for all the debts of the corporation, but only for its debts "to the extent of its capital stock," the liability "being, to this limited extent, for all the debts and contracts of the company, is not to be enforced for the benefit of the creditor who may first seek to ava!. himself thereof, which might result in excluding other creditors by exhausting the fund, but must be made available for the benefit of all the creditors [citing cases]. For the reasons stated in those opinions, it is only in equity that the rights of all parties can be protected, and an adequate remedy given." 77

Justice Mitchell, in a leading case in Minnesota, clearly states what is undoubtedly true, as follows: "The question as to the proper remedy to enforce the personal liability of stockholders or directors or officers for corporate debts depends so much upon the terms of particular statutes, or the remedial systems of different states, that not much aid can be obtained from the decisions of other courts. But we think it will be found generally true that, unless a particular remedy is prescribed by statute, the form of the remedy, whether by action at law by each creditor against one or more stockholders or officers, or by bill in equity in which all persons in interest or to be affected are made parties, is made to depend upon the character of the liability. If its object is to create a common fund, limited in amount, for the benefit of all creditors, or all of a particular class, so that if one were allowed to proceed alone he might exhaust the fund or get more than his share; or if the liability was only for the deficiency of corporate assets, or only for the excess of debts contracted over the amount permitted by the charter, so that an accounting is necessary; or if for any similar reason an action at law would be inadequate to furnish a complete remedy or protect the rights of all persons interested,— the courts have generally held, in the absence of any express statutory provision, that a suit in the nature of a bill in equity, bringing in all interested parties, must be resorted to. But

no such reason obtains here. The liability of each director is unlimited except by the amount of the corporate debts which fall within the terms of the statute. What one creditor may collect wi'l not reduce the amount which another may recover. No accounting

Tennessee. Tradesman Pub. Co. v. Knoxville Car Wheel Co., 95 Tenn. 634, 31 L. R. A. 593, 49 Am. St. Rep. 943, 32 S. W. 1097; Moulton v. Connell-Hall-MeLester Co., 93 Tenn. 377, 27 S. W. 672.

Vermont. Charles E. Brown & Co. v. Ware, 87 Vt. 121, 88 Atl. 507.

77 Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621.

is necessary in order to ascertain the amount of the deficiency of corporate assets, for the creditor is not bound to resort to them first; nor is his recovery limited to the extent of such deficiency. In fact, a direct action by any creditor against any director not only furnishes an adequate remedy, but it interferes with the rights of no one else.'' 78 The rule which should govern is also well stated by Justice Ingraham in a New York decision as follows: "Where the statute imposes upon a stockholder or director a liability for all the debts of the company, making the directors' liability as broad as the liability of the corporation, then each creditor has his remedy against the corporation and the director, and there is no more reason for allowing him to come into equity to enforce it against the director than for allowing him to enforce it in equity against the corporation. Both the director and the corporation are liable for all the debts, and that liability is a common-law liability to be enforced in an action at law. Where, however, the statute imposes upon directors and stockholders a liability which is not measured by the debts of the corporation, but is measured either by an arbitrary amount fixed by the statute, by an amount to be ascertained by the par value of the stockholders' stock, or by the amount of debts in excess of the capital of the corporation, or by any other method not fixed by the amount of indebtedness of the corporation, but limited to an amount less than such indebtedness, then the liability must be enforced in an action in equity, and enforced for the benefit of all the creditors." 79

Equity will not refuse jurisdiction of a suit by creditors or a receiver against directors for paying an illegal dividend, merely because the statute creating such liability imposes a penalty, since it is penalties created by contract between private persons that equity refuses to enforce, and not statutory penalties.8 80

Where liability is imposed by statute, in favor of the corporation, for all losses sustained from the loan of money by a national bank to one person in excess of one-tenth of the capital, the remedy is at law and not in equity, at least where the remedy at law is adequate.81

78 Patterson v. Stewart, 41 Minn. 84, 91, 4 L. R. A. 745, 16 Am. St. Rep. 671, 42 N. W. 926.

79 Bauer v. Parker, 82 N. Y. App. Div. 289, 81 N. Y. Supp. 995, 1002. See also Whitney v. Pugh, 58 N. Y.

App. Div. 316, 68 N. Y. Supp. 992. 80 Metzger v. Joseph, 111 Miss. 385, 71 So. 645.

81 Corsicana Nat. Bank v. Johnson, 218 Fed. 822.

§ 2673. To enforce common-law liability, if any, in favor of creditors. Creditors cannot themselves ordinarily maintain actions at law against the directors or other officers of a corporation to recover damages for conversion of its assets or loss by reason of misapplication thereof or of negligence, since the injury is to the corporation.82 Generally it is held that the proper mode of enforcing the liability, if the creditor has a right to sue, is by a suit in equity on behalf of all the creditors, and to which the corporation itself is a party.83

§ 2674. To enforce liability for tort in favor of third person. Of course, if no duty on the part of the officer to the corporation, and no fiduciary relation between the officer and the person suing, is relied upon, but one sues merely for a tort causing injury to himself, the action is cognizable at law rather than in equity.

§ 2675. Actions by particular persons-The corporation. The corporation itself, where a going concern, may always sue, in a proper case, for mismanagement of corporate officers resulting in a loss to it, where not precluded by laches or estoppel.84 Furthermore, the corporation sometimes may sue officers in a case where the stockholders, one or all, would have no ground for complaint. For instance, it has been held that a corporation may sue directors to compel them to reimburse the company for dividends improperly paid, where the corporation is a going concern, although the stockholders who received the dividend could not complain.85 Of course

82 Smith v. Poor, 40 Me. 415, 63 Am. Dec. 672; Fusz V. Spaunhorst, 67 Mo. 264; Branch v. Roberts, 50 Barb. (N. Y.) 435; Winter v. Baker, 50 Barb. (N. Y.) 432; Zinn v. Mendel, 9 W. Va. 580. See also Frost Mfg. Co. v. Foster, 76 Iowa 535, 41 N. W. 212; Myer v. Dupont, 79 Ky. 416.

83 Schley v. Dixon, 24 Ga. 273, 71 Am. Dec. 121; Landis v. Sea Isle City Hotel Co., 53 N. J. Eq. 654, 33 Atl. 964; Cunningham v. Pell, 5 Paige (N. Y.) 607.

84 A corporation may sue for damages caused by a fraudulent breach of trust on the part of its directors. Cream City Mirror Plate Co. v. Coggeshall, 142 Wis. 651, 135 Am. St. Rep. 1091, 126 N. W. 44.

May sue to cancel stock unlawfully issued by directors to themselves. Central Consumers' Wine & Liquor Co. v. Madden (N. J. Ch.), 68 Atl. 777.

If the managing agent of a company refuses to surrender possession of the corporate property after his term of office has expired, and he threatens to divert corporate assets, an injunction will be granted preventing him from interfering with the management of the property. Magpie Gold Min. Co. v. Sherman, 23 S. D. 232, 20 Ann. Cas. 595, 121 N. W. 770.

85 Flitcroft's Case, L. R. 21 Ch. Div. 519.

"The suit is by the corporation, which seeks, under a new manage

the mere fact of a partial change in the stockholders since the alleged wrongdoing is no defense; 86 but the rule has been held otherwise where all the stockholders were subsequent ones, and the recovery would be entirely for the benefit and advantage of those who were not stockholders at the time of the alleged misdoings.87

A corporation is not estopped to sue one of its officers for diversion of corporate assets or for secret profits because the board of directors voted it was not expedient to sue him, where there was no release executed, since the vote could be rescinded.88

A wilful publication of a libel by directors makes them personally liable therefor to the corporation as for a breach of their duty as quasi trustees, where a judgment has been recovered against the corporation therefor.89

§ 2676. Receiver, assignee or trustee in bankruptcy. The liability of directors or other officers of a corporation for mismanagement may be enforced at law or in equity, according to the cir cumstances, by a receiver of the corporation or official liquidator, or by an assignee for the benefit of creditors, or an assignee in bankruptcy or insolvency.90 However, there is conflict, due to some ex

'ment, to reinstate the capital, seriously impaired by the illegal acts of the defendants as directors, and then to continue the business. The corporation, therefore, represents the interests of the creditors as well as the present shareholders, and it may become necessary in the future, if not at the present, to use the capital for payment of debts. The well-recognized distinction between the shareholders and the corporation will permit a suit by the latter when the former would not be heard to complain. If this were an action by the holders of the stock they could not compel the former directors to replace the part of the capital they had already received by way of dividends. But the corporation is a going concern, and is not in liquidation, and hence its rights, as well as its duty, to compel the replacement of its capital. This is necessary for the protection of creditors in the future as well

as the present stockholders who may not be the persons to whom the dividends were paid five years ago." Loan Soc. of Philadelphia v. Eavenson, 248 Pa. 407, 94 Atl. 121.

86 Hooker, Corser & Mitchell Co. v. Hooker, 88 Vt. 335, 92 Atl. 443.

87 Home Fire Ins. Co. v. Barber, 67 Neb. 644, 60 L. R. A. 927, 108 Am. St. Rep. 716, 93 N. W. 1024.

88 Goodbody v. Delaney, 82 N. J. Eq. 140, 91 Atl. 724.

89 Hill v. Murphy, 212 Mass. 1, 40 L. R. A. (N. S.) 1102, Ann. Cas. 1913 C 374, 98 N. E. 781.

90 United States. Briggs v. Spaulding, 141 U. S. 132, 35 L. Ed. 662; Gibbons v. Anderson, 80 Fed. 345; Main v. Mills, 6 Biss. 98, Fed. Cas. No. 8,974; Gindrat v. Dane, 4 Cliff 260, Fed. Cas. No. 5.455.

Connecticut. New Haven Trust Co. v. Doherty, 74 Conn. 353, 50 Atl. 887. Illinois. Ellis v. Ward, 137 Ill. 509, 25 N. E. 530.

tent to the wording of statutes relating to receivers, as to whether a receiver represents merely the corporation or whether he represents both the corporation and the creditors.91 Under some statutory receiverships, the receiver represents the corporation only and cannot recover damages accruing merely to the corporate creditors and not to the corporation itself.92 Generally, however, a suit or action brought by a receiver is to be treated as the same as one brought by the corporation itself,93 although in most cases he is to be treated as representing both the corporation and stockholders and also the creditors of the corporation.94 A receiver represents "both the cor