ment as to when plaintiff's debt was contracted 39 and allegations showing that at that time the officers were in default; 40 but it is not necessary to allege that the directors sued were stockholders during their term of office,41 nor that a judgment has been recovered. and an execution returned unsatisfied against the corporation, where not a condition precedent.42 Matters of defense need not be anticipated; and this rule has been applied to an allegation that the failure or refusal to act was wilful, 43 or that plaintiff had no knowledge that the corporation had exceeded its charter limit of indebtedness." Facts must be pleaded and not conclusions.45 Ordinarily it is sufficient to follow the words of the statute in alleging the default of the officers.46

The necessary allegations in a complaint in an action by a receiver against officers for negligence in management depend upon what a receiver must allege to show his authority to sue, plus the allegations necessary to show the negligence.47

If the action is by a stockholder in behalf of the corporation, the complaint must allege (1) the cause of action in favor of the corporation, which should be stated in exactly the same manner and with the same detail of facts as would be proper in case the corporation had brought the action, and (2) the facts which entitle the stockholder to maintain the action in the place of the corporation.48

ford v. St. John, 164 Ind. 277, 73 N. E. 596; Clow v. Brown, 150 Ind. 185, 49 N. E. 1057, 48 N. E. 1034; Niles v. Dodge, 7C Ind. 147; Hill v. Weidinger, 110 N. Y. App. Div. 683, 97 N. Y. Supp. 473.

In New York, compliance with the proviso added in 1899 requiring notice to be served on the directors within three years need not be pleaded. Boynton v. Sprague, 100 N. Y. App. Div. 443, 91 N. Y. Supp. 839, aff'd 183 N. Y. 505, 76 N. E. 1089.

39 Continental Nat. Bank of Memphis, Tennessee v. Buford, 107 Fed. 188, aff'd 114 Fed. 290, construing Arkansas statute.

40 Continental Nat. Bank of Memphis, Tennessee v. Buford, 107 Fed. 188, aff'd 114 Fed. 290, construing Arkansas statute.

41 Swancoat v. Remsen, 78 Fed. 592. 42 Swancoat v. Remsen, 78 Fed. 592.

43 Miles v. Woodward, 115 Cal. 308, 46 Pac. 1076.

44 Nuckels v. Robinson-Pettett Co., 159 Ky. 214, 166 S. W. 972.

45 Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 69 Pac. 77, 64 Pac. 692, applying rule where directors charged with misappropriating funds.

46 Pope v. Leonard, 115 Mass. 286, allegation that debts of corporation exceeded its capital in a certain

amount.

47 See Coddington v. Canaday, 157 Ind. 243, 61 N. E. 567, where numerous objections to the complaint are considered.

48 Kavanaugh V. Commonwealth Trust Co., 181 N. Y. 121, 73 N. E. 562; Weingreen v. Michelbacher, 139 N. Y. App. Div. 931, 124 N. Y. Supp. 41. "Ordinarily no other allegations are necessary or material." Kolb v.

The complaint must show that a demand has been made upon the corporation to sue which has been refused or disregarded, or that such a demand would be useless.49 It is not necessary to aver when and from whom plaintiffs acquired their stock.50

If the action is at common law, and based on deceit, then of course the elements going to make up fraud must be alleged.51

§ 2717. Action in another state-In general. Where officers of a foreign corporation reside in another state, stockholders may sue them in such state for moneys converted by them as well as for moneys lost by their fraudulent and negligent conduct.52

§ 2718.Enforcing statute in another state. "The courts of no country execute the penal laws of another," is the concise statement made by Chief Justice Marshall as a fundamental maxim of international law.53 But, "in interpreting this maxim," said Justice Gray in a leading case in the Supreme Court of the United States, "there is danger of being misled by the different shades of mean

ing allowed to the word 'penal' in our language." 54 Many of the courts have held that this principle applies to statutes of a state imposing upon the directors of a corporation personal liability for its debts as a penalty for failing to file a report of the company's condition, or to do other acts required of them by law, or for doing acts prohibited; that such statutes are penal statutes, within this principle, and that they will not be enforced in the courts of other states.55 The more recent cases, however, show that this doctrine is erroneous and cannot be sustained; that the rule of international law that the penal laws of one state or country will not be enforced in another state or country applies only to penal laws in the strict sense that is, laws imposing a punishment, pecuniary or otherwise, for offenses against the state; and that a statute imposing upon directors a liability for corporate debts is not a penal law in this sense.56 The Supreme Court of the United States has in a late decision settled the law in this country in so far as the right of a creditor who has recovered a judgment to enforce the same in another state is concerned. It has held that a judgment recovered by a creditor against a director, under such a statute, in the state in which the corporation was created, is not based upon a penal statute in the sense of the rule of international law under which penal statutes are not enforced in other states, and that for the courts of other states to refuse to enforce the judgment on this ground is to deny to the judgment the full faith, credit and effect to which it is entitled under the Constitution and laws of the United States.57 In commenting on this case, it is said in a recent decision in Kansas that "the fact that the action was upon a judgment was not determina

54 Huntington v. Attrill, 146 U. S. 657, 666, 36 L. Ed. 1123.

55 Maryland. Attrill v. Huntington, 70 Md. 191, 2 L. R. A. 779, 14 Am. St. Rep. 344, 16 Atl. 651, rev'd 146 U. S. 657, 36 L. Ed. 1123; First Nat. Bank of Plymouth v. Price, 33 Md. 487, 3 Am. Rep. 204.

Massachusetts. Halsey v. McLean, 12 Allen 439, 90 Am. Dec. 157.

Missouri. Cary v. Schmeltz, 141 Mo. App. 570, 125 S. W. 532.

New Jersey. Salt Lake City Nat. Bank v. Hendrickson, 40 N. J. L. 52; Derrickson v. Smith, 27 N. J. L. 166. New York. Hutchinson v. Stadler, 85 App. Div. 424, 83 N. Y. Supp. 509;

Bird v. Hayden, 2 Abb. Pr. (N. S.) 61; Price v. Wilson, 67 Barb. 9.

56 Huntington v. Attrill, 146 U. S. 657, 36 L. Ed. 1123; Davis v. Mills, 99 Fed. 39; First Nat. Bank of Butte v. Weidenbeck, 97 Fed. 896, rev'g 87 Fed. 271; Great Western Mach. Co. v. Smith, 87 Kan. 331, 41 L. R. A. (N. S.) 379, Ann. Cas. 1913 E 243, 124 Pac. 414; Cady v. Sanford, 53 Vt. 632; Huntington v. Attrill, [1893] App. Cas. 150.

57 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.

tive of the matter, however, because a judgment founded upon a strictly penal statute is not within the protection of the full faith and credit clause of the federal constitution." It was also held by the Kansas court that "the question whether the statute, as interpreted by the court, is penal, in such sense as to deny it all extraterritorial operation, is not one of local, but of general or international, law," and hence the fact that the courts of the state where the statute was enacted regard it as strictly penal is immaterial.58

Of course, regardless of the conflict of opinion where a statute is deemed penal, a statute may be so worded or construed as to impose upon the directors or other officers of a corporation a contractual or quasi contractual liability for corporate debts, rather than a penalty,59 and such a liability may be enforced in the courts of other states,0 subject to the qualifications already stated.

This question of enforcement of such a statute in a sister state is sometimes expressly regulated by statute.61

§ 2719. Evidence. To prove that defendant was a director, the books of the corporation are admissible.62 Negligence or mismanagement will not be presumed but must be shown.63 In actions by stockholders on behalf of the corporation, the burden of proof is upon plaintiff. This rule has been applied to proof of fraud.64 However, if defendant is entitled to the reasonable value of his services, the burden is on him to show their reasonable value.65 Plaintiff cannot testify whether he would have made the loan which is the basis of the action had he known of the default of the officers relied upon to hold them personally liable.66 The seal attached to a report will be presumed to be the seal of the corporation, in the absence of any showing to the contrary.67

V.

58 Great Western Mach. Co. Smith, 87 Kan. 331, 41 L. R. A. (N. S.) 379, Ann. Cas. 1913 E 243, 124 Pac. 414.

59 See § 2597 et seq., supra.

60 Ex parte Van Riper, 20 Wend. (N. Y.) 617; Farr v. Briggs' Estate, 72 Vt. 225, 82 Am. St. Rep. 930, 47 Atl. 793.

61 P. L. 1897 (N. J.) p. 124.

62 St. George Vineyard Co. v. Fritz, 48 N. Y. App. Div. 233, 62 N. Y. Supp. 775, 30 N. Y. Civ. Proc. 253.

63 Redhead v. Iowa Nat. Bank, 127

Iowa 572, 103 N. W. 796; Occidental
Const. Co. v. Miller, 154 N. Y. App.
Div. 437, 139 N. Y. Supp. 166.

64 Walsh v. Goulden, 130 Mich. 531, 90 N. W. 406, 9 Det. L. N. 145; Polhemus v. Polhemus, 114 N. Y. App. Div. 781, 920, 100 N. Y. Supp. 263, 267.

65 Greathouse v. Martin, 100 Tex. 99, 94 S. W. 322, aff'g (Tex. Civ. App.), 91 S. W. 385.

66 Stafford v. John, 164 Ind. 277, 73 N. E. 596, failure to file annual report. 67 Dart v. Hughes, 49 Colo. 465, 109 Pac. 952.

§ 2720. Counterclaim and set-off. The officer may set off the amount of his salary which is due and unpaid, where the action is by the corporation.68

§ 2721. Discontinuance of suit. The right to discontinue the suit,69 the effect as discontinuance as to part of defendants,70 and the like, are governed by the same rules applicable to actions against persons as individuals.

§ 2722. Decree, damages recoverable and incidental relief. If the suit is in equity for mismanagement, the decree may fix the respective liabilities of the directors where some of them were in office longer than the others."1 The decree may, in a proper case, order payment directly to the complaining stockholder or creditor,72 but ordinarily, where the right to recover is as the representative of the corporation, the damages should be ordered paid to the corporation.73 The recovery, in case of wrongful transfer of assets, where one creditor sues alone, should be limited to such proportion of the value of the property transferred as his claim as a creditor, in connection with other creditors existing at that time, bears to the value of the property transferred; and he is not necessarily entitled to the full amount of his judgment.74 If one sues for all, in a representative capacity, payments made to him after the dismissal of his action belong to him and he need not share them with the other creditors who had taken no steps to come in as parties.75 Where directors vote excessive salaries to certain of their members who are also officers or employees of the company, ratification thereof

68 Bevier Black Diamond Coal Co. v. Watson, 107 Mo. App. 451, 80 S. W. 287.

Where one acting as treasurer and general manager is sued for an accounting by the corporation, a claim by such party for salary under agreement with the corporation may be properly offset. Bevier Black Diamond Coal Co. v. Watson, 107 Mo. App. 451, 80 S. W. 287.

69 Williams v. Brewster, 117 Wis. 370, 93 N. W. 479, holding that suit in equity cannot be discontinued before final judgment without consent of every creditor who appears and desires to prosecute.

70 Bauer v. Parker, 82 N. Y. App. Div. 289, 81 N. Y. Supp. 995, holding discontinuance as to one director

fatal.

71 Ackerman v. Halsey, 37 N. J. Eq. 356, aff'd 38 N. J. Eq. 501.

72 Eaton v. Robinson, 19 R. I. 146, 29 L. R. A. 100, 32 Atl. 339, 31 Atl. 1058. See also Hilliard v. Lyman, 138 Fed. 469, construing Vermont statutes. 73 See infra, note 78.

74 Buckley v. Stansfield, 155 N. Y. App. Div. 735, 140 N. Y. Supp. 953. 75 Davids v. Bauer, 155 N. Y. App. Div. 97, 140 N. Y. Supp. 55.