this work, but the general rules should be sought in leading textbooks on the law of Agency.91 As applied to corporate officers, it has been held that they are not liable for nonfeasance; 92 that they are liable for nonfeasance; 93 and that negligence in actually performing duties is misfeasance rather than nonfeasance.94 It is submitted that, sooner or later, the rule of nonliability for nonfeasance will be entirely discarded. 91 See 1 Mechem, Agency (2nd Ed.), §§ 1464-1481; 2 Clark & Skyles, Agency, $8 594-596. See also note in 25 L. R. A. (N. S.) 343, on "Liability of an agent or servant to third persons for his own negligence or nonfeasance." See also note in 28 L. R. A. 433, reviewing this question, as applicable to agents generally, at length. See further, on this subject, 48 Am. St. Rep. note, p. 923 et seq., 22 Am. St. Rep. note, p. 512 et seq. 92 O'Neil v. Young & Sons' Seed & Plant Co., 58 Mo. App. 628, 634. An officer or agent of a corporation is not liable, it is held in Nebraska, to third persons "for mere failure to perform some duty which the corporation may have owed them." Penney v. Bryant, 70 Neb. 127, 96 N. W. 1033. In New York, on this theory, a committee appointed by the board of directors, who were in charge of the erection of a grand stand which fell, injuring plaintiff, were held not personally liable for their negligence in constructing the stand. Van Antwerp v. Linton, 89 Hun (N. Y.) 417. 93 In Alabama, for instance, this distinction between nonfeasance and misfeasance is abolished by the common sense rule that "the mere relation of agency does not exempt a person from liability for any injury to third persons, resulting from his neglect of duty, for which he would otherwise be liable." Mayer V. Thompson-Hutchison Bldg. Co., 104 Ala. 611, 28 L. R. A. 433, 53 Am. St. Rep. 88, 16 So. 620, where manager of corporation held personally liable for negligent failure to erect a scaffold which was needed to protect persons near the walls. In Kentucky, see § 2536, supra. 94 Another line of cases hold that the rule that the directors and other officers of a corporation are liable to third persons for torts does not apply when the alleged tort consists in mere nonfeasance, if the nonfeasance is nothing more than a failure to perform the duty which the officer or agent owes, as such, to the corporation, but it does apply if the officer or agent enters upon the performance of his duties, and by nonfeasance therein performs those duties in such a negligent manner as to cause injury to third persons, on the theory that in such a case there is something more than mere nonfeasance-there is misfeasance. Osborne v. Morgan, 130 Mass. 102, 39 Am. Rep. 437; Greenberg v. Whitcomb Lumber Co., 90 Wis. 225, 28 L. R. A. 438, 48 Am. St. Rep. 911, 63 N. W. 93. If an officer or superintendent of a corporation directs an employee of the corporation to work at a machine which he knows to be defective and dangerous, he will be personally liable if the employee is injured. Greenberg v. Whitcomb Lumber Co., 90 Wis. 225, 28 L. R. A. 439, 48 Am. St. Rep. 911, 63 N. W. 93, in which case the court, while recognizing the distinction between nonfeasance and misfeasance, said: "It was Semple's duty to have had this machine safe. His neglect to do so was non feasance. But that alone would not have harmed the Nonfeasance, where a creditor sues and the injury is primarily to the corporation, involves a somewhat similar question as to which there is also a conflict.95 § 2559. Nuisance. The directors and other officers of a corporation are also liable personally for a nuisance erected or maintained. or consented to by them, although acting for the corporation.97 To the same effect, where officers of a corporation were convicted for the maintenance of a nuisance, and fined, the court said: "The officers of the company are jointly responsible for the business. It is not necessary to conviction that they should have been actually engaged in work upon the premises. The work is carried on by employees. The directors and officers are the persons primarily responsible, and therefore the proper ones to be prosecuted." 98 § 2560. Trespass. An officer of a corporation is personally liable for a trespass committed by him, or under his direction, upon the land or goods of another, although he may have acted for the corporation.99 Thus, the general manager of a corporation is liable for trespasses on adjoining property by placing mine tailings thereon, where he had knowledge of the continuing trespass although not actually trespassing himself.1 § 2561. Unlawful detention. It has been held that a vice president of a corporation is not liable personally, in an action to recover possession of land and for damages in the way of rents and profits, for alleged unlawful detention, where he disclaimed possession or any interest in the land, and there was no wanton or malicious entry, especially where the action was in the nature of an action on an Works, 82 Mich. 471, 9 L. R. A. 722, 46 99 Favorite v. Cottrill, 62 Mo. App. 119; Bates v. Van Pelt, 1 Tex. Civ. App. 185, 20 S. W. 949; Lytle Logging & Mercantile Co. v. Humptulips Driving Co., 60 Wash. 559, 111 Pac. 774. Compare Bath v. Caton, 37 Mich. 199. Application of rule to agents generally, see 1 Mechem, Agency (2nd Ed.), §§ 1455, 1456. 1 Robinson v. Moark-Nemo Consol. Min. Co., 178 Mo. App. 531, 163 S. W. 885. implied contract because rents and profits were set up as the measure of damages.2 § 2562. Liability over where judgment recovered against corporation for tort of officer. Directors are liable to the corporation where they publish a libel to gratify their own personal ends, and a judg ment is recovered against the corporation because thereof.3 XXIX. TRANSACTIONS WITH, AND LIABILITIES OF OFFICERS TO, §2563. In general. It has already been noted that there is some conflict of opinion as to how far directors or other corporate officers may be said to be trustees for individual stockholders. The only question to be considered in this subdivision is one which grows out of this conflict, as to whether directors or other corporate officers may take advantage of their superior knowledge gained as such officers, in purchasing stock from stockholders, without disclosing their knowledge to the stockholder. § 2564. Purchase of stock by officer from stockholder-In general. The decisions present a square conflict of opinion as to the duty of a director in purchasing stock from a stockholder.5 To go further back, it would seem that the dividing line is whether directors are to be deemed trustees for individual stockholders so far as their stock in the corporation is concerned. The rule laid down by one class of decisions is that "while directors occupy a trust relation to the corporation which they direct, their duty does not apply to the stockholder in the sale and purchase of stock. Dealing in its own stock is not a corporate function. In buying or selling stock, directors may trade like an outsider, provided they do not affirmatively act or speak wrongfully, or intentionally conceal facts with reference to it. There is also the qualification that no other relation of trust exists between the parties."7 This is the 2 Wootton Land & Fuel Co. v. John, 60 Colo. 305, 153 Pac. 686. 3 Hill v. Murphy, 212 Mass. 1, 40 L. R. A. (N. S.) 1102 with note, Ann. Cas. 1913 C 374 with note, 98 N. E. 781. 4 See 2270, supra. 5 For valuable notes on this subject, see 8 Mich. Law Rev. 267, 81 Cent. Law J. 256, 67 Cent. Law J. 452, L. R. A. 1916 B 708. 6 See 2270, supra. 7 Shaw v. Cole Mfg. Co., 132 Tenn. 210, 177 S. W. 479. rule in Arizona,8 Illinois, Indiana,10 Louisiana (semble),11 Michigan,12 Missouri (semble),13 New Jersey, 14 New York (semble),15 Pennsylvania,16 Tennessee, 17 Utah, 18 Washington, 19 the federal courts (semble),20 England 21 and Canada.22 The other line of cases hold that directors are trustees for indi 8 Steinfeld v. Nielsen, 15 Ariz. 424, 139 Pac. 879. For former appeal, see 12 Ariz. 381, 100 Pac. 1094, where contrary was held. That the court, on the later appeal, misconceived the cases holding officers liable, as all being based on special facts, is the view of Justice Ladd in Dawson v., National Life Ins. Co. of America, 176 Iowa 362, L. R. A. 1916 E 878, 157 N. W. 929, and is undoubtedly correct. 9 Hooker v. Midland Steel Co., 215 Ill. 444, 106 Am. St. Rep. 170, 74 N. E. 445, aff'g 117 Ill. App. 441. A director does not, says the Supreme Court of Illinois, sustain the relation of trustee "to an individual stockholder with respect to his stock, over which he has no control whatever, but he may deal with an individual stockholder and purchase his stock practically on the same terms as a stranger. In the absence of actual fraud, such a purchase will not be set aside for a mere failure to disclose any information the director may have affecting the value of the stock." Hooker v. Midland Steel Co., 215 Ill. 444, 106 Am. St. Rep. 170, 74 N. E. 445. "Officers of a corporation may purchase the stock of stockholders on the same terms and as freely as they might purchase of a stranger." Bawden v. Taylor, 254 Ill. 464, 98 N. E. 941, following Hooker V. Midland Steel Co., 215 Ill. 444, 106 Am. St. Rep. 170, 74 N. E. 445. 10 Tippecanoe County Comr's V. Reynolds, 44 Ind. 509, 15 Am. Rep. 245. 11 In re Shreveport Nat. Bank, 118 a. 664, 43 So. 270. 12 In Michigan it is held that directors do not stand in a fiduciary position "when dealing with other stockholders for the purchase or sale of stock. In the purchase and sale of stock between stockholders, there must be some actual misrepresentation in order to constitute fraud. Mere silence is not sufficient. The books of the corporation are open to all the stockholders alike, and each may inform himself of the condition of the company." Walsh v. Goulden, 130 Mich. 531, 90 N. W. 406, 9 Det. L. N. 145. 13 Wann v. Scullin, 210 Mo. 429, 109 S. W. 688. 14 Crowell v. Jackson, 53 N. J. L. 656, 23 Atl. 426. 15 See Carpenter v. Danforth, 19 Abb. Pr. (N. Y.) 225, 52 Barb. (N. Y.) 581. But see Von Au v. Magenheimer, 126 N. Y. App. Div. 257, 110 N. Y. Supp. 629. 16 See Krumbhaar v. Griffiths, 151 Pa. St. 223, 25 Atl. 64. Compare Rafferty v. Donnelly, 197 Pa. 423, 47 Atl. 202. 17 Shaw v. Cole Mfg. Co., 132 Tenn. 210, L. R. A. 1916 B 706 with note, 177 S. W. 479; Deaderick v. Wilson, 67 'Tenn. 108. 18 Haarstick v. Fox, 9 Utah 110, 33 Pac. 251. 19 O'Neile v, Ternes, 32 Wash. 528, 73 Pac. 692. 20 See Gillett v. Bowen, 23 Fed. 625; Grant v. Attrill, 11 Fed. 469. 21 Percival v. Wright, [1902] 2 Ch. 421. 22 Allen v. Hyatt, 17 Dom. L. R. (Can.) 7; Gadsden v. Bennetto, 5 Dom. L. R. (Can.) 529, rev'd on other grounds 9 Dom. L. R. (Can.) 719. vidual stockholders in so far as their stock is concerned,23 and that they cannot purchase stock from a stockholder without giving him the benefit of any official knowledge they possess which may increase the value of the stock. This is rule in Georgia,24 Iowa,25 Kansas,26 Nebraska 27 and West Virginia.28 Of course, decisions based on positive and intentional misrepresentation of material facts have nothing to do with the question under consideration.29 § 2565. Purchase from co-director. In any event the rule forbidding a purchase without a full disclosure does not apply where a director purchases from a co-director who has general charge of the business,30 although if one officer acts as special agent of another the rule is otherwise.31 § 2566. - Where officer makes himself agent of seller. Sometimes the invalidity of the purchase of stock is made to depend upon the fact that the director or other officer, in the particular transaction, made himself the agent of the seller, or professed to be aiding the stockholder in selling his stock and really acted as his agent in making the sale.32 Even if, under some circumstances, directors may deal at arm's length with individual stockholders, yet if the directors hold themselves out to individual stockholders as acting for them in purchasing their stock, to effect a consolidation, on the same footing as they were acting for the company itself, i. e., as agents, a fiduciary relation exists.33 A fortiori, if a committee is appointed. 25 Dawson v. National Life Ins. Co. of America, 176 Iowa 362, L. R. A. 1916 E 878, 157 N. W. 929, wherein Justice Ladd, at great length, reviews the decisions in an able and valuable opinion. 26 Stewart v. Harris, 69 Kan. 498, 66 L. R. A. 261, 105 Am. St. Rep. 178, 2 Ann. Cas. 873, 77 Pac. 277. 27 Jacquith v. Mason, 99 Neb. 509, 156 N. W. 1041. 28 In West Virginia, the rule is laid down that a director or other corporate officer, in purchasing stock from a stockholder, "is bound at his peril to withhold no fact known to 29 False representations as tort, see §§ 2544-2554, supra. 30 Perry v. Pearson, 135 Ill. 218, 25 N. E. 636. To same effect, Steinfeld v. Nielsen, 12 Ariz. 381, 100 Pac. 1094. 31 Mulvane v. O'Brien, 58 Kan. 463, 49 Pac. 607. 32 Mulvane v. O'Brien, 58 Kan. 463, 49 Pac. 607; Fisher v. Budlong, 10 R. I. 525, where sale was secretly made to third person but for president; Allen v. Hyatt, 17 Dom. L. R. (Can.) 7. 33 Allen v. Hyatt, 17 Dom. L. R. (Can.) 7. |