it will be impossible to do full and complete justice to all the parties in interest, it is reasonable and just to decline to administer them at all.' It is not necessary that the procedure to enforce the liability in question should be that required by statute in this state in the case of domestic corporations, as that would frequently be impossible and would withhold the right of comity altogether. . . . It is sufficient if the method of procedure in our courts is such that no injustice is done to the defendant, or to any citizen of this state, and the established policy of the state is not interfered with."

§ 448. Penal liability of stockholder.

If the stockholders' liability is penal, it cannot be enforced in a foreign State; but the stockholder's liability, whether absolute or contingent, is usually an original one, and not penal upon any theory. 42

$449. Director's liability as surety.

The liability of a director is in almost every case direct and absolute. The creditor is entitled to sue the director as a party absolutely liable for the debt, and to recover judgment without joining either the corporation or the other directors. No difficulty of procedure is involved, therefore, and if the liability is to be regarded as a contractual one there is no reason why recovery should not be had against the director in a foreign State. But if the liability is penal, the obligation is not to be enforced outside the State which created it.

In the State courts the question, what is a penal obligation, appears to be well settled. If the directors' obligation formed part of the original contract, and is given the creditor to prevent his personally suffering a loss of his claim because of some misconduct of the director, it is remedial, and may be enforced in any State. Such a statute as that making the directors liable for debts contracted in excess of the capital

42 Flash v. Conn, 109 U. S. 371, 27 L. ed. 966.

stock creates a liability which may be enforced in any State." "Where the purpose of a statute is to furnish a remedy to creditors who have been injured by the directors' violation of the requirements of the statute, the liability of such officers is contractual, and actions upon such statutes are transitory and can be brought in any State in courts of competent jurisdiction." 11 44 Such a statute is "a measure of individual security which created rights in individual citizens." 45

"Some of the decisions by courts of other States in which a different doctrine has been held have been rendered upon statutes not containing the remedy for creditors, which is expressly provided in the South Dakota statute. That statute clearly is not penal either in its letter or intent, but it grants a right of action to private persons who have suffered pecuniary injury in consequence of certain officers of corporations violating the statute, to recover damages of those officers, the extent of whose liability is the amount of pecuniary loss sustained by such private persons-creditors of the corporation. No public wrong was committed when the directors exceeded the prescribed limit in creating debts. The creditors were the only persons upon whom a wrong was committed, and they have a remedy by virtue of the quasicontract which the directors entered into with them when the sales of securities were made, to the effect that the directors were not exceeding the prescribed limits in creating debts. The obligation which the statute imposed upon the directors not to create debts beyond a certain limit entered into the contracts of sales of securities which the directors made through their agents. The directors created the debt in this jurisdiction, and the statute of the sister State fixes the extent of their liability, which does not arise from their personal mis

43 Field v. Haines, 28 Fed. 919; Neal v. Moultrie, 12 Ga. 104; Ex parte Van Riper, 20 Wend. 614; Farr v. Briggs, 72 Vt. 225, 47 Atl. 793, 82 A. S. R. 930.

44 Tyler, J., in Farr v. Briggs, supra.

45 Neal v. Moultrie, 12 Ga. 104.

conduct merely irrespective of its effect upon the property rights of others, but, as was said by the court in Field v. Haines, 'the liability arises out of the assent to the contract creating the debt.' As was said in Wind. Prov. Inst. v. Sprague,47 in respect to directors: 'They can keep the indebtedness of the company within the limits fixed by the legislature, or they can extend that indebtedness beyond that limit and voluntarily take upon themselves the relation of joint debtors to the creditors of the company.' The liability is similar to that of sureties and guarantors, and evidently was imposed partly for the purpose of inducing the directors to perform their prescribed duties, and partly as a means of securing the creditors of corporations from losses occasioned by the acts of their officers." 48

$450. Director's penal liability.

If on the other hand the liability is imposed upon the director as a punishment for not doing his duty, as for instance, for failure to file a report or for misrepresentation contained in such report, and enures to the benefit of the creditor without regard to the creditor's injury or even to the time of contracting the debt-if in short, the liability is imposed for some act or neglect in no way connected with the contracting of the debt, the obligation is a penal one, and cannot be enforced in a foreign State.49

To the same effect are decisions of the courts that liability of the sort just described is penal, and therefore does not sur

46 28 Fed. 919.

47 43 Vt. 502.

48 Tyler, J., in Farr v. Briggs, 72 Vt. 225, 47 Atl. 793, 82 A. S. R. 930. 49 Flash v. Conn, 109 U. S. 371, 27 L. ed. 966 (semble); Mitchell v. Hotchkiss, 48 Conn. 9; Diversey v. Smith, 103 Ill. 378; Halsey v. McLean, 12 All. (Mass.), 438; Derrickson v. Smith, 27 N. J. L. 166; Stephens v. Fox, 83 N. Y. 313; Bird v. Hayden, 1 Robt. (N. Y.) 383; Woods v. Wicks, 7 Lea (Tenn.), 40. On this ground enforcement of the director's liability in a foreign State was refused in First Nat. Bank v. Price, 33 Md. 487, though in that case the liability would seem to have been purely remedial.

vive,50 and that a judgment obtained against the corporation in an action on the contract is res inter alios, and cannot be shown in an action against the director.51

8451. Rule in the Supreme Court of the United States.

The Supreme Court of the United States, however, has taken a different view of this question. It has expressed the opinion that no obligation will be refused enforcement as penal in a foreign State unless it arises out of the commission of a crime. 52 In this opinion Mr. Justice Gray followed the reasoning of the English Privy Council on a Canadian appeal,53 and held that the statutory liability of a director for filing a false return is not penal, but may be enforced by a creditor by an action brought in a foreign State.

In the Privy Council Lord Watson said of the rule that a penal obligation will not be enforced abroad: "The rule had its foundation in the well-recognized principle that crimes, including in that term all breaches of public law punishable by pecuniary mulct or otherwise, at the instance of the State government, or of some one representing the public were local in this sense, that they were only cognizable and punishable in the country where they were committed. Accordingly no proceeding, even in the shape of a civil suit, which had for its object the enforcement by the State, whether directly or indirectly, of punishment imposed for such breaches by the lex loci, ought to be admitted in the courts of any other country. In its ordinary acceptation, the word 'penal' might embrace penalties for infractions of general law, which did not constitute offences against the State; it might, for many legal purposes, be applied with perfect propriety to penalties created

50 Fisher v. Graves, 80 Fed. 590; Stokes v. Stickney, 96 N. Y. 323. 51 Chase v. Curtis, 113 U. S. 452, 28 L. ed. 1038; Miller v. White, 50 N. Y. 137; Whitney Arms Co. v. Barlow, 63 N. Y. 62.

52 Huntington v. Attrill, 146 U. S. 657, 36 L. ed. 1123.

53 Huntington v. Attrill, [1893] A. C. 150, 8 T. L. Rep. 341, reversing s. c. 17 Ont. 245, 18 Ont. App. 136.

by contract; and it, therefore, when taken by itself, failed to mark that distinction between civil rights and criminal wrongs, which was the very essence of the international rule." 54 And in the Supreme Court of the United States Mr. Justice Gray said: "Penal laws, strictly and properly, are those imposing punishment for an offence committed against the State, and which, by the English and American constitutions, the executive of the State has the power to pardon. Statutes giving a private action against the wrongdoer are sometimes spoken of as penal in their nature, but in such cases it has been pointed out that neither the liability imposed nor the remedy given is strictly penal. . . . The provision of the statute of New York, now in question, making the officers of a corporation, who sign and record a false certificate of the amount of its capital stock, liable for all its debts, is in no sense a criminal or quasi-criminal law. The statute, while it enables persons complying with its provisions to do business as a corporation without being subject to the liability of general partners, takes pains to secure and maintain a proper corporate fund for the payment of the corporate debts. With this aim, it makes the stockholders individually liable for the debts of the corporation until the capital stock is paid in and a certificate of the payment made by the officers; and makes the officers liable for any false and material representation in that certificate. The individual liability of the stockholders takes the place of a corporate fund, until that fund has been duly created; and the individual liability of the officers takes the place of the fund, in case their statement that it has been duly created is false. If the officers do not truly state and record the facts which exempt them from liability, they are made liable directly to every creditor of the company, who by reason of their wrongful acts has not the security for the payment of his debt out of the corporate property, on which he had a right to rely. As the statute imposes a burdensome liability on the officers

54 Huntington v. Attrill, [1893] A. C. 150, 8 T. L. Rep. 341.