LEGAL PHASES OF COOPERATIVE ASSOCIATIONS. 11 



the courts, and contracts entered into by directors or officers with 

 the corporation are scrutinized by the courts with this thought in 

 mind. In a Wisconsin case ^ a corporation employed a man as man- 

 ager and at the same time sold him 100 shares of stock. A director 

 of the corjDoration entered into a .contract with the manager under 

 which the manager agreed, in case he left the employment of the 

 corporation for any cause, to sell his stock to the director. The 

 contract was held void on the ground that the private interests of 

 the director were' antagonistic to those he owed the corporation. 

 The court said : 



The ■defendant as director had a voice in determining whether or not plain- 

 tiff was to continue in the management of the corporate business, whether or 

 not plaintiffs management was for the general interest of the corporation 

 and its stockholders. Obviously his duties as director and his private interest, 

 xmder the contract to repurchase plaintiff's stock upon the conditions stated 

 were antagonistic and his private interests might oblige him to act contrary 

 to his duties toward the other stockholders. Under such circumstances, such 

 contracts are held void on the ground of public policy, unless all of the stock- 

 holders assent thereto. 



In the absence of a provision in the statute, charter, or by-laws, 

 a majority of the directors constitute a quorum and when regularly 

 assembled may transact any business which the corporation has a 

 right to transact under its charter.*" 



All of the directors constituting a quorum must be qualified to 

 act. If one of the directors whose presence is necessary to consti- 

 tute a quorum is disqualified because of his personal interest in 

 the matter that is being considered, the action would not be binding 

 on the corporation or stockholders if a timely effort to set it aside 

 were made. For instance, if a director should offer to sell land 

 to the corporation and as one of a quorum of the directors should 

 vote in favor of its purchase, the transaction would not be binding 

 on the corporation or the stockholders if they seasonably moved to 

 set it aside.^ 



The officers and directors of a corporation are bound by the re- 

 strictions imposed upon the corporation by its charter and by-laws, 

 and if they transgress such restrictions are liable for all damages 

 resulting to the corporation therefrom. In a Minnesota case^^ 

 the articles of incorporation limited the indebtedness which the 

 corporation might incur to half the amount of the capital stock 

 actually paid in. The manager, who was also a large stockholder, 

 contracted* debts in excess of this amount. It was claimed that the 



29Timme v. Kopmeir, 162 Wis. 571, 156 N. W. 961, L. R. A. 1919, 1114; see also 

 West V. Camden, 135 U. S 



80 In re Webster Loose Leaf Filing Co., 240 Fed. 779. 



3» In re Webster Loose Leaf Filing Co., 240 Fed. 779 ; Wardell v. Railroad Company, 

 103 U. S. 651. 



32 Fergus Falls Woolen Mills Co. v. Boyum, 136 Minn. 411, 162 N. W. 516. 



