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assignee,2 ,27 unless the assignment of the debt was absolute and for value, and was made before the default.28

A creditor is not precluded from enforcing his claim against an officer for the filing of a false report because he knew the report was false, where the statute does not require that he shall have relied on the report.29 And a creditor is not precluded from holding the of ficers liable for failure to file a report by the fact that he had actual notice of all facts which would have been stated in the report if filed.30

In some cases the directors will be estopped from denying the existence of the corporation,31 and if they have assumed to act as officers of a de jure corporation, and have contracted debts, they will be estopped from denying their official character.32

§ 2907. Enjoining creditors' actions; subrogation and marshalling assets. Officers who are liable under the statute for the failure to file reports cannot enjoin creditors' actions against them, by petitioning the court to have the creditors' claims presented to the court where a receiver for the corporation has been appointed, and by praying that they be subrogated to the rights of the creditors. Such of

ing any false certificate required by law. George Woods Co. v. Storer, 144 Mass. 399, 11 N. E. 662.

In an action by a secretary of a corporation to recover salary, where the plaintiff alleged that the annual report was not filed as required by Colo. Sess. Laws 1911, c. 102, and it appeared that the report was prepared in time to have been filed, but that the plaintiff retained the corporate seal without right, the plaintiff could not take advantage of his own Colo. wrong. Wingett v. Williams,

158 Pac. 139.

27 Knox v. Baldwin, 80 N. Y. 610; Bronson v. Dimock, 4 Hun (N. Y.) 614; Briggs v. Easterly, 62 Barb. (N. Y.) 51; Roach v. Duckworth, 61 How. Pr. (N. Y.) 128, aff'd 65 How. Pr. 303.

28 Cornell v. Roach, 101 N. Y. 373, 5 N. E. 52; Chemical Nat. Bank v. Colwell, 14 Daly (N. Y.) 361, 132 N. Y. 250, 30 N. E. 644.

The fact that a director of a corporation who held its bonds was in de

fault in filing a report does not affect the right of one to whom he has sold and assigned the bonds to sue the directors to enforce their personal liability. Morgan v. Hedstrom, 164 N. Y. 224, 58 N. E. 26.

29 Ferguson v. Gill, 64 Hun (N. Y.) 284, 19 N. Y. Supp. 149.

30 Sullivan v. Sullivan Mfg. Co., 20

S. C. 79.

31 See § 349.

32 Persons having assumed to act as officers of de jure corporation, and having contracted debts, are estopped to deny official character. Jenet v. Nims, 7 Colo. App. 88, 43 Pac. 147. See also Jenet v. Albers, 7 Colo. App. 271, 43 Pac. 452, and § 1852, supra.

In an action under N. Y. General Manufacturing Act of 1848, c. 40, § 12, as to reports, if a person voluntarily assumes the character of a trustee, he cannot be permitted to deny either as to his co-trustees, or the cestuis que trust, that he held that character, or to disavow his acts done in that capacity. Easterly v. Barber, 65 N. Y. 252.

ficers have no right to postpone the enforcement of the statute against them, and no equities can arise in their favor as against the creditors. The equitable principle as to enjoining the prosecution of numerous actions arising out of the same transaction cannot be applied in such a case, where the officers have no defense whatever to the actions at law brought to enforce their liability.33 The officers cannot assert their right to subrogation until the debts are paid in full, and while they may be entitled to subrogation ultimately, such right will not entitle them to interfere with or delay the rights of creditors, who may pursue every remedy open to them for the collection of their debts. By the same reasoning, the officers cannot ask a postponement of the creditors' rights in order that assets or securities may be marshalled.34

§ 2908. Parties-Plaintiffs. In determining who may enforce the liability of directors or other officers under the statutes as to reports, resort must be had to the particular statute involved, the terms of which are usually definite in this regard. Usually the liability is created for the benefit of, and may be enforced by, the creditors of the corporation.35 The term "creditors" is usually understood to mean creditors whose debts are within the terms of the statutes,36 and one who sues the directors under such a statute must prove that there is a valid subsisting debt due from the corporation to him.37 A creditor may maintain an action against the officers of a corporation under a statute rendering them personally liable for making a false certificate with reference to the corporate assets, irrespective of the fact

33 Jones v. Harris, 90 Ark. 51, 117 S. W. 1077.

34 Jones v. Harris, 90 Ark. 51, 117 S. W. 1077.

35 First Nat. Bank of Missoula v. Cottonwood Land Co., 51 Mont. 544, 154 Pac. 582.

36 As to what debts are within the statutes, see § 2879, supra.

Under the Massachusetts statute making officers liable for corporate debts if the certificate made as required by law is false, or if they fail to file a report, etc., and providing that, to render an officer liable, judgment must be recovered against the corporation and an execution returned unsatisfied, after which any creditor

may file a bill in equity for himself and all other creditors against all the officers liable for the debts of the corporation,-in such a proceeding, the judgment creditor, as well as other creditors, may prove any claims due on simple contract. Thacher v. King, 156 Mass. 490, 31 N. E. 648.

37 National Park Bank of New York v. Remsen, 43 Fed. 226; Jones v. Barlow, 62 N. Y. 202; Adams v. Mills, 60 N. Y. 533; Miller v. White, 50 N. Y. 137; Hoboken Beef Co. v. Hand, 104 N. Y. App. Div. 390, 93 N. Y. Supp. 834; Sherman v. Slayback, 58 Hun (N. Y.) 255, 12 N. Y. Supp. 291; Hill v. Frazier, 22 Pa. St. 320.

that he had not seen the certificate at the time of extending credit and was not injured thereby.38

The fact that a creditor is also a stockholder, or even an officer, does not prevent him from enforcing the liability of the directors or other officers, if he is in no way responsible for or connected with the misconduct or neglect of which he complains,39 also, the fact that a director seeking to hold the others liable was illegally elected is immaterial, if he acted as director.40

41

In the case of the assignment of debts or judgments, the right to enforce such debt passes to the assignee, and it has even been held that an assignee of bonds could enforce the liability of directors, where he purchased the bonds from a director who was in default for the failure to file the annual report.42 The director's delinquency

38 Heard v. Pictorial Press, 182 Mass. 530, 65 N. E. 901.

39 Weber v. Fickey, 52 Md. 500; Janney v. Minneapolis Industrial Exposition, 79 Minn. 488, 50 L. R. A. 273, 82 N. W. 984; Anderson v. Blattau, 43 Mo. 42; Sanborn v. Lefferts, 58 N. Y. 179.

Under N. Y. Stock Corp. Law (L. 1892, c. 688), § 30, a co-director who is a creditor may sue another director. 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.

40 Easterly v. Barber, 65 N. Y. 252. 41 Davis v. Mills, 99 Fed. 39; Fitzgerald v. Weidenbeck, 76 Fed. 695; Credit Men's Adjustment Co. v. Vickery, Colo. -, 161 Pac. 297; Morgan v. Hedstrom, 164 N. Y. 224, 58 N. E. 26; Cornell v. Roach, 101 N. Y. 373, 5 N. E. 52; Bolen v. Crosby, 49 N. Y. 183; Allen v. Clark, 66 Hun (N. Y.) 628, 21 N. Y. Supp. 338; Pier v. George, 14 Hun (N. Y.) 568, 86 N. Y. 613.

Under Colo. Laws, 1911, c. 102, whereby directors are made liable for all debts without restriction when they fail to file annual reports, if the claims are assigned to another person he becomes a creditor by virtue of ownership of the debts, and the remedial right to collect such debts passes

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When the debt against a corpora tion owned by a trustee is assigned absolutely for value, the assignee may proceed, on the subsequent default of the company to make a report, under N. Y. Laws, 1848, c. 40, § 12, although the assignor continues to be a trustee up to the time of the default. Cornell v. Roach, 101 N. Y. 373, 5 N. E. 52.

A cause of action under the New York statute (1848, c. 40, § 12) is given to creditors, and since the debt is assignable, the owner thereof takes as an incident thereof the right to the penalty, and is by statute entitled to maintain an action. Stickney, 96 N. Y. 323.

Stokes v.

Under a law rendering directors personally liable for failure to file an annual report, an assignment of a debt during the lifetime of the creditor passes right of action under the stat ute as an incident to the debt either to the assignee of the debt or to a receiver for the creditor in supple. mentary proceedings against such creditor. Boynton v. Sprague, 100 N. Y. App. Div. 443, 91 N. Y. Supp. 839, aff'd 183 N. Y. 505, 76 N. E. 1089.

42 Morgan v. Hedstrom, 164 N. Y. 224, 58 N. E. 26.

did not affect the salability of the bonds, and it could not affect the purchaser's rights as a creditor to enforce the statutory remedy.

In the case of a receivership, it has been held under statutes imposing a direct liability to creditors, that such creditors might proceed to enforce the liability regardless of the receivership, but in other cases it has been held that the receiver as an assignee at law might sue to recover the penalty for the failure to file reports.44

§ 2909.

Defendants.

-Defendants. Under a statute providing that all di rectors are liable, they may all be sued in one action,45 and it has been held under some statutes that it is necessary to join all the officers, and that the creditors cannot single out and sue only one, as is the rule in the case of trespassers.46

The corporation is not a necessary party when it is sought to enforce the liability of the officers or directors,47 and there is a misjoinder of parties defendant where a complaint proceeds against the corporation on a liability based on contract and also proceeds against the directors on a liability arising from tort in failing to comply with the statute as to filing reports.48

When a married woman is the officer of a corporation and is liable to creditors for the failure to file a report, her husband need not be joined as a codefendant in an action to enforce such liability. This

43 So held under Kirby's Ark. Dig. §§ 841, 848, 859, 862-864, as to the management of business by directors which provides that the president and the secretary of the corporation shall be liable jointly and severally for debts contracted, if there is neglect or refusal to make annual reports of the condition of affairs, etc. Bailey v. O'Neal, 92 Ark. 327, 135 Am. St. Rep. 185, 122 S. W. 503.

See also Fletcher v. Eagle, 74 Ark. 585, 109 Am. St. Rep. 100, 86 S. W. 810, where suit was brought by creditors in the name of the receiver without any objection being made on that account, though the case turned on other issues.

44 Boynton v. Sprague, 100 N. Y. App. Div. 443, 91 N. Y. Supp. 839, aff'd 183 N. Y. 505, 76 N. E. 1089.

In an action by a receiver to en

force the liability created, by N. Y. Stock Corp. Law (L. 1892, c. 688, as amended by L. 1897, c. 384), § 30, where a receiver's bond was filed with the clerk of the city court instead of with the clerk of the county as ordered, the court may correct such error under Code Civ. Proc. § 723, and defendants are not thereby injured. Boynton v. Sprague, 100 N. Y. App. Div. 443, 91 N. Y. Supp. 839, aff'd 183 N. Y. 505, 76 N. E. 1089.

45 M. I. Wilcox Cordage & Supply Co. v. Mosher, 114 Mich. 64, 72 N. W. 117.

46 Nickerson v. Wheeler, 118 Mass.

295.

47 Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590, 120 Am. St. Rep. 576, 80 N. E. 621.

48 Clough v. Rocky Mountain Oil Co., 25 Colo. 520, 55 Pac. 809.

rule results from the enactment of statutes providing that a married woman may be sued alone in respect to her separate property, business or individual earnings.49

A defect of parties is waived where no objection is made, either by demurrer or answer.50

Under some of the

§ 2910. Pleading-Nature of complaint. statutes, a complaint seeking to enforce the liability of directors is based upon a liability arising from tort, the penalty being imposed for the failure to perform a statutory duty.51

§ 2911.- - Allegations in general. Usually it is sufficient to aver the existence of the corporation without showing the steps taken to form it,52 and an allegation that officers of a corporation failed to make a report is the same as an allegation that the corporation failed to make such report.5 53

An averment which alleges that the directors failed, refused and neglected to make reports, is sufficient, even though it goes further than the language of the statute.54

Where the action under the statutes is founded on fraud and deceit, the creditor must allege in what manner he has been misled.55

was

§ 2912. Conclusions. An averment that if a report had been made and published, it would have shown that the corporation largely indebted and practically insolvent, states a mere conclusion.5 The same is true of an averment that the corporation became largely indebted to divers and sundry persons and was practically insolvent," also of an averment that the failure to make and publish a report caused damage to a creditor, under a statute requiring the creditor to show that he was misled.58

49 Arkansas Stables v. Samstag, 78 Ark. 517, 94 S. W. 699.

50 State v. Missouri Exploration & Land Co., 97 Mo. App. 226, 70 S. W. 1107.

51 Clough v. Rocky Mountain Oil Co., 25 Colo. 520, 55 Pac. 809.

As to the nature of the liability under these statutes, see § 2855, supra. 52 Traber v. Bright, 32 Ind. 69. 53 Bradford v. Gulley, 10 Colo. App. 146, 50 Pac. 314.

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

55 So of an action under Burns'

Ann. St. 1901, § 5091; Rev. St. 1881, § 3865. Stafford v. St. John, 164 Ind. 277, 73 N. E. 596.

Actions under Burns' Ann. St. 1901, §§ 5071, 5072, 5073, are founded upon fraud and deceit which the creditor must allege and prove. Brown v. Clow, 158 Ind. 403, 62 N. E. 1006.

56 Stafford v. St. John, 164 Ind. 277, 73 N. E. 596.

57 Stafford v. St. John, 164 Ind. 277,

73 N. E. 596.

58 Stafford v. St. John, 164 Ind. 277,

73 N. E. 596.

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