in a prospectus that certain contracts are the only contracts to which the company is a party, where untrue; and it is no defense that a director thought a contract omitted was not material and was so advised.16

The liability is generally imposed, by the express terms of the statute, only when the statement is known to be false, so that no liability will attach to a director who signs a statement in good faith, and in the belief that it is true.17 Where the statute omits the words "knowing it to be false," it is held in New York that it is no defense to the statutory liability that defendant signed a report without any knowledge or information that it was in any respect untrue, although defendant exercised proper care before he signed the report to ascertain the facts set forth and to which it related; and that, regardless of knowledge of the falsity, the fact that the report in untrue in any material representation is sufficient to support the action.18 In Pennsylvania, where the statute says nothing about knowledge, the rule to be deduced is that a director is liable, although he may sign without actual knowledge that the statement. is false, if he signs recklessly and without any knowledge as to its truth or falsity, when he ought to know that it is false, and would have such knowledge if he performed his duty.19 An intention to defraud is not necessary.2

The statute generally requires, in terms, that the false representation be material; and even in the absence of an express provision. to this effect, it would undoubtedly be implied.21

In California, the statute reads as follows: "Any officer of a corporation who wilfully gives a certificate, or wilfully makes an official report, public notice, or entry in any of the records or books of the corporation, concerning the corporation or its business, which

16 Shepheard v. Broome, [1904] A. C. 342.

17 Felker v. Standard Yarn Co., 150 Mass. 264, 22 N. E. 896; Stebbins v. Edmands, 12 Gray (Mass.) 203; Bonnell v. Griswold, 89 N. Y. 122; Pier v. Hanmore, 86 N. Y. 95; Van Vleet v. Jones, 75 Hun (N. Y.) 340, 26 N. Y. Supp. 1082.

The words "knowing it to be false" were contained in the earlier New York statutes, while in later statutes such words are omitted. See Huntington v. Attrill, 118 N. Y. 365, 376,

23 N. E. 544, noting changes in New York statute.

18 Torbett v. Eaton, 49 Hun (N. Y.) 209, 1 N. Y. Supp. 614, aff'd without opinion in 113 N. Y. 623, 20 N. E. 876, which was followed in Huntington v. Attrill, 118 N. Y. 365, 376, 23 N. E. 544.

19 Githers v. Clarke, 158 Pa. St. 616, 28 Atl. 232.

20 Chittenden v. Thannhauser, 47 Fed. 410.

21 Butler v. Smalley, 101 N. Y. 71, 4 N. E. 104.

is false in any material representation, shall be liable for all the damages resulting therefrom to any person injured thereby." 22 In Iowa, the statute imposes, liability for "intentional fraud" in "deceiving the public or individuals in relation to their means or their liabilities."' 23 In New York, the statute is more explicit than in most of the other states having such a statute. It includes any certificate or report or public notice by officers of a corporation, where false “in any material representation"; it makes the officers personally liable, if they sign, to any person becoming a creditor or stockholder on the faith thereof, regardless of whether the contents of the signed paper is communicated to him "directly or indirectly"; and it authorizes a recovery "to the amount of the debt contracted upon the faith thereof if not paid when due, or the damage sustained by a purchaser or subscriber to its stock upon the faith thereof." 24

In Massachusetts, certain corporate officers are personally liable, by statute, where they sign "any certificate which is required by law knowing it to be false; but only the officer or officers who have knowledge thereof shall be liable." 25 Thus, in that state, corporations cannot commence business until all the capital stock is paid in and certain of the officers have filed a certificate showing how the stock has been paid, etc., and officers who knowingly sign a false certificate in regard thereto are liable for corporate debts; but it is held that an officer is not liable although his statement that the stock has been paid in cash is false, where he was so advised by attorney and it depended upon a construction of the statute as to

22 Cal. Civ. Code, § 316.

This statute is the same as the one in Idaho Rev. Codes, § 2739.

23 Iowa Code 1897, § 1620, which makes no express reference to false reports, certificates or the like.

24 Stock Corporation Law (N. Y.), $35.

Statute is not penal in international sense, so as to preclude suing on it in another state. Huntington v. Attrill, 146 U. S. 657, 36 L. Ed. 1123, rev'g 70 Md. 191, 2 L. R. A. 779, 14 Am. St. Rep. 344, 16 Atl. 651, and see § 2718, infra.

25 Mass. Rev. Laws, c. 110, § 58, subd. 5.

This statute applies to a certificate of amount of capital stock and assets and liabilities of foreign corporations required in Rev. Laws, c. 126, §§ 13, 14. Heard V. Pictorial Press, 182 Mass. 530, 65 N. E. 901.

Ignorance is a defense to an action under this statute, based on an alleged false certificate, although it was such as to amount to recklessness in

making the oath. Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 146, 78 N. E. 886, following Nash v. Minnesota Title Insurance & Trust Co., 163 Mass. 574, 28 L. R. A. 753, 47 Am. St. Rep. 489, 40 N. E. 1039.

what constitutes a payment in cash.26 However, it is no defense that the certificate was not made intentionally with a purpose to deceive or that the creditor who sues was not deceived thereby because he had never seen the certificate.27

It is to be noted that most of the statutes imposing liability for false certificates, reports, etc., impose liability merely to the extent of the actual damages sustained from relying on the false statements, instead of making the officers liable for all the debts of the corporation in such a case; 28 and it is held, because thereof, that the statute is not a penal statute.29

The liability of directors and other officers for deceit, in the absence of a statute, to persons who act to their injury upon a false report, is considered in another subdivision.30

Liability for false annual reports, as imposed by statute, is further considered in a subsequent chapter.31

The liability of officers of a national bank for making a false report, in violation of the statute, depends upon the particular wording of that statute.32

§ 2644. Liability of directors as trustees after dissolution of corporation. Under a statute which provides that, upon the dissolution of a corporation, the directors shall be liable to the creditors "to the extent of its property and effects that shall come into their hands,"

26 International Paper Co. v. Gazette Co., 182 Mass. 578, 66 N. E. 636.

In Massachusetts, under the statute imposing liability on officers for signing a false certificate that the capital stock was paid in in cash, it has been held that a mere transfer and retransfer of checks was not a payment in cash; that the giving of a note was not a payment in cash; that "there is no more a payment in cash where the corporation receives cash one day and lends the cash received to the stockholder the next day than where it receives a note originally in payment of a stock subscription"; but that where the directors acted under the advice of counsel in swearing to the certificate-his theory being that the payment was in cash-they were not liable, and that if one of the directors did not know of the evasion of

the law by the other directors, he is not liable on theory that he acted recklessly in making the oath. Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886. where statute provided that note should not be considered as payment.

27 Heard V. Pictorial Press, 182 Mass. 530, 65 N. E. 901, followed in Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886.

28 Bagley & Sewall Co. v. Lenning, 61 N. Y. App. Div. 26, 70 N. Y. Supp.

and where another statute provides that the corporation may be sued to enforce existing debts notwithstanding its dissolution, an action for a tort committed during the life of the corporation, commenced after its dissolution, should be brought against the corporation rather than its former directors.33 On insolvency of the corporation, statutes in some jurisdictions make the directors personally liable for wages of servants for one year back.34 These questions as to liability after dissolution are more properly a part of the chapter on Dissolution of Corporations, and hence further consideration of these matters will be reserved for such chapter.

§ 2645. Statutes relating to banks and bank officers-In general. In some states, there are statutes creating liability of officers which are applicable only to officers of banks.

§ 2646. Liability for receiving deposits or creating debts when corporation is insolvent. Statutes in some states Laake officers of banks personally liable for deposits received or debts created when they knew that the bank was insolvent.35 However, such a statute is not applicable to national banks.36

§ 2647. Statutory liability of officers of national banks, The federal statutes provide that "if the directors of any national banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this title," then "every director who participated in or assented to the same" shall be held personally liable for all damages sustained by the bank, its shareholders, or "any other person." 37 This statutory liability of directors of national banks is the

33 Cunningham v. Glauber, 133 N. Y. App. Div. 10, 117 N. Y. Supp. 866. 34 Reuckwald v. Murphy, 28 Dom. L. R. (Can.) 474.

35 Mallon v. Hyde, 76 Fed. 388, construing Washington Constitution; Forbes v. Mohr, 69 Kan. 342, 76 Pac. 827; Baxter v. Coughlin, 70 Minn. 1, 72 N. W. 797; Utley v. Hill, 155 Mo. 232, 49 L. R. A. 323, 78 Am. St. Rep. 569, 55 S. W. 1091.

36 Stout v. Lusk, 9 Kan. App. 694, 59 Pac. 603.

37 U. S. Rev. St. § 5239, 5 Fed. St. Ann. p. 180.

exclusive rule by which to measure the right to recover damages from directors based upon a loss alleged to have resulted solely from violation by such directors of a duty expressly imposed by a provision of the National Banking Act.38 Under this statute the test of liability is whether the directors "knowingly" violate, or "knowingly" permit the violation of, the statute.39 This phase of the question was carefully considered by the Supreme Court of the United States in a comparatively recent case.40 In that case the Supreme Court of Nebraska had held the directors of a national bank liable for making false statements to the Comptroller of the Currency. It was held in the state court that the means of information were accessible to them, and whether the attesting directors possessed knowledge of the falsity of the report was wholly immaterial. The judgment of the state court was reversed solely on the ground that it did not appear that the violation in question was intentional. This statute covers excessive loans by the bank.41 Where the offense claimed is the loaning to an officer of more than one-tenth the capital stock of the bank-which is forbidden by statute-it is no defense that the by-law forbidding overdrafts was copied from the by-laws of other banks and that notwithstanding such by-laws other banks also often allow overdrafts.42

C. Debts or Obligations for Which Officers Are Liable

§ 2648. In general. The statutes imposing upon directors and other officers personal liability for corporate debts vary in the different states, and, in determining to what debts or obligations the liability extends, regard must be had, of course, to the terms of the particular statute. They may be made liable for all debts of the

are personal one may sue in his own right instead of for the bank; no direct issue of negligence is involved; the liability of the directors is several; the measure of damages is limited to losses from the false element in a report and does not include losses from causes not included within the element so falsified; and that damages must be such as defendant officers should naturally have anticipated would follow from the representation. Chesbrough v. Woodworth, 195 Fed. 875, aff'd 244 U. S. 72, 61 L. Ed. 1000.

38 Yates v. Jones Nat. Bank, 206 U. S. 158, 51 L. Ed. 1002; McCormick v. King, 241 Fed. 737, 743. See also Jones Nat. Bank v. Yates, 93 Neb. 121, 139 N. W. 844, 1135.

30 Bailey v. Babcock, 241 Fed. 501. 40 Yates v. Jones Nat. Bank, 206 U. S. 158, 179, 51 L. Ed. 1002.

41 City Nat. Bank of Mangrum v. Crow, 27 Okla. 107, Ann. Cas. 1912 B 647, 111 Pac. 210.

42 McCormick v. King, 241 Fed. 737, 743.