holder cannot sue where the acts complained of had been consented to by the transferror of the stock owned by plaintiff 50 or have long been acquiesced in by the corporation.51 In other states, a stockholder may sue although he became a stockholder after the transaction of which he complains.52

Rule 27 of the Rules of Practice in equity for the federal courts, formerly rule 94, provides that a stockholders' bill "must contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law."

This question is considered more at length in a subsequent chapter in dealing with the effect of transfers of shares of stock.53

§ 2686. Effect of appointment of receiver as precluding suit by corporation, stockholders or creditors. Ordinarily, if the corporation has gone into the hands of a receiver, he is the proper party to bring suit against offending officers of the corporation; 54 and a stockholder cannot sue, after a receiver has been appointed for the corporation, except by leave of court.55 So, if the corporation is in the hands of a receiver, it is held in Idaho that a creditor, or depositor in a bank, cannot sue the officers for mismanagement,56 although it would seem that the appointment of a receiver does not preclude the right of a creditor to enforce a liability created by statute in his favor as an individual.57

In any event, where the receiver is himself charged with hav

A purchaser of stock cannot complain of illegal salaries paid before his purchase. Rankin v. Southwestern Brewery & Ice Co., 12 N. M. 54, 73 Pac. 614.

50 Ward v. Smith, 95 N. Y. App. Div. 432, 88 N. Y. Supp. 700.

51 Erny v. G. W. Schmidt Co., 197 Pa. 475, 47 Atl. 877.

52 Continental Securities Co. v. Belmont, 206 N. Y. 7, 51 L. R. A. (N. S.) 112, Ann. Cas. 1914 A 777, 99 N. E. 138, following Pollitz v. Gould, 202 N. Y. 11, 38 L. R. A. (N. S.) 988, Ann. Cas. 1912 D 1098, 94 N. E. 1088.

53 See, infra, chapter on Stockholders. For review of conflicting authorities, see Pollitz v. Gould, 202 N. Y. 11, 38 L. R. A. (N. S.) 988, Ann.

Cas. 1912 D 1098, 94 N. E. 1088.

54 Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426, and see § 2570, supra.

55 Kelly v. Dolan, 233 Fed. 635; Cunningham v. Wechselberg, 105 Wis. 359, 81 N. W. 414.

56If the receiver fails or refuses to do his duty in this regard, that matter ought to be called to the attention. of the court, and the court ought to compel him to do so or remove him." McTamany v. Day, 23 Idaho 95, 128 Pac. 563, where, however, it is recog nized that there are some decisions to the contrary.

57 Patterson v. Minnesota Mfg. Co., 41 Minn. 84, 4 L. R. A. 745, 16 Am. St. Rep. 671, 42 N. W. 926.

ing been one of the officials guilty of the wrongdoing, an equitable proceeding may be maintained by the stockholders,58 provided, it has been held, that the corporation and the receiver are both made defendants.59

If a receiver has been appointed, and the court has refused to permit him to sue officers for negligence because of the existence of a complete defense, a stockholder cannot sue in equity even though the court has given him permission to sue, where no order was made purporting to assign to the stockholder the claim vested in the receiver, nor to confer on him a right to enforce the legal right vested in the receiver.60

Where a corporation is in the hands of a receiver, and leave to sue the directors has been granted by the court to minority stockholders, there is no merit in the contention that the suit is premature because brought while the affairs of the company are still being liquidated, where the available assets will probably all go to the creditors.61

This subject is considered more in detail in a subsequent chapter relating to receivers.

§ 2687. Administrative suit as remedy. In some jurisdictions. the liability of corporate officers is ordinarily enforced by a general administrative suit brought by creditors solely to wind up the corporation and to enforce all liabilities of the stockholders and officers existing at the time in favor of creditors as a class. Thus, in Wisconsin the remedy; by statute, is in equity where it is sought to enforce a liability against stockholders and directors in which all the creditors of the corporation are interested,62 and where the primary pur

58 Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426; Brinckerhoff v. Bostwick, 88 N. Y. 52, 60, writ of error dismissed 106 U. S. 3, 27 L. Ed. 73.

Where the corporation is in the hands of a receiver, and he was one of the guilty officers sought to be held liable, it is unnecessary to allege any demand made upon the receiver to sue, since he could not be permitted to sue himself. Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426.

If a director is appointed receiver, and he is chargeable together with other directors, a stockholder may sue

without first requesting the receiver to sue. Flynn v. Third Nat. Bank, 122 Mich. 642, 81 N. W. 572.

59 Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426.

60 Kelly v. Dolan, 233 Fed. 635, 638. 61 Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426.

62 Harrigan v. Gilchrist, 121 Wis. 127, 99 N. W. 909; Williams v. Brewster, 117 Wis. 370, 93 N. W. 479.

In Wisconsin, all liabilities of of ficers, stockholders and directors of a corporation that can in any event be enforced for the benefit of creditors of a corporation generally or as a

64

pose of the suit is to enforce any one of the liabilities mentioned in the statute, the other liabilities that may exist, mentioned in the statute, are germane thereto, and must be joined therewith if enforced at all; 63 and this includes statutory liabilities of directors of a penal character, although it does not include a liability of a purely personal nature merely to the particular creditor imposed upon, such as liability for deceit.65 In Canada the liability of directors is generally enforced by a liquidator under what is called a "misfeasance summons."

§ 2688. Form of action at common law-In general. Where the statute does not provide the form of remedy, it has been held in New Hampshire that a creditor may employ any form of action adapted to enforce a statutory liability, and hence may recover in an action of debt; and the court said, in regard to the question of contribution: "If an officer would be entitled to contribution, were it enforced in equity, he is entitled to it, if the liability is enforced in an action at law; for it is the character of the liability-not the form of action by which it is enforced-which is determinative of his right to contribution."66 If the corporation has given a note, the holder of it should sue the officer on the debt rather than on the note.67

§ 2689. Action for money had and received. An action for money had and received lies against the president and general manager of a corporation, who, as such, received money to which plaintiff was entitled, where such officer knew of the plaintiff's right to the money,68

§ 2690. Remedy for injury from false representations. The remedy of shareholders against the general manager who has induced them to sell their stock to him, by false representations as to its value, is not confined to an action for rescission, but includes an action. against such officer, in which all the defrauded stockholders may

class, may be dealt with in a single suit and are so connected with each other as to constitute but a single cause of action. Hurlbut v. Marshall, 62 Wis. 590, 22 N. W. 852.

63 Gager v. Marsden, 101 Wis. 598, 77 N. W. 922.

64 Williams v. Brewster, 117 Wis. 370, 93 N. W. 479.

65 Killen v. Barnes, 106 Wis. 546,

82 N. W. 536, explained in Williams v. Brewster, 117 Wis. 370, 93 N. W.

479.

66 Coulombe v. Eastman, 75 N. H. 531, 77 Atl. 936.

67 First Nat. Bank of Missoula v. Cottonwood Land Co., 51 Mont. 544, 154 Pac. 582.

68 Alexander v. Coyne, 143 Ga. 696, 85 S. E. 831.

join, to require him to account for the profits obtained by him by a resale.69

§ 2691. Remedy in case of transaction voidable because officer adversely interested or where he has profited thereby. The corporation has several courses open to it, where it has contracted or dealt with one or more of its officers, and the contract is voidable. First, it may, if it deems it advisable, hold the officer on the contract according to its terms.70 Second, it may repudiate the contract and sue to set it aside, although if other officers represented the corporation in the deal it is generally necessary to show unfairness or bad faith.71 Third, the corporation may elect to affirm the contract and hold the officer for profits received.72 Thus, where directors or other officers, conspiring with other directors of the corporation, sell land to the corporation at a price largely in excess of its value, the corporation may either (1) sue the officers for their secret profits, without tendering a reconveyance of the lands or otherwise disaffirming the sale, or (2) may rescind the sale if the parties can be placed in statu quo and even in some instances, by leave of court, where the parties can only partially be put in statu quo.73 The law governing is clearly stated as follows: "As a general rule, a trustee or agent cannot purchase on his own account what he sells on account of another nor purchase on account of another what he sells on his own account. He cannot unite in himself the opposite characters of buyer and seller. And if he does do so, the cestui que trust or principal, unless upon the fullest knowledge of all the facts, he elects to confirm the act of the trustee or agent, may repudiate it, or he may charge the profits made by the trustee or agent with an implied trust for his benefit."'74 The remedy for secret profits is ordinarily an action for an accounting.75 If a director or other corporate officer derives a personal benefit, which is provided for in connection with a contract between the corporation and a third person,

69 Black v. Simpson, 94 S. C. 312, 46 L. R. A. (N. S.) 137, 77 S. E. 1023. See, however, dissenting opinion of Justice Fraser as to misjoinder of parties.

70 Rutland Elec. Light Co. v. Bates, 68 Vt. 579, 54 Am. St. Rep. 904, 35 Atl. 480.

71 See §§ 2345-2348, supra.

72 Rutland Elec. Light Co. v. Bates,

68 Vt. 579, 54 Am. St. Rep. 904, 35 Atl. 480.

73 United Zinc Companies v. Harwood, 216 Mass. 474, Ann. Cas. 1915 B 948, 103 N. E. 1037.

74 Parker v. Nickerson, 112 Mass. 195, 196.

75 Metcalf v. American School Furniture Co., 122 Fed. 115, 123.

the corporation has two remedies, if not more. It may sue to set aside the contract," 76 or it may hold the officer, as a trustee for its benefit, for the amounts or value of the benefits received by him.

In England, however, where a director who sold property to the corporation was under no duty to purchase it in the first place for the company, and was in no sense a trustee for the company as to the purchased property, and he resold it to the company without disclosing the price he paid for it, the corporation cannot affirm the sale and recover the profit realized on the resale, it is held, but must either rescind in toto or stand by the contract.77

§ 2692. Assignment of cause of action. If the cause of action. survives, it is assignable; otherwise, it is not assignable. Therefore, reference should be made to the section stating the law as to abatement and revival of these actions.78 The right of a corporation to sue officers for fraud in selling it land at an excessive price, or to rescind the sale because thereof, is not assignable at law or in equity.79

§ 2693. Venue of actions. Actions to hold corporate officers personally liable to a creditor or creditors, pursuant to the terms of a statute, for debts of the corporation, are generally considered within a statutory provision that an action for the recovery of a "penalty or forfeiture" imposed by statute shall be tried in the county where the cause of action arose.80 Generally, the question of venue under such a statute narrows itself down to whether the liability imposed by the corporation statute is penal-a question already discussed at length.81 If the corporation statute is penal, then the penal statute applies. If it is not penal, then the penal statute does not apply.82 Where a statute merely makes corporate officers liable for fraud, unfaithfulness or dishonesty to the extent creditors are specially injured by such acts, it is held in Minnesota that the statute imposes no penalty within such a statute relating to venue,83 and it would.

76 Guild v. Parker, 43 N. J. L. 430. 77 Burland v. Earle, [1902] A. C. 83, 98, 99.

78 See §§ 2705, 2706, infra. Assignment under Michigan statute, see Hicks v. Steel, 142 Mich. 292, 4 L. R. A. (N. S.) 279, 105 N. W. 767. 79 United Zinc Companies v. Harwood, 216 Mass. 474, Ann. Cas. 1915 B 948, 103 N. E. 1037.

80 Woodworth v. Henderson, 28 Colo.

381, 65 Pac. 25, where question as to whether statute was penal was not discussed; Veeder v. Baker, 83 N. Y. 163.

81 See § 2597 et seq., supra.

82 See Hutchinson v. Young, 80 N. Y. App. Div. 246, 80 N. Y. Supp. 259, false reports.

83 Flowers v. Bartlett, 66 Minn. 213, 68 N. W. 976, overruling Merchants' Nat. Bank of Chicago v. Northwestern