in the latter part of the quotation, and the exceptional cases in the first part of it. In the present case the board of directors and the stockholders held no meetings and were entirely inactive, devolving the whole management of the affairs of the company upon Medlock. And this was not a casual or occasional state of affairs, but was continuous and permanent. Medlock was negotiating with Jaudon, the president, for his stock, and took a formal transfer of it shortly after the mortgage was executed. LaRoche, who held the stock issued to Medlock as security, is not complaining. And as one witness expressed it, Medlock was "the lock, stock and barrel of the concern, he was the whole thing." Or, as another witness expressed it, "he practically did all the running." Apparently he had exercised the entire functions of the corporation, including buying and selling property. After his purchase of Jaudon's stock, he renewed the note in the name of the corporation more than once. Under this condition of affairs we think that the mortgage should be held good as against the corporation, and also as against a subsequent creditor who obtained a lien, if at all, by suing out a distress warrant after the record of the mortgage and with full knowledge of such mortgage. The rent accrued long after the making of the mortgage. Indeed the landlord's lien arose only upon the levy of the distress warrant. Civil Code, § 3125. And the evidence leaves it in doubt as to when the levy was made, relatively to the time when the restraining order was passed. The judge of the Superior Court did not err in holding that the lien of the mortgage was superior to that of the distress warrant. See 10 Cyc. 1196; Antietam Paper Co. v. Chronicle Pub. Co., 115 N. C. 143, 20 S. E. 366. * * *

Judgment affirmed. All concur.6

6 "The proof was ample to show that the corporation of Scanlan & Co. practically devolved the powers of the board of directors upon its executive officers, and that this method of doing business was not casual and temporary merely, but continuous from the date of its commencing to do business to the end. The board of directors was dormant. The rule is that where, by the direction or acquiescence of the stockholders, the executive officers of a corporation assume and exercise the functions of the board of directors, the corporation and those deriving rights from it while it is so managing its affairs are bound by the acts of its officers to the same extent as if they had been directed by the board. In so far as the duties of the directors are not expressly prescribed by the charter, they derive their powers from the stockholders, who may, if they see fit, select other agencies for the transaction of the corporate business." Severens, J., in Cunningham v. German Ins. Bank (1900) 101 Fed. 977, at p. 980, accord.

See also, Smith v. Wells Mfg. Co. (1897) 148 Ind. 333, 46 N. E. 1000; Sherman v. Fitch (1867) 98 Mass. 59; Manhattan Brass Co. v. Webster &c. Queensware Co. (1889) 37 Mo. App. 145 (conveyance authorized at meeting of all the stockholders upheld); Groh's Sons v. Groh (1903), 80 App. Div. 85, 80 N. Y. S. 438; Chicago &c. R. Co. v. Union Pac. R. Co. (1891), 47 Fed. 15 ("In this, as in any other stock corporation, with the stockholders rests not

PEOPLE EX REL. MANICE v. POWELL.

1911. 201 N. Y. 194, 94 N. E. 634.

APPEAL from an order of the Appellate Division of the Supreme Court in the first judicial department, entered October 28, 1910, which affirmed, as matter of law and not in discretion, an order of special term denying a motion for a peremptory writ of mandamus to compel the defendants to reinstate the relator as a director of the respondent Atlantic Terra Cotta Company.

CHASE, J.-The relator, who had been elected a director of the defendant Atlantic Terra Cotta Company for a term which will not expire until January, 1912, has been removed from his office as a only the ownership of the property, but the ultimate and absolute power and control," per Brewer, J., at p. 19), affd. (1895) 51 Fed. 309, and 163 U. S. 564, esp. 595-600, 41 L. ed. 265, 16 Sup. Ct. 1173. Colorado Springs Co. v. American Pub. Co. (1899) 97 Fed. 843 (if power vested by statute in directors, unanimous action of stockholders required). See, also, note, 15 Mich. Law Review, 264-265.

BARKIN CONSTRUCTION Co. v. GOODMAN (1917), 221 N. Y. 156, 116 N. E. 770. An action was brought by a corporation, owning an apartment house, against its renting agents for a balance of rent in their hands. Defendants proved an agreement by which the rents were to be held as security for a loan made by them, the proceeds of which loan were applied to the payment of interest on a mortgage upon the property of the corporation. These transactions had been conducted by a former president of the corporation, whose wife was the owner of the majority of the stock and was then its president, in the presence of and with the approval of the secretary of the corporation, who had been intrusted with its general management. Held, that it was error for the trial court to hold the agreement of no effect and to direct a verdict for plaintiff, since enough was proved to permit a jury to say that the pledge was within the scope of the secretary's powers. CARDOZO, J. said (p. 161): "Courts are not to shut their eyes to the realities of business life. Here was a small corporation controlled by a single family. Its business was run without formality (Hall v. Herter Bros., 83 Hun, 19; 90 Hun, 280; 157 N. Y. 694). None the less it was run, and responsibility must be centered somewhere. In the daily conduct of its affairs there was no one except the secretary who assumed to speak for it. If he was not the manager, the company had none.” GALBRAITH V. FIRST NATIONAL BANK (1915), 221 Fed. 386. Where the business of a corporation was entirely conducted by the president, who owned most of its stock, the directors never meeting and permitting him to manage the business as if it were his own, it was held that "a mortgage executed by him for moneys loaned to the corporation, and received and used for its benefit solely, is valid."

IN RE BOULEVARD THEATER & REALTY Co. (1921), 231 N. Y. 615, affirming 195 App. Div. 518. The certificate of incorporation provided: "The number of directors of said corporation shall be three and the said directors and the number thereof shall not be changed except by the unanimous consent of all the stockholders of said corporation." At an election of directors it was attempted to change the directors without the unanimous consent of the stockholders. Held, that the provision in the certificate of incorporation, that a director could only be elected upon the unanimous consent of all of the stockholders, was illegal and void and was also contrary to the provision of the New York Stock Corporation Law, that "directors of every stock corporation shall be chosen at the time and place fixed by the by-laws of the corporation by a plurality of the votes at such election."-Eds.

director as hereinafter stated, and another person has been elected to fill the alleged vacancy, and he is now performing the duties as such director. The relator seeks by peremptory mandamus to set aside the proceedings by which it is alleged he was removed and to be reinstated in his office as a director.

The defendant Atlantic Terra Cotta Company is a domestic corporation organized in February, 1907, for the purpose of manufacturing and selling architectural terra cotta. Its certificate of incorporation provides for a board of three directors. Soon after the company was organized the number of directors was increased from three to twelve by unanimous consent of the stockholders, and the by-laws were amended to provide for a division of the directors into three classes of four directors each, and directors were thereafter elected for such terms respectively so that the term of office of four of such directors would expire each year. In January, 1909, the board of directors changed the general officers of the corporation by electing a new president, secretary and treasurer, general superintendent and general counsel. The relator was opposed to such changes, and it is alleged that he and those deposed from said offices were thereafter hostile to the new management.

Early in January, 1910, an amended certificate of incorporation, altering the original certificate of incorporation of the defendant corporation, was filed, by which there was included therein the following provision: "If the notice of any regular or special meeting of the board of directors shall contain a statement to the effect that the board will at such meeting consider whether sufficient cause exists for the removal of some specified person from the office of director of the corporation, and if the board, after consideration. of such question, shall determine at such meeting by the affirmative vote of two-thirds of all the directors in office that sufficient cause exists for the removal of such person from such office, and that his removal is desirable and for the best interests of the corporation, and if such determination shall thereafter be approved and ratified at a duly called stockholders' meeting by the affirmative vote of the holders of two-thirds of the outstanding stock of the corporation, then such person shall immediately cease to be a director of the corporation, and the resulting vacancy in the board of directors shall be filled as provided in the by-laws."

Such alteration of the certificate of incorporation had been opposed by the relator, but it was authorized by a majority vote of the directors at a meeting held December 30, 1909, and by a vote of stockholders representing more than three-fifths of the capital stock at a meeting of stockholders called for that purpose and held December 24, 1909.

The annual meeting of the stockholders was called to be held. January 21, 1910, and also a special meeting of the stockholders to be held January 19 for the purpose of reducing the number of directors of the company from twelve to six.

Before the meeting was held on January 19 a stockholder of the company brought an action to prevent such meeting being held upon

the ground that a reduction in the number of the board of directors violated certain alleged contract rights specified in the complaint in that action. A temporary injunction was obtained. An appeal was taken to the appellate division from the order granting such temporary injunction, and the order was reversed and the motion denied. (Bond v. Atlantic Terra Cotta Co., 137 App. Div. 671.) The annual meeting of stockholders was adjourned from time to time until May 18, and the special meeting of the stockholders for the purpose of reducing the number of directors was adjourned from time to time until April 26. On April 26 the order granting an injunction having been reversed and the motion having been denied, the special meeting of stockholders was held and the number of directors was reduced from twelve to six.

On May 7 a special meeting of the directors of the company was called for May 11, and included in the notice of such meeting was the following: "The board will at this meeting consider whether sufficient cause exists for the removal of William Manice from the office of director of the company." The meeting was, at the request of counsel for Manice, adjourned until the same hour on May 12.

At the meeting on May 12 the relator with his counsel and all the directors except one, and the general counsel of the corporation were present, and a resolution was offered of which the following is a copy: "Whereas, William Manice has participated in the organization of the Federal Terra Cotta Company, a competitor of this company, and is now an officer and director of and otherwise interested in said company; and,

"Whereas, The conduct of said Manice has not in the judgment of this board been for the best interests of this company;

"Resolved and determined, That sufficient cause exists for the removal of said Manice from the office of director of this company and that his removal from such office is desirable and for the best interests of this company."

Counsel for the relator objected to the consideration of the resolution upon the ground that the amendment to the certificate of incorporation providing for removal of directors did not apply to the relator, because he was a member of the board at the time it was passed and his term of office had not yet expired, and upon the ground that there was no by-law authorizing the procedure. Counsel for the corporation suggested that the objection be put in the form of a motion, and it was so offered as a resolution and defeated by a vote of eight to three. Counsel for the relator then asked that inasmuch as the relator had then for the first time been apprised of the charges implied in the resolution, he should be allowed a reasonable time within which to confer with counsel and determine what answer to make to such charges. The chairman of the meeting asked relator's counsel what he considered a reasonable time, and suggested that the directors might be willing to allow him ten or fifteen minutes. Counsel for the relator replied that he meant by a reasonable time until Monday, May 16, 1910, which would mean four days. A motion was then made that the relator be