CORPORATIONS - LIMITATION OF ACTIONS - NATURE OF DIRECTORS' STATUTORY LIABILITY FOR ILLEGAL LOANS TO STOCKHOLDERS

The creditors of a bankrupt corporation sued its directors under a New Jersey statute that made the directors liable for all corporate debts to the extent of loans illegally made to stockholders. The decision hinged on the nature of the directors' liability with respect to the New Jersey statute of limitations. The directors maintained that the action was either for a contractual debt or else for a penalty, and that in either case it was barred by limitations. Held, that the liability of the directors was neither for a simple debt nor for a penalty within the meaning of the New Jersey statute of limitations, but for a debt on a specialty.

Cole v. Brandle, (N. J. Eq. 1940) 11 A. (2d) 255.