the purchase price is not payable until after a new board of directors assumes office. 10 Accordingly such a debt cannot rightfully be said to have been incurred by a subsequent board so as to make them. liable merely because it matured by performance and became payable after they came into office.11 The same rule applies to extra freight on goods shipped and received during the predecessors' term in office, but not adjusted until after a new board assumes office.12 § 2886. Judgments. A judgment against a corporation for the recovery of a sum of money is a "debt," within a statute as to reports, and may be counted on in an action against a director without pleading the original indebtedness.13 Thus it has been held that a judgment for costs is a debt contracted by the corporation within the meaning of such statutes. 14 But the fiction of the law which implies upon the part of the judgment debtor a promise to pay the judgment and which will support an action of contract against him and upon which the judgment may be called, justifiably, a debt or contract of record, cannot be carried so far as to change an involuntary into a voluntary assumption of liability.15 A judgment recovered after failure to file a report, on a debt contracted before, or a judgment recovered after a person became a director, is not within a statute making directors liable for debts contracted during the time of their certificate of the capital stock, assets and debts, and rendering stockholders liable for existing debts in case of failure to file the certificate, where a corporation which was in default as to the certificate entered into a contract to purchase goods, but the goods were not delivered until after the corporation had corrected its default and filed the certificate, a debt was not created until delivery was made under the contract and did not exist at time contract was entered into. Wing v. Slater, 19 R. I. 597, 33 L. R. A. 566, 35 Atl. 302. 10 Risdon Iron & Locomotive Works v. Von Storch, 166 Fed. 936. 11 Risdon Iron & Locomotive Works v. Von Storch, 166 Fed. 936. See also § 2880, supra. 12 Risdon Iron & Locomotive Works v. Von Storch, 166 Fed. 936. 13 Tabor v. Commercial Nat. Bank of Cleveland, 62 Fed. 383; Lewis v. Armstrong, 8 Abb. N. Cas. (N. Y.) 385. Judgment against the corporation is conclusive in a suit against the directors and stockholders of the existence and amount of the debt or demand as declared on. Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. 14 Allen v. Clark, 108 N. Y. 269, 15 N. E. 387, rev'g 43 Hun (N. Y.) 377; Matty v. Sampson, 64 N. Y. App. Div. 1, 71 N. Y. Supp. 731; Allen v. Clark, 66 Hun (N. Y.) 628, 21 N. Y. Supp. 338; Andrews v. Murray, 9 Abb. Pr. (N. Y.) 8. 15 Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. See § 2887, infra. neglect to file a report, or for debts contracted while they are directors, as the case may be.16 § 2887. Damages for torts and judgments therefor. Bearing in mind the rule, heretofore discussed, that these statutes as to reports are penal and are not to be extended by construction,17 it has been held that statutes imposing liability for debts existing or contracted during the period of default will not be extended so as to impose liability for debts not arising ex contractu.18 Therefore obligations ex delicto are not included, even when reduced to judg ments.19 A judgment does not become a debt by contract when it is entered, since a contract signifies the agreement of two or more minds, and mutual assent is necessary.20 The fiction of the law as to the promise of judgment debtors to pay the debt will not be carried to this extent.21 § 2888. Debts contracted in other states. A statute making directors liable for corporate debts on failure to file an annual report extends to debts contracted and due in other states.22 Y.) 635, 7 Robt. 137. 17 See § 2855, supra. 18 United States. Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038. Colorado. Bovee v. Boyle, 25 Colo. App. 165, 136 Pac. 467. Massachusetts. Savage V. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. Missouri. Cable v. Gaty, 34 Mo. 573, 86 Am. Dec. 126. New York. Esmond v. Bullard, 16 Hun 65, aff'd 79 N. Y. 404. Rhode Island. Leighton v. Campbell, 17 R. I. 51, 9 L. R. A. 187, 20 Atl. 14. Liability for unliquidated damages for infringement of a patent, copyright, or trade-mark is not a "debt contracted," within the meaning of a statute making directors personally liable for debts contracted. Child v. Boston & F. Iron Works, 137 Mass. 516, 50 Am. Rep. 328; Roberts v. Reed, 4 Wkly. Notes Cas. (Pa.) 417. 19 Taylor v. Dexter, Ark. 189 S. W. 1060. Under the statute (Rev. L. c. 112, § 19) as to the liability of the directors of a street railway company for debts and contracts until the capital stock is paid in or a certificate stating its amount is filed, a judgment in an action of tort for injuries received by a passenger is not a debt for which the directors are liable. Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. Such words as "debts" or "debts and contracts" of corporations, in statutes imposing personal liability upon directors or stockholders, cannot be construed to include judgments for torts of corporation. Savage v. Shaw, 195 Mass. 571, 122 Am. St. Rep. 272, 12 Ann. Cas. 806, 81 N. E. 303. 20 Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038. 21 See § 2886, supra. 22 Sears v. Waters, 44 Hun (N. Y.) 101. § 2889.Extinguished debts. It has been held that the liability of directors for an original corporate debt under a statute making them liable for corporate debts on failure to file a report, is not affected by the creditor's recovering a judgment thereon against the corporation or taking a note therefor.23 But this view cannot be sustained where the original debt is thereby extinguished. In such a case they are liable on the new debt or not at all. They are only liable for debts actually due, and for which a right of action exists against the corporation, and whatever will defeat or abate an action against the corporation on a debt will be a defense to them.24 Where a corporate creditor, secured by a chattel mortgage on machinery and tools with a power of sale in case of default, undertook to sell under the power, but sold at auction at a place on the premises where not all of the property could be seen, and sold it as a whole instead of in parcels, when no one was present except himself and the secretary of the company, and the creditor bid in the property for very much less than the debt, whereas it was worth more than the debt, it was held that the creditor had no claim against the corporation for the deficiency, and could not hold the directors liable therefor because of their failure to file an annual report.25 § 2890. Effect of fraud of creditors. A statute making directors liable for corporate debts for failure to file a report of the company's condition does not render them liable for an indebtedness imposed upon the corporation by fraud or improper practices of the creditor.26 § 2891. Penalties—In general. Cumulative penalties are not favored, and successive defaults by the same directors do not renew as to them penalties already incurred.27 Thus, if a statute as to reports imposes a definite penalty for its violation, and does not provide that each neglect or refusal shall render the directors liable for 23 Novelty Mfg. Co. v. Connell, 88 26 Adams v. Mills, 60 N. Y. 533. ulent concealment of alleged borrowing of plaintiff's money and that the transaction was not brought to the attention of the board of trustees or to the knowledge of defendant and the loan was usurious, as well as without authority, a debt does not exist which can be enforced against a trustee. Adams v. Mills, 60 N. Y. 533. 27 Morgan v. Hedstrom, 164 N. Y. 224, 58 N. E. 26. such penalty, no other or greater sum than the penalty named can be recovered, although the violations of the statute have been frequent.28 The maxim de minimis non curat lex cannot be applied in an action to recover a penalty where the statute has been violated, even though the required reports would have shown very little of interest to the stockholders for whose benefit the report is required.29 § 2892. Forfeiture of charter. Under the Illinois statute as to reports, failure to comply with the statute is prima facie evidence of nonuser of the corporate charter,30 and the secretary of state is required to enter a cancellation of the charter. Such cancellation does not of itself work a forfeiture of the charter, however.31 28 Loveland v. Garner, 71 Cal. 541, 12 Pac. 616. The pendency of an action for a penalty under the statute (Cal. Act of April 23, 1880; St. 1880, p. 134), or a recovery therein, is not a bar to an action for a delinquency occurring after the former action was commenced. Shanklin v. Gray, 111 Cal. 88, 43 Pac. 399. An action will lie under Cal. Act of March 30, 1874, to recover a penalty of one thousand dollars from the director of a mining company where an account is not posted as required. Francais v. Somps, 92 Cal. 503, 28 Pac. 592. 29 Francais v. Somps, 92 Cal. 503, 28 Pac. 592. 30 People v. Rose, 207 Ill. 352, 69 N. E. 762. 124, J. & A. Ann. St. ¶¶ 2667-2675, is simply to make a failure to report prima facie evidence of nonuser, and the cancellation which the secretary of state is required to enter upon the records of his office does not of itself work a forfeiture of the charter of the corporation. People v. Rose, 207 Ill. 352, 69 N. E. 762. "The thing that works a forfeiture of the corporation is the fact of nonuser, which can be finally determined only by a court of competent jurisdiction (Bruffett v. Great Western R. Co. of 1859, 25 Ill. 353; Baker v. Backus' Adm'r, 32 Ill. 79; Board of Education of Illinois v. Bakewell, 122 Ill. 339, 10 N. E. 378); and the cancellation which the secretary of state is required to enter upon the records of his office would, in such proceeding, make a prima facie case for the people. If the corporation is, in fact, engaged in active business and fails to make the report, it is not, by reason of that failure, deprived of its charter, but may, in a suit brought against it, show the fact and thereby defeat the proceeding. The effect of the act is simply to make a failure to report, as required, prima facie evidence, and the clause providing that the failure to report and pay the fee therefor 'shall be prima facie evidence that said corporation is out of busi 31 Henssler v. A. G. Wiese Drug Co., 133 Ill. App. 539; Spreyne v. Garfield Lodge No. 1, United Slavonian Benev. Society, 117 Ill. App. 253. Ill. Laws 1901, p. 124, J. & A. Ann. St. ¶¶2667-2675, as to annual reports, does not authorize the secretary of state to declare absolute forfeitures of the charters of defaulting corporations, but merely establishes a new rule of evidence and is a lawful exercise of legislative power. People v. Rose, 207 Ill. 352, 69 N. E. 762. The effect of Ill. Laws 1901, p. * * # - § 2893. Suspension of corporate powers. Under the Michigan statute as to reports, the corporation in case of default suffers a suspension of its powers until such report is filed, and is also denied the right of action on contracts entered into during the period of default.32 § 2894. Waiver or release of liability. Creditors who agree with directors that they need not file the annual report, cannot afterward hold them liable for the violation of the statute.33 The right to enforce such liability is not waived, however, by recovering a judgment against the corporation,34 and directors are not relieved from liability because a bond of the corporation, constituting one of its debts, contains a provision that no stockholder shall be individually liable upon or in respect to it.35 Where a statute makes a director personally liable for failure to file an annual report, in an action based on the statute, it is not necessary that there be a specific finding that the plaintiff has not waived the personal liability of the director or that the liability has not been waived by any instrument creating the debt, the burden being on the defendant to prove the waiver if advantage is to be taken thereof.36 § 2895. Termination of duties and liabilities-Termination of official relation. An official's duty, under statutes relative to the making and filing of reports, terminates when his relation as an officer of the corporation is severed. Having no power to perform the duties imposed by the statute, he cannot be held liable for the debts ness, and shall work a forfeiture of the charter of such corporation,' was merely intended to be a statement of the effect of a condition, namely, nonuser, of which condition the failure is made prima facie evidence." People v. Rose, 207 Ill. 352, 69 N. E. 762. The term "active business'' as used in Ill. Laws 1901, p. 124, §§ 2, 7, J. & A. Ann. St. ¶¶ 2668, 2673, as to annual reports, means the exercise of corporate powers the doing of those things which the corporation is authorized to do by its charter. People v. Rose, 207 Ill. 352, 69 N. E. 762. 32 Continental & Commercial Nat. |