the filing of a certificate with the county recorder is no defense where the statute also requires that it be filed with the secretary of state. Where a corporation is required to file a paper in the county where the principal business office of the corporation is located, the validity of the act of the corporation in changing the office cannot be inquired into. Other facts held to constitute no defense, in a few particular actions, are set forth in the note below.3 Want of assent of a director to acts of his co-directors is sometimes a defense, so far as the director is concerned, and the statutes sometimes expressly provide for the exoneration of directors who protest in a certain way against particular acts of the board.5 The necessity for judgment against the corporation before suing officers is treated of under "Conditions Precedent."6 Ordinarily ignorance as to the corporate business is no defense.7 The statute imposing liability ordinarily is construed as making officers liable for the doing of acts, or the omission to act, regardless of knowledge, except that it is sometimes provided that the directors who are absent from a directors' meeting may protect themselves against liability by thereafter filing a dissent.8 § 2662. Non-existence of corporation or of de jure corporation, and insolvency or dissolution of corporation. Ordinarily, a corporate officer, when sued for mismanagement, is estopped to attack the 1 Thatcher v. Salomon, 16 Colo. App. 150. 64 Pac. 368. 2 Uptegrove v. Schwarzwaelder, 46 N. Y. App. Div. 20, 61 N. Y. Supp. 623, aff'd without opinion 167 N. Y. 587, 60 N. E. 1121. 3 It is no defense that the corporation had no debts prior to the time when the annual report was due, where the report was also required to state the amount of the capital of the corporation and the proportion actually paid in, for the information of those who might afterwards become creditors. Thatcher v. Salomon, 16 Colo. App. 150, 64 Pac. 368. The fact that the seller of bonds was a director and was in default in filing the annual report at the time of his sale of the bonds to the plaintiff, so that he could not enforce the penal- 4 See § 2493 et seq., supra. 6 See § 2668, infra. 7 Gaffney v. Colvill, 6 Hill (N. Y.) 567. 8 See § 2619, supra. regularity of the creation or organization of the corporation as a defense. In other words, it is no defense that the corporation is merely a de facto one.10 So, as a general rule, it is no defense that the corporation has become insolvent and gone out of business or has been placed in the hands of a receiver or assignee; 11 and the expiration of the charter of the corporation is no defense, at least in some states.12 But it seems to have been held that it is a defense, so far as statutory liability is concerned, that there never was any existing corporation either de jure or de facto.13 However, the obligation of corporate officers to make and file certificates and reports as to its capital stock, condition or the like, ceases upon dissolution, since thereafter the corporation is carrying on no business and is deprived of the means of carrying it on.14 Thus, where the entire property of the corporation passes to a receiver or assignee or bankruptcy or the like before the expiration of the time for filing an annual report, the officers cannot be held liable for failure to file such a report.15 So it is a defense to an action against the president of a corporation to recover from him personally a corporate debt, under a statute making certain officers liable where they refuse to make a certificate stating the amount of capital stock paid in, or where the certificate is false, that the corporation was insolvent before the cause of action arose and had been adjudged a bankrupt under the federal 9 Merchants' & Planters' Line v. Waganer, 71 Ala. 581; Newcomb v. Reed, 12 Allen (Mass.) 362. 10 Seymour v. Richardson Fueling Co., 103 Ill. App. 625, rev'd on other grounds 205 Ill. 77, 68 N. E. 716. 11 The fact that the affairs of the corporation have been placed in the hands of a receiver neither takes away nor suspends the right of a creditor to sue, at least where he may sue alone in an action at law. Bailey v. O'Neal, 92 Ark. 327, 135 Am. St. Rep. 185, 122 S. W. 503; Patterson v. Stewart, 41 Minn. 84, 4 L. R. A. 745, 16 Am. St. Rep. 671, 42 N. W. 926. It is no defense to liability for failure to file the annual report that the corporation has made an assignment for the benefit of creditors and has gone out of business. Horrocks Desk Co. v. Fangel, 71 N. Y. App. Div. 313, 75 N. Y. Supp. 967. So a corporation does not finally abandon its business so as to excuse the failure to file an annual report merely because it discontinues business as unprofitable where it sues the municipality to establish its claimed exclusive right, where the municipality put in a rival plant. Stevenson v. Cowan, 84 N. Y. App. Div. 135, 82 N. Y. Supp. 78. 12 Hargroves v. Chambers, 30 Ga. 580, 604. Contra, Moultrie v. Hoge, 21 Ga. 513. 13 Corey v. Morrill, 61 Vt. 598, 17 Atl. 840. 14 Benjamin v. Laffray, 79 N. J. L. 310, 75 Atl. 775. 15 Bonnell v. Griswold, 80 N. Y. 128; Huguenot Nat. Bank v. Studwell, 74 N. Y. 621. laws and restrained from doing business, or that a state court had appointed a receiver and restrained the corporation from doing business. 16 On the other hand, the insolvency of a corporation, and the transfer of its assets to a receiver or the like, "after" the duty to make a certificate or report has become absolute, is no defense.17 Liability for failure to file an annual report is not excused because the corporation is out of existence before the note held by a creditor becomes due, where it was in existence at the date the statute required the statement to be filed.18 It is no defense to an action for failure to file an annual report, that after the certificate of incorporation had been issued by the secretary of state no steps were taken to organize the corporation by the adoption of by-laws, the election of officers, etc., although the statute provides that on omission of such steps "its corporate powers cease," since it is held that such omission does not ipso facto work a dissolution nor permit the question of want of organization to be urged collaterally.19 § 2663. Advice of counsel. Advice of counsel may be a defense, under some circumstances, especially where the default is an alleged false certificate and the alleged falsity related to a matter involving a question of law as to which the officer sought to be held liable followed the advice of reputable counsel.20 § 2664. Waiver, release or discharge. A creditor of a corporation, having a right to enforce his debt against a director or other offi cer under a statute, may waive his right or release the officers.21 16 Benjamin v. Laffray, 79 N. J. L. 310, 75 Atl. 775. 17 Benjamin v. Laffray, 79 N. J. L. 310, 75 Atl. 775. 18 Ginsburg v. Von Seggern, 59 N. Y. App. Div. 595, 69 N. Y. Supp. 758, aff'd without opinion 172 N. Y. 662, 65 N. E. 1116. 19 Daily v. Marshall, 47 Mont. 377, 133 Pac. 681. 20 Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886. See also § 2643, supra. 21 A creditor who, at the time his debt is contracted, agrees with the directors that it shall not be necessary for them to file their report, cannot afterwards hold them liable for fail ure to file the same. Caraher v. Mulligan, 54 Hun (N. Y.) 638, 8 N. Y. Supp. 42. But directors of a corporation are not exempt from liability for failure to file an annual report because a bond of the corporation, which constituted one of its debts at the time of such failure, contained a provision that no stockholder should be individually liable upon or in respect to it. Swancoat v. Remsen, 78 Fed. 592. And it has been held that the directors of an insurance company cannot exempt themselves from a personal liability imposed upon them by statute by inserting a provision in policies that they shall not be liable. Greene And he may do so by releasing the corporation.22 So a waiver of a tort, as against the corporation, is also a waiver as to its officers.23 However, it seems to have been held in one case that a part of the directors liable, less than all, cannot be released from liability: 24 But a creditor who files his claim with an assignee of the corporation for the benefit of creditors does not thereby waive his right to enforce the personal liability of the directors.2 25 Nor does a creditor waive his right to enforce the personal liability of directors by proceeding against stockholders to enforce their personal liability, and recovering judgment against them; 26 or by recovering a judgment against the corporation,27 unless the liability is on the original debt only, and not secondary, and the original debt is thereby extinguished. So obtaining a mechanic's lien on the property, where nothing is realized therefrom, does not waive the right to sue.28 After the assignment of a judgment against a corporation for which the directors are personally liable, the assignor cannot release the directors so as to affect the rights of the assignee, at least, if the directors have notice of the assignment.29 2665. Discharge of officer in bankruptcy. Claims against corporate officers, as based on statutes, are not provable in bankruptcy against the estate of the officer, and hence a discharge in bankruptcy does not bar an action to enforce the statutory liability of the bankrupt officer. 30 v. Walton, 59 Hun (N. Y.) 102, 13 N. Y. Supp. 147, 59 Hun (N. Y.) 618, 14 N. Y. Supp. 943. Evidence not sufficient to show release, see Slater v. Taylor, 146 Ill. App. 97, aff'd 241 Ill. 102, 89 N. E. 271. 22 Raber v. Jones, 40 Ind. 436. See also Jones v. Barlow, 62 N. Y. 202. 23 Birdsell Mfg. Co. v. Oglevee, 187 Ill. 149, 58 N. E. 231, aff 'g 87 Ill. App. 351, where goods were converted. 24 Murphy v. Penniman, 105 Md. 452, 121 Am. St. Rep. 583, 66 Atl. 282. 25 Loverin v. McLaughlin, 161 Ill. 417, 44 N. E. 99. So the proving of their demands in bankruptcy against the corporation, 27 Byers v. Franklin Coal Co., 106 Mass. 131; McHarg v. Eastman, 35 How. Pr. (N. Y.) 205. 28 Kruse v. Humpert, 21 Ky. L. Rep. 985, 53 S. W. 657. 29 Bolen v. Crosby, 49 N. Y. 183. 30 Old Colony Boot & Shoe Co. v. . Parker-Sampson-Adams Co.. 183 Mass. 557, 67 N. E. 870; First Nat. Bank v. Hingham Mfg. Co., 127 Mass. 563. [§ 2667 § 2666. Discharge of corporation in bankruptcy. The discharge of a corporation in bankruptcy under the federal Bankruptcy Law of 1898 does not discharge directors from a statutory liability for its debts, since the act expressly provides that the discharge of a bankrupt shall not affect the liability of any person who is a codebtor with him, or who is a guarantor or in any manner a surety for him.31 So, by the amendatory act of February 5, 1903, it is provided that the bankruptcy of a corporation does not release its officers, directors or stockholders, as such, from any liability under the laws of a state or territory of the United States.32 E. Conditions Precedent § 2667. In general. Conditions precedent must all be complied with 33 Under an Oklahoma statute providing for individual liability of directors in case of incurring debts beyond the debt limit or diversion of assets, the words "in the event of its dissolution" limit the right of creditors to sue to cases where the corporation has been dissolved, and it is held that the mere fact of the corporation having been declared a bankrupt does not work a dissolution.34 A statute requiring service of a written notice of intent to hold a director personally liable has been held not applicable to an action commenced after the enactment of the statute but for a default occurring prior to its enactment.35 In New York the liability of directors for corporate debts for failure to file an annual report was repealed in 1901, saving the rights of any creditor "providing action thereon be commenced. within six months after this takes effect." It was held thereunder that a condition precedent-and not a statute of limitations—was 31 In re Marshall Paper Co., 95 Fed. 419; Wood & Selick v. Vanderveer, 55 N. Y. App. Div. 549, 67 N. Y. Supp. 371. See also Chickasaw Hotel Co. v. C. B. Barker Const. Co., 135 Tenn. 305, L. R. A. 1916 F 106, 186 S. W. 115. 32 Brandenburg, Bankruptey (4th Ed.), § 1353. 33 See State Bank of Rock Island v. Pope, 179 Ill. App. 282. 34 Swofford Bros. Dry Goods Co. v. Owen, 37 Okla. 616, L. R. A. 1916 C 189, 133 Pac. 193. There is no "dissolution," the statute expressly provides, until the expiration of the time fixed in the charter or until the corporation is dissolved by the judgment of a competent court. Topeka Paper Co. v. Oklahoma Pub. Co., 7 Okla. 220, 54 Pac. 455. 35 Shepard v. Fulton, 171 N. Y. 184, 63 N. E. 966, aff 'g 55 N. Y. App. Div. 329, 66 N. Y. Supp. 861, failure to file annual report. See also Staten Island Midland R. Co. v. Hinchliffe, 170 N. Y. 473, 63 N. E. 545. |