other than the president, vice-president and directors, are ordinarily entitled to compensation for their services; and, in the absence of any previous agreement with the corporation with respect to the amount of compensation, they may recover upon a quantum meruit.2 The act of the managing officer of a railway company in ordering the payment in part of a claim by one of its officers for salary for services rendered, is an admission of liability as against the company." But evidence of a resolution of the board of directors that the salary of an officer was during the preceding year fixed at a certain amount, does not show a contract for a salary prior to that time. In a late action against a railway company on a note given in return for services rendered, it was held no defense thereto that in the execution of the note all the requirements of the bylaws had not been strictly complied with, as recovery ought not to be defeated by matter of mere form and not of substance.5

1 See cases cited in the following note. Cf. St. Louis etc. R. R. Co. v. Fiernan, 37 Kan. 606. But see Holder v. Lafayette etc. R'y Co. 71 Ill. 106, 22 Am. Rep. 89, and Kilpatrick v. Penrose Ferry Bridge Co. 49 Pa. St. 118, 88 Am. Dec. 497, where it was said that a treasurer cannot claim compensation.

2 Smith v. Long Island R. R. Co. 102 N. Y. 190; Hall v. Vermont etc. R. R. Co. 28 Vt. 404; Low v. Connecticut etc. R. R. Co. 45 N. H. 370; Cincinnati etc. R. R. Co. v. Clarkson, 7 Ind. 595; First National Bank v. Drake, 29 Kan. 311; 44 Am. Rep. 646; Bee v. San Francisco etc. R. R. Co. 46 Cal. 248; Bill v. Darenth Valley R'y Co. 26 Law J. Ex. 81; S. C. 1 Hurl. & N. 305.

3 St. Louis eto. R. R. Co. v. Tiernan, 37 Kan. 606.

4 Smith v. Woodville Mining Co. 66 Cal. 398.

5 St. Louis etc. R. R. Co. v. Tiernan, 37 Kan. 606.

§ 486. The degree of diligence required of directors, officers and agents.-Directors acting in good faith within the limits of their powers, using proper prudence and diligence, are not responsible for

mere mistakes or errors of judgment, such as men of ordinary prudence would not have committed; for, as they receive no salary, they cannot be expected to devote all their time to the duties of their office.2 But salaried officers and agents are held to a higher degree of diligence in the performance of their duties than are directors. It appears to be clear that directors are not liable for a misrepresentation, or a mistake in point of law. Supine and gross negligence, however, on their part may amount to a breach of trust. Whether a particular act of the directors is under the circumstances performed with ordinary prudence, skill and care, or whether it be rash and imprudent, is for the jury to determine."

5

1 Hun v. Cary, 82 N. Y. 65, 70; 37 Am. Rep. 546; Excelsior Petroleum Co. v. Lacey, 63 N. Y. 422; Vance v. Phoenix Ins. Co. 4 Lea (Tern), 385; Godbold v. Branch Bank of Mobile, 11 Ala. 191; 46 Am. Dec. 211; Citizens' Building Assoc. v. Coriel, 34 N. J. Eq. 383; Spering's Appeal, 71 Pa. St. 11; 10 Am. Rep. 684; Charitable Corporation v. Sutton, 2 Atk. 400.

2 Percy v. Millaudon, 8 Mart. N. S. (La.) 68; S. C. 6 Martin N. S. 616; 17 Am. Dec. 196.

3 Commercial Bank v. Ten Eyck, 48 N. Y. 305; Austin v. Daniels, 4 Denio, 293; East New York etc. R. R. Co. v. Elmore, 5 Hun, 214; Concord R. R. Co. v. Clough, 49 N. H. 257; Pangborn v. Citizens' Building Assoc. 35 N. J. Eq. 341; First National Bank v. Reed, 36 Mich. 263; Taylor on Corporations (2nd ed. 1889), § 618. Cf. Taylor v. Taylor, 74 Me. 582.

4 Browne v. Theobald's Railway Law, 110.

5 Charitable Corporation v. Sutton, 2 Atk. 400.

6 Hun v. Cary, 82 N. Y. 65; 37 Am. Rep. 546. Cf. Van Dyck v. McQuade, 86 N. Y. 33. See also Scott v. De Peyster, 1 Edw. Ch. 513; Litchfield v. White, 2 Sand. 515; Spering's Appeal, 71 Pa. St. 11; 10 Am. Rep. 684; Liquidators etc. v. Douglas, 11 Ses. Cas. (3d series) 112.

§ 487. Directors not personally liable on contracts within their power to make.-Directors are not liable at common law upon any contract lawfully entered into by them in their official capacity on behalf of the corporation,1 unless it be apparent upon the face of the contract that they in

tended to assume personal liability; so that the liability of directors upon contracts within their powers resolves itself into a matter of intention.3 Declaring the common law on this point, the English Companies' Clauses Act of 1845 enacts that no director, by being party to or executing in his capacity of director any contract or other instrument on behalf of the company, or otherwise lawfully executing any of the powers given to the directors, shall be subject to be sued or prosecuted, either individually, or collectively, by any person whomsoever, and the bodies or goods or lands of the directors shall not be liable to execution of any legal process by reason of any contract or other instrument so entered into, signed, or executed by them, or by reason of any other lawful act done by them in the execution of any of their powers as directors. There are statutes in some of the American States, however, which subject the directors to personal liability for the debts of the corporation by way of penalty for failure to make annual reports. To subject the directors of a corporation to liability joint and several for the corporate debts for the preceding year, upon a neglect on their part to file the report of debts and capital, as prescribed by statute, it is hed that the complaint must allege that the com

4

was transacting business in the county where

it is claimed that the report should have been filed, and must state the contract of indebtedness, which is sued upon, as well as set forth the default of the company and the fact that the parties sued are directors so as to be liable, since the corporation

is, by the terms of the statute, charged with no such duty unless these facts exist."

1 Rochester v. Barnes, 26 Barb. 657; Roberts v. Button, 14 Vt. 195; Beattie v. Ebury, Law R. 7 H. L. 102; Lindus v. Melrose, 3 Hurl. & N. 177. Cf. Knomer v. Haines, 31 Fed. Rep. 513.

2 Serrell v. Derbyshire etc R'y Co. 19 Law J. Com P. N. S. 371; 8. C. 9 Com. B. 811; Healy v. Story, 3 Ex. 3.

3 Burrell v. Jones, 3 Barn. & Ald. 47; Tyrrell v. Woolley, 1 Man. & G. 809. Cf. Holt v. Winfield Bank, 25 Fed. Rep. 812.

4 8 Vict. ch. 16, § 100.

5 Cook v. Pearce, 23 S. C. 239; Child v. Boston etc. Works, 137 Mass. 516; 50 Am. Rep. 323; Aufenger v. Anzeiger Publishing Co. 9 Colo. 377; Colo. Gen. Stat. 181, § 16.

6 Aufenger v. Anzeiger Publishing Co. 9 Colo. 377.

§ 488. Indemnification of directors.-Asagents and trustees the directors are entitled to be indemnified by the company for all losses and expenses in good faith sustained and incurred by them in the exercise of the trust imposed on them.' This rule has been reduced to statutory form in England, where the Companies' Clauses Act of 1845 provides that the directors, their heirs, executors and administrators, shall be indemnified out of the capital of the company for all payments made or liability incurred in respect of any acts done by them, and for all losses, costs and damages which they may incur in the execution of the powers granted to them; and the directors for the time being of the company may apply the existing funds and capital of the company for the purposes of such indemnity, and may, if necessary for that purpose, make calls of the capital remaining unpaid, if any. But directors and agents are not entitled to any indemnity fron the corporation in respect of unauthorized expenditures.3 And in many cases a director cannot even make unconditional and unrestrained use of legal

remedies against his

to outside creditors.1

2 8 Vict. ch. 16, § 100.

1 2 Lindley on Partnership, 760; In re Court Grange Manuf. Co. 2 Jur. N. S. 494.

3 In re National Building Soc. Law R. 5 Ch. 309; In re Worcester Corn Exchange Co. 3 De Gex, M. & G. 180; Ex parte Cropper, 1 De Gex, M. & G. 147. Cf. 2 Lindley on Partnership, 765. Contra, Ex parte Chippendale, 4 De Gex, M. & G. 19, followed by Hoare's Case, 30 Beav. 225; Troup's Case, 29 Beav. 353; Ex parte Bignold, 22 Beav. 143; Baker's Case, i Drew & S. 54.

4 Taylor on Corporations (2nd ed. 1889), § 634; Hallam v. Indianola Hotel Co. 56 Iowa, 178.

§ 489. Liability of directors upon contracts beyond their own and the corporate powers.— If a contract be made by directors in excess of their powers, their liability depends upon whether or no it be of such a nature as may be ratified by the shareholders-that is to say, although the contract be beyond the power of the directors, but not beyond the corporate powers, they cannot be held individually liable to the other contracting party.1 But directors incur a personal liability upon all contracts entered into by them which are beyond the powers of the corporation. The fact that they he acted in good faith is no defense to an action against them for damages resulting from ultra vires acts, except where there is doubt as to the limits of their authority; as where the charter of a company is a complicated one, made up by comparing sixteen acts of incorporation or supplements.5

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1 Davidson v. Tulloch, 3 Macq. 783. Cf. Davis v. Memphis City R'y Co. 22 Fed. Rep. 883.

2 Roberts v. Button, 14 Vt. 195; Owen v. Van Uster, 10 Com. B. 318. Cf. Holt v. Winfield Bank, 25 Fed. Rep. 812.

3 Van Dyck v. McQuade, 45 N. Y. Super. Ct. 620; Lester v. Howard Bank, 33 Md. 558; 3 Am. Rep. 211; Ex parte Wilson, Law R. 8 Ch. 45;