§ 95. The directors or managers of a corporation are trustees, answerable to its members or shareholders for any breach of trust, for any misappropriation of the corporate funds, or for any want of good faith in their dealings with its property. An action may be maintained by a stockholder, in his own behalf, and in behalf of the other stockholders, against the directors acting in bad faith. In equity a director may be treated as the agent or trustee of the stockholders, and held liable on the ground that he acts in a fiduciary capacity."

Officers entrusted with the transfer of the stock on the books of a corporation, are liable to any subsequent purchaser of unauthorized or spurious stock, fraudulently issued by them. The right of action arises upon the purchase. The corporation is also liable to the purchasers of such fraudulent and spurious stock, where it has through its own tegligence and misplaced confidence furnished the opportunity and permitted the overissue; it is liable for the fraud perpetrated by its agent within the letter of his authority in respect to matters which lie peculiarly within his knowledge.*

§ 96. Remedies. Every misuse or misappropriation of goods intrusted to the mandatary, will render him liable, being a breach of the contract under which he receives them.5 A misuser of the goods in contravention of the trust will amount to a conversion of them, and this of course renders the mandatary liable for their value, since by such act he appropriates them as his own. After such an unauthorized assertion of title, or the right of control over the property, the mandatary will be charged with every risk attending it. This follows logically from the fact that any conduct or act which amounts to a conversion, renders the mandatary responsible for the property, so that the owner may recover the same, or its value, in an action as he may elect.

§ 97. The owner's remedy, where a mandatary receives money to de

1 Butts v. Wood, 38 Barb., 181; S. C., 37 N. Y., 317.

2 Cumberland Coal Co. v. Sherman, 30 Barb., 553; Michoud v. Girod, 4 How. U. S., 4; Case v. Carroll, 35 N. Y., 385.

3 Shotwell v. Mali, 33 Barb., 445; S. C., 36 N. Y., 200.

4 N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y., 30. The number of shares of the stock being fixed by law, and outstanding in the hands of the shareholders, no one but the transfer agent would be likely to know that a given number of shares represented the genuine stock. A purchaser therefore has a right to act upon his assertion as to that matter of fact, since it rests peculiarly within the knowledge of the agent.

De Tollennere v. Fuller, 1 So. Car. Coust. R., 121; Ulmer v. Ulmer, 2 Nott and McCord, 489.

6 Holbrook v. Wright, 24 Wend., 169; Brown v. Hotchkiss, 9 John. R., 361. ▾ Sargent v. Giles, 8 New Hamp. Rep., 325.

liver to another and fails to make the delivery, must depend upon the contract, or upon the relation in which the parties stand to each other. If the money be sent by an agent to the owner according to his instructions, the owner alone may sue for and recover it; the agent retains no interest in the money. If the money be placed in the hands of the mandatary by a debtor, to be delivered to his creditor, an action may be brought by either the debtor or the creditor to recover the money; by the debtor because it is his money and he is interested in having it paid over; and by the creditor because the bailee has promised to pay it to him. In both of these cases it is proper to sue on the contract; as it is in all cases where by the understanding of the parties, the bailee is at liberty to deliver the same amount in other bills.2

When the money is delivered to a mandatary in a sealed package, an action of assumpsit for money had and received, cannot be maintained without showing that he has broken the seal and appropriated the money to his own use. It is a breach of trust in him to break the seal, and the law will not infer such an act from his mere omission to deliver the package within a reasonable time.3

§ 98. Failing to deliver a package of money within a reasonable time, it is the duty of the mandatary to render some account of it; and if on demand he refuses to deliver or to give any account of the package, an action may be safely brought against him for its loss through his neglect. Under the code practice, a complaint alleging the facts would be sufficient to establish a cause of action, without giving it a name. It would prima facie establish a right to recover in an action in the nature of trover; because a failure to deliver to the owner on demand, is evidence of a conversion; and it is a conversion where the bailee has the package or goods in his custody at the time the demand is made."

1 Thompson v. Fargo, 49 N. Y., 183. The contract, though made by the agent, enures to the benefit of the owner; and where the agent has fulfilled his whole duty, and delivered the money as he was directed to, he has no interest in it. The owner must bring the action, or at least a party interested in the fund; Krulder v. Ellison, 47 N. Y. 36; Green v. Clarke, 12 N. Y., 343.

2 Del. & H. Canal Co. v. Westchester Co. Bank, 4 Denio, 97. An infant cannot be charged in an action of tort in such a case; Root v. Stevenson, 24 Ind., 115.

Beardslee v. Richardson, 11 Wend., 25.

+ Beardslee v. Richardson, 11 Wend., 25; Boies v. Hartford, &c., R. R. Co., 37 Conn., 272; Dunn v. Brauner, 13 La. Ann. R., 452; Newstadt v. Adams, 5 Duer, 43; Schwerin v. McKie, 5 Robt., 404. The burden of proof is on the bailee, where the goods are not returned or are returned in a damaged condition; Cumins v. Wood, 44 Ill., 416.

Lockwood v. Bull, 1 Cowen, 322.

§ 99. A delivery of a money package to a boy or to another man to complete the execution of the trust, is unauthorized; it is an act of gross negligence. A misdelivery of the package, that is, a delivery of it intentionally or by mistake through inattention to a wrong party, renders the mandatary liable to the true owner. His good faith will not protect him; he is bound to deliver the property to its owner. It will not excuse him to show that he made the delivery under a forged order; unless he is to be treated with some favor not shown to other bailees. Without regard to the motive, the sale of another man's property without his consent, is a conversion of it, and in actions of trover a misdelivery by a bailee has the same effect. Clearly it casts upon him the burden of showing a loss of the property without any default or want of ordinary care on his part.5

§ 100. A trust is often created, and a contract relating to goods, is often made for the benefit of a third person; and that person is permitted to enforce the contract or trust by an appropriate action. His want of knowledge of the trust from the first, will not affect his rights; he may affirm it afterwards, and by affirming the trust he acquires the legal right to insist upon its execution; it being beneficial to him, his assent to the trust will be presumed until the contrary appears. The action of assumpsit is a proper remedy, where a contract can be implied from the facts and circumstances; as it may be where money or goods are sent or delivered by A to B, to be by him paid or delivered over to C, there being a valid consideration between A and C, the party beneficially interested. The plaintiff need not have been privy to the consideration.R

§ 101. The Code has abolished the old forms of action, but has not abolished the previously recognized causes of action. Hence in many cases the bailor has an election, now as formerly, to sue on the bailee's implied contract, or to waive the contract and resort to an action in the

1 Skelley v. Kahn, 17 Ill., 170; Colyar v. Taylor, 1 Coldw. (Tenn.), 372. 2 Willard v. Bridge, 4 Barb., 331; Koykendall v. Eaton, 55 Barb., 188.

3 Hawkins v. Hoffman, 6 Hill, 586; see Price v. Oswego & Syracuse R. R. Co., 50 N. Y., 213; 45 N. Y., 34.

4 Hicks v. Cleveland, 48 N. Y., 84 and 492.

5 Lancaster Co. National Bank v. Smith, 62 Pa. St., 47; Maury & Osborn v. Coyle, 34 Md., 235, 247.

6 Cumberland v. Codrington, 3 John. Ch. R., 229, 251; Shepherd v. Mc Evers, 4 John. Ch. R., 136; 12 Johu., 277.

7 Berly v. Taylor, 5 Hill, 577; Sturtevant v. Orser, 24 N. Y., 538; Barker v. Bradley, 42 N. Y., 316; Barker v. Bucklin, 2 Denio, 45.

8 Lawrence v. Fox, 20 N. Y., 268.

9 DENIO, J., in Hull v. Carnly, 11 N. Y., 501, 510.

nature of replevin, case or trover. The choice of the action to be brought is naturally determined by the remedy given by way of arrest in actions. of tort. If the bailce has been guilty of a conversion, an action of trover may be brought against him; as where he has given a mortgage or made an absolute sale of the property, in violation of the trust.2 The owner should make his election of remedies with care considering the situation of the parties; and should not attempt to combine inconsistent causes of action; since by so doing he may lose an advantage otherwise within his reach. He should also take care not to bring an action of replevin to recover the possession of securities or scrip, so situated that a delivery cannot be adjudged to the plaintiff, the title being in the defendant under a trust; since his true remedy is by a suit in equity.5

§ 102. The bailor cannot sue in trover, or in an action in the nature of trover, unless there has been a wrongful conversion of the property; and when he sues in that action, it is not to recover damages for the non-performance of any contract, but to obtain redress for the tort. The contract of bailment may be given in evidence for the purpose of proving the plaintiff's title, and showing that the property was in possession of the defendant; but the contract is not the foundation of the action. An action in the nature of assumpsit, it is true, may be brought directly on the contract implied from the bailment; but an action of trover sounding in tort is brought for the wrongful appropriation of the property."

The action of trover lies against a bailee who, having property in his possession under a stipulation to deliver it at a particular place, on a demand made, refuses to deliver it at all. By denying the right of the bailor he makes himself answerable for the property in the proper action. If the demand is made at the wrong place, and he answer that he is ready to deliver at the right place, there will be no breach of his

1 Brown v. Treat, 1 Hill, 225 ; Duguid v. Edwards, 50 Barb., 288; McGovern v. Payn, 32 Barb., 83, 91; Bowen v. True, 53 N. Y., 640.

2 Sargent v. Gile, 8 N. H., 325; Stanley v. Haas, 40 Cala., 474; Ogden v. Lathrop, 1 Sweeny, 643.

3 As an illustration, see Morris v. Rexford, 18 N. Y., 552; and Rodermund v. Clark, 46 N. Y., 354. The law does not permit a party to pursue conflicting and inconsistent remedies. Sanger v. Wood, 3 John. Ch., 416.

See Bowen v. True, supra; and Smith v. Knapp, 30 N. Y., 581; and Elwood v. Gardner, 45 N. Y., 349, as to cases in which the order of arrest may be set aside or the defendant discharged from imprisonment on execution.

5 Wheeler v. Allen, 51 N. Y., 37.

Sydam v. Smith, 7 Hill, 182; Smith v. Knapp, 30 N. Y., 581, 588.

duty; but an absolute refusal, though made at a place where he is not bound to produce the goods for delivery, will render any further demand unnecessary. This holds true wherever property is in the hands of a mandatary or general bailee, on a trust connected with its custody or disposition; it must be disposed of, surrendered, or delivered, in the manner, and at the time and place, contemplated in the contract.

§ 103. The general rule that a bailee of property may maintain an action against any stranger or third party for a loss, injury or conversion of the same, applies to a mandatary. He holds it under a trust; he has a special or possessory interest in it; he is answerable for it under his contract with the owner. But his right to recover against a third party is not limited or measured by the liability he is under; suing in trover he may recover the full value of the property, where he has little if any pecuniary interest in it. He holds the excess above his special interest in trust for the owner; and hence in an action against the general owner or one claiming under him, he recovers only to the extent of his interest.*

§ 104. The rule allows either the general owner of property or the bailee to maintain an action of trover for a conversion of it, or an action on the case for an injury to it; the right to sue is indispensable to each to protect his particular interest, and is given for that purpose. In a bailment determinable at the pleasure of the bailor, either may bring an action of trespass or the action of trover; and as the law does not suffer a defendant to be twice harassed for the same cause, a judg ment in the first suit will be a bar to any further action. As a general rule, the bailee may recover against a third party for injuries to the goods by force or negligence, to the full extent of the loss or damage; having a definite interest, as hirer for a term or for a specified purpose, he re

1 Dunlop v. Hunting, 2 Denio, 643; Scott v. Crane, 1 Conn., 255; Higgins v. Emmons, 5 id., 76; Slingerland v. Morse, 8 John. R., 474; Mason v. Briggs, 16 Mass., 453; 2 Kent's Comm., 50S; Rogers v. Weir, 34 N. Y., 463, 471.

2 Ante §§ 37 and 69; Kellogg v. Sweeney, 1 Lansing, 397 ; S. C., 45 N. Y., 291 ; Moran v. Portland, 35 Maine, 55; 13 Wend., 63.

3 Bowen v. Fenner, 40 Barb., 383; Bass v. Pierce, 16 Barb., 595; Paddock v. Wing, 16 How. Pr., 547; Buck v. Remsen, 34 N. Y., 383; Greene v. Clark, 12 N. Y., 343; Little v. Fosset, 34 Maine, 545; White v. Bascom, 28 Vt., 208.

4 Lyle v. Barker, 5 Bin., 457, 460; Spoor v. Holland, 8 Wend., 445; Russell v. Butterfield, 21 Wend., 300, 303.

Smith v. James, 7 Cow., 328.

6 Greene v. Clark, 12 N. Y., 343; Dillenback v. Jerome, 7 Cow., 294; and as to right of action by bailor, see note to case on pp. 300, 301; and Chadwick v. Lamb, 29 Barb., 518; and Bush v. Lyon, 9 Cow., 52; Orser v. Storms, 9 Cow., 687; Nicholls v. Bastard, 2 Cromp., Meeson & Ros., 659. ខ