wrongful acts have not been injurious to any one.64 For example, although it is a breach of duty for the directors to vote an officer a salary to which he is not entitled, yet, if the salary is not paid, their act is injuria absque damno, and will not support an action by the corporation against them.65 And the directors of a bank are not liable because of their negligence in not preventing its cashier from making loans to himself, unless it is shown that the bank sustained loss as a direct consequence of such negligence.66 Where copartners transferred their business to a corporation created by themselves and issued part of the stock to themselves as fully paid up, and became the sole officers, the corporation cannot recover from such officers the difference between the actual value of the property turned in to the corporation and the face value of the stock received therefor, since the corporation has suffered no damages.67 On the other hand, a corporation may maintain an action against its directors for fraudulently issuing and negotiating promissory notes in its name, which have reached the hands of bona fide purchasers for value, and have thereby become legal obligations of the corporation, although they have not yet been paid, and, in the absence of special circumstances diminishing the damages, it will be entitled to recover the face value of the notes.68 Moreover, it is no defense to liability for misconduct causing a loss to the corporation that the corporation is still solvent nor that the stock of the company increased in value during the period of such misconduct.69 A trustee in bankruptcy cannot recover from one time directors of the bankrupt corporation assets claimed to have been illegally paid out by them, where such acts did not cause the bankruptcy, and Nebraska. Yates V. Jones Nat. Bank, 74 Neb. 734, 105 N. W. 287. New York. Metropolitan El. R. Co. v. Kneeland, 120 N. Y. 134, 8 L. R. A. 253, 17 Am. St. Rep. 619, 24 N. E. 381; Commercial Bank v. Ten Eyck, 48 N. Y. 305, aff'g 50 Barb. 9; Kavanaugh v. Gould, 147 App. Div. 281, 131 N. Y. Supp. 1059. Tennessee. Wallace v. Lincoln Sav. Bank, 89 Tenn. 630, 24 Am. St. Rep. 625, 15 S. W. 448. Wisconsin. Lindemann v. Rusk, 125 Wis. 210, 104 N. W. 119. 64 Levin v. Mayer, 86 N. Y. Misc. 116, 149 N. Y. Supp. 112; Larwill v. Burke, 19 Ohio Cir. Ct. 449, 513, 10 65 Metropolitan El. Ry. Co. v. Kneeland, 120 N. Y. 134, 8 L. R. A. 253, 17 Am. St. Rep. 619, 24 N. E. 381. 66 Wallace v. Lincoln Sav. Bank, 89 Tenn. 630, 24 Am. St. Rep. 625, 15 S. W. 448. 67 Hoffman Motor Truck Co. V. Erickson, 124 Minn. 279, 144 N. W. 952. 68 Metropolitan El. Ry. Co. v. Kneeland, 120 N. Y. 134, 8 L. R. A. 253, 17 Am. St. Rep. 619, 24 N. E. 381. 69 Jacobson v. Brooklyn Lumber Co., 184 N. Y. 152, 76 N. E. 1075. where, at the time of such acts, there were no creditors, since there must be both a breach of duty and an injury to warrant a recovery.70 § 2408. Statutory liability as precluding common-law liability. Where a liability is imposed upon an officer or a director by a state statute, his common-law liability for misfeasance and negligence in the performance of his duties is not thereby excluded. Thus, where an officer of a corporation has wrongfully withdrawn or allowed to be withdrawn funds of the corporation, that a penalty for such wrongdoing is imposed by statute does not annul liability imposed by the common law." In a late case in a federal court it was contended, in an action brought by a receiver against officers of a national bank, that there is no common-law liability of a director of a national bank, but it was held that it was clear that there was a liability on their part "for failure to perform the duty imposed upon them by the general principles of the law, irrespective of the statute." 72 This question of common-law liability of officers of national banks is further considered hereafter.73 § 2409. Persons liable-In general. The general rule is that persons are liable as corporate officers, either under a statute creating the liability or independent of statute, and without regard to who is seeking to enforce the alleged liability, only where they were officers at or during the time of the act or omission relied on as creating liability.74 Whether one is in reality an officer, so as to be within the 70 Gill v. Ásh, 124 Md. 612, 93 Atl. 210, 212. 71 Great Western Min. & Mfg. Co. v. Harris' Estate, 111 Fed. 38, 42. 72 Williams v. Brady, 232 Fed. 740, 742. 73 See § 2471, infra. 74 California. Irvine v. McKeon, 23 Cal. 472. Colorado. Austin v. Berlin, 13 Colo. 198, 22 Pac. 433. Indiana. Schofield v. Henderson, 67 Ind. 258. Maine. Bank of Mutual Redemption v Hill, 56 Me. 385, 96 Am. Dec. 470. New York. Boughton v. Otis, 21 N. Y. 261; Hoboken Beef Co. v. Hand, 104 App. Div. 390, 93 N. Y. Supp. 834; Chandler v. Hoag, 2 Hun 613, 63 N. Y. 624; Shaler & Hall Quarry Co. v. Brewster, 10 Abb. Pr. 464; Shaler & Under a statute making the directors of a corporation personally liable for their "official mismanage ment," directors are liable only for mismanagement which occurred dur ing the year for which they were elected, and during which they acted. They are not liable for renewals of worthless paper discounted by a previ ous board. Bank of Mutual Redemption v. Hill, 56 Me. 385, 96 Am. Dec. 470. Those directors only are liable for debts created in excess of the capital stock who were directors at the time the excessive debts were contracted. terms of the statute, depends largely upon the circumstances of the particular case.75 Of course no duties arise nor liability accrues as a corporate officer until there is an implied or express acceptance of the office. Thus one who was elected a director but who was not present at the meeting when he was elected, and who never received any notice or information that he was elected and never acted as such and had nothing to do with the management of the corporation until after the act complained of, is not liable.76 Likewise, directors cannot be held liable for the mismanagement of the directors of a preceding year.77 Moreover, a director ought not to be held responsible for the conduct of the business of the corporation from the very day of his election if he has not been a director theretofore.78 A reasonable time should be allowed to permit him to get acquainted with the business and condition of the corporation, and to act upon the knowledge acquired.79 Ordinarily, nonresident directors are liable as well as resident directors.80 § 2410. Where alleged officer has not been notified of election nor accepted the office. A director or other corporate officer is not liable for mismanagement, either to the corporation or stockholders or creditors or a receiver or the like, and without regard to whether the liability is created by statute or exists at common law, where he has not accepted the office either expressly or impliedly by acting as such officer.81 Thus, a person who has been held out as a director without his knowledge, and who has never accepted the office or acted as a director, cannot be held liable.82 In any event, there is no liability before the officer has any notice of his election, where he never Irvine v. McKeon, 23 Cal. 472; Schofield v. Henderson, 67 Ind. 258. A former director is not liable by reason of excessive debts created by his successors. Schofield v. Henderson, 67 Ind. 258. 75 See Edwards v. Armour Packing Co., 190 Ill. 467, 60 N. E. 807, aff'g 90 Ill. App. 333; Millsaps v. Chapman, 76 Miss. 942, 71 Am. St. Rep. 547, 26 So. 369. 76 Bank of Des Arc v. Moody, 110 Ark. 39, 161 S. W. 134. 77 Bank of Mutual Redemption v. Hill, 56 Me. 385, 96 Am. Dec. 470. 78 Rankin v. Cooper, 149 Fed. 1010, 1018. 79 This is well exemplified by the leading case of Briggs v. Spaulding, 141 U. S. 132, 35 L. Ed. 662. 80 Cameron v. First Nat. Bank, Tex. Civ. App., 194 S. W. 469, and see 2467, infra. 81 One who has been elected a director, but who has never evinced his assent to the election, or in any manner acted as director, cannot be held liable. Cameron v. Seaman, 69 N. Y. 396, 25 Am. Rep. 212; Osborne & Cheesman Co. v. Croome, 14 Hun (N. Y.) 164. 82 Hume v. Commercial Bank, 9 Lea (Tenn.) 728. acts as such officer.83 So it is held that a director who informs the president that he will not be able to serve as a director any longer, where the president promised that he would not be re-elected, has been held not liable where he never knew of his re-election and did not act as director thereafter.84 § 2411. Where holding of office has been terminated. In a preceding volume, the duration of the term of office, the mode and sufficiency of resignations, and the method of removing officers, has been fully stated.85 It goes without saying that if the term of office of a corporate officer has been ended either by lapse of time, a valid resignation or by removal, and he does not hold over so as to be a de facto officer, he is not liable for acts or omissions after he has ceased to be an officer,86 although, of course, his liability continues for acts or omissions while in office,87 and he is liable for a default after expiration of his term of office, if he continued to act,88 or where the statute provides that directors shall hold office until others are chosen and qualified in their stead, and it does not appear that any new directors were chosen.89 But if the directors are the original directors and the 83 Woodman v. Butterfield, Me. 101 Atl. 25. 84 Zimmerman v. Western & S. Fire Ins. Co., 121 Ark. 408, Ann. Cas. 1917 D 513, 181 S. W. 283. 85 See §§ 1799-1832, vol. 3. 86 Breitzke v. Bank of Grand Prairie, 124 Ark. 495, 187 S. W. 660, liability for failure to file annual report; Moran v. Vreeland, 81 N. Y. Misc. 664, 143 N. Y. Supp. 522. 87 Nix v. Miller, 26 Colo. 203, 57 Pac. 1084. Directors who retire from office after default in filing a report, while they remain liable for debts contracted before their retirement, are not liable for those contracted afterwards. Vincent v. Sands, 42 How. Pr. (N. Y.) 231. It is immaterial that defendants had ceased to be directors before the commencement of the action, where they were guilty of malfeasance while in office. Boyd v. Mutual Fire Ass'n of Eau Claire, 116 Wis. 155, 61 L. R. A. 918, 96 Am. St. Rep. 948, 94 N. W. 171, 90 N. W. 1086. 88 Jenet v. Nims, 7 Colo. App. 88, 43 Pac. 147; Reed v. Keese, 5 Jones & S. (N. Y.) 269; Deming v. Puleston, 3 Jones & S. (N. Y.) 309; Barnard Mfg. Co. v. Ralston Milling Co., 93 Wash. 111, 160 Pac. 309. A director is liable in case of failure to file a report after his term of office expires, but before his successor is elected, where a statute provides that every director shall continue to hold office until his successor has been elected. Tysen v. Fritz, 44 N. Y. App. Div. 562, 60 N. Y. Supp. 923. 89 Seebeck v. King, 34 N. Y. Misc. 483, 70 N. Y. Supp. 322. But it has been held that if the statute makes no provision as to holding over, then the expiration of the term of office presumptively terminates liability where no other facts are shown. Bank of Metropolis v. Faber, 38 N. Y. App. Div. 159, 56 N. Y. Supp. 542. But see § 1808, vol. 3. articles of incorporation state that they shall serve up to and including a fixed date, the express limitation of the term leaves no room for presumption as to holding over.90 A former director is not liable for a default occurring after he had resigned in good faith and ceased to act as a director, although his resignation may not have been formally accepted; 91 but he must have ceased to act as a director after resigning.92 However, one who resigns as a director, and whose resignation is accepted, but who continues to act as an agent or manager of the corporation, cannot be held responsible, under a statute, to creditors, "as a director," for malfeasance in office, at least where he does not hold himself out, or permit himself to be held out, to the public, as a director.93 A sale of his stock by a director, or his unaccepted resignation, does not terminate his liability, where he continues to act as director.94 The resignation is effective although the creditors had no notice of the resignation.95 The duties and liabilities of corporate directors or other officers cease when the corporation becomes insolvent or is dissolved or where by any other means the corporate affairs are taken out of the hands of such officer or otherwise cease; or where the officer has resigned or been removed,96 subject to the exception that they are not thereby 90 Barnard Mfg. Co. v. Ralston Milling Co., 93 Wash. 111, 160 Pac. 309, approving Philadelphia & R. C. & D. Co. v. Hotchkiss, 82 N. Y. 471. 91 Jackson v. Clifford, 5 App. Cas. (D. C.) 312; Wade v. Baker, 81 N. Y. 622; Van Amburgh v. Baker, 81 N. Y. 46; Bruce v. Platt, 80 N. Y. 379; Noble v. Euler, 20 N. Y. App. Div. 548, 47 N. Y. Supp. 302; Blake v. Wheeler, 18 Hun (N. Y.) 496; Chandler v. Hoag, 2 Hun 613, 63 N. Y. 624; Squires v. Brown, 22 How. Pr. (N. Y.) 35. A statute authorizing corporate of ficers to resign by delivering or mailing a written resignation, filing a duplicate with the county clerk, and publishing notice thereof, has been held not to prescribe an exclusive method for resigning, and that hence where a director delivered his resignation to the president of the company and thereafter refrained from acting as director, he was not liable for subsequent acts or omissions of the board. B. F. Goodrich Rubber Co. v. Helena Motor Car Co., 53 Mont. 526, 165 Pac. 454. A director is not liable after resig nation, although re-elected, where he does not accept the office nor continue to act as director. Zimmerman v. Western & S. Fire Ins. Co., 121 Ark. 408, Ann. Cas. 1917 D 513, 181 S. W. 283. 92 Western Nat. Bank v. Faber, 29 N. Y. Misc. 467, 62 N. Y. Supp. 82. Whether person, after resigning, continued to be a director, see Brown v. Clow, 158 Ind. 403, 62 N. E. 1006. 93 Brown v. Clow, 158 Ind. 403, 62 N. E. 1006. 94 Benedum v. First Citizens' Bank, 72 W. Va. 124, 78 S. E. 656. 95 Bruce v. Platt, 80 N. Y. 379. 96 Right to resign and validity of, see 1809-1813, vol. 3. |