Hodgkinson v. National etc. Ins. Co. 26 Beav. 473; Williams v. Page, 24 Beav. 654; 2 Lindley on Partnership, 592, 794.

4 Hodges v. New England Screw Co. 1 R. I. 312; S. C. 3 R. I. 9; 53 Am. Dec. 624; Spering's Appeal, 71 Pa. St. 11; 10 Am. Rep. 684.

5 Spering's Appeal, 71 Pa. St. 11; 10 Am. Rep. 684.

490. The same subject, continued-Upon debts beyond the charter or statutory limit.— The directors of a corporation may be held individually liable in a court of equity for debts contracted by them for the company in excess of its limit of indebtedness; and the remedy against them exists independently of statute.1 In New York, by statute, 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.2 An action arising under a similar act survives the directors and may be brought against their administrators. A statutory liability imposed on the directors for any excess of the debts of the corporation over its capital stock, does not embrace debts due to the directors personally. An assent on the part of a trustee to contracting a debt in excess of the capital stock of a corporation is not implied by his neglect to enter his protest against it upon being informed thereof after it has been incurred. Neither can an assent be implied on the part of those trustees who are never present at the meetings, are never conferred with, and never take

a more active part in the administration of the trust than to affix their signatures to the yearly reports. A party, holding himself out as trustee may be liable, even though it appear that he was never duly chosen, and that he owned no stock in the corporation,7

1 Stone v. Chisolm, 113 U. S. 302.

2 N. Y. Laws of 1845, ch. 230, § 1.

3 McComb v. Kellogg (1888), 1 N. Y. Suppl. 206, construing N. Y. Laws of 1843, ch. 43, § 23.

4 McClave v. Thompson, 36 Hun, 365.

5 Patterson v. Robinson, 36 Hun, 622.

6 Patterson v. Robinson, 36 Hun, 622.

7 Halstead v. Dodge, 51 N. Y. Super. Ct. 169.

§ 491. Liability of directors, officers and agents for fraudulent and illegal acts.-The directors, officers and agents of a corporation are liable to persons injured by their fraud and illegal acts.1 Thus, the president of a company, which is a common carrier of persons, is personally liable for the ejectment and injury of persons, whom he has ordered to be excluded, as a class, from carriage, even though an action might lie against the company also.2 Directors are individually responsible for intentionally issuing spurious stock and securing loans thereon. It is not necessary to bring an action first against the corporation, and the existence of the corporation does not come into issue. The directors of a corporation, who have placed in the hands of an agent, for sale, bonds indorsed falsely and intentionally, "first mortgage bonds," are answerable to bona-fide purchasers who have been injured by relying on such indorsement. It is proper for a suit to be instituted against the general manager of a corporation, for a violation by it of an ordi

nance requiring it to pay a license tax before it can transact business. The directors, officers and agents are liable for their fraudulent and illegal acts to the corporation also, and to its stockholders; and 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.'

1 Bolz v. Ridder, 12 Daly, 329; Clark v. Edgar, 84 Mo. 106; 54 Am. Rep. 84; Exchange Bank v. Sibley, 71 Ga. 726; Peck v. Cooper, 112 II. 192; 51 Am. Rep. 231; Robinson v. Smith, 3 Paige Ch. 222; 24 Am. Dec. 212; Salmon v. Richardson, 30 Conn. 360; 79 Am. Dec. 255; Hodges v. New England Screw Co. 1 R. I. 312; 53 Am. Dec. 624; Wyandotte v. Corrigan, 35 Kan. 21; Peck v. Gurney, Law R. 6 H. L. 377.

2 Peck v. Cooper, 112 Ill. 192; 54 Am. Rep. 281.

3 Exchange Bank v. Sibley, 71 Ga. 726.

4 Clark v. Edgar, 84 Mo. 106; 54 Am. Rep. 84.

5 Wyandotte v. Corrigan, 35 Kan. 21.

6 United Soc. v. Underwood, 9 Bush, 609; 15 Am. Rep. 731; Amisiana v. Goldthwaite, 34 Tex. 125; Stevens v. Davidson, 18 Gratt. 819; 98 Am. Dec. 692; Bedford R. R. Co. v. Bowser. 48 Pa. St. 29; Citizens Building Assoc. v. Coriell, 34 N. J. Eq. 383; Williams v. Riley, 34 N. J. Eq. 398; Oakland Bank v. Wilcox, 30 Cal. 126; Taylor on Corporations, § 616.

7 Penobscot etc. R. R. Co. v. Dunn, 39 Me. 587; Bedford R. R. Co. v. Bowser, 48 Pa. St. 29.

§ 492. Liability of directors for the misfeasance of their appointees.-Ordinarily directors are not liable for the misfeasance of officers and agents appointed and selected by them with due care, which in no way results from any omission of duty on their part,1 unless they have expressly or tacitly authorized the wrong-doing." Thus, where directors authorized brokers to issue a prospectus for the purpose of borrowing on 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. So, also, it has been held that directors re-electing a

3

secretary without requiring a renewal of his bond, supposing that the one originally given to secure the faithful performance of his duties was a continuing security, are not liable to make good the loss occasioned by his defalcation where they acted in good faith. The law, however, on this point is, perhaps, open to reconsideration, and it may be doubted whether the better opinion is not that a director who delegates his duty to another person is bound to see that no fraud is committed in carrying out the duty; so that, for instance, a director who authorizes brokers to issue a prospectus would be liable for a fraudulent statement contained therein.5 Accordingly, it is held that the directors are chargeable with notice of all important matters done by their committeemen. In England it is required by statute that before any person intrusted with the custody or control of moneys, whether treasurer, collector, or other officer of the company, shall enter upon his office, the directors shall take sufficient security from him for the faithful execution of his office."

6

1 Batchelor v. Planters' National Bank, 78 Ky. 435, 446; Hewitt v. Swift, 3 Allen, 420; Bacheller v. Pinkham, 68 Me. 253; Bath v. Caton, 37 Mich. 199; Nicholson v. Mounsey, 15 East, 384; Stone v. Cartright, 6 Tenn. Rep. 411. Cf. Weir v. Barnett, 3 Ex. Div. 238.

2 Cargill v. Bower, 10 Ch. Div. 502; Weir v. Barnett, 3 Ex. Div. 32; Weir v. Bell, 3 Ex. Div. 238.

3 Weir v. Bell, 3 Ex. Div. 238; Browne & Theobald's Railway Law, 110. 4 Vance v. Phoenix Ins. Co. 4 Lea, 385.

5 Browne & Theobald's Railway Law, 110, citing Weir v. Bell, 3 Ex. Div. 238, judgment of COTTON, L. J., and Peck v. Gurney (Barclay's Case), Law R. 6. H. L. 377, p. 392.

6 Hun v. Cary, 82 N. Y. 65; 37 Am. Rep. 546. See, also, Smith v. Prattsville Manuf. Co. 29 Ala. 503; Henry v. Jackson, 37 Vt. 431; Neall v. Hill, 16 Cal. 145, 151.

7 8 Vict. ch. 10, § 109.

§ 493. Of the joint and several liability of directors.-A director is not liable for the breaches

of trust or fraudulent or illegal acts of his co-directors which he has neither expressly nor tacitly sanctioned, nor for those wrongful acts of which he had no knowledge. But this is doubted by an eminent authority, upon the ground that it may be the duty of a director to acquaint himself with the doings of his co-directors. But however this may be, it is certain that those who know of and sanction a breach of trust, although not actively taking part therein, are equally liable,' as also are those who know of the breach of trust, but who take no steps to prevent it beyond writing a letter of disapproval. And of course it follows that all those directors who are actually implicated in a breach of trust in misapplying the corporate funds are jointly and severally liable therefor, although they only sign checks prepared by others. But directors failing to account for profits improperly received by them, are only severally liable each for his own receipts. In that case, to affect them with joint liability, it must be shown that they acted jointly as a board.

1 Cargill v. Bower, 10 Ch. Div. 502; Weir v. Barnett, 3 Ex. Div. 32. 2 Ashurst v. Mason, Law R. 20 Eq. 225; In re Montrotier Asphalt Co. 34 Law T. N. S. 716.

3 Lindley on Partnership, 596.

4 Land Credit Co. v. Fermoy, Law R. 5 Ch. 763; 2 Lindley on Partnership, 535.

5 2 Lindley on Partnership, 595, citing Joint Stock Discount Co. v. Brown, Law I. 8 Eq. 381.

6 2 Lindley on Partnership, 595; Land Credit Co. v. Fermoy, Law R. 5 Ch. 763.

7 Parker v. McKenna, Law R. 10 Ch. 95; General Exchange Bank v. Horner, Law R. 9 Eq. 180.

8 Franklin Ins. Co. v. Jenkins, 3 Wend. 130.

§ 494. Of contribution between directors jointly liable.-Where the directors of a corporation be