of a private corporation is not responsible for corporate funds and papers intrusted to his care, and lost without negligence on his part.1 § 267. Liability of officers on contracts. The liability of the agent or officer upon written contracts is determined exclusively by the legal construction to be put upon the language used in the contract in each case. In other cases the question of the personal liability of the officer making the contract is determined by the principles of the law of agency. Officers are not liable generally upon any contract lawfully entered into on behalf of the corporation by them in their official capacity, without circumstances indicated that they intended to assume personal liability. But where the president of a corporation procured credit for the corporation upon false representations as to its solvency, he may be held liable personally, and the case warranting, an order of arrest against him may issue. Where goods are purchased by a corporation, would have been charged for an unoccupied hotel building, and it was burned before occupancy, and the company paid the loss, and sued the agent to recover the amount so paid, it being shown that the risk assumed was within the company's business, and that it was only a question of rates, the company could not recover, without showing that it was damaged in rates, more than nominal damages. State Ins. Co. v. Richmond, (1887) 71 Iowa, 519. Cf. Holt v. Winfield Bank, 25 Fed. 4 Phillips v. Wortendyke, (1883) 31 Hun, 192. Where a corporation purchases goods, and the vendor receives the personal acceptance of the president of the company in payment, and, upon the falling due of the acceptance, takes the company's sixty-day draft in payment; and it appears that the president represented that the company could not pay the amount at once, but would 1 Mowbray v. Antrin, (1890) 23 N. be able to in sixty days; and that E. Rep. 858. 2 Roberts v. Button, 14 Vt. 195; Rochester v. Barnes, 26 Barb. 657; Beattie v. Ebury, L. R. 7 H. L. 102; Lindus v. Melrose, 3 Hurl. & N. 177. Cf. Knomer v. Haines, 31 Fed. Rep. 513. 3 Serrell v. Derbyshire &c. Ry. Co., 19 L. J. C. P. (N. S.) 371; s. c. 9 C. B. 811; Healy v. Story, 3 Ex. 3; Burrell v. Jones, 3 Barn. & Ald. 47; Tyrrell v. Woolley, 1 Man. & G. 809. the vendor made inquiries of other parties, and examined the company's business, and came to the same conclusion; and there being no evidence but that the president had good reason for stating what he did, or that the company was not solvent at the time, or that the draft was ever presented to the company for payment, it was held that there was no evidence of such representations by the president of the solvency of and the president thereof gives his personal acceptance for the purchase price, which is received by the vendor in payment, he is relieved from personal liability, if, when such acceptance falls due, the vendor accepts the corporation's draft for the amount without the president's indorsement, and surrenders the president's acceptance. Where a trading corporation, which has been in the habit of assisting persons with whom it does business, allows its general manager to transact all its business, and he indorses in the corporate name the note of one with whom the corporation is dealing, causes the note to be discounted, and pays the proceeds to the maker, he is not liable to the corporation, though it be obliged to pay the note. Agents of a corporation who, as such, receive money from persons with whom they contract, may be compelled to an accounting at the instance of shareholders, where the corporation has refused to sue. An agent of a company who the company, or that it would pay the draft when due, as to bind him personally for the debt, upon the failure of the company to pay the draft at maturity. Riverside Iron-Works v. Hall, (1887) 64 Mich. 165. G. agreed with B., a bondholder, and also the largest stockholder in a street-railway company, to take his holdings if B. would put G. into control. B. thereupon got the company to give him its notes for $15,000, which was about the amount of its pressing debts, in consideration for which he undertook to pay off the outstanding claims. These were made up in the main of mortgage coupons, and the understanding was that B. was to hold these coupons, when taken up, as collateral security, and that, as fast as the notes were paid, coupons to a proportionate amount were to be surrendered. G. was then installed as manager, and the notes turned over to him. He raised the money on them, and paid it to B., who then gave him the coupons. Of these coupons - 313 in number but 192 belonged to B.'s bonds. The remainder had been paid when presented at the company's office, but they had passed into B.'s hands without the knowledge or consent of the former holders. G. took up the notes for $15,000 as they fell due, and the company then paid him the difference between their value and that of the coupons in consideration of their surrender, it being agreed that the coupons should thereafter belong to G. absolutely. It was held that as against the other bondholders secured by the mortgage, the coupons had been paid, and that G., who had sold them with a warranty that they were a lien under that mortgage, was liable in damages to the purchaser for a breach thereof. South Covington & C. S. Ry. Co. v. Gest, (1888) 34 Fed. Rep. 628. 1 Riverside Iron-Works v. Hall, (1887) 64 Mich. 165. 2 Holmes v. Willard, (1889) 5 N. Y. Supl. 610. 3 Sheridan V. Sheridan Electric Light Co., 38 Hun, (N. Y.) 396. undertakes to bind his principal by simple contract, but without authority, binds himself.1 $268. Provisions of the New York Penal Code. A director of a stock corporation, who concurs in any vote or act of the directors of that corporation, or any of them, by which it is intended (1) to make a dividend, except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law; (2) to divide, withdraw, or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation; or to reduce the capital stock without the consent of the legislature; (3) to discount or receive any note or other evidence of debt in payment of an installment of capital stock actually called in, and required to be paid, or with intent to provide the means of making the payment; (4) to receive or discount any note or 1 Roberts v. Button, (1842) 14 Vt. 195; Owen v. Van Uster, 10 Com. B. 318. But in Holt v. Winfield Bank, (1885) 25 Fed. Rep. 814, Brewer, J. said, "I had occasion when I was on the supreme bench, in the case of Abeles v. Cochran, 22 Kan. 405, to examine with great care the circumstances under which an agent is responsible when the principal is not bound. There was in this case no misrepresentations of fact or of law made by the president. He simply told the parties he would subscribe (towards starting a creamery) if a majority of the directors assented. He saw a majority of the directors, and they assented; he then came back and subscribed in the bank's name. There were no false representations of facts, no representations of law. Every person who deals with corporations is chargeable with notice of the general scope of their powers. If he deals with an insurance company he knows that it is insurance business that that company is authorized to transact. So if he deals with a bank he knows that it is banking business that that bank is authorized to transact and none other. He has the same general knowledge that the officers of the bank have. Of course, where there is a concealment of a fact within the special knowledge of the party making the representation or making the signature, he may be bound. If, for instance, the bank had power to make such a contract as this, provided the directors assented, and the defendant had represented to the plaintiffs that the directors had assented when in fact they had not, then unquestionably a failure to hold the bank liable would cast a liability upon him; but when a man deals with an officer of a corporation, and no representations are made by that officer, and that officer simply proposes to bind the corporation, and as a matter of fact the corporation is not bound, and is not bound simply because the contract is ultra vires of that corporation, the individual making the subscription is also not bound." other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock; (5) to apply any portion of the funds of the corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock; (6) to receive any such shares in payment or satisfaction of a debt due to the corporation; (7) to receive in exchange for the shares, notes, bonds, or other evidences of debt of the corporation, shares of the capital stock or notes, bonds or other evidences of debt issued by any other stock corporation, is guilty of a misdemeanor.1 A director, officer or agent of any corporation or joint-stock association, who knowingly receives or possesses himself of any property of that corporation or association, otherwise than in payment of a just demand, and with intent to defraud, omits to make, or to cause or direct to be made, a full and true entry thereof, in the books or accounts of the corporation or association; and a director, officer, agent or member of any corporation or joint-stock corporation, who, with intent to defraud, destroys, alters, mutilates or falsifies any of the books, papers, writings or securities belonging to the corporation or association, or makes or concurs in making any false entry, or omits or concurs in omitting to make any material entry in any book of accounts or other record or document kept by the corporation or association, is punishable by imprisonment in a State prison not exceeding ten years, and not less than three years, or by imprisonment in a county jail not exceeding one year, or by a fine not exceeding five hundred dollars, or by both such fine and imprisonment. A director, officer, or agent of any corporation or joint-stock association, who knowingly concurs in making or publishing any written report, exhibit or statement of its affairs or pecuniary condition, containing any material statement which is false, other than such as are elsewhere, by this code, specially made punishable, is guilty of a misdemeanor.3 A director of a corporation or joint-stock association must be deemed to have such a knowledge of the affairs of the corporation or association as to enable him to determine whether any act, proceeding or omission of its directors, is a violation of this chapter. A director of a corporation, or joint-stock 1 N. Y. Penal Code, § 594. 2 N. Y. Penal Code, § 602. 3 N. Y. Penal Code, § 603. N. Y. Penal Code, § 609. association, although not present at a meeting of the directors, at which any act, proceeding or omission of the directors, in violation of this chapter, occurs, must be deemed to have concurred therein, if the facts constituting such violation appear on the record or minutes of the proceedings of the board of directors, and he remains a director of the company for six months thereafter, without causing, or in writing requir ing, his dissent from such illegality to be entered in the minutes of the directory. The term "director" as used in this chapter, embraces any of the persons having by law the direction or management of the affairs of a corporation, by whatever name such persons are described in its charter, or are known in law.2 § 269. Procuring withdrawal of opposition to a charter. A decision of Lord Eldon's in which he intimated that withdrawing opposition to a bill in parliament might be good consideration for a contract, has given authority to a long line of cases in which contracts between the promoters of a company and persons opposing in parliament the granting of a charter, whereby, in consideration of the opposition being withdrawn, the promoters undertake that the projected corporation shall perform certain acts for the benefit of its opponents, have been sustained, not only in equity, but at law also. Thus it has been decided that a contract of the promoters that the company will purchase certain lands if the vendor supports the bill and it becomes a law, the latter may hold the promoters liable in damages, if the company fails to take and pay for the land." Though it has also been decided that specific performance of contracts that the company is to take the 1 N. Y. Penal Code, § 611. 2 N. Y. Penal Code, § 614. Co. v. Stockport D. & W. Ry. Co., 24 3 Vauxhall Bridge Co. v. Spencer, 2 Ry. Co., 1 Am. & Eng. R. Cas. 462. Madd. 356. 4 Doe v. London & C. Ry. Co., 1 Am. & Eng. R. Cas. 257; Stanley v. Chester & B. Ry. Co., 1 Am. & Eng. R. Cas. 58; 9 Sim. 264; Hawkes v. Eastern Counties Ry. Co., 1 De Gex, M. & G. 737; s. c. 3 De Gex & S. 314; s. c. 15 L. R. Eq. 358; s. c. 4 Eng. L. & Eq. 91; Cromford & H. P. Ry. Edwards v. Grand Junction Ry. Co., 1 Mylne & C. 650. 6 Howden v. Simpson, 1 Am. & Eng. R. Cas. 326; 1 Keen, 583; 3 Mylne & C. 95; s. c. 10 Ad. & E. 793; s. c. 3 Am. & Eng. R. Cas. 294; s. c. 9 Clark & F. 61. 7 Bland v. Crowley, 6 Ex. 522; Capper v. Lindsey, 3 H. L. Cas. 293. |