Where proceedings have been initiated for the dissolution of a corporation, on an application made by the trustees to the Attorney-General before the expiration of the twentieth day of January, the trustees are not required, in order to shield themselves from personal liability for the corporate debts, to make the annual report. First Nat. Bk. v. Lamon, 55 Hun, 414; Van Amburgh v. Baker, 81 N. Y., 46; Huguenot N. Bk. v. Stud well, 74 id., 621; Bruce v. Platt, 80 id., 379; Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473; Kirkland v. Kille, 99 N. Y., 390. The trustees are neither parties nor privies to a judgment by the creditor against the corporation. Miller v. White, 50 N. Y., 137. In an action against them to enforce their liability under this section, proof of the recovery of a judgment against the company is neither conclusive nor prima facie evidence of the debt. Id. A judgment against the corporation is not conclusive or binding upon the trustees in an action against them under this section, as to the existence of the original cause or ground of action. Kraft . Coykendall, 34 Hun, 285; Miller v. White, 50 N. Y, 137; Stephens v Fox, 83 id., 317; Rorke v. Thomas, 56 id., 565; Jones v. Barlow, 202; Esmond v. Bullard, 16 Hun, 67; aff'd 79 N. Y., 404; Whitney Arms Co. Barlow, 63 id., 62.

Under this section, a judgment against the corporation is neither necessary to the liability of the trustees nor binding upon them. Rorke v. Thomas, 56 N. Y., 565; Kraft v. Coykendall, 34 Hun, 285. Even though the trustees should participate and conduct the defense as trustees, they would not, probably, be concluded, by the judgment rendered in the action, in another suit against them personally Id.

under the statute.

An action against a trustee under this section must be founded on the original claim against the corporation, and not upon a judgment recovered against it. Esmond . Bullard, 16 Hun, 65; aff'd 79 N. Y., 404. Such judgment is not even prima facie evidence, as against the trustee, of the existence of the debt. Id.; Miller v. White, 50 N. Y., 137; Whitney Arms Co. v. Barlow, 63 N. Y., 62.

In an action against a trustee to enforce his personal liability under this section, a judgment against the company is not even prima facie evidence of the existence of the debt, as against the trustee. Esmond v. Bullard, 16 Hun, 65; aff'd 79 N. Y., 404; Miller v. White, 50 id., 137; Whitney Arms Co. v. Barlow, 63 id., 62. For an omission to file a report, all the trustees are liable under this section. Bonnell v. Griswold, 68 N. Y., 294.

The trustees are made jointly and severally liable for the debts of the company by reason of the omission to make the annual report required by this section. Hoag v. Lamont, 60 N. Y., 96.

A separate action is given to each individual creditor, by the words of this section, for his separate debt, though his is not the only debt against the corporation. Wiles . Suydam, 16 Hun, 578.

An action, under this section, may be brought against such trustees as the creditor may select, and the non-joinder of the others constitutes no defense. Halstead v. Dodge, 51 Supr., 169; Strong v. Sproul, 4 Daly, 326; Quigley v. Walter, 2 Sweeney, 175.

As many actions, under this section, can be brought against the trustees as can be brought against the corporation. Roach v. Duckworth, 95 N. Y., 391. A creditor may sue all the trustees successively until he shall obtain satisfaction, or he may at the same time commence a suit against each trustee. Id. No trustee

can properly set up the pendency of a suit, or the recovery of a judgment, against any other trustee as a bar to a recovery against him. Id. A judgment can be enforced only against the trastee who is defendant in the action. Id.

Non-joinder of a co-trustee is not a defense. Nimmons v. Tappen, 2 Sweeney,

652

The question whether the trustees will, upon payment of the corporate debt, be subrogated to the right of the creditor against the corporation was not, though raised, decided in Jones v. Barlow, 62 N. Y., 202.

Under chap. 510 of 1875, all the other trustees are bound ratably to contribute to the amount recovered against and paid by the co-trustee. Roach v. Duck

worth, 95 N. Y., 391.

An action under this section does not abate by reason of the death of the creditor, though it will abate upon the death of the defendant trustees. Zoller v. O'Keeffe, 15 Abb., N. C., 483; Bonnell v. Griswold, id., 470.

It was held, in Bank of California v. Collins, 5 Hun, 209, that an action against a trustee under this section did not survive against his personal representatives.

An action under this section is penal, and abates upon the death of either party before verdict. Blake v. Griswold, 104 N. Y., 613; Brackett v. Same, 103 id., 425; Stokes v. Stickney, 96 id., 323. See semble to same effect in Carr v. Rischer, 119 N. Y., 117.

An action, under this section, does not absolutely abate upon the death of the trustee after judgment. Carr v Rischer, 119 N. Y., 117. A reversal of such judgment by the general term does not extinguish it for every purpose. Id. Though a new trial can not be had, the judgment may be restored on appeal to the court of appeals, and the action continued for that purpose. Id.

Upon the death of the trustee, the action can not be revived against his personal representatives. Stokes v. Stickney, 96 N. Y., 323.

A failure to file the report renders the trustees liable for both existing and subsequently contracted debts. Carley v. Hodges, 19 Hun, 187. And where the failure occurs after the death of the creditor, the trustees are personally liable to his executor.

Id.

The action, under this section, must be brought within three years from the time the cause of action accrued. Merchants' Bk. v. Bliss, 35 N. Y., 412; Rector v Vanderbilt, 98 N. Y., 170; Shaler & H. Q. Co. v. Bliss, 27 N. Y., 297; Duckworth v. Roach, 81 N. Y., 49; Miller v. White, 50 N. Y., 137; Losee v. Bullard, 79 N. Y., 404.

The action, under this section, need not be commenced within three years after the debt accrued against the corporation. Duckworth v. Roach, 81 N. Y., 49. If the debt existed and might have been the subject of an action at the time of the alleged default in complying with the requirement of the statute, an action may be commenced at any time within three years thereafter. Id. See Merchants' Bk. v. Bliss, 35 N. Y., 412; Jones v. Barlow, 62 id., 202.

The statute of limitations, made applicable to such actions, begins to run only from the time a cause of action accrues, and not from the time of default in making the report. Jones v. Barlow, 62 N. Y., 202.

The fact that the trustees make a report in a year subsequent to the default, does not revive their liability. Wamsley v. Palmer, 5 N. Y. St. Rep., 307. It is simply evidence that they consider themselves as continuing in office. Id.

Neither the continuance of default in paying a debt nor subsequent omissions of the company to make annual reports can renew the liability of a trustee for such debt, or create a new right of action, after it has been barred by the statute of limitations. Rector, etc., v. Vanderbilt, 20 W. Dig., 488.

When the statute of limitations begins to run in favor of a trustee, nothing subsequent will stop it. Rector, etc., v. Vanderbilt, 98 N. Y., 170.

Nothing can be presumed against the trustees, but every fact necessary to establish their liability must be affirmatively proved. Tovey v. Culver, 54 Supr., 404.

The onus is upon the creditor, in an action under this section, to prove the default. Whitney Arms Co. v. Barlow, 68 N. Y., 34. Nothing can be presumed as against the trustee. Every fact necessary to establish his liability must be affirmatively proved, though it will necessitate the proving of a negative. Id.

Where a complaint, under this section, sets out a copy of the report as filed and published, and alleges that it does not comply with the statute, the particular defects therein need not be set forth in the complaint. Glen's F. P. Co. v. White, 18 Hun, 214.

In an action under this section, a trustee can serve an unverified answer to a duly verified complaint. Gadsden v. Woodward, 103 N. Y., 242; rev'g 38 Hun, 548. That the company is indebted to a trustee, is no defense on his part to an action by a creditor under this section. Morey v. Ford, 32 Hun, 446.

In an action under this section, it is not a good defense that the trustee is himself a creditor of the company to an amount equaling his stock. Richards . Kinsley, 27 W. Dig., 372.

A trustee, who has paid a creditor's claim after judgment in an action against him for non-filing of an annual report, can not set off such amount in reduction of his liability under section 57 of this act. Veeder v. Mudgett, 95 N. Y., 295.

In such action, a compulsory reference can not be ordered, though the only issue is as to indebtedness of the corporation on a long account. Hyatt v. Roach, I Abb.

N C., 125.

The clerk can not, in an action under this section, enter judgment on default under section 1212 of the Code. Gadsden v. Woodward, 38 Hun, 548.

In an action against several trustees, where process is served only on some of them, a recovery may be had, and judgment entered, in form, against all, but to affect only the individual property of the trustee served and the property owned jointly by all. Hoag v. Lamont, 60 N. Y., 96.

The recovery of a judgment on a corporate claim against a stockholder under section 57 of this act is no bar to an action on the same claim against a trustee under this section. Vincent v. Sands, 42 How., 231; aff'd 58 N. Y., 672.

An action against the trustees, under section 30 of this act, to charge them with the same debt, is no bar to an action to charge the stockholders under this section. Douglass v. Ireland, 73 N. Y., 100.

The mere fact of being a director and stockholder is not per se sufficient to hold a party liable for the frauds and misrepresentations of the active managers of a corporation. Arthur v. Griswold, 55 N. Y., 400. That the name of a person was published as a trustee, and a certificate of stock issued to him, are not sufficient to authorize a recovery against him for a fraud perpetrated by other agents and trustees of the corporation. Id.

§ 31. Liability of officers for false certificates, reports or public notices.-If any certificate or report made or public notice given by the officers or directors of a stock corporation shall be false in any material representation, the officers and directors signing the same shall jointly and severally be personally liable to any person who has become a creditor or stockholder of the corporation upon the faith of any such certificate, report, notice or any material representation therein to the amount of the debt contracted upon the faith thereof if not paid when due, or of the damage sustained by any purchaser of or subscriber to its stock upon the faith thereof. The liability imposed by this section shall exist in all cases where the contents of any such certificate, report or notice or of any material representation therein shall have been communicated either directly or indirectly to the person so becoming a creditor or stockholder and he became such creditor or stockholder upon the faith thereof. No action can be maintained for a cause of action created by this section unless brought within two years from the time the certificate, report or public notice. shall have been made or given by the officers or directors of such corporation.

Former section 31 amended.

See section 15, chap. 40 of 1848, and section 21, chap. 611 of 1875, now repealed. As to liability under this section, see N. Y. Law Review, No. 1, vol. 1, pp.

14. 15.

This section must be strictly construed. Torbett v. Godwin, 62 Hun, 407; 27 Abb. N. C., 444.

The liabilities imposed upon trustees for making false reports, and allowing the indebtedness of the corporation to exceed its capital stock, are in their nature penal, and each act of this character enters into and becomes a separate cause of action. Anderson v. Speers, 8 Abb. N. C., 382.

A trustee, who has not signed the report, is not liable under this section. Bonnell v. Wheeler, 3 T. & C., 557.

For making and filing a false report, the trustees only, who do the act, are liable. Bonnell v. Griswold, 68 N. Y., 294; and only such of this number as know it to be false. Id.; Pier v. Hanmore, 86 id., 95.

Director is officer of corporation. Brand v. Godwin, 15 Daly, 456.

Under section 21, chap. 611 of 1875, the term "officers," was held to include the directors or trustees of a corporation. Torbett v. Eaton, ante. Section 31 of this act, has made express mention of the directors. And by section 2, chap. 561 of 1890, the term "directors" expressly includes trustees.

A director of a business corporation is liable for all of its debts, without limit as to the amount. Richard v. Croker, 19 Abb. N. C., 73.

This section subjects the offending trustee to all the debts of the company con tracted while he is a trustee thereof, without regard to the amount of his stock and without any right of contribution. Pier v. Hanmore, ante.

A trustee is not liable, under this section, for debts of the corporation contracted before the report was made. Torbett v. Godwin, 41 N. Y. St. Rep., 323.

This section must be taken to mean that, as to debts contracted after the report is filed, the officers who signed it are liable. Torbett v. Godwin, 62 Hun, 407; 27 Abb. N. C., 444. They are not liable for claims which accrued prior to the filing of the report. Id.

Breach of contract is debt within this section. Rep., 305.

Brand v. Goodwin, 24 N. Y. St.

The complaint, under this section, must allege that the debt was contracted while the defendant was a trustee. Anderson v. Speers, 8 Abb. N. C., 382. This penalty does not attach when the stock of the corporation has been issued in payment for property, though this fact is not stated in the report. Bonnell v. Griswold, 80 N. Y., 128.

In an action under this section, where the statutory certificate states that the whole of the capital stock has been paid up in full by the purchase of a certain described patent, the question of the value of the patent, and whether it was worth the amount of the stock, is one of faet for the jury, even though such certificate in form follows the statute. Bolz v. Ridder, 19 W. Dig., 463.

Where the capital stock is actually paid in in cash, the mere fact that the corporation bought out assets of an old company at their fairly appraised value, does not call for, or authorize, a statement in the report that the stock had been paid for in property. Wickens v. Foster, 22 W. Dig., 426.

The trustees are not rendered personally liable for the corporate debts, under this section, by the mere omission to specify separately, in their annual report, the amount of stock issued for cash and the amount issued for property purchased by the company. Whitaker v. Masterton, 21 W. Dig., 209.

A report, which contains the names of persons as stockholders and states the amount of their stock as actually paid in, where in fact such persons are not stockholders at all, is false in a material representation. Brandt v. Godwin, 3 N. Y. Supp., 807. The fact that the trustee signed such report in good faith, under advice of counsel, and believing its statements to be true, is no defense to the statutory liability. Id.

In an action, under this section, in a case where the certificate filed by the trustees states that the whole of the capital stock had been paid in fully by the purchase of a certain described patent, though said certificate in form followed the statute, the question of the value of the patent, and whether it was worth the amount of the stock, is a question for the jury. Bolz v. Ridder, ante.

Directors, in issuing stock for property, must see that purchase price does not exceed fair value. Huntington v. Attrill, 118 N. Y., 365.

Its then value is measure of consideration. Id.

In judging of their knowledge and motive, they will be treated as men of or dinary discernment and sagacity. Id.

Knowledge of falsity of report is not essential to liability. Id.

Statute is constitutional. Id.

Evidence of similar property, or opinion based upon knowledge of other property, is inadmissible in action for filing false report. Ante.

This section does not limit the liability of the trustees for a materially false representation to a case in which it shall be fraudulently or knowingly made. Torbett v Eaton, 49 Hun, 209. In this respect, it differs from section 15, chap. 40, of 1848. That act contained the further requirement that the trustee signing the report, should do so, knowing it to be false. But the language of the present section follows and is identical, in this respect, with section 21, chap. 611, of 1875. Under the latter section, it was held that the liability of a director of a corporation for a false report did not depend upon his good faith in making and signing such report. Torbett v. Eaton, ante.

In an action under this section, it is not necessary to show knowledge on the part of the officer at the time of signing. Huntington v. Attrill, 118 N. Y., 365; Torbett . Eaton, 113 id., 623; 49 Hun, 209. Proof that the statement is untrue in any material representation, is sufficient. Id.

To charge a trustee with the penalty imposed by this section, some act or circumstance must be shown indicating that it was made in bad faith, willfully, or for some fraudulent purpose, and not ignorantly or inadvertently. Bonnell v. Griswold, 89 N. Y., 122; Pier v. Hanmore, 86 id., 95. This is a question of fact, which must be passed upon, before the liability can be adjudged. Id. The necessity of such proof is confined to cases where it is possible for the trustee to sign a false, under the belief that it is a true, report. Id. The penalty follows an actual, and not a constructive falsehood. Id. Butler v. Smalley, 101 N. Y., 71. Liability under this section does not attach, when a report is made and filed, in terms complying with the statute, though some of the material representations therein are untrue. Bonnell v. Griswold, ante; Pier v. Hanmore, ante.

Where the trustee should knowingly state that a larger amount of capital had been paid in than had in fact been paid, or state the indebtedness of the company at less than the actual amount, it can hardly be necessary to prove the purpose for which the misrepresentation was made, or that any particular fraud was intended. Pier v. Hanmore, ante.

When the knowledge of the trustee is not directly proven, but is matter of inference, the existence of a guilty motive or purpose may be material to establish the scienter.

Id.

To render the trustees personally liable under this section, it must appear that they have signed the report with knowledge that it contained a materially false representation, and that it was made in bad faith or for some fraudulent purpose. Whitaker v. Masterton, 21 W. Dig., 209; Bonnell v. Griswold, 80 N. Y., 128 Pier v. Hanmore, ante; Bonnell v. Griswold, 89 id., 122. See Glen's F. P. Co. v. White, 18 Hun, 214; Wickens v. Foster, 22 W. Dig., 426.

A finding that a trustee signed the annual report in bad faith, with knowledge of its falsity, was held, in Blake v. Griswold, 103 N. Y., 429, to be justified by the facts.

If a trustee acts honestly and in good faith in making the statement, believing it to be true, this will exonerate him from liability under this section. Taylor v. Thompson, 66 How., 102; Lake Sup. I. Co. v. Drexel, 90 N. Y., 87.

In an action under this section, an allegation in the complaint that the trustee knew the report to be false when he signed it, is sufficient. Taylor v. Thompson. 66 How., 102.

False statement in annual report of corporation as to capital paid in, not affect ing judgment or conduct of persons dealing with it, is not material false statement, rendering officers signing report liable for its debts. Walton v. Goodwin, 58 Hun,

87.

In an action against a trustee to charge him with liability under this section, a judgment, recovered against the corporation is neither conclusive, nor prima facie evidence of the debt. Torbett v. Goodwin, 62 Hun, 407; 41 N. Y. St. Rep., 323; 27 Abb. N. C., 444.

Judgment against company is not conclusive in action against director. Brand v. Goodwin, 24 N. Y. St. Rep., 305.

In action against trustees for not filing report, stock transfer book is evidence of transfers of stock and dates thereof. Kraft v. Coykendall, 26 N. Y. St. Rep., 79. An assignee of a claim against the corporation may maintain an action against a trustee thereof under this section. Pier v. George, 86 N. Y., 613.

The penalty is recoverable by an assignee of the claim, it seems, though not by a legal representative of a deceased claimant. Torbett v. Godwin, 62 Hun, 407; 27 Abb. N. C., 444.

The liability created by this section abates on the death of the original creditor of the corporation and can not be revived in favor of, or prosecuted by, his personal representatives. Boyle v. Thurber, 50 Hun, 259; Brackett v. Griswold, 103 N. Y., 425; Blake v. Same, 104 id., 613.

The action under this section abates upon the death of either party. Blake v. Griswold, 104 N. Y., 613. But it does not abate in case the plaintiff dies after the rendition of the judgment. Id. In such case, the personal representatives are entitled to be substituted in his place. Id.

The death of the creditor, pending an action against the trustees under this section terminates the action. Brackett v. Griswold, 103 N. Y., 425. The action does not survive to his personal representatives. Id. Blake v. Griswold, 104 N. Y., 616; Whitaker v. Masterton, 104 id., 280; Hegerich v. Keddie, 99 id., 258. So far as the action is for a conspiracy to cheat or defraud, it involves an injury to property rights and survives. Brackett v. Griswold, ante.