§8 BULLETIN" ij.0 6, U. S. DEPARTMENT OF AGRICULTURE 
personally interested, is in the corporation, or in its receiver if the 
corporation is in the hands of a receiver, but members of the corpora- 
tion may sue the directors under such circumstances, if the directors 
then in control of the association are themselves the wrongdoers, as 
it would be folly to expect directors to institute and properly con- 
duct a suit against themselves. 13 The general rule is that no other 
persons can institute such suits. 
Can directors of an association ever be liable personally to third 
persons? If directors cause or are responsible for the association 
violating the legal rights of third persons — for instance, by fraud, 
trespass, coercion, or deceit — they are personally liable to such per- 
sons, 14 and the fact that the association may also be liable does not 
alter the situation. The doctrine is simply an application of the 
general rule that agents are liable to third persons for any invasion 
of their legal rights regardless of the liability of their principals. 
The liability of directors who sign the notes of an association is 
discussed under the heading of promissory notes. 
ADDITIONAL LIABILITIES IMPOSED BY STATUTE 
The discussion so far has been based upon the common law, that 
is, the rule applicable independent of any statute. Now, do the 
State constitutions and statutes impose liabilities upon directors of 
cooperative associations in common with other corporate directors? 
Yes ; many, if not all, of the States have provisions in their statutes 
or constitutions which impose duties and liabilities upon the di- 
rectors or officers of corporations, or both. Generally speaking, 
these provisions are applicable to the directors and officers of coop- 
erative associations. 
As illustrating the liability under statutes of directors of associa- 
tions, a case passed upon by the Supreme Court of Montana in- 
volving a cooperative association is of interest. In this case the 
directors of the association were held liable to creditors because 
they failed to file a report required by a statute of that State, show- 
ing the condition of the association. 15 
The constitution of California provides that: 
The directors or trustees of corporations and joint-stock associations shall 
be jointly and severally liable to the creditors and stockholders for all moneys 
embezzled or misappropriated by the officers of such corporation or joint-stock 
association, during the term of office of such director or trustee. 
In a case 16 arising under this provision, which was passed upon 
by the Supreme Court of California, an officer of a corporation was 
held liable to the trustees in bankruptcy of the corporation because 
he sold an automobile belonging to him to the corporation, the officer 
acting in the dual capacity of buyer and seller without disclosing 
the facts to the corporation. 
13 Browne v. Hammett, 133 S. C. 446. 131 S. E. 612 ; Morton v. Morton Realty Co., 
■ Idaho , 241 P. 1014. 
14 Frontier Milling & Elevator Co. v. Rov White Co-op. Mercantile Co., 25 Idaho 478, 
138 P. 825 ; Springinan Paper Products Co. v. Detroit Ignition Co.. 236 Mich. 90. 210 
N. W. 222 ; Seott v. Shook, 80 Colo. 40, 249 P. 259 ; Houston v. Thornton, 122 N C. 
865, 29 S. E. 827, 65 Am. St. Rep. 699. 
15 Anderson v. Equity Co-op. Ass'n, 67 Mont. 291, 215 P. 802. 
"Dean v. Shingle, 198 Cal. 652, 246 P. 1049. 
