The plaintiff, suing on behalf of himself and other stockholders of the defendant, the United States Lithograph Com*787pany, a corporation incorporated under the laws of the State of New Jersey, asked for judgment in favor of the corporation and against the individual defendants, who are directors of the corporation, to compel the individual defendants to return to the corporation the amount of certain dividends, which the directors have declared and paid out of net earnings. The complaint alleges that this corporation, while having upon its hooks an alleged surplus of $600,000 did not in fact have or make any surplus or net profits; that this apparent surplus was obtained by carrying property and accounts receivable as assets largely in excess of their actual value and in fact did not have any surplus or net profits; that the said individual defendants willfully and negligently made and declared dividends quarterly at the rate of one and three-fourths per cent on the outstanding preferred stock of said company, payable on or about the 1st day of December^ 1909, and on or about the 1st days of March, June, September and December, 1910, and on or about the 1st days of March, June and September, 1911; that such dividends in the aggregate amounted to $200,000; that the said individual defendants paid the said dividends ostensibly out of the said pretended and fictitious surplus, but did in fact willfully and negligently and contrary to the laws and statutes of the said State of New Jersey, and sections 28 and 70 of the Stock Corporation Law of the State of New York in such case made and provided, divide, withdraw and pay to the preferred stockholders of said corporation the capital stock of said corporation, and wasted and impaired the capital stock of and damaged the said corporation to the extent of about $200,000; that the payment of the said unauthorized and illegal dividends and the said dissipation and waste of the capital stock of the company has resulted in the impairment of its finances and credit, which forced the said company to place a mortgage of $1,500,000 on its property for the purpose of borrowing money with which to discharge debts for the payment of which creditors were pressing, to the said company’s special damage in the sum of $100,000, and the complaint demands judgment against the individual defendants jointly and severally for $300,000 and for other and further relief. The complaint further alleges that the corpora*788tion was organized under the laws of the State of New Jersey and had an authorized capital of $3,200,000 preferred and $3,300,000 common stock; that on April 27, 1908, the corporation filed in the office of the Secretary of the State of New York a sworn copy of its charter and a statement under its corporate seal in compliance with and as required by section 16 of the General Corporation Law of the State of New York,* in order to enable it to do business in the State of New York; that on or about April 27, 1908, it received from the Secretary of the State of New York a certificate under section 15 of the General Corporation Law of the State;* that since April 27, 1908, the corporation has continuously done business and is now doing business in the State of New York, and has maintained and still maintains offices in the city of New York; that the offices of the executive officers and the books of account of the said corporation have been and now are in the city of New York; that the board of directors, since April 27, 1908, have held and now hold their meetings in the State of New York and that those dividends were actually declared in the State of New York. The complaint further alleges that section 30 of the General Corporation Law of the State of New Jersey (Laws of 1896, chap. 185), as amended by chapter 143 of the Laws of 1904, provides: “ The directors of a corporation shall not make dividends except from its surplus, or from the net profits arising from the business of such corporation, nor shall it divide, withdraw, or in any way pay to the stockholders, or any of them, any part of the capital stock of such corporation, or reduce its capital stock except as authorized by law.” The section further provides: “ In case of any wilful or negligent violation of the provisions of this section, the directors under whose administration the same may have happened, except those who may have caused their dissent therefrom to be entered at large upon the minutes of such directors at the time, or who not then being present, shall have caused their dissent therefrom to be so entered upon learning of such *789action, shall jointly and severally he liable at any time within six years after paying such dividend, to the stockholders of such corporation, severally and respectively, to the full amount of any loss sustained by such stockholders, or in case of insolvency to the corporation or its receiver to the full amount of any loss sustained by the corporation, by reason of such withdrawal, division or reduction.” (See 2 N. J. Comp. Stat. 1617, § 30.)
The demurrer admitting the facts alleged in the complaint, the declaration of this dividend was clearly a violation of the provisions of the General Corporation Law of the State of New Jersey, and the directors of the corporation, therefore, were not authorized to declare and pay such dividend and the divi dend was, therefore, an “ unauthorized ” dividend. The liability imposed by the statute of the State of New Jersey for a violation of its statute is not attempted to be enforced in this action. The complaint does not allege damage to the plaintiff as stockholder as distinct from the corporation, nor does the complaint allege that the corporation is insolvent. Therefore, as long as the corporation had confined its operations to the State of New Jersey, its directors, for a violation of the statutes of New Jersey, could be held liable only as provided in the statutes of the State of New Jersey. The defendant corporation, however, has come into the State of New York, and as provided by law has obtained authority to do business within this State, has maintained "its offices here and has transacted its business in this State. It has, therefore, assumed the obligation to obey the laws of this State, and has subjected itself to such liability as the laws of this State impose upon foreign corporations coming into this State and transacting business here.
- To sustain this action the plaintiff must allege facts to show that under the laws of this State its directors have become responsible to the corporation to the amount of these dividends thus illegally declared in violation of the statutes of the State under which it received its right to exist and authority to do business. By section 28 of the Stock Corporation Law of New York (Consol. Laws, chap. 59; Laws of 1909, chap. 61), which re-enacted section 23 of the former Stock Corporation *790Law (Gen. Laws, chap. 36 [Laws of 1890, chap. 564; Laws of 1892, chap. 688), as amd. by Laws of 1901, chap. 354), it is provided that “ The directors of a stock corporation shall not.make dividends, except from the surplus profits arising from the business of such corporation, nor divide, withdraw, or in any way pay to the stockholders, or any of them, any part of the capital of such corporation, or reduce its capital stock, except as authorized Jsy. law. In case of any violation of the provisions of this section, the directors, under whose administration the same may have happened, except those who may have caused their dissent therefrom to be entered at large upon the minutes of such directors at the time, or were not present when the same happened, shall jointly and severally be liable to such corporation and to the creditors thereof to the full amount of any loss sustained by such corporation or its creditors respectively by reason of such ■withdrawal, division or reduction.” This provision applies solely to domestic corporations. It directly prohibits the declaration or payment of dividends except from the surplus profits arising from • the business of such corporation and is substantially the same as the provision of the statute of New Jersey, to which reference has been made. In both New York and New Jersey the declaration or payment of dividends out of the capital stock of the corporation and not out of surplus or net profits arising from the business of the corporation is illegal. The liability imposed for the payment of such a dividend upon the directors of the corporation is somewhat different, but the main object of' both statutes is to prohibit the payment of dividends out of capital and to restrict the payment of such dividends to cases where the corporation actually has surplus or net profits over and above its capital which is applicable to the payment of dividends. Section 70 of the Stock Corporation Law of New York (Consol. Laws, chap. 59, Laws of 1909, chap. 61), which re-enacted section 60 of the former Stock Corporation Law (Gen. Laws, chap. 36 [Laws of 1890, chap. 564; Laws of 1892, chap. 688], as added by Laws of 1897, chap. 384), relates to corporations organized under the laws of other States which have come into this State and which are transacting business herein. That section provides: “The officers, directors and stockholders of a foreign stock corporation *791transacting business in this State, except moneyed and railroad corporations, shall be liable under the provisions of this chapter, in the same manner and to the same extent as the officers, directors and stockholders of a domestic corporation, for: 1. The making of unauthorized dividends; * *
When this New Jersey corporation came into this State, obtained permission to transact its business here and established its executive offices here, it acquired the rights of a domestic corporation to the protection of the laws of this State, to transact its business here, and to the substantial benefits that accrue to a domestic corporation. By its voluntary act and to secure to itself the benefits of recognition herein as a corporation duly authorized to transact its business here it necessarily accepted and subjected itself to the provisions of the laws of this State in relation to the regulation of its corporate affairs and to the obligations imposed upon such a foreign corporation by the laws of this State. It subjected itself to taxation, in accordance with the laws of this State; it subjected itself to such regulations as this State prescribed for the management and conduct of corporations acquiring authority to transact business here and to the imposition of such penalties or liabilities for a violation of the laws of this State in relation to the transaction of business as are imposed by the laws of this State. It was under no obligation to come here, to transact its business here, or to subject itself to the laws of this State. But when it voluntarily acquired the right to transact business here, it necessarily subjected itself to the regulations which this State has seen fit to impose upon corporations acquiring such privileges, and its officers, directors and stockholders, who brought this corporation here and performed on behalf of the corporation the duties of their respective offices, also subjected themselves to the provisions of law regulating their conduct as such directors and officers, assumed the obligation to the State to obey its laws in relation to the performance of their duties, and subjected themselves to the liabilities imposed for a violation of the laws of this State in the performance of their duties as officers and directors.
I assume that it could not be disputed that, if the laws of this State provided that the declaration of such unauthorized *792dividends was made a crime, and the officers and directors had met and declared such a dividend in this State, they would have been subject to the penalty prescribed, although the laws of New Jersey imposed no such penalty for a violation of its laws. Whether or not the dividend was authorized or unauthorized, of course, must be determined by the laws of New Jersey, under whose authority the corporation existed. Whether or not this State could prohibit foreign corporations from declaring a' dividend in the State where it was incorporated is not the question here presented, as the State has not attempted to regulate the internal affairs of foreign corporations so far as to regulate what is and what is not an unauthorized dividend. What the State has done is "to say that the officers and directors of a foreign stock corporation, other than a moneyed or railroad corporation, shall not make dividends, prohibited by the laws-of the State under whose laws it exists; and it then provides that, if the directors of such a foreign corporation shall make such an unauthorized dividend, such directors under whose administration the same may have been declared and paid shall jointly and severally be liable to the corporation and the creditors thereof to the full amount of any loss to such corporation or creditors by reason of such withdrawal, division or reduction of the capital stock. For the purpose of enforcing that liability section 70 of the Stock Corporation Law of New Tork further provides that ‘ ‘ such liabilities \i. e., the liability prescribed by the chapter of the Consolidated Laws known as the Stock Corporation Law containing section 70] may be enforced in the courts of this State, in the same manner as similar liabilities imposed by law upon the officers, directors and stockholders of domestic corporations.” Thus, the directors of a foreign corporation doing business in this State shall be liable to the corporation in the same manner and to the same extent as the directors of a domestic corporation, which liability may be enforced in the same manner as a similar liability imposed by the law upon the directors of a domestic corporation. The liability for the declaration of an unauthorized dividend depends upon the law of this State and not upon the law of the State of New Jersey. As to what is or is not an - unauthorized dividend recourse must be had to the powers *793¡ given to the corporation by the statutes of New Jersey. If the dividend declared by the directors of a foreign corporation, organized under the laws of the State of New Jersey, doing business in this State is prohibited by the statute of the State of New Jersey, it is an unauthorized dividend, and the law of this State says that, if the directors of this corporation have declared an unauthorized dividend, they shall be hable, not as provided by the laws of the State of New Jersey, but in the same manner and to the same extent as the officers, directors and stockholders of a domestic corporation, and such liability may be enforced in this State in the same manner as a similar liability imposed upon the directors of a domestic corporation. For the declaration of unauthorized dividends the directors were jointly and severally made liable to such corporation and the creditors of such corporation to the full amount of any loss sustained by said corporation or creditors by reason of such withdrawal, division or reduction.
It is to be noticed in construing the New Jersey statute that the prohibition is directed against the directors of the corporation and not against the corporation itself. The New Jersey statute provides that the directors of a corporation shall not make dividends except from the surplus or net profits arising from the conduct of the business of such corporation. By section 28 of the Stock Corporation Law of New York the prohibition is also directed against the directors of a stock corporation, and they are prohibited from making any such dividend. So, the action of these individual defendants, acting as directors of said corporation, was in violation of the laws of the State of New Jersey, wherein the corporation was incorporated, and the laws of, the State of New York, where it had been domiciled and had applied for and received permission of the authorities of New York to do business here. Thus, it seems to me, the question that is here presented is whether the State of New York has distinctly prohibited the directors of a foreign corporation from declaring a dividend in violation of the laws of the State which incorporated it, and whether the violation of such a statute exposes a director to the liability which the law of this State imposes upon the directors of a domestic corporation for a violation of its provisions, and if the laws of this *794State have imposed such a Lability, whether there is any reason why such a law should not be enforced.
This question was examined in Hutchinson v. Stadler (85 App. Div. 424), and in that case I tried to establish that the liability of directors of a corporation neither rested upon the common-law liability of directors nor could liability of directors of corporations incorporated by another State, imposed by the laws of the State of their incorporation, be enforced in this State. But I came to the conclusion that this liability could be enforced under section 60 of the Stock Corporation Law of New Tork (Cen. Laws, chap. 36 [Laws of 1892, chap. 688], as added by Laws of 1897, chap. 384), which is now the provision of section 70 of the Stock Corporation Law of 1909. It is not necessary to repeat wh at I said in that case. The conclusion at which I then arrived has been confirmed by subsequent study as follows: *'£ Beading these two sections together, it would seem that it was the intention of the Legislature to impose upon the directors of a foreign corporation transacting business in this State a liability to the corporation for the amount of its capital divided among stockholders, when such dividend was prohibited by the State from which the corporation had received its charter.” That the State has power to impose upon foreign corporations coming into this State and its officers and directors such liability for a refusal to comply with the laws of this State is, I think, clear. (See Hovey v. De Long Hook & Eye Co., 147 App. Div. 881.)
Therefore, I think, there is a good cause of action alleged, and that the order should be affirmed, with ten dollars .costs and disbursements to the respondent.
Scott, J., concurred.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs, with leave to plaintiff to amend on payment of said costs.
See Gen. Laws, chap. 35 (Laws of 1893, chap. 687), §§ 15, 16, as respectively amd. by Laws of 1904, chap. 490, and Laws of 1895, chap. 672; now Consol. Laws, chap. 23 (Laws of 1909, chap. 28), §§ 15, 16.— [Rep.