Although state courts disagree on this issue, we are persuaded that Idaho would follow the weight of common law authority and hold that the contract is valid between the parties, especially when the parties have acted in accordance with the agreement. See, e.g., Palmer v. Chamberlin, 191 F.2d 532, 534 (5th Cir. 1951) (applying Louisiana law); Barton Naphtha v. Commissioner, 56 T.C. 107, 119 (1971) (applying Iowa law); Vannucci v. Pedrini, 217 Cal. 138, 143, 17 P.2d 706 (1932); Doss v. Yingling, 95 Ind. App. 494, 172 N.E. 801, 803 (1930); Searles v. Bar Harbor Banking Co., 128 Me. 34, 145 A. 391, 393 (1929); Baumohl v. Goldstein, 95 N.J.Eq. 597, 124 A. 118, 120 (1924); Blue Mountain Forest Assn. v. Borrowe, 71 N.H. 69, 51 A. 670, 673 (1901). See also Note, Restriction Upon Transfer of Stock While Not Valid By-Law, Is Nevertheless Binding Upon the Parties as a Contract, 38 Va.L.Rev. 103 (1952).
It is of course well settled that "A void by-law may become a valid contract". Blue Mountain Forest Association v. Borrowe, 71 N.H. 69, 51 A. 670, 673. For cases applying that principle to stock transfer restrictions see: Searles v. Bar Harbor Banking Trust Co., 1929, 128 Me. 34, 145 A. 391, 65 A.L.R. 1154; Blue Mountain Forest Association v. Borrowe, supra; Vannucci v. Pedrini, 1932, 217 Cal. 138, 17 P.2d 706; Doss v. Yingling, 1930, 95 Ind. App. 494, 172 N.E. 801; Model Clothing House v. Dickinson, 1920, 146 Minn. 367, 178 N.W. 957; Garrett v. Phila. Lawn Mower Co., 1909, 39 Pa. Super. 78; New England Trust Co. v. Abbott, 1894, 162 Mass. 148, 38 N.E. 432, 27 L.R.A. 271; Prindiville v. Johnson Higgins, Ch. 1921, 92 N.J. Eq. 515, 113 A. 915; Brown v. Little, Brown Co., 1929, 269 Mass. 102, 168 N.E. 521, 66 A.L.R. 1284.
While her status under the trust agreement could not be affected by her subsequent conduct, her acts in furtherance of, and her consent to, the plan of recapitalization, preclude successful attack by the defendant upon the validity of the agreement of August 20th and the by-law of the corporation controlling the disposition of such stock. Compare: Blue Mountain Forest Association v. Borrowe, 71 N.H. 69, 51 A. 670; Prindiville v. Johnson Higgins, 92 N.J. Eq. 515, 113 A. 915; Searles v. Bar Harbor Banking Trust Company, 128 Me. 34, 145 A. 391, 65 A.L.R. 1154; New England Trust Company v. Abbott (Mass.), supra. The question now arises as to the date as of which the book value should be determined.
It is conclusive proof that the holder has contracted to be bound by the terms. Blue Mountain Forest Ass'n v. Borrowe, 71 N.H. 69, 51 A. 670; Jacobs v. Miller, 50 Mich. 119, 15 N.W. 42; Hassel v. Pohle, 214 App. Div. 654, 212 N.Y.S. 561; Commissioner of Banks v. Prudential Trust, 242 Mass. 78, 136 N.E. 410; Grand Rapids Indiana Ry. Co. v. Osborn, 193 U.S. 17, 24 S. Ct. 310, 48 L. Ed. 598. The stockholders contend that the promise to pay the assessment is a contract to answer for the default of another and is void under the statute of frauds because the certificate was not signed by the holder thereof nor by his agent.
Some involve bylaws which were ineffective as such only because they were faultily adopted; some concern the enforcement of corporate rights against a shareholder; the older cases antedate the modern corporation statutes; or the argument made here was not presented.See, e.g., Krauss v. Kuechler, 300 Mass. 346, 15 N.E.2d 207 (1938); Federal Services Finance Corp. v. Bishop National Bank, 190 F.2d 442 (9th Cir 1951); Blue Mountain Forest Association v. Borrowe, 71 N.H. 69, 51 A. 670 (1901); Weiland v. Hogan, 177 Mich. 626, 143 N.W. 599 (1913); In re William Faehndrich, 2 N.Y.2d 468, 141 N.E.2d 597 (1957). Moreover, the question before us is not whether an agreement among corporate shareholders not to act at a shareholders' meeting unless all are represented, if such an agreement were actually made, could give rise to a contract cause of action by one shareholder against another or whether such an agreement would be void as contrary to ORS 57.165.
The defendant corporation was organized in 1891 by Austin Corbin, "under chapter 152 of the General Laws, for the purpose of enabling him to conveniently manage the park owned by him, consisting of about 25,000 acres of land, including Croydon and Grantham mountains, all fenced and stocked with wild animals, located in the towns of Newport., Cornish, Croydon and Grantham, in establishing and maintaining which he expended in the vicinity of half a million dollars." Blue Mt. Forest Ass'n v. Borrowe, 71 N.H. 69. Included among the animals imported into Corbin park were Prussian wild boar from the Black Forest of Germany.
In furtherance of the foregoing authority, the tendency of more recent decisions is to sustain such restrictions as contained in article IV, supra, if reasonable, and if the stock has been accepted following the adoption of the restriction, with knowledge of its provisions, whether valid as a by-law or not, on the ground that it constitutes a valid agreement between the stockholder and the corporation. Searles v. Bar Harbor Banking Trust Co., 128 Me. 34, 145 Atl. 391, 65 A.L.R. 1154; New England Trust Co. v. Abbott, 162 Mass. 148, 38 N.E. 432; Weiland v. Hogan, 177 Mich. 626, 143 N.W. 599; Model Clothing House v. Dickinson, 146 Minn. 367, 178 N.W. 957; Blue Mountain Forest Ass'n v. Borrowe, 71 N.H. 69, 51 Atl. 670. So, whether we hold the restriction on the alienation of the stock is valid under the provisions of the by-law, or sustain the restriction by virtue of an agreement entered into between the original incorporators, as evidenced by the by-law, which agreement and by-law were thereafter acted upon and observed by the stockholders of the corporation, the result is the same. See Baumohl v. Goldstein, 95 N.J. Eq. 597, 124 Atl. 118. The reasoning of the New Jersey court appears on page 602 of the opinion as follows:
" If elsewhere there is any recognition of a conception that a corporation, apart from and regardless of its membership, is "an objectively real entity" (vide XXIV Harv. Law Rev. 253, 347, 361), the doctrine that it is an associated body as expounded in Dow v. Railroad has not undergone modification here. Blue M't'n c Ass'n v. Borrowe, 71 N.H. 69, 73, 74. "The fiction that the corporation is a being independent of those who are associated as its stockholders is not favored in this state. Dow v. Railroad, supra, 3.
However that may be, it is not necessary to consider that question. It is well settled that a by-law which is invalid and unenforceable as such may be enforceable as a contract against stockholders or members who were parties to its adoption or who have accepted or assented to it, except where it is beyond the power of the corporation to contract. 8 Fletcher Cyc. Corp. 736; Clark Marshall on Corporations, ยง 493; New England Trust Company v. Abbott, 162 Mass. 148, 38 N.E. 432, 27 L.R.A. 271; Jennings v. Bank of California, 79 Cal. 323, 21 P. 852, 5 L.R.A. 233, 12 A.S.R. 145; Blue Mt. Forest Assn. v. Borrowe, 71 N.H. 69, 51 A. 670; Weiland v. Hogan, 177 Mich. 626, 143 N.W. 599. In 8 Fletcher Cyc. Corp., supra, it is said: "The power of a natural person to make contracts not prohibited by law, is, in its scope, far beyond the power of a corporation to adopt bylaws, and although a regulation, adopted by the corporation, be not enforceable, considered strictly as a by-law, it may be enforceable as a contract against a stockholder or member or director who agrees to be bound by it, provided it is not of itself illegal or ultra vires the corporation."
This decision, however, is confined strictly to the facts here presented and does not undertake to lay down principles governing other circumstances. It finds support in the reasoning and result of the following decisions, though none are direct authorities to this point. New England Trust Co. v. Abbott, 162 Mass. 148. Barrett v. King, 181 Mass. 476. Kingman v. Spurr, 7 Pick. 234. Blue Mountain Forest Association v. Borrowe, 71 N.H. 69. It follows that the defendants who claim to hold office as directors by virtue of shares of stock transferred in violation of this restriction inherent in the nature of the corporation, are not qualified and must surrender their offices as such. Writ to issue.