statute, however, provides for liability where directors "intentionally" neglect to make and file certain reports, it cannot be construed as though the quoted word was omitted.68 In such case, or where the statute provides for liability if directors "wilfully" neglect to file or publish reports, no liability arises from neglect due to mere inadvertence or forgetfulness.69 But in the absence of evidence to the contrary, the presumption is that the neglect was wilful or intentional.70 There is no wilful refusal or failure to report where the officers in good faith attempt to comply with the statute and a public official, without authority, extends the time for filing the report," and a like rule has been held to apply where the failure to report was caused by the neglect of a public official in failing to require a report or to prescribe its form.72 The California statute as to reports by superintendents of mines merely imposes liability upon directors for the wilful failure to have reports made and posted by the superintendent 73 and this statute ture could have intended to fetter so beneficial a provision as that in question, in the manner now contended for." Van Etten v. Eaton, 19 Mich. 187. 68 Breitung v. Lindauer, 37 Mich. 217. 69 Under Conn. Rev. St. §§ 404, 413, pp. 172, 174, as to annual reports, intentional neglect and refusal create the liability. Providence Steam-Engine Co. v. Hubbard, 101 U. S. 188, 25 L. Ed. 786. Under Mich. Pub. Acts 1885, No. 232, § 12 (3 How. St. § 4161 bl) penalty for wilful neglect is imposed upon the same persons as those made liable for the indebtedness, and those persons who compose the board of directors and who wilfully fail to make report are liable. Gennert v. Ives, 102 Mich. 547, 61 N. W. 9. See also Breitung v. Lindauer, 37 Mich. 217. 70 M. I. Wilcox Cordage & Supply Co. v. Mosher, 114 Mich. 64, 72 N. W. 117; Bank of Saginaw v. Pierson, 112 Mich. 410, 70 N. W. 901; Gennert v. Ives, 102 Mich. 547, 61 N. W. 9. 71 Suburban Elec. Co. v. Com., 21 Ky. L. Rep. 1556, 55 S. W. 684. Under Ky. St. § 4087, providing that a corporation or officer wilfully failing or refusing to make the reports which are required shall be guilty of misdemeanor, the auditor has no power to suspend operation of law and allow further time for compliance. Suburban Elec. Co. v. Com., 21 Ky. L. Rep. 1556, 55 S. W. 684. 72 Louisville Tobacco Warehouse Co. v. Com., 20 Ky. L. Rep. 1047, 48 S. W. 420. 73 Eyre v. Harmon, 92 Cal. 580, 28 Pac. 779. Under the statute (Act of April 23, 1880; St. 1880, p. 134; Deering's Civ. Code, pp. 148, 149), an evil intention is not essential to such violation of the statute as requires a visitation of the penalty. Shanklin v. Gray, 111 Cal. 88, 43 Pac. 399. In a proceeding thereunder it is not incumbent upon plaintiff to show that failure of directors was wilful. Miles v. Woodward, 115 Cal. 308, 46 Pac. 1076. merely requires good faith and honesty on the part of directors in the management of the corporate business.74 § 2877. Intent to make or publish false report. The statutes as to false reports usually provide for the imposition of liability only when the report is known to be false,75 and liability will not attach to an officer or director who signs a report in good faith and in the belief that it is true. The statutes should be so construed even when knowledge is not required.76 Of course, directors or other officers must use ordinary diligence in informing themselves of the true condition of the corporation before issuing statements as to such condition, and they will be presumed to have knowledge of such facts as may be obtained by the exercise of ordinary diligence. This does not mean that the officers are required to be expert bookkeepers or financiers, but they cannot close their eyes to the existence of facts which they ought to know and then say that they did not knowingly issue false statements.77 Accordingly, liability is imposed where a 74 Eyre v. Harmon, 92 Cal. 580, 28 Pac. 779. 75 Mass. Pub. St., c. 106, § 60, is general in its terms and provides that officers who knowingly make false certificates shall be jointly and severally liable for its debts and contracts. Felker v. Standard Yarn Co., 148 Mass. 226, 19 N. E. 220. Officers may be held liable for signing a certificate that the capital stock has been paid in where they have knowledge that the corporation has loaned a stockholder the amount of his stock subscription. Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886. Under Mass. Rev. L., c. 112, § 19 (St. 1906, c. 463, pt. III § 29), as to street railway companies, the filing of a certificate falsely stating that capital stock has been paid in does not terminate the liability imposed upon the directors. Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621. inghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621. 76 Felker v. Standard Yarn Co., 150 Mass. 264, 22 N. E. 896; Stebbins v. Edmands, 12 Gray (Mass.) 203; Bonnell v. Griswold, 89 N. Y. 122; Pier v. Hanmore, 86 N. Y. 95; Van Vleet v. Jones, 75 Hun (N. Y.) 340, 26 N. Y. Supp. 1082. The penalty imposed by N. Y. Laws 1848, c. 40, § 15, for signing a report false in any material representation, is not incurred where there is no evidence that the report was false, or that defendant signed it knowing it to be false, and where there is no evidence either of bad faith, or of wilful or fraudulent purpose on the part of the trustees, nor of any fact showing actual fraud. Butler v. Smalley, 101 N. Y. 71, 4 N. E. 104. 77 Allen v. Neale, 134 Ky. 690, 121 S. W. 612. Thus where an action was brought by a purchaser of stock in a national bank against the directors of such bank, alleging damage by reason of the fact that he had purchased in re It is immaterial whether directors did or did not act in good faith in making such false certificate. West report is signed or issued and the officer does not actually know that it is false, but signs without any knowledge as to its truth or falsity, either negligently or recklessly.78 Usually the statutes provide in terms that the false representation must be material; and even in the absence of an express provision to this effect, it would undoubtedly be implied.79 It has been held, however, that an intention to defraud is not necessary,80 § 2878. Default of predecessors. Newly-elected officers or directors are bound to acquaint themselves with the financial affairs of the corporation, and must, ascertain whether the statute as to reports has been complied with.81 If their predecessors in office have disregarded the statute, it is the duty of the new officers to perform the statutory duty as soon as they have ascertained the fact, and within a reasonable time after investigating the financial affairs of liance on the statements of the bank, alleged to have been false, as to its resources and liabilities, made to the comptroller of the currency, the report having been attested by the directors and having been published as directed by the statute, the following charge to the jury was proper: "It must appear by a preponderance of the evidence that, at the time of the attesting and publication of said report, the directors so attesting this report, or who assented to and directed the publication of the same, did so knowing the report to be false, or, under such circumstances as will warrant the jury in finding by a preponderance of the evidence that such directors, by the exercise of ordinary care and prudence, would have known that said report was false in some one or more of the particulars set forth in the petition." Mason v. Moore, 73 Ohio St. 275, 4 L. R. A. (N. S.) 597, 4 Ann. Cas. 240, 76 N. E. 932. 78 Tucker v. Osbourn, 101 Md. 613, 61 Atl. 321; Huntington v. Attrill, 118 N. Y. 365, 23 N. E. 544; Torbett v. Eaton, 49 Hun (N. Y.) 209, 1 N. Y. Supp. 614, aff'd 113 N. Y. 623, 20 N. E. 876; Brand v. Godwin, 15 Daly (N. Y.) 456, 9 N. Y. Supp. 743, 8 N. Y. Supp. 339; Hatch v. Attrell, 1 N. Y. St. Rep. 497, aff'd 118 N. Y. 383, 23 N. E. 549; Githers v. Clarke, 158 Pa. St. 616, 28 Atl. 232; Collins v. Chipman, 41 Tex. Civ. App. 563, 95 S. W. 666. 79 Waters v. Quimby, 27 N. J. L. 198; Butler v. Smalley, 101 N. Y. 71, 4 N. E. 104; Walton v. Godwin, 58 Hun (N. Y.) 87, 11 N. Y. Supp. 391. Under Ky. St. 1909, § 549, whereby directors are made individually liable for publishing a false statement of the condition of the corporation, if officers give out statements false in a material respect, persons who deal with the corporation are entitled to recover for damage suffered by reason of their reliance on the statement. Allen v. Neale, 134 Ky. 690, 121 S. W. 612. 80 Chittenden v. Thannhauser, 47 Fed. 410. As to necessity of a fraudu lent purpose, see also Butler v. Smalley, 101 N. Y. 71, 4 N. E. 104. 81 Breitzke V. Bank of Grand Prairie, 124 Ark. 495, 187 S. W. 660. the company.82 But the newly-elected officers or directors are not responsible for the consequences of the defaults committed by their predecessors.83 § 2879. Debts to which liability extends-In general. It is usually provided by these statutes that directors who disregard the statutes shall be liable for all ordinary debts of the corporation which are contracted in the prosecution of the legitimate business of the 82 Breitzke V. Bank of Grand Prairie, 124 Ark. 495, 187 S. W. 660. Under Mont. Civ. Code 1895, § 451, requiring corporations to make an annual report showing the capital paid in and the amount of debts and providing that directors shall be jointly and severally liable for all debts then existing or thereafter contracted until a report is made, etc., directors are liable for debts incurred after they assumed office, where they fail to rectify the omission of their predecessor to make a report prior to creating indebtedness. Risdon Iron & Locomotive Works v. Von Storch, 166 Fed. 936. The fact that a director did not become such until after the expiration of the period when the report should have been filed, does not relieve him of liability for debts incurred thereafter during his administration (1 Mills' Colo. Ann. St., § 491). Cayanaugh v. Patterson, 41 Colo. 158, 91 Pac. 1117. Colo. Rev. St. 1868, c. 18, p. 121, § 15, was amended by Sess. Laws 1876, p. 49, § 1, limiting liability of trustees in default to debts contracted or incurred since publication of last annual report, and for all that should be contracted before such report should be made. Gregory v. German Bank, 3 Colo. 332, 25 Am. Rep. 760. If the trustee did not occupy an official position at the time of the default, but became such afterwards, his liability is limited to debts created while he remains trustee and while default continues (General Manufacturing Law, § 12). Shaler & Hall Quarry Co. v. Bliss, 27 N. Y. 297. A director who accepts office after default by the corporation in making a report can refuse to act or he can resign and protect himself, but if he continues to hold office without objection he is liable for the debts contracted by the corporation. Union Bank of Buffalo v. Keim, 52 N. Y. App. Div. 135, 64 N. Y. Supp. 1070, aff'd 169 N. Y. 587, 62 N. E. 1101. 83 Providence Steam-Engine Co. v. Hubbard, 101 U. S. 188, 25 L. Ed. 786. Under Mont. Civ. Code 1895, § 451, requiring corporations to make annual report showing the capital paid in and the amount of debts and providing that directors shall be jointly and severally liable for all debts then existing or thereafter contracted until the report is made, etc., no responsibility as to existing debts of company attaches to directors when they assume office, because of the failure of the preceding board to file a statement. Risdon Iron & Locomotive Works v. Von Storch, 166 Fed. 936. Where the term of office of directors expires after an indebtedness has been created and after default in making annual report, it would be an unreasonable construction of statutes to make successors in office liable for indebtedness incurred in which they had no voice. Austin v. Berlin, 13 Colo. 198, 22 Pac. 433. company, rather than involuntary obligations imposed by law in consequence of the negligent or tortious acts of the corporation's agents or servants,85 and the statutes will be liberally construed to embrace all debts within the language of the act.86 An unliquidated claim for a breach of a contract of employment, if due, is a "debt," within the meaning of a statute making directors liable for corporate debts on failure to file a report.87 A statute making the directors of a corporation liable for "all damages" resulting from their failure to make the reports required by statute, includes unliquidated as well as liquidated damages.88 84 Adams v. Mills, 60 N. Y. 533. Laws of New York, 1875, c. 510, § 12 (amending L. 1848, c. 40, § 12, as amended by L. 1871, c. 657), by its own terms limits the liability on part of trustees for debts of corporation existing and arising ex contractu. Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038. Under Kirby's Dig., §§ 848, 859, as to annual reports, the words "all debts' are intended to include liabilities arising from breach of contract as well as those due by express agreement. Proctor-Gamble Co. v. Warren Cotton Oil Co., 180 Fed. 543. The natural construction of Mass. Pub. St., c. 106, § 60, includes existing debts and contracts. Felker v. Standard Yarn Co., 148 Mass. 226, 19 N. E. 220. A "debt" is an unconditional promise to pay a fixed sum at some specified time. Bovee v. Boyle, 25 Colo. App. 165, 136 Pac. 467. It is a liquidated demand or sum of money due by a certain and express agreement. Wing v. Slater, 19 R. I. 597, 33 L. R. A. 566, 35 Atl. 320. The word denotes any kind of just demand, and ordinarily imports sum of money arising upon contract express or implied, but in its most general sense means that which one person is bound to pay or perform for another. ProctorGamble Co. v. Warren Cotton Oil Co., 180 Fed. 543. And it ordinarily may be taken to include all that is due under any form of obligation as well as under any promise. Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. It is not, however, synonymous with "'obligation." Bovee v. Boyle, 25 Colo. App. 165, 136 Pac. 467. 85 Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. See § 2887, infra. Corp. Laws (Laws 86 N. Y. Stock 1892, c. 688), § 30, should be liberally construed so as to embrace all debts within the language of the act, however strictly construed as to the acts of directors constituting a default or as to evidence of the debt. Morgan v. Hedstrom, 164 N. Y. 224, 58 N. E. 26. Colo. Rev. St. 1868, p. 121, c. 18, § 15, as to annual reports, prescribes a penalty for neglect of duty imposed upon trustees of companies, the amount of forfeiture being measured by the aggregate debts contracted by the company. Gregory v. German Bank, 3 Colo. 332, 25 Am. Rep. 760. 87 Green v. Easton, 74 Hun (N. Y.) 329, 26 N. Y. Supp. 553; Cady v. Sanford, 53 Vt. 632. Under N. Y. Laws 1892, p. 1832, c. 688, 30, the "debt" must be one existing in fact, and a director cannot be held liable for unliquidated damages arising out of breach of contract. Hill v. Weidinger, 110 N. Y. App. Div. 683, 97 N. Y. Supp. 473. 88 MacVeagh v. Wild, 95 Fed. 84. |