action is treated as ex delicto, then the directors are several and joint tort feasors and have no right of contribution between themselves.38 The rule that there can be no contribution between joint wrongdoers is generally applied to corporate directors and officers.39 In England, however, the right to contribution seems to be conceded and the only question is whether it is equitable, in the particular case, to authorize a recovery by one director who has paid a judgment against him in favor of the corporation, against other directors.40 In an early case in England it was held that directors actually participating -in fraudulent transactions must reimburse less guilty colleagues who were liable to the company only because of negligence. But it was said by Lord Cottenham in another early English case that "where the liability arises from the wrongful act of the parties, each is liable for all the consequences, and there is no contribution between them." 42 On the other hand, if directors make or indorse a note, they have been held liable to contribution, in case of loss, 43 whether payment be made by one by compulsion or voluntarily, and without regard to the amount of stock owned by each director.45 In Maryland, it is held that directors against whom a decree is rendered for making loans in excess of the limit and for improper payment of dividends may "assert according to the ordinary course of procedure any right of contribution which they may have against other participants in the transactions out of which the liability en selling bonds of the company for their own private account, may "bring his co-directors before the court if he desires, and require them to contribute," is stated in Widrig & Co. v. Newport St. Ry. Co., 82 Ky. 511, 515, 6 Ky. L. Rep. 760. Contribution as between promoters, see Lomita Land & Water Co. v. Robinson, 154 Cal. 36, 18 L. R. A. (N. S.) 1106, 97 Pac. 10, and see generally §§ 132-166, vol. 1. 38 Ervin v. Oregon Ry. & Nav. Co., 20 Fed. 577, 582. 39 Gilbert v. Finch, 173 N. Y. 455, 61 L. R. A. 807, 93 Am. St. Rep. 623, 66 N. E. 133. See also Avery v. Central Bank of Kansas City, 221 Mo. 71, 119 S. W. 1106, where, however, cashier of bank sought contri bution from a stockholder, but the For dicta to the contrary, however, 40 Ramskill v. Edwards, 31 Ch. Div. 100. 41 Charitable Corporation v. Sutton, 2 Atk. 400, 406. 42 Attorney General v. Wilson, 1 Craig & Phillips, 1, 28. 43 Middleton v. McCartee, 2 Mackey (D. C.) 420; Hall v. Gleason, 158 Ky. 789, 166 S. W. 608. 44 Slaymaker v. Gundacker's Ex'rs, 10 Serg. & R. (Pa.) 75. 45 Brooke v. Boyd, 80 Wash. 213, Ann. Cas. 1916 B 359, 141 Pac. 357. 1 forced by the decree arose," and that "as contribution between defendants entitled thereto may be enforced in the same case in equity in which their common liability is established, the defendants * may, if entitled to contribution, have it decreed here as against each other in respect to losses, if any such be established, resulting from acts in which only they participated, but as to acts in which other directors also participated the safer plan for them would be to employ for that purpose a proceeding in which all of the participants in those acts are made parties." 46 It is to be noticed, however, that this was held in a case where a bill by a receiver was demurred to for the failure to make defendants all the directors who participated in any of the alleged negligent or unlawful acts complained of, and it appeared from the bill different directors were in office at various times when the various alleged improper acts occurred, and therefore the language of the opinion should, it is submitted, be limited to cases where some of the directors were liable for part of the losses but not liable for other losses. § 2418. Where act illegal or forbidden by statute. If the director seeking contribution knew the act for which he was held liable, to be illegal, or if the circumstances were such as to render his ignorance inexcusable, then he is not entitled to contribution from his codirectors.47 This rule was applied in Oklahoma where a corporation whose indebtedness was limited by statute to the amount of its capital stock, was incorporated with a subscribed capital stock of one hundred and fifty dollars, of which less than half was paid up, but contracted a debt for seven hundred dollars, and judgment was recovered against the director seeking contribution for such sum. So, apparently on this theory, it was held in Nebraska that where directors of an insolvent corporation, with knowledge of the pendency of an action against it, divided among stockholders nearly all its available assets, and such act was expressly forbidden by statute, the treasurer, who was also a director, who paid out the money and against whom judgment was recovered for converting the corporate assets, could not obtain contribution from other directors.49 48 § 2419. Where liability created by statute. If the liability is imposed by statute, and the statute is remedial in its nature rather 48 Rogers v. Bonnett, 2 Okla. 553, 37 Pac. 1078. 46 Gaither v. Bauernschmidt, 108 Md. 1, 69 Atl. 425. 47 Wilkinson v. Dodd, 40 N. J. Eq. 123, 138, 3 Atl. 360; Andrews v. Murray, 33 Barb. (N. Y.) 354. See also Cooley, Torts, 148, 149. 49On the other hand, if the action was taken in good faith, and with defendant's participation, and plaintiff need not be presumed to have than penal, it is held that there is a right to contribution.50 On the other hand, when the liability imposed upon the directors or other officers of a corporation is penal in its nature,51 an officer who has been sued and compelled to pay a debt cannot sue the other officers for contribution.52 The right to contribution, if it exists, is not affected by the form of action against the officer to enforce the statutory liability, as for instance whether it was in law or equity.53 Under a statute making the officers of a corporation liable for debts contracted before the whole capital stock has been paid in, and also making the stockholders liable after the remedy against the officers has been exhausted, there is not a common duty or burden resting upon officers and stockholders alike, but the officers are primarily liable, and the liability of the stockholders is secondary. And therefore officers who have been compelled to pay corporate debts under the statute are not entitled to contribution from the stockholders. "The obligation of contribution is founded on the equitable principle that those who have united in taking upon themselves a common duty or burden ought to bear it equally. But in order to create this obligation it is essential that the duty or burden should be a common one; that is, that it should rest upon all alike. It is not sufficient that two or more persons are liable to pay the same debt. The liability must be the same in kind and degree; not separate and successive, but joint and co-ordinate, so that all stand in aequali jure, in regard to the performance of the obligation or payment of the debt for which they are respectively liable." 54 known it was wrong, there would be a right to contribution."' Sharp V. Call, 69 Neb. 72, 96 N. W. 1004, 95 N. W. 16. 50 Woolverton v. Taylor, 132 Ill. 197, 22 Am. St. Rep. 521, 23 N. E. 1007, rev'g 30 Ill. App. 70; Nickerson v. Wheeler, 118 Mass. 295 (applying rule where statute violated was one creating liability for failure to file annual certificates, and statute required joinder of all of directors, the execution having been levied on the property of one of the directors); National Bank of Auburn v. Dillingham, 147 N. Y. 603, 49 Am. St. Rep. 692, 42 N. E. 338. 51 See §§ 2594-2604, infra. 52 Gregory v. German Bank of Denver, 3 Colo. 332, 25 Am. Rep. 760; Andrews v. Murray, 33 Barb. (N. Y.) 354; Rogers v. Bonnett, 2 Okla. 553, 37 Pac. 1078; Hill v. Frazier, 22 Pa. St. 320. In an early New York case this rule was applied where liability was created by statute, without any reference to whether the statute was penal or remedial. Andrews v. Murray, 33 Barb. (N. Y.) 354, statutory liability for failure to file annual report. 53 Coulombe v. Eastman, 75 N. H. 531, 77 Atl. 936. 54 Stone v. Fenno, 6 Allen (Mass.) 579. § 2420. Offer to do equity. Stockholders cannot come in and have a judgment against the corporation set aside, without offering to do equity by returning the money actually owed by the corporation.55 § 2421. Conclusiveness of judgment against corporation Statutory liability. By the weight of authority, when a statute makes the directors of a corporation originally liable for corporate debts in case of certain defaults or misconduct, and an action is brought against a director by a creditor on his claim against the corporation, a judgment recovered against the corporation for the debt is not only not conclusive, but it is not even prima facie evidence of the debt.56 However, even in New York where the cases generally support this rule, there is authority to the contrary where a judgment against the corporation was obtained before suing the officers.57 In Massachusetts, however, a statute provides that in suits against corporations, in which it appears that one of the objects is to enforce an alleged liability of an officer thereof, such officer may be permitted, on petition, to defend the suit. In an action against a director, after a judgment against the corporation, he sought to show that the creditor who was suing had released the corporation and therefore there was no ground for the judgment, the recovery of which was, by statute, a condition precedent. Justice Braley, in delivering the opinion of the court, said that "the opportunity to contest the primary debt is not to be treated as a matter of common right, but a privilege, to be had, if at all, only upon complying with the terms of the statute which confers it. 58 In addition, the court held that the fact that the director was absent from the state from the inception to the ter 55 Burns v. National Mining, Tunnel & Land Co., 23 Colo. App. 545, 130 Pac. 1037. 56 Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038; Audenried v. East Coast Milling Co., 68 N. J. Eq. 450, 59 Atl. 577; McMahon v. Macy, '51 N. Y. 155; Miller v. White, 50 N. Y. 137; Watson v. Godwin, 62 Hun (N. Y.) 622, 17 N. Y. Supp. 51; Torbett v. Godwin, 62 Hun (N. Y.) 407, 17 N. Y. Supp. 46; Kraft v. Coykendall, 34 Hun (N. Y.) 285; Esmond v. Bullard, 16 Hun (N. Y.) 65; Brand v. Godwin, 15 Daly (N. Y.) 456. Compare, however, Allen v. Clark, 108 N. Y. 269, 15 N. E. 387, rev'g 43 Hun (N. Y.) 377; Squires v. Brown, 22 How. Pr. (N. Y.) 35; Cady v. Sanford, 53 Vt. 632. In Tyng v. Clarke, 9 Hun (N. Y.) 269, however, it was held that a judgment in favor of the corporation was admissible as a bar to a suit against an officer. 57 Cæsar v. Bernard, 156 N. Y. App. Div. 724, 141 N. Y. Supp. 659, rev'g on other grounds 79 N. Y. Misc. 224, 139 N. Y. Supp. 974. 58 Old Colony Boot & Shoe Co. v. Parker-Sampson-Adams Co., 183 Mass. 557, 67 N. E. 870, reviewing Massachusetts decisions at length. mination of the suit, and had no knowledge of it, and did not for this reason petition for leave to amend, was immaterial; and that the judgment could not be collaterally attacked whether the director be considered as a privy or a stranger to the judgment.59 And in regard to the decisions in Massachusetts, it has been said, in that state, that "the decisions in relation to individual liability for corporate debts have been, in all aspects in which the question has been presented, uniform in sustaining the conclusiveness of the judgment against the corporation, as establishing the existence of the debt for which it is rendered." 60 § 2422. Common-law liability. Where directors are joined as codefendants in an action against a corporation, a judgment against the corporation has been held admissible in an action to hold them personally liable in the same matter, where the facts alleged in the original action tended to make them liable as trustees so as to impose on them the duty of controlling the suit.61 So where executive officers of a corporation had instigated an infringement of a trade-mark, and when the corporation was sued therefor had directed and controlled the defense, the decree, including the damages found, is conclusive against them when subsequently sued by the same person to recover the amount of the decree against them personally.62 In another connection, it was remarked that "the very fact that appellant recovered judgment against the corporation affords conclusive evidence that the trustees in contracting the debt did not exceed their authority.” 63 B. Breach of Duty in General § 2423. Scope of subdivision. In this connection, attention is called to a few rules of law and illustrations thereof, relating to breaches of duty by corporate directors or other officers, where the breach of duty is such a general one that it is not subject to classification, at least not in its entirety, either as negligence, fraud, misappropriation, conversion or other specific branch of misconduct, as where it may be looked at from either one of two or more different viewpoints as to the nature of the tort. 59 Old Colony Boot & Shoe Co. v. Parker-Sampson-Adams Co., 183 Mass. 557, 67 N. E. 870. 60 Thayer v. New England Lithographic Steam Printing Co., 108 Mass. 523, 528, citing Massachusetts cases. 61 McCollom v. Dollar, Tex. Civ. App. 176 S. W. 876. 62 Saxlehner v. Eisner, 140 Fed. 938, aff'd 147 Fed. 189. 63 American Radiator Co. v. Kinnear, 56 Wash. 210, 35 L. R. A. (N. S.) 453, 105 Pac. 630. |