showing the county where the corporation does business has been held necessary. 66

Under some of the statutes as to reports, the duty to institute proceedings to recover fines and penalties rests on a public official such as a prosecuting attorney,67 and the proceedings are in the name of the state.68

§ 2898. Notice of intention and judgment against corporation as prerequisites. Under some of the statutes as to reports, it has been provided that the directors or other officers shall not be liable to creditors unless such creditors, within a certain time after the default, serve a notice of intention to hold the officers personally liable.69 Such a statute has been held to apply to both foreign and domestic corporations,70 but does not apply to actions in existence at the time of its enactment," although a proviso may be included for the purpose of saving existing claims, by allowing the service of notice or the commencement of an action within a shorter time.72

Under most of the statutes requiring reports, the liability imposed

upon the officers is direct and primary,73 and an action may be maintained against them, by creditors, without first recovering a judgment against the corporation, and without having an execution returned unsatisfied.74

Under other statutes, it is provided that a judgment must be recovered against the corporation, and that there must be an effort to collect the debt by demand on execution,75 unless such a step is impossible or of no avail.76 Such a statute should be reasonably construed, and not with the technical strictness prevailing as to penal

73 See § 2873, supra.

74 Patterson v. Stewart, 41 Minn. 84, 4 L. R. A. 745, 16 Am. St. Rep. 671, 42 N. W. 926; Ginsburg v. Von Seggern, 59 N. Y. App. Div. 595, 69 N. Y. Supp. 758, aff'd 172 N. Y. 662, 65 N. E. 1116; Manhattan Co. v. Kaldenberg, 27 N. Y. App. Div. 31, 50 N. Y. Supp. 265, rev'd 165 N. Y. 1, 58 N. E. 790. See also Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 69 Pac. 77, 64 Pac. 692.

Under Mass. Rev. Laws, c. 112, § 19 (St. 1906, c. 463, pt. III, § 29), as to street railway companies, creditors need not exhaust their remedy against the corporation by taking out an execution or otherwise, since the statute does not require it. Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621. The liability imposed by Mass. Rev. Laws, c. 112, § 19 (St. 1906, c. 463, pt. III, § 29), as to street railway companies, is different from that imposed by Rev. Laws, c. 110, § 58 et seq. Westinghouse Elec. & Mfg. Co.. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621. As to the necessity of a judgment under Mass. St. 1862, c. 218, § 3, see the next note infra, this section.

The Michigan statute (3 How. St., § 4161bl) does not require creditor to put claim into judgment against corporation before it has right of action against directors for failure to file report. M. I. Wilcox Cordage & Supply

Co. v. Mosher, 114 Mich. 64, 72 N. W. 117.

75 Under Mass. St. 1862, c. 218, § 3, proceedings against officers are precluded unless judgment shall have been recovered in suit against corporation, and there shall have been neglect of payment for space of thirty days after demand made on execution. Thayer v. New England Lithographic Steam Printing Co., 108 Mass. 523; Norfolk v. American Steam Gas Co., 103 Mass. 160. See also Train v. Marshall Paper Co., 180 Mass. 513, 62 N. E. 967; Thacher v. King, 156 Mass. 490, 31 N. E. 648; Priest v. Essex Hat Mfg. Co., 115 Mass. 380; Norfolk v. American Steam Gas Co., 103 Mass. 160; Kinsley v. Rice, 10 Gray (Mass.) 325; National Bank of Auburn v. Dillingham, 147 N. Y. 603, 49 Am. St. Rep. 692, 42 N. E. 338; Paulsen v. Van Steenbergh, 65 How. Pr. (N. Y.) 342. That judgment is not prerequisite under Mass. Rev. Laws, c. 112, § 19, see the next note supra, this section.

The fact that an execution against the corporation, on which a creditors' suit against the directors is based, was falsely returned unsatisfied, is no defense, unless there was collusion on the part of the plaintiff. BerwindWhite Coal Min. Co. v. Wadsworth, 27 N. Y. App. Div. 550, 50 N. Y. Supp.

501.

76 Whitney v. Pugh, 58 N. Y. App. Div. 316, 68 N. Y. Supp. 992.

statutes, and judgments in scire facias suits against the corporation have been held sufficient to enable the creditors to sue the officers.78

When the liability of the officers is direct and primary, a judgment rcovered against the corporation is not conclusive evidence of the debt, and in fact is not even primary evidence of such debt.79 Since the officers are not parties or privies to the judgment, they are not bound by it.80 But under the other statutes requiring a judgment against the corporation, the officers are concluded by such judgment and cannot show the invalidity of the claims involved.81 The judgment in such case operates to merge the debt to the extent that an action cannot be maintained against the corporation, but does not merge and extinguish the debt so as to relieve the officers of their statutory liability.82

§ 2899. Enforcement of liability in foreign state; foreign judgments. The liability of directors for the failure to make and publish annual reports has been held unenforceable in other states in a number of cases.83 Such decisions are based on the theory that the liability is imposed by penal statutes, and the general rule of international law that "penal laws will not be allowed extra-territorial operation" has been applied.84

The question has been passed upon by the Supreme Court of the United States with respect to the rights of a creditor who has recov.

77 Norfolk v. American Steam Gas Co., 103 Mass. 160.

78 Norfolk v. American Steam Gas Co., 103 Mass. 160.

79 Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038; McMahon v. Macy, 51 N. Y. 155; Miller v. White, 50 N. Y. 137; Watson v. Godwin, 62 Hun (N. Y.) 622, 17 N. Y. Supp. 51; Torbett v. Godwin, 62 Hun (N. Y.) 407, 17 N. Y. Supp. 46; Kraft v. Coykendall, 34 Hun (N. Y.) 285; Esmond v. Bullard, 16 Hun (N. Y.) 65, aff'd 79 N. Y. 404; Brand v. Godwin, 15 Daly (N. Y.) 456, 9 N. Y. Supp. 743, 8 N. Y. Supp. 339.

Compare, however, Allen v. Clark, 108 N. Y. 269, 15 N. E. 387, rev'g 43 Hun 377; Tyng v. Clarke, 9 Hun (N. Y.) 269; Squires v. Brown, 22 How. Pr. (N. Y.) 35; Cady v. Sanford, 53 Vt. 632.

82 Byers v. Franklin Coal Co., Mass. 131. 83 Halsey v. McLean, 12 Allen Mass.) 439, 90 Am. Dec. 157; Cary Schmeltz, 141 Mo. App. 570, 125 S. W. 532; Derrickson v. Smith, 27 N. J. L.

166.

V.

See also 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.

84 Halsey V. McLean, 12 Allen

(Mass.) 439, 90 Am. Dec. 157.

It is a general principle of international law that "the courts of no country execute the penal laws of another." Chief Justice Marshall, The Antelope, 10 Wheat. (U. S.) 66,

123, 6 L. Ed. 268.

in

ered a judgment to enforce the same in another state. The court 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.85 This decision, of course, does not affect the power of state courts to refuse to enforce such statutes of other states, where the action is not based upon a judgment, the question of the enforcement of such a statutory obligation being a question of public policy and comity.8

86

In somewhat analogous cases, similar obligations have been denied enforcement on the theory that the liability involved had no basis at common law or in contract, and was purely statutory.87

§ 2900. Remedies. Under some of the statutes as to annual reports, the appropriate remedy to enforce the liability of the officers is in equity.88 But usually the statutes impose a joint and several liability upon directors or other officers who violate their provisions,89 which may be enforced by an action at law.90 The same rule applies

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

86 Halsey v. McLean, 12 Allen (Mass.) 439, 90 Am. Dec. 157.

87 Thus in a case arising in New York, the court declined to enforce liability of directors of a foreign corporation for payment of dividends from capital stock on the ground that, while the liability was not penal, it was statutory, and had its basis neither in common law nor in contract. The court held, however, that it would entertain suit in behalf of the corporation for the recovery of funds unlawfully distributed as dividends. Hutchinson v. Stadler, 85 N. Y. App. Div. 424, 83 N. Y. Supp. 509.

88 Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621; Byers v. Franklin Coal Co., 106 Mass. 131.

89 See § 2873, supra.

IV Priv. Corp.-53

New York. Sanborn v. Lefferts, 58 N. Y. 179; Garrison v. Howe, 17 N. Y. 458; Hutchinson v. Young, 93 App. Div. 407, 87 N. Y. Supp. 678; Milsom Rendering & Fertilizer Co. v. Baker, 16 App. Div. 581, 44 N. Y. Supp. 999; Camp Mfg. Co. v. Reamer, 14 App. Div. 408, 43 N. Y. Supp. 1027, rev'g 18 Misc. 619, 43 N. Y. Supp. 673; Rose v. Chadwick, 9 App. Div. 311, 41 N. Y. Supp. 190; Empire State Sav. Bank of Buffalo v. Beard, 81 Hun 184, 30 N. Y. Supp. 756; Bauer v. Platt, 72

to the statutes as to false reports which impose a joint and several liability.91

Where there is a failure to file the annual report, and an action. is brought to recover from the directors a debt due by the corporation, there is not an action to recover a debt owed by such directors, but to impose upon them, as a penalty for their default, the payment of the debts of the corporation.92 Accordingly, the action should be classed as ex delicto, rather than ex contractu.93 Under some of the statutes requiring annual reports, the disregard of the statute gives rise to a cause of action for damages as for deceit and the creditors must show that they have been deceived or misied.94

In the case of false reports, the action has been held analogous to the old common-law action for deceit or fraud, the notable difference being that proof of scienter is not required.95 Also, where a false report is made, it has been held that creditors relying upon the same and making a sale in consequence thereof can rescind the sale and maintain an action of replevin for the goods.96

Hun 326, 25 N. Y. Supp. 426; Kugelman v. Hirschman, 23 Misc. 773, 53 N. Y. Supp. 1107, aff'g 22 Misc. 533, 49 N. Y. Supp. 1012.

91 Huntington v. Attrill, 118 N. Y. 365, 23 N. E. 544; Pier v. Hanmore, 86 N. Y. 95.

92 Gadsen v. Woodward, 103 N. Y. 242, 8 N. E. 653. See § 2855, supra.

93 Stokes v. Stickney, 96 N. Y. 323. 94 The action under Burns' Ind. Ann. St. 1901, §§ 5071, 5073, is for deceit. Brown v. Clow, 158 Ind. 403, 62 N. E. 1006; American Credit-Indemnity Co. v. Ellis, 156 Ind. 212, 59 N. E. 679. Under this statute the creditor must have been misled and deceived. Stafford v. St. John, 164 Ind. 277, 73 N. E. 596; Brown v. Clow, 158 Ind. 403, 62 N. E. 1006. The recovery thereunder is strictly limited to the amount of damages sustained. Brown v. Clow, 158 Ind. 403, 62 N. E. 1006.

Under original statute is was not necessary that any one should be deceived or misled. American CreditIndemnity Co. v. Ellis, 156 Ind. 212, 59 N. E. 679. And under Burns' Ind.

Ann. St. 1894, §§ 5071, 5073, failure to publish report gives rise to cause of damage for which creditors may recover. Clow v. Brown, 150 Ind. 185, 49 N. E. 1057, 48 N. E. 1034.

An action for deceit will lie though the statement required of fire insurance companies (Iowa Code, § 1714) was not published but merely on file in a public office for public purpose. Warfield v. Clark, 118 Iowa 69, 91 N. W. 833. Under this statute, as far as buying insurance is concerned, any person has the right to rely and act upon reports required thereby as fully as if they were personal communications to him, and to treat them as frauds if he was deceived to his dam. age. Warfield v. Clark, 118 Iowa 69, 91 N. W. 833.

95 Hutchinson v. Young, 93 N. Y. App. Div. 407, 87 N. Y. Supp. 678.

96 Where a certificate filed under Mass. Pub. St. c. 106, § 54, is false and made with intent to deceive the public, creditors relying thereon and making sale in consequence thereof can rescind a sale and maintain an ac