4 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.3 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. 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." 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 had no notice of its dishonor. And 269. 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. first been obtained in the State enacting them. A judgment obtained under these laws merges all right of action of such creditor against the officer as a stockholder of the corporation. In a suit to enforce the penalty under the Massachusetts act, which makes the directors of a corporation personally liable for the corporate indebtedness, where the certificate as to the condition of the corporation is false, it must appear that the statements in the certificate were willfully made, with a purpose to deceive.3 261. For failure to make reports. There are statutes in some of the American States which subject the directors to personal liability for the debts of the corporation by way of penalty for failure to make annual reports. This annual 1 Attrill v. Huntington, (1889) 70 Md. 191. 4 N. Y. Laws of 1890, ch. 564, § 30; N. Y. Laws 1848, ch. 40; 1875, 2 Attrill v. Huntington, (1889) 70 ch. 611; Chase v. Curtis, 113 U. S. Md. 191. 3 Felker v. Standard Yarn Co., (1890) 148 Mass. 226, construing Mass. Pub. Stat. ch. 106, § 60. In an action to recover from the trustee of a corporation the amount of a debt due the plaintiff on the ground that the defendant had been guilty of actual falsehood, in that he had signed a report required by the New York Manufacturer's Act of 1848, which stated that the capital of the corporation had been fully paid in, while in fact the defendant knew that the whole stock had been issued to one of the incorporators in payment of lands bought by him from another corporation, and by him conveyed to the defendant's company at a grossly exaggerated price, the books of the two companies are admissible in evidence, not only to prove the corporate acts of the companies, but also for the purpose of proving the defendant's knowledge of the circumstances under which the stock was issued. Blake v. Griswold, (1877) 103 N. Y. 429. 452. New York Laws, 1875, ch. 510, repeals 1848, ch. 40, § 12, and relieves the trustee of a manufacturing corporation from liability for its debts for failing to file the report, and it was so held as to failure to file the report due January, 1875. Victory Web Printing &c. Co. v. Beecher, (1881) 26 Hun, 48. Laws N. Y. 1848, ch. 40, § 12, provided that every corporation organized under that act should annually, within 20 days from the 1st day of January, make, publish, and file a verified financial report, and for a failure so to do imposed a joint and several liability upon all the trustees for all existing debts. This act was so amended by Laws 1875, ch. 510, in regard to preceding cases, as to require only that the report should be made within 20 days from the 1st of January of the year following the January of the year in which the company was incorporated; the word "annually" being omitted. The company of which defendant was trustee in January, 1867, was incorporated in 1865. It was held that by statement must be made without regard to whether there was or was not a stockholders' meeting. The fact that it is not actually filed within the twenty days, although made within that time, is immaterial if it is filed within a reasonable time.2 An annual report of a corporation signed by two only of seven trustees is insufficient to satisfy the requirement of the law that a majority must sign the report. Only those in office at the time fixed for the statement were liable for failure to make it." § 262. For acts of appointees.- It is a rule in the law of agency that an agent is not liable for the wrongs committedi by a subordinate agent appointed and controlled by him, unless he authorized the wrong or participated in it. So ordinarily, directors are not liable for the misfeasance of officers and agents appointed and selected by them with due care, except such wrong-doing is in some way due to an omission of duty on the part of the directors. They are not sureties shall be jointly and severally liable for all the debts of the company that shall be contracted during the year next preceding the time when such report should omitting the word "annually" word "annually" from the act of 1848, no liability was left upon defendant, in a suit commenced after the passage of the act of 1875, for an omission to make, publish, and file a report in January, 1867; it not being shown that such report was not duly made in 1866. Carr v. Risher, (1888) 50 Hun, 147. 1 Cooke v. Pearce, 23 S. C. 239. 2 Butler v. Smalley, 101 N. Y. 71. 3 Westerfield v. Radde, 67 How. Pr. 204; s. c. 12 Daly, 450. 4 State v. Cox, (1883) 88 Ind. 254; Austin v. Berlin, (1889) 22 Pacif. Rep. 433, where the decision was that the directors of a corporation, whose terms of office began after an indebtedness had been created against the corporation, and after default had been made by the previous board in failing to file, as required by law, a report showing the amount of the corporate indebtedness, are not liable under Gen. St. Colo. $252, which provides "that all the directors or trustees of the company have been until such re made and filed, and 5 Thompson on Liability of Officers and Agents, 355. 6 Batchelor v. Planters' National Bank, 78 Ky. 435, 446; Batcheller v. Pinkham, 68 Me. 253; Bath v. Caton, 37 Mich. 199; Hewitt v. Swift, 3 Allen, 420; Nicholson v. Mounsey, 15 East, 384; Stone v. Cartright, 6 to the corporation or its stockholders for the fidelity of a secretary or other subordinate officer appointed by them, so as to be liable for his embezzlement or defalcations, if they have acted prudently and in good faith, and had no knowledge that he was untrustworthy.' Directors of a bank, by the same rule, are not liable for the dishonesty or negligence of the bank cashier, or other bank officers, when they themselves are guilty of no negligence or dishonesty. The directors of a bank who receive no compensation for their services are not personally liable for the defalcations of their fellow director whom they have chosen as cashier, teller and bookkeeper of the bank, with no reason to suspect his fidelity to its interests, and whose past life as a business man, so far as known, was a guaranty of his honesty and capacity, and whose experience in banking, personal and financial character for integrity commended him to all business men as well qualified for the position. But where directors sanction a breach of trust by a subordinate officer, or by negligence or inattention enable him to divert corporate funds, they will no doubt be liable. Circumstances may exist which will charge the directors, although they did not know of the fraud at the time it was committed, as where the directors personally and knowingly derived a benefit from the fraud, in which case the subordinate agents who committed the fraud become in a sense the agents of the directors. So where they remove Term Rep. 411. Cf. Weir v. Bell, Cargill v. Bower, 10 Ch. Div. 502; 3 Ex. Div. 238. 1 Scott v. De Peyster, 1 Edw. Ch. 513. 2 Shering's Appeal, 71 Pa. St. 11; Godbold v. Bank of Mobile, 11 Ala. 191. Cf. United Soc. v. Underwood, 9 Bush, 609. 3 Savings Bank v. Caperton, (1888) 87 Ky. 306. In this case it was said the directors ordinarily need do no more than to see that his daily, weekly or monthly statements correspond with the general balance upon the books of the bank. 4 Angell & Ames on Corp., § 334; Att'y-Gen. v. Leicester, 7 Beav. 176; Weir v. Barnett, 3 Ex. Div. 32; Weir v. Bell, 3 Ex. Div. 238. As in a case where directors authorized brokers to issue a prospectus for the purpose of borrowing debentures, and the brokers issued a prospectus containing fraudulent statements, a director who was abroad at the time the prospectus was issued, and knew nothing of its contents, was held not liable. And one who received no personal benefit from the transaction was also held not liable. Weir v. Bell, 3 Ex. Div. 238; Browne & Theobald's Ry. Law, 110. The law on this point, say |