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creditors in the sense, however, in which an agent is trustee for his principal,' and hence are not liable to them for mere nonfeasance, but only misfeasance. But they are liable to the creditors of the corporation, where their wrongful acts have resulted in diminishing the fund to which the latter have a right to look for the payment of their claims. judgment creditor may sue directors for illegal preferences.'

Paschall v. Whitsett, 11 Ala. 472; Allen v. Montgomery R. Co., 11 Ala. 437; Bassett v. St. Albans' Hotel Co., 47 Vt. 313; Adler v. Milwaukee Patent Brick Co., 13 Wis. 57; Miers v. Zanesville &c. Turnpike Co., 11 Ohio, 274; s. c. 13 Ohio, 197; Henry v. Vermillion &c. R. Co., 17 Ohio, 187; Marsh v. Burroughs, 1 Woods, 467; Payne v. Bullard, 23 Miss. 90. In Tinkham v. Borst, 31 Barb. 407, the court proceeded on the idea that the creditors have an equitable lien upon the assets of a dissolved corporation in the hands of one of its members.

1 Pool's Case, 9 Ch. Div. 322, 328. 2 Fusz v. Spaunhorst, 67 Mo. 256, 264. See in support of the same view, Smith v. Hurd, 12 Metc. 371; Smith v. Poor, 40 Me. 415; Zinn v. Mendel, 9 W. Va. 580.

3 Penobscot &c. R. Co. v. Dunn, 39 Me. 587; Bedford R. Co. v. Bowser, 48 Pa. St. 29. And where Laws Minn. 1873, ch. 11, § 23, (Gen. St. ch. 34, § 142) declares that "if any corporation organized and established under the authority of this act shall violate any of its provisions, and shall thereby become insolvent, the directors ordering or assenting to such violation shall be jointly and severally liable in an action founded on this statute for all debts contracted after such violation as aforesaid." It was held, that where a series of acts, or a continuous course of conduct, on part of the directors in violation of the stat

An unsecured

ute, finally producing the insolvency of the corporation, is begun before the debt of a creditor is contracted, the debt is one contracted "after such violation," although the series of acts or course of conduct is not completed, or the insolvency of the corporation consummated, until afterwards. Patterson v. Minnesota Manuf. Co., (1889) 41 Minn. 84; s. c. 6 Ry. & Corp. L. J. 351. And this case further decided that the ultra vires acts of the directors in executing accommodation paper in the name of the corporation, or in lending its funds to others, constitute a violation of the act "by the corporation" within the meaning of the statute. The directors of a company, holding property of an insolvent company in trust, who misapply such assets, are individually liable to the creditors of the insolvent company to the extent of the assets so misapplied. National Bank v. Texas Investment Co., (1889) 74 Tex. 421.

4 As where the directors of a corporation known to be insolvent granted a preference to the estate of a deceased director and president. The board, at the time, consisted of but three persons, two of whom were brothers of deceased, and one was agent of deceased's estate, and voted his stock. One brother was also a creditor of the estate. The preference was held illegal, and that an unsecured judgment creditor of the corporation could recover of

§ 258. Liability for debts of the company.- Trustees of a corporation are not ordinarily liable individually for the debts of the corporation, they not having made themselves so.1 So the facts that the directors of a corporation have mismanaged its business, and contracted an indebtedness in excess of the limit prescribed by its charter and the published notice of incorporation, do not render them liable to creditors of the corporation, unless made so by the provisions of the charter, or some general statute; and it is immaterial that the creditors allege that credit was extended in reliance on the business character and responsibility of the directors. But the directors of a corporation may be held individually liable for debts contracted by them for the company in excess of the limit of indebtedness fixed by a statute; and the remedy against them is in equity, not having been prescribed by the statute. The law prohibiting the directors of a corporation from creating debts "beyond their subscribed capital stock,"

the two brothers who had voted for the preference, such percentage of his debt as he would have received if the sum wrongfully paid had been divided pro rata among all the unsecured creditors, but could not charge the other director, who was not present at any of the directors' meetings, and did not vote for the preference. Adams v. Kehlor Milling Co., (1888) 36 Fed. Rep. 212. But a creditor at large can not, under S$ 1781, 1782, of N. Y. Code, maintain an action against directors of a corporation for their misconduct. A judgment creditor, only, is entitled to sue. Paulsen v. Van Steenbergh, 65 How. Pr. 342. And under the Missouri statute, a creditor of a dissolved corporation, the assets of which have been appropriated by the directors, can only maintain an action against them after an ascertainment in equity of the amount due him, unless his claim is the only one that the corporation owed at the

time of its dissolution, or unless the assets appropriated by the directors exceed such claim in amount. Horner v. Carter, 3 McCrary C. Ct. 595. Though where, at the time of the loss of a policy-holder in a mutual assessment fire insurance association, there was a fund in the hands of the company, arising from dues and advance assessments, which was appropriated by the company to the payment of its privilege taxes and attorneys' fees, stripping it of its assets and rendering it insolvent, the directors and corporators of the company are personally liable to the assured for the loss, the sum misappropriated being in excess of the sum needed to satisfy his demand. Stewart v. Lee Mutual Fire Ins. Assoc., (1887) 64 Miss. 499.

1 Snyder v. Wiley, 59 Tex. 448. 2 Frost Manuf. Co. v. Foster, (1889) 76 Iowa, 555.

3 Stone v. Chisolm, (1884) 113 U. S. 302; Horner v. Henning, 93 U. S.

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under penalty of being individually liable therefor, applies to all the subscribed capital stock, whether paid in or not, and regardless of the disposition made of it; and the debts do not include capital stock paid for corporate property.' But railroad directors, authorized by law to contract debts for construction and equipment, are not liable under the general statute for debts so contracted, though exceeding half the capital stock and assets. Under a law providing that persons, who, by articles of association in writing, associate themselves together, "and who comply with the provisions of this chapter, shall, with their successors and assigns, constitute a body politic and corporate," the defendants organized and drew up and signed articles of agreement with the understanding and agreement that they were not to take effect till certain things were done, which never were done. It was decided that they did not constitute a corporation, and that the president and directors could not be held liable for debts, under the law making such officers personally liable for debts contracted by corporations failing to comply with certain statutory requirements.3

259. For what debts liable.- A tax duly assessed against the corporation, and presently payable, is a debt, within the

228. By the statute of New York every officer, agent or stockholder of a company who knowingly assents to, or has any agency in contracting or incurring any debt, in excess of the limit of indebtedness prescribed by the statute, is held personally and individually liable to pay such debt; and also liable to arrest and imprisonment in any action for the same and on any execution issued on any judgment obtained thereon in the same manner as defendants in actions of trespass are liable, and is also deemed guilty of a misdemeanor. N. Y. Laws of 1845, ch. 230, § 1. Cf. N. Y. Laws of 1890, ch. 564, § 24.

Pacif. Rep. 875; Shea v. Lent, (Cal. 1890) 22 Pacif. Rep. 876.

2 Niagara Bridge Works v. Jose, 59 N. H. 81.

3 Corey v. Morrill, (1889) 61 Vt. 598. But in this case one of such directors having visited plaintiff at his place of business, and represented that the corporation had been legally organized, and that he was a director in it, and plaintiff having on the strength of this representation sold goods to the corporation, and accepted notes, such director is estopped from setting up the defense that the corporation was never legally organized, and that, therefore, he could not be personally held

1 Moore v. Lent, (Cal. 1890) 22 liable for its debts.

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meaning of the statute;1 so also is a judgment for costs against the company; and a contract obligation to one employed for a specified time by the corporation at a fixed salary, is a debt from the time the contract goes into effect. But a claim in tort is not a debt within the act, even though it has been reduced to judgment; nor are unliquidated claims for breaches of contracts, and causes of action incidentally arising thereon;" nor are bonds of the corporation, which have been, with the holder's knowledge, diverted from their intended and authorized purpose. A renewal of an old debt does not create the liability though the indebtedness exceeds the limit. The liability of a corporation for infringement of letters-patent is not before judgment "a debt" for which the officers are liable.R The statutory liability does not embrace debts due to the directors personally. The liability under these statutes, before suit brought to fix it, is not a debt, nor any fixed obligation to pay, but only that from which, by the prescribed course, an obligation to pay may be raised.10 To charge a trustee of a manufacturing corporation for its debt, no report having been filed, the debt must have been so contracted as to give a present right of action against the corporation."

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1 Felker v. Standard Yarn Co., (1889) 148 Mass. 226.

new account. They were credited on the old account, and the indorsers

2 Allen v. Clark, (1888) 108 N. Y.. of the paper under the new account 269.

had no notice of its dishonor. And

3 Brandt v. Godwin, (1889) 24 N. Y. it was considered that defendants St. Rep. 305.

4 Chase v. Curtis, 113 U. S. 452. 5 Victory Web Printing &c. Co. v. Beecher, 26 Hun, 48.

6 Kirkland v. Kille, 99 N. Y. 390. 7 Rutland Bank v. Page, 53 Vt. 452. So in an action by a bank receiver against certain trustees of a mill company, it appeared that the mill was indebted in excess of its capital stock to the bank; that a contract was made by which the bank agreed to treat the debt as dead or suspended, and thereafter to cash the mill paper when indorsed by one of the defendants and the bank president individually, and that subsequent mill deposits were to be credited on the

were not liable under the law making trustees individually liable for indebtedness to which they have assented in excess of the capital stock of the company, as the new paper made by the mill under the contract was paid, so far as defendants were concerned. Patterson v. Robinson, (1889) 116 N. Y. 193; s. c. 6 Ry. & Corp. L. J. 483.

8 Child v. Boston & Fairhaven Iron Works, 137 Mass. 516; s. c. 50 Am. Rep. 328.

9 McClave v. Thompson, 36 Hun,

365.

10 Knower v. Haines, 31 Fed. Rep. 513.

11 Vernon v. Palmer, 62 How. Pr.

§ 260. For false reports. Other statutes make directors, and trustees liable for false reports made by them.' The report must have been knowingly false. These statutes cannot be enforced in another State, even though judgment has

425. And where a lessee agrees to pay the taxes assessed on the leased property, or to pay the amount to the lessor on a certain day afterwards, no debt is due to the lessor until the day named. In three years from that day the bar of the statute of limitations attaches. After the bar has attached, it follows that there is no debt on the basis of which the trustee of the lessee (a manufacturing corporation organized under the New York act of 1848) can be charged for a default in filing an annual report of the condition of the corporation. Trinity Church v. Vanderbilt, 98 N. Y. 170.

IN. Y. Laws of 1890, ch. 564, § 31; N. Y. Laws 1848, ch. 40; 1875, ch. 611. A report containing the names of two persons as stockholders, and stating the amount of their stock as actually paid in, where in fact such persons are not stockholders at all, is

'false in a material representation." Brandt v. Godwin, (1889) 24 N. Y. St. Rep. 305. But such officers are liable, though they had no actual knowledge that the representations were false, and signed in good faith. Torbett v. Eaton, (1888) 49 Hun, 209, Brady, J. dissenting. And it is no defense to the statutory liability that defendant signed such report in good faith, under the advice of counsel, and believing its statement to be true. Brandt v. Godwin, (1889) 24 N. Y. St. Rep. 305.

2 Pier v. Hanmore, 86 N. Y. 95; Pier v. George, 86 N. Y. 613, where it was decided that to charge a trustee of a manufacturing corporation within New York Laws 1848, ch. 40, for signing a false report, know

ing it to be false, some fact or circumstances must be shown indicating that it was made in bad faith, or for some fraudulent purpose, and not ignorantly or inadvertently; and this is a question of fact that must be passed upon before the liability can be adjudged. If the report filed be untrue, and constitutes a false representation, it renders liable only the trustee who signed it, and who signed knowing it to be false. Where the falsity charged consists in a statement that the capital stock had been paid up in full, without stating that a portion was paid for in property, it was held that bad faith or a fraudulent purpose must be shown, as the penalty follows an actual, not a constructive, falsehood. Bonnell v. Griswold, 89 N. Y. 122. See Bolz v. Ridder, 12 Daly, 329. A complaint in a proceeding to charge a trustee with a debt due from a corporation, on the ground that he signed an annual report which he knew to be false in a material representation, is sufficient in alleging knowledge of the falsity of the report, without stating facts which are implied in such allegation. Taylor v. Thompson, 66 How. Pr. 102. And conversely it has been decided that Pub. St. Mass. ch. 106, § 60, providing that the officers of a corporation, who knowingly make a false certificate to be filed in the office of the secretary of the commonwealth, "shall be jointly and severally liable for its debts," applies as well to, debts existing when the certificate is made as to future debts. Felker v. Standard Yarn Co., (1889) 148 Mass. 226.

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