come liable upon a contract entered into by the corporation, and any of them are required to assume more than their proper proportion of the liability, they are entitled to contribution from the others. But with respect to liability arising out of tort, the rule is different. The right of contribution then depends upon the innocence of those of them who have been held liable therefor. There is no right of contribution between those that are equally guilty, although one of them may have been compelled to make good the whole loss, for each is liable for the whole. But if several directors have been held liable for the wrongful acts of another of which they are innocent, they are entitled to contribution from him; and so if one director be made to pay the whole loss arising from a wrongful act of which he is innocent, he is entitled to contribution from the others." 2 1 Slaymaker v. Gundacker, 10 Serg. & R. 75. 2 Andrews v. Murray, 33 Barb. 354. Contra, Nickerson v. Wheeler, 118 Mass. 295. 3 Power v. O'Connor, 19 Week. Rep. 923; Power v. Hoey, 19 Week. Rep. 916; Lewin on Trusts (5th ed.), 744. § 495. Liability of directors under the New York Penal Code. --A director of a stock corpora tion, who concurs in any vote or act of the directors of that corporation, or any of them, by which it is intended (1) to make a dividend, except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law; (2) to divide, withdraw, or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation; or to reduce the capital stock without the consent of the BEACH ON RAILWAYS-51 legislature; (3) to discount, or receive any note or other evidence of debt in payment of an installment of capital stock actually called in, and required to be paid, or with intent to provide the means of making the payment; (4) to receive or discount any note or other evidence of debt with intent to enable any stockholder to withdraw any art of the money paid in by him on his stock; (5) to apply any portion of the funds of the corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock;5 (6) to receive any such shares in payment or satisfact on of a debt due to the corporation; (7) to receive in exchange for the shares, notes, bonds or other evidences of debt of the corporation, shares of the capital stock or notes, bonds or other evidences of debt issued by any other stock corporation, is guilty of a misdemeanor." 1 N. Y. Penal Code, § 594. 2 N. Y. Penal Code, § 594. 3 N. Y. Penal Code, § 594. 4 N. Y. Penal Code, § 594. 6 5 N. Y. Penal Code, § 594. N. Y. Penal Code, § 594. 7 N. Y. Penal Code, § 594. § 496. Liability of directors, officers and agents under the New York Penal Code.— A director, officer or agent of any corporation or joint-stock association, who knowingly receives or possesses himself of any property of that corporation or association, otherwise than in payment of a just demand, and with intent to defraud omits to make, or to cause or direct to be made, a full and true entry thereof, in the books or accounts of the corporation or association; and a director, officer, agent or member of any corporation or joint-stock association, who, with intent to defraud, destroys, alters, mutilates or falsifies any of the books, papers, writings or securities belonging to the corporation or association, or makes or concurs in making any false entry, or omits or concurs in omitting to make any material entry in any book of accounts or other record or document kept by the corporation or association, is punishable by imprisonment in a State prison not exceeding ten years, and not less than three years, or by imprisonment in a county jail not exceeding one year, or by a fine not exceeding five hundred dollars, or by both such fine and imprisonment.1 A director, officer, or agent of any corporation or joint-stock association, who knowingly concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary condition, containing any material statement which is false, other than such as are elsewhere, by this code, specially made punishable, is guilty of a misdemeanor." A director of a corporation or jointstock association must be deemed to have such a knowledge of the affairs of the corporation or association as to enable him to determine whether any act, proceeding, or omission of its directors, is a violation of this chapter.3 A director of a corporation or joint-stock association, although not present at a meeting of the directors, at which any act, proceeding or omission of the directors, in violation of this chapter, occurs, must be deemed to have concurred therein, if the facts constituting such violation appear on the record or minutes of the proceedings of the board of directors, and he remains a director of the company for six months thereafter, without causing, or in writing requiring, his dissent from such illegality to be entered in the minutes of the directory. The term "director," as used in this chapter, embraces any of the persons having by law the direction or management of the affairs of a corporation, by whatever name such persons are described in its charter, or are known in law.5 1 N. Y. Penal Code, § 602. 2 N. Y. Penal Code, § 603. 3 N. Y. Penal Code, § 609. 4 N. Y. Penal Code, § 611. § 497. Directors and officers prohibited from gambling in the securities of the corporation. No officer or director of any railroad corporation shall sell, or agree to sell, or be directly or indirectly interested in the sale of, or agreement to sell, any shares of the stock of the corporation of which he is an officer or director, unless at the time of sale, or agreement to sell, he is the actual owner of such shares.' Any person violating any of the provisions of this act shall be guilty of a misdemeanor, and upon conviction thereof shall be punished by imprisonment not less than six months, or by a fine not exceeding five thousand dollars, or by both such fine and imprisonment." 1 N. Y. Laws of 1884, ch. 223, § 1. 2 N. Y. Laws of 1884, ch. 223, § 2. § 498. Of de facto directors, officers and agents. Ordinarily the power of persons to act in behalf of a corporation, who have become directors de facto, cannot be collaterally questioned by a stockholder, but only by a judgment of ouster against them in direct proceeding for that purpose. Thus, a board of de facto directors may bring an action in trespass against another board claiming to be directors de jure, and the latter cannot defend by impeaching the title of the former, as this would be doing collaterally what may be done only by direct proceedings under a writ of quo warranto.2 In England this doctrine has been reduced to statutory form by the Companies' Clauses Act of 1845, which declares that all acts done by any meeting of the directors, or of a committee of directors, or by any persons acting as directors, notwithstanding it may be afterwards discovered that there was some defect in the appointment of any such directors or persons acting as aforesaid, or that they or any of them were or was disqualified, shall be as valid as if every such person had been duly appointed and was qualified to be a director 3 The doctrine of the validity of the acts of de facto officers rests upon public policy and the principles of justice. Their dealings with third persons are sustained as rightful and valid on the ground of continuous acquiescence by the corporation in suffering them to hold themselves out as possessing authority to act for it, and thereby inducing others to deal with them in the capacity of corporate officials. But stockholders are not third persons in their relation to the corporation, and in dealings between them and usurpers the necessity and justice of the rule as to the validity of the acts of directors does not exist, and the rule itself is inapplicable. Accordingly, the validity of the acts of directors de facto and their authority may be collaterally called in question by a stockholder whenever those acts are destructive or affect his proprietary 4 |