§ 58. Rights and duties of a member. The personal element which may characterize membership in a corporation having no capital stock as distinguished from shareholding, accounts for the difference in the legal positions. Where a social or co-operative element exists, the member owes to the body a reasonable degree of loyalty; and to his fellow members a reasonable degree of good conduct. For misbehavior he may, after a fair hearing, be expelled. The standard of conduct will, of course, vary with the nature of the corporation, and a distinction is drawn between those owning property and those having none. In the former case it is said that there is no inherent power of expulsion, and that the right does not exist unless conferred by charter or by by-laws to which the member has subscribed.1 On the other hand there is no personal element in the relation of a shareholder to his company; he is not its agent; there is no fiduciary relation between him and it; and he may at

1 See the opinion and note in Burt v. Union League, as reported in 8 L. R. A. 195; and for the conflict of authorities, Am. & Eng. Ency., 2nd Ed. Vol. 9, p. 477-"Disfranchisement." In Anacosta Tribe v. Murbach, 13 Md. 91, a by-law which provided for expulsion was sustained; and see Osceola Tribe v. Schmidt, 57 Md. 98. Courts will not entertain the complaints of a member where the by-laws provide for their submission to and final determination by a tribunal within the organization. See cases just cited and Donnelly v. Supreme Council, 106 Md. 425. But the facts must show an opportunity for a hearing and for a fair hearing. Council v. Littleton, 100 Md. 416, and Dague v. Grand Lodge, 111 Md. 104. There is an exhaustive note on the subject to the case of Ryan v. Cudahy, 40 L. R. A. 353. The technical term for the expulsion of a member is "disfranchisement"; and the removal of a member of the governing body is "amotion." For the distinction, see the curious case of James Bagg, 11 Rep. (Coke) 93.

all times vote his shares for his own interest.1 In normal course, a shareholder's rights are those which he exercises, as part of the majority in corporate meetings, in electing directors and adopting by-laws for their governance. But outside of corporate meetings his activity is limited to cases in which his property rights as shareholder are affected. The following are points for notice: Ist. In order to preserve his proportionate control, a stockholder is, in the absence of special conditions, entitled to take his share of increased stock.2 2nd. "A stockholder, though owning but a single share, may invoke and set in motion the plenary and far-reaching powers of a court of equity to investigate, strike down and strip of its covering any act of the corporation to which he belongs, when that act is tainted with fraud, or is ultra vires or illegal." 3rd. Statutes usually confer some rights upon minority shareholders, and those contained in the Maryland general law are substantially the following: (a) The Act of 1910, relating to banks and

1 Shaw v. Davis, 78 Md. 308. Herein a shareholder differs from a director. In Beatty v. Transportation Co., L. R. 12, App. Cas. 598, a shareholder was allowed to vote his shares in favor of ratifying a contract which he had made with the corporation as a director; see also, Hodge v. Steel Co., as reported, with briefs of counsel, in 60 L. R. A. 742.

2 Railroad Co. v. Hambleton, 77 Md. 341; Real Estate Co. v. Bird, 90 Md. 229; post, Chap. XIV.

3 Du Puy v. Terminal Co., 82 Md. 426; Bond v. Gray Imp. Co., 102 Md. 426; Shaw v. Davis, 78 Md. 308. It must be remembered, however, that the right to sue for injury to the corporation belongs primarily to it; and the shareholder can maintain no action unless he shows: (1) That the transaction complained of is not within the powers of the majority or is otherwise unlawful; (2) that he has made demand upon those in control to take action; or (3) that they are acting collusively and an appeal to them would be useless. Hawes v. Oakland, 104 U. S. 450; Davis v. Gemmell, 70 Md. 356.

TANFOR

THE STATUS OF A MEMBER

101

trust companies (Code 1911, Art. 11, sec. 76), vests in a single shareholder the right of canvassing the votes at all corporate meetings.1 (b) The owners of five per cent, or more of the outstanding capital stock, or of any class, if two or more classes have been issued, may by written request obtain a sworn statement of the corporate affairs, comprising a particular account of its assets and liabilities in detail, which must be placed on file at the principal office of the corporation within twenty days after demand, and remain open during business hours to the inspection of any stockholder, who may copy the same. (c) Prior to the revision of 1908, it was the right of any stockholder to demand a personal inspection of the books at any reasonable time (Weihenmayer v. Bitner, 88 Md. 331). The present law limits this right to any person or persons holding in the aggregate five per cent. of the capital stock, or of any class thereof if two or more classes have been issued.3 In a proper case, a writ of mandamus will issue to compel the inspection; but the writ will not be granted if the application is not made in good faith.* (d) In the case of consolidation, or the sale, lease or exchange of the corporate property as an entirety, a dissenting stockholder is entitled to have his shares valued and paid for."

1 Useless, and probably the result of indiscriminate copying; see ante, p. 90, note 3.

2 Code (1911), Art. 23, sec. 72.

3 The former law is reproduced in the Act of 1910 relating to banks and trust companies. See Code (1911), Art. 11, sec. 53.

Wright v. Heublein, 111 Md. 657. In Guthrie v. Harkness, 199 U. S. 148, the right of inspection is declared to be a common law right; and a mandamus issued by a state court to the directors of a national bank was upheld. In McClintock v. Young Republicans, 210 Pa. 115, 68 L. R. A. 459, it was held that the right of inspection belongs to a member of a corporation having no capital stock. 5 Code (1911), Art. 23, secs. 31 and 32.

CHAPTER X.

DIRECTORS.

§ 59. Qualification. Directors, managers or trustees, are names indifferently applied to the board in which the administrative powers of a corporation are primarily vested. In the absence of some statutory provision; any person may be a director who is qualified to act as the agent of another. Share ownership is not necessary, nor is residence in the state of the domicil. Statutes, however, sometimes impose conditions, e. g. share ownership; the only condition in the general law of Maryland is that at least one of the directors must be a citizen of and actually reside in this State.1

§ 60. Election. Subject to any special provision in the charter or governing statute, the time and manner of electing directors is within the control of the shareholders or members and subject to the by-laws adopted by them. Statutes usually provide (and such seems to be the common law rule) that directors hold over until their successors are

1 Code (1911), Art. 23, sec. 8. Under the national banking act a director must own at least ten shares; and in Art. 11 of the Code, which deals with state banks and trust companies, there are special and foolish qualifications, e. g. sec. 50.

duly chosen and qualified.1 Courts of equity have no authority to determine the validity of a corporate election; they have no power to remove directors fraudulently chosen or to prohibit them from exercising the powers of their office. Where the proceedings have been illegally conducted, the persons rightfully elected may, by writ of mandamus, be put in control. A director may resign, whenever he so pleases.3

1 The Maryland statutory provisions, which are subject to variations of detail in the case of a few particular classes of corporations, are found in Code (1911), Art. 23, secs. 3, 8 to 12, and 16. The board for the first year consists of the persons named as such in the certificate of incorporation, subject, however, to the right of the stockholders, by a by-law, to increase or decrease the number; and, by action taken at a special meeting, to remove any director from office. After the first year the members of the board are elected at the annual meetings. By a by-law, the directors may be divided into classes and the terms of office of the several classes prescribed; but no class may be elected for a shorter period than one year or for a greater period than five; and the term of office of at least one class must expire in each year. Vacancies in the board are filled as the by-laws provide; and in the absence of any provision they may be filled by the remaining members of the board.

2 But, nevertheless, equity can grant preventive relief. Compare: Supreme Lodge v. Simering, 88 Md. 276; Triesler v. Wilson, 89 Md. 169; and Pope v. Whitridge, 110 Md. 468 and 486.

3 "A resignation of a bank director orally made to the president is sufficient when it is made on the sale of his shares of the stock." Briggs v. Spaulding, 141 U. S. 132. This result would naturally follow because ownership of shares is one of the qualifications of a director in a national bank imposed by the Act of Congress. But in the same case, the general doctrine on the subject is stated as follows: "Putting a resignation in writing is the more orderly and proper mode of procedure, but if the fact exists and is adequately proven, the result is necessarily the same as applied to this case. We do not understand that because sec. 5145. Rev. Stat. provides