7. But where the authority of a quorum of directors is required for the execution of a bond, it must be given at a formal meeting, whereat the members of the quorum are all present at once.9

* SECTION VII.

Qualification of Directors.

1. One cannot be a contractor and director. 4. Bankruptcy or absence will not vacate 2. May be their banker and director.

office.

3. May be director by virtue of stock mort- 5. Company compelled to fill vacancies in board. gaged.

§ 24. 1. By the Companies' Clauses Consolidation Act,1 it is provided, that no person interested in any contract with the company shall be a director, and no director shall be capable of being interested in any contract with the company; and if any director, subsequent to his election, shall be concerned in any such contract, the office of director shall become vacant, and he shall cease to act as such. Under this statute it was held, that, if a director enters into a contract with the company, the contract is not thereby rendered void, but the office of director is vacated.2

has a right to vote upon all questions to be determined by the president and directors. McCullough v. Annapolis & Elk Ridge R. 4 Gill, 58.

The records of the clerk of a railway company, of the proceedings of the directors, in making calls, may be used as evidence by the company in suits for calls, against one who subscribed for shares, and was one of the grantees of the charter and a director at the time of making such calls, and who had exercised the rights of a shareholder from the first. White Mountain R. v. Eastman, 34 N. H. R. 124. As to the effect of the records of the doings of the corporation kept by their own officer, being evidence, but not indispensable evidence of such facts, when proved by third parties, see Hudson v. Carman, 41 Me. R. 84; Coffin v. Collins, 17 Id. 440; Penobscot Railw. v. White, 41 Me. R. 512. See, also, Ind. & Cin. R. v. Jewett, 16 Ind. R. 273.

9 D'Arcy v. Tamar, K. & C. Railw. 12 Jur. N. S. 548.

1 8 & 9 Vict. c. 16.

2 Foster v. Oxford W. & W. R. 14 Eng. L. & Eq. 306.

This case is dis

cussed in a later case in the House of Lords. Aberdeen Railway v. Blakie, 23 Law Times, 315.

2. But it has been held, that being a member of a banking company, who were the bankers and treasurers of the railway, and who, as such, received and gave receipts for calls, and paid checks drawn by the directors, will not disqualify one from acting as director, but that this clause only applied to such contracts as were made with the company in the prosecution of its enterprise.3

3. Where the qualification of a director consisted in owning a certain number of the shares, the qualification is not lost by a mortgage of the shares.4

4. Neither the bankruptcy nor absence of a director, and voluntarily ceasing to act as such, will put an end to his character of director, unless it be so provided in the deed of settlement.5 5. If shareholders are dissatisfied with the board of directors not being full, that may be a ground of applying for a mandamus to compel the company to complete the number."

6

Sheffield, Ash. & Man. Railw. v. Woodcock, 7 M. & W. 574; s. c. 2 Railw. C. 522.

* Cumming v. Prescott, 2 Y. & Coll. Eq. Exch. 488.

5 Phelps v. Lyle, 10 Ad. & Ellis, 113. But if one abscond from his creditors the office is thereby vacated. Wilson v. Wilson, 6 Scott, 540.

• Thames Haven Dock & Railway v. Rose, 3 Railw. C. 177, s. c. 4 Man. & Gr. 552. Maule, J. Mozley v. Alston, 1 Phillips, 790. By the Lord Chancellar.

*CHAPTER V.

PREROGATIVE FRANCHISES.

1. Control of internal communication in a state a prerogative franchise.

2. Such a grant confers powers pertaining exclusively to sovereignty, as taking tolls, and the right of eminent domain.

§ 25. 1. RAILWAYS possess also many extraordinary powers or franchises which partake more or less of the quality of sovereignty, and which it is not competent for the legislature even to delegate to ordinary corporations. These are sometimes called the prerogative franchises of the corporation. They exist in banks, which practically supply the currency of the country, or its representative, and railways, which have already engrossed the chief business of internal communication in this country, and almost throughout the civilized world. And both currency and internal communication between different portions of a state are exclusively the prerogatives of sovereignty.

2. In saying that it is not competent for the legislature to confer prerogative franchises upon all corporations, nothing more is intended than that these prerogative franchises do not appertain to all the operations of business, and must therefore of necessity be limited to those persons, whether natural or artificial, which are occupied in matters of a sovereign or prerogative character, and which thus render an equivalent for the franchises conferred.1 This subject will be discussed more in detail under the titles of Tolls and Eminent Domain.

1 State v. Boston, Concord, & Montreal R. Co. 25 Vt. R. 433, 442, 443. But the right to build and use a railway, and take tolls or fares, is a franchise of the prerogative character, which no person can legally exercise without some special grant of the legislature. But it is competent for the legislature to confer this franchise upon a foreign corporation, so as to enable it to take land for the purpose of constructing a public improvement in the state. Morris Canal & Banking Co. v. Townsend, 24 Barb. 658. And what title shall be acquired by such foreign corporation, and whether the proposed amendment will be likely to prove beneficial to the citizens of the state, is a question solely within the discretion of the legislature. Ib.

§ 26. 1. Ir is incident to all corporations to enact by-laws or statutes for the control of its officers and agents, and to regulate the conduct of its business generally. And in the case of railways this includes the regulation of the conduct of passengers and others who are in any way connected with them in business, although not their agents.

1

2. This power is subject to some necessary limitations. Such by-laws must not infringe the charter of the company or the laws of the state, must not be unreasonable, and must be within the range of the general powers of the corporation. And the question, whether reasonable or not, is to be determined by the jury under instructions from the court, being a mixed question of law and fact.2 But in a recent case in New Jersey it was de

1 Elwood v. Bullock, 6 Q. B. 383; Calder Navigation Co. v. Pilling, 14 M. & W. 76; Child v. Hudson Bay Co., 2 Peere Wms. 207; Angell & Ames, c. 10; 2 Kent, Comm. 296; Davis v. Meeting H. in Lowell, 8 Met. 321. In a recent case in Kentucky it is said the power of a corporation to make by-laws is limited by the nature of the corporation and the laws of the country. It can make no rule contrary to law, good morals, or public policy. Sayre v. Louisville Union Benevolent Association, 1 Duvall, 143.

2 Day v. Owen, 5 Mich. R. 520.

3

Ayres v. Morris & Essex Railw. Co., 5 Dutcher, 393.

cided that the question whether the regulation of a corporation affecting third persons is reasonable is a question of fact; but the validity of a by-law of a corporation, which affects only its members, is a question of law to be determined by the

court.

The general powers of business corporations to enact by-laws was extensively and learnedly discussed in a somewhat recent case which passed through the Queen's Bench, the Exchequer Chamber, and was finally determined in the House of Lords.4 The case turned mainly upon the reasonableness of the by-law, which excluded any person who had become bankrupt or notoriously insolvent from becoming one of the governing body of the company. The provision of the by-law was held entirely reasonable; but that having admitted the party to the office, he could not be removed without formal proceeding upon notice and hearing. And where one part of a by-law is reasonable it may stand, although connected with another part which is not reasonable.5

3. By-laws in violation of common right are void. The power to make by-laws is usually given in express terms in the charter. And where such power to make by-laws is given in the charter upon certain subjects to a limited extent, this has been regarded as * an implied prohibition beyond the limits expressed, upon the familiar maxim Expressum facit cessare tacitum.7

4. By-laws, unless by the express provisions of the charter or general statutes of the state, are not, in this country, required to be enacted or promulgated in any particular form, but only to be enacted at some legal meeting of the corporation. But in England it is generally considered requisite that by-laws be made under the common seal of the corporation, and that in regard to railways, by-laws affecting those who are not officers or servants

4

Reg. v. Saddlers' Company, 6 Jur. N. S. 1113; s. c. 7 id. 138; s. c. 9 id. 1081; s. c. 4 B. & S. 1059; s. c. 10 Ho. Lds. Cas. 404.

5

Reg. v. Lundie, 8 Jur. N. S. 640.

6

• Hayden v. Noyes, 5 Conn. R. 391; Adley v. The Whitstable Co., 17 Vesey, 315; Clark's case, 5 Coke, 64. When the penalty of a by-law is imprisonment, it is void as against Magna Charta. But such power may be given by

statute.

Child v. Hudson B. Co., 2 Peere Wms. 207.