statute.6 64 Under a New York statute authorizing a director to sue co-directors for misconduct, it has been held that the action abates if the director ceases to be an officer pending the suit,6 fails to be re-elected.66 65 as where he § 2707. Parties-In general. The general rules governing parties in civil actions are applicable.67 Who are necessary parties depends, of course, to some extent, on the particular form and nature of the action,68 § 2708. Who must or may be joined as plaintiffs. If the action is brought by the corporation, stockholders are not necessary plaintiffs.69 Creditors may join as plaintiffs to recover from corporate officers individually a judgment requiring them to make good the minimum capital stock to the extent of all the corporate indebtedness, as provided for by statute making officers individually liable where they transact business before the minimum capital stock has been subscribed for.70 If the action is for fraudulent representations in inducing deposits in a bank, it has been held that separate depositors cannot join as plaintiffs.71 In some cases it is held that stockholders who have been induced to buy or sell stock by fraud may join in suing the officer or officers,72 and this applies to an action to compel the officer to account for the profit made by him.73 Whether an individual creditor who has sustained injury from the wrongful act of corporate officers may sue alone, under a statute creating liability in favor of creditors, has been noticed in connection with the law as to whether the remedy is in equity or law.74 64 Stephens v. Overstolz, 43 Fed. 465. 65 Hamilton v. Gibson, 145 N. Y. App. Div. 825, 130 N. Y. Supp. 684. 66 Hamilton v. Gibson, 145 N. Y. App. Div. 825, 130 N. Y. Supp. 684. 67 Geoghegan v. Luchow, 75 N. Y. App. Div. 581, 78 N. Y. Supp. 278. 68 See American Spirits Mfg. Co. v. Easton, 120 Fed. 440, rev'd without opinion 129 Fed. 1004 (mem. dec.); Fricker v. Americus Manufacturing & Improvement Co., 124 Ga. 165, 52 S. E. 65. 69 Fricker v. Americus Manufacturing & Improvement Co., 124 Ga. 165, 52 S. E. 65. 70 John V. Farwell Co. v. Jackson Stores, 137 Ga. 174, 73 S. E. 13. 71 Chester v. Halliard, 36 N. J. Eq. 313. 72 See Bradley v. Bradley, 165 N. Y. 183, 58 N. E. 887; Wells v. Jewett, 11 How. Pr. (N. Y.) 242; Austin v. Murdock, 127 N. C. 454, 37 S. E. 478. But see Loewenstein V. Diamond Soda Water Mfg. Co., 94 N. Y. App. Div. 383, 88 N. Y. Supp. 313; Cazeaux v. Mali, 25 Barb. (N. Y.) 578; Deaderick v. Wilson, 8 Baxt. (Tenn.) 108. 73 Black v. Simpson, 94 S. C. 312, 46 L. R. A. (N. S.) 137, 77 S. E. 1023. 74 See §§ 2671, 2672, supra. § 2709. Corporation as proper or necessary defendant. The corporation is generally a proper party defendant; 75 and where the action is based on a note plaintiff may join the corporation maker and its officers and the corporation indorser and its officers, as defendants, where a statute permits suit against one or all where persons are bound by contract or statute jointly, jointly and severally, or severally.76 The corporation has been held a proper party notwithstanding it had made an assignment and all its assets had been distributed.77 The corporation is not a necessary party defendant, it seems, where the right to proceed against the officers never belonged to the corporation and was no part of its assets.78 Where suit is brought in a federal court, to enforce a state statute making officers liable for debts in excess of the capital stock, it is held that neither the corporation nor its assignee in insolvency is an indispensable party, and their joinder will not be ordered where it would defeat the jurisdiction of the court.79 If the action is brought by stockholders, as representing the corporation, it is a necessary party defendant,80 for the reason that any 75 Swartley v. Oak Leaf Creamery Co., 135 Iowa 573, 113 N. W. 496, statutory liability for illegal payment of dividends. 76 Swartley v. Oak Leaf Creamery Co., 135 Iowa 573, 113 N. W. 496, where liability based on unlawful dividends. 77 Webster v. Whitworth (Tenn. Ch. App.), 63 S. W. 290. 78 Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621. 79 James H. Rice Co. v. Libbey, 105 Fed. 825, Illinois statute. 80 Colorado. Byers v. Rollins, 13 Georgia. Bethune v. Wells, 94 Ga. 486, 21 S. E. 230; Young v. Moses, 53 Ga. 628; Colquitt v. Howard, 11 Ga. 556. Kansas. Deming v. Beatty Oil Co., 72 Kan. 614, 84 Pac. 385. Massachusetts. Converse v. United Shoe Machinery Co., 209 Mass. 539, 95 N. E. 929; Tibballs v. Bidwell, 1 Gray 399. Montana. McConnell v. Combination Mining & Milling Co., 31 Mont. 563, 79 Pac. 248. New Jersey. Barry v. Moeller, 68 N. J. Eq. 483, 59 Atl. 97; Camp v. Taylor (N. J. Ch.), 19 Atl. 968. New York. Greaves v. Gouge, 69 N. Y. 154; Cunningham v. Pell, 5 Paige 607. Pennsylvania. Kelly v. Thomas, 234 Pa. 419, 51 L. R. A. (N. S.) 122, 83 Atl. 307. South Carolina. Charleston Insurance & Trust Co. v. Sebring, 5 Rich. Eq. 342. Tennessee. Deaderick v. Wilson, 67 Tenn. 108; Black v. Huggins, 2 Tenn. Ch. 780. Wisconsin. Elmergreen v. Weimer, 138 Wis. 112, 119 N. W. 836. It is immaterial that the corporation is a foreign corporation. Deming v. Beatty Oil Co., 72 Kan. 614, 84 Pac. 385. judgment against defendant must be in favor of the corporation, and a judgment cannot be rendered in favor of one not a party to the action.81 However, the corporation need not be made a party where it is insolvent and its receiver is made a party,82 nor where a suit for an accounting is by the equitable owners of all the stock.83 If depositors in a bank sue to enforce rights of the bank against its officers, where the proper officers of the corporation either actually or virtually refuse to bring suit, the corporation, if a going concern, is a necessary defendant, but it is otherwise if the corporation, for all practical purposes, is defunct, in which case the assignee must be made a party.84 So the corporation is often a necessary defendant where a creditor sues.85 Sometimes the joinder of the corporation is unnecessary and improper, especially in actions by creditors where the liability is created by statute.8 86 § 2710. Joinder of all of directors or guilty parties as defendants. Ordinarily, regardless of who brings the action, one or more of the directors or other officers may be sued, and it is not necessary to join co-directors or other officers although they are equally guilty,87 81 Peck v. Peck, 33 Colo. 421, 80 Pac. 1063. The reason why the corporation is a necessary defendant is that the result of the action may bind it and bar any future action which it might bring for the same cause. Weslosky v. Quarterman, 123 Ga. 312, 51 S. E. 426. 82 The Telegraph v. Lee, 125 Iowa 17, 98 N. W. 364; McConnell v. Combination Mining & Milling Co., 30 Mont. 239, 104 Am. St. Rep. 703, 76 Pac. 194, aff'd 31 Mont. 563, 79 Pac. 248; Barry v. Moeller, 68 N. J. Eq. 483, 59 Atl. 97; Niles v. New York Cent. & H. River R. Co., 176 N. Y. 119, 68 N. E. 142; Craig v. James, 71 N. Y. App. Div. 238, 75 N. Y. Supp. 813; Polhemus v. Polhemus, 43 N. Y. Misc. 141, 88 N. Y. Supp. 273. 83 Conery v. Sweeney, 81 Fed. 14. 84 Gores v. Field, 109 Wis. 408, 85 N. W. 411, 84 N. W. 867. 85 Lyman v. Bonney, 101 Mass. 562; Cunningham v. Pell, 5 Paige (N. Y.) 607; Brown v. Orr, 112 Pa. St. 233, 3 Atl. 817. 86 Smith v. Colorado Fire Ins. Co., 14 Fed. 399; Hill v. Frazier, 22 Pa. St. 320; Archer v. Rose, 3 Brewst. (Pa.) 264. 87 United States. Chesbrough v. Woodworth, 195 Fed. 875, 880. Indiana. Coddington v. Canaday, 157 Ind. 243, 61 N. E. 567. Kentucky. Western Bank of Louisville, Kentucky v. Coldewey's Ex'x, 120 Ky. 776, 83 S. W. 629. New Jersey. Barry v. Moeller, 68 N. J. Eq. 483, 59 Atl. 97. New York. Gaffney v. Colvill, 6 Hill (N. Y.) 567; Cunningham v. Pell, 5 Paige 607. But see Bauer v. Parker, 82 App. Div. 289, 81 N. Y. Supp. 995; Whitney v. Pugh, 58 App. Div. 316, 68 N. Y. Supp. 992. South Carolina. Sigwald v. City Bank, 82 S. C. 382, 64 S. E. 398. Tennessee. Shea v. Knoxville & K. R. Co., 65 Tenn. 277. Directors of national banks may be since the liability is joint and several.88 This rule applies equally well where the action is based on a statute creating the liability.89 If the statute makes certain officers "jointly and severally" liable, then, of course, part of the officers may be sued without joining the others who would be liable. Under a statute expressly authorizing suit against one or more of the directors, an action based on the wrongful act of directors in transferring the corporate property may be brought against one director.91 Even if the directors are jointly liable by statute, a nonresident director need not be joined.92 Of course if the liability is deemed joint rather than several, or joint and several, then all the directors must be sued.93 Officers who jointly misappropriate money belonging to plaintiff may be joined as defendants.94 The mere fact that one is a director does not make him a necessary party to a stockholder's suit to recover money converted by former directors.95 In any event, it is not necessary to join nonresident directors where the court could not obtain jurisdiction over them under the statutes, by service in another state or otherwise 96 Sometimes directors who had ceased to be such before the action was brought may be joined as defendants, as in case where the action is for an accounting.97 § 2711. Joinder of personal representatives of co-director. If the directors convert the corporate property, the administratrix of sued for mismanagement either jointly or severally or a part but not all. Williams v. Brady, 232 Fed. 740. Thus the president of a corporation may be sued alone for negligence although the cashier and some of the directors were also negligent. Western Bank of Louisville, Kentucky v. Coldewey's Ex'x, 120 Ky. 776, 790, 83 S. W. 629. 88 See § 2609, supra. 89 German American Coffee Co. v. Diehl, 86 N. Y. Misc. 547, 149 N. Y. Supp. 413. 90 O'Neil v. Eagle Generator Co., 92 Ark. 416, 123 S. W. 373. 91If any equities between the directors can be enforced as against each other, we do not think plaintiff is required to take part in that litigation, or proceed against all the directors in order to adjust such equities in this action."" Buckley v. Stansfield, 155 N. Y. App. Div. 735, 140 N. Y. Supp. 953, following Bartlett v. Drew, 57 N. Y. 587. 92 White v. How, Fed. Cas. No. 17,548. 93 Banks v. Darden, 18 Ga. 318. 94 Virginia-Carolina Chemical Co. v. Floyd, 158 N. C. 455, 74 S. E. 465. 95 Mulheran v. Gebbardt, 93 N. Y. App. Div. 98, 86 N. Y. Supp. 941. 96 Fisher v. Parr, 92 Md. 245, 48 Atl. 621. 97 Jacobus v. Diamond Soda Water Mfg. Co., 94 N. Y. App. Div. 366, 88 N. Y. Supp. 302. one of them may be joined as a defendant where it may be presumed that the estate in her hands has been enriched by the fraud.98 § 2712. - Receiver as necessary defendant. It is proper, where the suit is in equity, to make temporary receivers of the corporation parties defendant "for the purpose of providing a method by which the amount recovered from the trustees under this liability may be properly distributed among the creditors of the corporation." 99 So where the suit is in equity, it has been held that the receiver of the dissolved corporation is a necessary defendant.1 A discharged receiver has been held, under some circumstances, not a necessary party.2 Receivers having no connection with the default alleged are not proper defendants.3 In an action for false representations by officers inducing the purchase of stock by plaintiff, the receiver of the corporation is not a necessary defendant.* § 2713. — Joining other stockholders as defendants. Other stockholders should not, under ordinary circumstances, be made defendants where the action is brought by stockholders.5 § 2714. Intervention. If the corporation sues offending officers, but it appears that the suit is collusive, it has been held that minority stockholders may intervene; but if they do, the complaint in intervention must allege sufficient facts to show collusion and also to support an independent suit brought by them in behalf of the corporation. If stockholders sue to recover damages payable to themselves, then it seems that other stockholders, who acquired stock at different times, cannot intervene and become parties." 98 Lewisohn v. Stoddard, 78 Conn. 575, 63 Atl. 621. 99 Whitney v. Wilcox, 58 N. Y. App. Div. 57, 68 N. Y. Supp. 667, where action was to enforce liability for consenting to debts in excess of paid-up capital stock. 1 Bauer v. Parker, 82 N. Y. App. Div. 289, 81 N. Y. Supp. 995. 2 Lilienthal v. Betz, 185 N. Y. 153, 7 Ann. Cas. 41, 77 N. E. 1002, rev'g on this point 108 N. Y. App. Div. 222, 95 N. Y. Supp. 849. Compare Michel v. Betz, 108 N. Y. App. Div. 241, 95 N. Y. Supp. 844. 3 Moran v. Vreeland, 81 N. Y. Misc. 664, 143 N. Y. Supp. 522. 4 Squiers v. Thompson, 73 N. Y. › App. Div. 552, 76 N. Y. Supp. 734, aff'd without opinion in 172 N. Y. 652, 65 N. E. 1122. 5 McCrea v. McClenahan, 114 N. Y. App. Div. 70, 99 N. Y. Supp. 689, 37 Civ. Proc. 195, 99 N. Y. Supp. 689. 6 Keystone Copper & Gold Min. Co. v Evans, 9 Ariz. 275, 80 Pac. 344. 7 Thomas v. Barthold, Tex. Civ. App., 171 S. W. 1071. |