R. H. F, VARIEL ATTORNEY AT LAW- LOS AHSBLBB. «AL. THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW A TREATISE ON STOCK AND STOCKHOLDERS, BONDS, MORTGAGES, AND GENERAL CORPORATION LAW, AS APPLICABLE TO RAILROAD. BANKING. INSURANCE, MANUFACTURING, MINING, TELEGRAPH, TELEPHONE. EXPRESS, GAS, WATER- WORKS, COMMERCIAL, TURNPIKE, BRIDGE, CANAL, STEAM- SHIP, AND OTHER PRIVATE CORPORATIONS. BY WILLIAM W. COOK, Ml Of the New York Bar. TBXRD EDITION". VOL. I. CHICAGO : CALLAGHAN AND COMPANY. 1894. T CTl37c 4 COFYBIGHT, 18H By WILLIAM W. CO >K STATE JOURNAL PRINTING COMPANY, Printers and Stereotypers, MADISON, wis. TO THE HONORABLE THOMAS M. COOLEY, LL.D., PROFESSOR, AUTHOR AND JUDGE, WHOSE PRE-EMINENT ABILITY, UNTIRING RESEARCH, PROFOUND LEARNING AND EXALTED CHARACTER HAVE SECURED FOR HIM AN IMPERISHABLE FAME AS A JURIST, UNDER WHOSE INSTRUCTION THE AUTHOR ACQUIRED A DESIRE TO SEARCH OUT AND MASTER THE PRINCIPLES OF THE LAW, THIS WORK IS RESPECTFULLY DEDICATED. G6784 * 2 PEEFACE TO THIRD EDITION. This edition contains double the amount of material found in the second edition, and has increased the size of the work to two volumes. The subjects covered by the additional material are important and extensive. Bonds, mortgages, deeds of trust, foreclosures, re- ceivers and reorganizations are treated in several chapters in detail and with full notes. Xew chapters on the law peculiar to steam railroads, street railroads, gas, telegraph, telephone, electric light, plank-road, and other corporations owing a duty to the public, have been added. In addition thereto a comprehensive synopsis of the constitutional and statutory provisions of the various states so far as they atfect corporations is contained in this edition. Several chapters of the second edition have been rewritten, nota- bly the chapters on corporate meetings, corporate elections, divi- dends, preferred stock and "watered" stock. Moreover, the nu- merous cases and new principles of law that have arisen on the .subject of corporations during the past four years have been em- bodied in this third edition. The large sales of the second as well as first editions indicate that the original plan of the work — a statement of general principles in the text and an exhaustive analysis of the cases in the notes — is satisfactory to the profession. In this belief the author has pur- sued the same mode of treatment in the expansion of the work and the inclusion of new subjects. William W. ('wok. New York, January 9, 1894. PREFACE TO SECOND EDITION. The second edition of' this work is a treatise on the law of cor- porations as approached from the stand-point of stock and stock- holders. The first edition has been revised, enlarged, extended, and in large part rewritten. No substantial part of it has been omitted, and the general arrangement, order and section numbers have been re- tained. But the notes have been enlarged by all the recent cases, the text has been compressed into brief forms of expression, and many chapters have been entirely remodeled. In addition to this a large number of new subjects and princi- ples are given, so as to make the book a complete work on corpora- tion law. Among these new subjects may be mentioned the power of a corporation to hold land; to make mortgages; to borrow money; to loan money; to issue bills and notes; to issue debent- ures; to issue bonds secured by mortgages; to assign for the benefit of creditors; to give preferences; to exercise the power of eminent domain; to sell all its property; to consolidate, merge, amalgamate, absorb and lease; to enter into pools; to limit its lia- bility; to make traffic arrangements; to make discriminations; to maintain monopolies and exclusive privileges; to become a partner in a copartnership; to guaranty the bonds or stocks of another corporation; to be an accommodation indorser; to undertake a new business; to be an executor or trustee; to pay for lobbying, and various other acts. A detailed statement of the law is made as to the power of the directors, executive committee, president, sec- retary, treasurer, cashier, general manager, superintendent and other agents to act and contract for the company. The proper method of executing corporate contracts and the liability of officers on irregularly-executed contracts; the character and use of the cor- porate seal; the law as to notice and admissions; the liability of the corporation for torts; and the rules, regulations and complica- tions of directors' acts and meetings, are fully explained. Irregular incorporations; lapses of charters; misfeasances, malfeasances and non-feasances; and dissolutions of corporations, with all the inter- ests and complicated questions connected therewith, are examined. viii PREFACE TO SECOND EDITION. "Trusts," the recent combinations in trade, are explained and their legality considered. This edition also treats of foreign cor- porations, with their various rights, disabilities and liabilities, and of the process, pleadings, procedure and service in suits by and against foreign and domestic corporations. The author believes that the law of stock and stockholders leads naturally up to and includes the whole law of corporations. Be believes that the difficulty in understanding corporation law is due largelv to the method of studying the subject. That legal fiction, that intangible existence, that imaginary bodv called the corporation, is not easily understood, and is not always dealt with intelligently. It is believed, however, that be who under- stands the rights, duties, powers and liabilities of stock and st< holders will have little difficulty in understanding the nature corporations, the powers of corporations, t; corporate creditors, and the various peculiarities of corporation law. A com- plete exposition of the law of stock and Btockholdi exposition of the law of corporations. The remarkably rapid growth of corporations during the \ twenty-five years has created a body of law which ning a system of juris] rudence in itself. In the i 11 and Ames, corporation law was just arising, and in tie tt work it was impossible to give the infinite detail and subdivision of prin- ciple which now exist. In these latter days, however, a text-book on corporation law must give more than general principles and un- digested citations of cases. It must explain theapplii 3 of the general principles; subdivide the topics; evolve rules from quently-recurring facts; point out the difficulties, rights and rem. edies in the separate cases as they have arisen; and give the j I of the decisions themselves. The write'r has sought to make a clear, practical ami com pi presentation of the subject for the every-day use of the bench and bar. The subdivisions, the chapter subjects and the section head- ings are made so as to aid in finding, without delay, the point of law in which any one may be interested. These divisions ami head- ings have been built up from the cases themselves, and from a study of the subjects which arise most frequently in the courts and in business transactions. The writer has carefully avoided all theories, long discussions, and, as far as possible, the use of t> nical language. He has not hesitated to express his opinion when the occasion seemed to warrant it, but his sole object has been to give a complete and concise statement of the law governing the subject. The plan of the work is original, and this volume is the result of PEEFACE TO SECOND EDITION. JX a loner and conscientious studv of the sources of authority — the cases themselves. These have been systematically examined and collected, and made the groundwork of the subdivisions of the book. A special effort has been made to develop fully those subjects which are litigated most often in the courts, and which occasion doubt, difficulty, danger and lawsuits to corporations and stock- holders. The number and complexity of the decisions have caused some confusion and doubt, even in the mind of the bench itself. Out of the chaos of material which lay scattered throughout many thousands of reports, the writer has sought to construct a treatise that will be a practical guide on all subjects relative to stocks and corporation law. A special effort has been made to explain fully those principles which are of importance and constant interest and use to lawyers, investors, directors, stockholders, corporations and the general public. Copious notes are given for the purpose of illustrating, fortify- ing and explaining the text, By this method it is believed that the . thread of the subject is preserved in the text, and the mind of the reader not distracted by a mass of details. On the other hand, by the notes the subject is still further developed, and the application of the principles to particular facts fully set forth. The dates of the cases are given in the notes. It is believed that thereby the relative importance of a given case can be more easily ascertained and determined. It is also worthy of note that the dates of the cases become of great use when there is a conflict of authority. 15v the dates also the important facts are brought out that the law of stock and stockholders and of corporations is of verv recent origin; that most of the cases have arisen within the past fifty years; that the law relative to stockholders' actions against directors has arisen within thirty vears; and that we are as yet only on the threshold of that new jurisprudence which, though now in a formative state, is for the future to regulate the great subject of corporations having a capital stock. In the composition of this work the author has been burdened with an abundance rather than a paucity of material. The law of corporations, when explored in all its branches and details, is a vast subject. There are over twelve thousand cases cited in this vol- ume. Although it is difficult to exhaust in a single volume the law contained in so great a number of cases, yet a conscientious effort has been made to do so. The generous reception, given to the first edition, which was double the number usually printed, is appreciated by the author. The mode of treatment appears to have been satisfactory, and it X PREFACE TO SECOND EDITION. has been retained in the present enlargement of the work to the whole Geld of corporation law. If an equally favorable judgment is passed upon the second edition, it will be a reward commen- surate with the labor and thought involved in a work of this mag- nitude. William "W". Cook. New York, November 4, 1S89. CONTENTS. PART I. ISSUE OF AND LIABILITY ON STOCK CHAPTER I. Sec. Definitions and Scope of the Work 1. CHAPTER II. Stock May be Issued Legally for Money or Property or by a Stock Dividend 16- CHAPTER III. •• Watered" Stock — Stock Issued Illegally for Money, Property or by a Stock Dividend — It is Then Called " Watered " or Fictitiously Paid-up Stock 28 A. Nature of Watered Stock. B. Watered Stock Issued lor Cash. C. Watered Stock Issued for Property or Construction Work. D. Who May Complain and Against Whom Complaint May be Made. E. Issue of Watered Stock by a Stock Dividend. CHAPTER IV. Method of Subscribing — Parties to Subscriptions — Action to En- force Subscriptions 52 A. Methods of Subscribing. B. Who is Competent to Subscribe for Stock. C. An Action Lies to Collect Subscriptions. CHAPTER V. Conditional Subscriptions 77 CHAPTER YI. Municipal Subscriptions 90 CHAPTER VII. Calls 104 Xil CONTENTS. CHAPTER VIII. Sec Forfeiture of Shares for Non-payment 121 CHAPTER IX. Defense of Parol Agreements and Fraudulent Representations In- ducing Subscriptions for Stock 135 CHAPTER X. Miscellaneous Defenses to Subscriptions for Cap; . . . MM CHAPTER XI. The Stockholders' Liability to Corporate Credit n Unpaid Subscriptions 199 CHAPTEE XII. Statutory Liability of Stockholders to < tors . SIS A. Extent of the Liability. B. Enforcement of the Statutory Liability. CHAPTEE XIII. Liability of Stockholders Where tiik Supposi d In* Not Protect Them, and fob Assessments i the I'm; Vai of the Stock CHAPTEE XIV. Liability of Pledgees, Trustees, Executors, Agents, etc, . . 2H CHAPTEE XV. Liability as Affected by Transfers 2'<\ CHAPTEE XVI. issue of Preferred Stock and Stock Upon Which Interest is Guar- antied CHAPTER XVII. Increase and Reduction of the Capital Stock and Overisse. Stock 379 A. Legal Iucrease or Reduction of Capital Stock. B. Illegal Iucrease of Stock, Being Overissued Stock. CONTENTS. Xlll PAET II. TRANSFERS OF STOCK. CHAPTER XVIII. Sec. Legacies and Gifts of Stock 299 CHAPTER XIX. Who May Buy and Sell, Stock 309 CHAPTER XX. Sales of Stock — The Formation and Performance of the Con- tract — Gambling Sales — Fraudulent Sales . . 331 A. Formation and Performance of Contracts to Purchase Stock. B. Gambling Sales of Stock. C. Fraud as Affecting a Sale of Stock. rilAPTER XXI. Sales of Stock — Sales While Suits Are Pending Affecting that Stock; Forgery; Lost and Stolen Certificates of Stock; Confiscation of Stock 358 A. Purchases Without a Certificate of the Stock. B. Sales of Stock While Suits Are Pending Affecting that Stock. C. Forgery. D. Stolen or Lost Certificate. E. Confiscation of Stock. CHAPTER XXII. Sales of Stock — Formal Method of Transferring Certificates and Registry Thereof 372 A. Method of Transferring the Certificate. B. Method of Registering a Transfer of Stock. C. Rights and Duties of the Corporation in Allowing or Refusing Reg- istry. CHAPTER XXIII. Rules for Corporations in Regard to Refusing or Allowing Reg- istries of Transfers of Stock 393 CHAPTER XXIY. Non-negotiability of Stock and Dangers Incurred in the Purchase of Certificates of Stock 411 A. Non-negotiability. B. Dangers Incurred in Purchasing Stock. Si 4- xiv TAUT HI HBCELLAN1 - UOHB :i & CHAPTEB XXV. CK-BROKKRS 4KB 1 CHAPTER XXVI. DOES A" ...••• ell \ri vn. l.hvv 09 An v CHAPTER XXVIII. n < 1 1 A I \ \ I X • i • • (HAi CHAPTER XXXI. , Rs'Dnrraro rin • Ml . m CHAPTER XXXII. Divmmofl • CHAPTER XXXIII. I.n ■••••' < HAPTER XXXIV. Xjj ... Ml \. S XV CHAPTER XXXV. Sec, Forms 01 Aon «s and Measure of Damages \Vhere a Stockholder Baa l pan bd op His 3tOck CHAPTEB XXXVI. STOCKnOLDi .I:.-" M - ( '.ALLS, TIME, PLAGE AND CLASSES OF MEETINGS. 588 CHAPTER XXXVII. TIONS AND OTHEB COEFOBATI Ml ! UN' 602 CHAPTEB XXXVIII. DlSSOLl AMi II. I ■RPORA1. . . .028 PART IV. n:\ri - -INTRA VIRES ACTS — NEGLIGEN< E D IRREGULAR 3 01 I'll:! "» TORS, BTOCKHOLD] - PROMOTERS AND A( CHAPTEB XXXIX. UTO THIRD 643 <\ Pui pose of I ct I [erein. H. Prau ; f a Majority <>f the stc.rk ! i >r Third I Remedy Which a Stockholder May Bring Suit ( HAPTEB XL Ultra Vnu In Otheb Words, Acts and Con- tracts \Yhi> ii Ari thi. Charteb Powers of the Corp k>rs ob Sto kh i 00i CHAPTEB XI. I. Intra Vibes a re— Is Other Words, Acts and C tra< ts \\"i 1 1 h Abb Within the Charter Powers of the Corpora- tion. Direct eholders 683 CHAPTEB XLII. Stockhoi Actions to Bold phi l kectors Liable for Negli- qbncb in the Discharge op Their Duties 701 xvi i K.vrs. CHAPTER XIJII. Tur. POWER OF VARIOUS I Ml [I i BS AND AGl p. i) Tin: filoi I K " POB .1 B M T8 U>MISS1 IN A. 1'o^r ol Pron Stockholdi re, Dir< i I Pri sident, iry, Tr ' J Miscellam o ats to « B. The I orno ol < or) orate ' antra* I ning and Sealing — Liability of Offl< u- l.nlv Executed. C. Ado of < Mfii ■ CHAPTER XI. IV. Ratification, Acqi d Ai nos Hi BEHI (IIAI'l 1.1; XI. V. I'ai: III s PLEADING I N ,; ' " » I RPOEAT] ■ ' : \l ... A. Suits by Stockholders in Behalf <>f t! B. Suite bj oi PART \ Bi >NDS, MORTGAGES, FORI I I 0SURE8, REC1 l\ NI- CHAPTER XI .VI. & ... . [APTER XLVIL MORTG LQES - POWEB TO .... \. l '.>w er t" Make M< • I B. I '■ Tin and Proi isions "i the Mori D I I ( '. Authoi CHAPTER XI. \ III. Trustees \m' Bonds - Rembdh lob .... A. The Position, Duties and Liabilities of Trust |:. The l'- mediee of th< 1 1 usl ; I ■ ;mil Taking I >n. < '. Bondholders' Suits to I ind to Pro! I iit.-. CONTENTS. XV ii CHAPTER XLIX. Secl The Foreclosure of Mortgages by Suit in Equity . . . .832 CHAPTER L. Priority of the Mortgage Lien Over Other Liens, Mortgages, Deeds, Leases, Claims, Judgments, Debts and Liabilities . . .851 CHAPTER LI. Receivers 862 A. Appointment of Receiver — Effect as to Title to the Property; B. Suits and Claims by and Against Receivers. C. Duties and Powers of Receivers. D. Liability, Compensation, Accounts and Discharge of Receivers, CHAPTER LII. Purchases and Reorganizations 883 PAET VI. RAILROADS, STREET RAILROADS, TELEGRAPH, TELEPHONE, GAS, ELECTRIC LIGHT, WATER-WORKS AND OTHER QUASI-PUBLIC CORPORATIONS CHAPTER Lin. Railroads 891 CHAPTER LIV. Street Railroads 912 CHAPTER LV. Telegraph, Telephone, Gas, Electric- Light and Other Quasi- Public Corporations 922 PAET VII. STATUTORY AND CONSTITUTIONAL PROVISIONS REGULATING COR- PORATIONS. CHAPTER LVI. Statutory and Constitutional Provisions of the Various States of the Union in Reoaiu) to Corporations 934 B xv iii CONTENTS. CHAPTER LYII. The Tebbjtories — Statutory Provisions Affectlno Corporations . 980 CITAPTER LVIII. The Federal Government — Constitutional and BlATDTOSf Vn->-- IONS AFFECTING CORPORATIONS 9 ^» TABLE OF CASES. [The references are to the foot-paging. J A. Abbey v. Chase, 1104 Abbey v. Long; Abbey v. W. R, eta, Co., 3851 Abbot v. American Hard Rubber Co., 821. B59, 954, 1055, 1146. Abbott v. Aspinwall, 388, 388, 384, - Abbott v. Baltimore, etc, I Abbott v. Cobb, 668, 1036 Abbott v. Bapgi od, 1089, 1047. Abbott v. Jewett, I Abbott v. Johnstown, etc., EL R. R., 1498, 1586 Abbott v. Merriam, 1 1 Abbott v. N. m fork, eta, R R. H bott v. < iin.ilia Smelting < 'o., 308. Abe chran, 416 Abels v. M< Kean, 663, 671. la v. Mobile, etc., Co, 831. Abercorn's, Marquis of, Case, 88. Abercrombie v. Riddle, ' 10, 7 r>. Aberdeen i:'y Co. v. Blaikie, 903, 916 Abratb v. Northeastern R'y Co., 205, 1010. Academy of Music, Appeal of, 536 834. Accidental Insurance Co. v. Davis, 197. Areola v. ('.. B. & Q. R R, 1016 Achlin v. Paschal, 889. Ackerman v. Emott, 134. Ackerntan v. Halsev, 1033. Ackerson v. Erie R'y Co., 1010, 101 1. Ackerson v. Lodi, etc., R R, 1323. Adair v. Brimmer, 434. Adamantine Brick Co. v. Woodruff, 1056 Adams v. Creditors, 1100. Adams v. Cross, etc., Co., 939, 1167. Adams v. Empire, etc., Co., 966. Adams v. Fort, etc.. Bank, 376. Adams v. Goodrich, 273, 274. Adams v. Hannibal, etc., R R. Co., 1113. Adams v. Kehlor. etc., Co., 939. Adams v. Lamson, etc., Co., 1166. A. lams v. Mills. 1084. Adams v. Nashville, 703, 706. Adams v. Rivers, 1631. Adams' rase, 97. 313. Adams Exp. Co. v. Denver, etc., R'y Co., 1183. Adams Exp Co. v. Hoeing, 1579. Adams Exp Co v. Holmes, 1579. Adamson v. Jams. 567. Adamsori's < lase, 159. Addaras v. Ferick, 338. Adderly v. Storm. 15, 880, 850, 353,, 58a Addiev. Western J '.auk, etc., 913. Addison's Case, 313, 386 Addli stone, eta, Co., Re, 46. Adelbert College, etc., v. Toledo, etc, R'y, 1838. A elk ins v. Thornton. 385. Adler v. Kansas, etc.. R R. 1010. Adler V. Milwaukee Pat, B. Mfg. Co., 160, 355, 356, 357, 356 261. Adley v. Reeves. 17::. Adley v. Whitstable Co., 183. 1023. 1035. Adm'r of Bigelow v. Cong. Society of M.. 814 Adolph v. Central Park, etc., R. R Ca, 1576 Adriance v. Roome, 955, 1089. .Etna, etc., Ins. Co. v. Middleport, 153. JEtna. Ins. Co. v. Harvey, 1002, 1005. .Etna Ins. Co. v. Shields, 201. yEtna National Bank v. Charter Oak L. I. Co., 1243. African, etc., Church v. Conover, 005. Agar v. Athenaeum Life, etc., Co., 1108, 1254. Agate v. Sands, 300. Aggs v. Nicholson, 1105. TARI.K OF CA [TTtr references (ire •nltural Bank v. Burr, Agricultural Hank v. Wilson, 87, 529. Lgricurtural Branch R B Win- cl Agricultural C. L M, - cultural, • i Aiken r. Western R R, Aikin v. Wasson, I Ait- v. Bit Akin v. Blanchard, 188, 11 I \ ibama Natl Hank v. Mali.-r. 3 Albert t Clarendon, ■ 1 115, Albert \ S 3 MI - IL Albion - Martin. 81 I Albright X 1 \»ociation. AMebert « L141, 16C Alden e. Boston, -•!•• . B. R. 1 1 Alderman Flnley, l II Aldhara v. Brown, 1040, 1041. II. Aldrich r. Ai • ich v. Drury, l Al.iii.h v. Press Printing I x index v. Atlanti l: R. 1914, to the foot-paging.] srney, 1016. trown, 1 Alexand luldwell, 1084, 1119 Kander v. Centra) R R. 1980, I •'J. i ; . - ircy, 194,888, 1188, mi. 1144, 1- Ale\ tb, 880,0 tnder v. Willia i ind< r v. Worn Alexandra ; Ini Jiam, KJ84. Alfoi - - \ A If. rd v. Mill< v. . All E All v Work-hoOM v.Moore, Alleghei '^ • k \ i 19, 3 Allen v. Baikiinj Vss'n ><86. .188. Allen v. ii.uk. All. Allen v. i>.,; 1190, 1197, :. v. D} 208, k. 984. All Allen v. Herrick, Allen r. Hill, 83 - Allen v. Inhabitant- of -bay. 188, 139, All . Ry. 875. Allen v. I Allen v. oa, 181. u v. M '•">!. TAB I L OF CASKS. XXI [The references a re Allen v. IfcConilu T7. Allen v. IfcKean, 6 - Allen v. Montgomery R R Co, 175. 176, 177,2: J55 860, 843, 39, 136a Allen v. X. J. Southern R R Co, 1144. 1145. 1158 Allen v. Fogram. -Jl.::. 470. Hi - wall. 384 88 Allen v. South Boston R R. 396, 5 ' Allen v. Sullivan, etc.. R R. 10 - Allen v. T< ras. etc., R*yCa, 1183. Allen v. Walsh, 98 Allen v. Wilson. 1125, 1130, 115 Allen v. \Y . t Co, 967. AUentown v. Western Union T. 15! AUentown. First Natl Bank of. v. Hook. ! Aller v. Town of Cameron. s 7i». Allerton v. Allerton, Hi Allerton v. Lai _ AlUbone v. Bager. 104. 243, 336. Ailing v. Ward, 42, 815, 816, 337, 344 Allin's Case, 359. Allis v. Jones - 87, 1263, 18 Allison v. Coal, eto.. Co., 1131. Allison v. Versailles, eto, R R Co.. 134. Allison v. Wood, 466, Allman v. Havana R & E. R R Co, O OP Almado, eto, C o.. Re, 46. \M. eto.. Co. \ Alta, . 1294 Alt. San Autonia. 1397. Alvord v. Syracuse Saw Bank, Alward v. Holmes. 992, Amador, etc, Co. v. Dewitt, 1529. Ambergate, Nottingham ft Boston ft Bast rn K'y Co. v. Mitchell, 157, 162, 394 69 Ambergate K'y Co. v. Noroliff. 167. Ambrose, etc, Co, Iu re. 43. 013. Ambrose Lake T. ft G Mia Co, Re. 46 American Academy, etc.. Appeal of, 15. American Bank v. Faker. 16, American Bank v. Mumford, 757. American Bible Soc, v. Marshall. 990. 1001. American Bible Soc. v. Noble, 000. to the foot-paging.] American Bridge Co. v. Hetdelbach, 1317. 1300. 14' American Button, etc.. Ca v. Moore. K" . American Can Co. v. Jacksonville, etc.. K'y. 1300. 1423, 1434. American Coal Co. v. Alleghany County. American Coal Co, v. County Comm'rs, 754. American Colonization Soc. v. Cartrell. Ill American, etc.. v. Chicago, etc.. 1023, American, etc.. Bank v. Oregon, etc.. Co., 1077. American, etc.. clans v. Merrill. 1014. American, etc.. Co. v. Bayless, 51, 509, American, etc.. Ca v. Conant, 117' American, etc.. Ca v. Kentucky. 1288, 1304. American. • v. Klot/, 040. American, etc.. Ca v. Linn. 835, 1 1-15. 1147. American, etc.. Co. v. Manrer, American, etc.. Ca, Appeal of, 58S American, etc.. *.'o.. K.\ parte. 1109, American, etc.. Ins, Co. v. 0« in American, etc.. K'y v. Miles. 923, 1083, 148 American, etc.. Tel. Ca v. Middleton, 151 American Exp. Ca v. Johnson. 1170. rican Exp, Ca v. Patterson, 1009, 1530. American File Ca v. Garrett, 338, 1231. American Ins, Ca v. Butler. 1002. American Ins, Ca V, Oakley. 1078, 1093, 1005. American Ins. Ca v. Welhnan. 1002. American Ins. Ca v. Yost. 889. American Life Ins, Ca V, Dobbin, W9. American Loan ft T. Oa v. East, etc. R R. 1003, 133,0. 1351. 1400. American L. ft T. Co. v. St. Louis, etc.. K'y. 10SC. 1215. American L ft T. Co. v. Smith. 1504. American I- ft T. Ca v. Toledo, etc.. RV 848. 1155. 1209, 1336, 1400. XXII TABLE OF CA [The reference* are American Mortg. Ox r. T.nnille, 993. American Nafl Bank v. Oriental Mills, American P. Trust v. Taylor, etc. MA American Paper Bag Co. v. Van ui.k. 1' American Pi rs Co. v. Norrii American Primitfri S ty v. Billing, American Railway Frog Oar. Ha 1: Amerian Etapid Tel Ca v. Conn. T. ■!.- phone Ca, in Ball oheimer, 812. Ami - Ik Works, Tin man, Ami American Tube Work 01. American ' American U. T. < '••. r. Weati ra American Water-work 1062, i An Amee w. K ins its I ' Am- ce Baperioi MO. Amee i Vf.O •■■ . R B . Ames v. Tru 1 110, I I Amee v. Williamson, 7 15. Amesbury r. B w ditcl 1024 Aroey r. Alleghany City, 142, 145, \i Amherst Academy v. Cowls, 28, 112, l 24 A mli. Tst Bank v. Root, 101 Ammont v. Pittsburg T. Co, I Ammont v. President, etc., 1170. Amory r. Lawreni Amory v. aferryweather, 177. Amoski 1 Bank v. To* n i tawa, 188, 18S. Amsden v. Norwich, etc., Ins. Soc., 1181. v. 1 Nibuque, 1240. onda Tribe r. Murbach. l to thr foot-paging.] Ancient Club v. Miller, 5 Anderson v. Beal, I Anderson r. C B. el .. R I rson t. Jacksonville, etc., R R, Anderson r. Jett, M4 Anderson v. Kiesam, ~>68. Anderson » Anderson v. I Anderson r. Hid . R R, \- Richmo: R < ... 101, Anderson r. Nichol 781 : v. Ph .rehouse Anderson v. E • i Anna, Andi Wolf, 1145, 111 dd, 112, 115, 17 1. l . i. it Andorer Turn| r. 11 ■>'. 1068, 108 Andi M l: B . 198. Andn w » Vanderbilt, 5 Andi Andn Andrews r. I lai Andi Andrews r. Hart, 1 Andi in Central R R Ca, 111 Andrew Andi Union, i "»88t - V. \\ Andi Yam gstown, etc., . 1106. ppeal, 4fl And Andi in, etc-, Ca v. Bethel, :a. I v. Hume, 1 14 I 11 v. Hadd AngeU v. Lawtoa, 480, 878. II v. Springfield Home for ' Women, 4u7, 409. TABLE OF CASES. xxiil [The references are Angelo, Re, 587. Angirhoefer v. Bradstreet Co., 1177. Angle v. Mississippi & Mo. R R Co., 153a Anglesea Colliery Co., Re. 330. Anglo-California Gold Mining Co. v. Lewis. 802. Anglo-Californian Bank v. Grangers' Bank, 688, 689, 695, 699. Anglo-Danubian, etc., Co., Re, 366. Anglo, etc., Bank v. Baragnon, 165. Anglo, etc.. Co., In re, 1305, Angus v. Clifford. 491. Angus v. Robinson's Adm'r, 598. Anonymous, 1016. Anson ia Brass & Copper Co. v. New Lamp Chimney Co.. 251, 28L Anthony v. Household, etc., Co., 364 Anthony v. Jasper County, 143. Antipaedo Baptist Soc. v. Mulford, 1018. Antoine v. Smith, 339. Appeal of Larimer, etc., St. R'y, 1557. Apperly v. Page, 1041. Applegarth v. McQuiddy, 1152, Applegate v. Ernst. 775. Aj. pieman v. Fisher. 562, 576, 579. Appleton v. Turnbull, 241, 607. Appleton Mut Fire Ins. Co. v. Jesser, 231. Appleyard's Case, 33. Apthorp v. North, 1093. Arapahoe, etc.. Co. v. Stevens, 34, 58, 1079. 1109. Archer v. American, etc., Co., 455, 830. Archer v. Rose, Archer v. Terre Haute, etc., R R, 1489. 1504, 1506. Archer v. Whiting. 1053. Ardesco, etc., v. North American, etc., 989. Arentz v. Commonwealth, 1231, 1232, 1233, 1236, 1247, 1248. Arenz v. Weir, 278. Argus Co. v. Mayor, etc., 1067. Argus Printing Co., In re, 812, 813, 824, 827, 850. Argyle, C. & C. Co., Re, 212. Arkadelphia, etc., Mills v. Trimble, 224. Arkansas, etc., Co. v. Farmers", etc.. Co., 50, 70, 905, 1126, 1137, 1139, 1217. to the foot-paging.'] Arkansas, etc., Soc. v. Eichholtz, 111, 387, 922. Arkansas Midland R R Co. v. Berry, 774. Arkright v. Newbold, 193, 489. 494, 914, 915. Armant v. New Orleans, etc, RR, 716. Arminton v. Barney, 1591. Armi6ton, etc., R R v. Jacksonville, etc., R R, 1530. Armour, etc., Co. v. Smith, 615. Arms v. Conant 1059, 1070, 1293. Armstrong v. Abbott, 1120. Armstrong v. Chemical Nat'l Bank, 991. Armstrong v. Church Society, 968, 1139. Armstrong v. Karshner, 122, 124, 188, 210, 235, 237, 246, 1499, 1507. Armstrong v. Savannah, eta, WorkB, 975 Armstrong v. Treasurer, etc., 194L Arnison v. Smith, 194, 204. Arnold v. Fawtuxet, etc.. Co., 683. Arnold v. Ruggles, 21, 22, 429. Arnold v. Suffolk Bank, 26, 525, 087, 688, 690, 693, 779. Arnold, Appeal of, 409. Arnoldi v. Gonin, 274. Arnot v. Erie R'y, 1245, 1249, 1511. Arnot v. Pitteton, etc., Coal Co., 449 ( 646. A mot's Case, 76. Aron v. De Castro, 454, 492. Arrington v. Savannah, eta, R'y Ca. 1541. Arthur v. Clark, 223. Arthur v. Commercial, eta. Bank, 885, 989, 1267, 1272. 1273. Arthur v. Griswold, 206. 489. 49L Arthur v. Midland R'y Co., 340. Arthur v. Willing, 276, 289, 29U. Ash v. Guie, 661. Ashburner v. Macguire. 410. Ashbury v. Watson, 365. Ashbury R C. etc.. Co. v. Rich, So% 1125. - Ash by v. Blackwell. 506. Ashe v. Johnson's Adm'r. 460. Asher v. American, etc., Co., 833. Asher v. Sutton. 1075. Asheville Division v. Aston, 991, 9&t, 1017. Ashhurst v. Fowler, 1033, XXIV TABLE OF CASES. [The references are Ash hurst v. Mason, 41G. Ashhurst v. Montour Iron Co., 1300. Ashhurst's Appeal. 919, 1128, 1130, 1473. Ashland v. Montour Iron Co., 1334. Ashley v. Rinnan, 936. Ashley's Case, 195, 207, 208. 209. Ash mead v. Colby, 203. Ashpitel v. Sercorube, 1040. Ashtabula & New London R R Co. v. Smith, 89, 92, 113, 122, 125, 219, 814. Ashton v. Ashton, 404. Ashton v. Atlantic Hank, 439. Ashton v. Buibank. 17."), <):;:;, <;:!!», 1586. Ashton v. Dakin, 473. Ashton v. Dashaway Assoc, 891, 947. 1150. Ashton v. Langdale, 22. Ashton, Ex parte, <'><>3. Ashton's Appeal, 598. Ashuelot, etc., Co. v. Marsh. 1078. Ashuelot R R v. Elliot. 629, 1285, 1304, 1318. 1347, 1469 Ashuelot. etc. Co. v. Boit, 118. Ashurat v. Field's Adm'r, 739. Ashworth v. Munn, 167. Askew'B < 'ase, 202. Aspbitel v. Sercombe, 103. Aspinwall v. Butler, 890. Aspinwall \. Commissioners of Daviess County. 1942. Aspinwall v. Jo. Daviess Co., 140. 148, 158. Aspinwall v. Ohio, etc., R R Co., 1059, 1542. Aspinwall v. Sacchi, 233, 305. Aspinwall v. Torrence, 269. Assessors v. Commissioners, 142. Assiguee, Freeman's, v. Stine, 56. Aston v. Dashaway, 672, 730. Astor v. Westchester, etc., Co., 955, 1265, 1272. Astoria, etc., R R v. Hill, 239. Astoria, etc., R R. v. Neill. 224. As} T lum v. New Orleans. 1944. Atchafalaya Rank v. Dawson, 875, 878. Atcherson v. Troy, etc., R R Co.. 273. Atchison, etc., R R v. Cochran, 9, 423, 951, 1050. Atchison, etc., R R Co. v. Fletcher, 423, 424, 632, 1133, 1142, 1147, 1248, 1492, 1505, to the foot-paging.] Atchison, etc., R'y v. Nave, 1558. Atchison, etc., R R Co. v. Phillips Co., 151, 150. Atchison, etc., R R v. Roach, 1534. Atchison, T. & S. F. R R v. Denver & N. O. R, 1510, 1511, 1532. Athenaeum, etc., Soc. v. Pooley, 1856. Athenaeom, etc., Society, Re, 276, 1110. Atherford v. Beard, 46a Atherton v. Sugar, eta. Co., 162. Athol, etc., <'•>. v. Carey, 113. Athol, <'t<\, R R Co. v. Inhabitants of Prescott, 17"). 17i). Atkins v. Albree, 789, 744 Atkins v. Gamble, 23. 590, 596, 781. Atkins v. Wabash, etc., R Co., 20, 1346, 1413, 1418, 1462 Atkinson v. Atkinson, 441, ">10. Atkinson v. Foster, 501, 584. Atkinson v. Marietta & C. R R Co., 1278, 127."). Atkinson v. Pocock, 1041. Atkinson v. Rochester, etc,, Co., 990, 1107. Atkinson, Appeal of, 986. Atlanta v. < late, eta, ' So., 864 Atlanta, etc., R R I a v. State, 1545. Atlanta, etc., R R v. Western R'y, IS64 Atlanta & West Point R R Co. v. Bod- netr, 198 Atlantic City Water-works v. Atlantic City. 1597. Atlantic Cotton Mills v. Abbott, 116,229. Atlantic Delaine Co. v. Mason, 829, 802. Atlantic, etc.. Hank v. Savery. 1120. Atlantic etc, Ins. Co. v. Sanders, 1062, 1067. Atlantic, etc., Mill v. Indian, etc., Mill, 1116. Atlantic, etc., R R v. Allen, 774. Atlantic, etc., R. R v. Johnson, 1497. Atlantic, etc., R R Co. v. Reiser, 1089. Atlantic, etc., R. R Co. v. St. Louis. 875, 1525, 1551. Atlantic, etc., R. R v. Sullivant, 876. Atlantic, etc., R. R. Case. 1440. 1447. Atlantic, etc., Telegraph Co. v. Common- wealth, 712. Atlantic, etc., Tel. Co. v. Union P. R'y, 1595. TABLE OF CASES. XXV [Tlie references are Atlantic & G. W. R'y Co. v. Dunn, 1011. Atlantic & Pac. Tel. Co. v. Union Pac. R'y Co., 1153. Atlantic Trust Co. v. Consolidated, etc., Co., 1415. Atlas Bank v. Nahant Bank, 1170. Atlas Nat'l Bank v. F. B. Gardner Co., 852, 854. Attaway v. Third Nat. Bank, 904. Atterbury v. Knox, 998. Attleboro Nat'l Bank v. Wendell, 894. Attleborough Nat'l Bank v. Rogers, 982. Attorney-General v. Atlantic, etc., Ins. Co., Matter of, 1423. Attorney-General v. Bank of Columbia, 20. Attorney-General v. Bank of Niagara, 864, 873, 954. Attorney-General v. Bay State Min. Co., 748, 776. Attorney-General v. Boston, etc., R. R. Co., 386. Attorney-General v. Clergy Society, 858. Attorney-General v. Continental, etc., Ins. Co., 1157, 1459. Attorney-General v. Corporation, 977. Attorney-General v. Evart Booming Co., 1527, 1600. Attorney-General v. Foundling Hospi- tal, 874. Attorney-General v. Germantown, etc., Road, 1591. Attorney-General v. Great Eastern R'y Co., 873, 1540. Attorney -General v. Great Northern R'y Co., 873. Attorney-General v. Grote, 407. Attorney-General v. Guardian, etc., Ins. Co., 278, 1164, 1429. Attorney-General v. Jamaica, etc., Corp., 873. Attorney-General v. Joy, 1015. Attorney-General v. Knickerbocker, etc., Ins. Co., 1459. Attorney-General v. Life & Fire Ins. Co., 985, 1190, 1191, 1193. Attorney -General v. Mayor of Rye, 969, 1019. Attorney-General v. Mercantile Ins. Co., 660. to the foot-paging.'] Attorney-General v. Metropolitan R. R., 1561, 1566. Attorney-General v. Mid. Kent R'y Co., 873. Attorney-General v. North America, etc., Ins. Co., 1438, 1459. Attorney-General v. North, etc., Ins. Co., In re, 1158. Attorney-General v. Petersburg, etc., R. R. Co., 875. Attorney-General v. Railroad Cos., 873, 1513. Attorney-General v. Scott, 821, 1064. Attorney-General v. Simonton, 869. Attorney -General v. Tudor Ice Co., 873. Attorney-General v. Utica Ins. Co., 873, 954, 1220. Attorney-General v. Whitvvood, 684. Attorney-General v. Wilson, 874. Attree v. Hawe, 1252. Attrill v. Huntington, 292. Attrill v. Rockaway, etc., Co., 1461. Atwood v. Dumas, 662. Atwood v. Merry weather, 899, 945. Atwood v. Rhode Island Agric. Bank, 263, 321. Atwood v. Shenandoah, etc., R. R, 1187, 1197, 1302. Auburn, etc., Ass'n v. Hill, 113, 228. Auburn, etc., Co. v. Douglass, 1592. Auburn, etc., Works \. Schultz, 214, 234. Audenried v. Philadelphia & R R R, 1599. Auerbach v. Le Soeur Mill Co., 1186. Augerhoefer v. Bradstreet Co., 1174. Augusta v. National Bank, 750. Augusta Bank v. Augusta, 135. Augusta Bank v. Hamblet, 1079. Augusta, etc., R R. v. Kittel, 937, 1083, 1265, 1381. Auld v. Glasgow, etc., Society, 662. Aull v. Colket, 510, 781. Aultman v. Waddle, 232. Aultman's Appeal, 291, 292, 298, 329, 342, 356. Aurora City v. West, 1231, 1236. Aurora, etc., v. Paddock, 995, 1133, 1261, 1296. Aurora, etc., Co. v. Holthouse, 868. Aurora Nat'l Bank v. Black, 1391. XXVI TABLE OF CASE3. [The references are Austin v. Alderman. 761. Austin v. Bank of England, 441 Austin v. Berlin, 27ft Austin v. Boston, 760, 761, 763. Austin v. Daniels, 978, 1-109. Austin v. ( lillespie, 461, 464 Austin v. Manchester, etc., R'y, 1537. Austin's Case, 180, 182, 106ft Automatic, etc., Co. v. North American, Australian A. S. C. Co. v. Mounsey, 1261, 1262. Anther v. Auther, 105, Avegne v, I Sifciz ok, 390. Avelyn v. Ward, 104 Averill v. 1 93ft 940, 111.",. 1149. Avery v. Bleet Mfg. Co, ni2. Avery v. Ryan, 464 1089. Avil v. Alexander Water Co., 512, r v. \ \ er, 7H'>. Ay< rv.8 j mour, B28, 831. Ayers i . French, 489. Ayleabury Railway I ■ v. Mount, 848. Aynsworth v. Hank of England, ill. Ayr---, %. I Mitt. m. 98, 971. Ayresi French, 4f 781. Ayr* - v, Seibel, 1 127. Ayr..' Case, 1 r, Babbitt v. East, i ta, Ca, 313, 806. Babcock ». B man. 1 104 ock v. Cumberland, etc., Co., 1172. i cb \. Helena, l IT. I sock v. Schuylkill, etc., R R, 100, 1171, 1498 Babcock v. Thompson, 409. h v. Pacific, etc., Ca, '.»80. Bache V. Horticultural Soc., 864. Bache v. Nashville, etc., Soc, 877, 1168. Bacheller v. Pinkham, l Bachman, In re. 311. 849, 33(3, 687, 692, 694 C97. Backus v. Lebanon, 1592, Bacon v. Irvine, 1148. Bacon v. Mich. G R R. 1008. Bacon v. Mississippi Ins. Co., 1075, 1191. Bacon v. Robertson, 889. to the foot-paging] Badger v. American Ins. Co., 1106. Badger v. Badger, 1130, 1132. Badger v. Cumberland Bank, 1058. i Lumber Co. v. Marion, etc., Co., .'. 1581 Baeder v. Jenuh v. Pittsburgh, etc., Iron Co., ley v. Vanderbilfc 1214. y \. Atlantic. , t c., R R, 1495. 1 1 troit, 1591. . 1026. ey v. Smith. 659, 671. nail v. Carlton, 198, 910, 914 W& Bagahaw v. Eastern, etc., I 980, 1186, 1144 1145, 1538, 1541 -I law v. Seymour, 907. aw, Ex parte, 1 Bahia ft San Fi R*y <'•>., In re, \. (ah. rtC.E.8 . 190. Bailey v. AUanl R R, I Jo, 717. 01 Bailey v. Jirkenhead, etc, R'y, 165, 981 mi. v v. Buffal R, R I 107ft Bailey v. Bui gees, I Bailey v. ( ihambei lain, Bailey v. Champlain, et . 101, Bailev v. Citizens' (Jus Light Co., 427. 704 70ft 95ft Bailey v. I lark, 13. Bailey v. County of Buchanan, 1230. 12: Bailey v. Foi 871. Bailey v. Hannibal, etc., R R, 366, 374. Bailey v. HoUister, 881, 629, I Bailey v. McCauley, 10 Bailey v. Phil., etc., R R Co, 1516. Bailey v. Pittsburg, eta. Ca, 25a Bailey v. Piatt, 891 Bailey v. Railroad Co.. 14, 83, 704. 705, 824 Bailey v. Smith. 1225, 1 ! Bailey v. Strohecker, 582, 020. Bailey v. Universal Provident Life As- sociation. S T. Bailey v. Valley, etc., Bank, 1166. TABLE OF CASES. XXV 11 [The references are Bailey's Appeal, 862. Bain v. Globe Ins. Co., 1176. Baiu v. Richmond, etc. R. R, 778. Bainbridge v. Smith, 850. 855. Baine v. Whitehaven, etc., R'y Co., 524. Baines v. Babcock et al., 250, 251, 256, 260, 266, 332, 345. Baird v. Bank of Washington, 986, 1057, 1058. Baird v. Ross, 1041. Baird's Case. 331. Bakemore v. Glamorganshire Canal, 886. Baker v. Adm'r of Backus, 304, 861, 865, 878, 1155. Baker v. Atlas Bank, 248, 302, 303, 304. Baker v. Backus, 304. 861, 865, 878, 1155. Baker v. Cotter, 1079, 1093. Baker v. Drake. 572. 574, 576, 577, 578, 580, 588, 603. 785, 790. Baker v. First Nat'] Bank. 762. Baker v. Harpster, 962, 1056. Baker v. Kansas, etc., R R, 1091. Baker v. Marshall, 530. Baker v. Neff, 880. Baker v. Tyute, 612. Baker v. Wasson. 384, 500, 501, 780. Baker v. Woolston, 1122. Baker's Appeal, 819, 955. Baker's Case. 106, 335, 1185. Bakersfield, etc., Ass'u ,v. Chester, 880. Bakewell v. Board of Education, 891. Balch v. Hallett. 739, 740. Balch v. New York, etc., R R Co., 273. Baldwin v. Bank, 1102. Baldwin v. Canfield, 425, 518, 585, 589, 1049, 1063, 1137, 1162. Baldwin v. Commonwealth, 460. Baldwin v. Lawrence, 1144. Baldwin v. Trustees, etc., 1020. Baldwin v. U. S. Tel. Co., 1593. Bale v. Clelaud, 205. Balestier v. Metropolitan Nat'l Bank, 1428. Balfour v. Ernest, 1191. Balkis, etc., Co., Re, 517. Ball v. Gilbert, 469. Ballard v. Carmichael, 1107. Ballard v. Louisville, etc., R R, 1531. Balliet v. Brown, 955, 1141. to the foot-paging.] Ball in v. Ferst, 684. Ballin v. J., etc.. Imp. Co., 256. Ballou v. Farnam, 1319. Ballou's Appeal, 1465. Balsh v. Hyham, 328. Ballston Spa Bank v. Marine Bank, 258. Baltimore v. Baltimore & O. R R Co., 1535. Baltimore v. City Passenger R Co., 755, 769. Baltimore v. Connellsville, etc., R'y Co., 869. Baltimore City, etc., R R Co. v. Sewell, 782, 787, 790, 791. Baltimore, etc., Co. v. Hambleton, 100, 101, 240, 386. Baltimore, etc., Co. v. Interstate, etc., Co., 730. Baltimore, etc., R. R. Co. v. Fifth Bap. Ch., 2, 1009, 1167. Baltimore, etc., R. R Co. v. Glenn, 244. Baltimore, etc., R R v. Marshall Co., 878, 885. Baltimore, etc., R R Co. v. Pumphrey, • 122. Baltimore, etc., R R v. Quigley, 1010. Baltimore, etc. R'y Co. v. Sewall, 101, 102, 517. Baltimore, etc., R R v. Wheeling, 1165. Baltimore, etc., R R Co. v. Wight's Adm'r, 1544. Baltimore, etc., Turnpike Co. v. Barnes, 243. Baltimore & H. de G. T. Co. v. Union R R. Co., 1529, 1530. Baltimore & O. R. R v. Cannon, 956. Baltimore & O. R R Co. v. Cary, 1001. Baltimore & O. R R Co. v. Ford, 1543. Baltimore & O. R R Co. v. Gallahue, 1165, 1544. Baltimore & O. R. R Co. v. Noell, 1544. Baltimore & O. R R Co. v. Wightman, 1544. Baltimore & P. S. Co. v. Brown, 1532, 1533. Baltimore & P. R Co. v. Fifth Bapt. Ch., 1006. Baltimore Retort, etc., Co. v. Mali, 413. Baltimore & S. R R Co. v. Compton. 1526. XXV1U TABLE OF CASES. [The references are Baltimore & S. R R Co. v. Nesbit, 1942, Baltimore & Y. T. R v. Boone, 1010. Baltzen v. Nicolay, 404. Bancroft v. Wilmington, etc., 1095. Banet v. Alton, etc., R R Co., 113, 158, 168, 0:31. Bangor, etc., Co. v. Robinson, 510, 528. Bangor, etc., R R Ca v. Smith, G35, G4U, 888, 107' i. Bangor, etc., Slate Ca, Be, '■''•'■*■ Bangs v. Mcintosh, 1 170. Banigan v. Bard, 861, • Bank v. Bryce, 591. Bank v. Bui sham, ::: '". Bank v. City of Charlotte, 688, G39. Bank v. Concord, 150. Bank r. < treason, 1 109. Bank v. Flout Ca, 987, 108L Bank v. < Iridley, G 17. Bank v. 1 l.n i [son, 581. B ink v. Sooner, l 108. Bank v. Kennedy, 861. Bank v. Lanier, 180, 18 70t Bank v. McLeod, 1872, 1 1 Bank v. Richardson, 688, B10, Bank v. Trenbolm, 591. Bank Commission! ra r. Bank el Bn it, -I'.io. 1051. 1055. Bank I lommiasionera r. Bank of Buffalo, 866, 107ft Bank, eta, v. GrattschUck, 109 Hank, eta, v. Town, eta, 150, Bank of Africa v. Salisbury, eta, I 605. Bank of America ▼. McNeil, 517, 696, 697, 899, 780. Bank of Attica v. Mannf.. ink, H7. 686, 688, 691. Bank of Mtica v. Pottier, eta, Co, H Bank of Augusta v. Earle, 817, 997, I Bank of Australasia v. Nias, 996. Bank of Australia v. Breillat, H 1 - Hank of B. Falls v. Rutland, i ta, B. R Ca, 1168. Bank of Batavia v. N. X i to, R R i 545. Bank of Bethel v. raliMni.pi.' Bank, 881. Bank of Bramwell v. County Court of Mercer County, 76L Bank of British Col. v. Page, 100ft to the foot-paging] Bank of British N. A. v. Barling, 1181. Bank of California v. Collins, 315. Bank of Cape Fear v. Edwards. 1 Bank of Chenango v. Brown, 689. Bank of Chillicothe v. Dodge. 999, 1193. Bank of Chillicothe v. Swayne. 988. Bank of Circleville v. Renick, 881. Bank of Columbia v. Patterson's Adm'r, 107ft Bank of Columbus v. Patterson, 10 Bank of Commerce r. New York, 14, '. 760. Bank of Commerce v. Rutland, eta, R R Ca, 117:'.. Bank of < "omnierct "s Appeal. " I - Bank of Edwardsi ills v. Sim| son, n I Bank gland r. I. mm. 444 ok of England v. Moffat, 144. ik of England \ Parsons, 444 ok of 1 "it Madison r. Aid. n. 66, 1141. Bank of <■ Patchin Bank, 106 1108, : ; i. Bank I rgia \. Savannah. 1 Bank of Hin luBtan, In re, 1157. ok of Holly 3] l'ms.ii I Bank of Ireland r. Trustees of I (hanti Bank of Jamaica v. J< it. reon, 1164 Bank of Kentucky r. Schuylkill Bank. p. .iik • nworth v. llmr ■ k of Uttte Fork v. lid arthy, 1080. Bank I I "don v. Terrell, 911 Bank of Louisville r. Cray, 180, 184, 718. Bank of Foui-ville v. Young, B Bank of Lyons T.Demmon, 914, 485,1* Bank of Manchester w. All. n, B87. Bank of Marietta v. Pindall, 1173. Bank of Metropolis ». Guttschlick, Bank of Metropolis v. Jom b, 1075, 1086. Bank of Michigan v. Cray, Bank of Michigan w. Nil 99ft Bank of Michigan v. Williams, 11GG, 1173. Bank of Middlebury t. Edgerton, 1501, 1537. Bank of MiddlebUTJ v - Rutland, etc.. R i; . 1064, 1098. TABLE OF CASES. XXIX f The references are Bank of Miss. v. Duncan. 889. Bank of Monroe v. Gifford, 1050. Bank of Montgomery v. Reese, 386, 789, 791. Bank of Montreal v. Bathune, 320. Bank of Montreal v. Chicago, etc., R. R., 1455. Bank of Montreal v. Potts, etc., Co., 941, 1263. Bank of Montreal v. Sweney, 437. Bank of Montreal v. Thayer, 1455. Bank of N. A. v. Chicago, etc., R. R. Co., 1020. Bank of North Am. v. Rindge, 295. Bank of Old Dominion v. McVeigh, 628. Bank of Oldtown v. Houlton, 18. Bank of Omaha v. Douglas County, 760. Bank of Pennsylvania v. Common- wealth, 627. Bank of Pennsylvania v. Gries, 274 Bank of Pennsylvania v. Reed, 1086. Bank of Pittsburgh v. Whitehead, 1118. Bank of Poughkeepsie v. Ibbotson, 251, 272, 282, 283, 284, 288, 298, 304. Bank of Redemption v. Boston, 766. Bank of Republic v. Couuty of Hamil- ton, 752, 772. Bank of Rome v. Rome, 136, 147, 153. Bank of Rome v. Village of Rome, 153. Bank of St. Mary's v. Mumford, 1116. Bank of St. Mary's v. St. John, 215, 729, 1059. Bank of Sing Sing, In re, 302. Bank of South Australia v. Abrahams, 158, 163, 1253. Bank of South Carolina v. Humphreys, 1122. Bank of State v. Bank of Cape Fear, 1517. Bank of Switzerland v. Bank of Turkey, 859. Bank of Toledo v. International Bank, 881. Bank of United States v. Common- wealth, 877. Bank of United States v. Dallam, 244, 250, 254, 255, 288. Bank of United Statea v. Dandridge, 1086, 1094, 1108. Bank of United States v. Davis, 1119. to the foot-paging.] Bank of United States v. Deveraux, 2, 1020, 1947. Bank of United States v. Dunn, 1075, 1086. Bank of United States v. Owens, 988, 999. Bank of United States v. Planters' Bank, 1179. Bank of Utica v. Hilliard, 683. Bank of Utica v. Smalley, 19, 518, 687, 689,694,699,708, 1018, 1106. Bank of Vergenues v. Warren, 1099, 1100. Bank of Virginia v. Adams, 250. 253. Bank of Virginia v. Craig, 441. 503. Bank of Watertown v. Watertown, 666. Bank of Waterville v. Belster, 1166. Bank of Wilmington v. Wollastou, 1022. Bank of Wooster v. Stevens, 263. Bank of Yolo v. Weaver, 305, 1068. Bank Tax Case, 760. Bankers', etc., Tel. Co. v. Bankers', etc., Tel. Co., 1395. Bankhead v. Brown, 1526. Baukright v. Liverpool, L. & G. Ins. Co., 1175. Banks v. Gay, etc., Co., 1178. Banks v. Judah, 957, 1133. Banks v. Poitiaux, 993, 1094. Bannatyne v. Direct, etc., Co., 392. Banner v. Lowe, 743. Banque, etc., v. Brown, 199, 202, 916, 1200, 1201. Baptist Church v. Brooklyn Ins. Co., 1113. Baptist Church v. Mulford, 1093, 1095. Baptist Church, Re, 1015. Baptist House v. Webb, 864, 877, 1069. Barber v. Andover, 1529. Barber, etc., Co. v. New Orleans, 775. Barber's Case, 851. Barbour v. National Exch. Bank, 1480. Barclay v. Culver, 590. Barclay v. Quicksilver M. Co., 955. Barclay v. Talman, 250, 863. Barclay v. Wainewright, 741, 742. Barclay, Ex parte, 663. Bard v. Banigan, 362, 390. Bard v. Chamberlain, 987. Bard v. Poole, 997, 999. XXX TARLK OF CAS1 5. [The references are to the foot-paying.] Bardstown, etc., Co. v. Rodman, 632. Bardstown, etc.. R. R v. Metcalfe, 1262, 1206, 1294, 181& Bardwell v. Sheffield, etc., Co,, I Barbate v. Shortridge, 347, H s . 1107. Barge's I !aae, 159. Baring v. Dix, 659, 671. Barings v. Dabney, 990, 1948. Barington v. Pittsburgh ft Steubenville R R (',,.. 121. Barker v. Mechanics', etc.. Ins. Co.. linn. 11 in). Barker v, Rutland & Washington R R Co.. Barker v. Stead, 10 Barker. In re, 821, - Barksdale v. Finnej . W Barling v. Bank ol British N. A.. 885, iooa Barlow v. Chicago, etc., I.'. 1*.. 1581. Barnard r. Ba< khaus, 186, »<"•'». 171, 474, 475, 177. Barnard v. Hawks, 182, 584 Barnard v. Vermont. 1 1 . K. I'. . 878, 718, 710. Barndollar v. I >>• Boia, 670. Bamed v. Hamilton, 158, 785, 3 Barned's Banking Co., Re, 425. Barnes v. Atchison, 184 l 12. Barnes v. Brown. 42, 54, 150, 458, 459, 786, 788, 81 1. B45, 904 Barnes v. Chicago, etc, RR, 1201, 1469. Barnes v. Hall. 608, 755. Barnes v. Lacon, 181. Barnes v. Mobile, ete., B R Co.. 1177. 1201. Barnes v. Morgan, fil2. Bames v. Ontario Bank, 108'), 1106, 1190. 1192. Barnes v. Perine, 111. Barnes v. Selligman, 459. Barnes v. Stoddard, 993. Barnes v. Suddard, 999. Barnes v. Trenton, etc., Co., 1117. Bar net's, etc., Co., In re. 683. Baruett v. Chicago, etc., R R Co., 1171. 1176. Barnett v. Lambert, 1087. Barnett v. South, etc., K'y, 1112. Barnett's Case, 64, 818, 2 10, 241. Barney v. Joshua Stubba, 1462. Barney v. Keokuk, 1560. Barney v. Stale. 756, Barnstead v. Empire Min. Co., 16. Baron v. Kin^s Mountain Mining Co., 1< 99, 1107. Baron v. Mining r<>. 1107. Baron De Beville's Case, 46. Barr v, King, 1 175. v. New York, etc.. R R. 58, 62, 904, 980, 944 H26, 1138, 1158, 1210, lv Barr v, Pittsburgh Plate G. Co., 985, 945, 1126, 115a Barre National Bank v. Bingham Mfg. 30. Barret, in re, if Barrett r. Alton, eta, R R. Co.. 684 Barretl v. American, etc., < '<>.. 1177. Barrett ^. Blunt l 1 Barrett v. Byde, W Bai rett v. Mead, 469. Barrett'i I Barrick v. Austin, l 1 B6. Barri< k v. Oifford, 2£ 850 Barrington v. Miaa C. R. R. Co., 218 Barrin cton \. Pittsburgh ft S. R. B 166, 199. Barrington v. Washington Bank, Barron v, Baltimore, l Barron v. Burnside, 1001, IS - Ban.. n ?. Paine, 266, 21 Barrow v. Nashvilli . i te., T. I kx, 98 Barrow, eta, I kx, R Barrowcliffe v. Cummii >-'. 1 '..ii row 's I a-.-. 80. Bai ry v. Broach, v ">8. Barry v. Calder, i Barry v. Croskey, 190, 119. 469. Barry v. MerchantB' Exchange Ca, 18, 718, 721, 985, 991, 995. 1094, 1! 1186, 11 v 9. 1261. Barry v. Missouri, etc., R'y, 1240, 1341, 1242, 1825, 1826, 1848 Barstow v. Savage Min. Co.. 510, 545. Bartemeyer v. Iowa, 1949. Barter v. Wheeler. 1819. Bartholomew v. Bentley, 20, 79. 731, 849. 850. Bartlettv. Drew. 259. 729. 731. 782. TABLE OF CASES. XXXI [Tlie references are Bartlett v. Keim, 1436, 1447. Bartlett v. Kinsley, 1049. Bartlett v. Mystic, etc. Corp., 928. Bartlett v. Norwich, etc., R R. Co., 1510. Bartlett v. P. C. & St. L. R'y, 1536. Bartlett v. Peutland, 250. Bartlett v. Smith, 473, 475. Bartley v. Bartley, 684 Barton v. Cocke, 404. Barton v. Barbour, 1434. Barton v. Enterprise, etc., Ass'n, 858. Barton v. London, etc., R'y, 443, 508. Barton v. North, etc., R'y Co., 440, 507. Barton v. Port Jackson, etc., Co., 418, 421, 986, 1124 Barton, Re, 683. Barton's Case, 173. Barton's Estate, 434. Barton's Trust, In re, 741. Barttel v. Header, 143. Barwick v. English Joint-stock Bank, 205, 1007. Bason v. Min. Co., 1102. Bass v. Chicago & N. W. R'y Co., 1011. Bass v. Roanoke, etc., Co., 1579. Bassett v. Monte Christo, etc., Co., 1059, 1293. Bassett v. Moote, etc., Co., 919, 1301. Bassett v. St. Albans Hotel Co., 271, 283. Bassford v. Blakesley, 681. Basshor v. Dressel, 875. Basshor v. Forbes, 276. Batard v. Hawes, 1038. Batchelder v. Council, etc., Co., 1283, 1337. Bateman v. Mid- Wales R'y Co., 1191. Bateman v. Service, 291, 292, 318. Bateman v. Western, etc., Co., 1004. Bates v. Androscoggin, etc, E. R., 362, 374, 376. Bates v. Bank of Alabama, 983, 1068, 1095. Bates v. Great Western Telegraph Co., 15, 57. Bates v. Keith, etc., Co., 1087. Bates v. Lewis. 189. Bates v. McKinley, 710, 741, 742. Bates v. N. Y. Cent. R R, 1098. Bates v. New York Insurance Co., 686, 691, 700, 717. to the foot-paging.'] Bates v. Wiles, 790. Bates v. Wilson, 7, 311. 455. 1039. Bates County v. Winters, 151, 155. Bath v. Caton, 1033. Bath's Case, 201. Battelle v. Northwestern, etc., Co., 917, 1046, 1126. Batterson v. Cincinnati, etc., R'y, 962. Batties' Case, 357. Battle v. McArthur, 1390. Baughman v. National, etc, Co., 1182. Baumgarten v. Nichols, 848. Bauuatyne v. Direct, etc, Co., 379. . Bauton v. Dry Dock, etc, Co., 160. Baxendale v. East Co.'s R'y. 1520. Baxendale v. London & S. W. R'y, 1521. Baxter v. Moses, 250. Bay City v. State Treasurer, 135. Bay, etc., Ass'n v. Williams, 1069. Bayard v. Farmers' & Mechanics' Bank, 435, 439, 526. Bayard v. Hoffman, 467. Baylan v. Huguet, 590. Bayless v. Or me, 1053, 1155. Bayley v. Wilkins, 566, 579, 580. Bay 1 iff e v. Butter wortb, 567, 579. Bayliss v. Lafayette, M. & B. R R Co., 902, 932, 1402. Bayliss v. Swift, 250. 280. Beach v. Cooper, 948, 1157. Beach v. Fulton Bank, 983, 1009. Beach v. Hazard, 221. Beach v. Miller, 938, 939, 1055. Beach v. Smith, 35, 221. Beadles v. McElrath, 473. Beadleston v. Knapp, 1311. Beal v. Chase. 949. Beale v. Mouls, 1036. Beale v. Railway Co., 1010. Beals v. 111., etc., R. R, 1221, 1272, 1307. Bean v. American L. & T. Co., 495, 500, 503, 530, 846, 1477. Bean v. Bowen, 652. Beard v. Union & A. Pub. Co., 1002. Beardsley v. Beardsley, 432, 453. Beardsley v. Hotchkiss, 107. Beardsley v. Johnson, 266, 798, 807, 810, 853, 1164 Beardsley v. Smith, 133. Beaston v. Farmers' Bank, 1019, 117a XXXll TABLE OF CASES. [The references are Beattie v. Carolina, etc.. R R. 1531. Bcattie v. Lord Ebury, 975, 977. Beatty v. Marin- Ins. •''>.. HOG. Beatty v. Northwest, eta, Co.. 914 I ttys v. Solon, 219, I B aujolais Wine Co.. In re, 8G2. Beaumon- v. Meredith. 661. Beavan v. r» a\an, 743* Becher v. Wells Flouring Mill Co, 547, Beck v. Ashuel t. <• <•.. Ca, 1164 Beck v. Kantorowick, 913, 914 .!?«• k v. McGillis, 408. Becl et v. Dire* tors,< Us., HIT. 1156,1601, l 565. 1 '■• cket v. UniontowD, etc., 18800,6,811 Becketl v. Bouston, 37, 8S Beckford v. Wade, II Beckitt v. Bilbraugh, 103, 460, I6& I kman v. I [endei son, etc., R'y, Beckwith v. Burroughs, 467, 517, 614 1 U ckwitfa v. Rochester Iron, etc, ('<>.. 971 • B •' kwith v. Trusl . 1336, B ckwith v. Windsor, 109 B dford v. Bagshaw, 207, 187. I sdford County v. Nashville, CL ft Louu R R Ca,88, 101,216,718,716. Bedford, etc., R'y v. Stanley, 1047. Bedford R R Co. v. Bowser, 131, 178, 313, 898, 640, 1133. Beeclier v. I tacey, 1348. Beecher v, Marqu< tte & Pac R 1£ Co., 1864 Beecher v. s thieffelin, 1 153. Beecher v. Wells, . 980. Beekman v. Budson, etc., R'y, 1834 1837, 1841, 1846, L349. Beekman v. Baratoga & S. R R ' 1518, 1534 Beene v. Cabawba, etc., R R Co., 111. 118, 174 1018 Beer Co. v. Massachusetts, 1949. Beers v. Bridgeport Spring Co., 713, 714, 715, 781, 737. Beers v. New York L. Ins, Co.. 926. 988. Beers v. Phoenix Glass Co., 1055, 1059, 1185, 1193 Beers v. Waterbury, 279. Beeson v. Lang, 975, 1319. to the foot-paging.] Beliler v. German Hut F. Ins. Co., 1003. Belcher v.Willeox, 299, 300. Belcher's, etc., Co. v. St. Louis, eta, Co., 970. 1599. Belden v. Burke, 1138, 1200, 1210, 1229, 1331. Belding v. Floyd, 977. 1588. Belfast, eta, R R Co. v. Belfast, 360, 865, 866, 368, 869, B78, 733, " Belfast, eta, R R Ca v. Crooks, 145, 153, 236. Belfast, eta, R R Ca v. CottreU, 116, Belfast ft Moosehead Lake K'y Co. v. Moore, 116, 119. Belknap v. Boston ft Maine R R. 1011. Belknap v. North, eta, Ins. Ca, 1141, 1587. Bell v. Chicago, eta, R R 1888, 1885. Bell •■. Donahue, II Bell v. Farmers', 1 1 . Bank, 448, Bell v. Francis, I Bell v. Hull. 19, Bell v. Indianapolis, • I .. R R. 1147. Bell v. Lafferty, Bell v. PeniL, eta, R R, 1131, 1497, 151 Bell v. Railroad Oo, 18L 150. Bell Broa, Re, I Bell's Appeal, l! 148, Bell's Ca R ll'a - to, R K. v. Christy, 1047. Bell's Cap R R v. Pennsylvania, 77". 19 Bell Telephone Ca v. Commonwealth, 1696. Bellairsv. Tuck Belleville 8av. Bank v. Winslow, 1082. Bellona < Sompanj 's ( lase, 1051. Bellows v. Ballowel), etc.. Bank, 1015. Bellows v. Todd, l< 59. Belmont v. Coleman, 267, 296. Belmont v. Erie R'j 359, 1142, 1155, nsa Belmont, etc.. Co. v. Columbia, eta, Co., 1158. Belmont Nail Co. v. Columbia, etc., Co., 1412. Belo v. Com'rsof Forsyth, 756, 753. Belo v. Fuller, 100a TABLE OF CASKS. XXX1U [The references are Beloit v. Morgan, 132. Belton v. Hatch, 1025. Belton, etc., Co. v. Sanders, 223. Beman v. Rufiford, 1139, 1144, 1502, 1509, 1540. Bend v. Susquehanna Bridge Co., 343. Benedict v. Columbus, etc., Co., 971, 1586. Benedict v. Goit, 1590. Benedict v. Lansing, 1091. Benedict v. 'St Joseph, etc., R R, 1347. Benedict v. St. P., etc., R R, 1407. Benedict v. Western U. T. Co., 1143, 1595. Benesch v. John, etc., Ins. Co., 1109, 1167. Beneville v. Whalen, 1458. Bengley v. Wheeler, 922, 1144, 1146. Benjamin v. Elmira, etc., R. R, 1302, 1348, 1383. Bennett v. Austin, 591. Bennett v. Maryland, 1093, 1115. Bennett v. St Louis, etc., Co., 923. Bennett, Ex parte, 358. Bennett's Case, 337, 358, 415. Bennington v. Park, 137. Bennison, Re, 436. Benoist v. Carondelet 1095. Benoist v. Inhabitants, etc., 1190. Bensinger, etc., Co. v. National, etc., Reg. Co., 1181. Benson v. Albany, 135. Benson v. Hea thorn, 910, 913, 916, 925. Benson. Ex parte, 1520. Bent v. Hart 13, 20, 418. Bent v. Priest, 906. Bent v. Proest, 1587. Bentinck v. The London, etc., Bank, 572. Bentliff v. London, etc., Corp., 1179. Benton v. Ward, 493. Benwood Iron Works v. Hutchinson, 1176. Bercich v. Marye, 510, 784, 785, 788, 791. Beresford, Ex parte, 177. Berford v. New York, etc., Co., 728. Bergen v. Porpoise, etc., Co., 308, 988, 989, 1217, 1264. Bergman v. St. Paul, etc., Assoc, 392, 1023. Berks, etc., R R Co. v. Myers, 1017, 1099, 1101. c to the foot-paging.] Berlin v. Eddy, 590. Berliner v. Waterloo, 138. Bernard v. Vermont, etc., R, R Co., 377. Bernard's Case, 190, 346. Bernards Township v. Morrison, 135. Berney v. Tax Collector, 760. Berney Nat'l Bank v. Pinckard, 621. Berrian v. Methodist Soc, 1176. Berridge v. Abernethy, 296, 1042. Berry v. Brett, 1130. Berry v. Cross, 1053. Berry v. Yates, 104, 226, 238, 426, 434, 1586. Berryman v. Cincinnati S. R'y, 123. Bertram v. Godfrey, 564. Bery v. Marietta, etc., R R. Co., 245. Bescoby v. Pack, 408. Besley, Ex parte, 87, 92. 1037. Best v. Davis Sewing Machine Co., 1231. Bestor v. Wathen, 905. Best's Case, 97. Bethel & Hanover T. Co. v. Bean, 171. Bethlehem Iron Co. v. Phil., etc., R'y, 1358. Bethune v. Kennedy, 406. Betts v. De Vitre, 102. Bevans v. Dingman, etc., 683. Beveridge v. Hewitt, 471, 472, 473, 474, 475, 477. Beveridge v. New York Elevated R'y Co., 721, 1052, 1249, 1497, 1505. Bewley v. Equitable Life Assurance Soc, 1141, 1587. Bibb v. Montgomery, etc., Works, 1196. Bickford v. Grand Junction, etc., R'y, 1267, 1268, 1269, 1270. Bickley v. Schlag, 63, 257, 258. Biddle v. Bayard, 510, 781. Biddle's Appeal, 386, 738, 744. Bidstrup v. Thompson, 584, 618, 846. Bidwell v. Pittsburgh, etc., R'y Co., 322. Biederman v. Stone, 567, 579. Bigelow v. Benedict, 472, 562. Bigelow v. Gregory, 6, 308, 309. Bigelovv, In re, 690, 697. Bigelow, In the Matter of, 693. Biggart v. City of Glasgow Bank, 106. Bigg's Case, 182. Bigler v. Waller, 1287. Biglin v. Friendship Ass'n, In re, 51 L XXXIV TABLE OF CASES. [The references are Bill v. Boston Union Telegraph Co., 931. Bill v. Donohue, 1146. Bill v. New Albany, eta, R R, 1307, 1826, 1828, 1844, 1868, 1464 Bill v I 167. Bill v. Shibley, I Bill v. Western Union Tel Co., 1149. Billinger v. Bentley, 1104. Billings v. Aspen, . 1116, Billings v. ]• 867. Billings v. Trssk, 878, 1121, 1! Bingaman v. Hickman, 664, Bingham v. Rushii Bingbam v. Weidenwax, 8f Bin-ham, lfat( Bl. bamton v. I mton, eta, R'y, 161 Bingbamton B Bill!; Binney'a Appeal, B Birch v. i '• 79. Birch's I Bird v. Bird' 161 Bird v. Cilv Bird v. Chic i -•. L ft N. R R I Bird v. I :91. Bird v. Haydon, 88 Birdaal] v. Daren] . 1Q01. Birdsall v. Russell, 111 Birkenhead, el ■.. i;'y Ca v. POcber Birkenhead L ft C li'y Co. v. Webster, 167. Birmingham v. Gallagher, C70. Birmingham v. Sheridan, I Birmingham, Bristol ft Thames Junc- tion R'y Ca v. White, 681, I Birmingham, etc., Co. v. Mutual L. & T. Ca, 884 Birmingham, eta, K'y Co. v. Locke. 176, 17'.', 182, 847, 324 Birmingham, eta, R'y Co., In re, 682. 1416. Birmingham, Ex parte. 1261. Birmingham Fire Ins. Ca v. Com Birmingham Nat Bank v. Moser, 861, 803, 304. to the foot-pagtng.] Birmingham Nat. Bank v. Roden, 26, 101. 5! Bischoffsheim v. Brown, 661 !. 112, II v. Johnson, 18 Bishop v. American Preservers Co., 650. ainerd, 687, 1488, 1507,1508, 1644 ■be Compel P v. Ths Balkk etc.. C >0. rough T. Mortlock, I Bl. Bank, 1085. 11 v. Kanl •hern & N. I. R ■ I I Spring Vail 1 t v. Kentucky B ition Bittinger v. Bell, I Bjorngaard et al v. Qoodhne County t al.. 945, 11! Black v. Delaware, S96, Black v. Homersham, 710, 711. Black v. 11 1144 H68. Black v. Bhreve, 11 Black v. Wanes! 1687 Black v. Zachai Black's 10. k. In i Black R Ihion R R Co. v. Clarke. 220. 88 Black ft White Smith's Society v. Van- dyke, 1025, 1026. Blackburn v. Selma, etc., R R Co.. 1182, 1542. 1548. Blackburn's Blackman v. Central R R.etc. I Blackahaw v. Rogers, 411. TABLE OF CASES. xxxr [The references are Blackshire v. Iowa, etc., Co., 1100. Blackstock v. N. Y. & E. R R Co., 1522. Blackstone v. Blackstone, 405, 410, 776. Blagen v. Thompson, 454, 1559. Blain v. Agar, 1041. Blain v. Pacific Ex. Co., 1112. Blair v. Buttolph, 189, 195. Blair v. Compton, 008, G10. Blair v. Massey, 684. Blair v. Perpetual Ins. Co., 983, 997. Blair v. Reading, 1417. Blair v. St. Louis, etc., R R, 421, 964, 1204, 1227, 1355, 1392, 1393, 1396, 1397, 1399. 1400, 1402, 1409, 1420, 1432, 1459, 1484. Blair v. Walker. 934. 1341, 1393. Blaisdell v. Bohr, 506, 507. Blake v. Bay! Blake v. Brown. 237. Blake v. Buffalo Creek R. R Co., 934. Blake v. Griswold, 73, 74, 1122. Blake v. Hinkle, 250. Blake v. Holley, 87& Blake v. Portsmouth, etc., R R Co., 861, 889. Blake v. Rich, 1531. Blake v. Traders' Nat Bank, 436. Blake v. "Wheeler, 853. Blake's Case, 193, 195, 201. Blake, Ex parte. 212. Blakeley's Case, 331. Blakely, etc., Co., In re, 1197. 1256. Blakeman v. Puget Sound Iron Co., 622, Blaker v. Herts, etc., Co., 1598. Blalock v. Kernersville. etc., Co., 417, 990. Blanc v. Paymaster Mining Co., 961. Blanchard v. Dedman Gas Co., 547, 623. Blanchard v. Dow. 814 Blanchard v. Kaull, 309. Blanco v. Navarro, 481. Bland v. Crowley, 1038. Blandford v. School District, 1058. Blann v. Bell. 409. Blashfield v. Empire, etc., Co., 1596. Blatchford v. Ross, 631, 923, 927, 1072, 1144, 1154. Blatchford v. N. Y. & N. H. R R, 724. Blen v. Bear, etc., Co., 1075. Blewett v. Front St Ry. 1559. Blewitt v. Roberts, 410. to the foot-paging.] Bligh v. Brent, 21. Blindell v. Hagan, 650. Bliss v. Anderson, 1539. Bliss v. Kaweah, etc., Co., 1075, 1100. Bliss v. Matteson, 1471. Block v. Atchison, etc., R R Co., 1175, 1178. Block v. Commissioners, 146. Block v. Fitchburg R R, 967, 1534 Block v. Merchants', etc., Co., 1579. Blodgett v. Adams, 1091. Blodgett v. Morrill, 189, 213. Blood v. Marcuse, 1083. Bloodgood v. Kain, 714 Bloodgood v. Mohawk, etc., R. R Co., 138, 139. Bloom v. Pond's, etc., Co., 1070. Bloomer v. Union Coal & I. Co., 1254 1368. Bloomfield, etc., Gaslight Co. v. Calkins, 1584, 1585. Bloomfield. etc., R Co. v. Richardson, 1527, 1584 Bloomfield R R. v. Van Slike, 144a Blossburg, etc., R. R Co. v. Tioga R R Co., 1020, 1512. Blossom v. Milwaukee, etc., R R, 1356, 1357, 1358. Blossom v. Railroad, 1358. Blouin v. Liquidators, etc., 5S5, 586, 600. Bloxam v. Metropolitan R'y Co., 723, 728, 980, 1132, 1142. Bloxam's Case, 97. Bluck v. Mullalue, 462, Bluehill Academy v. Witham, 1042. Bluraenthal v. Brainerd, 1433, 1457. Blundell v. Winsor, 663. Blunt v. Walker. 34, 86. Bly v. Second National Bank, 984 Blyth v. Carpenter, 785, 790. Birth's Case, 239. Board of Bartholomew Co. v. Bright 134 Board of Com'rs v. Cottingham, 151. Board of Com'rs r. Davis, 765. Board of Com'rs v. Elston, 760. Board of Com'rs v. Lafayette, etc., R R Co., 1151. Board of Com'rs, etc., v. Indianapolis, etc., Co., 1584 XXXVI TABLE OF CASES. [The references are Board of Corn'rs of T. Co. v. Reynolds, 431, 480. Board of L. v. New Orleans Water-works Co., 533. Board of Supervisors v. Mineral Point R. R, 130G. 13 is. Board of Sup (rvisors v. Randolph, 137. Board of Tippecanoe Co. v. Lafayette, etc., R. R. Co., 2, 1150, 1491, 1504, 1 .")39. Board of Trade Tel. Co. v. Barnett, 1594. Boardman v. Cotter, I Boardman v. Gaillard, Boardman v. Lake Shore, etc, R. R Co.. 93, 861, 866, 867, 374, 875, 876, 711, 716, 1180, 1173, 1807, L545. Boatmen's Bis. Co. v. Able, 501, 517. Bockee v. Hathorn, 1388, 1284 Bocock's Ex'rs v. Alleghany, etc., Co., 1091. Iley v. Goodrich, 990. Bodley v. Reynolds, 791. Bod well v. Eastman, 868. Bodwin, etc., I !a, In re, CGI. Boehm v. Lies. 453. ] •■ eppler v. Menowq, 160. Bogardus v. Rosendale Mfg. Co., 869, 960. Bogardus v. Trinity Church, 99G. Boggs v. Adger, 484 Boggs v. Brown, 1468. gs v. Olcott, 87, 90, 239. Bohannan v. Binns, 877. Bohlen's Estate. 485, 140, 441. Bohm v. Loewer's, etc., Co., 1109. Bohmer v. City Bank, 887, G89. Bohn v. Brown, 878, 897. Bohn Manuf. Co. v. Lewis. 126. Boisgerard v. New York Banking Co., 666, 1017, 1097, 1108. Bolen v. Crosby, 298. Bolles v. Brimfield, 112. Boiling v. Le Grand, 313. Bolton v. Liverpool, 674. Bolton v. Madden, si i. Bolton v. The Natal Land, etc., Co., 726. Bolz v. Bidder, 73 Bommer v. American, etc., Co., 888, 1046. Bonaparte v. Baltimore, etc., R R, 883, 1558. to the foot-paying.] Bonaparte v. Camden & A. R R, 1524, 1525, 1526. Bond v. Appleton, 284, 292, 349. Bond v. Central Bank, 984. Bond v. Mount Hope Iron Co., 524, 780. Bond v. State, 1402. Bond v. Terrell, etc., Co., 983. Bond v. Wabash, etc., By, 1521. Bondholders, etc., R R, In re, 1299, 1800. Bone v. Canal Co., 993. Bonewitz v. Van Wert Co. Bank, 259, 860, 884 Bouham v. Bonham. 745. Bonnardet v. Taylor. 683, 683, 684. Bonner v. City of Now Orleans, 1249. Bonnifield v. Bidwell, I iy v. Drew, <;71. Booe v. Junction B. II., 688, 1 190. Boo^hi'i-\. Life Assoc, of America, 1010. k< r v. Y iing, 1067. Booker, l'..\ parte, 16, 885, 640, 1157, 1845. oe v. ( litizens 1 Bank. 656. i man v. Atlantic & Bacific R R Co.. 684 Boos 1 Appeal, 7. Boot, etc., Co. v. Dunsmore, 1072. Boot A: Shoe Co. v. Hart, 38,85. Booth v, Bunce, 965. Booth v. Campbell, 272. Booth v. Clark, 1488, 1127. ill v. Kiel. ling, 570. Booth v. Robinson, 426, 931. Booth v. Smith, 181. Booth v. Wonderiy, 819. Borland v. Haven, 284, 295, 298, 339, 353, 940, 1095. Borland v. Stokes, 781. Borough v. Frederick, 1187. Borough of Millvale's Appeal, 1541. Borton v. Dunbar, 408. Bosanquet v. Shortridge, 847, 848, 1064. Bosher v. Richmond, etc., Co., 193. 808, 198. Bosley v. National, etc., Co., 202, 208. Bostock v. Blakeney, 486, 712. Boston & Albany R R. Co. v. Pearson, 666, 667, 668, 670. Boston & A. R. R Co., Matter of, 1538. TABLE OF CASES. XXXV11 [The references are to the foot-paging.] Boston & M. R R. Co. v. Lowell & L. R R Co., 1529. Boston, B. & G. R R Co. v. Wellington, 224. Boston, C. & M. R R v. Gilmore, 1374. Boston, C. & M R R v. State, 1012, 1524. Boston Electric Co. v. Electric, etc., Co., 1178, 1182. Boston, etc., Co. v. Ansell, 906. Boston, etc., Co. v. Bankers', etc., Co., 426, 1208, 1209, 1214, 1222, 1365, 1383, 13S6, 1595. Boston, etc., Co. v. Barton, 1070. Boston, etc., R R v. Boston, etc., R R., 1498, 1503, 1505. Boston, etc., R R v. Coffin, 1313, 1380. Boston, etc., R R Co. v. Commonwealth, 707, 769. Boston, etc., R R Co.' v. New York & N. E. R R Co., 956, 1130, 1131, 1133, 1500, 1506. Boston, etc., R R Co. v. Richardson, 385, 506, 791. Boston, etc., R R Co. v. Wellington, 35, 87, 91, 116, 174, 224. Boston, etc., R. R. Co., Re, 1529. Boston, etc., R R Corp. v. Salem, etc., R. R Co., 1532, 1591. Boston Glass Co. v. Langdon, 862, 863, 864. Boston Loan Co. v. Boston, 776. Boston Mfg. Co. v. Commonwealth, 749. Boston Music Hall v. Cory, 447, 623. Boston Water-power Co. v. Boston & W. R R Co., 1592. Bostwick v. Fire Department of Detroit, 1026. Bothamley v. Shersan, 407. Bottomley's Case, 163, 1066. Botts v. Simpsonville, etc., Co., 1148, 1493, 1590. Bou, etc., Co. v. Standard, etc., Ins. Co., 878. Bouch, In re, 743. Bouchaud v. Dias, 94. Bouche v. Sproule, 742. Boulden v. Estey, etc., Co., 1004. Bouldin v. Bull, 1165. Boullemet, Succession of, 440. Boulter v. Feplow, 1038. Boulton Carbon Co. t. Mills, 66, 79, 80, 241, 299. Bou 1 ware v. Davis, 1004. 1427. Bound v. South Carolina R'y. 1284, 1310, 1337, 1357. 135S. 1399, 1403, 1458. Bourne v. Freeth, 1040. Bouton v. Dement, 34, 249, 263. Boutwell v. Townsend, 273. Bow v. Allenstown, 887. Bowdell v. The Farmers' & Merchants' National Bank of Baltimore, 329, 345. Bowden v. Johnson, 356. Bowdcn v. Santos, 356. Bowditch v. N. E., etc., Ins. Co., 984. Bowen v. Brecon R'y, 1237, 1255, 1256, 1334, 1410. Bowen v. Bull, 661. Bowen v. Carolina, etc., R. R, 928. Bowen v. First Nat. Bank, 1175. Bowen v. Kuehn, 165. Bowers v. Hechtman, 1100, 1103. Bowery Bank Case. 20. Bowick v. Miller, 1069. Bowker v. Pierce, 435, 740. Bowlby v. Bell, 567, 579. Bowling Green, etc., R. R Co. v. War- ren Co., 146. Bowman v. Chicago, etc., R'y, 1517, 1947. Bowman v. Wathan. 1132. Bowring v. Shepherd, 354, 580. Bowron,In re, 96. Bowyer v. Anderson, 1581. Box's Trusts, Re, 743, 744. Boyce v. Montauk, etc., Co., 1100, 1130, 1265. Boyce v. St. Louis, 1000, 1001. Boyce v. Trustees, etc., 882. Boyd v. Ches. & Ohio Canal, 1163, 1174, 1365. Boyd v. Conshohocken Worsted Mills, 709. Boyd v. Hall, 284, 286, 299, 300. Boyd v. Hanson, 475. Boyd v. Peach Bottom R'y Co., 120, 121, 221. Boyd v. Rockport Steam Cotton Mills, 547, 623. Boyd v. Sims, 1151. XX XV 111 TABLE OF [The reference* are Boyer v. Boyei Boy kin Boylan v. Huguer, 790, Boylnu Hull Colliery Co, Be, I . R'y, I0I8. Bo Boytioll v. □ v. Ai 72. oton v. Boyuton v. Lynn. etc.. Co., li f, 1!1 \. Brace v. Or Bracher v. 12. : 1". • •• l T Bradberry v. Ban lhury 1 k v. Phil., Marlton r • . Han rd v. 79 . 1017. 1 Banking Ca v. ■ i Bradfoi ; :. 17. v. N. Y lv Bradford Navigation Ca, Tn re, 861. v. Boston. Manufai IK Bradley v. Ballard, 1185, 11 Bradley v. I R. R. 1 Bradley * Bradley v. I rtli, 21. Bradley v. Tllii Bradley v. 198. Bradley v. etc., Co., 086, 1 Bradley v. 1 N. H. 17. B 16 Bradley v. I rn P R'y, 1525. Bradley v. P Bradley v. Bradley v. South. Bradley v. Wi Bradley, etc., Co. v. South Pub. Ca, 1042. Bra dner, In re, 150. to thefoot-pnging.} Bradshaw, E.\ parte, 1251 Bradstreet v. Bank of Rutland, 1061 : Brady v. I d, 106a iy v. M Brady v. Butlan I 1 R R . 36. m v. Merchants 1 N.t'l Bank, 911. Brain, rd v. N rkft II. 17. R Ca, 12 1281. I I I rt of i roch- B ra- nd v. II 171. ' . die, etc., R R Ca, 126 r. 711. >n, 864 adt v. 1 k, 490. Branham v. Record, Bran - t K n v. Winter, i Bran >nian R'y C Brant v. El, Wortl A v. \. Y. , !... R v. , 1828, 1 Brauser v. New : . [na I '<>.. 1020. ard v. Cincinnati, eta, 17. R.. W . v. Farwell 70. 'a A'lm'r v. Seligman'a Adna'r, ' 1 tiusville & F. R R. rABLE OF CAS] 3. XXXIX [The references are to the foot-paging.] Breitung v. Lindauer, 630. Brernan, etc., Bank v. Branch, etc., Bank, 966. Brennan v. Tracy, 1008, 1010, 1012. Brent v. Bank of Washington, 6S7, 691, 692, 693, 695, 696, 717. Brent v. State, 875. Breese v. U. S. Tel. Co., 1593. Bressler v. Wayne County, 764, 7C6. Brewer v. Boston Theatre, 943, 1149. Brewer v. Michigan Salt Ass'n, 731, 732. Brewer v. Stone, 126. Brewer v. Watson, 674. Brewer Brick Co. v. Brewer, 138, 139. Brewers' Fire Ins. Co. v. Burger, 94, 187, 188. Brewster v. Hartley, 343, 583, 585, 587, 830, 839. Brewster v. Hatch, 203, 204, 911, 914, 910. Brewster v. Lathrop, 711. Brewster v. Sime, 437, 594. Brewster v. Van Liew, 786. Brewster v. Wakefield, 1236. Briar, etc., Co. v. Atlas Works, 881. Brice v. Munro, 250. Brick v. Brick, Brickley v. Edwards, 878. Bridge Proprietors v. Hoboken Co., 1576, 1942. Bridgeford v. Hall, 1017. Bridgeport v. Housatonic R R Co., 133. Bridgeport Bank v. New York, etc., R R Co., 497, 498, 516, 517, 519, 54G. Bridgeport City Bank v. Empire Stone D. Co., 1243. 1244, 1247. Bridgeport Savings Bank v. Eldredge, 1078. Bridger's Case, 37, 189, 213. Bridgeton v. Bennett, 1095. Bridgewater Iron Co. v. Lissberger, 622. Bridgewater Nav. Co., Re, 362, 379. Bridgman v. City of Keokuk, 21, 749. Bridgwater, etc., Co., Re, 731. Bridport Old Brewery Co., In re, 801. Brien v. Harriman, 659, 671. Briggs v. Cape Cod, etc., Co., 875, 885. Briggs v. Cornwell, 300, 124& Briggs v. Horse R R, 1563. Briggs v. Massey, 550. Briggs v. Penniman, 272, 282, 494, 495. Briggs v. Spaulding, 854, 1028, 1030, 1031, 1429. Briggs v. Waldron, 353. Bri.-gs, Ex parte, 195, 207. Brigham v. Mead, 27, 342, 343, 346, 354, 469, 514, 584 Bright v. Farmers', etc., Co., 1600. Bright v. HuttoD, 1037. Bright v. Lord, 711. Bright v. Metairis, etc., Assoc, 1078. Brighfs Case, 1037. Brighton Arcade Co. v. Dowling, 240. Brighton, etc., Ry, Re, 366. Brightwell v. Mallory. 20, 447, 609. Brill v. AVest End R R, 1365. Brinckerhoff v. Bostwick, S73, 1027, 1029, 1132, 1135, 1144, 1150. Brine v. Insurance Co., 1346. Brinham v. Wellersburg Coal Co., 269, 279, 2b3, 305. 306. Brinkerhoff v. Brown, 2 Brinkly v, Hambleton, 355. Brinley v. Grou, 744. Brinley v. Mann, 1096, 1098. Brisbane v. Delaware, etc., R R Co., 498, 708, 709, 7 Briscoe v. Southern Can. R'y, 1493, 1536. Briseuden v. Chamberlain, 14, Bristol v. Chicago, etc., R R Co., 1020. Bristol v. Sanford, 278. Bristol, etc., Ry Co., Re, 366. Bristol Milling, etc., Co. v. Probasco, 306. Bristol, etc., Bank v. Keary, 10^4. Bristol, etc., Ry, In re, 1466. British American Land Co. v. Ames, 1173. British & American Telegraph Co., In re, 88. British Assurance Co. v. Brown, 1106. British Columbia, Bank of, v. Page, 1002. British, etc., Co. v. Comm'rs, 1251. British, etc., Co., Re, 53, 1139. British, etc., Life Assurance, Re, 1031. British, etc., Telegraph Co. v. Colson, 96. British Farmers* Pure Linseed Cake Co., Re, 82L British Provident Life Ass'n, Re, 164, 813, 849, 1139, 1362. British S. P. B. Co., Re, 50. xl TAUr.I. "I CASES. [The reference* are British Sugar Refining Co., In re, 166. 802, 805. Briton, etc., Ass'n v. Jones, 163, 806. Brittain v. Allen, 19. Brittain v. NewlanJ, 1018. Brittain, Ex parte, 1037. Brittania, etc., Assoc, Re, 332. Britton v. Green Bay, etc., Co., 159 Broadbent v. Farley, 781. Broadbont v. Johnson, 93. Broadway Bank v. McElrath, 519, 585, 617. Brobst v. Brock, 1354 Brocaw v. Board of Commissioners, 1 1". Brocavv v. Gibson Co.. 134, 151. Brock Dist Council v. Bowen, TUT. Brockenl>rou»h v. James River, etc., Co., 170. Brockway v. Allen, 1017, 1106. Brockway v. Inn-. 278. Brockway v. Ireland, 72, 73. Brodie v. McCabe, 181. Brokaw v. New Jersey R & T. Co.. 100(5. iooa Bromley v. Elliot, 277. Bromley v. Smith, 1111. Bromley, In re, 7 1 1. Bronson v. La Crosse R R Co.. 1165, 1214, 1216, 1231, 1072. 1349, 1851, 1458. Bronson v. Railroad, 1847, 1849, 1851, 1356. Bronson v. Wilmington, etc., Ins. Co., 306. Brooklyn C. & J. R. I.\ I kx v. Brooklyn C. R R. Co., 1530, 155 1565, 1566, 1568. Brooklyn, etc.. Co. v. City. - Brooklyn, etc., R. R. v. Strong, 396. Brooklyn, etc., R R Co., In re, B76, B8 884. Brooklyn, etc., R R, Matter of, 1 I'.'S 1504, 1557. Brooklyn Life Ins. Co. v. Bledsoe. 1005. Brookman v. Rothschild, 566. Brooks v. Dick, 1476. Brooks v. N. Y.. etc.. R R Co.. 11*°,. Brooks v. Railway. 1890. Brooks v. Vermont Central R R, 1313. 1316,1326, 1327. 1841, 1349, 1859, 1474. tn the foot-paging.] Brookville it G. T. Co. v. McCarthy. 231. Brookville Ins. Co. v. Brotherhood's C 180, 11 Bronghton v. Manchester, etc., Works, 1191, 11 Brower v. Baucus, 1272. Brower v. ( '■ itheal 677. seer v. I Brower v. ]' R R Co.. 98, 105. d v. Adams, 522, "17. E Brown v. Al 7a ■ Brown v. Black, ■. n v. Brown, I Brown v. Bull EL R ^^-. Wl 114a Brown \. !'■ mi v. Calumet. ■ : .. B,; Brown v. < amp' r.!..\\ D v. ( '!.: R'y, IB ■ minium ealtli, E Brown v. Dibble, I Brown v. Brown v. Duluth. eta, R.J ~" 1187, 1188, 1212. Brown v. Dupk wn v. Eastern - Brown v. Farmi 1 1097. Brown v. Fairmonnt Mil 68L Brown v. Finn. I Brown v. Florida Southern R'y Co. Brown v. French. ' Brown v. Hitch* J86, 292, 350, n v. lb.lt. I Brown v. Howard Ins. < Brown v. Killan, 98 Brown v. Lake Superior Iron Co.. 1411, 1412. Brown v. La Trinidad, 1048, II Brown v. Law b >n, 786. Brown v. Lehigh, etc., Cot, 704, 7' ! Brown v. Lunt, 1057. \n v. Mayor, et . rs, 175. Brown v. Stoerkel, 661. Brown v. Toledo, etc., R R.. 1442. Brown v. Union Ins. Co., 252,855. Brown v. Vandyke, 933. Brown v. Wabash R'y, 1482. Brown v. Ward, 601. Brown v. Winnissimmet Co., 972, 10S4, 1093. Brown's Case, 44. 88, 1032. Brown. F.x parte 359, 1446, 1462. Brown, Petition of. 741. Brown & Bros. v. Brown, 1077. Browne v. Black, 359. Browne v. Collins, 742, 745. Browne v. Monmouthshire R'y & Canal Co.. 726. 728. Brownell v. Town of Greenwich, 136. Browning v. Camden & W. R R Co., 1524. Browning v. Great, etc.. Co.. 1046. Browning v. Hinkle, 82, 1090, 1113. Browning v. Mullins. 1262, 1590. Brownloe v. Campbell. 196. Brownlee v. Ohio. etc.. R. R Co., 89, 92, 114, 1S8. 198. Brownson v. Chapman, 464, 568. Broyles v. McCoy, 325. Bruas' Appeal, 469. 471. Bruce v. Lord, 1105. Bruce v. Nickerson, 206. Bruce v. Piatt. 854, 863. Bruce v. Smith. 451. 456. 547. Bruff v. Mali, 395. 398. 399. to the foot-paying.'] Bruffett v. Great Western R R, 863, 1275, 1480. Brum v. Merchants', etc.. In?. Co.. 963. Brumley v. Westchester, etc., Soc, 1146. 1165. Brundage v. Brundage, 16, 704, 710, 711, 714, 743. Brundage v. Monumental, etc., Min. Co., 259. 290. Brundred v. Rice. 951. 975. 1520. Brunswick, etc., R. R. v. Hughes, 1320. Brunswick, etc.. R'y, In re, 1523. Brunton's Claim. Re. 1255, Bruschke v. Der Nor J, etc., Verein, 1145. Brush v. Fisher. 1548. Brush Electric Co. v. Brush, etc., Co.. 947. Bryan v. Baldwin. 5GG, 574, 604, 606, 607, 790. Bryan v. Board, etc., 641. Bryan v. Leu-is, 470. Bryant v. Goodnow, 806. Bryant v. Telegraph Co., 1593. Bryon v. Carter, 6S6, 6S8, 690. 691. Bryson v. Raynor, 598, 605, 606, 607, 784. Bryson v. Warwick, etc., Co., 1145, 1502. Buchan, Ex parte, 681. Buchan's Case, 332. Buchanan v. Litchfield, 144. Buchanan v. Meisser, 300. Bucher v. Dillsburg, etc., R. R Co., 89, 100, 188. Buck v. Buck, 663. Buck v. Seymour, 1364, 1383, 1488, 1505. Buck, etc.. Co. v. Lehigh, etc., Co., 865. Buckeridge v. Ingram, 22. Buckeye, etc., Co. v. Harxey, 648, 835. Buckfield, etc.. R R Co. v. Irish. 116. Buckland v. Adams Exp. Co., 1579. Buckley v. Briggs, 1190, 1193, 1196. Buckhn v. Bucklin, 652. Buckmaster v. Consumers' Ice Co., 532. Buckner v. Hart, 1557, 1567. Bucksport & Bangor R. R. Co. v. Buck, 119. 224. 230. 632. 806. Bucksport & Bangor R. R. Co. v. In- habitants of Brewer, 119, 120, 128, 152 Budd v. Monroe, 437. 462, 532, 850. Budd v. Multnomah St. R. R Co., 162, 164, 166. 173. 781. 783, 7S6. xlii TABLE OF CASES. [The references are Budd v. New York, 1515, 1000, 1950. Budd's Case, 3G8. Buell v. Buckingham, 918, 990,995, 1065. Buell v. Com'rs of Fayetteville, 702. Buenos Ayres, etc., Co., Re, 3GG, 957. Buenz v. Cook, 272, 321. Buffalo & Allegany R R Co. v. Cary, 233. 308. Buffalo & N. Y. G R R Co. v. Brainerd, 1524, 1526. Buffalo, etc., v. Hatch, 234 Buffalo, etc., Co. v. Delaware, etc., R R, 1517. Buffalo, etc., Institute v. Bitter, 1103. Buffalo, i I .. !'. l:. Co. v. Buffalo. R R. Co., 1514, 1570. Buffalo, eta, I:. R. I !a v. Clark, 92, 11& Buffalo, eta, R. K. Co. v. Dudley 111, 118, 174, 176, L92, Buffalo, eta, K. R, I 97, 118, 237. Buff. R R Ca v. II Bull'. R. I o. v. Lain) Buffalo, etc., R R Co. v. 1 Buffalo, eta, R'y Co. v. New Yi R R Co., 879. Buffalo Grape Sugar Ca v. AJbei 51 Buffalo Lubricating Oil Co. v. Stan Oil Co., 1009. Buffalo, Matter oi Lee'a Bank of, ' Bufflngton v. Bardon, 805, 1042. Buffit v. Troy & Boston U. 1 Buford \. Keokuk Northern Line Packet Co., 958, 11".:;. Bugg, Ex parte, Bugg'sCa 18a Bulkley v. Beg, etc., Co., 1148. Bulkley v. Bri .. 1094. Bulkley v. Derby Fishing Ca, 1092, 1098, 1106. Bulkley v. Whitcomb, 299, 300, 935. Bull v. Douglas, 785, 7s7. 791. Bullard v. Bank, 688, 701. Bullard v. Bell, 284, 289, 80& Bullard V. Kinney, G68. Bullard v. Nantucket Bank, 1018. Bullock v. Bullock. 486. Bullock v. Chapman, 859. to the foot-paging.] Bullock v. Consumers', etc., Co.. 1112. Bullock v. Falmouth. 88, 111, 609. Bullock v. Kilgour, 296. Bulmei'- 331. Bulow v. city of Charleston, 700. Bult v. Worrell, 1191. Bumgardner \. L avitt, 4 Buncombe, etc., Commissioners v. ] m I, 1512. Buncombe Turnpike Co. v. M Bundy v. t rackson, : Bunn's X7. Im'r v. Camden, et< ., 1,'. K., Bui I Bur< h \. Ti I 1216. ( I K'y, 15" Bur ham v. Savii k. 1018. Bui!. Ham, 751, 3 Bin! SU. Burke Burke v. Smith. 181, 177.°: Burker v. Lj udon, I Burkinahaw v. Nichols, 31, 81, - Bui kilt v. Tayl. Burleigh v. Ford, II Burlingame \. 1 !07. Burh of, v. Burlington "W Ca, 819. Burlington, . v. Palmer, 91. Burlington, - ta, R R v. Chicago Lum- ber Co.. 1G Burlington, i ta, R B, v. Y, rry, 1894. Burlington, eta, R R Ca v. White, Burlington, etc.. Ky v. Dey, 1514 Burlington, eta, R'y ^. Simmons, 1856. TABLE OF OASES. xliii [The references are Burlington & Missouri River R R. Co.* v. Boestler, 126, 128. Burlington's Case, 106. Burlinson's Case, 836. Burmester v. Norn's, 1185, 1186. Burmingham v. Sheridan, 461, 462. Burmpe v. Haskins Steam-engine Co., 272. Burnes v. Atchison, 1156. Burnes v. Pennell, 347, 479, 496, 734, 1049. Burnham v. Bowen, 1315, 1359, 1399, 1400, 1402. Burnham v. San F. & Co., 184. Burns v. Beck, 223, 227, 241, 324, 930. Burns v. Commencement, etc., Co., 924. Burns v. Lawrie's Trustees, 692. Buruside v. Dayrell, 1036, 1041. Burnsville, etc., Co. v. State, 531. Burr v. Charitan Co.. 147. Burr v. McDonald, 1053, 1058. Burr v. Sherwood, 709. Burr v. Wilcox, 14, 24, 20, 27, 107, 164, 239, 301, 332. Burrall v. Bushwick R R. Co., 13, 20, 515, 520, 532, 7S4, 785, 889. Burrill v. Boardman, 996. Burrill v. Calendar, etc., Co., 927, 928. Burrill v. NahantBank, 1072, 1093, 1100. Burroughs v. Burroughs, 3. Burroughs v. Commissioners, 1236. Burroughs v. North Carolina R. R. Co., 16, 711. Burrows v. Smith, 28, 98, 99, 102, 122, 125, 240. Burt v. Batavia Paper Mfg. Co., 1114. Burt v. British, etc., Ass'n, 1137. Burt v. Dutcher, 789. Burt v. Farrar, 95, 212. Burt v. Rattle, 371, 1261. Burtis v. Buffalo & S. L. R R, 1533. Burton v. Burley, 1081. Burton's Appeal, 995. Burton, etc., Co., In re, 684. Burton & Saddlers' Co., 684. Busbee v. Freeman, 741. Busey v. Hooper, 15, 214, 798, 1137. Bush v. Buckingham, 940. Bush v. Johnson, 1490. Bush's Case, 27. to the foot-paging.] Bushel v. Commonwealth, etc., Ins. Co., 1020, 1175. Bushnell v. Beloit, 137. Bushnell v. Consolidated, etc. Co., 312. Bushnell v. Park Bros. & Co., 060, 1182. Bustros v. White, 682. Butcher v. Dillsburg & M. R. R Co., 221. Butchers', etc., Bank v. McDonald, 878. Butchers' Union Co. v. Crescent City Co., 1944. 1949. Butler v. Aspinwall, 228. Butler v. Cumpston, 105, 328, 336, 355. Butler v. Dunham, 133. Butler v. Duprat, 1084. Butler v. Eaton, 239. . Butler v. Edgerton, 1207. Butler v. Finck, 568. Butler v. Glen Cove Starch Co., 511, 704 Butler v. Glens, etc., R. R., 19. Butler v. Myer, 1207. Butler v. Poole, 243, 302. Butler v. Rahm, 1238, 1273, 1281, 1293, 1296, 1297, 1300. 1383. Butler v. Watkins, 1007. Butler University v. Scoonover, 91. But man v. Howell, 586, 602. Butt v. Monteaux, 1041. Butte Hardware Co. v. Wallace, 321. Butterfield v. Beardsley, 667, 672. Butterfield v. Corning, 1467. Butterfield v. Cowing, 1131. Butterfield v. Spencer, 667. Butterfield v. Town of Ontario, 1237. Butternuts & Oxford Turnpike Co. v. North, 122. Butterworth v. Kennedy, 5S9. Butterworth v. O'Brien, 732. Button v. American Tract Soc, 1019. Button v. Hoffman, 1050, 1051. Buttrick v. Nashua, etc., R. R, 623, 1063, 1118. Butts v. Burnett, 576, 597, 604, 781. ' Butts v. Wood, 926. Butz v. Muscatine, 142. Buxton v. Lister, 460. Bwlch-y-plwm Lead M. Co. v. Baynes, 201, 210. Byam v. Beckford, 666. By bee v. Oregon, etc., R R, 884. xliv TABLE OF CASES. [The references are Byers v. Beattie, 474. Byers v. Franklin Coal Co., "51. Byers v. Rollins, 390, 400, 841, 1145, 1148. Byrne v. New York, etc, Co., 859. Byrne v. Union Bank of Louisiana, 686. Bywaters v. Paris, etc., R'y, 233, 883. c. Cable v. McCune, 278, 293. Cable R'y, Re. 887. ( labot & W. S. B. v. Chapin, 226. Cacbar, Re\ 195. Cadet t v. Earle, 409. Cady v. Potter, 501, 528. Cady v. Smith, I Cagill v. Woolbridge, 1427. Cagney, Tn re, 840. Cagwiu v. Town of Hancock, 136, 1 10. 149. Cahall v. Citizens', etc., Ass'n, 880. Cahill v. Bigger, 1015, 1016. Cahill v. Kalamazoo Ins. Co., 863, 1021, 1058, 1065. Calm v. W. U. Tel. Co., 57a Cahoon v. Bank of Utica, 598. Cain v. Pullen, 680. Cairo, etc., R. R. v. Fackney, 1! Cairo, etc., R R Co. v. Mahoney, 1089. Cairo, etc., R R Co. v. Sparta, 187, 143. Cake v. Pottsville Bank, 1077. Calder, etc., Nav. Co. v. Pilling, 102a Calderwood v. McRae, 175. Caldicott v. Grifliths, 601. Caldwell v. Burke Co., 136. Caldwell v. Nat'l Mohawk Bank, 10S5. Caldwell v. New Jersey Steamboat < ... 1011. Caledonian, etc., Co. v. Curror, 1031. Caledonian, etc., R'y v. Helensburg, etc., 1044, 1541. Caledonian, etc., R'y v. Magistrates, etc., 1044. Caledonian R'y v. Solway R'y, 15:',s. Caley v. Phila. & Chester County R. R. Co., 120, 121, 12-2. 133, 187, 235, 635. Calhoun v. Lanaux, 1434. Calhoun v. Memphis, eta, R R, 1385. Calhoun v. Millard, 136. to the foot-paging."] Calhoun v. Paducah & M. R R Co.. 1381. Calhoun v. St. Louis, etc., R'y, 1402, 1 ! I 1451, 1155. Calhoun v. Steam Ferry Boat, etc., 25a California v. Central Paa Kailroad Co., Ill California v. Pacific R R Co., 2, 776. California, etc., Co. v. Alta, etc., Co.. 15) California, etc., Co. v. Russell. 226. California, etc.. I bafer, 114. California, eta, Hotel Co. v. Calender, Calisher 1 kins v. Atkinson, 2 illahan v. Louisville & N. R • ',,., 1513. lanan v. Wind II. Callao Bis. I • . Re, Callaway, el I , • '• 1 "'35. Callender v. Painesville, i i .. R R, 882. Calvert et aL v. state 1568. ( 'ah in v. Williai Can. v. Westchester R R Co., 821. Camblos v. Phil, eta, R R Co, 9S0. 1142, 15ia Cambrian R'y, I 1 166, 141 Cambridge v. Cambridge R R, 1572. Cambridge Water-works v. Somerville Dy ( .-<». -.'90. i "anidt n v. 1 ». -i cm us. 251. ( iamden v. Mayhev Camden v. Stuart, 57, 67. Camden, eta, Assoa v. Jones, 516. Camden, eta, R R v. Briggs, 1516. Camden, eta, R R v. Elkins, 832, 833, 834,835, 114a Camden, etc.. R R v. May's Landing, eta, R R. 974, 1496, 1504, 1605. Camden Rolling-Mil] Co. v. Swede Iron Co.. 1175. 1176. Came v. Brigham, 266. 296, 1160. Cameron v. Durkheim, 478, 502, 575, 787. 791. ( lameron v. Havemeyer, 017. ( lameron v. Seaman, 85a Cameron v. Tome, 123a ( animai k v. Lewis, 158a Cammeyer v. United, etc., Churches, 849, 1064. TABLE OF CASKS. xly [The references are Camp v. Barney, 1433, 1456, 1457. Camp v. Byrne, 795. Camp v. Taylor, 1029. Camp v. W. U. Tel. Co., 1593. Campbell v. American, etc., Co., 362, 365, 533, 589, 1137. Campbell v. Argenta, etc., Co., 805, 1108, 1265. Campbell v. Cypress, etc., Cemetery, 906, 1216, 1224. Campbell v. Dulutb, etc., R'y, 1180. Campbell v. Fleming, 492. Campbell v. James, 1099. Campbell v. Kenosba, 132. Campbell v. London, etc., R'y. 367. Campbell v. Marietta, etc., R. R, 1519. Campbell v. Miss. Union Bank, 863. Campbell v. Morgan, 26, 44, 55. Campbell v. Paris, etc., R. R Co., 131. Campbell v. Parker, 604. Campbell v. Pope, 1095. Campbell v. Poultney, 831, 843. Campbell v. Railroad Co., 1313, 1322, 1328, 1329, 1354. Campbell v. Richardson, 468. Campbell v. Texas, etc., R R, 1292, 1339, 1348, 1363, 1386. Campbell v. Trustees, 1091. Campbell v. Woodstock, 584. Campbell v. Wright, 565, 574. Campbell's Case, 936, 1205. Campbell, etc., Co. v. Hering, 1003. Canada Southern R'y Co. v. Gebhard, 999, 1466, 1479, 1944. Canal Bridge v. Gordon, 1092, 1093. Canal Co. v. Railroad Co., 887, 1543. Canal, etc., Co. v. St. Charles, etc., Co., 1555. Canal, etc., R R. v. Crescent, etc., R R, 1570. Canal, etc., R. R. v. Orleans R R, 1570. Canal St, etc., Co. v. Paas, 877. Canandaigua Academy v. McKechine, 1165. Candee v. Pennsylvania R R Co., 1532, 1533. Candy v. Globe Rubber Co., 1007. Canfield v. Minn., etc., Ass'n, 604. Cannon v. Bryce, 477. Cannon v. New Orleans, 1599. , to the foot-paging.] Cannon v. Trask, 165, 799, 811, 843. Cantillon v. Dubuque, etc., R. R Co., 156. Cape v. Dodd, 580. Cape Breton Co., In re, 442. 913, 916. Cape, etc.. Co., In re, 828, 842. Cape Fear, Bank of, v. Edwards, 759. Capel v. Sims, etc., Co., 195, 915. Cape's Executor's Case, 344, 352, 353, 355. Capital, etc., Co. v. Charter, etc., Co., 1585. Capital, etc., Ins. Co., Re, 8S5. Capper, Ex parte, 1037. Capper's Case, 107, 333, 358. Cappin v. Greenlees, 418. Cappur v. Harris, 460. Capron v. Capron, 743. Capron v. Stout, 274. Capron v. Thompson, 576, 578. Caraher v. Royal Ins. Co., 921. Card v. Carr, 1071. Cardiff, etc., Bank, Re, 1033. Cardot v. Barney, 1456. Carew v. White, 679. Carew's Estate Act, In re, 1118. Carey v. Brown, 1314. Carey v. Cin. & Chicago R. R. Co., 210, 880, 882. Carey v. Des Moines, etc., Co., 1042. Carey v. Houston, etc., R'y, 933, 1128, 1337, 1338, 1343, 1472, 1473. Cargill v. Bower, 205, 487, 976. Carli v. Stillwater, etc., Co., 1562. Carling, Ex parte, 209, 491. Carling's Case, 46, 78, 83. Carlisle v. Cahawba & Marion R R Co., 168. Carlisle v. Evansville, Ind. & C. S. R R Co., 188. Carlisle v. Saginaw, etc., 92, 110. Carlisle v. Southeastern R'y, 728. Carlisle v. Terre Haute & Richmond R. R Co., 633. Carmichael's Case, 1036. Carmody v. Powers, 1047. Carnaghan v. Exporters', etc., Co., 854, 864. Carnatic, Nabob of, v. East India Co., 291. Carnegie, etc., Co. v. Hulbert, 1180. xlvi TABLE OF 0A8ES. [The references are Carolina Nat'l Bank, Ex parte, 1197. 1449. Carothers v. Alexander, 1077 Carpenter v. Black Hawk, etc., Min. Co., 1200, 1261, 12G2, 1208, 1273, 1277. 1300, 1321. Carpenter v. Canal Co.,'l324, 1382. Carpenter v. Catlin. 1474. Carpenter v. Dan forth, 431. Carpenter v. Fains worth, 1104. Carpenter v. Longan, 122^. Carpenter v. Marine Bank, ! 288. Carpenter v. N. Y. & N. IX R R, 724 Carpenter v. Rommel, 12 Carpenter v. Westinghouse Air-brake Co., 11 i Carr v. Chartiere Coal C Carr v. Commercial Bank, 1170. Carr v. Hinchliff, 570l Carr v. Iglehart, 822, Carr v. Lancashire, etc., R'y, r Carr v. Le Fevre, 88, 84 48, 64, 1230, 1231. Carr v. Rischer, Carriage Co., Re, 909. Carriage, etc., Assoc, In re, 90S. Carrick's < !ase, 1037. i Earrier v. Concord R R, 1 195, 13 Carrol v. Green, 801, 802, 808, 304. can-oil v. Campbell, 1582. Carroll v. Cone, 716. Carroll v. East St. Louis, 1000. Carroll v. Mullanphy Savings Bank, .~>17, r,i7. cor,. 688, 691,699, I Carroll v. St. Johns, etc., II Carroll County v. Smith, ill. lie, us, 152 Carron Iron Co v. McClaren, 1174 Carrugi v. Atlantic, etc., Ca, 1110. Carson v. Antic- Mining Co., I (arson v. Central R R, 1561. Carson v. Iowa, etc., Co.. 603, 605, 1148. Carson, etc., Bank v. Carson, etc.. Co., 970. Cartan v. Father Mathew, i, tv. 173. Carter v. Ford, 1028. Carter v. Ford Plate Glass Co., 1159, 1 172. Carter v. Good, 443. to the foot-paging.] Carter v. Howe Machine Co., 1007, 1008, 1009, 1010. Carter v. Manuf. Nat'l Bank, 445, Q Carter v. Taggart, i Carter v. Union Printing Co. et al., 216. Carter et al. v. Rome, etc., Co. et al., 189 tmell'aC 1 " >7L Cartwrigbt v. Dickinson, 102. 213. r v. Braintree Ml 19, 271. v. Mann: Can v. Hulme, I 16. Caryl v. McElrath, 1 v. Bank. 521, « I 990. v. Kelly, 1" 1 • M : hand, 1 118. I -v [man, 1016, 1090. iit Ifobilier, ', 5 1 . -7. v. Dillon, 186, 140. v. Ottai 1141. 1146. 154 v. Pittsburgh, Va arleston K'> '. 124, 127. 171. .id v. \\. inmau II v. Lexis . 797, 804. ( !astellan v. Hi Castello v. city Bank of Albany, 606. 107. Castle v. Belfast, etc., Co.. 107a „• v. Lewis. 1066, IS Castleman v. Holm 339, 350. veil v. Putnam. 571, 572, 576, 590. < iatawba, etc, I k* v. Flow ere, l ! Catch pole v. Ambergate, etc., B'j 17s. 179 i \. Ei i rleigb, I Caterham K*y v. Loudon & Brighton R'y, 151 Gates v. Sparkman. 460, 181, 917. TABLE OF CASES. xlvii Catlett v. Starr, 1100. Catlin v. Eagle Bank, 990. Catlin v. Green. 384. Catskill Bank v. Gray, 9G7. Caulkins v. Memphis, etc., Co., 529, 745. Causland v. Davis, 781. Cave v. Cave, 1115. Caylus v. New York, etc., R R Co., 1199, 1200. Cayuga, etc., v. Kyle, 90, 233. Cayuga B. Co. v. Magee, 1576. Cayuga R'y v. Niles, 1381. Cazeaux v. Mali, 398, 478, 486. Cecil, Matter of, 822. Cecil National Bank v. Watsontown Bank, 097, 099. Cedar, etc., Co. v. Cedar, etc., Co., 1163. Cedar, etc., Ins. Co. v. Butler, 208. Ceeder v. Load, etc., Co., 1088. Cefu Cilcen Min. Co., In re, 1192. Cent., etc., Co. v. Hartshorn, 1166. Centennial Board of Finance, In re, 892. Central Agricultural, etc., Assoc, v. Ala- bama Gold Life, etc., Co., 231, 282, 356, 629. Central Bank v. Empire Stone D. Co., 1243. 1244, 1247. Central Bridge Co. v. Lowell, 1592. Central City Sav. Bank v. Walker, 325. Central Democratic Ass'n, Re, 7. Central, etc., Assoc, v. James, 453. Central, etc., Bank v. Levin, 1117. Central, etc., Bank v. Walker, 1126. Central, etc., Co. v. Chatham, 1089. Central, etc., Co. v. Smitha, 1537. Central, etc., Co. v. State, 1596. Central, etc., Co. of N. Y. v. Chicago, etc., Co., 1392. Central, etc., Co. of New York v. United States, etc., Co., 1338. Central, etc., Ins. Co. v. Callaghan, 1047. Central, etc., R R v. Morris, 1530. Central, etc., R R. Co. v. Twenty, etc., R'y Co.. 677, 875. Central, etc., R. R Co. v. Twenty-third, etc., R. R Co., 877, 1499. Central, etc., Tel. Co. v. Bradbury, 1593. Central Gold Mining Co. v. Piatt, 991, 1207, 1261, 1300. Central Mills Co. v. Hart, 1319. [The references are to the foot-paging.] Central Nat. Bank v. Hazard, 1343, 1455, 1481. Central Nat. Bank v. United States, 703, 713, 762. Central Nat. Bank v. White, 681, 684. Central Nat. Bank v. Willistou, 023. Central Nebraska, etc., Bank v. Wilder, 588, 708. Central Ohio Salt Co. v. Guthrie, 648. Central Park, Matter of, 1527. Central Pr. Co. v. Clements, 232, 235. Central R Rv. Central Trust Co., 1337, 1355. Central R R v. Collins, 422, 631, 983, 1142. 1521, 1538. Central R R v. Georgia, etc., Co., 773, 1171, 1545. Central R. R v. Smith, 1534. Central R R. v. Twenty-third St. R., 682. Central R. R. & BaukingCo. v. Atlantic, etc., R. R Co., 7S9. Central R R. & Banking Co. v. Ward, 512. Central R R, etc., Co. v. Claghorn, 15. Central R R., etc., v. Papot, 713. Central R, R, etc., Co. v. Pettus, 961, 1158, 1309. Central R R Co. of L. I., Matter of, 1530. Central R R. Co. of N. J. v. Pennsylvania R. R. Co., 422. Central T. Co. v. East Tenn., etc., R R, 1345. 1398, 1460. Central T. Co. v. Florida, etc., Co., 1345. Central T. Co. v. Kneeland, 10, 1362, 1364, 1380, 1383, 1384, 1387. Central T. Co. v. Marietta, etc., R R, 933, 1375, 1441, 1442, 1444. Central T. Co. v. Ohio, etc., R R, 1372, 1378, 1379, 1439. Central T. Co. v. St. Louis, etc., R'y, 1391, 1399, 1435, 1447, 1542. Central T. Co. v. Tappan, 1451. Central T. Co. v. Texas, etc., R'y, 1288, 1290, 1353, 1389, 1390, 1391, 1421. Central Trans. Co. v. Pullman's Car Co., 6, 648, 974, 1500, 1600. Central Trust Co. v. Grant, etc., Works, 1357. xlviii TABLE OF CASES. [The references are Central Trust Co. v. New York City, etc., R R, 1209, 1217, 133G, 1394, 1451. Central Trust Co. v. Richmond, etc., Co., 1392. Central Trust Co. v. Seasonwood, 1453. Central Trust Co. v. Sheffield, etc., R'y, 1391, 1451. Central Trust Co. v. Sloan, 1391, 1482. Central Trust Co. v. Wabash, etc., R'y, 932, 1277, 130S, 1339. 1846, 1850, 1859, 1393, 1397, 1898, 1401, 1409. 111'. 112(i, 1433, 1440, 1111. 1112. ]■ llll. 1445, 1458, M.V.i. 1481. Central Turnpike Co. v. Valentini . Cerl i in Stockholders of Cal. Nat' I Bank, In re, 304. Chafee v. Sprague, 452. Ohaffev. Ludeling, 809, 825. Chaffee v. Middlesex R R, Chaffee v. Quidnick < '".. 1 125. Chaffee v. Rutland R R Co., 860, 868, 869, 873, 702, 703, 71- -'08. Chaffee County \. Potter, 184. Chaffin v. Cummings, 87, 807, S Chafford v. Board of Supervisors, 1020. Chagrin, etc., P. R Co. v. Cane, L589. Chamberlain v. Bromberg, 262, 988 Chamberlain v. Burlington, 184 Chamberlain v. Chamberlain, 994, 1001. Chamberlain v. Conn., etc., R R, 1300, 133G, 1852. Chamberlain v. Greenleaf, 572, 578, 577, 592. 598. Chamberlain v. Huguenot, etc., 271 7:55, 1167. Chamberlain v. Mammoth, etc., Co., 1164. 1167. Chamberlain v. Pacific, etc., Co., 928. Chamberlain v. Painesville & Hudson R R Co., 119, 120, 123, 128, 2 IS. 797, 806. Chamberlain v. Rochester, etc., Co., 1414. Chamberlain v. St Paul, etc., R R, 1276. Chambers v. City of St Louis, 993. Chambers v. Falkner, 9S3. Chambers v. Manchester, etc., R'y Co., 1253. Chambersburg Ins. Co. v. Smith, 845, 524, 698. to the foot-paging.] Champagnie, In re, 1216. Champion v. Memphis, etc., R R Co.. 633, 639. Chandler v. Bacon. 79, 909, 915, 1147. ('handler v. Braiuard, 667. Chandler v. Brown, 217, 262, 263, 306. Chandler v. Hoag, 853, Chandler v. Keith, 161, 260, 262, i Chandler v. Monmouth Bank, 925. Chandler v. Northern Cross R R Co., 289, 245. Chandler v. Siddle, 5, 261, 1427. Chandler's 1 1. Chapln v. ( lambria, etc., i kx, II Chapin v. First, etc., Boc, 665. Chapin v. Merchants' Nat Bank, 421. Chapin V. School District, 96S, 1 Chapin v. Sullivan R R. Co.. 1531. ( lhapin v. Thompson, 1 126. Chapin v. Vermont etc., R R, 1202, 1 222. Chapleo v, Brunswick Building Soc., 118 Chaplin v. Clarke. 103. 1041. Chapman v. Barney, 066, 1183. < ftapman v. Brook Chapman \. City Council, 439. Chapman v. Comstock, 985. ( lhapman v. I k>ray, i Chapman v. Douglas County, 1153. Chapman v. Gat - 139. Chapman v. Mad River & Lake Erie R R Co.. 119. Chapman v. New Orleans Gas Light etc., Co., 529, 619. • hapman v. Phoenix Nat'l Bank, 512. Chapman v. Pittsburg, etc., R R, 1381. Chapman v. Porter, 94, 960, 966. ( ha] man v. Railroad Co., 205. Chapman v. Reynolds, 408. Chapman v. Shepherd, 357, 567, 579. Chapman's Case. 97. Chapman & Barker's Case, 109, 327, 330, 336. Chappel v. Skinner, 781. Chappell's Case, 448, 358. Charitable Association v. Baldwin, 1019, 1058. Charitable Corporation v. Sutton, 898, 1031. TABLE OF CASES. xlix [The references are Charity Hospital v. New Orleans, etc., Co., 1545, 1547. Charles River Bridge Co. v. Warren Bridge, 875, 1577. 1941. Charleston v. People's Nat'l Bank. 761. Charleston Ins. & Trust Co. v. Sebring, 922, 1144. Charlick v. Flush, etc., R. R, 674. Charlotte, etc., R. R. v. Gibbes, 1515, 1950. Charlotte, etc., R R. Co. t. Blakely, 92, 114,219. Charlton v. Newcastle, etc., Co., 1139, 1502, 1510. Charter Oak Ins. Co. v. Sawyer, 1005. Chartiers R'y v. Hodgens, 235, 884, 1271, 1483, 1524, 1559. Chase v. Burritt, 412. Chase v. Curtis, 278, 292, 293, 296. Chase v. East Tennessee, etc., Railroad Co., Ill, 172, 1025. Chase v. Hibernia Nat. Bank, 430. Chase v. Lord, 14, 271, 285, 304, 321, 331. Chase v. Sycamore & Courtland R. R Co., 126, 128. Chase v. Tuttle, 1062, 1260. Chase v. Vanderbilt, 367, 373, 712. 1145, 1146. Chnsis, etc., Co. v. Baston, etc., Co. 878. Chatauqua County Bank v. Risley. 992. 1423. Chater v. San Francisco S. F. Co., 102, 113, 456, 461. Chattanooga, etc., R. R. v. Liddell, 1111. Chatteroi R'y Co. v. Kinner, 1524. Cheale v. Ken ward, 355. 451, 460. Chedworth v. Edwards, 784. Cheeney v. Lafayette, etc., R'y Co., 926. Cheever v. Meyer, 619, 622. Cheever v. Rutland, etc., R. R, 1409. Cheltenham & G.W. N. R'y Co. v. Daniel, 87, 518. Chemical, etc., Bank v. Wagner. 1083. Chemical Nat. Bank v. Armstrong, 595, 1082. Chemical Nat, Bank v. Colwell, 521, 852, 854. Chemical Nat. Bank v. Kohner, 1078, 1085. Chenango Bridge Co. v. Paige, 316. D to the foot-paging.] Chenango County Ins. Co., In the Mat- ter of the, 812, 840. Chenango, etc., Co. v. Lewis, 1070. Chenango, etc., Ins. Co., Re, 812, 840. Chenango Ins. Co., Matter of, 1058. Cheraw & Chester R. R. Co. v. Garland, 158, 225. Cheraw & C. R. R Co. v. White, 223. Cherokee Iron Co. v. Jones, 968. Cherokee Nation v. Kansas R'y, 1526. Cherry v. Colonial Bank, 977. Cherry v. Frost, 547, 593, 594. Chesapeake & Ohio Canal Co. v. Balti- more & Ohio R R. Co., 858, 863, 875, 877. Chesapeake & Ohio R'y Co. v. Miller, 773, 774, 1483. Chesapeake & O. R. R Co. v. Paine, 22, . 612, 614, 616, 624. Chesapeake & O. R. R Co. v. Virginia, 773, 774. Chesapeake, etc., Co. v. Blair, 1223, 1226, 1232. Chesapeake, etc., R. R, Co. v. Griest, 962. . Chesapeake, etc., Tel. Co. v. Baltimore, etc., Tel. Co., 1596. Cheshire Banking Co., Re, 331. Cheshire, etc., Telephone Co. v. State, 757. Chesley v. Cummings, 239. Chesley v. Pierce, 350, 353. Chesnut v. Pennell, 266, 297. Chesnut Hill Turnpike v. Rutter, 1009, 1093. Chester Glass Co. v. Dewey, 27, 87, 100, 239, 972. Chesterfield Colliery Co. v. Black, 917. Chetlain v. Republic Life Ins. Co., 235, 416. 1157. Chew v. Bank of Baltimore, 430, 518. Chew v. Henrietta, etc., Co., 1091, 1215, 1230. Chewacla, etc., v. Dismukes, 970, 973. Chicago v. Evans, 1564. Chicago v. Hall, 305. Chicago & Alton R R v. Chicago, V. & W. Coal Co., 1513. Chicago & Alton R R v. People. 1513, 1515, 1519. Chicago & Grand Trunk R'y v. Well- man, 1950. 1 TABLE OF CAS [The references are Chicago & I. R R Co. v. Davis, 1006. Chicago & N. W. R'y Co. v. Auditor- General, 770. Chicago & N. W. R R Co. v. Williams, 1009. Chicago Bldg. Soc. v. Crowell, 972, 1085. Chicago, B. & Q. R Co. v. Lewis, 993. Chicago, B. & Q. R Co. v. McGiuuis. 235. Chicago, etc., v. Mallory, Ml. : ( hicago, etc., < son, 1 116. Chicago, etc., Co. v. People's, eta, Co.. r,n. Chicago, etc., In-. Co. v. Needles, 866. Chicago, etc., Land Co. v. Peck, 1199. 1227, 1251, 1805, 1818, 1855, 1859, 1892, 1898, 1 171. Chica^M. etc., R'j v. Auditor-! '•• i 1542. Chicago, etc, R'y v. u.-rs 1489, l chi.;,-... 1 1-.. l:'y v. ('In. ago Bank Chicago, etc., i;> v. ( rane, 155 Chicago, etc, l;> v. Da Chicago, etc., R'j v. 1>. nv. r, « t .. R I:.. 150ft Chicago, etc., R'j v. Dey, 1514, 1515. Chicago, .tc. R'y v. Freeman, 140 Chicago, etc., R'y v. Kansas City, eta, R R, 1569. Chicago, etc., R'y v. Keokuk, eta, 1424 Chicago, etc.. R'y v. Loewenthal, 1218, 1229, 1887, 1882, 1581. Chicago, '■('■.. R'y v. Miller, 1 Chicago, etc., R'y v. Minnesota, 1514, icon. Chicago, etc., R'y v. People, 152 Chicago, etc., R'y v. Kid Grande, etc.. R h\. 1508, 1509, 1510. Chicago, etc.. R'y v. Turni r, 1 - Chicago, etc.. R'y v. Onion Pac R'y. 10, 801, 1050. 1509. Chicago, etc., R'j v. Wellman, 1514, 1515. Chicago, etc., R K. Co. v. Auditor-Gen- eral, 1513. Chicago, etc., R R Co. v. Aurora, 133, 147, 151. Chicago, etc., R R Co. v. Board of Corn'rs, 1492, 1507. to the foot-paging.] ( hicago, etc., R R Co. v. Coleman, 1074 Chicago, etc., R. R Co. v. Davis, 1009. Chicago, etc., R R Co. v. Fosdick, 1283, !85, 1290, 1820 1322, 1336, 1338, 134s, 1855, 1856, 1857. Chicago, etc., R. R Co. v. Guff. y. 757. Chicago, etc., R R Co. v. James, 1064, 30 Chicago, etc.. R R. I '... v. KeiseL 1018. .. etc., i;. R i ••. v. B « 'hi . R i:. c,.. v. [.••wis, uoo. Chi ■■ v. M. & A. R . 1531. .:. R i ... v. Man ( '!, • . R R » !o. v. Minn., etc., R I:. Co., 1548. . etc., I.'. 1-'. I kx v. "il. Chi< . l.'. l:. i ■ I' pie, r>i9. ( l, Pinckney, 1 1". Chic I r. I'm.-.'. 1548, ( hi. a i:. R < . v. Pulln Co., 10 !:. R i •. v. Putnam, 150, 156, 15 fhi . I:, i:. c .. \. Pyne, IS Chicago, etc., R R Co. v. R R Corn'rs, 1515. Chica . R R Co. v. - 152, Chicago, ■ t.-.. l: R ■ ... v. Smith, II Chic . R R Co, 9. Tow nof 1 1." . Chic R R < ... v. Union, . 1890. Chit . R R Co. v. Wilson, r Chicago Hansom, • \. Y. rkes, 946, 111 Chicago Life* Ins. Co. v. Auditor. 868. 1589. Chicago Life In<. Co, v. Needles, 1586. Chicago, M. & St. P. R'y v. Minnesota, 1949. Chica-.-. P. & s. R R v. President, etc, of Town of Marseilles, 416. Chicago, R I. & Pac R R i'o. v. Town of Lake, 1526, L529. Chicago R'y, etc, Co. v. Merchants' Bank, I Chickaming v. Carpi nt« r, 185, 156. Chickering, In re, 1825, 1828, 1353. TABLE OF CASES. li [The references are Chicot Co. v. Lewis, 147, 149. Child v. Boston, etc., Iron Works, 277. Child v. Coffin, 331, 349, 629, 632, 810. Child v. Hudson Bay Co., 687. Child v. Hugg, 596. 599. Child v. Morley, 567. Child v. N. Y., etc., R R, 1234, 1250, 1471, 1474. Childs v. Digby, 615. Childs v. Harris Mfg. Co., 1176. Childs v. Hurd, 309. Childs v. Smith, 233, 452, 1038. Chillas v. Snyder, 470. Chillicothe, etc., R R Co. v. Brunswick, 135. Chilton v. Brooks, 1017. China, Imp. Bank of, v. Bank of Hindu- stan, 802. China Steamship & Coal Co., In re, 158. Chincleclamanch, etc., Co. v. Common- wealth, 869, 883. Chinnock's Case, 358. Chippendale, Ex parte, 328, 329, 665. Chippewa, etc., Ry v. Chicago, etc., R'y, 969. Chisholm Bros. v. Forney, 66, 248. Chittenden v. Brewster, 1344 Chittenden v. Thaunhauser, 73. Choat v. Yeates, 410. Choisserv. People, 142. Chollette v. Omaha, etc., R R Co., 1536. Chorley, Ex parte, 1214, 1216. Choteau v. Allen, 592, 593, 604, 607, 1092, 1097. Chouteau v. Dean, 31, 178, 248. Chouteau Ins. Co. v. Floyd, 164, 189, 217, 245. Chouteau Ins. Co. v. Holmes, 1062. Chouteau Spring Co. v. Harris, 346, 356, 447, 517, 523, 524. Christ Church v. Philadelphia, 628. Christensen v. Colby, 242, 244, 300. Christensen v. Eno, 13, 56, 59, 255, 294, 1205. Christensen sr. 111., etc., Co., 1205. ' Christensen v. Quintard, 58, 59, 244. Christian v. American, etc., Co., 1005. Christian v. Atlantic, etc., R R, 584, 1276. Christian v. Bowman, 311. to the foot-paging. 1 Christian, etc., Co., Matter of, 1435. Christian, etc., Court v. Smith, 134. Christian Union v. Yount, 999. 1000. Christian University v. Jordan, 1092, 1093. Christie v. Gage, 1097. Christie v. Missouri P. Ry, 1518. Christmas v. Biddle, 615. Christmas v. Russell, 1365. Chubb v. Upton, 56, 207, 209, 223, 233, 249, 261, 265, 390. Church v. Kelsey, 1944. Church v. Sterling, 18, 935, 1085, 1093. Church of Redemption v. Grace Church, 996. Church of St. Mary's, 635. Churchill v. Bank of England, 444. Chj'nowetlrs Case, 357. Ciancimino, In re, 674. Cicotte v. Anciaux, 1154. Cincinnati v. Walker, 137. Cincinnati City v. Morgan, 1277, 1278. Cincinnati, etc., R'y v. Citizens' Nat'l Bank, 400. Cincinnati, etc., R'y v. City, etc., Assoc, 1563. Cincinnati, etc., R R. v. Clifford, 885. Cincinnati, etc., R R Co. v. Clinton Co., 136. Cincinnati, etc., R. R. Co. v. Cole, 635. Cincinnati, etc., R. R Co. v. Duckworth, 1155. Cincinnati, etc., R R Co. v. Harter, 1100. Cincinnati, etc., R. R. Co. v. Sloan, 1417, 1462. Cincinnati, etc., R R Co. v. Smith, 1557. Cincinnati, etc., St R'y v. Village Com'rs, 1549, 1590. Cincinnati, etc., St. R'y v. Village of Cumminsville, 1561. Cincinnati, H. & D. R R v. Pontius, 1534. Cincinnati, Ind. & Chicago R. R. Co. v. Clarkson, 33, 34. Cincinnati Mutual, etc., Co. v. Rosenthal, 998, 1002, 1005. Cincinnati, Union & Ft Wayne R R Co. v. Pearce, 26, 187, 189, 999. Circleville, Bank of, v. Renick, 881. Citizens' Bank v. Board of Assessors, 3, 773. lii TABLE OF CASES. [The references are Citizens" Bldg., etc., Assoc, v. Coriell, 1032. Citizens' Coach Co. v. Camden, etc., R. R Co., 1553, 1570. Citizens', etc., Bank v. Blakesley, 1085. Citizens', etc., Co. v. Bridgport, etc., Co., 1599. Citizens', etc., Co. v. El wood, 1583. Citizens', etc., Co. v. Gillispie, 161, 257, 34a Citizens', etc., Co. v. Parry, 159a Citizens', etc., Co. v. Sands, 1580. Citizens' Ins. Co. v. Sortwell, 166. Citizens' Mutual Fire Ins. Co. v. Sort- well. 798, 816. Citizens" Mutual Ins. Co. v. Lott. 711. Citizens' Nat'l Bank v. Elliott. 928. < itizens' St. R'y v. Bobbins, 445, 501. Citizens' St. R'y Co. v. Jones. 1556 Citizens' St, R. Co. v. Memphis, 3, 1546, 1551. City t. Larason, 1237. 1239, 1240. City Bank v. Bangs, 528. City Bank v. Perkins, 1085. City Bank of Baltv. Bateman, 1110, 1111. City Bank of Columbus v. Beach, 1191. City Bank of Columbus v. Bruce, 418, 121. City Bank of Macon v. Bartlett, 207. City Bank, Re. 1252. City Council, etc., v. Montgomery, etc., Co., 131. city, etc., Bank v. Houldsworth, 322. City, etc.. Bank, In re, ! City, etc, Ins. Co. v. Carrugi, 1171. City, etc., Ins. Co. v. Olmstead, 462m City, etc., R'y Co. v. Mayor. 1571. City Hotel v. Dickinson, 116, 174. 229, 2114, 973. City Nat'l Bank v. National Park Bank, 1070. City Nat'l Bank v. Paducah, 764, 765, 767. City Nat'l Bank v. Phelps, 1015. City of Atchison v. Butcher, 134. City of Atlanta v. Gate City, 888. City of A'tlauta v. Grant, 1388. City of Aurora v. West, 133, 139. 141. City of Bath v. Miller, 1363, 1367. City of Binghamton v. Biughamton, etc., R'y, 1553. to the foot-paging.] < ity of Boston v. Beal, 702. City of Brenham v. Brenham, etc., Co., 1597. City of Brooklyn v. Brooklyn, etc., R R, 157a City of Buffalo. Matter of, 1521. City of Buffalo, Re, 15 City of Burlington v. Burlington St R*y, 1566. City of Burlington v. Burlington "Water Co., 219, 1598 City of Chicago v. Cameron, 1129, 1131, 1115. H49, 1215. 1540, City of Chicago v. Evans, 1550, 1565, 1572. City of Chicago v. Jones, 385. City of « olumbus v. street R R Co., 157a City of Council Bluffs v. Kansas I St J. &C. B. R. K.. 1516. City of Covington v. Covington, etc., Co.. 632, 61 l. 887, I City <>f Davenport v. Miss., etc., R R, ' 1201. City of Davenport v. P etc., Co., 1094 City of Denver v. Mull. n. B81. City of Detroit v. Detroit & F. Plank- road Co., 1575, 1591. City of Detroit v. Detroit Street R'y, 891, 1551. 1555. L575, 1591. City of Detroit v. Fort Wayne, etc., R'y, 1572, 1578 City of Elizabeth v. Force, 1198. City of Evansville v. Hall, 749, 750. City of Goldsboro v. Moffett, 1596. City of Indianapolis v. Indianapolis, etc., Co., 1585. City of Indianapolis v. Vajen, 765. City of Jefferson ville v. Patterson, 1237. City of Jonesboro v. Cairo, etc., R R Co., 131. City of Kansas v. Hannibal, etc., R R Co., 1098.1102. City of Kenosha v. Lamson, 132. City of Kuoxville v. Knoxville.etc. RR, 636, 964, 1194. 1501. 1503. 1500. 1507. City of Lexington v. Butler, 1240. City of Louisville v. President, etc., 634, 810, 1517. TABLE OF CASES. liii City of Lowell v. Morse, 1019. City of Lynchburg v. Slaughter, 131. City of Memphis v. Ensley, 756. City of Memphis v. Farrington, 758. City of Newport v. Newport, etc., Co., 1583, 1585. City of New York v. Third Ave. R R, 1574. City of Ohio v. Cleveland, etc., R. R Co., 377,378,707,711, 715. City of Ottawa v. Carey, 131. City of Pekin v. Reynolds, 1237. City of Philadelphia v. Ridge Ave. R R. Co., 14, 1573. City of Reading v. Consumers' Gas Co., 1585. City of Richmond v. Daniel, 753. City of Richmond v. Richmond & Dan- ville R R Co., 771, 772. City of Richmond v. Scott, 766. City of Rochester v. Bronson, 1155. City of Rushville v. Rushville, etc., Co., 1583, 1585. City of San Francisco v. Mackey, 756. City of St. Louis v. St. Louis R R., 957, 1571, 1585. City of St. Louis v. Shields, 879. City of San Antonio v. Lane, 1237. City of Utica v. Churchill, 760. City of Wheeling v. Baltimore, 1162, 1544. City of Wheeling v. Mayor of Baltimore, 1162, 1544. City of Wilkes Barre v. Wyoming, etc., Soc, 1279. City Sav. Bank v. Whittle, 669. City Terminus Hotel, In re, 330, 338. Claflin v. Farmers' & Citizens' Bank, 1192. Claflin v. McDermott, 250. Claflin v. South Carolina R. R., 937, 1195, 1197, 1200, 1205, 1234, 1321. Clancy v. Onondago Fine Salt, etc., Co., 647. Clapp v. Astor, 712, 743. Clapp v. Cedar Co., 134. Clapp v. City of Burlington, 7C2, Clapp v. City of Spokane, 1304, 1574. Clapp v. Peterson, 416, 419, 729. Clapp v. Wright, 300. [The references are to the foot -paging] Claremont Bridge v. Royal, 999. Claren v. Franciscus, 250. Clark v. American Coal Co., 52, 545, 907, 925, 1138, 1143. Clark v. Atkins, 408. Clark v. Barnard, 184, 1543, 1544. Clark v. Bever, 57, 58, 66. Clark v. Brockway, 1430. Clark v. City of Janesville, 1233. Clark v. Continental Improvement Co., 36, 87, 90. 239. Clark v. Crickfield Union, 1096. Clark v. Des Moines, 138, 139. Clark v. Edgar, 490. Clark v. Farmers" Mfg. Co., 1057, 1007, 1070, 1095, 1097, 1099, 1189, 1190. Clark v. Farrington, 33, 34, 35, 87, 239, 986. Clark v. Flint, 461. Clark v. Foss, 468, 476, 477. Clark v. Gibson, 469. Clark v. Gordon, 1097. Clark v. Iowa City, 1231, 1240. Clark v. Janesville, 137, 138. Clark v. Jones, 312, 669, 1167. Clark v. Leathers, 139. Clark v. Meigs, 564, 576. Clark v. Middleton, 1005. Clark v. MonongahelaNav. Co., 221, 632. Clark v. Myers, 279, 305. Clark v. Piuney, 7S8. Clark v. Reed, 668. Clark v. Reyburn, 1315. Clark v. San Francisco, 1146. Clark v. South Metropolitan Gas Co., 442. Clark v. Sparhawk, 603. Clark v. Titcomb, 982, 1185, 1261, 1263. Clark v. Town of Easton, 1058. Clark v. Trust Co., 1320. Clark v. Turner, 400. Clark, In re, 1392. Clarke v. Central R. R, etc., 316, 318, 422, 427, 650, 826, 833, 835, 838, 846, 1257, 1301, 1416, 1419, 1449. Clarke v. Dickson, 203, 209. Clarke v. Hancock Co., 145. Clarke v. Hart, 173. 177, 178. Clarke v. Imperial Gas-light. & C. Co., 969. liv TABLE OF CASES. [T7ie references are Clarke v. Le Cren, 1024. Clarke v. Lincolu Lumber Co.,' 53. ( llarke v. Omaha, etc., R R, 1495, 1504, 1589. Clarke v. Potter County, 1017. Clarke v. Rochester, 135. Clarke v. Thomas. 230, 2G2, 390. Clarke, Ex parte, 36, 76, 1036. ' i:, ike's Case, 908. ( larkson v. Clarkson, 707, 739, 743. ( larkson v. Hudson River R R Co., 3. < larkson v. Snider, 593. I Hay v. Hast, etc, R R, 1369. ( lay v. Hawkins, 187. ( lay Co. v. Society for Savings, 133. Clayton v. < Iresham, 7 1 1. Clayton v. Ore, etc., ( '"., 66. t learv. Newcastle* D. R. R Co., 'J 15. Clearwater v. Meredith, i 1545. Clegg v. Hamilton Co., Cleghorn v. N. Y. Central & EL R R .. 1011. Clem v. Newcastle iV. lianville R R Co., L89, 197. ( llemens v. Clemens, 994 < ilement v. < !ity of Lathrop, 1017. Clements v. Bower, 1041, 1187. Clements v. Todd. 1041. Clemshire v. Boone, etc., Hank, 90,316, is:', Cleveland v. Burnham, 95, 164, 350, 800. Cleveland v. Marine Bank, 251. Cleveland & Bl \l. RCo, v. Bobbins, 199, 584. Cleveland & P. R R Co. v. Speer. 1534, 59, 1548. ciev. .land, etc., Co, v. Courier Co., 967. Cleveland, etc., Ca v. Crawford. 71. 905. Cleveland, etc., Co. v. Prewitt, 1547. Cleveland, etc, Co v. Taylor. 805, 860. Cleveland, etc.. Co. v. Texas, etc, R'y Co.. 65, 81. Cleveland, etc., R'y v.Closser,1511, 15ia Cleveland, etc, R RCo. v. Robbins,70a Cleveland Iron I la v. Bnnor, 189, 1196. Cleveland Rolling M. Co. v. Crawford, 1217. clews v. Bardon, 1083 Clews v. Brunswick, etc., R R, 1276. to the foot-paging] Clews v. Woodstock, etc., Co., 1179. Clifford v. Taylor, 679. Clifton, etc., Co. v. Randall. 664. Clinch v. Financial Co., 634, 681, 967, 1151,.1503. Cliquot's Champagne, 7-7. ( live v. Clive, 711, 711. 712. Close v. Glen wood Cemetery, 629, 637, -. 880, 1944 Cloutman v. l'iko. 1053. Clow v. Brown, 03. Clowes v. BrettelL 3! Clubb v. Davidson. 903. ( 'lute v. Loveland, 661. Clyde v. Richmond, eta, Ca, 1311. de v. l: Coal Co. v. Blatchford, 1311. 182 ,1, etc., Co.. In re, 913 d.lale ( ', ial ( 'o. v. Nat'l, etc.. Bank, 966. Coalfield Coal Co, v. Peck, 8 Coatee v. London & S. \V. R'y Co., 506. Coatee v. Nottingham, etc., B*j Co, 866, 8*3 1. Coatee v. Nottingham Water-works Co., v. DonnelL 990, 991, 1085. te v. Elliott, 1170. Cobb v. Kant, 71 Cobb v. PrelL 474 Coburn v. Cedar, eta, Ca, 910. ( '..l.mn v. Omepi I <0 Ige, 1 1 ' » 1- lir.in v. American < >pera Co., 289. bran v. < Jochran, 407. ( lochran v. < teean, eta, 940. hran v. < Icean Drj dock Co., 729. man v. Wiechers, 2 i lochrane v. < !hamb Cock v. Bailey, 70, I Cockburn v. Onion Bank, 075, 677, 682. < iockburn's ( laee, 1 15. Cockerel v. Aucompe, 661. cerell v. Van Diemen'a Land Co., 181. 18 Cocker's I ase, 1588. Cocksedge v. Metropolitan, etc., Ass'n, 209. Coddington v. Gilbert. 1201. Coddington v. Railroad, 36, 1330. Codman v. Vermont, etc., R R, 1217, 1248, 1501, 1504. TABLE OF CASES. lv [The references are Coe v. Columbus, etc., R. R, 1206, 1273, 1274, 1296, 1308, 1314, 1383. 1435. Coe v. Del., L. & W. R. R, 1387. Coe v. East, etc., R. R., 35, 65, 70, 856, 930, 943, 1199, 1206, 1210, 1211, 1218, 1221, 1222, 1265, 1353, 1396. Coe v. Galion, etc., R. R, 1313. Coe v. Johnson, 1262, 1300. Coe v. Knox, etc., Bank, 1374, 1436. Coe v. McBrown, 1300, 1383, 1346, 1364. Coe v. N. J. Mid. R'y, 1279, 1293, 1294, 1295, 1296, 1297, 1310, 1349, 1352, 1373, 1391, 1451, 1461. Coe v. Peacock, 1317. Coey v. Belfast, etc., R'y, 368, 376, 712, 715. Coffin v. Chattanoooga, etc., Co., 1181, 1341. Coffin v. Chicago & N., etc., Co., 602. Coffin v. Collins, 93, 88S. Coffin v. Rausdall, 31, 47, 63. Coffin v. Reynolds, 273. Coffin v. Rich, 271, 321, 628, 630. Coghlan v. South Car. R R, 1237. Cogswell v. Bull, 1148, 1151. Cogswell v. Cogswell, 745. Coheco Bank v. Haskell, 1112. Cohen v. Gvvynn, 438, 529, 667. Cohen v. Wilkinson, 1523, 1540. Cohn v. Bank of St. Joseph, 448. Colin v. Borst, 661. Coil v. Pittsburgh College, 198. Coit v. Campbell, 1132. Coit v. North Car. Gold Amal. Co., 47, 60, 64, 72. Colborne, Ex parte, 1252. Colchester, Mayor & Commonalty of, v. Lotten, 1220. Colderwood v. McCrea, 473. Coldicott v. Griffiths. 661. Cole v. Butler. 300, 305. Cole v. Cassidy, 490. Cole v. Joliet Opera House Co., 171. Cole v. Knickerbocker, etc., Ins. Co., 860. 1141. Cole v. La Grange, 139. Cole v. Millerton, etc., Co., 964. Cole v. Milmine, 470. Cole v. Ryan, 112, 342, 357, 447. Coleman v. Colemau, 309. to the foot paging.] Coleman v. Columbia Oil Co., 417, 710. Coleman v. Eastern Counties R'y Co., 1246. Coleman v. San Rafael T. R Co., 994. Coleman v. Second Ave., etc., R. R, 916, 1550. Coleman v. Spencer, 102, 547, 621. Coleman v. White, 257, 258, 259, 286, 288, 289, 290. Coles v. Bank of England, 508, 780. Coles v. Bristowe, 579. Coles v. Kennedy, 194. Colfax Hotel Co. v. Lyon, 88. Colgate v. Compagnie, etc., 683. Colglazier v. Louisville, N. A. & C. R R Co., 1542. Colket v. Ellis, 576, 580. Collamer v. Day, 469. Colleuder v. Dinsmore, 1537. Colles v. Iron City, etc., Co., 971. Collier v. Collier, 409, 745. Collier v. Morgan's, etc., R R, 1164. Collier v. Sq"uire, 408. Collingwood v. Berkeley, 1035. Collins v. Bradbury, 1228. Collins v. Central Bank, etc., 1320. Collins v. Chicago, 760. Collins v. City & County Bank, 209. Collins v. Godfrey, 924. Collins v. Lowry, 782. Collins v. Yates, 681. Collins' Claim, 1064. Colman v. Eastern, etc., R'y, 1142. Colman v. West, etc., Co., 1078. Colonial Bank v. Cady, 549. Colonial Bank v. Hepworth, 485, 519. Colonial Bank v. Willan. 1108. Colonial, etc., Co. v. Hutchinson, etc., Co., 1163. Colonial, etc., Corp., In re, 1235. Colorado, etc., R'y v. Union, etc., R'y, 1530. Colorado, etc., Works v. Sierra, etc., Co., 1004, 1163. Colquhoun v. Courtenay, 358, 359, 432. Colt v. Barnes, 1276, 1277. Colt v. Clapp, 109, 469. Colt v. Gold Amal. Co., 392. Colt v. Ives, 622. Colt v. Netterville, 460, 464. lvi TABLE OF CASES. [Tlie references are < !olt v. Owens, 576, 578, 785, 786, 790. Colt v. Woollaston, 103, 480, 1041. Col ton v. Ross, 1152. Colton v. Stanford, 431, 480. Coltness Iron Co. v. Black, Columbia Bank v. Gospel, etc., Church, 1063, 1078, 1083. Columbia Bank v. Patterson, 1093, 1094, 1095. Columbia Bank's Appeal. 391. Columbia Elec. Co. v. Dixon, 233, j:!'.». 483, 878. Columbia, etc.. Co. v. Meier, 816. Columbia Nat. Bank, Appeal of, 805; Columbian Bank, In re, 419. Columbian Ins. Co., Matter of, 1460, Columbine v. Cbichester, 462, 168. Columbus Buggy Co. \ Qrav< I lolumbus, etc.. R'y v. Braden, 1880, ( lolumbus, eta, R j v. Lanier, 1210. Columbus, 1 1 ■■.. i;. R v. Burke, 19, 948, 1140, 1209, 1220, L222. Columbus, eta, 1;. R ( ... v. [ndianapo- lis. eta, R R. Co., 1510. Columbus, etc., It R, \. Powell, 968, 1190. Columbus Ins. Co. v. Walsh, to02, 1005. Col ville's Case. 212, 218 Colvin v. Williams. 464 Comanche County \. Lewis, 188, 874 Combination Trust * ". v. W< 1268 Combs v. A-rie. Ditch L\\, H'.OO. Combs v. Smith, 1398. Comeau v. Guild Farm oil (\\, 617. Comet, etc.. Co. v. Frost, 1164 Comfort v. Leland, 166. Comius v. ( loe, ISO. Commercial Bank v. City of lola. 188, 139. Commercial Bank 7. Cunningham, 1119. Commercial Bank v. French, 1017, 1102. Commercial Bank v. Great Western R'y, 1186. Commercial Bank v. Kortright, 516, 517. 521, 586, 6! i! i. Commercial Bank v. Lock wood, 963. Commercial Bank v. Newport Manuf. Co., 1185,1190. to the foot-paging] Commercial Bank v. Nolan, 98 Commercial Bank v. State, 866,868,875, 1517. Commercial Bank v. Ten Eyck. 1029. imercial Bank, eta, v. Pfeiffer, 878, 1166. Commercial Bank, etc.. Re. 11 mercial Bank of Buffalo v. Kort- right, 586, I imercial Dank of In. Ha. Iu re, 861. < lommercial B amnion, Commercial Natfl Bank v. Durcb. 419. 1229, lllo. Commercial Natl Bank v. Farmers', ( omro srford v. William in re. < "ii . AspinwalL 1 . imissi n v. Atlantic & N. I '. 1,'. R 1185, 1261. C mi- \. Baltimore, eta, R. R ... in;. ( '(.mini- \. I., in' ( '.•nun v. Mill i Thayer, 1 1 15. ( k>mmissioi . v. Boll Coiim, i- . v. Bockner, t 'oiiimi- eta, Ca, Commission! v. Holyoke Water- pOM : I Commission! . ?. Northern, etc., . 1585. Commissioi • re, i ta, v. Thayer, 115. Commissioners of ('raven v. Atlantic, . R R., liv:'.. 1206. ( bmmissioni rawford Co. v. Louis- ville, etc.. R. R Co., 184 Commissioners <.f Johnson Count] v. Thayer, 1808. Commission! re of Knox Co. v. Nichols, 186. Commissioners of Rice County v. Cm /.,ns' Nat') Hank. '. Commonwealth v. Allegheny Co., 187, 8, 1577. Commonwealth v. American B. T. Ok, 775. Commonwealth v. Arrison, 836. TABLE OF CASES. lvii [The references are to the foot-paging.] Commonwealth v. Bakeman, 887, 1167. Commonwealth v. Bonsall, 638. Commonwealth v. Boston, 1594 Commonwealth v. Boston & Albany R R Co., 19, 84, 421. Commonwealth v. Bried, 868. Commonwealth v. Bringhurst, 820. Commonwealth v. Brush, etc., Co., 768, 769, 773. Commonwealth v. Central Bridge Co., 1012. Commonwealth v. Central Pass R'y, 49, 65, 1275, 1484, 1566. Commonwealth v. Central T. Co., 394, 703, 768, 769. Commonwealth v. Chesapeake & Ohio R R Co., 770. Commonwealth v. Chesapeake, etc., Ca- nal Co., 1199, 1201, 1223, 1231, 1234, 1235, 1236, 1239, 1251. Commonwealth v. Cleveland, etc., R R, 707. Commonwealth v. Cochituate Bank, 303, 304, 628. Commonwealth v. Cooper, 566. Commonwealth v. Commercial Bank, 866. Commonwealth v. Covington, etc., Co., 1577. Commonwealth v. Cullen, 640, 856, 863, 1051. Commonwealth v. Dalzell, 823, 827. Commonwealth v. Delaware, etc., Canal Co., 770, 871, 1578. Commonwealth, etc., Ins. Co. v. Dunson, 1020. Commonwealth v. Eastern R R, 1523. Commonwealth v. Emigrant, etc., Bank, 1198. Commonwealth v. Erie & N. E. R R, 771, 1524, 1527, 1529. Commonwealth v. Essex Co., 638. Commonwealth v. Farmers', etc., Bank, 868. Commonwealth v. Fayette R R Co., 771. Commonwealth v. Fitchburg R R Co., 867. Commonwealth v. German Society, 1025. Commonwealth v. Gill, 810, 836, 843, 1021. Commonwealth v. Gloucester, etc., Ferry Co., 776. Commonwealth v. Graham, 836. Commonwealth v. Hamilton Mfg. Co., 748, 1517. Commonwealth v. Intoxicating Liq- uors, 1517. Commonwealth v. Keim, 799. Commonwealth v. Lintsman, 819. Commonwealth v. Lykens Water Co., 883, 1599. Commonwealth v. Mahoning, etc., Co., 773. Commonwealth v. McWilliams, 137. Commonwealth v. Milton, 776, 988. Commonwealth v. Nashville, etc., Co., 773. Commonwealth v. New York, etc., R Co., 42,). 750, 775, 992, 993, 1000. Commonwealth v. Nickerson, 6, 815, 818. Commonwealth v. Northern, etc., Co., 773. Commonwealth v. Oliver, 1026. Commonwealth v, Penn. Co., 768. Commonwealth v. Perkins, 137. Commonwealth v. Phil., etc., R R, 769, 1590. Commonwealth v. Philanthropic Soc, 1026. Commonwealth v. Phcenix Iron Co., 673. 674, 675, 677, 1019. Commonwealth v. Pike Beneficial So- ciety, 1025, 1026. Commonwealth v. Pittsburg, etc., P. R, 137, 142, 153, 156, 703, 707, 769, 868, 886, 1542. Commonwealth v. Proprietors of New Bedford Bridge, 1011. 1524. Commonwealth v. Pulaski, etc., Ass'n, 1012. Commonwealth v. Runk, 1456. Commonwealth v. St. Bernard Coal Co., 757. Commonwealth v. St. Mary's Church, 1106. Commonwealth v. St. Patrick Soc, 1026. Commonwealth v. Smith, 644, 797, 836, 1187, 1188, 1193, 1194, 1262, 1266, 1272, 1275. Lviii TABLE 01 CAS [Tlie references are Commonwealth v. Standard Oil Co.. Commonwealth v. Susquehanna, etc., R R., 110S, 12 21. Commonwealth v. Temple, loTO. Commonwealth v. Tenth, etc;, Co., 866, 1275. Commonwealth v. Texas & Pac. R R Co., 776. Commonwealth v. Tuckermai Commonwealth v. Union I Common wealtli v. I'd inn 1 Commonwealth v. B. R», 1011. ( k>mm mwealth v. Watmouth, Commonwealth v. Western Union Tel Co., 776 ( k)mmonwealth v. W. Commonwealth v. v. ham, 1065. Commonwealth v. Wilkinson, 15 I Commonwealth v. Woelj 1021, 1 umonwealth v. Wood, t v l. tnmonwealtb v. Wynuu mmonwealth, '. ( iommonwealth I imraonwealth of Kentucky v. Lo ville Bridg nao \. P( it Henry Iron Co., 1 1 1 Compton v. Cbek 71 -J. 815, II Compton v. Rsilv 1547. mpton v. Wabash, etc., R'j v. Bach ii: m. I v. IV dei ickson, 1 1 . omstock, Re, nit v. N.;tu oal, etc., Co, 101. Hunt v. Reed, 5 I tenant v. Seneca Co. Bank. 647, 699. nit v. Van Schaick, OCT nard v. Atlanta* Concord v. Portsmouth Savings Bank, 188, 140, 152. ■ cord v. Robinson, 133. Concord, etc., R K. v. Porsaith, 1519, 1520. to the foot-pagin'jl Concord R R Co. v. G re, Condit v. Ki: • v. Dunham. 45 Cone' v. Ruse ngdon v. Winsor, 94 Conger v. N. Y.. etc, R. B., 15881 ; C hurch, Matter of, 882. . v. Pen J V. :. v. Raili ikey v. Bond, 51 klio \. I'm oklin v. - ■.■ ii.il Bank, 688, ■ i ■ j I I.\ I.'.. 1181, R K. I 116, 171. 1- ' B*y Co, ' v. llilh' r, 781, I : Mutual 1141, 1 i I Henry Iron I 1017, lated Assoc v. A regno, 123 .Co, ■. 1115, 1141, 1264, 1412. | . 1581. Consolidated S. Co. v. I 1177. v. \". u:,']. 8ft ! V. I'll .111". tinople, 96. ■tigress, etc.. TABLE OF CASES. lix [The references are Consumers' Gas, etc., Co. v. Harless, 1584 Continental NatT Bank v. Eliot Nat'l Bank, 24. 513. 585, 586, 618. Continental Tel. Co. v. Nelson, 50. 63, 78. Contoocook Valley R. R Co. v. Barker, Conver's Case, 276. Converse v. Dimock, 1149. Converse v. Hood. 973. Converse v. Michigan Dairy Co., 1229, 1348. Converse v. Norwich & N. Y. Trans. Co., 1532, 1533. Conway v. John, fill. 621. Conway, Ex parte, 990. Conwell v. Town of Connersville, 750. Conyngham's Appeal, 598, 603, 605, 784 Cook v. Berlin Woolen M. Co., 92a Cook v. Champlain, etc., Co., 1183. Cook v. Chicago, etc., R R, 1520. Cook v. Chittenden, 215. Cook v. City of Burlington, 749, 756. Cook v. Detroit, etc., R R, 963, 1480. Cook v. Gray. 654' Cook v. Hager, 1020. Cook v. Manuf g Co., 139. Cook v. Rome Brick Co., 1004. Cook v. Sherman, 906, 986. Cook v. Ward. 107: 1 .. Cooke v. Hallett. 613. Cooke v. State, 1090. Cooke v. State Nat'l Bank, 1183, 1185. Cookney's Case, 88. Coolidge v. Goddard, 55. Coon v. Plymouth, etc., Co., 866. Cooper v. Canal Co., 608. Cooper v. Corbin, 777, 1263, 1373, 1479. Cooper v. Curtis, 1058. Cooper v. Frederick, 393, 630. Cooper v. Griffin, 618. Cooper v. Lampeter, 1073. Cooper v. Neil. 474. Cooper v. N. Y., etc., R B. Co.. 1089. Cooper v. Swamp, etc., Co.. 531. Cooper v. Town of Thompson, 1232. Cooper v. Welb. 1041. Cooper Mfg. Co. v. Ferguson, 1003, 1946, 1947. Coopers v. Wolf, 1364, 13S3, 1389. Cope, Ex parte, 277. to the foot-paging.] Copeland v. Copeland, 22. Copeland v. C. Gas Co., 955. Copeland v. Johnson, etc., Co., 926. Copeland v. Memphis, etc., R R Co., 1543. Copes v. Charleston, 137. Copley v. Grover & Baker Co., 1007, 1010. Copp v. Lamb, 795. Coppage v. Hutton, 89. Coppell v. Holhns, 1468. Copper Miners v. Fox, 972, 1097. Coquard v. St. Louis, etc., Co., 392. Coquard v. Wernse, 432. 449. Corbet v. Underwood, 580. Corbett v. Twenty-third, etc., B'y, 1570. Corbett v. Woodward, 940, 1060, 1075. Corcoran v. Chesapeake, etc., Co., 1237, 1306, 1317. Corcoran v. Snow C. Co., 1083, 1117. Cordova, etc.. Co. v. Long, 1188, 1195. Cordova, etc., Co., Be, 201. Corey v. Long, 1459. Corey v. Wadsworth, 938. Cork, etc., B*y Co. v. Cazenove, 107, 334. Cork, etc.. R'y. In re, 1185, 1187, 1252 Cormac v. Western, etc.. Co., 347. Corn Exchange Bank v. Blye, 593. Corn Ex. Bank v. Cumberland Coal Co., 1065. 1072, 1106. Corn Ex. Bank v. Nassau Bank, 580. Cornell v. Clark, 936. Cornell v. Hay, 193. Cornell v. Hickens, 34. Cornell v. Springs Co.. 993. Cornell v. Utica, etc., R R, 1475. Cornell, Appeal of, 126, 226, 243, 258, 261. Cornell's Case, 429. Cornell University v. Fiske, 996. Cornick v. Richards, 585, 588, 602, 618. Corning v. McCullough, 285, 286, 292, 301, 303. Corning v. Roosevelt, 458. Corning, In re, 650. Cornwall, etc., Co. v. Bennett, 1070. Corrigan v. Trenton, etc., Co., 1098. Corry v. Londonderry, etc., B'y, 366, 372, 374, 376, 723. Corser v. Hale et al., 458. Corser v. Russell, 1461, 1482. lx TABLE OF CASKS. [The references are Cortclyou v. Lansing, 596, 788. Cortes Co. v. Thaunhauser, 912. Cortis v. Kent, etc., Co., 1020. Corwith v. Culver, 187, 190. Cory v. Lee, 312. Cory, etc., Soc. v. Beatty, 660. Costa M. R Co. v. Moss, 1526. Costa Rica v. Erlanger, 683. Cost-book Company Case, 056. Costello's Case, 334, 358, 359. Cotheal v. Brown-, 677,679. Cottage, etc.. Church v. Kendall, 9& Cottam v. Eastern Counties R*y Co., 440,501. 506, 507. Cotting v. N. V.. etc., i:. R, 369, 374, Cottle, Ex pnrtc 1<>:;7. Cotton v. Atlas Nat Bank, 589. Cotton v. Leon ( !o., 1 '■*>'■). Cotton v. The Imperial, etc., Corpora- tion, '.'5 7. 1023 Cottrell v. Tenney, 1136. Coulter v. Roberl on, 889. Coulter v. Trustees' W< stern, etc., Semi- nary, 1018. Counselman v. Hitchcock, 1952. int Palen's Case, lis. 179. County v. Brinton, 137. ( 'ounty v. Moultrie, 1 11. County Courl v. Baltimore ft O. R 1.'.. 423, '.Ml. 1062, 11H5, 1548. County Coram'rs v. Annapolis, 758, 759. County Comm'rs v. farmers' Nat. Bank, 7 5i'.. County Comm'rs v. Woodstock [ron Co., 772. County Comm'rs Case, 1 180. County, eta, v. Foster, ill. County, eta, v. Gillett, 141. County, etc., v. Locomotive, etc., 156. County, etc., v. Nicolay, 141. County, etc., Co., In re. 1058 County Marine Ins. Co., In re, 728, 735. County of Alleghany v. Cleveland, etc., R. R, 1544. County of Armstrong v. Brinton, 153. County of Bates v. Winters. 147. County of Beaver v. Armstrong. 1236, 1239. County of Bruce v. Cromar, 1019. to the foot paging.] County of Calloway v. Foster, 142. County of Cass v. Gillett, 1 12. I County of < ass v. Johnson, 148, 149. County of Cass v. Jordon, 1 I s1 . County of Clay v. Society for Savings, 1 12. County of Crawford v. Pittsburgh ft R I;. I a 23a County of Daviess v. Buidekoper, ' County of Drummond v. S. E. R'y, 1512. County of Henry v. Nicolay, 156. ( 'ounty of Jasper v. Ballon, 1 1 1. 145. County of Lackawanna v. First Nat'l Bank, 756. County oi Lancaster v. Cheraw, eta, I.'. h\. 187. ( ounty of Leavenworth v. t !hi< RR, 932, 1246, 1358, 1494, IS County of Macon v. Shores, 140, IS County of Morgan v. Allen, 151. 848, t 'ounty t.f Moultrie v. Fairfield, ill. ( 'ounty of Moulta i'' v. Rockingham 'I'm at Savin-. Bank, 140, 1 12. 150, 1948. County of Ralls v. Douglass, 112.147. i ounty of Randolph v. Post, l II. County of Ray v. Vansycle, 1 1". 1 12. i ounty of Richland v. P< ople, 1 16. • ounty of San Mateo v. Southern Pa- cific R R Ca, 9, 1020. < ounty of Schuyler v. Thomas, 140, 156. County ot Scotland v. Thomas, 140, 1 12, 155. ( 'ounty of Silver Bow v. Davis, 766. County of Stevens, In re, 77 l. County of Tazewell v. Farmers', etc., Trust Ca, 983, 1150. County of Tipton V. Locomotive Works, 156. County of Todd v. St Paul, etc., R'y Co.. 771. ( 'ounty of Washington v. Estate of Jef- ferson, In re, 658 County of Wilson v. National Bank, 137, 1183. Coupland v. Challis, 1040. Courtois v. Harrison. 288 Courtright v. Deeds. 26, 234. Cousland v. Davis. 582. TABLE OF CASES. lxi [TJie references are to the foot-paging.] Covell v. Loud, 572, 573. Covert v. Rogers, 19, 804, 999, 1061. Covey v. Pittsburg, etc., R R, 1364, 1373, 1374. Covington v. Bridge Co., 364. Covington v. Covington, etc., Co., 640, 1550, 1574. Covington, etc., Bank v. Covington, 765. Covington, etc., Bridge Co. v. Mayer, 796, 1542. Covington, etc., Bridge Co. v. Sargent, 364. Covington, etc., Bridge Co. v. South Covington, etc., R'y Co., 1568, 1577. Covington, etc.. Co. v. Keith, 1523. Covington, etc., Co. v. Mayer, 1542. Covington, etc., Co. v. Sanford, 1546, 1591. Covington, etc., Co. v. Shepherd, 1171, 1388, 1411, 1576, 1948. Covington, etc., R R. Co. v. Bowler's Ex'rs, 921, 1133. Cowardin v. Universal Life Ins. Co., 1171. Cowden v. Pacific Coast S. S. Co., 1599. Tow-drey v. Galveston, etc., R R, 1309, 1310, 1357, 1437, 1446. Cowdrey v. Railroad, 1419, 1437, 1438, 1439, 1458, 14G0, 1461. Cowell v. Colorado, etc., Co., 875, 880. Cowell v. Springs Co., 999. Cowles v. Cromwell, 342. Cowles v. Mercer County, 1948. Cowles v. Whitman, 461. Cowley, etc., Co., Re, 693. Cowling v. Cowling, 408. Cox v. Bodfisb, 660. Cox v. Hickman, 654 Cox v. Midland, etc., R R Co., 1089. Cox v. Stokes, 1475. Cox v. Volkert, 1430. Cox, Ex parte, 1253. Cox's Case, 108, 339, 340, 358. Coxe v. Hart, 1144. Coxon v. Gorst, 731, 894. Coy v. Jones, 294. Coyle v. Ball, etc., R R. Co., 1112. Coyote, etc., Co. v. Ruble, 720. Cozad v. McKee, 730. Cozart v. Georgia, etc., R R, 1247. Crabtree v. St. Paul, etc., Co., 1056. Craft v. McConoughy, 644. Craft v. South Boston R R, 1083. Craft v. Tuttle, 750, 762. Cragg v. Riggs, 739. Cragg v. Taylor, 612. Cragie v. Hadley, 1007, 1115. Craig v. Continental Ins. Co., 1115. Craig v. First Presbyterian Church, 815, 816, 820, 841. Craig v. Gregg, 1027, 1136. Craig v. Phillips, 912. Craig v. Rochester, etc., R R Co., 1561. Craig v. Town of Andes, 136, 148. Craig Medicine Co. v. Merchants' Bank, 1064, 1066, 1087, 1088. Cram v. Bangor, etc., 1065. Cramer v. Bird, 721, 861. Crampton v. Varna R'y Co., 1096. Crandall v. Lincoln, 331, 333, 336, 337, 385, 419. Crandall v. State of Nevada, 1945. Crane Bros., etc., Co. v. Adams, 929. Cravens v. Eagle, etc., Co.. 126, 234. Craw v. Easterly. 852, 853. Crawford v. Branch Bank, etc., 1942. Crawford v. Dox, 500, 745. Crawford v. Fisher, 527. Crawford v. Gross, 664. Crawford v. Longstreet, 994, 1094, 1591. Crawford v. Northeastern, etc., R'y Co., 360, 366, 369, 374. Crawford v. Provincial Ins. Co., 518, 522, 531. Crawford v. Rohrer, 47, 63, 64, 161, 248, 255, 261. Crawford v. Spencer, 477. Crawford R R Co. v. Lacey, 232. Crawshay v. Soutter, 1471. Crease v.*Babcock, 257, 258, 272, 286, 290, 304, 324, 329, 353, 417, 861. 886. Credit Co. v. Arkansas, etc., R R, 920, 1127, 1290, 1306, 1330, 1336, 1450. Credit Co. v. Howe, 1244. Credit Co. v. Webster, 684. Credit Co of Ireland v. Fermoy, 415. Credit Foncier of England, In re, 630. Credit Mobilier v. Commonwealth, 651, 656. Creed v. Commercial Bank, 988. lxii TABLE OF CASES. [The references are Creek v. State, 836. Cregin v. Brooklyn, etc., R R Co.. 19. Crenshaw v. Ullman, 881. Crescent City R Co. v. City of New Or- leans et al., 703. Crescent, etc., Co. v. Deblieux, 585. Crescent, etc., Co. v. Flanner, 919. Cresson's Appeal, 1019. Creswell v. Lanahan, 1092. 1108. Creswell v. Oberly, 825. Creyke's Case, 176. Crick raer's Case. 77, 82. Cridge's Appeal, 590, 599. Cridland v. De Mauley, 1041. Crockerv. Crane, 97. B8, 820. Crocker v. < Srocker, 184 Crocker v. Old Colony R R Co.. 445. Crocker v. Whitney, '■■ Crocket v. young, 1085. Croft v. Bunster, 12 Croft v. Lumpkin, etc., Mm. < Cromwell v. American, etc. Co., 5 Cromwell v. County of Sac, 1208, 1214, 1224, 1226, 1286, I - Crook v. Jewett, 1157. Crooked, etc., Co. v. Kenka Nav. Co., 916. Crooks v. State, 132, 156, 163. Crosby v. Hanover, 1592. Crosby v. New London, etc, R R Co., 1236, 1239. Crosby v. Lillie, 922. Crosby Lumber Co. v. Smith, 966. Cross v. Eureka, etc., Co., 600, 709, Cross v. Fisher, 1189. Cross v. Jackson. 668, 669, Cross v. Peach Bottom K'y Co., 628, 632, 636. Cross v. Phenix Bank, 6-7, 094. 007. Cross v. Pincknoy ville, etc, Co., 113,313. Cross v. Sackett, 54. 80, 480, 486. Cross v. West Virginia, etc., Co., 820, 836, 853, 1023. Cross v. Williams, 661. Cross' Case, 41 1. Grossman v. Penrose Ferry Bridge Co., 190. Croton T. Co. v. Ryder, 1592. Crouch v. Credit Fonder, 1223, 1255 1256. to the foot-paging.] Crow v. Greene, 325. 1038, 1040. Crowder et al. v. Town of Sullivan et al., 811, 1580. Crowell v. Jackson, 481, 975. Crown, etc, Bank. I '. 1157. Crowtber v. Thorley, 655. Croyden Hospital v. Fairly, 1019. Crubb v. Miller. 457. Cruikshank v. Fourth Nat'l Bank. 1182. Croll v. Dodson, 464 ( frumlish v. Shenandoah, etc., R R Co., 1182, 1172. Crump v. Thurber, 462, E dump v. 1". S. Min. Co.. 191, 192, 1075, ma < 'rum's Appeal, 871. Cruae v. Paine, I, 56ft Crutcher v. Commonwealth, 1580. Crutcher v. Kentucky, 777, 1947. Crutcher'e Adrn'r v. Bedford, 994, Crutchfield v. Mutual,* Cucullu v. Union Ii ( 'ml or < luddee v. Rutl ( luddon v. Eastw i< k, l Culberteon v. Wabash Nav. Co., 16. Cullen v. Thorn] son, :- Culp per A. B c, v. Diggea, 1017. Culver v. Fort Edward, 149. Culver v.Reno Real Estate Co., 373, lv Culver v. Sanford, I Culver v. Third National Bank, 280.284, Culver v. Wilkinson, 590. Cumberland v. BCagruder, 1 12. Cumberland Coal Cav. Sherman, 821, 3, 945, 1127. Cumberland, etc, Ca v. IToffman, etc, Co.. 1172. Cumberland, etc, Ca v. Paresle, 937. Cumberland, etc, Corp. v. Portland, 101ft Cumberland, etc.. Co. v. Turner, 1171. (. 'umbei land, etc., R R Co. v. Barren Co., 151. Cumberland Valley R. R Ca v. Baab, 12:1. Cuming v. Bosuell. 742. Cummer v. K> nt. 682. i lummlng v. Prescott, 20, 584, 85a TABLE OF CASES. lxiii [The references are Cummings v. Cummings, 430. Cummings v. Merchants' Nat'l Bank of Toledo. 764. 7(56, 767. Cummings v. Webster, 1024. Cumnock v. Institution for Sav., 596, 782. Cunningham v. Alabama, etc., Trust Co., 687, 691, 692. Cunningham v. City of Glasgow, 327. Cunningham v. Edgefield & Ky. R R Co., 191, 198, 199. Cunningham v. Massena, etc., R R, 1081, 1396. Cunningham v. Pell, 1144, 1172. Cunningham v. Pittsburgh, etc., R. R. Co., 377. Cunningham v. Third, etc., Bank of Au- gusta, 477. Cunningham's Appeal, 387. Curien v. Santini, 839. 862. Curling v. Chalklen, 1057. Curran v. State, 154. Curran v. State of Arkansas, 248, 729, 731, 889, 1942. Currie v. Mut Assoc. Soc, 634. Currie v. White, 452, 710, 711. Currie's Case, 64, 78. Currier v. Lebanon Slate Co., 337, 382, 419. Currier v. Marietta & Cin. R R Co., 1524, 1525. Currier v. New York, West Shore, etc., R R Co., 903, 1141, 1150. Curry v. Scott, 105, 364, 386, 387, 530, 632. Curry v. Woodward, 16, 160, 243, 252, 255, 261, 715, 889. Curry Hotel Co. v. Mullins, 229. Curtis v. County of Butler, 132, 153. Curtis v. Harlow, 350. Curtis v. Leavitt, 1072, 1082, 1107, 1115, 1185. 1190, 1207, 1261, 1263, 13C8. Curtis v. Piedmont, etc., Co., 1107. Curtis v. Steever, 429, 612, 613. Curtis v. Watson, 1050. Curtis v. Whipple. 139. Curtis' Case. 107, 333, 359 Curtis, In re, 739. Curtiss v. Hurd, 481. Curzon v. African Co., 1169. to the foot-paging.] Cushman v. Bonfield, 1468. Cushman v. Brownlee, 889 Cushman v. Hayes, 603. Cushman v. Root, 470, 572. Cushman v. Shepard, 288. Cushman v. Smith, 1525. Cushman v. Thayer Mfg. Co., 461, 498, 517, 525, 532, 547. Custar v. Titusville Gas & Water Co., 189, 191. Custer v. Tompkins County Bank, 1120. Cutbill v. Kingdom, 802. Cuthbert v. Cuthbert, 406. Cutler v. Estate of Thomas, 670. Cutler v. North, etc., R'y, 1537. Outright v. Stanford, 250. Cutter v. Estate of Thomas, 668. Cutting v. Damerel, 262, 278, 345, 351, 519, 524. Cutting v. Florida, etc., Co., 1351, 1438, 1511. Cutting, Ex parte, 1161. Cuykendall v. Corning, 278, 279. Cuykendall v. Miles, 289, 293. D. Dabney v. State, etc., 990. Dabney v. Stevens, 1075, 1081. Dade Coal Co. v. Haslett, 326. Daft v. Daft, etc., Co., 1137. Daggett v. Davis, 780, 781, 782, 792. Dahl v. Montana Copper Co., 1003. Dails v. Lloyd, 566. Daland v. Williams, 739. Dale v. Donaldson, etc., Co., 1089. Dale v. Grant, 1161. Dale v. Hayes, 742. Dale, etc., Co., Limited, Re, 929, 1047. Dale, etc., Line, Re, 925. Dallas v. Railroad Co., 1174. Dallas County v. McKensie, 141. Dallas, etc., Mills v. Clancy, 237, 239. Dallemand v. Odd Fellows', etc., Bank, 228. Daloret v. Rothschild, 460. Dal ton v. Midland R'y Co., 105, 506, 507, 528, 715, 717. Dal ton & Morgan town R. R Co. v. Mc- Daniel, 161, 254, 255, 257. Ixiv TABLE OF CA- [The refcre-ices are Daly v. Georgia, etc.. R. R, 1563. Daly v. National Life Ins. Co., 998, 1171, 1588, 1950. Daly v. Thompson, 39" S5, 780. Damarin v. Huron, etc., Co.. 1263. Dana v. Bank of St Paul, 1108. Dana v. Bank of United States. 955, 990, 1049. Dana v. Brown, 686. Danbury & Norwalk R R Co. v. Wilson, 91, 109, 112, 167, 170, 176, 282, I 640. Dane v. Dane Mfg. Co.. 271, 804, 881. Dane v. Young, 285, 846, K Danforth v. Allen, 668. Danforth v. Penny, 818 Daniell v. OlT. Managers of Bank, S Daniell v. Royal British Bank, 524 Daniell. Ex part.'. 12. II, 46. Dan iell's Case. 887, 858, 115. Daniels v. Hart, 1266, 181ft Dannemeyer v. Coleman, 1131, 1159. Danville v. Montpelier, etc., R. R Co., 150. Danville, etc, Co. v. Tommy, 1116. Danville, etc., P. Co. v. Stat . Danville. Matter of the Bank of. 666. Danville Seminary v. Mott» 891, 10 Darby v. Wright. 1 1»' \ i < y v. Tain ir. etc., K'y, 106a Dardauelle. et •.. R'y v. Shinn, i Darling v. Boston, eta, R. \l, r Darlington, etc, Co, Be, :<'>. Darnall v. Lyon, 164 Darnell v. Dickens, 1100. Darnell v. State. 866. Darsl r. Gale, 1085, 1186, 120.1. 1263. 1272. Dartmouth College v. Woodward, 1, 626, 771. Dartmouth College Case, 635, 1576. Dater v. Troy, etc., R R Co., 1009. Dauchy v. Brown. 250, 271, 280, 888 Dauphiu & Lafayette R'y Co. v. Ken- nedy, 771. 772. Davenport v. Dows. 747. 1144. Davenport v. Kleinschmi.lt. 1597. Davenport v. Mississippi & Missouri R R Co., 753, 770. to the ' foot-paying. ] Davenport v. Receivers, 1444. 1446.1456. Davenport Bank v. Davenport, 763. Davey v. Pern ber ton. 6 David's Trusts, Re, : Davidson v. Bridgeport, 1058. Davidson v. Grange, 10 Davidson v. New Orleans. 1949. Davidson v. 1! on- y < '. >.. I! Davidson v. Rankin, 24:1. 271. 2^0. 285, Davidson v. Seymour. 915. Davidson v. Tulloch, 19:1. 488, 7-5. Davidson v. Westchester, etc., Co., 321, 1200. 1888, 15-1. Davids. .1-0. 818 Darvii a v. Fowler, 408, 404, 405. Davies v. New Y t Co., 1081. IS . 1886 Davis v. Bank <>r' England, 508, 508, 516, Bank of River Rafain,985, 1193. Davis v. Barb r, 1 17. 25.".. Da\ Davis v. ( ain'.- l'x'r, 406. Davis v. Cook, 1188 v. County of Yuba, 1 S Davis v. Davis. * is v. Duncan. 1448, 1456, 1463. Davis v. England. 1105. Davis v. Esses Baptist Society. 881,845. - e. Gemmell, 936, 1131, 1150, 1159. Ill Davi.- v. Gray, 278, 1428, 1429. Davis v. Gwynne, 564 Davis v. Haycock. 854 570. .".TO. Davis v. Jackson. 740. Davis v. Mayor, etc., 1169. 1550, 1553. 1 555. Davis v. Memphis, etc.. R'y Co., 889, 890, 891, 927. 990. 1078 Davis v. Montgomery, etc, Co., 66. 70, 1045, 1193. 1205. Davis v. Old Colony R R Co., 1247. Davie v. I tewell, 791. Davis v. Proprii I .. 370. II Davis v. Rock. etc.. Co.. 935. Davis v. Rockingham Investment Co., 1087. TABLE OF CASKS. lxv [TJie references are Davis v. Shafer, 117, 669, 1041. Davis v. Stevens, 339, 356. Davis v. Tuseumbia, C. & D.RR. Co., 1526. Davis v. U. S., etc., Co., 829, 835, 1156. Davis v. Weed, 331, 351. Davis' Case, 1187. Davis, Ex parte, 338. Davis, etc., Co. v. Best, 984, 985, 1080. Davis, etc., Co. v. Davis, etc., Co., 950, 1114. Davis, etc., Wheel Co. v. Davis, etc., Wagon Co., 1119. Davison v. Davis, 456. Davison v. Gillies, 724, 72a Davison v. Holden, 66S. Dawes v. North River Ins. Co., 1106. Dawes v. Ship, 639. Dawes' Case, 177. Dawkins v. Antrobus, 1026. Dawson v. Gaskoin, 408. Dawson v. Kittle, 580. Dawson v. Insurance Co., 387. Dawson v. Morrison, 1036, 1037. Day v. American Tel. & Cable Co., 506. Day v. Day, 337, 745. Day v. Holmes, 577, 580, 587, 588. Day v. Ogdensburgh, etc., R. R Co., 884, 997, 1240, 1242, 1497, 1503, 1504. Day v. Perkins, 788. Day v. Postal Tel. Co., 951, 1422, 1443. Day v. Spiral, etc. Co., 973. Day v. Vinson, 274. Day v. Worcester, etc., R. R, 384. Dayton v. Borst, 111, 113, 255, 262, 263. Dayton v. Warne, 1105. Dayton & Cincinnati R R Co. v. Hatch, 34, 122, 128, 129, 631. Dayton, etc., Co. v. Coy, 114. Dayton, etc., R R. Co. v. Hatch, 660. Dayton Nat'l Bank v. Merchants' Nat'l Bank, 581. Deaderick v. Wilson, 260, 431, 673. Deaf & Mute Inst v. Norwood, 1019. Dean v. Bennett, 1026. Dean v. Biggs, 252, 263, 1362. Dean v. De Wolf, 273. Dean v. Mace, 281, 295. Dean v. Sullivan R R Co., 1531. Bean v. Whiton, 283. E to the foot-paging.] Dean v. Whitory, 284. Dean and Chapter of Femes, Case of, 821. Deane v. Test, 406. Deansville Cemetery, Matter of, 1526, 1527. Dearborn, etc., Co. v. Augustine, 1003. De Betz's Petition, 1309. De Bost v. Albert P. Co., 1076. De Camp v. Alward, 863, 989. De Camp v. Dobbins, 993, 994, 118& Decatur, etc., Co. v. Neal, 821. De Caumont v. Bogert, 412. Decker v. Evansville, etc., Co., 1579. Decker v. Gardner, 8C0, 1411, 1413, 143L Decker v. Gutta Percha, etc., Co., 1089. Decker v. Hughes, 133, 141. De Cordova v. Barn urn, 573, 602. Dedham Bank v. Chickeriug, 1092, 1093. Dedham Inst. v. Slack, 1084. De Duvigne's Case, 908. Deems v. Albany, etc., Line, 670. De Forth v. Wisconsin, etc., R R Co., 150. De Gendre v. Kent, 711, 745. De Graaf v. Thompson, 1367. De Graaf v. Wyckoff, 1239. De Graff v. American Thread Co., 971, 1108, 1245. De Graffenried v. Brunswick, etc.. R R, 1434. Dehon v. Foster, 1425. De La Cuesta v. Insurance Co., 388. Delacy v. Neuse River Nav. Co., 1025. Delafield v. State of Illinois, 580. Delamater v. Miller, 716. Delamater's Estate, 408, 413. Deland v. Williams, 707. Delaney v. Van Aulen, 745. Delanney v. Strickland, 661. Delano v. Butler, 299, 390, 391. Delano v. Case, 1141. Delano v. Trustees, etc., 1069. Delaware & Atlantic R R Co. v. Irick, 1019. Delaware & R C. Co. v. Camden, 1529. Delaware Canal Co. v. Penn. Coal Co., 852, 1057, 1058, 1578, 1579. Delaware Canal Co. v. Sanson], 174, 342. Delaware, etc., Co. v. Commonwealth, 777. Ixvi TABLE OF CAsf-. [The references are Delaware, etc., R R Co. v. Central, etc., Co.. 1600, 1601. Delaware, etc., R R Co. v. ErieR'y, 1415. Delaware, etc, R R Co. v. Irick. 19. 634. Delaware, etc, R R Co. v. Oxford Iron Co., 701. Delaware, etc., R R Co. v. Rowland. Delaware R R Co. v. Tharp, 631. Bffl Delaware Railroad Tax, 627. 747. 771. 772. 77::. 774. 1946. Delevan v. Simonson, 576. De Lisle v. Hodges, 410. Deller v. Staten bland, etc. Club, Delta, etc, Co. v. William-!. lu90. Demarestv. Flack. 310. 314. 317. 896 887. Deming v. Bail' Deming v. Bull. 386, 349. Deming v. Darling, Deming v. Pdlestoo, - Deming v. Williams. 413. Demings v. Supreme Lodge, 1108. Dempsey v. Harm. Den v. Vreelandt, 1100. Denham & Co.. In re, 206. 7 Denike v. New York, eta, Co, B58, 859. Denney v. Cleveland, etc.. R R. K Dennis v. Kennedy, 667, EI70, 671. 919. Dennis v. Superior Court, 892. Dennison. Ex parte, 590, B Denniston v. Chicago, etc. R R. 1408, I >. nnistoun v. New York, etc, R R Co.. 1644 Denny v. Lyon. 594 Denny, etc., Co. v. s.-hram. 223. Densmore v. Central R R Co.. 1142. Densmore v. Red Wing, etc., Co., 878. Densmore Oil Co. v. Densmore, 15, 849, sua Dent v. Holbrook, 3 Dent v. London Tramways Co., 373. 374, 718, 719. Dent v. Nickalls, . r >63. 580. Dent v. North, etc., Co.. 1088. Dent"- Case, 77. Denton v. International Co.. 1179. Denton v. Jackson. 2. Denton v. Livingston. 22. 60S. Denton v. Macneil, 195, 208 to the foot-paging.] Denver & R G. R'y v. Harris. 1006, 1008, 1010. Denver & R T. R R v. United States T. Co., 1805, Denver, etc., Co. v. Union, etc, R'y, 1530. Denver, etc., R'y v. Barsaloux, 1566. Denver, etc.. R'y v. Bourne, 1563, Denver, etc.. R R Co. v. Atchison, etc, R R Co.. 151L DeP % « SI 358 De Peyster v. American Fire Ins. Cc, De I v. Beckman, 656. -it Hank v. Barrett) 42:.. 641. 1090, •. 1471. 149a Deposit Life A. Co. v. Ayscough. 810. Derbj w. Yale, 1 Derby Turnpike Co. v. Parks, 1591. Dp Ribeyre v. Barclay. 584 DerricksoD v. Smith. 29a . \ Peek. 904 1 1. Rui ign< 'a ( De Ruyt< r ». St Pi De Rnyter v. Trustees, etc, .. Wood, 1131. 1152. Deadoity, Ex parte, 830, 841. D sdoity, Re, ^39. t... K'y v. I> 1. TABLE OF CASES. hrix [The references are Dozier v. Thornton, 285. Drake v. Flewillen, 1105. Draper v. Beadle, 72. Draper v. Manchester, etc., R R Co., 683, 684. Diaper v. Moss, etc., Co., 1104. Draper v. Springport, 145. Drinkwater v. Falconer, 404. Drinkwater v. Portland Marine R'y, 250, 280, 294. Driscoll v. West Bradley, etc., Manuf. Co., 686, 688, 689, 691. Droitwich Patent Salt Co. v. Curzon, 381, 394. Dron field Silkstone Coal Co., Re, 46, 212, 213,216. Drover v. Evans, 109. Drum Slate Quarry Co., Re, 908, 909. Drummond Tobacco Co. v. Randle, 1014. Drummond's Case. 31, 36. Drury v. Cross, 601, 932, 1218, 1221, 1272. Drybutter v. Bartholomew. 22. Dryden v. Kellogg, 251, 278, 281, 286. Duanesburgh v. Jenkins, 136, 147. Dublin & Wicklow Ry Co. v. Black, 107, 334. 428. Dubois v. Delaware, etc., Co., 1095, 1105. Dubois v. Sistare, 597. Dubois v. Thompson, 568, 781. Du Bois. etc., R'y v. Buffalo, etc., R'y, 1563, 1565. Dubuque Co. v. Dubque, etc., R R Co., 134. Ducarry v. Gill, 1065. Ducat v. Chicago, 997, 998, 1002, 1947. Duce, Ex parte, 822. Ducios v. Benner, 739. Ducket v. Grover, 1145. Duckworth v. Roach, 293. Dudley v. Collier, 1005. Dudley v. Congregation, etc., 1109, 1264. Dudley v. Gould. 500, 606, 616. Dudley v. Kentucky High School, 814, 1065. Dudley v. Price's Adm'r, 731, 733. Duff v. Maguire, 668. Duffield v. Barnum, etc., Works, 209. Duffy v. Mutual Brewing Co., 679. Dufour v. Stacey, 1581. Duggan v. Colorado, etc., Co., 880. to the foot-paging] Duguid v. Edwards, 580. Duke v. Andrews, 1040. Duke v. Cahawba Nav. Co., 517. Duke v. Diver. 1040. Duke v. Forbes, 1040. Duke v. Markham, 856, 1063, 1294 Duke's Case, 416. Duluth v. Duluth, etc., Co., 159a Dummer v. Corporation, etc., 683. Dummer v. Pitcher, 413. Duncan v. Atlantic, etc., R. R, 1308, 1356, 1357, 1400. Duncan v. Jaudan, 435, 439, 593. Duncan v. Jones. 666. Duncan v. Hill, 580. Duncan v. Luntley, 396. Duncan v. Maryland Svgs. Inst, 983. Duncan v. Mobile, etc., R. R, 1221, 1233, 1233. 1234, 1316, 1468, 1472, 147a Duncomb v. New York, etc., R R, 593, 594. 935. 937, 1195. 1216, 126a Duncuft v. Albrecht. 460, 464. Dundas v. Dutens, 609. Dundee, etc., Co. v. Cooper, 880. Dundee, etc., Co. v. Nixon, 1004 Dunham v. Cincinnati, P., etc., R'y Cou, 1233, 1382, 1394. Dunham v. Earl, 1383. Dunham v. Isett, 12G9, 1367, 136a Dunkerson, In re, 687, 701. Dunkle v. Renick, 987. Dunlop v. Dunlop, 693, 697. Dunlop v. Patterson, etc., Ins. Co., 1421, 1424, 1432. Dunlop, Re. 700. Dunman v. Strother, 46a Dunn v. Bell, 476. Dunn v. Com. Bank of Buffalo, 515, 52a 699. Dunn v. Rector, etc.. of Church, 1096. Dunn v. St. Andrew's Church, 109a 1094, 1095, 1096. Dunn v. Star, etc., Ins. Co., 521, 617. Dunn's Adm'r v. Kyle's Adm'r, 1031. Dunne v. English, 916. Dunnebroge Mining Co. v. Ailment, 881. Dunnovan v. Green, 133, 149. Dunphy v. Travelers', etc., Ass'n, 1131, 1147, 1151. lxx TAI1LE OF CASES. [The references are Dunstan v. Imperial, etc., Co., 16, 924, 1024. Dunston v. Hoptonie Co., 260. Dupee v. Boston Water-power Co., 417, 419, 972, 995. Du Pont v. Bushong, 1238. Du Pont v. Northern Pac. R R Co., 919, 1142, 1238, 1269, 1270. Du Pont v. Tilden, 63, 82. Duquesne Club v. Pennsylvania Bank, 1173. Durant v. Burt, 469, 475, 567. Duranty's Case, 192, 203, 205. Durar v. Insurance Co., 1085, 1093. Durfee v. Old Colony, etc., R R Co., 637, 814, 1493, 1504, 1508. Durfee v. Peoria, etc., R'y, 1532. Durgin v. American Exp. Co., L579. Durham v. Man., etc., Co., 532. Durham's Case, 276. Durham, etc., Co. v. Chid', 669. Durkee v. Board of Liquidation, 111. Dutch West India Co. v. Hennquez, 291. Dutch West India Co. v. Van Moses, 1016. Dutcher v. Importers & Traders, etc., 991. Dutcher v. Marine Nat Bank, 278. Dutchess Cotton Manufactory v. Davis, 111, 113, 232, 1166. Dutchess, etc., Ins. Co. v. Hachfield, 1198, 1226. Dutchess, etc., R R Co. v. Mabbett. 89, 233 Dutenhofer v. Adirondack Ry, 1476. Dutton v. Connecticut Bank, 523, 547. 621. Dutton v. Ives, 1229. Dutton v. Marsh, 1106. Duverger v. Fellows, 663. Dvvight v. Boston, 750. Dwight v. Smith, 1303, 1330. Dwyer v. Fuller, 485. Dyer v. Osborne, 22, 750. Dyer v. Tuskaloosa, etc., Co., 1577. Dyer v. Walker, 877. Dykers v. Allen, 573, 590, 591. Dykers v. Townsend, 470. to the foot-paging. .] E. E. & P. Dis. v. Cecil, 1521. Eagan v. Clasbey, 453. Eagle v. Beard, 155. Eagle, etc,, Co. v. Miller, 1168. Eagle Iron Works, Re, 19. Eaglesfield v. Marquis of Londonderry, 102, 205, 302, 977, 1189. Eakright v. The Logansport, etc., R R Co., 89. 90, 162, 168, 188. Eales v. Cumberland, etc., Co., 925. Earaee v. Doris, 288, 289, 80S, Earl of Lindsay v. Great Northern R'y, 1045. Earl of Shrewsbury v. North Staff ord- Bhire R'y Co., 952, 1044, 1045, 1540. Earl Powlet v. Herbert, 185. Early & Lane's Appeal, 417. Earp v. Lloyd, ,. Electric R'y v. Com. Council, 1571. Elems v. Ogle, 1070. Eley v. Positive, etc., 1043, 1044. Elizabetb City Academy v. Lindsey, 877, 105^. Elizabetbtown G. L Co. v. Green, 49, 877, 884. Elizabetbtown & P. R R v. Elizabeth- town, 772. 77.-.. 77C. Elkhart, etc., Co. v. Ellis, 1433. Elkington & Co. v. Hurter, 1189. Elkington's Case, 37. Elkius v. Camden & Atlantic R R Co., 369, 374, 422, S32, 1139, 1142. Ellerman v. Chicago Junction, etc., Co. et al., 3, 427, 645, 960, 980, 1160, 1246. Elliot v. Abbot 1063. Elliott v. Fair Haven, etc., R R, 1561. Elliott v. Richardson, 844. Ellis v. Am. Tel. Co., 159a Ellia v. Andrews, 479. Ellis v. Barfield, 742. to the foot-paging] Ellis v. Boston, etc., R R, 1301. 1316, 1346, 1360, 1367. 1368, 1396, 1400. 1458. Ellis v. Eden, 409. Ellis v. Howe, etc.. Co., 1085. Ellis v. Indianapolis, etc., R R, 1447. Ellis v. Marshall, 838. Ellis v. Nortbern, etc., R R 137. Ellis v. Proprietors of Essex Merrimack Bridge, 87, Ml, 709, 743. Ellis v. Pulsifer, 1101. Ellis v. Scbmoeck, 665. Ellis v. Ward, 927. 923, 1132, Ellis' Appeal, 51 Ellison v. Bignold, 063. Ellison v. Mobile & O. R R Co., 121, 188, 197. 248. Ellsworth v. Cole, 470. Ellsworth v. Curtis. 1110. Ellsworth v. New York, etc., R R. 712. Ellsworth v. St Louis, etc., R R Co., 998, 1192, 1206, 1211. Ellsworth, etc., Co. v. Faunce, 817, 1057. Elmira, eta, Co. v. Erie R'y, 1397. Elston v. Pisgott 999. 1002. Flwell v. Dodge, 1092. 1102. Elwell v. Fosdick. 1300, 1314. Elwell v. Grand St, etc., R R., 1296, 1384. Elwes v. Causton, 410. Ely v. Sprague, 10, 713. Elysvillc Mfg. Co. v. Okisko Co.. 1068, 100r.. Elyton, etc., Co. v. Birmingham, etc., Co., 70. Emhrey v. Jemison, 109. 477. Emerson v. Auburn, etc., R R Co., 1176. Emerson v. Com., 1597. Emerson v. European, dtc, R'y, 1367. Emerson v. McCormick, etc., Co., 1174. Emerson v. N. Y., etc., R R, 1131, 1500, 1506. Emerson v. Providence, etc., Co., 1092. Emery v. Evansville, etc., R R Co^ 1166. Emery v. Ohio Candle Co., 64a Emery v. Wason, 409, 745. Enilen v. Lehigh, etc., Co., 1235. Emma Silver Min. Co. v. Grant, 911. 913, 913, 914. 1157, 1159. TABLE OF CASES. Ixxiii [The references are Emma Silver Min. Co. v. Lewis, 193, 908, 911, 915. Emma Silver Mining Co.'s Case, 681. Emmerson's Case, 359. Emmert v. Smith, 258, 300. Emmet v. Reed, 1085. Em mitt v. Springfield, J.&P.RR. Co., 228. Emmons v. Davis, etc., Co., 20, 1414. Empire v. Darlington, 147, 155. Empire Assurance Co., In re, 88, 1259, 1545. Empire City Bank, Matter of, 272, 300, 329,. 336, 353, 629. Empire, etc., Co., Re, 1478. Empire Mfg. Co. v. Stuart, 879. Empire Mills v. Alston, etc., Co., 309, 320. Empire R R'y Appeal, 676, 678. Employers', etc., Corp. v. Employers', etc., Co., 1014. Empress Engineering Co., The, Re, 1043. Enders v. Board of Public Works, 785, 787. Enfield v. Jordan, 141. Enfield Toll Bridge Co. v. Conn. River Co., 863, 875, 1592. Enfield Toll B. Co. v. Hartford & N. H. R. R Co., 1577, 1592. Engel v. The South, etc., Co., 1423. Engelke v. Schlender, 767. England v. Dearborn, 1051, 1076. England's Ex'rs v. Beatty, etc., Co., 928. Englefield Colliery Co., Re, 908. English v. Chicot Co., 133. English, etc., Trust, The, v. Brunton, 1253. Episcopal, etc., Society v. Needham, etc., Church, 1094. Eppes v. Mississippi, Gainesville & Tus- caloosa R R Co., 36, 168, 181, 640. Eppright v. Nickerson, 264, 1102. Equitable Trust Co. v. Fisher, 1222, 1312, 1320. Equity Gas-light Co., Re, 872. Erickson v. Nesmith, 256, 259, 260, 269, 283, 285, 286, 289, 293, 294, 305. Ericsson v. Brown, 273, 274. Erie & Northeast R R v. Casey, 627, 886, 890. to the foot-paging.] Erie City J. Wks. v. Barber, 1007. Erie, etc., Co. v. Brown, 120, 221. Erie, etc., R'y Co. v. Patrick, 332. Erie, etc., R. R Co. v. Owen. 92. Erie R'y Co. v. Delaware, etc., R. R Co., 1527. Erie R'y Co. v. New Jersey, 778. Erie R'y Co. v. State, 319. Erie R'y Co. v. Vanderbilt. 948, 1158. Erlanger v. New Sombrero Co., 910, 912, 913, 915. Ernest v. Croysdill, 1132. Ernest v. Nicholls, 931, 1065. Erskine v. Lowenstein, 81. Erskine v. Peck, 213, 216. Ervin v. Oregon R'y & Nav. Co., 680, 684, 956, 1136, 1142, 1147, 1159, 1172, 1176. Erwin v. Davenport, Receiver, 1457. Erwin v. Oldman, 609. Eschweiler v. Stowell, 1150. Eslava v. Ames, etc., Co., 1020. Esmond v. Bullard, 278, 296. Esparto Trading Co., 212. Esser v. Linderman, 575. Essex Bridge Co. v. Tuttle, 113, 116, 169. Essex Turnpike Co. v. Collins, 110, 115, 1068, 1092, 1095. Estabrook, Ex parte, 1190, 1243, 1244. Estabrook, In re, 1192. Estate of Prime, 739. Estate of Woodruff, 739. Estell v. Kuightstown & Middleton Turnpike Co., 159. Estes v. Belford, 1176, 1178. Etting v. Bank of the U. S., 1008. Eureka Co. v. Bailey Co., 1088, 1095. Eureka, etc., Co. v. Richmond, etc., Co.. 12, 997. Eureka Ins. Co. v. Parks, 1005. European Bank, In re, 342. European Central R'y Co., In re, 394. European, etc., R'y Co. v. Poor, 901, 90& European, etc., Society, In re, 861. Eustace v. Dublin T. C. R'y Co., 525. Euston's Estate, In re, 752. Evangelical, etc., Home v. Buffalo, eta, Assoc, 1578. Evans v. Boston, etc , Co. et al., 802. Evans v. Boston Heating Co., 1601. lxxiv TABLE OF CA [The references are Evans v. Brandon, 1027, 1028, 1159. Evans v. Coventry, 268, 324, 331, 414, 415, 734, 1141, 1587. Evans v. Dillingham, 1434. Evans v. Hughes County, 1581. Evans v. Jones, 410. Evans v. Lee, 1100. Evans v. Osgood, 797. Evans v. Philadelphia Club, 1005. Evana v. Smallcombe, 180,215,814, 1125, 1128. Evans v. Trip, 404. Evans v. Wain, 580. Evans v. Wood, 866, 570. Evans' Case, 97. Evansville v. Hall, 749, 76ft Evansville Bank v. Britton, 704. Evansville, etc., R R Co. v. Dunn, 128. Evansville, eta, H R. Ca v. Evansville, 133, 148, 15::. 2 Evansville, etc., R R. <'... v. Frank, 1461, Evansville, etc., R R Ca v. Shearer, 123, 126. Evansville, Indianapolis & C. S. R, R, Co. v. Posey, isa Evansville National Bank v. Metropol- itan National Hank, 688, 701. Evansville R R <'<>. v. Androsi" Mills. 1684 Evarts v. Eillingworth Mfg. Ca, 86a Evening Journal Asso. v. MeHermott. 1008. Evens v. Monet. 61 1. Everett v. Coffin, 716. Everett v. Smith. 816. Everett v. United States, 1086, 100:!. Everhart v. West Chester, etc., R R Co., 221, 356. 364. 631, 689. Everingham v. Meighan, 17~>. Bvcritt v. Automatic, etc, Co., 701. Everitt v. Knapp, 177. Everitt's A-ppeal, 766. Evershed v. London & N. W. R'y. 151'.). 1621. Evertson v. National Bank, lilts, 1826, 1231, 1232, 1286. Ewing v. Medlock, 661, 671. Ewing v. Robinson, 1166. Excelsior Co., Re, 631. Excelsior, etc., Co. v. Pierce, 724. to tlie foot-paging.} Excelsior G. B. Co. v. Stayner, 221. Excelsior Petroleum Co. v. Lacey, 392, 733. Exchange Banking Co., In re, 735. Exchange, etc., Co., Re, 892. Exchange Nat'l Bank v. Hastings, 878, 1165. Exehange Nat'l Bank v. Miller, 765. Executors of Gihnore v. Bank of Cin- cinnati, 341. Exeter Bank v. Rodgers, 1008. Exeter & »'. R'y Co. v. Puller. 9*0. Exhall, etc., Co.. In re, 1809. Ex-Mission, etc., Co. v. Flash, 814, 1129. Exmonth Docks Co., In re, 861. Exposition, eta, R'y v. Canal, etc., R'y, Expi 68, 1580. Expr< 38 Ca v. Caldwell, 16 Express Ca v. Kountze Bros., 1948. 1 : n | .i « — . ( 'o. v. Railroad, 139T •nan v. Ki ieckhans, 66. Eyi -. 114. Eyster v. Centennial Board of Finance. F. Factage Parisien, Re, 861. Factors', etc.. Insurance Ca v. Harbor, etc., Co., 660. Factors' & T. Ins. Co. v. Marine D. D. & s. Co.. 498, 499, 686, 1117. Fadnesa v. Braunborg, *::7. Faikney v. Kevnous, 474. Fairbank v. Merchants', etc., Bank, 588, 711. Fairbanks v. Farwell, 264. Fairfield v. County of Gallatin, 140, 141, 1944. Fairfield v. Phillips, 430. Fairfield County Turnpike Co. v. Thorp, 162, 167, 170, 1058, 1110, 1118. Fairfield Sav. Bank v. Chase, 1114, 1115, 1118. Falioner v. Buffalo, etc., R R Co., 141, 150, 153. Falconer v. Campbell, 666. Fales v. Roberts, 1366. Falk v. Moebs, 1105. TABLE OF CASES. lxxv [The references are Fall, etc., Bank v. Sturtevant, 1116. Fall River Iron Works v. Old Colony R. R. Co., 632. 810. Fall River Nat'l Bank v. Slade, 603. Fallon v. Railroad Co., 461. Falmouth, etc., Co. v. Shawhan, 244. Faneuil, etc., Bank v. Bank of Brighton, 985, 1086. Fanning v. Gregoire, 1582. Fanning v. Insurance Co., 88. Fanning v. Osborne, 1527, 1557. Fargo v. Louisville, New Albany & Chi- cago R'y Co., 666. Fargo v. Michigan, 777, 1946. Fargo v. Redfield, 1580. Fariera v. Gabell, 471, 472, 473, 475, 476, 477. Faris v. Reynolds, 148. Farley v. Kittson, 1470. Farlow v. Lea, 1428. Farmer v. National Life Assoc, 1178. Farmers' & Citizens' Bank v. Payne, 1119. Farmers' Bank v. Chester, 1058. Farmers' Bank v. Gettinger, 1543. Farmers' Bank v. McKee, 1113, 1118. Farmers' Bank, etc., v. Beaston, 1422. Farmers' Bank of Md. v. Iglehart, 687, 693, 695, 700. Farmers' Bank of Maryland Case, 690, 695, 696. Farmers', etc., Bank v. Butchers', etc., Bank, 1090. Farmers', etc., Bank v. Colby, 1104. Farmers', etc., Bank v. Empire, etc., Co., 1083, 1247. Farmers', etc., Bank v. Haight, 1102. Farmers', etc., Bank v. Kimball, etc., Co., 1120. Farmers', etc., Bank v. Troy, etc., Bank, 1166. Farmers', etc., Bank v. Wasson, 686, 687, 1022. Farmers', etc., Co. v. Bankers', etc., Co., 1355. Farmers', etc., Co. v. Burlington, etc., R'y, 1359. Farmers', etc., Co. v. Chicago, 829. Farmers', etc., Co. v. Cincinnati, etc., R. R. Co., 1393. to the foot -paging. \ Farmers', etc., Co. v. Clowes, 982. Farmers', etc., Co. v. Farmers', etc., Co., 1014. Farmers', etc., Co. v. Floyd, 220, 324, 975. Farmers', etc., Co. v. Kimball, 960. Farmers', etc., Co. v. Toledo, etc., Co., 957, 964, 1227. Farmers', etc., Ins. Co. v. Chase, 1071. Farmers', etc., Ins. Co. v. Harrah, 998. Farmers', etc., Ins. Co. v. Needles, 1427. Farmers', etc., Nat. Bank v. Dearing, 1175, 1950, 1951. Farmers', etc., Nat. Bank v. Rogers, 601. Farmers', etc., T. Co. v. Bankers' Tel. Co., 132& Farmers', etc., T. Co. v. Canada, etc., R'y, 1390. Farmers', etc., T. Co. v. Chicago, etc., R'y, 1051. Farmers', etc., T. Co. v. Green, etc., R. R, 1204, 1330. Farmers', etc., T. Co. v. Missouri, etc., R'y, 961, 1318, 1465. Farmers', etc., T. Co. v. Newman, 1393. Farmers', etc., T. Co. v. Petitioners, 1452, Farmers', etc., T. Co. v. Pine Bluff, etc., R'y, 1227. Farmers' L. & T. Co. v. Ansonia, 1572. Farmers' L. & T. Co. v. Bank of Racine, 1363. Farmers' L & T. Co. v. Bankers', etc., Tel. Co., 1283, 1287, 1289, 1290, 1320, 1344, 1345, 1475. Farmers' L. & T. Co. v. Carroll, 1108. Farmers' L & T. Co. v. Cary, 1369. Farmers' L & T. Co. v. Central R. R., 1326, 1356, 1357, 1358, 1456, 1459, 1460, 1462, 1482. Farmers' L & T. Co. v. Chicago, etc., R'y, 846, 1284, 1289, 1290, 1301, 1323, 1346, 1407, 1442, 1480. Farmers' L. & T. Co. v. Commercial Bank, 1363. Farmers' L. & T. Co. v. Fisher, 1385. Farmers' L. & T. Co. v. Goodyears, etc., 1013. Farmers' L. & T. Co. v. Grape, etc., Co., 1453. Farmers' L. & T. Co. v. Green Bay, etc., R. R., 1329. 1347, 1400, 1470, 1473. lxx\ i TABLE OF CASES. [The references are to the foot-paging.] Farmers' L. & T. Co. v. Harmony F. & M. T. Co.. 1000. Farmers' L. & T. Co. v. Hendrickson, 1261, 1370. Farmers' L. & T. Co. v. Houston, etc., iry. 134a Farmers' L. & T. Co. v. Hughes, 657, 1309, 1311. Farmers' L. & T. Co. v. Kansas City. etc., R R, 1306, 1328, 1369, 1400, 14 I, 1455. Farmers' L. & T. Co. v. L. C, etc., R'y, 1396 Farmers' L. & T. Co. v. Long Beach Co., ISC"). Farmers' L. & T. Co. v. McHenry, 1329. Farmers' L. ft T. C v. Mclfini Farmers' L. & T. Co. v. Newman, 1389, 1859. Farmers' L ft T. Co. v. New Rochelle, eta, R'y, 1894, 1571. Farmers' I- ft T. ( !a v. Oregon, etc, R'y, 1264, 107?. 133a Farmers' L ft T. Co. v. Perry, 982. 9&j. Farmers' L ft T. Co. v. Baa I I go, i to, st. R'y Co 945, 1126, 1195, 1196, 1222, 1272, 1847, U Farmers' L. ft T. Co. v. St. Joseph, etc., R'y C<... 1371, 1878, 1495, U Farmers' L, & T, Co. v. Stone, 151 Farmers' L. ft T. Co. v. Toledo, etc., I 1196, 1485. Farmers' L. & T. Co. v. Vicksburg, etc.. R R, 1891, 1401. Farmers' ft 11 Bank v. Downey, 900. Fanners' ft M Bank v. Nelson, 219. Farmers' & M. Bank v. WaBBOn, 517. Farmers' ft M. Bank v. Wayman, 440. Fanners' ft Manufacturers' Bank v. Haight, 10 Farmers' ft Mechanics' Bank v. Cham- plain Transportation Co.. I s . 417. Farmers' & Bier. Ins. Co. v. Harrah, 1002 Farmers' Nat'l Bank v. Cooke. 762, 767. Farmers' Nat'l Bank v. Hannon, 117. Farmers' Nat'l Bankv.McElhinny.1182. Farmers' Nat'l Bank v. Sultan, etc, Co., 1244. Farmers' Nat'l Gold Bank v. Wilson. 022. Farmington Academy v. Allen, 1094. Farmington Savings Bauk v. Fall, 986. Farnam v. Brooks, 1182. Farnham v. Benedict, l ^81 Fainsworth v. Lime Rock R R, 3, 87 ». 887, 1520. Farnsworth v. Minnesota, etc., R R. : 1270. irth v. Robbins, 216, 420, US Farnaworth r. Western, e lOi Farnaworth t. W< >~ Farnam « Ballard, eta, Machine 8aop S, 1100. Faroum r. ] . • 1544 Farnam r. Pali Fai rat r. . - Limited, 917. I .11 111 v. 1 ar v. Walker, 208, 210. FarreU r. Win R Bv. 1561 FarreU Foundry c. Dart, 11 Fan nut. .n v. South Boston R R, 390. Fai i ington v. '!"■ □ ; "'6, :. 1948. I'anior v. N\u- England, etc.. Co., 1004 Farrow v. Bn ii . Farwcll v. Houghton Copper, etc., 830, 1001. Farwcll v. Tweddle, Path v. Ton R'y, 157L Fatman v. Lobach. 648, 588, 584 I'aul.ls v. Yates, 814, 848 Faulkner r. Hebard, 4^7. Faull v. Alaska, etc., Mining Co., ">. Faore, etc.. Co. v. Bhillapart, 178, 1006. Faun Re, 878. Favill r. Bhehan, 48L Fawcett v. Charles. 102.1 Fawcett r. Laurie, 714, 715, 728, 1144 Faxton r. M< I ai ter, '• ' •l. Fay v. Nobl( L084, 1087, 1109, 1185. Fay v. Wheeler, 46 rnside ft Dean'e Lther v. Lee, etc., Co., O.'iG. Featherstone v. Cooke, 981. Fechheimer v. Nat. Ex. Bank, 417. TABLE OF CASES. lxxvii [The references are Fee v. Gas Company, 1493, 1507, 1546. Felgate's Case, 183, 190. Felt v. Heye, 593. 596. Felton v. Dean, 1581. Felton v. McClane, 1077. Felton v. Potomac, etc., Ins. Co., 1366. Fenlon v. Dempsey, 684. Fenn v. Curtis, 487. Fenn's Case, 665. Fenton v. Hughes, 683. Fenwick's Case, 328, 339, 340. Ferguson v. Gill, 73. Ferguson v. Paschall, 461. Ferguson v. Soden, 997. Ferguson v. Wilson, 99, 100, 101, 462 1145. Ferrin v. My rick, 054. Ferri3 v. Ludlow, 381, 393. Ferris v. Strong, 859. Ferris v. Thaw, 309. Ferris. In re, 1328. Fertilizing Co. v. Hyde Park, 1943. Ffooks v. Southwestern R'y, 53, 1139, 1142, 1539. Fidelity, etc.. Co. v. Glover, 435. Fidelity, etc., Co. v. Mobile St. R'y Co., 1351, 1358, 1568. Fidelity, etc., Co. v. Shenandoah, etc., RR.. 1100. 1163. 1204, 1305, 1307, 1345, 1375, 1373. 1403. 1455, 1465. Fidelity, etc., Co. v. West Pa. R R, 1187. 1234. Fidelity Ins., T., etc., Co. v. Niven, 1173. Fidelity Trust Company's Appeal, 405, 407. Field v. Chicago, etc.. R R, 1537. Field v. Cooks, 308. Field v. Field, 815. Field v. Haines, 293. Field v Kinnear, 579. Field v. Lelan, 577, 78,6. Field v. Pierce, 20, 322. Field v. Ripley, 1417. Field v. Schieffelin, 441. Field v. Union Box Co., 924. Fielden v. Lancashire, etc., R'y, 363. Fiery v. Emmert, 258. Fietsam v. Hay, 5. Fifth Avenue Bank v. Forty-second Street, 396. to the foot-paging. \ Bank v. First NatT Pittsburg, etc., R Fifth, etc., Sav. Bank, 1084. Fifth Natfl Bank v. Navassa. etc., Co., 1079. Fifth Nat'l Bank v. R. 1461. Fifty, etc., Bonds, In re, 1195, 1419. Filder v. London, etc., R'y Co., 1142. Filli v. Delaware, etc., R. R.. 1179. Finance Co.. etc., v. Charleston, etc., R R, 1398. 1399, 1400, 1401, 1402, 1418, 1419, 1444. . Financial Corporation, Re. 394. Finch v. Riverside, etc., R'y. 903, 1551, 1559. Finch v. Ullmann, 881 Fine v. Hornaby, 464. Finlay v. Lindsay. 681. Finley Shoe, etc., Co. v. Kurtz. 101, 385, 856. Finn v. Brown, 88, 354, 501, 729. 730. Finnegan v. Knights, etc., Ass'n. 314, 315. Finney's Appeal, 585. 601. 606, 617. Firbank's Ex'rs v. Humphreys, 1189. Fire Department v. Noble. 998. 1001. Firemen's Ins. Co., Ex parte. 530. First Baptist Church s: Branliam, Sher- iff, 8S1. First, etc., Bank v. North, etc., Co.. 938. First, etc., Bank v. Salem, 416, 417. First Municipality of N. O. v. Orleans Theater Co., 234. First Nat. Bank v. Almy, 324. First Nat. Bank v. Anderson. 1117. First Nat Bank v. Arlington, 150. First Nat. Bank v. Armstrong. 1042. First Nat. Bank v. Bennett, 1074. First Nat Bank v. Breneman. 1507. First Nat. Bank v. Burch. 1176. First Nat Bank v. Christopher. 1119. First Nat. Bank v. Concord, 147. 150. First Nat. Bank v. Council Bluffs, etc., Co., 1083. First Nat Bank v. County Com'rs, 1224. First Nat Bank v. Davies, 310, 313. First Nat. Bank v. Dorset. 149. First Nat. Bank v. Douglas County, 760. First Nat Bank v. Drake, 923. 1126. First Nat Bank v. Dunbar. 10S5. lxxviii TABLE OF CASES. [The references are First Nat Bank v. Fancher, 714. 755, 760. First Nat Bank v. Fisher. 76a First Nat Bank v. Fricke, 1082, 1117. First Nat Bank v. Gifford. 27, 192, 342, 346, 498, 514, 518, 523. 584. First Nat Bank v. Greene. 244. First Nat. Bank v. Gustin, etc., Co., 50, 65, 66. First Nat. Bank v. Hartford, 689. First Nat. Bank v. Hartford, etc., Ins. Co., 687. First Nat Bank v. Hcndrie, 123. First Nat. Bank v. Herbert, 761. First Nat. Bank v. Hoch. 563, 1075. v, Hogan, 1083. Hurford. First Nat. Bank Firet Nat. Bank v. First Nat Bank v. Kreig, 761. First Nat Bank v. Lanion. 855. First Nat. Bank v. Lindsay, '>>'. First Nat. Bank v. Loghed, 1119. First Nat. Bank v. Lucas, '■'~~. 1075 First Nat. ! '.ink v. National Exch I Bank. 104, 125, 1161. First Nat. Bank v. OBkaloosa, 472, 178. First Nat. Bank v. Peterborough. 70~>. First Nat. Bank v. Portland, eta, R R, 1439. First Nat. Bank v. Trier. 293. First Nat. Bank v. Reed, 902. First Nat Bank v. Richmond, 762. First Nat Bank v. Root. 68 First Nat Bank v. St Joseph, 766, First Nat Bank v. Salem, eta, < Sa, 1206, First Nat Bank v. She-Id. 1356, 18 First Nat. Bank v. Sherbourne, 1117. First Nat. Bank v. Smith. 258, 754, 762. First Nat. Bank v. Strong; *.»T<». First Nat Bank v. Taliaferro, 439. First Nat Bank v. Tisdale, 1069, 1074, 1121, 1122. First Nat Bank v. Waters. 763. First Nat Bank, etc., v. McDonald, etc., Co., 989. First Nat Bank of Albia v. City Coun- cil of Albia, 761. First Nat Bank of Davenport v. Davies, 316. First Nat Bank of Hannibal v. Mere- dith, 767. to the foot-paging.] First Nat. Bank of Hannibal v. Smith. 732. First Nat Bank of Garrettsville v. Greene, 251. First Nat. Bank of Hartford v Hart- ford, etc Ins. Co.. 695, 69 First Nat. Bank of Lyons v. Oskal - Packing Co.. 475. First Nat. Bank of New Orleans v. Bohne. 1183. First Nat. Bank of St Johnsbury v. Con- cord. 137. First Nat. Bank of Toledo v. Treasurer, 767. First Nat, etc., Bank v. North, etc., Co.. 1080. First Nat, etc. v. Wolcott, 1 to, First Nat Ins. Co. v. Salisbury. 1280, 1290, 1807, 1815, 1817, 1322, 1824, 1840. First Parish v. Cole. 891, 892, '.»'.»<;. 1019. Firet Parish in Sudbury v. Stearns, M". First Presbyterian Church of Harris- burg, 1016. r v. Mi". & Tenn. R R. Co., 219. Fish v. Budlong, 431. Fish v. Keinpton, 570 Fish v. Nebraska, etc., Co., 893. Fish v. N. Y.. etc.. Paper Co., 1238. Fishback v. Citizens 1 St. R. h\. 1414. Fisher v. Andrews, 1150, 1151. Fisher v. Brown. 485, 51 ~>96, 782, 785. 7-7. 790 Fisher v. Bush, 449, 828, 847,8 Fisher v. Essex Bank, 21. 22, 518, 517 Fisher v. Evansville, etc.. R R Co., 123, 168. Fisher v. Fisher, 600. Fisher v. Jones, 522, 621. Fisher v. Keane, 1026. Fisher v. Marvin, 351. Fisher v. Metropolitan El. R'y, 1499. Fisher v. Murdock. 985, 1117. Fisher v. N. Y. < '.. etc.. R R, 1498. Fisher v. Otis. 1229. Fisher v. Price. 470. Fisher v. Seligman. 56, 61, 353, 587. Fisher. Ex parte, 10. Fisher's Case, 37. Fishkill Savings, etc., v. National Bank. 1006. TABLE OF CASES. lxxix [The references are Fisk v. Chicago & Rock Island R R Co., 44, 55, 1172, 1543. Fisk v. Kenosha, 137. Fisk v. Patton, 664, 995. Fisk v. Potter, 1387. Fisk v. Union Pacific Railroad Co., 1141, 1948. Fiske v. Carr, 621, 622. Fister v. La Rue, 1093. Fitch v. Lewiston, etc., Co.. 1099. Fitch v. Poplar, etc., Co., 224. Fitch v. Wetherbee, 370. Fitchburg R. R v. Gage, 1519. Fitchburg R. R. v. Grand, etc., Co., 1516. Fitchburg Sav. Bank v. Torrey, 517, 588. Fitchett v. North Penn. R R, 1226, 1237. Fitzgerald v. Evans, 1359. Fitzgerald v. Grand Trunk R. R, 1520. Fitzgerald v. Missouri P. R'y, 10, 424, 951, 1050, 1542, 1548. Fitzgerald Con. Co. v. Fitzgerald, 929, 938, 1079, 1179. Fitzhugh v. Bank of Shepherdville, 686, 699. Fitzhugh v. Franco, etc., Co., 1081. Fitzpatrick v. Dispatch, 69, 84. Fitzpatrick v. Woodruff, 465. Fitzroy, etc., Co., In re, 95, 915, 1131. Flagg v. Baldwin, 468, 473, 475, 477. Flagg v. Gilpin, 475. Flagg v. Manhattan R'y Co., 930, 1506. Flagg v. Metropolitan R'y Co., 1052. Flagler Co. v. Flagler, 53, 78. Flanagan v. Great Western R'y Co., 462, 916. Flash v. Connecticut, 281, 283, 288, 292. Fleckner v. Bank of U. S., 983, 1095. Fleeson v. Savage S. M. Co., 19. Fleet v. Murton, 580. Fleming v. Northampton Nat Bank, 589. Fleming v. Soutter, 1360. Flemyng v. Hector, 661. Fletcher v. Dickinson, 596. Fletcher v. Marshall, 565. Fletcher v. McGill, 100. Fletcher v. New York, etc., Ins. Co., 998, 1588. Fletcher v. Rutland, etc., R R, 1312. to the foot-paging.] Fletcher, Ex parte, 212. Fletzell v. Chicago, etc., R. R Co., 1164. Flinn v. Bagley, 43, 50, 56, 57. Flint v. Clinton Co., 989, 1100. Flint v. Pierce, 322, 1023. Flint, etc.. Plank-road Co. v. Woodhull, 886. Flint, etc., R'y Co. v. Dewey, 902. Flitcroft's Case, 727, 734, 735, 974, 1132. Florence, etc., Co., In re, 1254. Florida v. Florida, etc., R R. 1276. Florida v. Jacksonville, etc., R. R, 1155, 1416. Florida, etc., Co. v. Murrill, 455, 493. Florida, etc., R. R v. Varnedge, 1111. Flour City Nat. Bank v. Wechselberg, 286. Floyd v. Perrin, 137. Floyd Acceptances, The. 1192. Fluker et al. v. Emporia City R'y Co., 1155. Flynn v. Hudson, etc., R R Co., 1177. Fobes v. Rome, etc., R R, 1562. Fogg v. Blair, 57, 62, 69, 75, 964, 1210, 1397. Fogg v. Boston, etc., R R. Co., 1008. Fogg v. Griffin, 1007. Fogg v. Sidwell, 628. Folger v. Chase, 861. Folger v. Columbian Ins. Co., 859, 865. Follett v. Field, 859. Foil's Appeal, 463. Fonnereau v. Payntz, 407. Foot v. Worth ington, 710. Foote v. Cunard Min. Co., 1149. Foote v. Glenn, 264. Foote v. Linck, 747, 1135. Foote v. Mount Pleasant, 151. Foote, Appellant, 407, 743. Forbes v. Memphis, etc., R. R Co., 21, 933, 1156, 1328. Forbes v. San Rafael, etc., Co., 1265. Forbes v. Whitlock, 1161. Forbes' Case. 36. Force v. City of Elizabeth, 1226. Ford v. Easthampton, etc., Co., 715. Ford v. Ford, 410. Fordyce v. Beecher, 14631 Fordyce v. Dixon, 14C2. Fordyce v. Withers, 1435. Ixxx TABLE OF CASES. [The references are Foreman v. Bigelow, 31, 34, 81, 82. Forepaugh v. Del., etc., K. R, 1537. Forest v. Dean Coal Co., 1033. Forest v. Manchester S. & L. R*y Co., 1535. Forest, etc., Min. Co., In re, 1031. Forrest v. Ehves, 782, 788, 790. Forrest v. Luddington, 1276. Forrest v. Manchester, etc, R'y Co., 1142. Forrester v. Bill, 1036. Forrester v. Boardman, 580. Fort Edward, etc., Co. v. Payne, 111, 110, 122, 174. Fort Madison, etc., Co. v. Bataviau Bank, 621. Fort Payne Furnace Co. v. Fort Payne, etc., Co. et al., 1354. Fort Wayne, etc., Co. v. Maumee, etc., Co., 1592. Fort Wayne, etc.. R R v. Mellett, 1433, 1431. Fort Worth, etc., Co. v. Bettson, 966, 1081. Fort Worth, etc., R'y v. Queen, etc., R'y, 1550. Fovtenbury v. State. 470. Fosdick v. Car Co.. 1412, 1145. Fosdick v. Goshen, 136. Fosdick v. Greene, 782, 788, 791. Fosdick v. Perrysburg, 136. 140. 142. Fosdick v. Schall, 1369, 1370, 1375, 1399, 1442, 1445. 1470. Fosdick v. Slurges, 44, 51. 55, 479. Foss v. Harbottle, 799, 898. 946, 980, 1148, 1156. Foster v. Chesapeake, etc., R'y. 154, 1343, 1501. Foster v. Essex Bank, 779, 861, 893, 1094. Foster v. Kansas, 1949. Foster v. Kenosha, 137. Foster v. Mackinnon, 90. Foster v. Mansfield, etc., R R., 1128, 1131, 1246, 1330, 1351, 1352, 1354. Foster v. Ohio, etc., Co., 1084. Foster v. Oxford R R, 920. Foster v. Potter, 583, 608, 612, 613, 624, 699. Foster v. Pray, 667. Foster v. Seymour, 53. to the foot-paging.] Foster v. Townsend, 1170. Foster v. White. 676. Fothergill's Case, 36, 77. Fougeray v. Cord et al., 721. 902. Foulke v. San Diego, etc, R'y Co., 1107. Fountain Ferry, etc., Ca v. Jewell, 237, 859. Fountaine v. Carmarthen, etc, Co., 1108, 1186, 1253. 1254, 1255. Fountaine v. Tyler, 405. Four Mile V. R R Co. v. Bailey, 65. 837. Fourth Nat Bank v. Francklyn, 251, 880, 281, 292, 295. Foushee v. Grigsby, 274. Fowle \. Ward, 590, 598, 003, 789. Fowler v. Ludwig, 345. 353. Fowler v. New York Gold Exchange Bank, 568, 7^7. 79?. Fowler v. Pittsburgh, etc.. R. R. 1368. Fowler v. Robinson, 279, 299. Fowler's Petition. 1 I Fox v. Allensville C. S. & V. T. Co., 166. 167. 171, 838, 812. Fox v. Carr, 409. Fox v. Clifton, 109. 225, 338, 1040. Fox v. Horah, 889. Fox v. Northern Liberties, 1093. Fox v. Seal, JS86, 1390. Fox v. Western Pa. R R Co., 1525. Fox, Ex parte, 1507. Fox, In the Matter of, 1020. Fox's Case, 201. 212. 35ft Frames v. The Bulfoutein, etc, Co., 930. France v. Clark, 550, 591. Francis v. New York & B. El. R R Ca, 207, 413, 494. Francklyn v. Sprague, 966. Franco, etc., Co. v. Bousselet, 383. Franco-Texas Land Co. v. Laigle, 796. Frank v. Bingham, 1436. Frank v. Denver, etc., R'y, 1376. i:57S, 1387, 1441, 1444. Frank v. Edison, etc., Co., 120a Frank v. Morrison, 262. Frank v. N. Y., etc., R R., 1480. Frank ford, etc., Pass. R'y Co. v. Phila- delphia. 1574. Frankfort Hank v. Johnson, 969, 1161. Franklin v. Bank of England, 444, 741. Franklin v. Twogood, 880. TABLE OF CASES. lxxxi [Tlie references are Franklin Bank v. Commercial Bank, 425. Franklin Bank v. Cooper, 861. Franklin Branch Bank v. State of Ohio, 1942. Franklin Bridge Co. v. Wood, 2. Franklin Co. v. Lewiston Bank, 104, 425. Franklin, etc., v. Deposit Bank, 772. Franklin, etc., Co. v. White, 115, 175. Franklin, etc., Ins. Co. v. Hart, 1048. Franklin, etc., Ins. Co. v. Jenkins, 978. Franklin Glass Co. v. Alexander, 174. Franklin Savings Bank v. Bridges, 242. Franklin Savings Bank v. Fatzinger, 161. Frank's Oil Co. v. McCleary, 342. Fraser v. Charleston, 514, 515, 548, 586, 617. Fraser v. Ritchie, 417, 419. Fraser v. Whalley, 834. Fray lor v. Sonora Min. Co., 925. Frayser's Adra'r v. Richmond, etc., R. R., 1367. Frazer v. Siebern, 755, 757, 764. Frazier v. East Tenn., etc., R R, 1483. Frazier v. Wilcox, 997. Fredenhall v. Taylor, 668. Frederick v. Augusta, 138, 139. Fredericks v. Pennsylvania Canal Co., 818, 1128. Free Schools v. Flint, 323. Freedman's Sav. Co. v. Shepherd, 1366. Freehold, etc., Assoc, v. Brown, 887. Freeholders v. State Bank, 20, 1419. Freeland v. Hastings, 139. Freeland v. McCullough, 250, 271, 292, 303, 351. Freeman v. Harwood, 183, 606, 781, 782, 787, 790. Freeman v. Howe, 1374. Freeman v. Machias Water, etc., 795. Freeman v. Mack, 126. Freeman v. Ottawa, etc., Assoc, 177. Freeman v. Winchester, 174, 254. Freeman's Assignee v. Stine, 56. 924. Freeman's National Bank v. Smith, 803. Fremont v. Stone, 450, 845. French v. Braintree Mfg. Co., 1527. French v. Currier, 434. French v. Donohue, 967. F to the foot-paging.] French v. First Nat'l Bank, 683. French v. Fitch, 481. French v. Fuller, 717. French v. O'Brien, 1024 French v. Sanger, 464. French v. Teschemaker, 276, 321. Frenkel v. Hudson, 34. Freon v. Carriage Co., 531, 786. Fresno, etc., Co. v. Warner. 879. Frick v. Mercer County, 144. Friedlander v. Slaughter-house Co., 500, 619. Friedman v. Gold, etc., Tel. Co., 1593. Friend v. Powers, 289. Fries v. Southern Penn. R R, 1382. Friezen v. Allemania, etc., Ins. Co., 1183. Fripp v. Chard R'y, 1410, 1419. Frits v. Muck, 661. Fritts v. Palmer, 994. Fromm v. Sierra Nevada Silver Min. Co., 789, 791. Frost v. Clarkson, 470, 472. Frost v. Domestic Sewing M. Co., 1008, 1088. Frost v. Frosthurg Coal Co., 308, 880. Frost v. Inhabitants, etc., 1046. Frost v. Shackleford, 654. Frost v. Stokes, 587. Frost v. Walker, 662, 667, 668. Frost, etc., Co. v. Foster, 978. Frostburg Bldg. Ass'n v. Stark, 1156. Frostburg, etc., Assoc, v. Bruce, 1102. Frothingham v. Barney, 671, 672, 889, 891, 958. Frothingham v. Broadway, etc., R. R. Co., 1143. Frowd, Ex parte, 192. Frue v. Houghton, 461. Fry v. Lexington, etc., R. R Co.. 87, 109, " 111, 112, 222, 629, 633. Fry, In re, 671. Fry's Ex'rs v. Lexington, etc., R P., 1493. Five v. Tucker, 983, 1193. Fryeburg Canal Co. v. Frye, 1059. Fuld v. Burr Brewing Co., 1246. Fulgam v. Macon & B. R R Co., 239, 240. Fulkerson v. Chitty, 408. Fuller v. Dame, 844, 905. Ixxxii TABLE 07 CAS [The references are Fuller v. Ledden. 2S3. 285. Fuller v. Roue, 312, 314. Fullerton v. Mobley, 602. Fulton Bank v. Benedict, 1118. Fulton Bank v. N. Y., etc., Canal Co., 107(5. 1119, 1165. Furdonjee's Case, 3 - Furley v. Hydes, 74~>. Furman v. Nichol, 1042. Furnis8 v. Gilchrist & Co., 1185. Fyfe v. Swabey, 4."j 5. Fyfe's Case, 34a G. Gadsden v. Lance, 465. Gadsden v. Woodward, 293. Gaff v. Flesher, 21". G afford v. American, etc.. Co., e v. Newmarket R'y < !a, 1540. Gainsford v. ( Sarroll, 7 Gale v. Troy, eta, B l: Galena, etc.. R. R. Ca v. I. .RE v. Menzii Galena Iron Co. v. Km. 238 gher v. Jones, 564, 7 — Gallery v. Nat Ex. Bank. 1 Gallini v. Noble, I Calloway v. Hamilton. Ill Gait's Ex'rs v. Swain. 124. Galvaniz ■ i u o Co. v. Westoby, 225. Galveston City Co. v. Sibley, 51L Galveston, etc., R'y v. Johnson, 1547. Galveston, etc., R'y v. Si ite, 884 Galveston, etc.. R'y Co. v. Galveston, etc.. R'y Co., 1" Galveston, H. & S. A. R'y Co. v. Dona- hoe, 1011. Galveston Hotel Co. v. Eolton, B Galveston R R. v. Cowdrey, 1059, 1200, 1231, 1268, 1293, 1300. 1322, 1369, I i, 1394. Gamble v. Queeus, etc., Co., 74, 944. 1205. Games v. Robb, 134. Gamewell, etc., Co. v. Mayor, G83. Gam well v. Pomeroy, I Gano v. Chicago & N. W. R'y Co., 1192. Gans v. Switzer, 274. Garden Gully, etc., Co. v. McLister, 162. 177, 178, 179, 180, 83a to the foot-paging.] iner v. Pollard. 1028, 113*5. Gardiner v. Victoi 115. Iner v. But Iner v. C. B. K '65. Gardner v Gardner v. 1 Gardner v. Frunatte, SOL Gardner v. Ham r >29. 1588 Gardner v. B Gardner \. 1 . I- y ' 141". : Garrard v. 1 : 118 Dillon I II \L IL Co.. 214. 51, 245. Garrett v. K Cai: ille, 1 f, t. 251. I Garrison v. Ho* Garten Mfc ixweU, 313. II. II. Gashwiler v. V. IB, 1063 cell v. Beard, I skell v. < (ill v. Dodl Light < ... v. Hayni Gas Light. v. Terrell, v 3qoet v. ity B. < - v. New York. • mi ricnn Ex. Nat Bank Catch v. Fitch. . Gates v. etc., R B . 1816, 141 Cat-s v. Natl, ' • 554. Gatling Gun. Re. :.7 Gatzmei v. Philadelphia, etc., R. R., TABLE OF CASES. Lxxxiii [Tne references (ire Gauch v. Harrison. 299. Gaudy v. Ban-it. 654. Gaus v. Reimensnyder, 93. Gauss, etc., Co. v. St Louis, etc., R'y, 156:1 Gavenstine's Appeal, 933, 1141, 1165. Gaw v. Bennett 474. Gay et al. v. Brierfield, etc., Co. et al., 1841. Gay Mfg. Co. v. Gittings, 1246. Gaylord v. Fort Wayne, etc., R R Co., 665. Gee v. Alabama L & T. Co., 9S3. Gee v. Moss. 490. Geismer v. L S. & M. S. R R. Co., 1522. Gel poke v. Blake, 1-7. 188,214,21ft Gelpcke v. Dubuque, 131, 132, 123& Gemmel v. Davis, 6S6. 700, 7: 118. General Auction, etc, Co. v. Smith. 1263. General Estates Co.. In re, 1190, lltS. 122 4. IS General, etc.. Co., In re, 1106. 1261. General Exchange Bank v. Horner. 906. neral Exchange Bank. In re, 692. General Ins. Co. v. U. S. Ins. Co.. 1117. General Lying-in Hosp. v. Knight, 1019. General South, etc.. Co.. In re. 1281,127ft Genesee. Bank of. v. Patchin Bank, 1085, 1103. 1243. 1244. Genesee Mutual Ins. Co. v. Westman, 320. Genesee Sav. Bank v. Mich. Barge Co.. 1191 1192. Genet v. Howland, 597. 603. 604. 605. Genin v. Isaacsen, 407. 564 Genoa, Town of. v. Woodruff, 1237. Gent v. Mfg.. etc.. Co.. 1042. George v. Oxford, etc.. 146. George v. St Louis, etc.. R'y. I - George, etc.. Co., In re, 988. Georgetown College v. Brown. 967. Georgetown, Union Bank of, v. Laird. 689. Georgia v. Atlantic, etc.. R R. 1394 Georgia, Bank of. v. Savannah. 750. Georgia Co. v. Castleberry. 1042. Georgia R R v. Smith. 1513. 1515. Georgia R R Co. v. Hart. 19. Gerard v. McCormick, 437. Gerard v. Penswick, 679. to the foot-paging.] Gere v. N. Y. Central, etc.. R. R, 149ft 1505. Gerhard v. Bates. 199. 47S. 486, 4-7. German Bank v. Franklin Co., 143. German Date Cor.. Re. 862 German, etc.. Inst. v. Jacoby. 1187. German Land Association v. Scholler, 665. German Sav. Bank v. Wulfekuhler, 4 - German Security Bank v. Jefferson, C87, 696. German Union B. Ass'n v. Sendmeyer. 516. 519. 534. Germantown. etc.. R'y Co. v. Fitler. 161, 177. 178 184 S4S .55.261. 264. Germantown. etc.. R'y Co. et al. v. Citi- zens', etc., R'y Co.. 1556. Germantown Ins. Co. t. Dhein, 984. Germicide Co.. Matter of. 823. Gernsheim v. Olcott 1476. Gerry. Re Accounting of, 745. Getty v. Barnes, etc., 1088. Getty v. Devlin. 914. Gever v. Western Ins. Co.. CS7, 693. Gheen v. Johnson. 476. 568 Giant P. Co. v. Oregon, etc.. R'y. 1391. Gibbes v. Greenville, etc.. R R, 120 1276. 1277, 1310, 1419. Gibbons v. Ellis. 117. 22ft bons v. Grinsel, 103. 246.260. Gibbons v. Mahon, 20. 707. 740. Gibbons v. Mobile, etc.. R R. Co.. 133. Gibbs v. Baltimore Gas Co.. 158 I - v. Davis. 282, 285. Gibbs v. Queen Ins. Co., 1178. Gibbs' Case. 1185 Gibert v. Washington, etc.. R. R- 1204. 1233. 1236, 1310. 1339. 1367, 1439. Gibson v. American L, etc., Co.. 1311. Gibson v. Columbia & N. R T. & B. Co., Gibson v. Crick. 571, 580. s »n v. Manofrs, etc., Co.. 11 rft Gibson v. Martin. 1417. Gibson v. Mason, 135, 1527 Gibson v. McCall. 666. Gibson v. Richmond, etc., R R. 589, 590. 827. Gibson v. Stevens, 658. lxxxiv TABLE OF CAS - [Tlie references are Gibson v. Trowbridge, etc., Co., 938. Gibson's Case, 190. Gibson, Assignee of Evans, v. Hudson's Bay Co., 680, Gibson County v. Pullman, etc., Co., na Giddings v. Sears. 579. Giesy v. Cincinnati. Wil & Z. R R Co.. 1535, 1531. Gilford v. Car hill, 490. Gifford v. Livingston, 666. Gifford v. New Jersey R R Co., 16, 814,1130, 1139. Gifford v. Rockett, 1017. Gifford v. Thompson, 739, 740, '■ Gihon v. Belleville, etc.. Co.. i860. Gilbert v. Gouger, 472. Gilbert v. Bole, 998 Gilbert v. Manchester Iron Munuf. Co., 19, 517. Gilbert v. Nantucket Bank. 101 Gilbert v. New Zealand In-. Co., I Gilbert v. Sykes, LI Gilbert's Case, 165, 358 859, 481, 448. Gilbert, Matter of. 966. Gilbert El. R R Co.. ::. Gilbroughv. Norfolk, etc., R R. 1224, 1226. 1227. 1232. Gilchrist v. Helena, etc.. R R. 211. 256, bin:;. Giles v. Corn foot. 1037. Giles v. Hutt. 17(5. 179. Giles v. Smith. 277. Gilfillan v. Mawhinney, 210. GilHllan v. Union Cana! Co., 1406, 1479. 1944. Gilkey v. Paine, 739. Gill v. Balis, 189, 217, 248. Gill v. Bnrley, 741. Gill v. Kentucky, etc., Co., 87, 111, 113. 232. 997. (lill v. New York Cab Co., 923. G ill's Case, 240. Gillan v. Morrison, 329. Gillespie v. Commercial, etc., Ins. Co., 1178, 158a Gillespie v. Gaston, 751. Gillett v. Bate, 610. Gillett v. Bowen, 450, 947. Gillett v. Missouri V. R Co., 1010. to the foot-iiaging.] Gillett v. Moody. 24«. 420, 421. 606. Gillett v. Peppercorne, 566. Gillett v. Phillips. 666, 1107. Gillett v. Whiting. 571. 578, Gillig v. Barrett. 907. Gillis v. Bailey. 1071. Gilman v. Des Moines. eta, R P.. 1309. Gilman v. Illinois, etc.. Tel. Co, 1885, 1366. Gilman v. Ketcham, 1425. Gilman v. New Orleans, etc.. Ry. 1199. 1215. 1248, 1251. 1276, 1828, 1882, Gilman v. Philadelphia, 1945. Gilman v. Second Nat. Hank. 1117. Gilman v. Sheboygan, 188, '■">■■'. 1 18 Gilman. Peoria & Spring. P. R. Co. v. ;.. 44, 55. 902, 948, 1127. Gilmer v. Lime, etc., < <>.. 1" Gilmer v, Morris, 5) Gilmore v. Woodcock, 469. Gilpin v. Bowel! 59 ( lilson v. 1 feyton, 1 Gindrat v. Dane, 1141, l ■ Gin/, v. Stumph, 586. < lirard v. Philadelphia, 1015. Girard, i ta, T. I r, nil. Given'e Appeal, 510. Given'a Case, 912 sner v. Anheuser, eta, Assoc., 1557. Glaize v. South Carolina R R. 769, 1177. Glamorganshire Banking Co.. Re, 6 s l. Glamorganshire Iron, etc., Co. v. Irvine, Glasier ^. Rolls. 204, 489. Glass v. Hop... 184 Glass v. Tipton, eta, Co.. 1018, 1017. jscott v. ( topper, eta, Co., 683. Gleason v. McKay, 670 Gleaves v. Brick, etc., Co.. B87. Glen v. Breard. 314. Glen Iron Works. Re, 50. Glenn v. Abell. 240. Glenn v. Clabaugh, 24. Glenn v. Dodge. 160. Glenn v. Dorsheimer, 161. 244 Glenn v. Foote. 243. 312. Glenn v. Garth, 115, 340. Glenn v. Hateh.it. 214. Glenn v. Howard, 168, 243. Glenn v. Lancaster. 254. 257. TABLE OF CASES. lxxxv [The references are Glenn v. Liggett. 94. 164. 243. Glenn v. Macon, 243. Glenn v. Marbury, 243. 264, 1430. Glenn v. McAllister's Ex'rs, 94, 244. Glenn v. Orr, 96. 2:34. 1167. Glenn v. Priest. 243, 244. Glenn v. San pie, 160. Glenn v. Saxton, 160, 161. 244, 261. Glenn v. Scott. 337. 342. Glenn v. Soule, 243, 1310. Glenn v. Springs. 266. Glenn v. Sumner. 254. Glenn v. Williams, 160, 243, 259, 261. Glen wood Co.. Re. 7. Globe, etc., Assoc, Matter of, 1"). Globe Refining Co., In re, 672. Gloninger v. Pittsburg, etc., R. R, 1194. 1205. 1217. 1269. 1274 Gloucester Bank v. Salem Bank. 1094, Gloucester, etc.. Co. v. Russia, etc., Co.. 644. Gloucester Ferry Co. v. Pennsylvania. 1946. Godbold v. Branch Bank 923. Goddard v. Grand Trunk R"y of CaD., 1011. Goddard v. Stockman. 148. Godden v. Kimmeil. 1132. Goddin v. Crump. 137. Godfrey v. Pell. 781. Godfrey v. Terry, 301. 302. Godwin v. "Whitehead, 1310. Goedone Co., Re. 53. Goesele v. Bimeler, 665. Goff v. Flesher, 215. Goff v. Hawkeye Pump & W. M. Co., 53. 190. Goff v. Winchester College. 114. Goforth v. Rutherford, etc., Co.. 136. Gogebic Inv. Co. v. Iron, etc., Co.. 75. Gold v. Clyne. S93. Gold Co., Re, 46. Gold. etc.. Co. v. National Bank, 1092, 1117. Gold Mining Co. v. National Bank, 420. 983, 984. Golden v. Morning News. 1179. Golden, etc, Co, v. Joshua, etc., Works, 308. 882L Goldengate M. Co. v. Superior Court, 1 169. to the foot-paging.] Guldschmidt v. Jones, 579. Goldsmith v. Great E Ry, 1537. Goldsmith v. Home Ins. Co., 998. Goldsmith v. Swift, 739, 744. Gooch, Re. 412. Gooch's Case, 335. Good v. Daland. 646, 969. Good v. Elliott. 468. Good Hope Co. v. R*y, etc, Co., 1175, 117a Gooday v. Colchester, etc.. E'y, 1045. 1094. Goodbar v. City Nat'l Bank. 701. Goodin v. Cincinnati, etc.. R R Co., 1133. Goodin v. Evans, 34. 640. Goodlad v. Burnett. 407. Goodlet v. Louisville R. R. Co., 1544. Goodloe v. Godley, 1114. 1115. Goodman v. Cincinnati, etc., R, R.. 1336. 1337. Goodman v. Jedidjah Lodge, 661. Goodnow v. Oakey, 1100. Goodrich v. Dorman. 73. Goodrich v. Reynolds. 34. 171. Goodsell v. Western, etc. Tel. Co.. Goodson"s Claim. 336. 438. Goodspeed v. East Haddam Bank. 1006. 1007, 1109. Goodwin v. American National Bank, 44?,. 44H. 57^. Goodwin v. Colorado, etc. Co.. 1178, Goodwin v. Evans. 601. 634. 640. Goodwin v. Hardy. 16. 702, 71". Goodwin v. McGehee. 248. 729. Goodwin v. Ottawa & P. R'y Co., 531. Goodwin v. Roberts. 28. 1223. Goodwin v. Union, etc. Co., 1089. Goodwin, etc.. Co., Appeal of. 461, 717. Goodyear v. Phelps. 077. Goodyear, etc., Co. v. Caduc. 1162, Goodyear, etc. Co. v. George. 1054. Goodyear Rubber Co. v. George D. Scott Co. et ah, 939. Goodyear Rubber Co. v. Goodyears, etc. Co.. 1013. 1014. Gorder v. Plattsmouth. etc, Co., 937, 1100. Gordillo v. Weguelin. 1235. Gordon v. Appeal Tax Court, 628, 758. 1941. lxxxvi TABLE OF CA [The references are Gordon v. Duff. 404, 405. Gordon v. Jennings, 274. Gordon v. Parker, 457. Gordon v. Preston, 15, 1099,1263,1295. Gordon v. Sea Fire Ins. Co., 277. 1187. Gordon v. Winchester, etc., Assoc, 987. Cordon's Case, 347. Gordon's Ex'rs v. Mayor, etc., 750, 765, 759. Gordon's Ex'rs v. Richmond, etc. R R. 362. 865, 866, 369. 371, 370, 705; 707. Gorge's Appeal. 765. Gorgier v. Milville, 1228 Gorham v. Campbell, S13. ( rorham v. < lilson, '•» 16. Gorman v. Guardian Sav. Bank, 1058 (human v. Pacific R. R, 1515. Gorrisen's ( !ase, 91. Goshen v. Dotterill, 88, 1"7. Goshen, etc., Co v. Ilmtin. LI 2, 118, 171. Goshorn v. < mio < Jounty, I Goshorn v. Supervisors, 1544 (Joss v. Hampton, 591, 598, 594 (loss v. Phillips. 608. Goss, etc., Mfg. Co. v. People, 610. Gott v. Cook. 652. Cott v. Dinsmore, 668. Gottberg v. United States Nat Rank, 143, 595 Gottfried v. Miller, 609, 948, 1094 Gould v. Cayuga, eta, Bank, 1158 Gould v. Farmers' Loan & Trust Co., 598, 594. 505. Gould v. Head. 526, 588 649, 657. Gould v. Little Rock, etc., R'y, 941, Gould v. Norfolk, etc., Co., 1070. Gould v. Oneonta, 185, 101. 176. Gould v. Seney, 1476. t tould v. Town of Sterling, 147, 154 Could v. Trask, 574, 608 Goulding v. Clark, 799. Goundie v. Northampton Water Co., 993. Gourand v. Edison, etc., Co., 680. Gouthwaite, Ex parte, 831. Gouthwaite's Case, 331. Government S. I. Co. v. Dempsey, 240. Governors of King's College v. McDou- ald, 1103. Gover's Case, 910. Gowan's Appeal, 815. 816. to the foot-paging.] Gowen v. Penol>scot R R Co., 1517. Gower's Case, 177. 179, 198, 107. 352. Grady's Case, 337, 415. Graff v. Bonnett, 652, 658. Graff v. Pittsburg, etc., R R Co., 95, 189, 342, 1122. ( Iraffam v. Burgess Grafius v. Land Ca, 1109. ( rrafton v. (Jnion 1 ■• rry < ><.. B9 Graham v. Atlantic etc. I a, 1807. Graham v. Birkenhead, eta, Ca, 1180. Graham v. Boston, eta, R, R. I . 795, 796, B56, 982, 1180, 1160, 1218, 1273, 1815, 1541, 1547. Graham v. Firsl Natl Bank of Norfolk, ( i-raham w. Houghton, 166. Graham v. 1 1 ■ y, 1050 Graham \. National Bank, I Graham v. Raili 919, 989, 1864* 1855. ( Iraham v. St. Joseph, 751. Graham \. Van Diemen's Land Co., 179, 182, 802. cram's Case, i' < .i.imi \ Stebbins, 470 Granbv Ca v. Richards, 818 Grand, i ta, R R. Ca r. II. i- I. 1561. .1 Gulf Bank *. Archer, nos, 987, 988. Grand Junction, etc., R'y ▼. Bickford, 1269. ( '.rand Lodge v. Farnham, B Grand Lodge ol Ala. v. Waddill, 988 Grand Rapids, eta, Ca v. Cincinnati, eta, Co.. 17. 787,907, '.'17. 1050, 1077. Grand Rapids, eta, v. Grand, eta, R .R, In re, 1529. Grand Rapids, etc., Co. v. Grand Rapids, eta, ^o.. 1581. (hand Rapids, etc.. R R v. Sanders, 1195; 1214. 1298, 1221. 1225. 1226. 1282. Grand Rapids Savings Bank v. Warren, 177, 386, 292, 296, BOO, 801. Grand River B. Co. v. Rollins. 1048. Grand Tower, etc., Co. v. Ullman. 1319. Grand Trunk, etc., R'y Co. v. Brodie, 108 Granger v. Bassett, 16, 743,744. TABLE OF CASES. lxxxvii [The references are Granger v. Grubb, 807. 815, 836. Granger .Cases. 1941. 1949. Granger, etc.. Co. v. Vinson, 108, 332. Grangers" Ins. Co. v. Turner, 206. Grangers' Life, etc., Ins. Co. v. Kamper, 6, 381, 393. Granite Rooting Co. v. Michael, 49, 158, 168. Grant v. Attrill, 431, 480. Grant v. Courter, 135. Grant v. East, etc., Co., 70, 1329. Grant v. Hamilton, 468. Grant v. Henry, etc.. Coal Co.. 992. Grant v. Mechanics' Bank, 689, 692, 695. Grant v. Phcenix Ins. Co., 1356. Grant v. United, etc., R'y, 930. Granville Charitable Ass'n v. Baldwin, 1038. Grape Co. v. Small. 104G, 1082. Grass v. U. S., etc., Co.. 1268. Gratwiek'-s Trusts, 409. Gratz v. Pennsylvania R. R., 1500. 1507. Gratz v. Redd, 174, 722, 723, 729, 731, 734. Gravely v. Commonwealth, 634. Gravenstine's Appeal, 1412. Graves v. Mono, etc., Co., 825, 929, 937, 945. Graville v. N. Y., etc., R. R. Co., 1121. Gray v. Chaplin, 1125, 1130. Gray v. Coffin, 269, 271, 305, 321, 331, 629, 632. 810. Gray v. Davis, 1427, 1429. Gray v. De Castro, etc., Co., 647. Gray v. Fox, 434. Gray v. Lewis, 899, 1431. Gray v. Lynch, 435. Gray v. Monongahela Nav. Co., 168, 634, 1018. Gray v. National St. Co.. 962. Gray v. New York, etc., Co., 955, 1153. Gray v. North River, etc., Co., 647. Gray v. Oxuard, etc., Co., 647. Gray v. Portland Bank, 3S2, 386, 387, 388, 530, 780. Gray v. Quicksilver Min. Co., 1178,1179. Gray v. Robbins, 482. Gray v. State. 154. Gray's Case, 343. Grayson v. Willonghby, 276, 1588. Grayville, etc., R, R Co. v. Burnes, 1111. to the foot-paging.] Great Barrington v. County Com'rs, 750. Great Eastern R'y Co. v. Turner, 416. Great Falls & C. R. R. Co. v. Copp, 321. Great Falls Mfg. Co. v. Fernald, 1527. Great Luxembourg R'y Co. v. Maguay, 916. Great North, etc., R'y Co. v. Kennedy, 175, 176, 183. Great North of Eng. R'y Co. v. Biddulph. 166, 693. Great Northern, etc., Min. Co., Re, 861, 1064, 1068. Great Northern R'y Co. v. Eastern Coun- ties R'y Co., 422, 1502. Great Western, etc., Co., Re, 911. Great Western R'y v. McCarthy, 1537. Great Western R'y Co. v. Metropolitan R'y Co., 424. Great Western R'y Co. v. Miller, 1010. Great Western R'y Co. v. Oxford, etc., R'y Co., 1133. Great Western R'y Co. v. Preston, etc., R'y, 1509. Great Western R'y Co. v. Queen, 886. Great Western R'y Co. v. Rushout, 1137, 1508. Great Western R'y Co. v. Sutton, 1520. 1521. Great Western Tel. Co. v. Buruham, 165. Great Western Tel. Co. v. Gray, 56, 160. 243. Great Western Tel. Co. v. Purdy, 242. Great Wheal Polgroath, In re, 91 L Greaves v. Gouge. 1148. Greeley v. Provident, etc., Bank, 1417. 1459. Greeley v. Smith, 893. Green v. Abietine, etc., Co., 53, 100, 184. 323. Green v. African Methodist Epia Soc, 1C25. Gre'en v. Barrett, 103, 1041. Green v. Beck man, 303, 321. Green v. Biddle, 629. Green v. Brookins, 465. Green v. Cady, 1058. Green v. Hugo, 1055. Green v. Merchants' Ins. Co., 1123. Green v Seymour, 985, 987. Green v. Tacoma, 1565. lxxxviii TABLE OF CASES. [77ie references are Green v. Walkill Nat'l Bank, 143(5. Green v. Wallis, etc., Works, 1433. Green v. Weave]-. 509. Green, In re, 473. 475, 050. Green Bay & M. R. R Co. v. Union Steamboat Co.. 1245. Green County v. Conness, 1545. Creen Mount. & S. L. T. Co. v. Bulla, 520, 521. 531. Greenbrier, etc., Co. v. Ward, Greenbrier, etc., Exposition v. Rodes, 039. Greene v. Dispean, 585, 599. Greene v. Smith, 71 1. Greene v. Walton, 877. Greenfield, etc., Bank v. Simons, 919. Greenleaf v. Ludington, 500. Greenleaf v. Moody, 580. Greenleaf v. Railroad, 928. Greenpoint Sugar Co. v. Whitin, 1284 Greensboro, etc., • '<>. \. Stratton, 92 Greenville & Columbia R. R. Co, \. Coleman, 207, 226, 631. Greenville etc. !:. El. Co. \. Cathcart, 17 I. Greenville, etc., R R ( !o. v. I loleman, B24 Greenville, etr.. K. R Co. v. Johnson, 632, 810. Greenville & ('. R R Ca v. Woodsides, 220. Greenwich v. Easton & A. R R 1530. Greenwood v. Freight Co., 027, 747, 8S6, 1135, 1555, 1944 Greenwood's Case. 276, 277, 668. Greer v. Chartiers R R Ca, 95. Gregg v. Mass. Medical Society, 1025. < rregory v. German Bank-, 680. Gregory v. Hatchett, 947. Gregory v. Lamb, 213. Gregory v. New York, etc., R R Co., 1172. Gregory v. Patchett, 1130, 1133. 1144, 1149. Gregory v. Wendell, 409, 471, 476, 574 Gregory's Ex. v. Trustees, *90. Grenada Co. v. Brogden, 140. 141, 795 Gresham v. Island, etc., Bank, 534, 1101. 1466. Grew v. Breed, 327, 329, 331, 1170. Grey, In re, 411. to the foot-paging.] I ley v. Barnes. 293. Gridley r. Lafayette, etc., R'y Co., 92a Grier v. Hazard. 1058. Griffen v. Ashville, etc.. Co., 1165. ( rriflin v. [Beverley, 1087, Giiffin v. Kentucky Ins. Co., 3. ( rriflin v. Mac-mi ( kranty, 12 Griffith v. Chicago, etc., R R, 107".. Griffith v. Green, 8 Griffith v. Jewett, 117. 149, 823, 840, 848. Griffith v. Mangam, J" Griffith v. Pagi Griffith v. Peat Griffith v. S ara, 1 7 7. Griffith v. Watson, 75a $8 v, I My, 464 ( irinii - \ . I [arrison, 994 ■idle v. Stone, ■.' Grisell v. Bristow< . ;9. - wood, Ex pari Griss II, \'.\ parte, 1252, 1254 i Irissell'e I toe, 158, 240, 211. Griswold v. Hazard, 1 1 Griswold v. Seligman, B7, , 330, 687. < Iriswold v. Tru -.. 1 13. Gri v. Blane, 169, I i Grofl v. Bird-in-hand T. Ca, 1590. ( trogen \. « looke, 609. Hilt, 242, 871, 2 - \. Onil ( Irosse Isle I totel ( 'o. v. L'Anson's Ex'rs, 158, 171. GroverA Baker s. M. Ca v. Missouri Pac. R'y Ca, U < Irubb v. Mahoning Nav. Ca, 11 Qrubbev. Vicksburg & Brunswick R. R Ca, 168. Gr.uberv. Washington & J. R R Co., 978, 1008. Gruman v. Smith. :,; Grund v. Tucker, 266, 267, 284 286. Grundy v. Pine, etc., Ca, 928, Gryines v. Home. 413, 547, Guadalupe, et -.. Ass'n v. West, 828. Guago Iron Co. v. Dawson. 1178. Guarantee, etc., Ca v. Weil, 190. Guaranty Trusts Ca v. Green Cove R R,, 1290. Gue v. Tide-water Canal Co., 608, 1578. TABLE OF CASES. lxxxix [77ie references are Guernsey v. Burlington, 1527. Guernsey v. Cook, 450, 844. Guest v. Lower, etc., Co., 1392. Guest v. Worcester R R Co.. 46. Guild v. Parker, 420. Guilford v. Minn., etc., Ry, 1199, 1233, 1302. Guilford v. Western U. Tel. Co.. 511. Guin v. New England, etc., Co., 1004. Guinn v. Iowa Cent Ry Co., 1183. Guinness v. Land Corporation, 6, 28, 369. Guirney v. St. Paul, etc., Ry, 1168. Gulf, etc., Ry v. James, 1088. Gulf, etc., Ry v. Morris. 1050, 1501, 1504. Gulf, etc., Ry v. Newell, 1480. Gulf, etc., Ry v. Trawick, 1536. Gulf, etc , Ry Co. v. Neely, 215. Gulf, etc., Ry Co. v. State, 1512. Gulf, etc., R R v. Ricker, 1547. Gulf, etc., R R v. Vaughn, 1534. Gulick v. Markham, 484. Gulliver v. Adams Exp. Co., 1579. Gun makers v. Fell, 1024. Gunn v. Central R R &B. Co., 967, 1007, 1534. Gunn v. London, etc., Ins. Co., 1045. Gunn v. Plant, 1393. Gunn v. White, etc., Co., 1004. Gunn's Case, 96. Guuterman v. People, 872, 1581. Gunther v. James, etc., Co., 1068. Gurney v. Atlantic, etc., Ry Co., 274. Gustard*s Case. 525. Guthrie v. Guthrie's Executor, 315. Gutzeil v. Pennie, 1101. Guy v. Baltimore, 1946. H. Haacke v. Knights, etc., Cluh, 878. Haag v. Board, etc., 1017. Habenicht v. Lissak, 661. Habertson's Case, 165. Habicht v. Pemberton, 671. Hackensack Water Co. v. De Kay, 880, 1058, 1108, 1109, 1187, 1223, 1229, 1261, 1262, 1313, 1314, 1322, 1324, 1339, 1482. Hackett v. Ottawa, 146. Hackettstown v. Swackhamer, 1185. to the foot-paging.] Hackney v. Allegheny Ins. Co., 1113. Hadden v. Spader, 467. 609. Hadden's Will, In re, 404. Had ley v. Freed man's, etc., Bank, 997, 1171, 1950. Hadley v. Russell, 256, 259, 269, 290, 305. Hafer v. New York, etc., R R, 821, 844, 846. Hagan v. Providence & W. R Co., 1011. Hagar v. Union National Bank, 691, 701, 716, 717. Hager v. Bassett, 232. Hager v. Cleveland, 228, 272, 343, 351. Hager v. King, 464. Hager v. Thompson, 480. Hagerman v. Empire Slate Co., 1002. Hagerstrom Road Co. v. Creeger, 1019. Hagg v. Maguire, S50. Hagg v. Snaith, 580. Hague v. Dandeson, 691. Halm, Appeal of, 125, 226. Hahneman, etc., Co. v. Beebe, 1173. Haig v. Swiney. 409. Haight v. Day. 98, 830. Haight v. Morris Aqueduct, 1165. Haight v. Railroad Co., 755. Haight v. Sahler, 1093, 1104. Hain v. North W. G. R Co., 222. Hakim's Case, 357. Haldeman v. Ainslie, 59, 269. Hale v. Burlington, etc., R. R, 1391. Hale v. Continental Life Ins. Co., 1165. Hale v. Duncan, 1433. Hale v. Frost, 1399. Hale v. Nashua, etc.. R R, 1310, 1322, 1325, 1352, 1397, 1450. Hale v. Republican River Bridge Co., 712. Hale v. Sanborn, 222. Hale v. Walker, 330. Hale, Ex parte, 207. Haley v. Reid, 612. Halford v. Cameron's Coalbrook R, 1106, 1107. Halifax, etc., Co. v. Francklyn, 1060. Halket v. Merchant Traders', etc., Asso- ciation, 276. Hall v. Astoria, etc., Co., 1156. Hall v. Auburn T. Co., 1243. Hall v. Brooklyn El. R R, 51. TABLE OF CASES. \The references are Hall v. Carey, U Hall v. Connell, • Hall v. Mobil . eta, R R Co., 1111. Hall v. Old. T. L. Mm. Co., 309. Hall v. Rose Hill & E. Road Co., 501, 715. Hall v. Selma & Tenn. R R Co.. 219, 238. Hall v. Sullivan R R, 1266. 1268, 1275, 1289, 1314, 131 Hall v. Tanner, • tc, Co., 318. Hall v. UuiU d Stat - [ns. Ca, 167, 170, 262, 343, 517, 692, 693, 694,697. Hall v. Vermont, etc, R R< .... '.'-'t. 1048. Hall, Ex part.'. 109, 331, 346, 9 Hall, etc., R'y. Re, 1254 Hall's Case, 97, 171 16, 1036, 1037. Hall Mfg. Co. v.American R'y, 972 Halladay v. Elliott, 659. Hallam v. Indian. .la Hotel O ' J 1 [allenbeck v. Halm. I Hallett v. Dowdall, 277. Halliday v. Holgate, 592. Hallowell v. Blackstone, etc, Bank, 5 Hallow. II, etc, Bank v. Hamlin, 1< 107.1 Hallows v. Ferraie, 194, 195, 000, 203,210. Hallstead v. Curtis, 812, 669. Halsey v. A.ckerman, I Halsey v. McLean, 292, 293 Halsey v. Rapid Transit R'y Co., 1563, 1567. Halsey, etc, Co v. Donovan, 2221 Halstead v. Dodge, 26. Halsted v. Meeker's Ex'rs, 434 Halwerson v. Cole, 580 Hambletoo v. Central O. R R Co., 508. Hanibleton v. Glenn, 017, 243, 250, 266, 343 Hambro v. Hull, etc.. Co., 1586. Hamell v. Chicago, etc, R R, 373 Haraer v. Hathaway, 789. Hamer, etc., Co., Re, 1062. Hauler's Devisee's Case, 331. Hamilton v. Austin. 1 Hamilton v. Accessory, etc., Co., 8S9, Hamilton v. Clarion, etc., Co., 223, 230, 231, 243, 250, 260, 261, 269, 1500. to the foot-paging] Hamilton v. Dennis. 1098. Hamilton v. Grand Rapids & Ind. R R Ca, 16a Hamilton v. Grangers' L. & H Ins. Co., '.. 046. Hamilton v. Keith, 1513. Hamilton v. Lycoming Ins. Co., 1094, 1096. Hamilton v. McLaughlin, 1097. Hamilton v, Newcastle & D. R R Co., 1190. Hamilton v. N. Y.. etc.. R R. 1550 Hamilton v. Savannah, etc, Ry. 423, :. 1039. Hamilton v. Smith. 10 - Hamilton Colli - S wart, 111. Hamilton ( ... v. Massachusetts, 748. Bamilton, •• v. Hamilton City, 158* 1584 Hamilton, etc, Ca v. Iowa, etc., Co., li. Hamilton, etc, Ca v. Rice, 111. 112, 224, 23ft Hamilton, etc, In- Ca v. Hobart,629, 649, 1588. Hamilton Nat'l Bank v. Halsted, 58 Hamilton's Windsor Water-works, In 1252, 1254 Hamlin v. EuiO| ., R'y, '• Hamlin v. .hi raid. 1373 Hamlin v. Kassafi r, 1056, I Hamlin v. Meadville, 148. Hamra v. Drew, LOS Hammett v. Little Rock & N. R R. I. 236. Hammock v. Loan & Trust Co., 1346, 1 :;:•-'. 1417. Hammond v. Hastings, 545, 689, 1013 Hammond v. Hudson River, etc, Co, 255. Hammond v. Shepard, 1016, 1017. Hammond v. Straus, E Hammond's Appeal, 936. Hampson v. Price's, etc, Co., 969. Hampson v. Weare, 265, 296. Hamsher v. Hamsher, U96. Hamtayne v. Bourne, 1W>. Hancock v. Holbrook, 858, 963. 1131. Hancock v. Louisville, etc, R R. 154, 829, 1493, 1505. TABLE OF CASKS. XCJ [The references are Hancock v. Toledo, etc, R R Co., 1471, 1480. Hand v. Cole, 27:5. Hand v. Dexter, 1155. Hand v. Savannah, etc., R R, 1234, 1277, 1444, 1453. Hand Gold Mining Co. v. Parker, 1527. Handley v. Russell, 269. Handley v. Stutz. 40, 57, 59, 60, 233, 240, 250, 257, 391, 796, 804, 807, 1070, 1205. Handrahan v. Cheshire lion Works, 296. Handy v. Cleveland, etc., R R, 1438, 1462. Handy v. Draper, 250, 281, 283, 301, 302, 304. Hankey v. Hammond, 654 Hanks v. Drake, 574, 604. Hanley v. Balch, 946. 1 136. Hanna v. Cin. & Fort Wayne R R Co., 632, 1490. Hanna v. International Petroleum Co., 1173. Hannah v. The Moberly Bank, 252. 253. Hannerty v. Standard, etc., Co., 919, 934. 1150. Hannibal v. Fountleroy, 149. Hannibal & St. Joseph R R Co. v. St. Joseph, 771. Haunibal & St Joseph R R Co. v. Shacklett. 13. 756, 758. Hannibal R C. & P. P. R Co. v. Meni- fee. 234. Hanover, etc., Co. v. Ashland, etc., Co.. 1112. Hanover Junction &; Susquehanna R R Co. v. Haldeman, 122, 123, 127, 221, 224, 232. Hanson v. Doukersley, 286, 298. Hanson v. Eichstaedt, 674. Hanson v. Vernon, 132. Harben v. Phillips, 821, 822, 842. Harcum v. Hudnall, 709. Hardenbergh v. Bacon, 479, 481, 590. Hardenburgh v. Farmers', etc., Bank, 98, 798, 807, 811, 813. Hardesty v. Pyle, 1375. Hardin v. Iowa, etc., Co., 1060, 1079, 1396. Hardin County v. Louisville, etc., R R, 83, 389. to the foot-paging.] Harding v. Chicago & A. R R Co., 1171. Harding v. Rockford, etc.. 146. Harding v. Yandewater, 1061. Hardman v. Sage, 282, 298, 302. Hardou v. Newton, 859, 942, 97:). Hards v. Platte, etc., Co., 228. Hardware Co. v. Phalen, 805. Hardy v. Merriweather, 34, 198,237,983, 1193. Hare v. London, etc., R'y Co., 1146, 1511. Hare v. Waring, 456. Hare's Case, 201. Harger v. McCullough, 285, 286, 298, 822. Harkness v. Manhattan R*y Co., 930, 1052. 1506. Harlaud v. Bankers', etc., Tel. Co., 1347, 142S, 1431. Harlem, etc., Canal Co. v. Seixas, 113, 174. 181. 227. Harlem Canal Co. v. Spear, 227. Harman's Case. 1588. Harmon v. Columbia, etc., R R, 1530. Harmon v. Page, 255. Harmstead v. Washington Fire, etc., Co.. 1026. Harpending v. Munson, 920, 933, 937, 1153, 1470. Harper v. Raymond, 667, 847. Harper v. Union Mfg. Co., 280, 289. Harpold v. Stobart, 306, 349, 353. Hariell v. Mexico, etc., Co., G24. Harrington v. District, etc., 1064. Harrington v. First Nat'l Bank, 1053. Harrington v. Plainview, 147. Harris v. American Bible Soc, 994. Harris v. Davis, 1475. Harris v. First Parish in Dorchester, 256, 289. Harris v. McGregor, 309. Harris v. Mississippi, etc., R. R Co., 863, 868. Harris v. Muskingum Mfg. Co., 862, 1049. Harris v. Xesbit, 864. Harris v. Norvell, 273. Harris v. Piatt, 481. Harris v. Pry or, 575. Harris v. Pullman, 250. XC11 TABLE OF CASES. [The references are Harris v. San Francisco, etc., 707. Harris v. Stevens, 711. Harris v. Thompson, 990. Harris v. Tumbridge, 469, 472, 562, 565, 575, 577, 787, 790. Harris, Appeal of, 584, 786. Harris' Case,. 96, 1072. Harrisburg Bank v. Tyler, 1113. Harrisburg, etc., R R, Appeal of, 1307. Harrison v. Aunapolis, etc., R R, 1296. Harrison v. Arkansas, etc., R R, 50. Harrison v. Harrison, 430, 653. Harrison v. Heathorn, 87, 207, 663. Harrison v. Mexican R'y Co., 361, 363, 366, 712. Harrison v. Pryse, 529. Harrison v. Union Pac. R'y Co., 50, 121"). Harrison v. Vines, 20. Harrison v. Williams, 682, 684. Harrison. Ex parte, 1254. Harrison's Case, 357. Harrod v. Hamer, 21 1. 309. Harselman v. Japanese, etc., Co., 864. Harshinan v. Bates Co., 149, 156. Harshman v. Knox County. 111. Hart v. Barney, etc., Co., 1372, 1375. Hart v. Boston, H. & E. R R Co., 1512. Hart v. Chicago, etc., R'y, 1536. Hart v. Clarke, 66."). Hart v. Eastern, etc., R'y, 1255. Hart v. Frantino, etc., Gold Min. Co., 499, 501, 529. Hart v. Lauman, 38. Hart v. New Orleans, etc., R R, 18. Hart v. St Charles St R R Co., 387, 388. Hart v. Ten Eyck, 436, 601. Hart, Re, 474. Hart's Case, 107, 334, 996. Harter v. Eltzroth, 482. Harter v. Kernochan, 140, 156. Hartford & New Haven R R Co. v. Croswell, 633, 954. 1538. Hartford & N. H. R R Co. v. Kennedy, 15, 113, 174, 176. Hartford & N. H. R R Co. v. N. Y. & N. H. R R Co., 1521. Hartford Bank v. Hart, 1110, 1113. Hartford, eta, Ins. Co. v. Inhabitants, 1020. to the foot-paging."] Hartford, etc., R R Co. v. Boorman, 343. Hartford, etc., R R Co. v. New York, etc., R R Co., 1510, 1537. Hartford Fire Ins. Co. v. Doyle, 1001. Hartga v. Bank of England, 444. Hartley v. Allen, 741, 743. Hartley's Case, 2ia Hartnian v. Ins. Co. of Valley of Va., 306. Hartman Steel Co.'s Appeal, 1557. Bartranffs Estate. In re, 602. Hartridge v. Rockwell, 383, 387, 417. Harts v. Ilrown. '.<^K Ham v. Harvey, MO, 8 Hai vanl College v. Aiimry. 431, 739, 710. Harvard College v. Boston, 996. Harvey v. I Tough, 665. Harvey v. Collett, 1041. Harvey v. HI. Mid. R'y. 1517. I [arvey v. M< rrill, 571. Harvey v. Thomas, 1527. Harvey v. West Sale, etc., Co., 1112. Harwood v. Railroad Co., 931, 1130,1330. llarwood's Cat I [asbrouck v. Vandervoort 583, 588, 598, 784 Hascall v. Life, e^c,, Ass'n, 1017, 1087, 1104, Hasenntter v. Kirchhoffer. 879. Haskell v. Worthington, 200, 222. Basking v. Nicholls. 405. II a ski us v. Harding, 283. Haskius v. Warren, 580. Haslam v. Adams Exp. Co., 1579. Haslett v. Wotherspoon, 324. Hassall v. Wilcox, 1393. Hassell v. Merchant Traders' Associa- tion, 277. Hasselman v. Japanese, etc., Co., 1017. Hasselman v. U. S., etc., Co., 880. Hassler v. Phila. Musical Ass'n, 1026. Hastings v. Blue Hill, etc., Corp'n, 515. Ha>tmgs v. Drew. 296, 729, 731, 889. Hat B. Co. v. Eiclimeyer, etc., 955. Hatch v. Attrill. 73. Hatch v. Barr, 1096. Hatch v. Burroughs, 280, 284. 292. Hatch v. Chicago, etc., R R, 1135, 1145, 1154, usa TABLE OF CASES. XClll [T7ie references are Hatch v. Cincinnati, etc., R R. Co., 1578. Hatch v. City Bank of New Orleans, 677. Hatch v. Coddington, 1079. Hatch v. Dana, 160, 161, 162, 254, 255, 258, 259, 260, 261, 288. Hatch v. Douglas, 468, 473, 567, 572. Hatch v. Spooner, 483, 491. Hatcher v. Toledo, etc.. R R, 1480. Hatten v. Russell, 438. Hattersley v. Earl Selburne, 1156. Hatton, Ex parte, 358. Haugen v. Albina, etc., Co., 1596. Haun v. Mulberry & Jefferson G. R. Co., 167. Hauseman v. Building Assoc, 1118. Havana Gold Mining Co., In re, 862. Havemeyer v. Havemeyer, 423, 449, 450, 843, 847. Havemeyer v. Iowa Co., 132. Havemeyer v. Superior Court, 643, 891, 892. Haven v. Adams. 1099. Haven v. Emery, 1398. Haven v. Grand Junction R. R & D. Co., 1098, 1231. 1232, 1235, 1316, 1359. Haven v. New Hampshire Asylum, 1067, 1070. Haven, etc., Co., In re, 821. Hawbeach, etc., Co. v. Teague, 1058. Hawes v. Anglo-Saxon Petroleum Co., 266, 272, 296. Hawes v. Gas Consumers', etc., Co., 503, 528. Hawes v. Oakland, 899, 1135, 1143. Hawkins v. Carroll Co., 148. Hawkins v. Furnace Co., 303. Hawkins v. Glenn, 243, 265, 345. Hawkins v. Maltby, 355, 570. Hawkins v. Mansfield Gold Mining Co., 102. Hawkins v. Miss. & Tenn. R. R Co., 639. Hawkins v. Municipal Council, etc., of Bruce, 1019. Hawley v. Bibb, 471, 1225. Hawley t. Brumagim, 26. Hawley v. Cramer, 566. Hawley v. Fairbanks, 144. Hawley v. Kansas, etc., Coal Co. et al., 1520. to the foot-paging.] Hawley v. Upton, 56, 89, 90, 94, 111, 239. Hawley's Case, 88. Hawtayne v. Bourne, 1091. Hawthorne v. Calef, 629, 1942. Haxtum v. Bishop, 98S. Hay t. Palmer, 743. Hay v. The Coliver Co., 1527. Hay's Case. 908. Haydel v. Hurck, 745. Hayden v. Androscoggin, 1173. Hayden v. Bates Mfg. Co.. 1182. Hayden v. Davis, 984, 1193. Hayden v. Middlesex Turnpike Co., 779, " 1049, 1055, 1092, 1095, 1096. Haydon v. Atlanta Cotton Factory, 31, Haydon v. Official, etc., Co., 921, 956, 958. Hayes v. Brotzman, 1426, 1431. Hayes v. Franklin, etc., Co., 182. Hayes v. Hayes, 404, 410. Hayes v. Holly Springs, 140, 141. Hayes v. Shoemaker, 346. Hayne v. Beauchamp, 219. Haynes v. Brown, 87, 96, 239, 281, 1122. Haynes v. Hunnewell. 1105. Haynes v. Palmer, 342. Hays v. Commonwealth, 818, 819. Hays, v. Dowes, 136. Hays v. Gal ion Gas L. & C. Co., 1185, 1186, 1263, 1301, 1313. Hays v. Houston & G. N. R R. Co., 1006, 1010. Hays v. Lycoming, 252. Hays v. Ottawa, etc., R. R Co., 235, 639, 1489, 1507. Hays v. Pennsylvania Co., 1520, 1521. Hays v. Pittsburgh, etc., R. R. Co., 95, * 166, 167. Hayter v. Tucker, 665. Hayward v. Lincoln Lumber Co., 1156. Hay ward v. National Bank. 606. Hayward v. Pilgrim Soc, 1093, 1113. Haywood v. Lincoln Lumber Co., 939, 1156. Haywood & Pittsborough Plank-road Co. v. Bryan, 822. Haywood, etc., R R Co. v. Bryan, 33, 129, 218. Hayworth v. Junction R R Co., 640. XC1V TABLE "1 CA.S - [Tlie references are to the foot-paying.] Hazard v. Dillon. 658, Hazard v. Durant, 1073, 1132. 1148, 1150. Hazard v. Nat Ex. Bank. 6 Hazard v. Vermont, etc.. R. R. 1194, 1268, 1270. 1501. Hazeltine v. Belfast, etc.. R R Co. 374, 72:5. Hazelton, etc., Co. v. HazeltoD. etc.. Co., 660, 9-1 9. 1014. Hazen v. Boston & It R R. V Hazen v. Union Bank of Tenn< — e, 628 Hazleburst v. Savannah, eta, EL EL, 388, 422 Hazleton Coal < lo. v. Megan 1 Heacock v. Sherman, 277. Bead v. Amoskeag Mfg. Co., 1949, Head v. Providence 1j .'. 1106. Head v. Tattersell, 918 Head's Case. 852. Beald v. Owen, 310, IK 1 [( alt y v. Lovei idge, 451. Health Com'ra v. Mauran, Heard v. I Sty of Brooklyn, 89 i Heard v, Eldridge, 789, Tin. II. ard v. Talbot, B77. it v. State Bank, I ' ' Heaston v. Cincinnati, eta, EL EL Co., 118 181, 889, 1168, 1167. Heath v. Barmore, 889. Heath \. Erie R'y Ca, (186, llll, 1145, 1151. Heath v. Griswold, ' 1 [eath v. Mah y, Heath v. Missouri, etc., R'y, 1 1K Heath v. Silverthorn Lead Mining, etc.. Co., 795, B27, 888, I i Heathcote v. North Staffordshire R'y Ca, 1508. Hebb's Case, 96, 97. Heck v. Bulkley,784 11, cks v. Burns, 281, Hedge & Home's Appeal, 659, G67. Hedges v, Harpur, 410. Heebner v. (have. 27 1. Heffner v. Brown 11. 1105. Heffron v. Detroit City Railway, 1570. Heggie v. Building, etc., Assoc, 214, 420. 1161. Height v. Railroad. 1282. Heiins, etc, Co. v. Flannery, 970. 1 1 1 i i : i _r v. Manufacturing Co., 311, ST Heinman v. Hardie, 469 Heinsheimer v. Dayton, etc., R R, 1407. Heintzelman v. Druids', etc., Assoc, 1021. Hele, Appeal of, 7:^9. Helm v. Swiggett, 148, 584, 547, 698,694 Heman v. Britton, 431, ! Hemenway v. Hemenway, I I 740, 7 It. Hemmii ddick, :?27. 1 & Hemphill's App< al, 184 Hendee v. Pinto rton, l ■ - - Henderann v. B ink, 969. lerson w. Bank of Austral 818 I R'y Ca, 890, 1531, 1545, 1532, 1' H( oderson r. Ja< ka >n < k>onty, 155. Henderson v. Lacoo, 102, 191, 198, IV 11. nderson v. Midland R'y < io. lOltt I rson v. ( )gden < iiy R'y, 1551, • ■ ilroad Ca, 198, - d r. R03 .1 I •! itbh Bank, 52 1. in v. S ind< rson, 84 L Henderson v. Walker, 1891, 141 1 lenders »n v. Wheatnn, Hendere a, \ \ \ \r\ lerson Brid v. IB nderson City. 19 Henderson Bridj 1547 Henderson, eta, Assoc, v. Johnson, 178 Henderson & Nashville R EL Ca v. 1 • aveJl, 118, 1- dricks v. Ja I '•>.. i n. I [endi i ikaon r. I '••• ow, Hendrix v. Academy of Music, l s 7. 222. Hendaon v. Spaulding, 227. Heness Henippling v. Burr, 4*0. 603. Henklev. Salem Mi_-. Ca, 880,881. Henkle v. Town of Keota, 719. Hennebi rger v. Mather, 455. Hennessy v. Griggs, 966, Hennessey's Es'rsCase, 885, :347. Henning v. Planters' Ins. Co., 1174. TABLE OF CASKS. XCV [The references are Henuing v. U. S. Ins. Co.. 1094. Henning v. Western U. T. Co., 1181. Henriques v. Dutch West India Co., 879, 1166, 1173. Henry v. Dubuque & Pac. R R Co., 1531. Henry v. Great Northern R'y Co., 360, 361, 36G. 374. Henry v. Jackson, 663, 1024 Henry v. Jeanes, 1499. Henry v. Jennes, 1161. Henry v. Rutland| etc., R R Co.. 925. Henry v. Travelers' Ins. Co.. 598, 682, 9sa Henry v. Vermilion . Hiss v. Baltimore, etc.. P. R*y Co.. 1501. Bitchcock v. Galveston W. Co., 154,614, 71-1. Bitchcock v. McElrath, 786, Hitchcock v. U. s. Bank, B99. Bitchcock et al v. Barrett et aL, 84% 1158. Bitching v. Kilkenny R'y Co., 104a Hit", etc., <'<•.. Appeal of. 37. Bixon v. Pixley, 564 Boadley v. County <'<>m'rs. 070. Hoadley v. County, etc, "f Essex, 2. I i ag v. Lamout. 285, 1094, 1095, 1111. land v. Bell, 93 Hoagland v. Cin. & V. W. R P. Co.,224, Hoagland v. Hannibal & St. J. R R.. l :.:;.->. Hoard v. Chesapeake, etc.. R'y, 963, 1480. Hoard v. Wilcox. 388, 385. Hoar . 837, 118ft Hobart v. Gould, 300. Hobart v. Johnson. 336. Hobart v. Milwaukee, etc., R R Co., 1561. Hobart v. Supervisors, 147. Hobbs v. McLean, 133a Hobbs v. Wayet, 745. Hobbs v. Western Nat'l Bank, 442. Hoboken Building, etc., Assoc, v. Martin, 863, 1019. Hoby & Co., Lim., v. Birch, 241. Hockett v. State, 1596. TABLE OF CASES. XCV11 [The references are Hodder v. Kentucky, etc., R'y, 1203, 1290, 1293, 1295, 13S3, 1384. Hodges v. New Eng. Screw Co., 427, 1029. Hodges v. Silver Hill Min. Co., 251, 256, 269. Hodges v. Paquett, 927. Hodges v. Planters' Bank, 687, 697, 700. Hodges v. Eutland, etc., R. R. Co., 925, 1075. Hodge's Appeal, 1199. Hodges Distillery Co., In re, 889. Hodges, etc., Co., In re, 892. Hodges' Ex'r v. First Nat'l Bank. 1075. Hodgkinson v. Kelly, 570, 579. Hodgkinson v. National Co., 215, 236. Hodgman v. St. Paul, etc., R, R. Co., 152, Hodgson v. Cheever, 292. Hodgson v. Duluth, etc., R. R, 795, 1148. Hodgson v. Earl Powis, 1538. Hodsdon v. Copeland, 891, 947. Hodson v. Tea Co., 1254. Hoey v. Coleman, 667. Hoey v. Henderson, 634. Hoff v. Jasper County, 143. Hoffman v. Bank?, 1005. Hoffman v. Livingston, 567. Hoffman Steam Coal Co. v. Cumberland Coal Co., 902, 918, 1127. Hoge v. Railway Co., 771. Hogg's Appeal, 258. Holbert v. St. Louis,. K C. & N R. Co., 1000, 1528. Holbrook v. Basset. 1185. Holbrook v. Fauquier, etc., Turnpike Co., 26, 398. Holbrook v. New Jersey Zinc Co., 24, 438, 498, 502, 503, 519, 547. Holbrook v. St, Paul Fire & M. Ins. Co., 308. Holcomb v. Managers, etc., Bridge Co., 1065. Holden v. Hoyt, 1069. Holden v. Metropolitan, etc., Bank, 428, 784, 1083. Holden v. N. Y. & Erie Bank, 1115. Holden v. Upton, 1084. Holder v. Lafayette, etc., R'y Co., 923. Hole's Case, 1037. Holgate v. Oregon P. R'y, 1177. G to the foot-paging.] Holladay v. Elliott, 104. Holland v. Cheshire R'y, 367, 1474. Holland v. Dickson, 680. Holland v. Heyman, 299, 936. Holland v. Lewiston, etc., Bank. 927. Hollenbeck v. Donnell, 1409. Holliday v. Elliott, 671. Hollingshead v. Woodward, 213, 251, 303,. 707. Hollingsworth v. City of Detroit, 1236. Hollins v. St. Paul, etc., R. R, 52, 1138,. 1465. Hollis v. Allen, 741. Hollis v. Drew Theological Sem., 3, 1000. Hollister v. Hollister Bank, 300. Hollister v. Stewart, 1235, 1285, 1293, 1303, 1395, 1464. Hollister Bank, Matter of, 284. Hollman v. Williamsport, etc., Co., 98. Holloday v. Patterson, 906. Hollwey's Case, 337. Holly Mfg. Co. v. New Chester, etc., Co.,. 70, 1120, 1246, 1392. Holly Springs, Bank of, v. Pinson, 687, 688, 689, 698. Holmau v. Norfolk Bank, 1113. Holman v. State, 48, 866. Holmes v. Gilliland, 313. Holmes v. Higgins, 1038. Holmes v. Holmes, etc., Co., 959, 1014. Holmes v. Mead, 652, 653, 665. Holmes v. Moffat, 490. Holmes v. New Castle, etc., Co., 730, 1127. Holmes v. New-Castle-upon-Tyne Abat- toir Co., 59. 393. Holmes v. Old Colony R R, Co., 967. Holmes v. Sherwood, 255, 257, 259, 260, 261, 269. Holmes v. Turner's, etc., Co., 1079. Holmes' Case, 394. Holmes, Ex parte, 421, 826, 827, 830, 839, 1164 Holmes, Booth & Hay dens v. The Holmes, etc., Co., 1013. Holmes, etc., v. Willard, 976, 1244. Holmes, etc., Co. v. Holmes, etc., Co., 426. Holmes, etc., Co. v. Morse, 459. Holroyd v. Marshall, 127a XCV1U TAULE OF CAS [The references are to the foot-paging.] Holt v. Bennett 941. Holt v. Jex, Holt v. W infield, 1104 Holt's Case, 190. 337. Hoi ton v. Bangor. 750L Holton v. New Castle, etc., R'y. 114E Holyoke v. McMmtry. B 9 Holyoke Bank v. Burnham, 329, 353, 357. Holyoke Bank v. Goodman Paper Mf& Co.. . Holyoki Lyman, 1943. Home Assoc. Matter of, 1368, 1412,11" Home Ins. Co. v. Board, eta, 701. Home Ins Buckley; Home Ina ' •. v. « 'ity ' ouncil, 1**43. Home 1 v. Daw Home Ins. Co. v. N.w York. 761, " 195a Home Ins. < Swigert, 776, Home Nat Bank v. Waterman's 1 117. Home of the Friendless v. Rouse, 771, 1942. Home Stock Ins. Co. v. Sherman. 219. . . - J4. Homer>ha,n v. Wolverhampton Wat- r- works, 1<»96. Honold v. Mey Bood v. McNanghtoo, 345, H B 1 v. N kftN. H.B. R. 1" Hooker v. Eagle Bank. l'»77. Hooker v. Utiea ft II L R Co.. 890. Hooker v. Vandewater, '546. Hoole v. Great Western R'y ( 727. 788, 1142. 1144. Hooper v. Rossiter, 741. Hooper v. Wells, Fargo & Co.. 1"~ Hoopes v. Auburn, etc.. Co., 1 . Hoosac, et .. Donat, 1131. Hoover v. Montclair, etc.. R'y. 14-30. Hopcroft v. Parker. 103a Hope v. International Financial Soc, 414. Hope v. Lawrence. 564, 791. Hope v. Salt Co.. 980, Hope Ins. Co. v. Beck man. 635. 640. Hope Ins. Co. v. Koeller. 635, 640. Hope Ins. Co. v. Perkins. I Hopkins v. Connel, 1398, 1456. Hopkins v. Gallatin, etc.. 989. 1099. Hopkins v. Mehaffy, 11 Hopkins v. Roseelare Lead Co., 1050. 1051. Hopkins v. St Paul. etc.. R R, 1480. Hopkins v. Win Hopkins v. Worcester, etc.. Canal, 1204, 1410. Hopkins' Appeal. 942. Hopkic's Trusts. In re. 741. 743. ]{■ pkinson v. Exeter, 1 Hopkinson v. Marquis >>f Exeter, 661. Hopper v. 1 .1 103. Hopi-i v. - 1. Hoppin v. Boffoj - Hopeon v. / Borbur Inre.fi Horn v. Chi i Horn v. Horn, I Horn, et Ryan, 1088, 1136. Horn Bilver Mining Co. v. New fork, 1 Horna.lay v. Ind ft 111. Central R R.. 1 Home v. B. M. B. li. Oa, 1548. 11 one v. ( . Home ft Holland, 1 lb. me. In re. 1854 Homeck's Exec t. American Bible Soc., 1019. Horner v. Cart Horaor v. Henning, 1 1 - Horsley v. Bell. ton v. Baptist Choi Hort<>n v. Morg " *0. Horton v. Thompson, 136, 158. Horton v. W - I B5L Hort's Case. I58fi Hosack v. College of Physicia 1110. Hosack v. Sogers, 1170. Hospes v. Northwestern, etc., Co., 217. Hostrup v. Madison City. 1 I Hotchin v. Kent. 11 Hotehkks v. Brainerd. etc., Co.. Hotchkiss v. National Bank. 1224. Hotel Co. v. Wade. 937. 1321. 1323. 1327. Hotham v. Sutton. 23, 407. etc.. ta: li ,;z,5. ~T\t referemce* are to tike foot-paging.] Houldsworth v. City of Glasgow Bank, 205, 206, 353. Houldsworth v. Evans. 180, 81-*, 1138, 113a Housatonic Bark v. Martin, 1114 Hoase v. Cooper. 1 Household :•. v. Grant, 96L Houston v. Jefferson College. 640, 858. Houston, et B v. Bremond. 337 - i Houston, etc. R R v. Bust, 15191 Houston, etc.. R R v. Stanley, 963. Houston ft 7 VanAlstyne. SOL Hovelman v. K 1553, 1558, 156L 1564, 1565. Hovey v. MagilL 1104. Hovey v. Ten Broeck. 2 i How v. Starkweather, 38 Howard v. Bank of Eng.. 429. Howard v. Glen 1,2 ■.261. Howard v. Kay. 409. Howard v. Kentucky, etcu Ins. Co 255 Howard v. La Crosse. etc R R, 141 L Howard v. Milwaukee, etc 1 394. Howard v. Rai. , 1393. Howard's Case, I Howard Co. v. Booneville, 156. Howard Ca v. P:Idock 14L Bow beach, el v. Teazue. 163. 226. Howbr; -itrin, 1030. How aey. 1087, 1028, 1150, 1159. Howe v. Bemis, 603. Howe v. Dead, 1154 Howe v. Freeman. 1268, 138 Howe v. Keiler, 1099. Howi SI \ 608, 610. Howe v. Van Schai H; f, 968. How 110S Ho* - .938. Howe Machine ( - lliOS. ell v. Cassopubs Howell v. Chicago & Northwestern I ~ : 7. 7:> Howell v. Harv -37L ril v. Manglesdorf, 29L ell v. Roberts, 5 Howell v. V. - ^ 133^ 1.-57. Hower v. Weiss \, 598, 599. Howland v. Edwards, 160. Howland v. M Howie:: : >30L ; Hoylake By Co_ In re, 343, G ! Hoyle v. Plarteburg. ete, R RCa. 1371, 1373. 1374 Hoyle v. Baflroad Co, 902. Amer. Ex. Bank, 681. Hoyt v. Bridgewafcer, eta, Cou 849, 1093. Hoyt v. Bunker, 280. Hoyt t. Chicago, ete, E I "16. Hoyt v. Latham, 1128, IS Hoyt v. Malone, 1154. He Sfa eldon, 1067, 10TL Hoyt v. Thompson, 1023, 1065, 1071, 1099. 1100, 1440. Hub Publishing Co. v. Richardson. 1035. Hubbard Jiperdown U^K 1063, 1158. Hubbard v. ChappeL 880. Hubbard t. Johnson Come : Hubbard - York <£ H R R R 187, IS 1831. Hubbard ^re, 196, 203, 205. ~ . ssf . : Hubbell v. Blandy. 573. 79L Hubbell t. Drexei I " 90, 591. HubbeU v. Meigs. S3. 4v 793,1183, Hubbell v. Syracuse, etc- Worl- 1283 Hubbersry v. Manchester. etc_ B 691 Hubbuck v. Helms, 1355. Huddersfield Canal Co. v. Buckley, 341, Hudson v. Carman. 851 B88 Hudson v. Hudson v. Spaulding. 324, 1038. H- "s . n. f::.. J : - 7 - - r. i.i Hudson, etc Tel Cc :ervliet; etc 3, 1567. Huey t. Macon County, 1240. Hugh v. McBae, 14 Hu^ ua Hughes v. Antietam _ x, 11L 16v 174, 181 198, 813, 314 381 1167. :i ■_'. — ■•■ es:er. e:: . ?. v :"•;-: aicago,etr. J9. TABLE OF CASES. [The references are to the foot-paging.] Hughes v. Com'rs, 154. Hughes v. India, etc., Co., 328. Hughes v. Northern Pac. R'y Co., 885, 1182, 1948. Hughes v. Oregonian R'y Co., 252. Hughes v. Parker, 798, 837. Hughes v. Vermont Copper Mining Co., 528, 721, 783. Hughes-Hallett v. Indian, etc., Co., 329. Huguenot Bank v. Studwell, 855. Huidekoper v. Dallas County, 143. Huidekoper v. Locomotive Works, 1 1 12, 1445. Huiskamp v. West, 1475. Huiskamp v. Wise. 604. Hulett's Case. 1216. Hull v. Burtis, 283. Hull v. Glover, 1074, Hull man v. Honcomp, 837. Humber Iron-works Co., 104. Humberstone v. Chase. 1 1 1. Humbert v. Trinity Church, 990. Humble v. Langston, 354 Humble v. Mitchell, 22, 404. Humboldt, etc., Ass'n v. Stevens et al., 387, 838. Humby's Case, 852 Hume v. Commercial Bank, 109. Hume v. Winyah & \Y. Canal Co., Humeston v. Tel. Co., 458. Hummell v. Bank of Monroe, 1116. Humphrey v. Merriam, 482. Humphrey v. Patrons' Mercantile, etc., 1186. Humphrey v. People, 1121. Humphreys v. Allen, 1452. Humphreys v. Humphreys, 410. Humphreys v. McKissock, 17, 584, 1050, 1362. Humphreys v. Moouey, 309, 313. Humphreys v. Newport, etc., C5., 1177. Humphreys v. New York, etc., R R. 1378. Humphreys v. Pegues, 771, 1943. Humphreys v. St. Louis, etc., R'y, 1378, 1490, 1494, 1505. Hun v. Cary, 1032. Hun v. Van Dyck, 1153. Hundleston v. Gouldsbury, 407. H'unnewell v. Duxbury, 77, 482, Hunt, Appellant, 434. Hunt v. Bullock. 1363, 1366, 1370, 1373. Hunt v. Columbian Ins. Co., 1424. Hunt v. Gunn, 102. Hunt v. Hamilton, 155. Hunt v. Hewitt, 682. Hunt v. Kansas & M. B. Co., 221, 202. Hunt, In re, 468. Hunt's Case, 908. Hunter v. International R'y, eta, Co., 1178. Hunter v. Roberts, etc., Co., 718, 719. 1 I hunt's Appeal. 751. Hunterdon Bank v. Nassau Bank, 017. Hunting v. Downer, 483. Huntington v. Attrill, 73, 74. 271, 298, 1087, 1121. Huntington v. Mather, 582. Huntington v. Palmar, 747. 11 Huntington v. Sav. Hank, 11. Huntington, etc., Coal Co. v. English, \ 788, 79tt Hunton v. Equitable Life, etc., Sac., L587. Hurbert v. Mechanics' Bldg. & Loan Ass'n, Kurd v. City of Elizabeth, 1427. Hurd v. Green, 97a Hurd v. Tallman. 379. Hurlbert v. Carter, 163. Burlbertv. Root. 163. Hurlbut v. Marshall. 810, 1141. Hurlbutv. Tayl. r, 3 Hurst v. Coe, 860. Hurt v. Hamilton, 147. Hurt v. Balisbury, B89. II use v. Ames, 1082. Huss v. Ran, 472. Hussey v. Crickitt. 468. Hussey v. King, 977, 1006, 1009. 1010. Hussey v. Manuf. & Mech. Bank, 534, 686. Hussey Mfg. Co. v. Deering, 1176. Hussner v. Brooklyn, etc., R R Co., 1562. Huston, Appeal of, 451. Hutchins v. Bynum, 1099. Hutchins v. New Eng. Coal Mining Co., 292. Hutchins v. Smith, 113. TABLE OF CASES. CI [The references are Hutchins v. State Bank, 22. Hutchins' Adm'r v. State Bank, 44"). Hutchinson v. Chicago, etc., R'y, 1537. Hutchinson v. Green, 955, 988, 989, 1052. Hutchinson v. Lawrence, 1025. Hutchinson v. Surrey, etc., Ass'n, 1044. Hutchinson, etc., R. R. v. Fox, 134. Huth v. Humboldt, 668. Hutton v. Scarborough, etc., Co., 362. Hutton v. Thompson, 1040. Hutton v. Upfield, 1037. Hutton v. West., etc., R'y Co., 924 Hutt's Case, 684. Hutzler v. Lord, 354. Huylar v. Cragin Cattle Co., 673, 677, ' 680. Hyam's Case, 358. Hyatt v. Allen, 13, 376, 702, 711, 739, 743. Hyatt v. Argenti, 604. Hyatt v. McMahon, 1015. Hyatt v. Swivel, 467. Hybart v. Parker, 664. Hyde v. Holmes, 684. Hyde v. Sodus Point R R., 1454. Hyde Park Gas Co. v. Kerber, 1155. Hydes, etc., Co. v. Davidson County, 1590. Hylaud v. Central Iron, etc., Co., 756. Hyman v. Coleman, 302. r. Iasigi v. Chicago, B. & Q. R R. Co., 532. Ide v. Conn., etc., R. R, 1202, 1223, 1230. Ide v. Passumpsic, etc., R. R., 1230. Ihmsen's Appeal, 434. Illinois Central R. R. v. Chicago, etc., R. R., 1531. Illinois Central R. R v. Copeland, 1533. Illinois Central R R. v. Mattoon, 773. Illinois Central R R. v. People, 1489, 1513, 1514, 1522. Illinois Co. v. Hough, 923. Illinois, etc., v. Barnett, 156. Illinois, etc., Canal v. Chicago, etc., R. R. Co., 1529, 1578, 1598. Illinois, etc., Co. v. Pearson, 1014. Illinois Grand Trunk R R Co. v. Cook, 234, 633, 1489. Illinois Ins. Co. v. Marseilles Mfg. Co., 19. to the foot-paging.'] Illinois Mid. R'y Co. v. Supervisors, etc., 235. Illinois River R. R. Co. v. Beers, 635. Illinois River R. R. Co. v. Zimmer, 112, 168, 218, 224, 631, 632. Imboden v. Etowah, etc., Min. Co., 881, 1112. Imlay v. Union Branch R. R Co.. 1525. Imperial Bank of China v. Bank of Hindustan, 802. Imperial, etc., Assoc, v. Newry, etc., R'y, 1255. Imperial, etc., Co. v. Coleman, 906, 917, 948, 1145. Imperial, etc., Co., Re, 911, 1223. Imperial Gas Co. v. Clarke, 683, 684. Imperial Hotel Co. v. Hampson, 901, 1053, 1154. Imperial Land Co., In re, 1256. Importers', etc., Exchange, Matter of, 860. Importing, etc., Co. v. Locke, 878. Improvement Fund v. Jacksonville, etc., R., 1276. Ince Hall Rolling Mills Co., Re. 46. Inchbald v. Western Coffee Co., 565, 567. Independence, etc., Co. v. Burlington, etc., R R., 1534. Independent Assurance Co., In re, 277. Independent, etc., Aid v. Paine, 879. Independent Ins. Co., Re, 861. Inderwick v. Snell, 1053. India Bagging Association v. Kock, 644. India Mutual Ins. Co. v. Worcester, etc., R. R., 384, 1546. Indian River Steamboat Co. v. East Coast Transp. Co., 1488, 1599. Indian, etc., Co., In re, 822, 840. Indiana v. American Express Co., 778. Indiana, etc., Co., In re, 821. Indiana, etc., R. R. Co. v. Attica, 134. Indiana, etc., R. R. v. Larrew, 1391. Indiana, State of, v. Woram, 971, 1020. 1245. Indianapolis Cable St R'y v. Citizens'. St. R'y, 1556. Indianapolis, City of, v. Vajen, 765. Indianapolis, etc., Co. v. Jones, 963. Indianapolis, etc., Co. v. St. Louis, etc., R R. Co., 1089. Cll TABLE OF CA- [TJie references are Indianapolis, etc., R R. v. Ervin, 1521. Indianapolis, etc., R. R v. Hyde. 1073. Indianapolis, etc, R R v. Jones, 1490, L547. Indianapolis, etc., R. R v. Morganstown, 1100. Indianapolis, etc., R R. v. Kay. 1485. [ndiaoapolis F. & Min. Co. v. Herkimer, 2:54. 309. Indianapolis & St L. R. EL I '". v. Juut- gen. 1522 IndianolaR R v. Fryer, 968. Ind's Case, 827, 880, 836, 524 Ingalls v. Byers, L382. Ingalls v. Coir. 299, 805. Inglehart v. Thousand, etc., Hotel 918, 936. Inglis v. Great North. R L75. Ingraham v. Taylor. 566 [ngraham v. Terry, 898 Enhabitante, etc., ^. N. 5 ETy, 1517. Inhabitants, etc., v. Port 1.'- ading l>'. B, 1568 Inhabitants, etc, v, Wedgewood, 1167. Inhabitants, etc., of * rlouci Bter v. I 1019. Inhabitant-, etc., of Salem ▼. String, 1019, Inhabitants of Middleton v. M< ' Sormick, L019. Inhabitants of Norton \. I todg Inhabitants of Waldoborough v, BLnox, etc, B Ca el al.. L498 Innes v. Lansing, 1158, 1159. Ennes v. Mitchell, HO. Inness v. Sayer, 109. Inns, etc., Co., In re, 1205. Inns of Court Hotel Co., 1 - Enstone v. Frankfort, etc, Co., 118 174, 176. Insurance Oc v. Brum's Assignee, 1827. Insurance Co. v. Francis, 1182. Insurance Co. v. Jenkins. 974 Insurance Co. v. McCain. 1088, 109 Insurance Co. v. Morse, 1001, 1948 Insurance Ca v. The «'C. D. Jr.." 117::. Inter-Mountain P. Co. v. Jack, 846. International Bank v. Monteath, '■ International, etc., Ass'n v. Walker, 148, 174, 228, 246. /.. the foot paging.] International. >. v. McMorran, 1117. International. '. v. Union, I I International, etc, I a, Be, v International, etc, B B Ca v. Bre- inoii.l. 1130. International, etc R. B ( Sa v. Moody, 15! International, etc, B'y v. Ormond, Mt7. Int. rnational, etc, B'y v. si 869, International, etc, B B \. Taylor, 1501. International, etc, S 1. Com'rs, 1020. Internationa] T. tnb rnational, ■ . 1018 I I ommiesion v. B. ft 0. B 1:.. 19 Int- to, B'j v. Early, 1564 Interstate Ti L < !o *. Baltimore ft « '. T. :. 1051 tmenl I a v. Ohio, • t- .. B B, 1 189, ! I Iowa Barb, etc . Wire Ca r. Southern Barbed WireCa, I Iowa, etc, t . \. American, 1 1114. Iowa, 1 tc, B B Ca *. Perkins, 89 167, 224 [owa I .wiii 1. 117. Ireland \ ■ Turnpifo ;i. Irish Pi ' l r. Phillips, Iron City Bank v. City of Pittsburgh, Iron Mountain Hank •>. Mercantile Rank, ;. nun. Iron Mountain, etc, B B v. ,I..liuson, 189 Iron B B Ca \. Fink, 5 Iron B'y v. Lawrence, etc, < a, 14, 1514 Irons v. Manufacturers' Nat Bank, 296, 801. 858 990, 1141 Irrigation ( !a of France, In re, - In ine v. Forb I r0. Irvine v. Lumberman's l'>ai.k. E En ine v. Nastn ille B'y, 1585. In ine v. Turnpike Co . 681. Irvine v. Union. , tc, Bank, 1109, 1182 Irvine v. Union Bank of Australia TABLE OF CASES. cm [Tfie references are Irving v. Houstoun, 741. Irwin v. Bailey, 1074. Irwin v. Oregon R. & Nav. Co., 946. Irwin v. Williar, 467, 469, 472, 474, 475. Isaac v. Clarke, 588. Isham v. Bennington Iron Co., 1049, 1099, 1108. Isham v. Buckingham, 342, 345, 524. Isham v. Post, 399. Island, etc., Bank v. Sachtleben, 963. Isle, etc., Co. v. Sec'y of State, 315, 1005. Isle of Wight R'y Co. v. Tahourdin, 799, 1053. Isle Royale, etc., Corp. v. Sec'y of State, 1003. Ithaca Gas-light Co. v. Treman, 933, 1139. Ittinger v. Persian, etc., Co., 1324, 1325. Ives v. Can by, 402, 410. Ives v. Smith, 1049, 1127, 1171, 1172, 1200, 1512, 1541. Ives v. Sterling, 113. Ives, In re, 454, 603. Jack v. Naher, 187. Jackson v. Bank of Marietta, 1166. Jackson v. Brown, 1263. Jackson v. Campbell, 1084. Jackson v. Cassidy, 662. Jackson v. Cocker, 102, 463. Jackson v. Foote, 475. Jackson v. Hampden, 800, 803. Jackson v. Hathaway, 1531. Jackson v. Hayner, 90. Jackson v. Ludeling, 920, 1153, 1167, 1325, 1329. Jackson v. McLean, 902, 1218. Jackson v. Meek, 298, 351. Jackson v. Munster Bank, 799, 1032. Jackson v. New York, etc., R. R. Co., 925. Jackson v. Newark Plank-road Co., 712, 715. Jackson v. Plumbe, 1166. Jackson v. Pratt, 1100. Jackson v. Rutland, etc., B. R. Co., 1531. Jackson v. Second Ave. R. R. Co.. 1008. Jackson v. Sligo Mfg. Co.. 82, 343, 352. to the foot paging.] Jackson v. Traer. 35, 65, 66, 248. Jackson v. Turquand, 195, 332. Jackson v. Twenty-third St. R'y Co., 412. Jackson v. Vicksburg, etc., R. R., 1198. Jackson v. Walsh, 638, 810. Jackson v. York, etc., R. R., 1232, 1236. Jackson, In re, 23. Jackson County v. Brush, 150. Jackson, etc., Co. v. Burlington, etc., R. R. Co., 1135, 1236, 1327, 1346, 1355. Jackson, etc., H. R R. Co. v. Interstate, etc., R'y, 1555. Jackson, etc., Ins. Co., In re, 869. Jackson Marine Ins. Co., Re, 864. Jacksouport v. Watson, 133, 139. Jacksonville, etc., R. R. Co. v. Virden, 146. Jacobs v. Miller, 450, 845. Jacobson v. Allen, 278. Jacobus v. Monongahela, etc., Bank, 611. Jacoby v. Stephenson, etc., Co., 1465. Jacques v. Chambers, 403. Jagger Iron Co. v. Walker, 298, 301, 351. Jamaica, Bank of, v. Jefferson, 1166. James v. Cincinnati, etc., R R Co., 98, 240. James v. Cowing, 1467. James v. Eve, 46. James v. May, 328, 355. James v. May rant, 654. James v. Milwaukee, 138. James v. Railroad Co., 932, 936, 1219, 1221, 1388, 1469. James v. St. Louis, etc., R'y, 1003. James v. Woodruff, 889, 892. • Jameson v. Coldwell, 905. Jameson v. People, 887. Jamison v. Harbert, 344. Jausen v. Otto, etc., Co., 1083. Jarrett v. Kennedy, 206, 210. Jarvis v. Manhattan Beach Co., 397. Jarvis v. Rogers, 585, 592, 594, 780. Jasper, County of, v. Ballou, 144, 145. Jaudon v. National City Bank, 435, 437, 439. Jay v. St. Louis, 1531. Jay Bridge Co. v. Woodman, 1023. Javcox v. Cameron. 571. CIV TABLE OF CASES. Jeans v. Pittsburgh, etc., R*y, 946. Jeans, Appeal of, 397, 604 Jefferson v. Burford, 421. Jefferson v. Hale, 786. Jefferson v. Hewitt, 198. Jefferson Bank v. Skelley, 771. Jefferson Branch Bank v. Skelly, 1942. Jeffersonville, City of, v. Patterson, 1237. Jeffersonville, etc., R R. v. Hendricks, 1490, 1547. Jeffersonville R. R Co. v. Rogers, 1007, 1009, 1011. Jeffrey v. Moran, 1478. Jeffreys v. Jeffreys, 331, 406. Jeffries v. Lawrence, 141. Jefts v. York, 1105. Jemison v. Citizens', etc., Bank, 969. Jenkins v. Andover, 139. Jenkins v. Charleston, 75 L Jenkins v. Fo%vler, 408. Jenkins v. Jenkins, 1157. Jenkins v. Union Turnpike < o., 320. Jennings v. Baddeley, 571, 659. Jennings v. Bank of Cat., 090. Jennings v. Braughton, 200, 210. Jennings v. Hammond, 650. Jennings v. Phil., etc., R R, 1423. Jennings, Re. 226. Jennison v. Citizens' Sav. Bank, 475. Jermain v. Lake Shore, etc., R R Co., 20, 23, 376, 710, 714, 715. Jernian v. Benton, 630. Jerome v. McCarter, 1197, 1272. 1347. 1350, 1357, 1434, 1450. Jersey City v. City of Hudson, 1598. Jersey City, etc., H. R. R Co. v. Jersey City & B. R R Co., 1569. Jersey City Gas Co. v. Dwight, 49, 866, 1584. Jersey City Gas Light Co. v. Jersey I !ity, 752, 757. Jersey City Gas Light Co. v. United G., etc., Co., 769. Jervis v. Wolferston, 328. Jessamine County v. Swigert's Adm'r, 144. Jessopp v. Lutwyche, 47 I. Jessopp's Case, 357. Jessup v. Bridge, 1368. 1383. Jessup v. Crruegie, 291, 292, 310, 313, 316. [The references are to the foot-paging.] Jessup v. City Bank, 1075, 1294, 1323. Jessup v. III. Cent. R. R., 942, 1129, 1350, 1492, 1505. Jessup v. 111., etc., R R, 424. Jesup v. Wabash, etc., Ry. 1344, 1481. Jewell v. Rock Riser, etc., Co., 87, 90, 2: :s Jewett v. Bradford, etc., Co., 533. Jewett v. Lawrenceburgh & I". M. R. R Co.. 123. 126, 127. Jewett v. Valley R"y Co., 191, 213, 221, Jobling, Ex parte, 89. John v. Cincinnati, etc., R R Co., 134, llo. John v. Farmers', etc, Bank, ^77. John Morley, etc, < 'a. v, Barras, 887. Johns v. Johns, '.'1. Johnson v. Ala, etc, ( '•'.. 1088. Johu-oii v. Albany, etc., R R Co., 26, 178, 17'.', 289, 2fl. Johnson v. Armstrong, 1077. Johnson \. Bridgewater lion Mfsr. Co., 712. 743. Johnson v. Brooks, 450, 155. Johnson v. Bush, 1100. Johnson v. Commonwealth, 758 Johnson v. Consol. Silv. Mill. Co., lis). Johnson v. County of Stark, 1232, 1236, 1239. Johnson v. Crawfordsville R R. Co., 162, 108, 190. Johnson v. Crow. 628, 1582. Johnson v. dimming, 594. Johnson v. Dexter, 601. Johnson v. Elizabeth, etc., Ass'n, 880. Johnson v. Fall, 468 Johnson v. Gallagher, 885. Johnson v. Georgia, etc., R R. Co., 119. Johnson v. Goslett, 656, 664. Johnson v. Hanover, etc., Bank, 1166. Johnson v. Hudson River R. R Co., 3, 629. Johnson v. Johnson, 407, 741. Johnson v. Jones, 814. Johnson v. Kessler, 321. Johnson v. Kirby, 5, 450, 4S0, 532, 785, 947. Johnson v. Laflin, 262, 337, 359, 415, 419, 420, 431, 448, 518, 525, 699, 729. TABLE OF CASES. CV [The references are Johnson v. Lyttle's Iron Agency, 178, 181. Johnson v. Markle Paper Co., 256. Johnson v. Mulry, 465, 565. Johnson v. New York & Erie R. R. Co., 34. Johnson v. Pensacola & Ga. R. R. Co., 187, 631, 1518. Johnson v. Railroad, 1520, 1521, 1599. Johnson v. Russell, 468. Johnson v. St. Louis Dispatch Co., 1008. Johnson v. Shortridge, 1116. Johnson v. Somerville Dyeing Co., 266, 329. Johnson v. Southwestern Railroad Bk., 357. Johnson v. Stark, 145. Johnson v. Sullivan, 81, 216. Johnson v. Underhill, 353. 354, 518, 547. Johnson v. Wabash, etc., Co., 95, 214. Johnson, Ex parte, 856. Johnson. In re, 654. Johnson County, Com'rs of, v. Thayer, 1308. Johnson, etc., Co. v. North, etc., Co., 685. Johnston v. Chicago, etc., R R, 1525. Johnston v. Crawley, 888, 1097, 1098. Johnston v. Elizabeth, etc., Ass'n, 1112. Johnston v. Goslett, 225. Johnston v. Jones, 797, 804, 824, 837, 838, 851, 1053,1063, 1154. Johnston v. Renton, 506. 507, 508. Johnston v. Riddle, 1369. Johnston v. Talley, 892. Johnston v. Trask, 466. Johnston's Appeal, 1584. Joint-stock Coal Co., In re, 861. Joint-stock Discount Co. v. Brown, 104, 426, 1029, 1033. Joint-stock Discouut Co.'s Case, 681, 684. Joint-stoek Discount Co., In re, 448. Jones v. Andrews, 679. Jones v. Arkansas. M. & A. Co., 919. Jones v. Atchison, etc., R. R., 436. Jones v. Bank of Leadville, 859. Jones v. Bank of Tennessee, 878. Jones v. Barlow. 293, 298. Jones v. Bolles, 494. Jones v. Boston Mill Corp'n, 1170. to the foot-paging.] Jones v. Brinley, 23, 783. Jones v. Canada, etc., R'y, 1466. Jones v. Cincinnati, etc., Co., 87S. Jones v. Davis, 13, 20, 751. Jones v. Dawson, 654. Jones v. Fitchburg Ry, 1228. Jones v. Guaranty &IndemityCo., 1262, 1271. Jones v. Habersham, 993, 996. Jones v. Harrison, 1041. Jones v. Hurlburt, 147. Jones v. Jarman, 256, 288, 321. Jones v. Johnson, 924, 1031. Jones v. Keen, 1459. Jones v. Kent, 454, 711. Jones v. Kokomo, etc., Assoc, 880. Jones v. Latham, 622. Jones v. Littledale, 570. t Jones v. Marks, 564, 568. Jones v. Milton, etc., Co., 109. Jones v. Milton & Rushville Turnpike, 805. Jones v. Morrison, 386, 707, 923, 926. Jones v. Newhall, 461. Jones v. Ogle, 742, 743. Jones v. Peppercorne, 568. Jones v. Scudder, 450, 844. Jones v. Seligman, 654, 1318. Jones v. Sisson, 169. Jones v. Smith, 1005. Jones v. Terre Haute, etc., R. R Co., 16. 27, 383, 708. 709, 710, 712, 713, 715. Jones v. Victoria, etc., Co., 1067. Jones v. Wiltberger, 299, 305. Jones v. Woolley, 1103. Jones' Case, 34, 36. Jones, Ex parte, 177. Jones & Cleveland R. R Co. v. Robbins. 708. Jones, etc., Co. v. Commonwealth, 756. Jones, etc., Co.. Re, 57. Jonesboro, City of, v. Cairo, etc., R. R. Co., 131. Jordan v. Alabama G. S. R. R. Co., 1010. Jordan v. Hayue, 134. Jordan v. Wells, 1447. Joseph v. Davis, 240, 252. Josephs v. Pebrer, 663. Joslyn v. Pacific Mail Steamship Co., 632, 637. CVL TABLE OF CASES. [The references are Joslyn v. St Paul, etc., Co., 495. 503. Jourdan v. Long I. R. R., 1055, 1511. Journalists' Fund, In re, T. Joy v. Jackson, etc., Co., 632, 810. Joy v. St Louis, 1120, 1509. Judah v. American, etc., Co., 110, 1G4, 813, 797. Judson v. Rossie Galena Co., 255, 350, 1170. Juker v. Commonwealth, 1021. Juker v. Fisher, 1022. Julia, etc., Assoc, v. Bell Tel. Co., 1594 Junction, etc., Co. v. Williamsport, Co., 1566. Junction Railroad v. Bank of Ashland, 12015, l'JnT. Junction R R. v. Cleneay, 1201, 1281. Junction R R Ca v. Reeve, 84, 124, 1068. Junkins v. Union, etc., District, 1078. Justh v. Holliday, 478, 177. K. K.iliii v. Walton, 177. Kain v. Smith, 1484, 1)57. Kain v. Texas Pacific Railroad Ca, 104a Kaiser v. Lawrence S. Hank, 809. Kalamazoo, etc., Co. v. McAlister, 1112. Kalamazoo, etc., Co. v. Sootsma, 1521. Kalbfleisch v. Kalbfleisch, L440. Kampf v. Jones, 105. Kanawha, etc. t. '<>. v. Kanawha, eta, < Jo., S75. Kane v. Bloodgoo.l. 7 in, 715. Kankakee v. .Ktna Life In-. ( '".. I'm. Kansas City, etc, R. R v. Richmond T., 134. Kansas City Hotel v. Bauer, 863, 864 Kansas City Hotel »'<>. v. Harris, :S90. Kansas City Hotel Co. v. Hunt. 233.390. Kansas, City of, v. Hannibal, etc., R R Co., 1098, 1102. Kansas Con. Co. v. Topeka, etc., R R, :)7. Kansas, etc., Co. v. Central Bank, 1088. Kansas, etc., R R. v. Daughtry, 1180 Kansas, etc., R. R. v. Interstate, eta, Co., 1179. Kansas, etc., R R v. Topeka, 1172. Kansas, etc., R'y v. Fitzgerald, 1140. to the foot-paging.] Kansas, etc,, R'y v. Pay no. 15s?. Kansas, etc., R'y v. Smith. 1546. Kansas Pac, R'y v. Mower. 1515. Kansas Pac. R'y v. Searle. 14 17. Kansas Pac. R'y t. Wood, 1391 Kappner v. St. Lonis, eta, R. EL, 1218. Karnes v. Rochester, etc., R R Co., 719, 720, 901. l: Karuth- < .!-■. 8a Katama, eta, Ca v. Jernegan, 116. Katowa Land Co. r. Holley, 116, 233. Katzenberger v. Aberdeen, ill. Kavey v. An, axon Ins. Co.. 1091, 1588. Kean v. Johnson, I 8, 966; 1189, 1496, 1506. Ke.ii ney v. Andrews, 1021 Keasley v. Codd, 660. K< ating v. .1. Stove, - to, Co.. 610. K i bland v. Menasha, etc., Ca, 1089, Keeler v. Brooklyn El R R, L167. Is.. Ii i \. Frost, 1064 Ke I- v. Van Reuth, B80. K( ene 1 i 17, 848. Keeney v. Globe Mill Ca, 148, 715. K.. ]. v. Mich., L s.. eta, R. R, 1342, 1105. Keine \. Kent, 1 19. Keith v. Clark. 194& Keith v. Globe In-. Co.. ni5. K« ith eta, < ■■. v. Bingham, K'97. Kelk's Case, 178, 177. 180 Keller v. Eureka, eta, < !a, 512. Keller v. Johnson, 128. Keller v. Me( anley. 154a Keller v. Swartz, 451. Keller V. WeSt, I* Kelley v. Mayor of Brooklyn. 1106. Kellej v. Mariposa Land a- Mining Ca, '.i57. Kelley v. Milan. 181 Kelley v. Miss . etc.. R. R Co., 932, 1163. Kelley v. Munson, 570. Kelley v. Newburyport, etc., R R. Co., 879, 904. 1127. Kelley v. Owens et al.. 195. Kelley v. Receiver. In re, 1396. Kelley v. Trustei s, etc., L! 67. Kelley v. Upton, 452. Kellinger v. Forty-second, etc., R. R, 1562 TABLE OF CASES. CVll iTIie references are Kellock v. Enthoven, 354, 355. Kellogg Bridge Co. v. United States, 667. Kellogg v. Larkin, 643. Kellogg v. StockwelL. 23, 345, 354, 547. Kellogg v. Union Co., 877. Kelly v. Calhoun, 1102. Kelly v. Mariposa, etc., Co., 1157. Kelly v. Neshanic, etc. Co., 1415. Kelly v. People's Trans. Co.. 991, 993. Kelly v. Trustees, etc., R. R, 1266, 1267, 1293, 1294, 1406. Kelly, In re, 1277, 1400. Kelsey v. National Bank, 1086. Kelsey v. National Bank of Crawford Co., 1539. Kelsey v. Northern Light Oil Co., 189, 192. Kelsey v. Pfaudler, etc., Co., 679, 680. Kelsey v. Sargent, 924, 926, 1150, 1151. Kemp v. Westbrook, 598. Kempson v. Saunders. 102, 103. Kendall v. Bishop, 1264, 1294. Kendall v. Kendall, 408. Kendig v. Dean, 462, 532. Kentield v. Latham, 574, 575. Kenkel v. Macgill, 403. Kenicott v. Supervisors, 131. Kennard v. Cass County, 1239. Kennebec & P. R. R. Co. v. Jarvis, 224; 229, 239. Kennebec & Portland R. R. Co. v. Waters, 187. Kennebec Co. v. Augusta Ins., etc., Co., 997. Kennebec, etc., R. R. Co. v. Kendall, 116, 173, 176, 323, 1022. Kennebec, etc., R. R. Co. v. Palmer, 112. Kennebec, etc., R. R. Co. v. Portland, etc., R. R Co., 933, 1267, 1268, 1294, 1316, 1317, 1380. Kennedy v. Baltimore Ins. Co., 1094, 1095. Kennedy v. Benson, 491. Kennedy v. California, etc., Bank, 285. Kennedy v. Chicago, etc., R. R, 680. Kennedy v. Gibson, 287, 861, 1183, 1948. Kennedy v. Indianapolis, etc., R. R, 1446, 1456. Kennedy v. McLellan, 315. to the foot-paging.} Kennedy v. Neary, etc., R'y, 609, 755. Kennedy v. Panama, N. Z. & A. R M. Co., 198. Kennedy v. Porter, 432. Kennedy v. Railroad Co., 679. Kenner v. Manuf. Co., 1106. Kennicott v. Supervisors, etc., 1227, 1228. Kenosha, City of, v. Lamson, 132. Kenosha, Rockford & Rock Island R R Co. v. Marsh, 636, 637. Kent v. Freehold, etc., Co., 209, 913. Kect v. Ginter, 785, 789. Kent v. Jackson, 862, 1027. Kent v. Lake Superior, etc., Co., 1329, 1452. Kent v. Miltenberger, 468, 475. Kent v. New York, etc., R. R Co., 273. Kent v. Quicksilver Mining Co., 5, 20, 53, 361, 362, 363, 399, 1022, 1124, 1125, 1185, 1190. Kent, Ex parte, 241. Kent's Adrn'r v. Deposit Bank, 430. Kent Benefit, etc., Soc, In re, 994. Kent County, etc., Soc. v. Houseman, 855, 857, 867. Kenton County Court v. Bank Lick Turnp. Co., 635, 640. Kenton Furnace Co. v. McAlpine, 58, 717, 803, 805, 829. Kenton Ins. Co. v. Bowman, 690, 698. Kentucky v. St. Paul, etc., R R., 1450. Kentucky, Bank of, v. Schuylkill Bank, 395.' Kentucky, Commonwealth of, v. Louis- ville Bridge Co., 872. Kentucky Railroad Tax Cases, 1949. Kentucky Seminary v. Wallace, 1017. Kentucky Union R'y Co. v. Bourbon Co., 142. Keogh v. McManus, 1461. Keokuk, etc., R R v. County Court, etc., 774. Keppel's Adm. v. Petersburg R R., 512, 706, 714, 716. Kerchner v. Gettys, 451, 457, 849, 853, 997. Kerigan v. Southern, etc., R. R., 1534. Kermode v. Macdonald, 408, 410. Kern v. Day, 427, 618, 853. CV1U TABLE OF CASKS. [Tlie references are Kernaghan v. Williams, 971. Kernochan, In re, 711, 739. Kernochen v. Murray, 453. Kerr v. Chicago, etc., Ass'n, 252. Kerr v. Dougherty, 996. Kerr v. Little, 1444. Kerr v. Middlesex Hospital, 410. Kerr. Matter of, 1568. Kerridge v. Hesse, 1035. Kerrison v. Stewart, 1314 Kersey, etc., Co. v. Oil, etc., R R. 1062. Kessler v. Continental, etc., I '" -. B5a Kessler v. New York Central R R, 1583. Ketchani v. Duncan. 1198, 1234. Ketchum v. Mobile, etc.. R R, 1311. Ketchum v. Pacific R R, 1276. Ketch um v. St. Louis, 1276, 12*; Key City, The, 1547. Keyes v. Bradley, 482. Keylinge's ( !ase, 441. Keyser r. Hit/. 335, 836, 354 Keyser v. McKissam, 1059. Keystone Bridge Co. v. Met 'henry. 81. Kid v. .Mitchell, :• Kid willy, etc., Co. v. Roby, 118. 214 Kiley v. Western U. Tel Co., 159a Kilgore v. Bulkley, 1106. Kilgore v. Smith, 1002 Killer v. Johnson, 188, 199. Killingsworth v. Portland Trnst Co.. 1097. Killmer v. Hobart, L434 Killmer v. N. Y. C. & II. R P. R, 1518, 1518. Kilner v. Baxter, 114, 1035. Kil pa trick v. Penrose, etc., Co., 927. Kil vert's Trusts, In re, 1019. Kimball v. Atchison, etc, R R, 428, 1 194 1505. Kimball v. Billings, 510. Kimball v. Goodburn, 1413, 1418. Kimball v. Ives. 1141, 1429. Kimball v. Lakewood, 135. Kimball v. Reding. 434 Kimball v. St. Louis, etc., R'y Co., 1171. Kimball v. Union Water Co., 530. Kimber v. Barber. 432, 576. Kimberly v. Arms, 43. Kimmel v. Geeting, 1136. Kimmel v. Stoner, 1136. to the foot-paging.] Kimpson v. Saunders, 0G3. Kincaid v. Dwindle, 251, 273, 281, 297, 864 Kincaid's Case. 195, 208. Kindberg v. Mudgett, 854 Kinder v. Taylor, 663. Kinealy v. St. Louis, etc., R R Co., 1558. Kingv. Accumulation, etc., Assurance Co., 277. King v. Amery, ' King v. Aahwell, 1021. 1024 King v. Bank of England, 530, 675. 718, .i. 780. King v. Barnes. 432, 529, 829, 951, 116$ 1 111. King v. Bedford Level, 1056, 1058. Bang v. ( Ihetwynd, - King v. Churchwardi as, etc., 783. King v. ( ity of Madison, '. King v. Clear, 675, 678. King v. < !oppei, 22 King \. Corporation of Bedford Level, 1057. King v. Doaue, 488. King v. Duncan, 801, 303, 350. King v. Dupine, 609. King v. Elliott, King v. K.llett. 710, 743. King v. Gray, 863. King v. Bill, 800. King v. Hughes, 88a King v. Ilwaco By. etc.. Co., 1015. King v. Inhabitant-. I tc., 1124 King v. Katherine Dock Co., 161, 254. King v. London Assurance Co., 580, 675. King v. Marshall, 161. 1862. King v. Mayo, 1061. King v. Merchant.-' Ex. Ins. Co., 1299. King v. Merchants' Exch. Co., 1261. King v. Men-ham Tailors' Co., 677. King v. Ohio, etc., R'y. 370, 1436. King v. Paterson, etc., R R Co., 714, 715, 716, 717. King v. Proprietors of the Wilts. & Berks. Canal Nav., 67a King v. Sarria, 8ia King v. Severn & Wye' R'y, 1522. King v. Talbot, 434. King v. Texas, 606. TABLE OF CASES. C1X [Tlie references are King v. Theodorick, 802, 806. King v. Travannion, 682. King v. Trevenen, 814. King v. Wilson, 134. King v. Winstanley, 22. King's Case, 108, 175, 180, 327, 328, 339, 340, 357. Kingman v. Rome, etc., R. R. Co., 1142, 1143. Kingman v. Spurr, 667, 847. Kings Bridge, etc., Co. v. Plymouth, etc., Co., 1083. Kings College, Governors of, v. McDon- ald, 1103. Kings County El. R'y Co.. Re, 883. Kings County, etc., R. R, Matter of, 1555. Kingsbury v. Kirwin, 469, 579. Kingsbury v. Ledyard, 1057, 1059. Kingsford v. Great Western R'y Co., 684. Kingsley v. First Nat'l Bank, 1168. Kingsley v. New Eng., etc., Co.. 1024, 1109. Kinkier v. Jurica, 975. Kiumouth v. Brigham, 434. Kinney v. Crocker, 1432, 1433, 1446. Kintrea's Case, 358. Kiuzie v. Chicago, # 1096. Kip v. Monroe, 457. Kip, In re, 18, 1110. Kirby v. Potter, 404. Kirk v. Bell, 1066. Kirk v. Nowill, 173. Kirkland v. Dinsmore, 1537. Kirklank t. Menasha, etc., Co., 1091. Kirkpatrick v. Bonsall, 468, 471, 473, 474. Kirksey v. Florida, etc., Co., 113, 174, 229. Kirkstall Brewery Co., In re, 393. Kisch v. Central R'y of Venezuela, 195, 200. Kirschmann v. Lediard. 1039. Kishacoquillas Centre Co. v. McCanahy, 188, 207, 232. Kissam v. Anderson, 568, 1116. Kisterbock's Appeal, 735. Kitchen v. St. Louis, etc., R'y Co., 921, 1130, 1133, 1469. Kittow v. Liskeard Union, 664. Klaus, In re, 447. to the foot-paging.] Kleeman v. Frisbee, 1225, 1229. Klein v. Alton, etc., R. R. Co., 113, 174, 219. Klein v. Jewett, 1418, 1446. Kline v. Bank of Tescott. 1104. Klinfs v. Supreme, etc., of Iron Hall, 1417, 1421. Klopp v. Creston City, etc., Co., 1176. Klopp v. Lebanon Bank, 694, 700. Kluht's Case, 106, 336. Knapp v. Railroad, 1311, 1318, 1327. Knapp v. Williams, 22. Kneeland v. American L. & T. Co., 1357, 1376, 1441, 1445. Kneeland v. Foundry, etc., Works, 1445. Kneeland v. Lawrence, 1214. Kneeland v. Luce, 1452, 1453. Knight v. Cambers, 474. Knight v. Fitch, 474. Knight v. Norris, 274. Knight v. Old National Bank, 687, 701. Knight v. Wilmington, etc.. R. R, 1224. Knight's Case. 175, 178, 179, 180, 181, 182. Knightley, Ex parte, 213. Knoop v. Bohmrich. 190, 1162. Knott v. Raleigh, etc., R R, 1534. Knott v. Southern,etc, Ins. Co., 1178. Knowles v. Duffy, 73. Knowles v. Scott, 1456. Knowlton v. Ackley, 256, 271, 283, 863. Knowlton v. Congress, etc., Co., 51, 53, 74, 400. Knowlton v. Fitch, 472, 562, 566. Knox v. Baldwin, 293, 303. Knox v. Bank of U. S., 999. Knox v. Childersburg L. Co., 34, 70, 235. Knox v. Hayman, 205. Knox v. Protection Ins. Co., 1020. Knox County v. Aspinwall, 132, 137. Knox County Commissioners v. Nichols, 136. Knoxville v. Knoxville, etc., R R., 964, 1194. Knoxville v. Railroad Co., 633, 636. Kobogum v. Jackson Iron Co., 33, 101, 216, 713, 716. Koch v. North, etc., R'y, 874, 1549, 1556, 1560, 1562, 1563. Koehler v. Black River Falls Iron Co., 901, 931, 937, 1096, 1101. ex TABLE OF CASE-. [77ie references are Koehler v. Brown. GG1. Koehler t. Dodge, 1118. Koehler v. Sanders, 1015. Koehler. Ex parte, 1514. Koenig v. Chicago, etc., R R, 10, 1538 Kohl v. Lilienthal, 959, 960. Kohn v. Lucas, 253. Kolflf v. St. Paul, etc., Exchange, 645. Kollman's Carriage Co. v. Beresford. '-212. Koons v. First Nat Bank, 598, 784 Koons v. Martin. 269. Kortright v. Buffalo Commercial Bank, 519, 699, 779, 780. Koshkonong v. Burton, 1240. Kouutz v. Gates. 150. Kraft v. Freeman, 1080. Kramer v. Arthurs, 668. Kramer v. Cleveland & P. R R Co.. 1524 Krause v. Malaga, etc., Co., Krause v. Setley, 470. Krauser v. Rnckel, 273, 874 Krebs v. Carlisle Bank, 880, 893. Kreiger v. Shelby R R Co., 154 Krider v. Trustees, etc., 108 Kropholder v. St Paul, etc., R'y, 1329, 1473. Krtiger v. Audrews. Krumhhaar v. Griffiths. 431, 480. Kruse v. Dusenbury, 319. Krutz v. Paola Town Co., 30a Kryger v. Andrews, 481. Kryger v. Railway, etc., Mfg. I Kuehner v. City of Freeport, 157}. Kuhn v. McAllister, 491, 780, 785. Kuhns v. Westmoreland Sank, 694. Kullman v. Greenebaum. 597. Kuukelman v. Rentchler, 268. 299. Kuykendall v. Draper, 303. Kyle v. Fayetteville, 761. Kyle v. Laurens R R, 1533. Kyle v. Mayor, etc.. 763. Kyle v. Montgomery, 613. Kynaston v. East India Co., 674. La Banque d'Hochelaga v. Murray, S72, La Crosse R R Bridge. 1439. La Farge v. Exchange, etc., Ins., Co., 1020. to the foot-paging.] La Farge v. La Farge Fire Ins. Co., 684. La Farge Fire Ins. Co. v. Bell, 1119. La Fayette v. Cox. 131. La Fayette, etc., Corp. v. Ryland, 212. La Grange v. State Treasurer. 1135, 1154. La Grange & M. P. R Co. v. Mays. 189. La Grange & Memphis R R Co. v. Rainey, 858, B63, B75. Lacey v. Hill. 575, 576, 579. Lacharme v. Quartz. •. 683, 1169. Lackawanna, County of, v. First Nat Bank. 756. Lackland v. North Ma R. R Co., 1534 Lacombe v. Forstall's Sons, Ladd v. Cartwright 889, 306. I -i.l.l v. Chotard, 1581. Ladd v. Southern, etc.. Co., 1601. Lad; Bryan 15. Lady Henlocb v. River Dee Co.. 11-7. Ladywell, eta, Ca v. Brook 911 Lafayt tte Bank v. ink, 1085. tyette < '•■. v. Neely, 1148, 1161. Lafayette, eta, R'y v, Cheeney, 934 Lafayette 1> . French, 998, 1018, 111 Lafayette, Mun .. R R Co. v. Geiger, 184 HO. Lafayette Savings Bank r, St. Louis Stoneware Ca, 1191, 1348, 1244. Lafferty v. Lafferty, 833, Lafond v. Deems, 661, 671, ' c v. Metropolitan, eta, R'y, 1563. Lail v. Mt Sterling I , R I kx, 883. Laing v. Burley, 348. Lain;,' v. Reed, 1 l s 5. Like v. Argyle, 1036, 1040 Lake Erie, etc., R R. v. Griffin, 963. 1 Wl Lake, etc., R R Ca v. Cincinnati, etc., R'y Ca, 1531. Lake Ontario. Auburn & N. Y. R R Co. v. Mason, 111, 112, 113, 159, 168, 170, 174. 181,314 830 Lake Ontario, etc.. Bank v. Onondaga Bank, 859. Lake Ontario Shore R R v. Curtiss, 114, 133. Lake Shore, etc., Bank v. Butter, etc., Co., noa Lake Shore & M. S. R R Co. v. Bennett, 1522, TABLE OF CASES. CXI [The references are Lake Shore R'y v. Cincinnati, etc., R'y, 1516. Lake Superior Building Assoc, v. Thomp- son, 1018. Lake Superior Iron Co. v. Drexel. 57, 66, 72, 418. Lake View v. Rose Hill Cemetery Co., 1517. Lakeside, etc., Co. v. Crane, 882. Lallande t. Prescott, 584. Lamar v. Micou, 435, 441. Lamar Insurance Co. v. Gulick, 259. Lamb v. Anderson, 152. Lamb v. Bowser, 1005. Lamb v. Burlington, etc., 145. Lamb v. Cecil, 989. Lamb v. Lamb, 998. Lamb v. Pannell, 989. Lamb v. San Pedro, etc., Co., 1153. Lambert v. Lambert, 406, 742. Lambert v. Neuchatel Asphalte Co., 724. Lambert v. Northern, etc., R'y Co., 929. I^ambertson v. Van Boskerk, 572, 588. Lamm v. Port Deposit Homestead, etc., 1008. Lamoille, etc., R. R. Co. v. Fairfield, 131. Lamphear v. Buckingham, 1319. Lamson, etc., Co. v. Russell, 1099. Lancashire Co. v. Greatorex, 682. Lancashire R'y v. Gidlow, 1521. Lancaster, Ex parte, 822. Lancaster Canal Navigation Co., Ex parte, 21, 22. Lancaster, etc., R'y Co. v. Northwestern R'y Co., 1511. Lance's Appeal, 1525. Land v. Coffin an, 992, 993. Land Co. v. Bushnell, 993. Land Credit Co. v. Lord Fermoy, 973, 1031. Land Credit Co., In re. 1109, 1192. Land Grant R'y & T. Co. v. Coffey County, 320, 997. Lander v. Logan, 324. Lander v. Tillia, 253. Landers v. Frank, etc., Church, 813, 1107. Landes v. Globe, etc., Co., 1136. Landheim v. White, 661. Landis v. Saxton, 894, 1132. to the foot-paging.] Landis v. Western Pa. R. R, 1474. Lane v. Boston, etc.. R. R. Co., 1112. Lane v. Brainerd, 91, 118, 119, 107. 227, 807, 1061. Lane v. Broughman, 1365. Lane v. Harris, 250, 280, 284, 286, 299. Lane v. Loughran, 741. Lane v. Lutz, 1373. Lane v: Morris, 278, 284, 303. Lane v. Weymouth School District, 1160. Lane v. Young. 347. Lane's Case, 337, 385. Lang v. Dougherty, 16. Lang v. Pennsylvania Ins. Co., 241. Lang, etc., Co. v. Ross, 923. Langam v. Iowa & Minn. Con. Co., 313, 316. Langdon v. Branch, 423. Langdon v. Fogg, 53, 78, 79, 1146. Langdon v. Hillside, etc., Co., 1162. Langdon v. N. Y., etc., R. R, 1518, 1522. Langdon v. Vermont, etc., R. R, 1420, 1463. Langford v. Ottumwa Water-power Co., 252. Langley v. Boston & M. R, R, 1493. Langley v. Little, 632, 810. Langsdale v. Ronton, 1069. Langston v. South Carolina R. R, 1223, 1230, 1231, 1235, 1236. Langton v. Waite, 570, 590, 592, 596. Lankershim, etc., Co. v. Herberger, 174, 697. Lankester's Case, 358. Lanyon v. Smith, 665. Lare v. Westmoreland, etc., Co., 492. Laren v. Franciscus, 356. Larkin, Ex parte, 935. Larned v. Beal, 311. Larrabee v. Badger, 785. Larrabee v. Baldwin, 267. 285, 286, 297, 350, 351. Larsen v. James, 294. Larwell v. Hanover Sav. Fund Soc, 1185. Larymer v. Smith, 473. Lasher v. Stimson, 1003. Latham v. Houston, etc., 1105. Lathrop v. Commercial Bank of Scioto, 987, 991, 999, 1058, 1095, 1173. cxn TABLE OF CASES. [The references are Latlirop v. Junction R R, 1510, 1521. Lathrop v. Kneeland, 98, 268, 381. Lathrpp v. McBurney, 609. Lathrop v. Union Pac. R'y Co., 1174. Latimer v. Eddy, 859, 1152. Latimer v. Union Pacific Ry, 1175. Latourctte v. Clark, 1< »G9. Latrobe v. Western Tel. Co., 890. Lauderdale Co. v. Fargason, 137. Laudman v. Entwistle, 277, 1036. Lauferty v. Wheeler, -309. Lauman v. Lebanon Valley R. R. Co.. 629, 633, 640, 858, 956, 958, 1500, 1508. Laurel Fork, etc., R R Co. v. Weal Va.. etc., Co., 1513. Lavasseur v. Mason and Barry, 1428. Law v. Conn., etc., R R, 1048. Law Guarantee, etc., Soc. v. Bank of England, 531. Lawe's Case, 337. Lawler v. Burt. 292, 398, 801. Lawler v. Rosebrook, 296. Lawnda v. Lawnds, 109. Lawrence v. Fox. 1832. Lawrence v. Gebbard, 1055. Lawrence v. Greenwich Fire Ins. Co., 855,859, 981, 1156. Lawrence v. Holmes, etc., 1118. Lawrence v. Lawrence. 1226, Lawrence v. Maxwell. 57::. 592, 600. Lawrence v. Morgan's, etc., S. S. Co., 1513. Lawrence v. Nelsor 240,300. Lawrence's Case, 195. Lawrence, Ex parte, 208. Lawrence, etc., Co. v. Rockbridge Co., 1412. Lawrenceville, etc., Co. v. Parker, 982. Lawson v. Milwaukee, etc., R, R Co., 137. 147. Lawson v. Stanley, 1137. Lawton v. Kittredge, 470. Laxon & Co., Re, 334. Lay v. Austin, 1104. Laybourn v. Seymour, 1430. Layng v. A. French, etc., Co., 426. Le Blanc. Matter of, 714, 1369. Le Cray v. Eastman, 590. LEngle v. Florida, etc., R R. 1463. to the foot-paging.] Le Roy v. Globe Ins. Co., 714, 716, 727. LeWarnev. Meyer, 53, 310, Hi Lea v. American Atlantic, etc., Canal Co., 863. Leach v. Fobes, 460. Leach v. People, 1057. Leake v. City of Philadelphia, 1573. Leake v. Watson, 569. Lean v. Lean. 712. Learned v. Burlington. 142. Leasure v. Union, etc., Ins. Co., 1178 Leatherman v. Times Co., 1164. Leathers v. Janney, 589, 980, 959. Leathers v. Shipbuilders' Dank, 1436. Leavenworth v. Hunt. 1 Leavenworth v. Norton, 142. Leavenworth County v. Chicago, etc.. R R, 932, 1127. 1246, 1353, 1494. enworth County v. Miller, 181, 134, 137, 141. Leavenworth, etc., R R Co. v. Douglas Co.. 134, 115. Leavett v. Pell, 34 Leavitt v. Blatchford, 666, 1190, 1193, 1201. Leavitt v. Fisher. 515, 519, 527. Leavitt v. Oxford, etc., Co., 822, 1005, 1070. Leavitt v. Palmer, 984 L avitt v. Tyl< r, 666. Leavitt v. Yates, 666, 985, 1055, 101 Leazure v. Hillegas, 992, 993, 1100. Lebanon, etc.. Co. v. Adair, 1059. Lebanon Savings Dank v. Hollenback, 999. Lechmere Dank v. Doynton, 796. Ledwick v. McKim. 119s. 1221. Lee v. Citizens' Nat Dank, 499, 602, 614. 688, 701. Lee v. Granger. 128. Lee v. Neuchatel Asphalte Co., 725. Lee v. Pittsburg Coal & Mining Co., 1078. Lee v. Pittsburgh, etc., Co., 1092. Lee v. St urges, 751. Lee County v. Rogers, 132. Lee's Dank of Buffalo, Matter of, 629. Lee's Dank of Buffalo, Re, 629, 887. Leech v. Harris, 661, 1025. Leed & Evensburg Turnpike Co. v. Phillips, 633. TABLE OF CASES. CX111 [The references are Leeds, etc., R'y Co. v. Fearnley, 107. Leeke's Case, 908. Lefevre v. Lefevre, 3. Lefray v. Gore, 1036, 1038. Legendre v. New Orleans, etc., Ass'n, 674, 676. Leggett v. Bank of Sing Sing, 687, 688, 692, 693. Leggett v. New Jersey, M. & B. Co., 1075, 1100, 1101. Legrand v. Hampden-Sidney College, 1095. Legrand v. Manhattan, etc., Assoc, 930. Lehigh v. Lehigh, etc., Co., 1020. Lehigh Bridge Co. v. Lehigh Coal & Navigation Co., 863. Lehigh Coal, etc., Co. v. Central R R, 1412. Lehigh, etc., Co. v. Central R R, 1242, 1438, 1439, 1476. Lehigh, etc., Co. v. Commonwealth, 769. Lehigh, etc., R R v. Orange, etc., Co., 1598. Lehigh, etc., R'y Co.'s Appeal, 14, 1186, 1187. Lehigh Valley Coal Co. v. Hamblen, 1013. Lehigh Valley R R v. Pennsylvania, 777, 1947. Lehigh Valley R R Co. v. McFarlan, 1524. Lehigh Water Co. v. Easton, 1944. Lehigh Water Co.'s Appeal, 1597. Lehman v. Feld, 475. Lehman v. Glenn, 94, 243, 266. Lehman v. Semple, 94, 243. Lehman v. Strassberger, 472, 475. Lehman v. Tallassee, etc., Co., 1195, 1223, 1227, 1261, 1352, 1370, 1401, 1406. Leibke v. Knapp, 188. Leifchild's Case, 327, 972. Leigh ton v. Campbell, 275, 277. Leighty v. Pres. of S. & W. T. Co., 221. Leinkauf v. Caiman, 1094. Leitch v. Wells, 429, 442, 502, 503, 545, 547, 586, 744. Leland v. Hayden, 417, 739, 740. Leloup v. Mobile, 1947. Lemon v. Pullman P. Car Co., 1600. Lenawee, etc., Bank v. City of Adrian, 757. to the foot-paging.] Lennox, etc., Co., Re, 209. Leo v. Union Pacific R R Co., 814, 1143, 1149, 1152, 1263. Leominster, etc., Co. v. Shrewsbury, etc., R'y, 1044. Leonard v. Burlington, etc., Ass'n, 1087. Leonard v. Davenport, 665. Leonard v. Poole, 449. Leonard v. Spencer, 16. Leonard v. Washburn, 1178, 1588. Leonardsville Bank v. Willard, 233, 878, 879, 1167. Leonberger v. Rowse, 755. Lepage Co. v. Russia, etc., Co., 949. Lesher v. Karshner, 125, 237. Leslie v. Lorillard, 646, 952, 969, 974, 982, 1148, 1512. Lessassier v. Kennedy, 355. Lesseps v. Architects' Co., 173, 180. Lester v. Buel, 470. Lester v. Howard Bank, 986. Lester v. Webb, 1055, 1084. Levering v. Mayor, etc., 1095, 1099. Levi v. Lynn, etc., R R, 1571. Levick's Case, 97. Levisee v. Shreveport, etc., R. R Co., 925. Levita's Case, 97. Levy v. Abercorris, etc., Co., 1251, 1252, 1253. Levy v. Loeb, 565, 578. Levy v. Mutual L. Ins. Co., 1587. Lewey's Island R R Co. v. Bolton, 178, 181, 182, 222, 226. Lewis v. Bank of Kentucky, 1166, 1172. Lewis v. Barbour Co., 133. Lewis v. Brainard, 673, 674, 675, 680. Lewis v. Chicago, etc., R'y, 1548. Lewis v. City of Shreveport, 131. Lewis v. Clarendon, 138, 156. Lewis v. Coates, 466. Lewis v. Glenn, 93, 243, 988. Lewis v. Graham, 585, 596, 603, 604, 605, 606. Lewis v. Hartford Mfg. Co., 1296. Lewis v. Meier, 61, 903, 1006. Lewis v. Montgomery, 1189. Lewis v. Mott, 592. Lewis v. New York, etc., Iron Co., 52. Lewis v. Robertson, 248. Lewis v. Ryder, 303. CXIV TABLE OF CASES. [The references are Lewis v. St. Albans, etc., Works, 948, 1146. Lewis v. St Charles Co., 272. Lewis v. Seifert, 1434. Lewis v. Tilton, 668. Lewis v. Wilson, 661. Lewis' Case, 167, 925. Lex v. Potters, 611. Lexington, etc., R R Co. v. Bridges, 735. Lexington, etc., R R Co. v. Staples, 181. Lexington Life, etc., Ins. Co. v. 1 726, 729, 732, 733. Lexington & West Cambridge R R Co. v. Chandler, 170, 181, 188, 884, 030. Libbey v. Hodgdon, 1176. Libby v. Ahrens, 668 Libby v. Tobey. 74, 863, -'76, 343. Liberman v. Chicago, etc., R R. 1549. Liberty Female College Associati"ii v. Watkins, 278. Licensed, etc., Ass'n, Re, 29. Liebke v. Knapp, 33. Liebscher v. Kraus, 1104. Life Association of America v. Fassett, 889, 893. Life Assoc, In re, 1366. Life, etc., Ins. Co. v. Mechanic, etc., Co., 983, 1074, 1185. Ligare v. City of Chicago, 1565. Liggett v. Glenn, 94, 86, 1843, 148a Liggett v. Ladd, 670. Lighte v. Everett Ins. Co., 1166. Lightfoot v. Creed, 489. Lighthall, etc. Co.. Matter of, 812. 821. Lightner's Appeal, 586. Ligonier Valley R R Co. v. Williams. 121. Lillard v. Porter, 1163. Lilley v. Rankin, 477. Lily v. Com' is. 760. Lima Gas Co. v. Lima, 1585. Lime Rock Bank v. Macomber. 1093. Limerick Academy v. Davis, 1094. Lincoln v. Cambria Iron Co., 147. Lincoln v. Wright, 170. Lincoln Comity v. Liming, 135. Lincoln, etc., Bank v. Richardson, 861, 887. to the foot-paging!] Lincoln Nat'l Bank v. Portland, 1477. Linder v. Carpenter. 905. Lindsay v. Gladstone, 684. Lindsay v. Hyatt. 301. 304. Lindsay, etc. Co. v. Hurd, 912, 913, 915. Lindsi y. Earl of, v. Great Northern R'y, 101"). Lindsley v. Simonds. 250, 30& Lingard v. Bromley, 1159. Ling'-r. l'.x part''. 191. Lingle v. National Ins. Co., 299, 936. Linnard, Appeal of. Lion, etc.. In-. Co v. Tucker, B88. Lion ■ ■ Broadway, < I Lioii \. Rowse, 761, ~^'>. Lippetl v. American Wood Paper Co., 616, 6243. Lippincott v. Pans, 1 11, 145. Lippincott v. Si iaw Carriage C •. 84a Liquidators, etc., v. Douglas, 1088. Liquidators of the British Nation Life Assurance Assi h iatioi . B "'$6. Liahman'e I him. 164, 11 List v. Wheeling, ill. Litchfield v. White, 10 Litchfii Id's Litchfield Bank v. Church, 189. 807,818, •:\\> ;. no:. Litchfield Bank v. Peck, 210. Litchfield Iron Co. v. Bennett, 1056. Liter r. Ozokerite Mia G . Littell v. Scranton Gas ft Water Little v. Barker, 687, 50a Little v. Dusenberry, 1 1"»7. Little v. O'Brien, 846, 984 Little Miami, etc., R. R. Co v. Dayton, 1589. Little Rock. Bank of. v. Mc< arthy, 1060. Little Rock, etc., R'y v. Hanniford, 1516. Little Rock, etc., R'y v. Huntington, 1240, 1202. Little Rock, etc., R'y Co. v. Page, 940, 1365, 1385. Little Rock, etc., R R v. Perry, 1043. Littledale. Ex parte, 693. Littlefield v. Fitchburg R Co., 1515. Littleton Manuf. Co. v. Parker, 222. Litzenberg v. Jarvis, etc., 1399. TABLE OF CASES. CXV [The references are to the foot-paging.] Live-stock Assoc, etc., v. Levy, 647. Livermore v. Bushnell, 449. Liverpool, etc., Ass'n, Re, 227, 1030, 1033, 1073. Liverpool, etc., Co. v. Phenix, etc., Co., 1536. Liverpool Ins. Co. v. Massachusetts, 321, 666, 775, 997, 1945, 1947. Livesey v. Omaha Hotel, 222, 229. Livingston v. Lynch, 626, 668, 670, 814, 856, 954. Livingston v. Pittsburg, etc., R, R. Co., 105. Livingston v. Rogers, 93. Livingston Co. v. Hannibal & St J. R. R Co., 771. Livingston County v. Portsmouth Bank, 155. Lloyd v. Loaring, 670. Lloyd v. Preston, 65, 67, 340, 1211. Lloyd v. Wagner, 1234. Lloyd, Ex parte, 1047. Loan Ass'n v. Stonemetz, 923, 924. Loan Ass'n v. Topeka, 138, 139. Loaners' Bank v. Jacoby, 879. Locke v. Yenables, 741, 745. Lockhart v. Craig St R'y Co., 1560, 156a Lockhart v. Little Rock, etc., R R, 1483. Lockhart v. Van Alstyne, 16, 361, 369, 374, 378, 702, 721. Lockport v. Weston, 14, 751. Lock wood v. Brantly, 599. Lockwood v. Mechanics' National Bank, 547, 687, 701, 853, 1065. Lockwood v. Thunder, etc., Co., 1054. Loder v. N. Y., etc., R R. 1388. Lodge v. Philadelphia & W. B. Co., 1525. Logan v. Earl of Courtown, 104 Logan v. McAllister, 888. Logan v. Vernon, etc., R. R, 867. Logan v. Western, etc., R R, 893. Logan County Bank v. Townsend, 969, 973. Lohman v. New York, etc., R. R Co., 383, 1058, 1070. Lollande v. Ingram, 585. Lombard, etc., R'y Co. v. Christian, 1111. Lombardo v. Case, 580. Londesborough v. Somerville, 744. 745. London v. City of Wilmington, 747. London v. Lynn, 1018. London Assurance Co. 's Case, 1120. London, Bank of, v. Terrell, 911. London & B. R'y Co. v. Fairclough. 175, 178, 343, 345, 347. London & C. Ins. Co. v. Redgrave. 225. London, etc., Assoc, v. Clarke, 448. London, etc., Assoc, v. Kelk, 1130. London, etc., Assoc, v. London, etc., Life Ins. Co., 1014. London, etc., Assoc, v. Wrexham, etc., R'y Co., 366, 1466, 1478. London, etc., Bank v. Simmons, 1223. London, etc., Co. v. Central T. Co., 493. London, etc., Co. v. London, etc., Bank, 494, 1226. London, etc., Co., Re, 46, 97, 414, 442. 801, 958, 1236. London, etc., R'y v. Freeman, 347. London, etc., R'y v. McMichael. 167, 1 108. London, etc., R'y Co. v. London, etc., R'y Co., 1502. London Financial Ass'n v. Kelk, 28. London India Rubber Co., In re, 379, 862. London & Mercantile Discount Co., In re, 862. London & N. W. R'y v. Evershed, 1519, 1521. London & Prov. Consol. Coal Co., Re, 212. London & Staffordshire Fire Ins. Co., Re, 207. London Suburban Bank, In re, 861. Londonslager v. Benton, 1374. Long v. City of Duluth, 1597. Long v. Daugherty, 990. Long v. Long, 999. Long v. Georgia, etc., R'y, 881. Long v. New London, 133. Long v. Penn. Ins. Co., 240. Long v. Stewart, 436. Long Branch, etc., R. R v. Sneden, 1415. Long Branch, etc., R. R, Matter of, 1415. Long Island, etc., Co. v. Terbell. 929, 930. Long Island R R Co., Matter of. 173. 804, 825, 826, 839, 840, 841. CXV1 TABLE OF CASES. Long Island T. Co. v. Terbell, 928. Lonsdale Iron Co. v. Porneroy Iron Co., 339. Longdale's Settlement Trusts, 409. Longley v. Boston & Maine R R, 1530. Longley v. Little, 302, 349. Longley v. Stage Line Co., 16. Longmont, etc., Co. v. Coffman, 1063. Loomis v. Davenport, etc., R R, 1387. Loom is v. Eagle Bank, 1119. Lord v. Brooks, 739. Lord v. Governor, etc., of Copper Mines, 899. Lord v. Hutzler, 354. Lord v. Yonkers, etc., Co., 1200, 1300. Lord Belhaven's Case, ITT, 212, 217. Lord Londesborough's Case, 976. Lord Talbot's Case, 277. Lordell v. Stowcll, 789. Lorillard v. Clyde, 43, 51, 1046, 1251, 1517. Loring v. Brodie, 437, 439, 1116. Loring v. Salisbury Mills, 417, 440. Loring v. U. S, etc., Co., 991. Loring v. Woodward, 404. Losse v. Bullard, 278, 864. Lothrop v. Stedman, 627, 868, 886, 889, 892, 1141. Lou bat v. Le Roy, 661. Lough v. Outti bridge, 768, 1599. Loughborough v. MFNevin, 596. Louis Hosp. Ass'n v. Williams' Adni.. 1019. Louisiana v. American Cotton Oil Tru>t, 653. Louisiana v. Bank of Louisiana, 719. Louisiana v. Taylor, 141, 112. Louisiana v. "Wood, 1153. Louisiana Ins. Co. v. Gordon, 345. Louisiana Paper Co. v. Waples, 255, 861. Louisiana State Bank v. Senecal, 1119. Louisville v. Savings Bank. 140, 141. 142. Louisville, Bank of, v. Gray, 430, 184, 716. Louisville, City of, v. President, etc., 634, 810. Louisville City Ry v. Louisville. 1571. Louisville, C. & C. R R Co. v. Latson, 1170, 1173, 1948. Louisville, etc., Co. v. Barbour, 757. [The references are to the foot-paging] Louisville, eta, Co. v. Eisenman, 1051. Louisville, etc., R R v. Boney, 963, 1512, 1516. Louisville, etc., R R v. Cauble, 1435. Louisville, etc., R R v. Commonwealth, 134, 770, 7?-!. Louisville, etc., R R v. County Court, 137. Louisville, etc., R R v. Gilbert, 1" Louisville, etc., R R v. Letson, 2, 1948. Louisville, etc.. R R v. Literary, etc.. 97D, 1064. Louisville, etc., R R v. Louisville City Ry. 1556. Louisville, etc., R R v. KisBissippi, 1047. Louisville, etc, R R v. State, 746. Louisville, etc., R R v. Tennessee, 148. Louisville, etc, R R v. Palmer, 1483, 1941. Louisville, etc, R R v. Wilson, 274, 1857, 1 (59. Louisville, etc., T. R Co. v. Ballard. 628, Louisville, etc., Turnpike Co. v. M. n- wether, 170. 181. Louisville Gas Co. v. Citizens' Gas < '•>.. 1944 Louisville ft N. R R Co. v. Common- wealth, 1012. Louisi ill-' & N. R R Co. v. Palmer, 771. Louisville ft N. R R Co. v. State, 1012. Louisville ft N. R. R v. Tenn. R R Co., 1513. Louisville A: Nash. R. R Co. v. Thomp- son, isa Louisville, Second National Bank <>f, v. National State Bank of New Jersey, 70L Louisville Transfer Co. v. American District Telephone Co., 1596. Louisville Underwriters, In re, 1180. Louisville Water Co. v. Clark, 3, 638, 773. 1945. Love v. Harvey, 469. Lovejoy V. Michels. 645. Loveland v. Alvord, etc., Co., 621. Lovell v. Mi not, 434, 740. Lovett v. German Reformed Church. 1057. Lovett v. Steam, etc, Assoc, 1099, 1100, 1102. TABLE OF CASES. CXV11 [The references are Loving v. Marsh, 1341. Low v. Buchanan, 2S8, 289. Low v. Central Pac. R R, 1247. Low v. Connecticut & R R R, 1538. Low v. Studebaker, 189. Lowe v. Edgefield & K. R R Co., 118, 124. Lowe v. Thomas, 23, 407. Lowe's Case, 348, Lowell v. Boston, 138, 139. Lowell, City of, v. Morse, 1019. Lowndes v. Garnett, etc., Co., 902, 1185. Lowne v. American Fire Ins. Co., 714. Lowry v. Chicago, etc., R R, 1518. Lowry v. Commercial & Farmers' Bank of Baltimore, 442, 444, 547, 586. Lowry v. Dillman, 476, 477. Lowry v. Inman, 251, 271, 283, 291, 292, 294, 323. Lowten v. Colchester, 1170. Luard's Case, 105, 106, 336. Lubbock v. British Bank, etc., 726. Lubricating Oil Co. v. Standard Oil Co., 205. Lucas v. Bank of Darien, 1119. Lucas v. Bank of Georgia, 1173. Lucas v. Beach, 1038. Lucas v. Pitney, 982, 1185, 1190. Lucas v. White, etc., Co., 1246, 1248. Lucas v. White Line Transfer Co., 1243. Luce v. Manchester, etc., R R Co., 442. Ludlam's Estate, 405, 411. Ludlow v. Hurd, 1364, 1383. Luffman v. Hay, 564. Luling v. Atlantic Mutual Ins. Co., 712, . 713. Lum v. Robertson, 889. Lumbard v. Aldrich, 999. Lumbard v. Stearns, 1527. Lumpkin t. Jones, 875. Lumsden's Case, 106, 334, 428. Lund v. Wheaton, etc., Co., 617. Lund's Case, 358. Lung Chung v. Northern Pac. R'y Co., 1179, 1183. Lungren v. Penned, 913. Luse v. Isthmus, etc., Ry Co., 1075. Lyceum v. Ellis, 1205. Lycoming Count}' v. Gamble, 751. Lycoming F. Ins. Co. v. Longley, 1173. to the foot-paging .] Lycoming F. Ins. Co. v. Wheelock, 1005. Lyde v. Eastern Bengal R'y Co., 1534. Lydney, etc., Co. v. Bird, 911, 913, 914, 915. Lyman v. Boston, etc., R R Co., 1516. Lyman v. Central Vt. R. R.. 1433, 1446. Lynch v. Eastern, etc.. R R Co., 156. Lynch v. Macdonald, 598. Lynch v. Metropolitan E. R Co., 1009. Lynchburg. City of, v. Slaughter, 131. Lynde v. County, 1098, 1203. Lyndeborough Glass Co. v. Mass. Glass Co., 972, 1093. Lyndon Mill Co. v. Lyndon, etc., Inst., 1064, 1074. 1114. Lyne v. Siesfield, 474. Lyneborough,.etc, Co. v. Mass., etc., Co., 1089. Lynn v. Freemansburg, etc., Assoc, 1022. Lyon v. American, etc., Co., 678. Lyon v. Culbertson, 469, 472. Lyon v. Denison, 612, 660. Lyon v. Ewings, 34. Lyon v. Jerome, 1071, 1073. Lyons v. Hodgen, 470. Lyons v. Munson, 146. Lyons v. Orange, etc., R. R Co., 635, 888. Lyons' Case, 225. Lyons, Bank of, v. Demmon, 214, 465, 1086. Lyons, First Nat. Bank of, v. Oskaloosa Packing Co., 475, Lyons, Town of, v. Chamberlain, 136. Lyster's Case, 180, 1065. M. Maas v. Missouri, etc., R'y, 1197. 1198, 1226, 1302. MacDougall v. Gardiner, 799, 814, 815, 899. MacGregor v. Dover, etc.. R'y. 1038. MacKellar, etc., Co. v. Commonwealth, 751. MacNaughton v. Osgood, 926. Macalister v. Maryland, 1277. Macalister's Adm'r v. Maryland, 1367. Macauly v. Robinson, 175, 177. CX 7111 TABLE OF CASES. [The references are MacdonaU v. Trojan, etc.. Co., 966. Macdougall v. Jersey Imperial Hotel Co., 728. Macedon & B. P. R Co. v. Lapham, 234. Macedon & Bristol Plank Road Ca v. Snediker, 122. Machinists' Bank v. Dean, 667. Machinists' National Bank v. Field, 384, 505, 509. Mack v. De Bardelaben, etc., Co., 796, 843, 1151. Mack, Appeal of, 128. 242. Mackay v. Bank of New Brunswick Mackay v. Commercial Bank, etc.. 191, 1007. Mackintosh v. Flint, etc., R R. 1170. Maekley's Case, 96. 9 Maclae v. Sutherland, I Maclaren v. Stainton, 742. Macon v. Western R R. 1 n & AuguM i EL R Co. v. Y 163, 166, 168, 171. 175. 176, 183, 215. >n, County of, v. Shores, l - Macon, etc., R R v. Georgia, eta, R R, 1245, 1251, 1387, 1388, 1313, 1830, 1336. Macon, etc., R R v. Parker, 1414. Macon, etc., R R v. Stain; Macon, Mayor, etc., of, v. First Nat'l Bank, 760. Macuee v. Persian, etc.. Corp., 8, 316, 970. Maddick v. Marshall, 1036. Maddox v. Graham. 134 Madison & I. R R Co. v. Norwich Sav- ings Soc, 1191, 1245. 1249. Madison Ave., etc., Church v. Baptist Ch., etc., 815, 996, 115:;. Madison Co. v. People, 133. Madison County v. Priestly, 19 Madison County Court v. Richmond, etc., R. R Co., 152. Madison, etc., Co. v. Watertown, etc., Co., !>S2. 1245, 1591. Madrid Bank v. Pelly, 908. Maeuhaut v. New Orleans, 143. Magdaleua, etc., Co., In re, 1130. Magdalena Steam Nav. Co. v. Johnson, Re, 1186. Magee v. Atkinson, 570, 577. Magee v. Badger, 34. to the foot-paging.] Magee v. Genesea Acad., 859. e v. Mokclumne Hill C. & M. Co., 1185, 1190. il v. Kauffman, 1068, 1094, 1110, 1111. Magnin v. Dirsmore. 1537. Magnus v. ^u.enslaud, etc., Bank, ruder v. Cotot n. 880, 853, 857. Maguire v. Board of Revenue, 762. Maguire'e Case, 847, " Magwood v. Patterson, 6 Magwood v. P. R Bank, 440. Mahan v. Wood, 102. 190, 63a Maliey v. Adams. 805, 206. Mahon v. Macy, Mahoney v. Atlantic & St L R R, 1588. Mahoney v. East, etc.. Co., 1 Mahoney v. Spring, Mahoney Mm. C . ■ B mm tt. '.»17. Main v. Mil Main, etc., i !o. v. Lotspeich, Maine v. Grand Trunk. 1 t'-.. K'y, 777, 111 17. Maine Stage Co. v. Longley, 1095. Maitland . 854, 1086, 1078. Makins v. Percy Ibotson & Sons, 1 113. Malecek v. Tower, etc., R R. 1112. Malleck v. Tower Grove & L. R'y Co., 1011. Mallett v. Uncle Sam G. & S. M. Co., in:,7. Mallorie'a Ca Mai lory v. Hanover, etc., Works, 648. Mallory v. Mallory, etc., Co., 926. Mai lory v. Russell, 685. Mallory v. West Shore, etc., R R, I 1302. Malloy v. Mallett, 889. Malone v. Crescent etc., Co., 1100. Maltby v. Northwestern, etc., R R Ca, 105, 232. Mai thy v. Reading & Columbia R R Co., 755, 770. 1201. Mammoth Copperopolis of Utah, In re, 733. 735. Manchester, etc., Case, 330. Manchester, etc., R R v. Concord R R, 1406, 1505. Manchester, etc.. R R v. Flak, 1071. TABLE OF CASES. CX1X [The references are Manchester, etc., R'y v. Brown, 1185. Manchester, etc., R'y v. Denaby,etc.,Co., 1522. Manchester, etc., R'y, Re, 1410, 1411, 1419. Manchester, etc., Works v. Truesdale, 1400. Manderson v. Commercial Bank, 972, 973, 1106, 1125. Mandeville v. Riggs, 277, 670. Mandion v. Fireman's Ins. Co., 356. Mandlebaum v. North Am. Min. Co., 396, 511, 546. Mangels v. Donau, etc., Co., 1327. Mangels v. Grand Collier Dock Co., 189. Manhattan Bank v. Walker, 439, 595. Manhattan Beach Co. v. Harned, 396, 398. Manhattan Co. v. Lydig, 1090. Manhattan, etc., Co. v. Dayton, etc., Co. 1586. Manhattan H. Co. v. Boland, 1133, 1294 Manhattan Hardware Co. v. Phelan, 1108, 1140, 1186. Manhattan R R Co. v. New York EL R R Co., 1159. Manhattan R'y Co. v. N. Y. El. Co., 930. Manheim, etc., Co. v. Arndt, 633. Manistee, etc., Co. v. Union, etc., Bank, 103. Manisty's Case, 177. Manlove v. Burger. 1431. Mann v. Butler. 672. Mann v. Chandler, 1104 Mann v. Cooke, 56, 174, 176, 189, 263. Mann v. Currie, 82, 176, 332. Mann v. Edinburgh, etc., Co., 914 Mann v. Pentz, 159, 161, 255, 257, 258, 259, 261, 262. Mann v. People, 977. Mann v. Williams, 453. Mann's Case, 333, 358, 359. Manneck, etc., Co. v. Manneck, 1156. Manning v. Norfolk, etc., R R, 1232, 1237. Manning v. Quicksilver Mining Co., 376, 708, 711, 714 Manns v. Brookville National Bank, 22, 583, 613. Manserge v. Campbell, 410. to the foot-paging.] Mansfield & New Lisbon R R. Co. v. Smith, 124 Mansfield, Coldwater & Lake Mich. R. R Co. v. Stout, 123, 124, 234 Mansfield, etc., R R Co. v. Brown, 123, 1499, 1507. Mansfield Iron Works v. Willcox. 283, 285. Manufacturers', etc., Bank v. O'Reilly. 932. Manufacturers' Nat'l Bank v. Baack, 1183, 1948. Manufacturing Company v. Bradley, 280. Manville v. Belden Mining Co., 1109, 1186. Manville v. Edgar, 292. Manville v. Karst, 299. Many v. Beekman Iron Co., 683, 1103, 1146. Mapes v. Second Nat'l Bank, 1112. Mapes v. Scott, 987, 993. Mape's Estate, In re, 413. Mappier v. Mortimer, 303. Marbury v. Ehlen, 440. March v. Atlanta, etc., R. R., 1306. March v. Eastern R. R Co., 479, 641, 710, 948, 1144, 1246, 1495, 1504, 1540. Marchaud v. Loan, etc., Assoc, 1048. Marcy v. Clark, 286, 356, 357. Mare v. Charles, 1105. Maria Anna, etc., Coal & Coke Co., Re, 338. Marie v. Garrison, 821, 822, 1144, 1475. Marietta & Cin. R. R Co. v. Elliott, 633, 634 Marietta, Bank of, v. Pindall, 1173. Marin Mansions Co., Re, 1252, 1253. Marine Bank v. Ogden, 967. Marine Bank, etc., v. Clements, 1076, 1080. Marine Bank of Baltimore v. Biays, 715, 1018. Marine &F.LB. Co. v. Jauncey, 1173. Marine M. Co., Re, 164, 1362. Mariners' Bank v. Sewall, 860. Marino's Case, 348. Marion County v. Harvey Co., 155. Marion Savings Bank v. Dunkin, 986. Market, etc., Bank v. Stump, 971. cxx TABLE OF CASES. [The reference* are Market Nat Bank v. Pacific Nat. Bank, 1175. Market St R'y v. Central R'y, 1551. Markey v. Langley, 1320. Markham v. Jaudon, 572, 574, 576, 588, 603, 789. Markoe v. Hartranft, 750 Mark well's Case, 1037. Marlborough Branch R R Co. v. Ar- nold. 94, 227. Marlborough Mfg. Co. v. Smith. 345, 347, 522, 547, 631. Marlor v. Texas, etc., R'y. 1 238, 1 2 10, 1 2 13. Marquette, etc., R R. Co. v. Taft 1089. Marquis of Abercorn's Case, 89. Marryatt v. Bank of England, 444. Marseilles Extension R'y Co., Re, 414, 1120. Marsh v. Burroughs, 159, 160, 166. 171, 255, 257, 259, 260, 261, 266, 268, 269. Marsh v. Burley, 1868. Marsh v. Fairbury, etc., R R Co., 1539. Marsh v. Fulton Co., 131. 156. Marsh v. Keating, 505, 576, 783. Marsh v. Stone, 505. Marshall v. Baltimore & Ohio R R Co., 1171, 1538, 1539, 1948. Marshall v. Farmers', etc.. Bank. 1032. Marshall v. Glamorgan Iron & Coal Co., 214. Marshall v. Golden Fleece, etc., Co., 184 Marshall v. Loveless, 670. Marshall v. National, etc.. Bank of Eng- land, 485. Marshall v. Queensborough, 1068. Marshall v. Thurston, 475, 477. Marshall v. Western, etc., R R, 154, 963, 1484. Marshall, etc., Co. v. Killian, 189, 249. Marson v. Deither, 239, 261. Marten v. Gibbon, 567, 715. Martens v. International, etc., Soc, 1174. Martin v. Central, etc., R R., 1018. Martin v. Continental Railway Co., 955, 1500, 1506. Martin v. Fewell, 309, 325. Martin v. Hill, 483, 494. Martin v. Merriweather, 1238. Martin v. Mobile & O. R R Co., 615, 997, 1544. to the foot-paging.] Martin v. Niagara, etc., Mfg. Co., 1056, 1080. 1081, 1082, 1109, 1110, 1244, 1248, 1261, 1265. Martin v. Pensacola R R Co., 126, 639, 640. Martin v. Second, etc., R'y Co., 1558. Martin v. Sedgwick, 484. Martin v. Somerville, etc., Co., 1227, 1324, 1338, 1476. Martin v. Walton, 1122. Martin v. Webb, 1086. 1116. Martin v. Williams. 676. Martin v. Zellerbach, 964. Martin's Estate, 466. Martin. Matter of, 070. Martindale v. Wilson, etc., Co., 92$. Martinius v. Helmuth, 527. Martino v. Commerce, etc., Co., 1024. Martinsburg, etc., R R v. March, 1548. Marye v. Strouse, 560. 567. Maryland, Farmers" Hank of, v. Iglchart, 687. Maryland Fire Ins. Co. v. Dalrymple, 004, 606, 781, 782. Marysville. etc., Co. v. Johnson, 113. Marysville, etc., Co. v. Munson, 890. Marzette's Case, 415. Mashur v. St. Louis, etc., R R Co., 1534. Masoinberd's Settlements, Re, 486. Mason v. Alexander. 287, 290, 350, 356. Mason v. Cronk. 976, 1251. Mason v. Davol Mills, 386. Mason v. Decker, 465. Mason v. Harris. 900, 915. 1115. 1149. Mason v. New York Silk, etc., Co., 279. Mason v. Pewabic Min. Co., '.HO. 958. Mason v. York, etc.. R. R. 1202, 1271, 1299, 1322. Masonic, etc.pAssoc. v. Channell, 187, 228. Masonic, etc., Co. v. Sharpe, 736. Massachusetts v. Western U. Tel. Co., 777. Massachusetts, etc., Can. Co. v. Cherokee, 144. Massachusetts, etc., Ins. Co. v. Chicago, etc., R R, 1325, 1329. 1343. 1460. Massachusetts Iron Co. v. Hooper. 686. Massey v. Bldg. Ass'n, 878. Masters v. Rossie Lead Min. Co., 257. 269, 288, 305, 1146. TABLE OF CASES. CXXI [The references are Master's Case, 342, 357, 358, 448. Masterton v. Boyce, 455. Mather v. Eureka, etc., Co., 929. Mathews v. Theological Seminary, 997. Mathez v. Neidig, 255, 279. 283, 299, 300. Mathis v. Pridham, 70, 120, 122, 210, 240, 241, 243, 248, 256, 265. Matson v. Alley, 1074. Matthewman's Case, Mrs., 105, 106. Matthews v. Albert, 240, 269, 272, 284, 288, 300, 305, 330. Matthews v. Associated Press, 662, 1023. Matthews v. Cady, 456. Matthews v. Coe, 790. Matthews v. Dubuque Mattress Co., 1105. Matthews v. Great Northern, etc., R'y Co., 366, 374, 375. Matthews v. Hoagland, 413. Matthews v. Massachusetts Nat'l Bank, 504, 505, 517, 519, 548, 1085. Matthews v. Murchison, 423, 1311, 1331, 1471. Matthews v. Patterson, 274. Matthews v. Skinner, 987. Matthews v. Theological Seminary, 998. Matthews v. Trustees. 853. Mattingly v. Roach, 433, 459. Mattison v. Demarest, 1158. Maturin v. Tredinnick, 482, 495, 913. Maund v. Monmouthshire Canal Co., 1009. Mauney v. High School Mfg. Co., 1018. Maunsell v. Midland Great Western R'y Co., 104, 422, 1508, 1538. Maupin v. Virginia, etc., Co., 1091. Maustin v. Durgin, 661. Maux, etc., Co. v. Branegan, 923. Maxted v. Fowler, 479, 488, 787. Maxted v. Norris, 569. Maxted v. Paine, 563, 569, 579. Maxton v. Gheen, 472, 473. Maxwell v. Atchison, etc., R. R, 1179. Maxwell v. Dulwich College, 1068. Maxwell v. Port Tennaut Co., 462. Maxwell's Case, 323. Maxwell's Trusts, In re, 743. May v. Block, 295. May v. Grave, 408. May v. Memphis Branch R R Co., 229, 246. to the foot-paging.'] May v. Printup, 1342, 1416. Maybin v. Kirby, 500, 589. Mayer v. Child, 465. Mayer v. Denver, etc., R R, 1137, 1138, 1146. Mayer v. Fort Wayne, etc., Co.. 1481. Mayers v. Manhattan Bank, 316. Mayers v. York & Cumberland R R Co., 37. Mayhew v. West Va., etc., Co., 1359. Mayhew's Case, 344, 348, 665. Mayle v. Landers, 1147. Maynard v. Board, etc., 820. Maynard v. Bond, 142,?. Maynard v. Eaton, 358. Maynard v. Fireman's Fund I. Co., 1008. Maynard v. Lumberman's Nat'l Bank, 601. Maynard v. Tilden, 599. Maynard's Case, 34, 36. 77. Mayo v. Knowlton, 485, 494, 495, 566, 590. Mayo v. Moritz, 654. Mayor v. Baltimore & O. R R Co., 423, 1493, 1505. Mayor v. Burgesses, 1017. Mayor v. Wylie, 1107. Mayor & Commonalty of Colchester v. Lotten, 1220. Mayor, etc., v. Bailey, 1009. Mayor, etc., v. Dry Dock, etc., R R, 1571. Mayor, etc., v. Houston, etc., R'y Co., 1554, 1555, 1556, 1558, 1566. Mayor, etc., v. Inman, 931. Mayor, etc., v. Knoxville, etc., R R, 1268. Mayor, etc., v. N. Y. & Staten I., etc.. Co., 1169. Mayor, etc., v. Norfolk R'y Co., 1540. Mayor, etc., v. Norwich, etc., R R, 628. Mayor, etc., v. Tenth Nat'l Bank, 1118. Mayor, etc., v. Third Ave. R R, 1574. Mayor, etc., v. Troy, etc., R E., 1552. Mayor, etc., v. Twenty, etc., R R Co., 772, 887, 1575. Mayor, etc., v. Vernon, etc., Co., 1592. Mayor, etc., of Baltimore v. Baltimore, etc., R'y Co., 753, 759. Mayor, etc., of Baltimore v. Ketchum, 506, 507. CXX11 TABLE OF CASES. [The references are Mayor, etc., of Baltimore v. Pittsburgh I & Connellsville R R Co., 886. Mayor, etc., of City of Houston v. Hous- ton, etc., Co., 883. Mayor, etc., of Macon v. First Nat'l Bank, 760. Mayor, etc., of Worcester v. Norwich & Worcester R R Co., 637. Mayor of Southampton v. Graves, 677, 681. 682. Mayor of Stafford v. Bolton, 1018. Mays v. Foster, 1051. Maysville Turnpike Co. v. How, 1091. M Aden v. Commissioners, etc., 766, McAleer v. McMurray, M. Allen v. Woodcock, McAllister v. Indianapolis & ('in. R R Co., 190. McAllister v. Kuhn, 491, 78 McAllisfc r v. Plant. v:<^. 1966, L269, 1810, 1818 McArthur v. Montclair K'y. 1 1 McArthur v. Seaforth, 678, 788. McArthur v. Times, etc., Co., 1045. McAuley v. Billenger, 118. McAuley v. Columbus, etc., K'y. 875. McAuley v. York Mining Co., L8, . McAvity v. Lincoln, etc., Co, B McBee v. Marietta, etc., K'y. l McBride v. Grand, etc., Co, U8L McBride v. Hardin County. 155. McBride v. Porter. 614 McBurney v. Martin. 571, ->72, 588. McCabe v. Goodfellow, 609. McCabe v, O'Connor, 93. McCall v. Byram Mfg. Co., 853, 1057, 1058, 1059, 1164. McCall v. California, 1947. McCall v. Town of Hancock, 149. McCallie v. Chattanooga, 147. McCallie v. Walton, 988. McCallion v. Hibernia, etc., Soc, 661. MoCallum v. Purssell, etc., Co., 1057. McCalmont v. Phil., etc., R R Co., 1267, 1272. McCandless v. Richmond, etc., Co.. 1517, 1546. McCann v. First Nat Bank, 392, 393. McCargo v. Crutcher, 682. McCartee v. Orphan Asylum Soc, 991, 995. to the foot-paging.) i McCarthy v. Gould, 609. McCarthy v. Lavasche, 232, 254, 283, 390. McCarthy v. Peake, 1417. McCarty v. Selinsgrove, etc,, R R, 168, 187. Md 'laren v. Franciscus, 280, 349. McClaury v. Hart, 1062. Md lean v. Stuve, 47".. McClellan v. Detroit, etc., Works. 966, 1076, 1244. McClellan v. Scott, 193. 195, 800, 208. McClelland v. Norfolk, etc., R R. 1224. 1282, 1286. McClellan.! v. Whiteley. 89, 109. M Clinch v. Bturgis, 313. Md luet v. Manchester, etc., R R, 1 198, 1583 Md lure v. People's Freight K'y Co., 129, 187, 040. McCIure v. Township of Oxford, 181, 146. M< < lluakey v. ( !romwell, 81 M< I !omb v. Barcelona, etc., Ass'n, i">. '.»i. 1079, 1265. M.i tomb v. • Ihicago, etc., R B Md oinl. v. ( (edit Mobilier of Am< etc, 91, 10.-). McComb v. Weaver, 11 nahy v. Centre & Kkto Turnpike R Co., 188. McConihy v. Wright, 890. McConnell v. Ha mm, 138, 139. McConnell v. Pedigo, 1541. Mn ord v. Ohio & Miss. R R Co., 240. McCord, etc., Co. v. Glen. 878. McCormick v. Great Bend, etc., Co., 113, 846. Met ormick v. Parry, 1268. McCormick v. Penn. Central R R Co., lis::. McCourry v. Suydam. 547. McCoy v. Cincinnati, eta, R R Co., 1178. McCoy v. Farmer, 889. McCoy v. Washington County, 1282. McCracken v. Mclutyre, 82. McCray v. Junction R R Co., 633, 1490, 1507. McCready v. Rumsey, 344, 688, 689. 692, 693, 695. McCrosky v. Ladd, 1098. TABLE OF CASES. CXX111 [The references are McCulloch v. Norwood, 893. McCulloch t. Smith, 1015. McCulloch v. State of Maryland, 2, 760, 1950. McCullough v. Merchants', etc., Co., 20, 1419. McCullough v. Moss, 285, 296, 350, 1049, 1076. McCullough v. Talledega Ins. Co., 1094. McCully v. Pittsburgh, etc., R. R Co., 109, 112, 207, 233, 237. 238, 242. McCune Min. Co. v. Adams, 230. McCurdy v. Meyers, 958. McCurdy's Appeal, 1293, 1295, 1301, 1323, 1335. McCurry v. Suydam, 522. McDaniels v. Flower Brook Mfg. Co., 589, 803, 807, 811. 1098, 1099. McDermott v. Dongan, 245. McDermott v. Hannibal, 1113. McDermott v. Harrison, 213, 488. McDonald v. Chisholm, 1074, 1080, 1100. McDonald v. Houghton, 1539. McDonald v. McKinnon, 1214. McDonald v. Ross-Lew in, 264, 1430. McDonald v. State, 1516. McDonnell v. Alabama, etc., Ins. Co., 272, 275, 276, 280, 282, 303, 304, 630. McDonnell v. Grand Canal Co., 1143, 1508. McDonough v. Bank, 1046. McDonough v. Phelps, 174, 263, 291, 292. McDonough v. Webster, 469. McDougall v. Gardiner, 980, 1149. McDougall v. Jersey, etc, Co., 225, 226, 722. McDowall v. Sheehan, 279, 304, 354, 849, 852, 925. McDowell v. Bank of Wilmington, 687, 693. McDowell v. Chicago Steel Works, 599, 604. McDowell v. Grand Canal Co., 1503. McDowell v. N. Y., etc., R R, 929. McDowell v. Rutherford, etc., Co., 136. McDowell's Appeal, 586. McDuffee v. Portland, etc., R R, 1519, 1520, 1521. McElhenny's Appeal, 913. McElrath v. Pittsburgh, etc., R R, 1213, 1215, 1224, 1306, 1321, 1335. 1345. to the foot-paging.] McElrath, In re, 1440. McElroy v. Carmichael, 468. McElroy v. Continental R'y, 1177. McElwee, etc., Co. v. Trowbridge. 966. McEuen v. West London Wharves, 220, 345, 352. McEwan v. Woods, 568, 579. McEwan v. Campbell, 1036. McEwen t. Montgomery, etc., Co., 1115. McFadden v. May's Landing & E. H. C. R Co., 1143, 1284, 1289, 1323, 1324. • McFall v. McKeesport. etc., Co., 453. McFareon v. Triton, 233. McFarland v. Triton Ins. Co.. 879. McFarlin v. Triton Ins. Co., 986. McFerran v. Jones, 609. McGary v. People, 1016. 1017. MeGarzell v. Hazelton Coal Co., 1058. McGeary's Appeal. 444. McGinness v. Adriatic Mills, 1112, Ilia McGinnis v. Smythe, 574. McGinty v. Athol, etc., Co., 796, 805. McGoon v. Scales, 860. McGourkey v. Toledo, etc., R'y, 903, 905, 1357, 1378, 1386. MeGraw v. Cornell University. 996. McGraw v. Memphis, etc., R R., 1369. McGreary v. Chandler, 670. McGregor v. Covington, etc., R B., 1207. McGregor v. Erie R'y Co., 1171, 1542. McGregor v. Home Ins. Co., 379. McGrew v. City Produce Exchange, 316, 472, 476. McGuffey v. Humes, 786, 790. McGuire v. Evans, 405. McHenry v. Duffield, 1104. McHenry v. Jewett, 784, 828, 831. McHenry v. N. Y., etc., R R, 1149, 1407, 1417. McHenry's Petition, 1329. Mcllcse v. Wheeler, 87, 91, 93, 109, 110, 232, 283, 285. Mcllhenny v. Binz, 1068. Mcllrath v. Suwre, 1366. Mclndoe v. City of St. Louis, 993. Mclntire v. Blakeley, 600. Mcintosh v. Flint, etc., R R Co., 365, 372, 376, 682, Mclntyre v. McLane D. Ass'n, 234. Mclntyre v. Preston, 982, 1103. CXX1V TABLE OF CASES. [The references are Mclntyre v. Trustees, etc., 683. Mclntyre v. UnioD College, 1146. Mclntyre Poor School v. Zanesville Canal, etc., Co., 858. Mclver v. Robinson, 761, 765. McKane v. Adams, 662. McKay v. Beard, 888. McKay's Case, 908, 915. McKee v. Grand Rapids, etc.. Ry. 1203, 1275, 1294, 1560. McKee v. Vernon County, 1199, 1231. McKee v. Wilmington, etc., R R, 1577. McKeen v. County of Northampton, 750. McKeesick v. Seymour, etc.. Co., 390. McKeever v. Daily. 15s. McKelvey v. Crockett. 252. McKenney v. Diamond, etc., Assoc, 1028, 1083. McKenney v. Haines, 780, 782, 785, 788, 790. McKensey v. Edwards, 1105. McKenzie v. Kitt ridge. 842. McKeon v. Kearney, 666. McKiernan v. Lusgan, 1087. McKim v. Glenn, 882, 842. McKim v. Bibbard, 486. McKim v. Odom. 2. 12, 683, 116ft McKinney v. O. & M. R R., I486, McKusick v. Seymour, etc., Co., 702. 730, 960. McLanahan v. North River Bridge Co., 1194. McLane v. King, 921, 1896. McLaue v. Placerville, etc., R R, 1300, 1309, 1317, 1320, 1441, 1458. McLaren v. First Nat'l Bank, 1081. McLaren v. Franciscus, 357. McLaren v. Pennington. 886, 889. McLaughlin v. Chad well, 762, 766. McLaughlin v. Detroit, etc., R R Co., 87, 378, 1130. McLean v. Eastman, 731, 732. McLean v. Lafayette Bank, 693, 987. McLean, Matter of, 768. McLendon v. Commissioners, 1236, 1237. McMahon v. Macy, 267. 296, 330. McMahon v. Morrison, 1515. 1547. McMahon v. New York, etc., R R Co., 36. McMahon v. Second Ave. R R, 1571. to the foot-paging.] McMahon v. The North, etc., Works, 1255. McMahon, In re, 763, 766. McManus v. Lancashire, etc., R'y. 1537. M< Master v. Davidson, 350, 351, 362. M< Masters v. Reed's Ex'ra, 1105, 1190, 1193. McMillan v. Carson, 104. McMillan v. Maysville & Lexington R. R Co., 119, 122. McMillen v. Boyles. 134. McMillen v. Lee Co., 134. McMill'a Case. 209. MrMinnville, etc., R R v. Huggins, 1 188. McMullen v. Maysville & Lex R R Co., 286. McMullin v. Leitch, 1502. McMullin'a Appeal. 1136. McMurray \. Moran, 1200. McMurray v. Northern, etc., R'y Co., 1151. McMurrich v. Bond Head Harbor Co., 521, 686, 782, 787, 791. McMurtry v. Montgomery, etc., Co., I860, 1855. McNab v. McNab, etc., Co.. 719,926,982. McNaughton v. McLean, 610. McNeal V. Mechanics', etc., Assoc, 608, 755. McNeeley v. Woodruff, 799. 830, 840, 841. McNeil v. Boston Cham, of Com., 1073. McNeil v. Chicago City R'y, 1558 McNeil v. Tenth National Bank. 483, 516, 517, 519, 545, 547, 548, 571, 573, 583 598, 601, 699. McNeish v. Hulless Oat Co., 672. McNichol v. United States, etc., Agency, 1176. McNulta v. Lockridge, 1446, 1456, 1462. McPherson v. Cox, 1811. McPherson v. Foster, 952. McQueen v. Middletown, etc, Co., 1175. McRea v. Russell, 219. McRoberte v. Washburne, 1582. McVeagh v. Chicago, 755. McVeigh v. Loomis, 765. McVicker v. American Opera Co., 961. McVicker v. Cone, 308, 1041. McVicker v. Ross, 671. McWhorter v. Lewis, 1104. TABLE OF CASES. CXXV [The references are Mead v. Burin, 200. Mead v. Keelev, 233, 1092, 1185, 1190. Mead v. New York, etc., R. R, 875, 1270. Meadow Dam Co. v. Gray, 232, 323. Meads v. Merchants' Bank, 1090. Meads v. Walker, 98. Meads v. "Wandell, 1577. Mealey v. Nickerson, 1136. Means v. Rees, 481. Means v. Swormstedt, 1104. Mean's Appeal, 262, 271, 280. Mears v. Moulton, 670. Meason's Estate, 22. Measure v. Carleton, 405. Mechanics' Bank, etc., v. Bank of Co- lumbia, 1102, 1108. Mechanics' Bank v. Mechanics' Bank, 691. Mechanics' Bank v. Merchants' Bank, 687, 695. Mechanics' Bank v. Meriden Agency, 104. Mechanics' Bank v. New York, etc., R R Co., 23, 381, 384, 395, 545, 547. Mechanics' Bank v. Richards, 527. Mechanics' Bank v. Schaumberg, 1117. Mechanics' Bank v. Seton, 440, 461, 525, 532, 1118. Mechanics' Bank v. Smith, 1022. 1109. Mechanics' Bank v. Thomas, 757. Mechanics' Banking Ass'n v. Mariposa Co., 523. Mechanics' Banking Ass'n v. New York & S. White Lead Co., 1192, 1244. Mechanics' B. & L. Association v. Con- over, 582, 585, 613. Mechanics', etc., Assoc, v. King, 180, 696. Mechanics', etc., Bank v. Burnett, etc., Co.. 1056, 1058. Mechanics', etc., Co. v. Hall, 116, 174, 175. Mechanics', etc., Ass'n, Appeal of, 708. Mechanics' Nat'l Bank of Newark v. Burnet Mfg. Co., 837. Mechanics' Soc, In re, 875. Medberry v. Short, 1105. Medbury v. N. Y, etc., R R Co., 1109. Medder v. Norton, 1132. Medical, etc., Soc. v. Weatherly, 800, 1025. to the foot-paging] Medical Inst. v. Patterson, 2. Medill v. Collier, 314. Medler v. Albuquerque, 114. Medomak Bank v. Curtis, 1086, 1093. Medway Cotton Mf'y v. Adams, 1016, 1017, 1018. Meed v. Keeler, 1059. Meehan v. Sharp, 459. Meeker v. Sprague, 1335, 1433. Meeker v. Winthrop Iron Co., 815, 943, 947, 1158. Mege's Case, 48, 64. Megibben's Adm'rs v. Perin, 461, 1051. Meier v. Kansas, etc., R'y, 1419, 1420. Meints v. East St. Louis, etc., Co., 252. Meisser v. Thompson, 279. Melchert v. American U. Tel. Co., 469, 475. Melendy v. Barbour, 1433, 1446, 1447. Melendy v. Keen, 195. Melhado v. Hamilton, 363. Melhado v. Porto, etc., Co., 1045, 1046. Melledge v. Boston Iron Co., 1016, 1017, 1068. Mellen v. Moline, etc., Works, 1141, 1272. Mellen v. Town of Lansing, 152. Melvin v. Lamar Ins. Co., 189, 213, 215, 330, 587. Melvin v. Lisenby, 149. Memphis v. Adams, 1099. Memphis Branch R R Co. v. Sullivan, 222, 229, 238, 631, 633, 640. Memphis City v. Dean, 1148, 1158, 1161. Memphis, City of, v. Ensley, 756. Memphis, City of, v. Farrington, 758. Memphis, etc., Co. v. Grayson, 1126, 1158. Memphis, etc., Co. v. Memphis, etc., R. R, 1246, 1248. Memphis, etc., R R v. Alabama, 1542, 1544. Memphis, etc., R R Co. v. Dow, 69. Memphis, etc., Co. v. Williamson, 1161. Memphis, etc., R'y v. Striugfellow, 1447. Memphis, etc., R R v. Railroad Com" is. 1274, 1275. Memphis, etc., R R v. State, 1296, 1348. Memphis, etc., R R v. Wood, 424, 834, 1148. Memphis, Kan. & Col. R. R Co. v. Thompson, 125, 126, 151. (XXVI TABLE OF CASES. [The references are to the foot-paging.] Merchants' Bank v. Petersburg, etc.. R R. 186ft Merchants' Bank v. Rudolf, 112L Merchant-' Bank v. Slioti- 692. 717. M. i. bants' Bank v. State Bank, 1085, 1092, ll'.'l. Merchants' Hank of Canada v. Living- Mi i bants' Bank of New Haven v. 1 . Merchants, .. 90 Miller v. N. Y.. etc., R R. 1193, 1230. Miller v. Peabody Bank, 343. Miller v. Pino. etc.. Co., 1166. Miller v. Pittsburgh & Connellsvill.' R. R. Co., 119, 236, 377, 378. Miller v. Porter, 992. Miller v. Preston, 190. Miller v. Ratterman. 361. 365, 368. 369, 370, 371, 842, 11S7, 1250. Miller v. Roach, 1104. Miller v. Rutland, etc., R R Co., 1096, 1226, 1231, 1233, 1266, 1295, 1807, 1370, 1371, 1476. Miller v. Second I. B. Ass'n, 215. Miller v. State, 637, 1943. Miller v. Town of Berlin, 1232, 1239. Miller v. Wheeler, etc., Co., 1180, 1188. Miller v. White, 267, 296, 301. Miller v. Wild Cat, etc., Co., Ill, 112. 113, 114, 163, 188. 192, 239. Miller, Appeal of, 216. Miller's Adm'r v. Norfolk, etc., R R. 1177. Miller's Case, 160. Miller's Dale. In re, 390. Milliken v. Dehon, 575, 604, 605. Millikin v. Whitehouse, 265, 295, 351. Millish, Ex parte. 969. Mills v. Central R. R. Co., 637. 640, 1130, 1496. 1504, 1506, 1508. v TABLE OF CASES. CXX1X [The references are to the foot-paging.'] Mills v. Hoffman, 434. Mills v. Hurd, 658, 672, 955, 1147, 1379. Mills v. Northern R'y, 369, 960, 1136, 1141. Mills v. Northern Railway of Buenos Ayres Co., 723, 726, 727, 728. Mills v. Scott, 257, 263, 289. Mills v. Stewart, 175, 176, 177, 248. Mills v. Town of Jefferson. 1236. Mills v. Western Bank, 985. Milner v. Pensacola, 149. Milnor v. New York & N. H. R R, 997, 1533, 1544. Milroy v. Lord, 463. Milroy v. Spurr Mountain Iron Mining Co., 284, 290. Miltenberger v. Logansport, etc., R'y, 1350, 1399, 1443, 1450, 1452. Mil vain v. Mather, 258. Milwaukee & Northern 111. R R Co. y. Field, 123. Milwaukee & St. R R'y Co. v. Arms, 1010. Milwaukee, etc., Co. v. City of Milwau- kee, 768. Milwaukee, etc., Co. v. Field, 378. Milwaukee, etc., Ins. Co. v. Sentinel Co., 1430. Milwaukee, etc., R'y v. Brooks, etc., Works, 1443. Milwaukee, etc., R. R v. Milwaukee, etc., R. R, 1342, 1364. Milwaukee, etc., R R v. Soutter, 1356, 1406, 1463. Miner v. Beekman, 599. Miner v. Belle Isle Ice Co., 720, 860, 927, 1129, 1133, 1156. Miner v.* New York C, etc., R R, 890, 1532, 1545. Mineral, etc., R R Co. v. Keefe, 1020. Mineral Water, etc., Co. v. Booth, 650. Miners' Bank v. United States, 886. Miners' Ditch Co. v. Zellerbach,952,955, 995, 1099. Mining Co. v. Anglo, etc., Bank, 1057, 1080. . Miuing Co. v. Mining Co., 962. Minn. Co. v. St. Paul Co., 1272, 1371. Mian., etc., Co. v. Davis, 113, 188. Minn., etc., Co. v. Denslow, 233, 318. 1 Minn., etc., Mfg. Co. v. Langdon, 278. Minneapolis, etc., Co. v. Betcher, 600. Minneapolis, etc., Co. v. Crevier, 113. Minneapolis, etc., R'y Co. v. Beckwith, 1949. Minneapolis, etc., R'y v. Emmons, 1950. Minneapolis, etc., R'y v. Minnesota, 1949. Minneapolis R'y v. Minnesota, 1514. Minnehaha, etc., Ass'n of Minneapolis v. Legg, 173, 182, 213. Minnesota & St L. R'y Co. v. Bassett, 218. Minnesota Assoc, v. Can field, 607. Minnesota C. R'y Co. v. Morgan, 580. Minnesota, etc., Co. v. Langdon, 732, 1429. Minnesota Harvester Works v. Libbj', 239. Minnesota, State of, v. Young, 140. Minnesota T. Co. v. Clark, 1081. Minor v. Mechanics' Bank of Alexandria, 189, 213, 224, 1058. Minot v. Boston Asylum, 1019. Minot v. Curtis, 1016. Minot v. Paine, 16, 702, 707. 739. Minot v. Philadelphia, Wilmington & B. R R Co., 778. Minot v. Railroad Co., 753, 755. Mintzer v. County of Montgomery, 762. Mississippi, etc., R. R Co. v. Camdon, 133. Mississippi, etc., R R Co v. Cromwell, 611, 620. Mississippi, etc, R R Co. v. Gaster, 170, 181, 1166. Mississippi, etc., R R Co. v. Harris, 109. 246. Mississippi, O. & R. R R Co. v. Cross. 187, 188, 234, 235, 634. Mississippi R R. Cases, 1514. Mississippi R'y Co. v. McDonald. 1524. Mississippi Val. Co. v. Chicago, etc., R R, 1380, 1384, 1423. Mississippi Valley, etc., R'y v. United States Express Co., 1368. Missouri, etc., Co. v. Reinhard, 1000, 10G0. Missouri, etc., R. R. v. Richards, 928. Missouri, etc., R'y Co. v. Richmond, 1003. cxxx TABLE OF CASES. [Hie references are Missouri, K. & T. v. Texas & St. L. R'y Co., 1543. Missouri Pacific Railway Co. v. Hanes, 1949. Missouri Pacific Railway Co. v. Mackey, 1949. Missouri Pacific R'y Co. v. Taggard, 123, 127. Missouri Pacific R'y Co. v. Texas, etc., R'y, 1444. 1511. Missouri R'y Co. v. Mackey, 1517. Missouri River, F. S. & G. R Co. v. Com'rs of Miami Co., 1101. Mitchell v. Amador, etc., Co., 1385. Mitchell v. Beckman, 18, 27, 91, 111, 240, 302, 304. Mitchell v. Burlington, 132. Mitchell v. Byrne, 795. Mitchell v. Cline, 995. Mitchell v. Deeds, 879. 1079. Mitchell v. Hartley, 472. Mitchell v. Hotchkiss. 293. Mitchell v. Newhall, 579. Mitchell v. Reed, 934. Mitchell v. Reynolds, G51. Mitchell v. RoraeRR.Co., 218, 983, 1110. 1113. Mitchell v. Rubber, etc.. Co., 680. Mitchell v. Union, etc., Co., 1098. Mitchell v. Vermont Copper Mining Co., 1G7, 178, 179, 181, 182, 183, 795, 1077. Mitchell v. Wedderburn, 452. Mitchell's Case, 107, 327, 328, 334, 358, 428. Mix v. Andes Ins. Co., 1179. Mixer's Case, 190, 205, 206, 209. Mobile & Cedar Point R R. Co. v. Tal- man, 12fi9. 1278. Mobile & Ohio R. R v. Franks, 1534. Mobile & Ohio R. R v. Moseley, 771. Mobile & Ohio R R v. State, 858, 859. Mobile & Spring Hill R R Co. v. Ken- nedy, 771, 772. Mobile, etc., Co v. Nicholas, 849. Mobile, etc., R'y v. Humphries, 440, 1477. Mobile, etc., R'y v. Steiner, 1516, 1519. Mobile, etc., R R v. Cogsbill, 1112. Mobile, etc., R R v. Davis, 1462. Mobile, etc., R R. Co. v. State, 1516. Mobile, etc., R R Co. v. Yandal, 110. to the foot-paging.] Mobile Mutual Ins. Co. v. Cull'om, 447, 692. 699. Mobley v. Morgan. 458, 845. Moch v. Virginia, etc., Co., 1175. 1178, 1183, 1588. Moers v. Reading, 187. Moffat v. Window, 479. 494. Moffatt v. Farquhar, 447. 418. 526, 824, 843, 844. Moffett v. Goldsborough, 1598. Mogridge's Case. 124. Mogul Steamship Co. v. McOrogor, 650, 1599. Mohawk & Hudson R R Co., Matter of, 812, 81 !. 836, 829, 105a Mohawk Bridge Co. v. Utica. etc.. R R. Co.. 1576. Mohawk, etc., R R v. Niles. 1533. Mohr v. Micsen, 475. Mohr v. Mmn., etc., Co., 298, 315. Moies v. Spragne, 285, 286, Mokelumne Hill, etc.. Co. v. Woodbury, is, 871, 8ia Mollett v. Robinson, 579. Molson'a Bank v. Board man, 340. Monadnock R R v. Felt 125. Monadnock R. R. Co. v. Petersboro, etc., 1 is. M'>neypenny v. Sixth Ave. R R. 1565. Monk v. Graham, 505. Monmouth Mut. F. Ins. Co. v. Lowell, 163. Monomoi Great Beach v. Rogers, 1098. Monongahela, etc., Co. v. United States, 1579. Monongahela Nav. Co. v. Coon. 636. Monongahela Nav. Co. v. United States, 194a Monopolies, Case of, 650. 651. Monroe v. Fort W. & S. R R Co., 222, 232. Monroe v. Peck, 567. Monroe v. Smeiley. 468. Monroe, Bank of, v. Gifford, 1050. Monsseaux v. Urquhart, 822, 829, 830, 841. Montana, etc., R'y v. Helena, etc., R R, 1531. Montgomery v. Everleigh. 654. Montgomery v. Exchange Bank, 1122. TABLE OF CASES. CXXX1 [The references are Montgomery v. Forbes, 318. Montgomery v. Merrill, 886. Montgomery's Appeal, 1565. Montgomery, etc., R. R v. Boring, 963. Montgomery, etc., Soc. v. Francis, 1237. Montgomery R R. Co. v. Hurst, 879, 1070. Montgomery S. R'y Co. v. Matthews, 191, 198, 210. Montgomery Web Co. v. Dienelt, 961. Montpelier & Wells River R. R Co. v. Langdon, 125. Monument National Bank v. Globe Works, 1191, 1244. Mooar v. Walker, 624. Moodalay v. Morton, 683. Moodie v. Seventh Nat Bank, 484, 548. Moody v. Caulk, 785. Moor v. Anglo-Italian Bank, 1254. Moore v. American, etc., Co., 443, 595. Moore v. Baker, 781. Moore v. Bank of Commerce, 447, 698. Moore v. Boyd, 303. Moore v. Brink, 660. Moore v. Brooklyn, etc., R R., 865. Moore v. Campbell, 127. Moore v. Chicago & St. P. R R Co., 1001, 1543. Moore v. Conhara, 594. Moore v. Fitchburg R R Co., 977, 1008. Moore v. Freeman's Nat. Bank, 1177. Moore v. Garwood, 1040. Moore v. Gennett, 614, 615. Moore v. H. Gaus & Co., 1085. Moore v. Hammond, 1061, 1062. Moore v. Hudson R R R Co., 38, 456. Moore v. Jones, 329, 343. Moore v. Lent, 275. Moore v. McLaren, 357. Moore v. Marshalltown, etc., Co., 522, 610, 622. Moore v. Metropolitan Nat'l Bank, 467, 548. Moore v. Moore, 413. Moore v. N. J., etc., Co., 184. Moore v. North, etc., Bank, 549. Moore v. Rector, etc., 1065. Moore v. Robertson, 189, 210, 49a Moore v. Schoppert, 877. Moore v. Silver, etc., Co., 1129, 1137, 1151, 1152, 1171. to the foot-paging.] Moore v. Taylor, 1548. Moore v. Williams, 488. Moore, etc., Co. v. Towers, etc., Co., 949, 1042. Moorehouse v. Crangle, 467. Moores v. Citizens' Nat. Bank, 396. 498. Moore's Heirs v. Moore, 991. Moran v. Alvas, etc., Co., 856, 1157, 1412. Moran v. Lydecker, 1439, 1527. Moran v. Pittsburgh, etc., R'y, 946, 1331, 1364. Mordecai v. Pearl, 476. Morehead v. Western N. C. R. R Co., 621. Moreland v. State Bank, 1108. Morelock v. Westminster Water Co., 1051. Morely v. Bird, 405. Mores v. Conham, 592. Morford v. Farmers' Bank, etc., 1243, 1244 Morgan v. Bank of North America, 690. Morgan v. Donovan, 881, 1380, 1385, 1535. Morgan v. East Tenn., etc.R R, 1181. Morgan v. Great Eastern R'y, 712. Morgan v. Kansas, etc.. R'y, 1243, 1323. Morgan v. Lewis, 214, 282, 418. Morgan v. Louisiana, 774, 1553. Morgan v. Morgan, 682. Morgan v. New York, etc., R R Co., 248, 257, 260, 288. Morgan v. Pebrer, 468. Morgan v. Railroad Co., 1148. Morgan v. Skiddy, 478, 487. 490. Morgan v. Struthers, 447, 466. Morgan v. Thames Bank, 610. Morgan v. United States, 1224. Morgan v. White, 1002. Morgan, Ex parte, 414. Morgan, Re, 412. Morgan & Raynor v. Donovan. 993. Morgan County v. Thomas, 154, 237, 1074, 1362, 1482. Morgan's Case, 337, 414, 670, 678. Morgan's, etc., Co. v. Texas, etc., R'y, 1283, 1288, 1351, 1396. Morley v. Thayer, 275, 282, 283, 321. Mormon Church v. United States, 886, 891, 1950. CXXXil TABLE OF CASES. [The references are Morrell v. Dixfield. 1110. ' Morriee v. Hunter. 579. Morrill v. Boston, etc., R R Co., 1512. Morrill v. C. T., etc., Co., 1068. Morrill v. Noyes, 1267, 1372, 1383. 1436. Morrill v. Segar, etc., Co., 1069, 1103, 1104, 1109. Morris v. Cannan, 355, 518. Morris v. Cheney, 164. Morris v. Conn., etc., R R Co., 610. Morris v. Glenn, 342. Morris v. Johnson, 272. Morris v. Keil, 1100, 1101. 1108. Morris v. Morris Co., 134. Morris v. St. Paul, etc., R'y Co., 1015, 1016. Morris & Essex R R v. Blair. 15*0. Morris & E. R R Co. v. Newark, 1586. Morris Canal & Bank. Co. v. Fisher. 1231. Morris Canal & Bank. Co. v. Lewis, 1281. Morris Canal & Bank. Co. v. Nathan, 122. 123, 127. Morris Canal Co. v. Townsend, 999, 1528. Morris, etc., R R Co. v. Central, etc., R R, 884, 1530. Morris, etc., R R Co. v. Green, 1113. Morris Run Coal Co. v. Barclay Coal Co., 449, 648. Morrissey v. Weed, 668. Morrison v. Dorsey, 228, 1021. Morrison v. Eaton, etc., R R. 1207. Morrison v. Globe Panorama Co.. 55, 63. Morrison v. Gold Mountain Mining Co., 102, 1043. Morrison v. Menhaden Co., 1417. Morrison, Ex parte, 1037. Morrison, In re, 695. Morrow v. Iron, etc., Co., 59. Morrow v. Nashville, etc., Co., 119, 1205. Morrow v. Superior Court, 280. Morse v. Beale, 1 100. Morse v. Brainerd, 1446, 1533. Morse v. Conn. River R R, 1113. Morse v. Conn., etc., R R. Co., 1112. Morse v. Hagenah, 105. Morse v. Swits, 486. Morse v. Weston, 413. Mortimer v. McCallan, 470, 570. Morton v. Gramin, 615, 618. to the foot-paging.] Morton v. Metropolitan Life Ins. Co., 1010. Morton v. Mutual Ins. Co., 1178, 1588. Morton v. N. O., etc., R'y, 1197, 1199. 1223, 1224. 1251, 1276, 1323, 1351. Morton v. Preston, 780, 782. Morton's Case, 220. Morton & Bliss v. N. O. & Selma R'y Co., 1225. Morton, etc., Co. v. Selma. etc., R'y, 1215. Morton, etc., Co. v. Wysoug. 1021. Morville v. Great North. R'y, 1537. Moseby v. Burrow, 864, s77. Mosely, etc.. Co.. In re, 1430. Moses v. Ocoee Bank, 34, 109. 251, 381, 393. Moses v. Scott, 846. Moses v. Thompson, 838. 3 v. Tompkins, 162. 179, 810, 1052, 1056, 1066. Moshannon, i v. Sloan, 10*4. MOSS v. Ay, nil. Os:.. 886, 297, 971, 1069, 1098, 1094, 11 v). Moss v. Harpath Academy, 1185. Moss v. Livingston, 1106. Moes \. McCullough, 207. 296. Moss v. Oakley, .. 296. 350, 351, 119a Mosa v. Rossie Lead Co., 992, 1076, 1093. Moss v. Steam Gondola Co., 87. Moss v. Syers, 362, 86a Moss' Appeal, 738, 714. Mott v. Danville S. ■in.. 891. Mott v. Hicks, 1017, 1190. Mott v. Penn. R R Co., 772. Mott v. United States Trust Co., 983, 984. Moulin v. Insurance Co., 1174, 1175. Mount Holly L & M. T. Co. v. Ferrie, 501. 519, 528, 548, 585, 593. 601. Mt. Holly Paper Co.'s Appeal, 397, 692, 695. Mt. Sterling, etc., Co. v. Little, 111, 114 Mt. Sterling, etc., Co. v. Looney, 1076. Mt. Vernon v. Hovey, 134. Mt. Washington Hotel Co. v. Marsh, 1082. Mountain Ferry, etc., Co. v. Jewell, 982. Movius v. Lee, 853, 1032. 1141, 1146. Mowatt v. Castle, etc., Co., 1256. Mowatt v. Londesborough, 1041. TABLE OF CASES. cxxxni [77ie references are Mower v. Inhabitants of Leicester, 1012. Mower v. Kemp, 1275. Mower v. Staples, 632, 810. Mowrey v. Indianapolis, etc., R R Co., 629, 633, 636. 637, 639, 640, 85& Movvry v. Hawkins, 614. Mowry v. Indiana, etc., R R, 1492, 1508. Moyer v. Pennsylvania, etc., 271, 274 Moyle v. Landers, 1132. Mozley v. Alston. 899, 1156. Mrs. Matthewman's Case, 105, 106, 336. Mudford's Case. 240. Mudgett v. Horrell, 93, 94, 95. Mugler v. Kansas, 1949. Muhlenburg v. Philadelphia, etc., R R, 367. Muir v. @ary of Glasgow Bank, 327. Muir v. Louisville & P. Canal Co., 1094. Mulhall v. Williams, 654. Mulhearn v. Press Pub. Co.. 1177. Mullanphy Bank v. Schott,937, 1069, 1100. Muller v. Boone, 1102. Muller v. Dows, 1345. 1346, 1543. Mulligan v. Mulligan, 274. Mulling v. Smith, 405. Mullins v. Smith, 403, 407. Mumford v. Hawkins, 1078, 1085. Mum ma v. Potomac, etc., 248, 863, 889, 1941. Mumford v. American L L Co., 985, 1190, 1193. Munas v. Isle of Wight Ry Co., 366. Muncy, etc., Co. v. De La Green, 214. Muudy v. Davis, 464 M unger v. Jacobson. 281, 282, 300. Munhall v. Pennsylvania R R, 1519. Municipal, etc., Co. v. Pollington, 727, 734, 854 Munn v. Barnum, 456. Munn v. Commission Co., 1087. Munn v. Illinois, etc., Railroad, 1513, 1514, 1600, 1948. Munn v. President, etc., of Commission Co., 1190. Munns v. Isle of Wight Ry, 1466. Munson v. Lyons, 144. Munson v. Syracuse, etc., R R Co., 915, 920, 1041. Munt v. Shrewsbury, etc., Ry Co., 1537, 1544 to the foot-paging.'] Munt's Case, 336, 358, 415. Murdock v. Woodson, 1276. 1277, 1305, 1306. Murphy v. Farmers' Bank, 865. Murphy, Adm'r, v. Holbrook, 1446, 1456. Murphy, Ex parte, 840. Murphy, Re, 621. Murray v. Aiken, etc., Co., 428. Murray v. Busch, 345, 348. Murray v. Charleston, 154, 1201. Murray v. County Com'rs, 1592. Murray v. Deyo, 1319, 1430. Murray v. Feinour, 436. Murray v. Glassee, 741, 742. Murray v. Lardner, 1222, 1226. 1227. Murray v. Nelson, etc., Co., 1075, 1076. Murray v. Stevens, 531. Murray v. Vanderbilt. 250, 1425. Murray v. Walker, 669. Murriam v. Childs, 599. Muscatine, 'etc., Co. v. Muscatine, etc., Co., 1094 Muscatine, etc., R R Co. v. Horton, 134. Muscatine Turn Verein v. Funck, 801, 863. Musgrave v. Beckendorff, 790. Musgrave v. Buckley, 108. Musgrave v. Morrison, 87, 90, 107, 109. Musgrave & Hart's Case, 352. Muskingum Valley T. Co. v. Ward, 169, 171, 340. Mussell v. Cooke, 464. Musser v. Fairmount, etc., St. R'y, 1552. Mussey v. Eagle Bank, 1090. Mussina v. Goldthwaite, 932, 1151. Mustard v. Hoppers, 143. Mutter v. Eastern, etc., Ry, 680. Mut. Ben. Life, etc., v. Bales, 1005. Mutual Benefit Life Ins. Co. v. Davis, 1173. Mutual Benefit Ins. Co. v. Rowood, 274. Mutual, etc., Ins. Co. v. Davis. 997. Mutual, etc., Ins. Co. v. Stokes, 887. Mutual F. Ins. Co. v. Chase, 163. Mutual Ins. Co. v. Supervisors, etc., 13. Mutual Life Ins. Co. v. Wilcox, 984 Mutual Sav. Bank & Bldg. Ass'n v. Meriden Agency Co., 425, 1586. Myatt v. St. H.'len's R'y, 1274, 1334 Mver v. Car Co., 1376. CXXX1V TABLE OF CASES. [The references are Myer v. Johnston, 1383. Myers v. Croft, 993. Myers v. Door, 1171. Myers v. Hazzard, 1229. Myers v. Irwin, 321. Myers v. Johnson, 134. Myers v. Merchants' Nat Bank, 595, 598. Myers v. Murray, etc., Co., 1181. Myers v. Perrigal, 22. Myers v. Seeley, 56, 81, 82, 160, 255, 261. Myers v. Tobias, 474. Myers v. Union Pac. R'y Co., 118a Myers v. Valley National Bank, 701. Myers v. York & Cumberland R R Co., 1232. My rick v. Dame, 668. Mysore, etc., Co., Re, 1478. K Nabob of Carnatic v. East India Co., 291. Nabnng v. Bank of Mobile, 582, 585, 603, 606, 608, 613, 718, 785. Nagle v. Pacific Wharf Co.. 621. Naglee v. Alexandria, etc., R'y, 1319, 1536. Najac v. Boston & Lowell R. R, 1533. Nanney v. Morgan. 412, 519, 549. Nannock v. Horton, 409. Nant-y-Glo. etc., Co. v. Grave, 908, 915. Nantes v. Corrock, 609. Napa Valley R R. Co. v. Napa County, 133, 137. Napier v. Central, etc., Bank, 600. Napier v. Poe, 218. Napier v. Staples, 679. Nappier v. Mortimer, 290. Narragausett Bank v. Atlantic Silk Co., 1067, 1070. Nash Brick, etc., Mfg. Co., In re, 1262. Nashua, etc., R R Co. v. Boston, etc., R R. Co., 1052, 1069. 1128, 1130, 1510, 1511, 1512. 1541, 1542. Nashua Lock Co. v. Worcester & N. R R, 1532, 1533. Nashville Bank v. Petway, 863. Nashville Bank v. Ragsdale, 608. Nashville & C. R Co. v. Scarries, 1011. Nashville, etc., R'y v. Alabama, 1946, 1949. to the foot paging.] Nashville, etc., R'y v. State, 1516. Nassau Bank v. Campbell, 1197. Nassau Bank v. Jones. 104, 425. 952. Nassau, etc., Co. v. City of Brooklyn, Natal, etc., Co., In re, 1256. Nathan v. Tompkins, 799, 811. 838, 852, 1053, 1151. Nathan v. Whillock, 262, 268, 337, 356, 889, 892. Nation's Case, 348. Nat. Albany Exch. Bank v. Wells, 744, 764, National Bank v. Baker, 607. National Bank v. Burkhardt 580. National Bank v. Case, 287,380,425. National Bank v. Colby 990. National Bank v. Commonwealth, 748, 7.-.:.. 760, 761, 768, Tiil. 11)51. National Bank v. De Bernales, 1173. National Bank v. Drake. 825, 1064. National Bank v. Graham, 1006. National Bank v. (hand Lodge, 1332. National Hank v. Insurance Co., 864, 986. National Bank v. Kimball, 767. National Hank v. Landon, 808. National Bank v. Matthews, 983, 987, 993. Natioual Bank v. Navassa, eta, Co., 1069, 107!». National Bank v. Norton, 1119. National Bank v. Sprague, 966. National Bank v. Texas, 1140. National Bauk v. Texas, etc., Co., 227, 815, 324, 493, 962. National Bank v. Van Derwerker, 667. National Bauk v. Watsontown Bank, 26, 27, 521, 687, 697, 698, 699, 700. National Bank v. Wells, 1243. National Bank v. Whitney, 987. National Bank v. Young, 1244. Natioual Bank, etc., v. Atkinson, 1077, 1243. National Bank of Commerce v. Hunt- ington, 1174, 1175. National Bank of Commerce v. New Bedford, 766. National Bank of Commerce v. Shutn- way, 1060. TABLE OF CASES. cxxxv [Ttie reference are National Bank of New London v. I^ke S. & M. S. R. R Co., 500, 613, 614. 620, 783. National Bank of Watertovvn v. London, 667. National Bank of Xenia v. Stewart, 420, 701. National Broadway Bank v. Wessell, etc., Co., 941, 942. National Broadway Bank v. Yuengling, 965. National Com. Bank v. McDonnell, 301, 304, 329, 332, 352, 630. National Com. Bank v. Mobile, 754. National Docks, etc., R'y v. State, 1530. National, etc., Bank v. Mechanics', etc., Bank, 990. National, etc., Co. v. Ballou, 252. National, etc., Co., In re, 378, 861. National, etc., Fuel Co., In re, 199. National, etc., Ins. Co. v. Pursell, 1178, 1588. National, etc., Milk Co. v. Brandenburgh, 1175, 1176. National, etc.. Works v. Oconto, etc., Co., 1196, 1206, 1596, 1598. National Exchange Co. v. Drew, 191, 194, 489, 1007. National Exchange Bank v. Hartford. Prov. & F. R. R. Co., 1231, 1236, 1239. National Exchange Bank v. Peters, 1140. National Exchange Bank v. Sibley, 398. National Exchange Bank v. Silliman, 700. National Financial Co., In re, 328, 329, 336. National Funds, In re, 734. National Mut. Ins. Co. v. Pursell, 1002. National Park Bank v. German, etc., Co., 1080, 1118. National Park Bank v. Gunst, 1175. National Park Bank v. Nichols, 1183, 1948. National Park Bank v. Remsen, 297. National Patent S. F. Co., Re, 1185. National Pemberton Bank v. Porter, 952, 982, 986. National S. & L. Bank, etc., v. Mechan- ics', etc., 990. to the foot-paging.] National Security Bank v. Cushmau, 1119. National Shoe, etc., Bank v. Mechanics', etc., Bank, 1168. National State Bank v. Young, 749. National Trust Co. v. Murphy, 986, 999. National Tube, etc., Co. v. Gilfillan, 73. National Typographic Co. v. N. Y., etc., Co., 1181. National Union Bank of Watertown v. London, 325. National Water, etc., Co. v. Clarkin, 993. Natusch v. Irving, 625, 954, 1586. Naugatuch, etc., Co. v. Nichols, 219. Neal's Appeal, 937. Neale v. Janney, 686, 688. Neale v. Turton, 1083. Neall v. Hill, 1029, 1154. Neath, etc., Co., Re, 815, 1478. Nebraska, etc., Bank v. Nebraska, etc.. Co., 1175, 1231, 1326, 1331. Nebraska Loan & Trust Co. v. Nine, 1014. Neff v. Wolf, etc., Co., 963. Negley v. McWood, 1042. Neiler v. Kelley, 21, 23, 596, 603, 781, 783, 785, 790. Neilson v. Crawford, 268, 296. Neilson, Appeal of, 433. Neilson, Ex parte, 566. Nellis v. Coleman, 330. Nellis Co., A. C, v. Nellis, 984, 1125. Nelson v. Blakey, 234. Nelson v. Burrows, 1028, 1150. Nelson v. Cowing, 191. Nelson v. Eaton, 1185, 1261. Nelson v. Haywood County, 142. Nelson v. Hubbard, 71, 805, 1196, 1206, 1338. Nelson v. Iowa, etc., R R, 1199, 1390. Nelson v. Jenks, 1338. Nelson v. Luliug, 313, 482, 490. Nelson v. St Nelson's Parish, 1944. Nelson v. Vermont & Canada R R, 1536. Nelson v. Vermont, etc., R R, 1515. Ne&bit v. Riverside Independent District, 1188. Nesmith v. Washington Bank, 517, 688, 699. Ness v. Angas, 87, 105. CXXXV1 TABLE OF CASES. Ness v. Armstrong, 87, 831. Nettles v. Marco, 213. Neuse, etc., Co. v. Commissioners of Newburgh, 1207. Neuse River Nav. Co. v. Coni'rs of New- bern, 32, 153. Nevada, State of, v. Leete, 824. Nevada, State of, v. Pettinelli, 797, 708, 807, 813, 814, 825. Nevada, State of, v. Wright, 799. Nevins v. Henderson, 1036. Nevitt v. Bank, 889. Nevitt v. Bank of Port Gibson, 248, 801. New v. Nicoll. 05), 055. New Albany v. Burke, 217, 1161. New Albany & Salem R R. Co. v. Mo- Cormick, 123, 124, 168. 181, 839. New Albany & Salem R R Co. v. Pick- ens, 159. New Albany & Salem R R Co. v. Slaughter, 189. New Albany, etc.. R R v. O'Daily, 1563. New Albany, etc., R R Co. v. Fields. 112, 190, 197, 245. New Albany, L. & C. P. R Co. v. Smitb, 1231. New Albany R. R. Co. v. Grooms, 1177. New Albany R R Co. v. Tilton, 1177. New Bedford, etc.. Turnpike Co. v. Adams, 115, 171. New Brunswick & C. R'y Co. v. Cony- beare, 194, 195, 1007. New Brunswick, etc., v. Muggeridge, 92, 108, 197, 200, 402. New Buffalo v. Iron Co., 155. New Castle & A. T. Co. v. Bell, £23. New Castle, etc.. R'y Co. v. New Castle, etc.. R Co., 1 354 New Castle R R Co. v. Simpson, 69, 1153. New Central Coal Co. v. St. George's C. & I. Co., 1527. New Cbester Water Co. v. Holly Mfg. Co., 1306, 1398. New Cbile, etc., Co., Re, 185. New Clydacb, S. & B. I. Co., Re, 1253. New Eberhardt Co., Re, 47. New England Commercial Bank v. Newport Steam Factory, 250, 285, 280, 321, 331. [The references are to Vie foot-pajing.] •New England, etc., Co. v. Chandler, 613. New England, etc., Co. v. De Wolf. 1104. New England, etc., Co. v. Gay. 1102. New England, etc., Co. v. Gilbert, etc., R R Co., lioo. New England, etc., Co. v. Phillips, 837. New England, etc., Co. v. Union, etc., Co., 1116. New England, etc., Ins. Co. v. Wood- worth, 1178. New England, etc., Life Ins. Co. v. Phil- lips 38a New England Exp. Co. v. Maine Cent R P., 1501, 15S0. New England F. & M. Co. v. Robinson, 1002, 1094 New England Ins Co. v. De Wolf. 1083. New England Iron Co. v. N. Y. Loan I ... 683. New England Mutual, etc.. Ins. Co. v. Phillip-. B30. New England R R Co. v. Rodriguos, l'.i7. New I'n-laud Trust Co. v. Eaton, 739, 7lo. 7 11. New Hampshire, etc, P. R Co. v. John- son. 116, 171. 3 New Hampshire Land Co v. Tilton. ::is. New Haven tV i». R R Co. v. chapman, 224 New Haven, etc., v. Chatham, 146. New Haven, etc., Co. v. Hayden, 1054. New Haven, etc., Co. v. Linden Spring Co., 82, 17. . New Haven Land Co. v. Tilton, 999. New Hope Bridge Co v. Phoenix Bank, 1093, 1110. New Hope, etc., Co. v. Poughkeepsie, etc., Co.. 986. New Jersey v. Yard, 685, 1943. New Jersey Central R R Co. v. Mills, 1135, 1146. New Jersey, etc., Bank v. Thorp. 1173. New Jersey, etc., Co. v. Ames, 1300. New Jersey, etc., R R v. Jersey City, 775. New Jersey, etc.. R R Co. v. Strait, 163, 107, 169, 634, 1228 New Jersey & New York R'y, In re, 1439. TABLE OF CASES. CXXXV11 [Tlie references are New Jersey R. R. Co. v. Long Branch Comm'rs, 877. New Jersey S. Co. v. Brockett, 100G. New Jersey Zinc Co. v. New Jersey Franklinite Co., 937. New London & Brazilian Bank v. Brocklebank. 692, 700. New London, etc., Bank v. Ware, etc., R. R., 1239. . New London, National Bank of, v. Lake S. & M. S. R. R. Co., 500. New Mashonaland, etc., Co., Re, 1030. New Orleans v. Clark, 1247. New Orleans v. Graihle, 141. New Orleans v. Houston, 756, 758, 889, 1944. New Orleans v. New Orleans, etc., Co., 1945, 1950. New Orleans v. New Orleans, etc., Works, 773. New Orleans v. Saving, etc., Co., 755. New Orleans Building Co. v. Lawson, 1079. New Orleans City, etc., Co. v. City of New Orleans et al., 703. New Orleans City R. R. Co. v. Crescent City R, R Co., 1555. New Orleans, etc., Co. v. Briggs, 174. New Orleans, etc., Co. v. Harris, 858. New Orleans, etc., Co. v. Louisiana, etc., Co.. 1545. New Orleans, etc., Co. v. New Orleans, 770, 1574, 1945. New Orleans, etc., R. R Co. v. Board of Assessors, 748. New Orleans, etc., R. R. Co. v. City of New Orleans. 1556, 1558. New Orleans, etc., R R. Co. v. Dela- more, 1266, 1269, 1559. New Orleans, etc., R. R Co. v. Frank, 33. New Orleans, etc., R. R Co. v. Harris, 815, 1495. New Orleans, etc., R R Co. v. McDon- ald, 135. New Orleans, etc., R R Co. v. Miss. Coll., 1226. New Orleans, etc., R R Co. v. New Or- leans, 1945. New Orleans, etc., R'y v. Parker, 1324, 1325, 1332, 1383, 1385. to the foot-paging, ,] New Orleans, etc., R'y v. Union T. Co., 1383. New Orleans, etc., Steamship Co. v. Dry- dock Co., 104. New Orleans, F. & H. S. Co. v. Ocean Dry-dock Co., 426. New Orleans. First Municipality of, v. Orleans Theater Co., 234. New Orleans, First Nat'l Bank of, v. Bohne, 1183. New Orleans Gas Light Co. v. Bennett, 263. New Orleans Gas Co. v. Louisiana Light Co., 1582, 1584, 1944, 1945. New Orleans, J. & G. N. R. Co. v. Bailey, 1006, 1011. New Orleans. Jackson & Great North- ern R R Co. v. Harris, 633, 634. New Orleans, Jackson & G. N. R. Cc , Hurst, 1010. New Orleans Nat'l Banking Ass'n % Wiltz, 23, 585, 688, 699, 701. New Orleans R R v. Morgan, 1325. New Orleans, St. L. & C. R, Co. v. Burl 1011. New Orleans Water-works Co. v. R .- ers, 1597. New Sombrero Co. v. Erlander, 910. New York v. Second Ave. R R, 1C '<, 1554, 1574. New York v. Squire, 1950. New York African Soc. v. Varick, 1017. New York Bank Com'rs v. Bank of Buf- falo, 873. New York Booking Co., In re. 316. New York Cable Co., In re, v. Mayor, 876. New York Central R. R v. Stokes, 511. New York Central R R Co., Matter of, 1525, 1526, 1528, 1529. New York Dry-dock Co. v. Hicks, 999, 1173. New York El. R R Co. v. Manhattan R'y Co., 930! New York El. R R Co., Matter of, 629, 637. New York El. R R Co., In re, 875. New York, etc., Canal Co. v. Fulton Bank, 967. New York, etc., Co. v. Buffalo, etc., Co., 935. cxxxvm TABLE OF CASES. [The references are New York, etc.. Co. v. Parrott, 808. New York, etc., Co. v. Phoenix Bank, 10.").-). New York, etc.. Co.. Iu re. 843. New York, etc., Exch. v. Board of Trade, etc., 1600. New York., etc., Mine v. Negaunee Bank. ioe New York, etc., R R Co. v. Carhart, 684. New York, etc., R. R Co. v. Cook. ia New York, eta, R R Co. v. Dixon. In:;:;. New York, etc., R R Co. v. Ketchum. 934, 1043. New York, etc., R R v. N. Y, etc.. R R., 1117. New York, etc.. R R v. N. Y. N. H., etc., R R. 883, 884, 1488, U New York, etc., R R. v. N. Y. W. S.. etc., R R, 1530. New York, etc.. R R Co. v. Nickalb, 373, 71-. 733. New York, etc., R. R. v. Parmalee. 890. New York, etc., R'y Co.. In re, 108 New York, etc., Soc. v. Varick, 1102 New York, etc., Tel. Co. v. Dryburg, 1598. New York, etc., Tel. Co. v. Jewett. 1462. New York, etc.. Trust Co. v. Helmer, 984 New York, etc.. Works v. Smith, - New York Ex. Co. v. De Wolf, 107, 101, 238 New York Firemen's Ins. Co. v. Ely. 983, 985, 1193. New York Firemen's Ins. Co. v. Sturges, 983, 9S7. New York Guaranty Co. v. Memphis, 1331. New York & H. R R Co. v. Forty-sec- ond St. & G. S. F. R R Co.. 1330. New York & H. R R Co. v. Kip. 1534, 1526. New York & H. R R. R Co. v. New York. 1093. New York & H. R R R Co., Matter of, 1535, 1526, 1584. New York & N. E. R R. v. N. Y., N. H„ etc., R R, 8S1. to the foot-paging.] New York ft New Haven R R v. Schuy- ler, 381, 394. 395, 399, 497, 498, 547, 1006. lOW New Y< i k ft O. M. R R Co. v, Yan Horn, 221. York, H. & N. R R Co. v. Boston, H. & E. R R Co.. 1529. New York. II. ft N. R R Co. v. Hunt, 336, 227. N u York. L E & W. R R Co. v. Da- vi. Newall v. Wiliiston. 622. 683. Newark B. Co, \. Newark, 751. Newark City Bank v. Assessor, 761. Newark ■ w ark, 7 N< wail<. Town of. v. Elliott. 995. Newberry \. Detroit, etc., Iron Co.. 622. Newberry v. t rarland, i Newberry v. Robinson, £ Newbold v. Peoria. Ob EL I.'.. 1804, 1154. Newburg Petroleum Co. v. Wears, 818, . 997, i Newburgb T. Co v. Miller, 1592. Newbury v. Detroit, etc., EL R I Newborypon T.C ,y Eastern R R Co., 1539. Newby v, .tent Fire-arms. etc., Cot, 1164, 1174. Newby v. Oregon, etc.. R R Co., 1013, 1014, 1148, 18SL Newcastle, etc, R'y v. Simpson, 1391, 1458 Newcastle ft R. R R Co. v. Peru & Ind R R Co.. 1 N". wcomb v. Reed, 818,798. Newcombe v. Lottimer, 588. Newcombe, In i 9& 350,851. Newell v. Borden, t Newell v. Gr. al W< stern R'y Co., 1174. Newell v. Miun., etc., R'y. 1562, Newell v. Smith, 1457. x. well v. Wiliiston, Newell's Appeal, 1019. Newlande v. National, etc.. Association, 479, Newling v. Francis, 1021. Newman v. Newman. 408. Newport, etc.. Bridge Co. v. Douglass, 607, 1197, 12li4, 1308, 1314, 1368, 1397. TABLE OF CASES. CXXX1X [Tlie re/arences are Newport Mechanics' Manuf. Co. v. Star- bird, 1019. Newry & Enniskillen R'y Co. v. Coombe, 107, 334, 428. Newry & Enniskillen R'y Co. v. Ed- munds, 157, 171, G93. Newry, etc.. Co. v. Moss, 328, 330, 591. Newton v. Belcher, 1036. Newton v. Daly, G65. Newton v. Fay. 581, 586. Newton v. Porter, 1226. Newton v. Van Dusen. 451. Newton Mfg. Co. v. White. 1051. Newton Hamilton Oil & Gas Co., Re, 315. Niagara Falls, etc., R R. Re, 1524, 1526. Niagara Ins. Co., In re, 860. Nicholay's Case, 1037. Nicholl v. Eberhardt Co.. 1478. Nicholls v. Diamond, 977. Nichols v. Ann Arbor, etc., St R'y, 876, 1563, 1564. Nichols v. Burlington & Louisa County Plank-road Co., 127, 128. Nichols v. Mase, 998, 1230, 1372, 1383. Nichols v. Nashville, 137. Nichols v. Pearce, 977. Nichols v. Scranton, etc.. Co., 1088. Nichols v. Somerset & K. R. R Co., 1525. Nicholson v. Great West R'y, 1518, 1519. Nicholson v. Mounsey, 1033. Nicholson v. Showalter. 19. Nickalls v. Eaton, 355, 563. Nickalls v. Merry, 333, 359, 429, 563, 579. Nickerson v. Atchison, etc., R R, 1281, 1309. Nickerson v. English, 238, 413, 917. Nickerson v. Wheeler, 306. Nicolay v. St. Clair County, 143. Nicol's Case, 337, 415. Nicoll v. New York, etc., R R Co., 991, 992, 996. Nicoll v. Railroad, 890. Nicoll's Case, 76, 96, 196. Nicollet National Bank v. City Bank, 688. Nightingal v. Devisrne, 23, 783. Niles v. Edwards, 595. Nimick v. Mingo Iron Works, 292, 294. Nimmons v. Tappan, 864. to the foot-paging.] Nimocks v. Grimm, 938. Nines v. St. Louis, etc., R. R, 1534. Nippenose Mfg. Co. v. Stadtou, 120, 188, 192. Nisbit v. Macon, etc., Co., 585. Nissen v. Cramer, 18. Niver v. Niver, 781. Nixon v. Brownlaw, 639. Nixon v. Green, 349. Noble v. Collender, 188. Noble v. Turner. 618, 621. Noble v. Yincennes, 149. Noblesville, etc., Co. v. Loehr, 1054 Nockels v. Crosby, 103, 663, 1040, 1041. Noel v. Drake, 844, Noesen v. Town of Port Washington, 151, 633. Nolan v. Arabella, etc., Co., 178. Nolan v. Hazen, 2*5. Noll v. Dubuque, etc., R R. 1531. Noonan v. Ilsley, 782, 785, 788, 790. Norbury's Case, 1037. Nordell v. Wahlstedt, 293. Norfolk, etc., R R v. Commonweal th, 776. Norfolk, etc., R R v. Cottrell. 1177. Norfolk, etc., R R. v. Pennsylvania, 7"; 7, 1947. Norman v. Mitchell, 183, 639. Norrice v. Ayhner. 21. Norris v. Cottle, 1037. Norris v. Crocker. 294. Norris v. Harrison, 741, 742. Norris v. Irish Land Co., 525, 531. Norris v. Johnson 2S4, 288. Norris v. Mayor of Smithville, 862. Norris v. Trustees, etc., 634, 810, 1517. Norris v. Wallace, 434. Norris v. AVrenshall, 292, 629. Nbrth v. Forrest, 464. North v. Phillips, 473, 475, 476, 782, 785 7S8, 790. North v. Platte County, 138. North v. State, 865. North, Ex parte, 199. North America, Bank of, v. Rindge, 295. North American Building Ass'n v. Sut- ton, 780, 782, 790. North American Colonial Ass'n v. Bent- ley, 34a cxl TABLE OF CASE8. [The references are North Australian, etc., Co., 907. North Bait., etc., R'y v. Mayor, 1556. North Bait., etc., R'y v. North Ave. R*y, 1569. North Beach, etc., R R Co.'s Appeal, 1554, 1574. North Car. R. R. Co. v. Drew, 1215, 1227, 1276. 1387. 1483, 1484. North Car. R. R Co. v. Leach, 18 ', 192. North, etc., Ass'u v. Childs et al., 974. North, etc., Assoc, v. First Nat'l Bank, 662, 1186. North, etc., Co. v. Spullock. 158. North, etc., Co. v. Stebbins, 970. North Hallenbeagle Mining Co., In re, 179. North Hudson, etc, Assoc, v. Childs et al., 1028, 1063. North Mo. R. R Co. v. Winkler. 119, 123. 771, 772, 1183. North Pa., etc., R R v. Adams, 1236, 1239. North River Bank v. Ay mar, 1119. North River Bank. Matter of. 1 186. North Shore Staten Island Ferry Co., In the Matter of. 826, 83a North State, etc., Co. v. Field, 184, 1171. North W. Distilling Co. v. Brant. 1017. North Ward Nat" I Bank v. City of Newark, 748, 755. 765. 767. Northampton v. Easton, eta, R*y, 1571. Northampton Bank v. Allen, 983. Northampton Bank v. Pepoon, 1051, 1055, 1071, 1092. Northampton Nat'l Bank v. Kidder, 1224. 1226, 1232. Northeast, etc., R R Co., Ex parte, 255, 630. Northeastern R'y Co. v. Jackson. 924. Northeastern R R Co. v.Rodrigues, llO. Northern Assam Tea Co., In re, 698, 700, 1254. Northern Central R. R v. Com., 1592. Northern, etc., Co., The, Re, 97. Northern, etc., Iron Co. v. Young. 934. Northern, etc., R'y Co. v. Raymond. 777. Northern, etc., R R. Co. v. Young. 934. Northern Liberties Bank v. Cresson, 1059. Northern Pac. R R v. Dustin, 152a to the foot-paging.'] Northern P. R R Co. v. Roberts. 137. Northern P. R R Co. v. Territory, 1522. Northern R'y v. Carpentier, 781. Northern R. R. Co. v. Concord & C. R R Co.. 1528. Northern R R Co. v. Miller, 111, 112, 174. 175, 625, 637, 8S6. Northern Trans. Co. v. Chicago, 999. Northey v. Johnson, 6G5. Northrop v. Bushnell. 56. Northrop v. Curtis 522. Northrup v. Miss., etc., Ins. Co., 1111. Northrup v. Newtown & B. T. Co., 518, 547, 708. Northumberland Avenue Hotel Co., Re, 104:!. Northumberland Co. Bank v. Ever, ioia Northwest Transportation Co. v. Beatty, 84::. 944 Northwestern, etc., Packet Co. v. Shaw, 971. Northwestern, eta, Ins. Co. v. Cotton, etc. Co., 75. 121U. Northwestern Mutual L L Co, v. Over- holt. 999, 1003. Norton v. Blinn, 476. Norton v. Bobart, 488. Noiton v. Brownsville, 143. Norton v. Dyeisburg, 168. Norton v. Florence, etc., Co., 1255. Norton v. Kellogg, 112a Norton v. Norton, 613. Norton v. Peck, 130. Norton v. Shelby County, 150. Noiton v. Union Trust Co., 68a Norton v. Wallkill, etc.. R R Co., 890. Norton v. Wis wall, 15S1. Norvah. etc., Co., In re, 915. Norwegian Titanic Iron Co., 869. Norwich, etc., Co. v. Hockaday, 639. Norwich, etc.. Co., In re. 1107. Norwich Gas L Co. v. Norwich City G. Co., 1583, 1584. Norwich Ins. Soc, In re, 322. Norwich & L Navigation v. Theobold, 225. Norwood, Ex parte, 1427. Norwood, In re, 893. Nott v. Clews. 53. 7a TABLE OF CASES. cxli [Tlie references are to the foot-paging.] Nott v. Hicks, 1104. Nourse v. Prince. 590. Noyes v. Blakeman, 654. Noyes v. Marsh. 450. 461. 844. Noyes v. Rich, 1367, 1422. Noyes v. Rutland & Bur. R, R., 1532, 1533. Noyes v. Spaulding. 24, 456, 472, 518, 547, ■" 590. Nucleus Assoc, v. McElroy, 1107. Nugent v. Boston, etc., R. R., 1536. Nugent v. Cincinnati, Harrison & In- dianapolis S. L. R. R. Co., 198. Nugent v. Supervisors, 145, 150, 156,639, 1492, 1507. Nulton v. Clayton. 89, 111, 113. Nu thrown v. Thornton, 461. Nute v. Hamilton, etc., Co., 1023. Nutter v. Lexington, etc., R. R. Co., 390. Nutting v. Boardman, 443. Nutting v. Hill, 878. Nutting v. Thomason, 444. Nutting v. Thompson, 443. Nyce's Appeal. 434. Nyraan v. Berry. 988. Nysewander v. Lowman, 459, 479. o. Oakbank Oil Co. v. Crum, 21, 713. Oakes v.' Oakes, 408, 409. Oakes v. Turquand, 8, 193, 197, 200, 209, 353, 639. Oakland R'y v. Keenan, 1388. Oakland R. R. v. Oakland, etc., R. R., 1487, 1504, 1556. O'Bierne v. Bullis, 1332. O'Brien v. Breitonbach, 423, 450. O'Brien v. Chicago, Rock Island & Pa- cific R. R. Co., 382. O'Brien v. Mechanics' & T. Ins. Co., 612. O'Brien v. O'Connell, 1148. O'Brien v. Shaws, etc., Co., 1175. Occidental, etc., Assoc, v. Sullivan, 178. Ocean Ins. Co. v. Portsmouth, etc., R'y, 1174. Ocean Nat'l Bank v. Carll, 1436. Ochiltree v. Railroad Co., 272, 392, 629, 1943. O'Connor v. Current, etc., Co., 1392. O'Connor, etc., Co. v. Coosa, etc., Co., 1140. O'Connor v. Irvine, 455, 461. Odd, etc., Bank's Appeal, 443. Odd Fellows v. Bank of Sturgis. 1084 Odd Fellows, etc., Co. v. Glazier, 116. Odell v. Odell, 991. O'Donald v. Evansville, etc., R. R. Co., 128, 1166. O'Donnell v. C. R. Johns & Co., 1015. Oelrichs v. Ford, 580. Ogden v. City of St. Joseph, 751. Ogden v. County of Daviess, 131. Ogden v. Lathrop, 591, 605. Ogden v. Murray, 923. Ogden City R'y v. Ogden City, 1556. Ogdenshurgh Bank v. Van Rensselaer, 1163. Ogdenshurgh, etc., R. R. Co. v. Frost, 105. 174, 175, 221. Ogdenshurgh, etc., R. R. v. Vermont, etc., R. R.. 867. Ogdenshurgh, etc., R. R. Co. v. Wooley, 34, 221. Ogilvie v. Currie, 195, 202, 208, 492. Ogilvie v. Knox Ins. Co., 61, 160, 207, 210. 253, 255, 256. 257, 259, 261. Ogle v. Knipe, 23, 408. Ogleshy v. Attrill, 165, 1160. O'Hare v. Second National Bank, 420, 984. Ohio v. Fox, 418. Ohio v. Frank, 1236. Ohio v. Knoop, 625, 747. Ohio, City of, v. Cleveland, etc., R. R. Co., 707, 711, 715. Ohio, etc., Co. v. State, 848, 855. Ohio, etc., College v. Higgins, 112. Ohio, etc.. College v. Rosenthal, 377. Ohio, etc., Missouri Railroad v. Wheeler, 1948. Ohio, etc., R. R. Co. v. Cramer, 129, 158. Ohio, etc., R. R. Co. v. McPherson, 1059. Ohio, etc., R. R. Co. v. Wheeler, 2. Ohio, etc., R'y Co. v. People, 796, 849, 1545. Ohio, etc., Trust Co. v. Debolt, 772. Ohio, Ind. & 111. R. R Co. v. Cramer, 33. Ohio Ins. Co. v. Nunnemacher, 2, 386, 389. cxlii TABLE OF CASES. [The references are to the foot-paying.] Ohio Life, etc., Co. v. Merchants' Ids. & T. Co., 1539. Ohio Life Ins. Co. v. Merchants' Ins. Co., 272. Ohio Life Ins. Co. v. Merchants' Ins. & T. Co., 985. Ohio Life Ins. & T. Co., Re, 983. Ohio & M. Ry v. People, 638, 1523, 1543. Ohio & M. R'y v. Russell, 1448. Ohio & M. R R. v. Anderson, 1447. Ohio & M. R. R. v. Davis, 1447. Ohio & M. R R. v. Fitch. 1435. Ohio & M. R R v. Indianapolis, etc., R R, 1499. Ohio & M. R. R v. McPherson, 795, 1293. Ohio & M. R. R v. Quier, 1177. Ohio & M. R R v. Weber, 14, 770, 1511 Ohio & M. R, R v. Wheeler, 1511, 1511. OhioR. R v. Dunbar, 1536. Oil Creek, etc., R R v. Penn. Trans. Co., 1541. O'Kell v. Charles, 1105. Olcott v. By num. 1338. Olcott v. Headrick, 1462, Olcott v. Supervisors, 133, 1526. Olcott v. Tioga R R Co., 1020. 1072. 1080, 1093, 1102, 1105. 1190, 1193, 1510. Old Colony R R v. Evans, 991. Old Colony R R. v. Tripp, 1541. Old" Dominion, Bank of, v. McVeigh, 628. Oldham v. Bank, 987. Oldknow v. Waiuvvright, 1067. Oldtown Bank v. Houlton, 18, 1113. Oldtowu, etc. R R Co. v. Veazie, 227, 229, 629, 632, 1167. O'Loary v. Board of Education, 1111. Oler v. Baltimore, etc. % R. R Co., 87, 99, 219. Olery v. Brown, 661. Oleson v. Green Bay, eta, 137. Oliphant v. Woodburn, etc., Co., 1027. Oliphant v. Woodhaven, etc., Co. 42. Oliver v. Gil more, 649. Oliver v. Liverpool, etc., Co., 775. Oliver v. Liverpool, etc., Ins. Co., 321, 322. Oliver v. Liverpool & London Life & Fire Ins. Co. ,*666. Oliver v. Walter, etc., Co.. 1178. Oliver v. Washington Mills, 753. Olney v. Chadsey, 1075. 1121. Olney v. Conanicut Land Co.. 940. Olyphant v. St. Louis, etc.. Co., 1350, 1351, 1395, 1397. 1403. Omaha, etc., R'y v. Wabash, etc., R'y, 1384. Omaha H. R'y v. Cable, etc., Co., 1556. O'Mahony v. Belmont, 1420. O'Meara v. North American Mining Co., 101, 785, 790. Ommaney v. Butcher, 408. O'Neal v. King, 125. Oneida Bank v. Ontario Bank, 985, 119a 0"Neil v. Dry Dock, etc., R R., 1570. O'Neill v. Win-ham. 600, 602. Onondaga Trust & Deposit Co. v. Price, 409, II!. 783. Onslow's Case, 88. Onstotl v. People, 1 is Ontario s.ilt Co. v. Merchants' Salt Co., 651, ln'.is. Onward, etc., Soc, Re, 1 139. Opdyke v. Marble. 681, 682 Opdyke v. Pacific R K.. 1217. Opelika v. Daniel, 133. Opere, Limited. Re, 1253. Orange, etc., R R v. Fulvuy. 785. ( >rd, Ex parte, 340 On-. in v. Jennings, 152. Oregon Cascade R R Co. v. Baily. 1525. [526. Oregon Central R R Co. v. Scoggin, 210. 223, 232 Oregon, etc., Co. v. Hilmers. 502. Oregon, etc., R. R. v. Forrest, 1213. Oregon R'y Co. v. Oregonian R'y Co., 6, 974. 1499, 1504. 1505. Oregon R*y Co. v. Oregon R'y & Nav. Co., 1016, 1065. Oregon Short Line, etc., R'y v. Ilwaco, etc., Co., 1599. Oregon & W. T. & L Co. v. Rathbun, 1002. Oregonian R'y Co. v. Oregon, etc., Nav. Co., 881, 1166. O'Reilly v. Bard, 271. 305. Oriental, etc.. Ex parte, 327. Oriental Steam Nav. Co. v. Briggs, 461, 462. TABLE OF CASES. CXU11 [T7., Re, 1252, 1253, 1354, 1255, 1356, 1299. Panama, etc., Tel. Co. v. India Rubber, etc., Co., 903. Panhandle, etc, Bank v. Stevenson, 729, I, 1077. Paper < '". v. Waples, 161. Paper Ca's A]. peal. 897. Paradi-c v. Farmers', etc., Bank, 1424. Parbury' 207. Paris v. Paris, 741. Parish v. Parish, 460. Parish v. Wheeler, 1261. 1881, 1866, 1535. Parish, etc.. v. Newburyport & A. Horse Railroad Co.. 1101. Park v. Grant Locomotive Works, 718, 721, 722, 1460. Park v. Musgrave, 598. Park v. Petrol* am Co.. 1161. Park v. Spaulding, 061. Park v. Whitney. 458 Tark Bros., etc., v. Kelly, etc.. Co., 1107. Park Nat'l Bank v. German, etc., Co., 1213. Parke v. Commonwealth Ins. Co., 1177. Parke, etc., Co. v. Terre, etc., Co., 730, 961. Parker v. Bernal, 420. Parker v. Browning. 1428. Parker v. Crol, 568. Parker v. Glover, 435. Parker v. Great West. R'y, 1521. Parker v. Kett, 1057, 1058. Parker v. Mason, 707, 728, 740. TABLE OF CASES. cxlv [The references are Parker v. McKenna, 922. Parker v. New Orleans, etc., R R., 1383, 1385. Parker v. Nickerson, 917, 922, 935. Parker v. Northern, etc., R R Co., 97. 112. Parker v. Scogin, 135. Parker v. Sun Ins. Co.. 612, 755, 761. Parker v. Thomas, 128, 196. Parker v. Washoe Mfg. Co., 1100, 1101. Parker Mills v. Com'rs, etc., 776. Parker, Ex parte. 358, 359. Parkhurst v. Northern, etc., R R, 1368. Parkin v. Fry, 1038. Parkins v. Watson, 987. Parkinson v. City, 1101. Parks v. Automatic, etc., Co., 710, 712. Parks v. Evansville, Ind. & Cleveland S. L. R R Co., 128. Parks v. Heman, 161. Parmley v. Railroad Cos., 747. Parmley v. Tenth Ward Bank, 666. Parrish's Appeal, 272, 336. Parrott v. Byers. 1136, 1137, 1151. Parrott v. City of Lawrence, 1577. Parrott v. Colby, 298, 351. Parrott v. Thatcher, 580. Parrott v. Worsfold, 404, 406. Parson v. Joseph. 53, 55, 1139. Parson's Case, 107, 333. Parsons v. East, etc., Co., 777. Parsons v. Greenville, etc.. R R, 1326. Parsons v. Hays, 53. Parsons v. Jackson, 1198. Parsons v. Joseph, 1152. Parsons v. Martin, 564, 580, 780. Parsons v. Robinson. 454, 1356. Parsons v. Spooner, 1035. Parsons v. Winslow, 740. Partridge v. Badger, 93, 1058, 1084. 1185, 1190. Partridge v. Davis, 1248. Partridge v. Forsythe, 580. Partridge v. Partridge, 406, 411. Paschall v. Whitsett, 730. Passaic Bridge, The, 1945. Passmore v. Mott, 1104. Patent File Co., Re, 1262. Patent Paper Mfg. Co., In re, 337. Paterson, etc., Co. v. Grundy, 1567. J to the foot-paging.'] Paterson, etc., R R v. Mayor, 1564, 1572. Paton v. Sheppard, 743. Patrick v. Reynolds, 1036. Patterson v. Baker, 291. Patterson v. Hempfield R R, 1309. Patterson v. Lynde, 250, 255, 257, 281, 282, 289, 306, 1427. Patterson v. Minn., etc., Co., 276, 278, 280, 285. Patterson v. Mississippi R R B. Co.. 1527, 1600. Patterson v. Robinson, 1078. Patterson v. Syracuse Nat'l Bank, 1090. Patterson v. Wyomissing Mfg. Co., 280,. 284. Patterson, Appeal of. 435, 436, 473. Pattison v. Supervisors, 141. Pattison v. Syracuse Nat'l Bank, 973." Paul v. Baltimore, etc., R R. 1181, 1542. Paul v. Virginia, 997, 998, 1001, 1945. 1947. Paulding v. Chrome Steel Co., 991. Paulding v. Jerome, etc., Co., 941. Pauling v. London & N. W. R'y Co., 1096. Paulino v. Portuguese Ben. Ass'n, 672.. Paulson v. Van Steen burgh, 1141. Pawle's Case, 209. Paxon v. Talmage, 253. Paxton. etc., Co. v. First Nat'l Bank, 1046. Payne v. Baldwin, 983. 1517. Payne v. Bullard, 175, 244. Payne v. Commercial Bank, 602. 1086. Payne v. Elliott, 21, 23. 26, 239. 780. Payne v. New South, etc., Co., 1044. Payne v. Western & A R. R. Co., 1008. Payne's Case, 358, 448. Payson v. Stoever, 265, 385. Payson v. Withers, 190, 245,. 291. 385, 632, 810. Peabody v. Eastern Methodist Society in Lynn, 665. Peabody v. Flint, 946, 1130. Peacock v. Pittsburg, etc.. Works, 1457. Peake v. Wabash R R Co., 168, 171. Peale v. Phipps, 1433. Pearce v. Billings, 406, 407. Pearce v. Madison & I. R R Co., 634, 1191, 1492, 1534 cxlvi TABLE OF CASES. [The references are Pearly v. Smith, 743. Pearsall v. Western U. T. Co., 578, 1122, 1593. Pearson v. Bank of England, 444 Pearson v. Concord R R Co., 422, 427, 932. Pearson v. London, etc., Ry, 367. Pearson v. Scott, 568. Pearson's Case, 217, 907, 915, 1038. Peavey v. Town, etc., 765. Peck v. Coalfield Coal Co., 34. Peck v. Cooper, 977. Peck v. Detroit, etc., Works, 1111. Peck v. Doran, etc., Co., 468, 476, 970. Peck v. Ellis, 1159. Peck v. Gurney, 486, 487, 489, 494. Peck v. Miller, 273. Peck v. New Jersey, etc., R R, 1195. Peck v. New York, etc., Ry, 1195, 1197, 1329, 1353. Peck v. Providence Gas Co., 440, 444. Peckham v. Hendrew, 1121. Peckham v. Ketchum, 567, 580. Peckham v. Newton, 435. Peckham v. North Parish, 1174. Peckham v. Smith, 390. Peckham v. Van Wagenen, 712, 714, 717. Pedell v. Gwynn, 277. Peddicord v. Baltimore, etc., P. R Ry Co., 1590. Peebles v. PatapscoGuano'Co., 205, 1006, 1007. Peebles, In re, 692, 696. Peed v. Millikan, 134. Peek v. Derry, 196, 205, 792. Peek v. Detroit, etc., Works, 1069. Peek v. Gurney, 204, 207. Peekskill Plow Works, Matter of, 959. Peel v. Thomas, 665. Peel's Case, 196, 208. Peik v. Bank of America, 444. Peik v. Chicago, etc., R R, 1330. Peirce v. Jersey W. Co., 225. Peirce v. New Orleans Building Co., 856. Peirce v. Somers worth, 1175. Pekiu, City of, v. Reynolds, 1237. Pellatt's Case, 37, 96. 97, 122. Pell's Case, 34, 36, 76. Pelly, Ex parte, 908, 1157, 1159. to the foot-paging.] Pelton v. East Cleveland R R, 1564 Pelton v. National Bank, 766, 767. Pelton v. Northern Trans. Co., 769. Peltz v. Supreme, etc., Union, 316. Pembina Mining Co. v. Pennsylvania, 776, 998, 1005, 1947, 1949. Pender v. Lushiugton, 826, 843, 1143. Pendergast v. Bank of Stockton, 687, 691. Pendergast v. Yandes, 273. Pendleton v. Empire, etc., Co., 929. Pendleton Co. v. Amy, 146. Pendleton Mfg. Co. v. Mubanna, 37, 199 Penfield v. Skinner, 001. Peninsular Bank v. Hanmer, 1085. Peninsular, etc., R R Co. v. Duncan, 15, 98. 113. Peninsular Iron Co. v. Stone, 1135. Peninsular R R Co. v. Howard, 19. Penn v. Calhoun, 1390. Penniman v. Biij^s, 261, 282. Pennington v. Baehr, 1231. Pennock v. Coe, 1238, 1261, 1374, 1382, 1383. Pennoyer v. NefF, 1175. Pensyl. Appeal of, 435. Pennsylvania, Bank of, v. Common- wealth, 027. Pennsylvania, Bank of, v. Gries, 274. Pennsylvania Bank v. Hopkins, 1141. 1429. Pennsylvania Bank v. Reed, 1055, 1086. 1093. Pennsylvania Co. v. Daudiidge, 1093, 1534. Pennsylvania Co. v. Ellett, 1536. Pennsylvania Co. v. Wentz, 1516. Pennsylvania Coal Co. v. D. & H. Canal Co., 1579. Pennsylvania College Cases, 638, 1942. Pennsylvania Co., etc., v. Bauerle, 1301. 1321. Pennsylvania Co., etc., v. Commissioners, 757, Pennsylvania Co., etc., v. Jacksonville, etc., Co., 1407. Pennsylvania Co., etc., v. Philadelphia etc., R Co., 507, 790. Pennsylvania, etc., Co.'s Appeal, 963. Pennsylvania,etc, RCo. v. Harkins, 1547. TABLE OF CASES. cxlvii [The references are Pennsylvania, etc., R'y Co. v. Keokuk, etc., Co., 953. Pennsylvania, etc., R. R. Co. v. Leuflfer, 273. Pennsylvania Ins. Co. v. Murphy, 668. Pennsylvania Match Co. v. Hapgood, 1047. Pennsylvania Mut., etc., Co. v. Heiss, 1382. Pennsylvania R. R. v. Allegheny, etc., R. R, 1245, 1246, 1337, 1340, 1357. Pennsylvania R. R. v. Angel, 1009. Pennsylvania R. R Co. v. Bait. & O. R R Co., 1532. Pennsylvania R R Co. v. Braddock, etc., R'y Co., 1568. Pennsylvania R R Co. v. Canal Cora'rs, 2. Pennsylvania R. R Co. v. Cook, 1098. Pennsylvania R. R. Co. v. Freeport, 1531. Pennsylvania R R. Co. v. Miller, 627, 1945. Pennsylvania R. R Co. v. National R'y Co., 1527. Pennsylvania R. R Co. v. Pemberton, etc.. R. R, 1251. Pennsylvania R. R. Co. v. Philadelphia, 131, 137, 139, 140. Pennsylvania R R Co. v. Riordan, 1537. Pennsylvania R R. Co. v. St. Louis, etc., R R, 6. 1246, 1490, 1491, 1504, 1505, 1543, 1544. Pennsylvania R R Co. v. Vandiver, 1008, 1095. Pennsylvania R. R Co.'s Appeal, 516, 519. Pennsylvania Trans. Co.'s Appeal, 1475, 1480. Penny, Ex parte, 448. Penobscot v. Dunn. 1058. Penobscot & Kennebec R. R. Co. v. Dunn, 122, 123, 126, 167, 1167. Penobscot Boom Corp. v. Lamson, 863, 877, 887. Penobscot, etc., R. R, Co. v. Bartlett, 91, 116,224, 230. Penobscot, etc., R R. Co. v. Dummer, 113, 167, 171, 227. Penobscot R. R Co. v. White, 227. Pensacola Tel. Co. v. Western Union Tel. Co., 1001, 1594, 1595, 1946. to the foot-paging."] Penticost v. Ley, 408. Pentz v. Citizens' Fire, etc., Co., 173. Pentz v. Hawley, 263, 2G8. Pen-y-Van Colliery Co., In re, 862. People v. Albany, etc., R R, 42, 81 1, 812, 814, 816, 824, 829, 831, 833, 836, 837, 839, 844, 850, 851, 867, 1012, 1061, 1154. 1155, 1498, 1504. People v. Albany & Susquehanna R R Co., 1417. People v. Albany & Ver. R R Co., 1522. People v. American Bell Tel. Co., 775. People v. Anderson, etc., Co., 890. People v. Assessors, etc., 658, 764, 767. People v. Assessors of Watertown, 2. People v. Atlantic, etc., Ins. Co., 1440, 1570. People v. Atlantic, etc., R R, 867. People v. Babcock, 1580. People v. Ballard, 49, 873, 955. People v. Bank of Niagara, 868. People v. Barnett, 235, 236, 1432. People v. Barrett, 144. People v. Batchellor, 135,' 137, 147, 807. People v. Beigler, 1167. People v. Blackhurst, 1099. People v. Board of Assessors, 705. People v. Board of Governors of Albany Hospital, 799. People v. Bogart, 869. People v. Boston, etc., R R Co., 1517, 1523. People v. Bowen, 3, 884. People v. Bradley, 752, 764. People v. Brandis, etc., Co., 531. People v. Brewster, 986. People v. Broadway R. R, 867, 1558. People v. Brooklyn, etc., R R, 1275, 1498. 1504, 1565. People v. Buffalo, etc., Co., 865. People v. Budd, 1600. People v. Cady, 674. People v. Central R R, 1165. People v. Chambers, 219. People v. Chapman, 148. People v. Chicago Board of Trade, 1026. People v. Chicago, etc., R R, 1523. People v. Chicago Gas T. Co., 3, 7, 426, 644, 872. People v. City Bank, 885. cxlviii TABLE OF CASES. [The references are People v. Clark, 1012, 1945. People v. Clute, 851. People v. Coffey, 1572. People v. Coleman, 14. 321, 667, 6G9, 767, 772. People v. Colorado, etc., R R, 1488, 1523. People v. Commissioners, etc., 14, 752, 760, 7G1, 763, 764. People v. Conklin, 817, 1067, 1155. People v. Cook. 1274. People v. Coon, 133. 154. People v. Cornell, 674. People v. Crissey, 819. People v. Crockett, 531, 686, 687, 690. People v. Crossley, 821, 1021, 1022. People v. Cummings, 798, 799. People v. Dashaway, 869. People v. Davenport, 752. People v. De Grauw, 863, 890. People v. Detroit, 135. People v. Detroit, etc., Works, 1009. People v. Devin, 825. People v. Dispensary, etc., Soc, 866. People v. Dolan, 760. People v. Dutch er, 144. People v. Eadie, 676, 678, People v. Eastman, 770. People v. Elmore, 622. People v. England, 977. People v. Equitable Trust Co., 770, 77G. People v. Erie l,'"y. 1143. People v. Farnham, 887. People v. Ferguson, 752. People v. Fire Assoc, of Plnla., 998. People v. Fire Underwriters, 1025, 1026. People v. Fishkill, etc., Co., 875. People v. Fleming, 817. 841. People v. Flint, 872. People v. Formosa, 1586. People v. Fort Edward, 140. People v. Franklin, 138, 148. People v. Gilcu, 1571. People v. Goss Mfg. Co., 531, 610. . People v. Griffin, 510. People v. Gunn, 315. People v. Harp, 148. People v. Hart, 799. People v. Hatch, 149. People v. Hektograph Co., 862. People v. Henshaw, 135. to the foot-paging.] People v. Hillsdale, etc., T. Co., 86a People v. Hitchcock, 150. People v. Holden, 125. 126. 152. People v. Home Ins. Co., 752, 769. People v. Horn, etc., Co., 776. People v. Howard, 998, 1005. People v. Hughitt, 14a People v. Hurlburt, 144, 14a People v. Hurl but. 130. People v. Hutton, 144 People v. Improvement Co., 866, 868, 870. People v. Jackson, etc., P. Co., 885. People v. John, etc., Co., 1436. People v. Justices, 1177. People v. Kankakee Improvement Co., P85. People v. Keese, 816. People v. Kenney, 819. People v. Kerr, l.V.l. People v. Kingston, etc., Co., 875, 885. People v. Kip. 822, 825, 84% 10221 People v. Knickerbocker, eta, Ins. Co., 14J People v. Lake Shore & M. S. R R Co., 676, 677, 678, 879, 680, 681. People v. Logan County, 142. 144, 236. People v. Long I. R R, 1517. People v. Los Angeles, etc., Ry, 874, 1567. People v. Louisville, etc., R R Co., 152, 1522. People v. Lowe, 602, 672. 869. People v. Manhattan Co., 875, 1582. People v. Mauran, 996. People v. May, 1552. People v. McLane, 1400. People v. McLean. 752. 769, 776. People v. Medical Society of Erie Co., 1025. People v. Merchants' & Moch. Bank, 714. People v. Metropolitan Ry Co., 1052, 1506. People v. Milk Exchange, 869. People v. Miller, 530. People v. Mitchell, 136. People v. Montecito, etc., Co., 871. People v. Moore, 763. People v. Morris, 130. People v. Mott, 679. People v. Mulholland, 1517. People v. Musical, etc., Union, 1025. TABLE OF CASES. cxlix [The references are to the foot-paging.'] People v. Mutual Gas, etc., Co., 684. People v. Nash, 823. People v. National Sav. Bank, 49, 223, 883, 885. People v. Nat'l Trust Co., 891. People v. Nelson, 315. People v. N. Y. Benevolent Soc, 1025. People v. N. Y. C, etc., R. R Co., 1012, 1522. People v. N. Y. Com. Assoc, 1026. People v. N. Y. Cotton Exchange, 661, 1026. People v. N. Y, etc., Asylum, 836, 1066. People v. N. Y, etc., Co., 752. People v. N. Y, etc., R R, 770, 1523, 1546. People v. N. Y, L. E. & W. R. R, 1523. People v. Newton, 1566. People v. Niagara, 666. People v. Nortli River S. Rep. Co., 643, 645, 657, 846, 865, 950, 967. People v. Northern R R. Co., 849, 1484. People v. Oakland Co. Bank, 866, 875. People v. O'Brien, 890, 1275, 1414, 1497, 1504, 1505, 1554, 1555. People v. Oldtown, 148. People v. Oliver, 148, 149. People v. Ottawa, etc., Co., 875. People v. Pacific Mail Steamship Co., 676, 679, 682. People v. Parker Vein Coal Co., 385, 395, 530. People v. Paton, 526, 676. People v. Peck, 148, 806, 813. People v. Pendleton, 1154. People v. Peyton, 680. People v. Phillips, 842, 1022. People v. Phoenix Bank, 875. People v. Potter, 1017. People v. Pres., etc., 891. People v. Pueblo Co., 133. People v. Reilly, 674. People v. Remington, 274, 603, 1436, 1443, 1447. People v. Remington & Sons, 1443, 1447, 1461. People v. Rensselaer, etc., R. R, 871. People v. Rice, 315. People v. Robinson, 825, 840. People v. Rome, etc., R R Co*, 152, 1522. People v. Runkle, 863, 1017. People v. Saint Francisco's Benevolent Society, 1025. People v. St. Louis, etc., R'y Co., 676. People v. Salem, 135, 139. People v. San Francisco Sav. Union, 727. People v. Sawyer, 149. People v. Schoon maker, 1020. People v. Schurz, 1484. People v. Security, etc., Co., 1436. People v. Selfridge, 313. People v. Sheldon, 646. People v. Sherman, 1012. People v. Sierra, etc., Co., 1016. People v. Simonton, 839, 996. People v. Smith, 1526. People v. Soldiers' Home, 771. People v. Spencer, 136. People v. Squire, 1581. People v. Stanford, 869, 871, 874 People v. State Treasurer, 141. People v. Sterling Mfg. Co., 45, 50, 1022. People v. Stockton, etc., R R. Co., 34, 92, 219. People v. Sturtevant, 1145, 1154, 1552. People v. Suffern, 144. People v. Third Ave. R R, 1549. People v. Throop, 674, 678, 679, 682, 1022. People v. Tibbits, 822, 826, 836. People v. Town of Fairbury, 799. People v. Town of Laena, 144. People v. Town of Santa Anna, 144. People v. Tuthill, 840. People v. Twaddell, 385, 805, 820, 855, 1057. People v. Ulster, etc., R R, 871, 884. People v. United States, etc., Co., 680. People v. Universal, etc., Co., 1443, 1461. People v. Utica Ins. Co., 6, 870, 1019. People v. Van Valkenburg, 148. People v. Wagner, 149. People v. Walker, 676, 677, 678, 1065. People v. Washington, etc., Bank, 868. People v. Watertown, 666. People v. Weaver, 760, 761, 765. People v. Webster. 850. People v. Wemple, 667, 775. People v. White, 890. People v. Williamsburgh Gas Light Co. s 752, 875. cl TABLE OF CASES. [Tlie references are People v. Winans, 799, 1062. People v. Woodstock T. Co., 866. People v. Wren, 863. People, etc, v. Smith, 144, 148. People ex rel. Content v. Metropolitan R'y Co., 930. People ex rel. Field v. Northern Pac. R R Co., 676, 679. ' People ex rel. Krohn v. Miller, 689, 699. People ex reL Kunze etal. v. Ft Wayne & E. R'y Co., 1560. People ex reL S. Cotton Oil Co. v. Wem- ple. 775. People's Bank v. Gridley, 517, 622. People's Bank v. Kurtz, 22, 26, 395, 397, 398, 399. People's Bank v. St. Anthony's, etc., Church, 1063, 1074, 1076. People's, etc., Assoc, v. Furey, 170, 662. People's, etc., Co. v. Babinger, 95. People's Ferry Co. v. Balch, 113, 125, 225. People's Insurance Co. v. Westcott, 802. People's Mut Ins. Co. v. Westcott, 162. People's Pass. R'y v. Baldwin, 1566. People's Pass. R R. v. Memphis, 15.") 1. People's R R v. Memphis R. R., 1550. People's R R, Matter of, 1557. People's Savings Bank v. Collins, 879. Peoria, etc., R'y v. Coal, etc., Co., 1489. Peoria, etc., R R Co. v. Elting, 174, 631, 632. Peoria, etc., R R Co. v. Thompson, 69, 1211, 1229, 1347. Peoria, P. & I. R R Co. v. Peoria & S. R. R. Co., 1529. Peoria & Rock Island R R Co. v. Pres- ton. 222, 631. Pepper v. Chambers, 682. Peppercorne v. Clinch, 563. Peppin v. Cooper, 1057. Percy v. Millaudon, 383, 385, 1031, 1055, 1071. Perdicaris v. Charleston Gaslight Co., 400, 512. Perin v. Carey, 991. Perin v. McGibben. 458. Perin v. Parker, 575. Perine v. Grand Lodge, etc., 878. Perkins v. Bradley, 1084. to the foot-paging.] Perkins v. Church. 250, 280. Perkins v. Deptford, etc., Co., 1255. Perkins v. Maysville, etc., Assoc, 1008. Perkins v. Missouri, K. & T. R R., 1011. Perkins v. Port Washington, 151. Perkins v. Portland, Saco & P. R R., 1532. Perkins v. Sanders, 224, 279, 887. Perkins v. Savage, 98, 108. Perkins v. Union, etc., Co., 114, 215. Perkins v. Washington Ins. Co., 1058, 1092, 1095, 1588. Perpetual Ins. Co. v. Goodfellow, 691. Perrin v. Granger, 173, 178. Perrine v. Chesapeake, etc., Co.. 953. Perrine v. Fireman's Ins. Co., 697. Perry v. Barnett, 580. Perry v. Hale. 206,315,487. Perry v. Hoadley, 321. Perry v. Keane. 135. Perry v. Little Rock, etc., R R, 1043. Perry v. Maxwell. 404. Perry v. Pearson, 430, 431, 483, 494, 939, 1126. Perry v. Round, etc , Assoc, 2. Perry v. Simpson, etc., Co., 1081, 1082. Perry v. Turner, 258, 272, 282, 284, 288, 306. Perry v. Tuscaloosa, etc, Co., 55, 837, 903, 1064. Perry's Case, 1032. Persch v. Quiggle, 484. Persch v. Simmons, 254. Person v. Civer, 781. Person v. Warren R R. Co., 776. Persse, etc. Works v. Willett, 882 Peru Iron Co., Ex parte, 992. Peruvian Rys. Co., In re, 96, 1120, 1191. Peterborough, etc., R R Co. v. Nashua, etc., R R Co., 75, 587. Peters v. Fort Madison, etc., Co., 963. Peters v. Foster, 279, 287. Peters v. Grim, 476. Peters v. Heywood, 783. Peters v. Lincoln, etc., R R, 190, 1495, 1506. Peters v. Nashville Savings Bank, 600. Peters v. St. Louis, etc, R. R Co., 1516. Peterborough, Bishop of, v. Mortlock, 406. * TABLE OF CASES. cli [The references are Petersburg Savings, etc., Co. v. Lums- den, 691, 693, 694. Peterson v. Chicago, etc., P. P., 1537. Peterson v. 111. Land & Loan Co., 419. Peterson v. New York, 1092. Peterson v. Sinclair, 252. Petillon v. Hippie, 468. Petition of Brown, 741. Peto v. Brighton, etc., R'y, 463, 1213. Petre v. Eastern, etc., R'y, 1044, 1045. Petre v. Petre, 410. Petrie v. Hannay, 449, 476. Petrie v. Wright, 1C93. Pettibone v. McGraw, 290. Pettibone v. Toledo, etc., R R Co., 1257. Pettingill v. Androscoggin, etc., R R, 1368. Pettis v. Atkins, 312, 667. Pew v. First Nat'l Bank. 929. Pewabic Min. Co. v. Mason, 607, 948, 1358, 1469. Peychaud v. Love, 245. Pfeifer v. Sheboygan, etc., R R, 1382. Pfeiffer v. Lansberg, etc., Co., 924. Pfister v. Milwaukee, etc., R'y Co., 1196, 1322. Pfohl v. Simpson, 255, 288, 289, 305. Phelan v. Ganebin, 1434, 1435. Phelan v. Hazard, 47, 63, 64. Phelan v. State, 674. Phelps v. Elliott, 1201. Phelps v. Farmers', etc., Bank, 16, 710, 712. Phelps v. Lyle, 854. Phene v. Gillan, 328, 463. Phenix Nat'l Bank v. Cleveland Co., 1219, 1221. Philadelphia v. Contributors, etc., 628, 772. Philadelphia v. Empire, etc., R'y, 1551, 1566. 1573. Philadelphia & Bait., etc., R R v. John- son, 1230. Philadelphia & R R R Co. v. Derby, 1006. 1009. Philadelphia & S. R R v. Lewis, 1192, 1193, 1194. 1208, 1214. 1215. Philadelphia & Trenton R. R Co. Case, 1551. to the foot-paging. .] Philadelphia & West Chester R R Co. v. Hickman, 33, 122, 123, 125, 126, 166, 217, 221. Philadelphia & Wilmington R, R. Co. v. State, 758. Philadelphia, City of, v. Ridge Ave. R R Co., 14. Philadelphia, etc., Co. v. Knight, 1236. 1245, 1247. Philadelphia, etc., Co. v. Pennsylvania. 777. Philadelphia, etc., Co.'s Appeal, 628, 738, 1569. Philadelphia, etc., R R Co. v. Bowers. 1513. Philadelphia, etc., R R Co. v. Cowell, 87, 109, 207, 716, 717. Philadelphia, etc., R. R. Co. v. Johnson, 1238, 1289. Philadelphia, etc., R. R. Co. v. Love, 1465. Philadelphia, etc., R R Co. v. Smith. 1236. Philadelphia, etc., R. R Co. v. Stichter, 1240. Philadelphia, etc., R R Co. v. Stickler. 1185, 1240. Philadelphia, etc., R R Co. v. Towner, 986. Philadelphia, etc., R R Co. v. Woelpper, 1238, 1364, 1383. Philadelphia Fire Assoc, v. New York, 776, 1947, 1949. Philadelphia Lpan Co. v. Towner, 998. Philadelphia Steam Supply Co. v. City of Philadelphia, 1585. Philadelphia Steamship Co. v. Pennsyl- vania, 1946. Philadelphia, W. & B. R, Co. v. Larkin, 1010. Philadelphia, W. & B. R R Co. v. Mary- land, 774. Philadelphia, W. & B. R R Co. v. Quig- ley, 210, 1006, 1007, 1008, 1010. Philadelphia, W. & D. R R Co. v. Woelpper, 1238, 1364, 1383. Philes v. Hickies, 37. Pliillippi v. Phillippi, 1131. Phillips v. Albany, 137, 147. Phillips v. Blatchford, 663, 672. clii TABLE OF CASES. Phillips v. Burlington, etc., Co., 1174. Phillips v. Campbell, 1084, 1088. Phillips v. Covington & Cin. Bridge Co., 33, 226, 327. Phillips v. Eastern R R Co., 366, 367, 707, 722, 842, 1306. Phillips v. Ives, 468. Phillips v. Knox County Ins. Co., 18. Phillips v. Mason, 460. Phillips v. Moir, 568, 580. Phillips v. Therasson, 30S, 350, 351. Phillips v. Wickham, 820, 821, 803. Phillips v. Window, 1269, 130:,, 1870, 1371, 1388 Phillips v. Wortendyke, 077. Phillips Academy v. King, Phillipsburgh Bunk v. Lackawanna EL R Co., 1544. Phiuizy v. Murray, 710. Phipps v. Jones, 670. Phipps v. Shai pe, 466. Phoenix, etc., Co., Re, 818, I Phoenix Foundry v. Ninth River Con. Co., U56, 1425, 1482. Phoenix Ins. Co. v. Commonwealth Phoenix Life Assur. Ca' Bl 1- Phoenix Warehousing Co v. Badger, X T. 89, 159, 187, 188 846, 1431. Phosphate of Lime Co. v. Green, 180, 217,814, 1127. Phosphate of Lime Co., Re, 163. Phosphate Sewage Co. v. Hartmout, 908, 913, 914. Picard v. East Tenn., etc., R R 1483. Pickard v. Pullman Southern Car Co., 1946. Pickering v. Appleby, 464. Pickering v. Cease, 470. Pickering v. Demerritt, 565, 577. Pickering v. Ilfracombe Ry Co., 164. 1362. Pickering v. Stephenson, 95 1. 115 s . Pickering v. Templeton, 56, 198, 213 Pickering's Claim, 1102 Pickett v. Abney, 865, 1068 Pickford v. Grand Junction Ry. 1521. Pidgeon v. Burslem, 474. Pier v. George, 293. [The references art- to the foot-paging.'] Pier v. II : in more, 293. Pierce v. Burroughs. 739. Pier mmonwealth, 11, 819. v. Crompton, 891, 997, 1002. Pierce v. I >rew, 1594 Pierce v. Em< ry, 1261, 1268, 1273, 1307, 181 Equitable Life Assurance Co., 708 igens, 1841. II. Pierce v. Kearn Milwaukei traction . K. EL, 1269. 8 \. l'.ii tl 'idge, 16. Pierce \ . • I EL EL, l m v. B ink of Washington, 686, 696. Pieraon v. Cronk, 91 ..I v. McCurdy, ISO, 198, 1189, 1168, 15€ n v. Morgan, I Pike w. I 3, I. B. l: 158, 183, 165, 171, 8 E»ike I ■ ■nut y v. Rowland, LI Pillow v, Rob it-. : Pim's Case, L07, 109, 167. Pinch v. Anthony, i Pine, . v. Lafay< tte, eta, Works, Pine Grove. Township of, v. Talcott, 135. Pine Rii ■ ■ -M idsdon, 219. Pinedo \. ' lermania, el 190. Pingry v. Washburn, 640, 1538, 1539. Pinkerton v. Manchester, eta, R RCo., >2, 586, 623, 779, - 799 Pinkett v. Wright, 486, I 1'int.. Silver Min. Co., In re, 1130. Pioi l ". v. Baker, 1146 Pioneer Paper Ca, Re, B29, 849 1 ipe v. I iateman, 661, 670, 671. Piqua & I. EL P. Ca v. Indianapolis & B. R R Co., 1510. Piscataqua Bridge v. N. II. Bridge, 1576, Piscataqua Ferry Ca v. Jones, 174, 187, 190, 229 Pitcher v. Board of Trade of Cbi< 661. TABLE OF CASES. cliii [The references are Pitchford v. Davis. 225, 228, 670. Pitman v. Kintner, 1104, 1190. Pitman, Ex parte, 1185, 1254. Pitot v. Johnson, 585, 58(5, 617, 688, 700. Pitt v. Kellogg, 1039. Pitts v. Temple, 807. Pittsburg Coal Co. v. Foster, 1122. Pittsburg C. Co. v. McMillan, 646, 647. Pittsburg, etc., Co. v. Quiutrell, 1045. Pittsburg, etc., R R. v. South, etc.. R R, 1516. Pittsburgh, Bank of, v. Whitehead, 1118. Pittsburgh & C. R M. Co. v. Byers, 237, 242. Pittsburgh & Connellsville R R Co. v. Stewart, 120, 122, 124, 128, 188. Pittsburgh & Connellsville R R R Co. v. Clarke, 158, 342, 343, 687, 689, 692, 693, 694. 699. Pittsburgh & C. R R Co. v. Graham, 242. Pittsburgh & C. R R Co. v. Plummer, 242. Pittsburgh & Lake Erie Railroad Co. v. Bruce, 11. Pittsburgh & Lake Erie R R Co. v. Jones, 1582. Pittsburgh & Steubenville R R Co. v. Biggar, 119, 121. Pittsburgh & Steubenville R R Co. v. Wood row, 121. Pittsburgh, Cin. & St L R'y Co. v. Hal- lowell, 1522. Pittsburgh, Cin. & St. L. R'y Co. v. Kain, 1536. Pittsburgh, etc., Co. v. Reese, 1075. Pittsburgh, etc., R'y v. Keokuk, etc., Bridge Co., 1489, 1500, 1503. Pittsburgh, etc., R'y v. Marshall, 1350, 1393. Pittsburgh, etc., R'y v. Ruby, 1116. Pittsburgh, etc.. R. R. Co. v. Allegheny Co., 155, 371, 378. Pittsburgh, etc., R R Co. v. Applegate, 91, 93, 95, 218. Pittsburgh, etc., R E. Co. v. Com., 1592. Pittsburgh, etc., R. R Co. v. Gazzam, 87, 95, 114, 116, 633. Pittsburgh, etc., R R v. Rothschild, 932, . 1212, 1345, 1547. to the foot-paging.] Pittsburgh, etc., R. R Co. v. Stewart, 1077. Pittsburgh, etc.. R. R. Co.'s Appeal, 71. 1137, 1187. 1212, 1344. Pittsburgh, Ft. W. & C. R R. Co. v. Hazen, 1522. Pittsburgh Iron Co. v. Otterson, 342. Pittsburgh Min. Co. v. Spooner, 915. Pitzman v. Freeburgh, 141. Pixley v. Boy n ton, 470, 472. Pixley v. Roanoke, etc., Co., 873. Plainview, Town of, v. Winona, etc.. R. R Co., 140. Planks, etc., Co. v. Burkhard, 214. Planters' Bank v. Sharp, 988, 1092, 1093. Planters' Bank v. State, 868. Planters' Bank v. Union Bank, 985. Planters' Bank v. Whittle, 940, 990. Planters' Bank, etc., v. Bivingsville, etc., Mfg. Co.. 285. Planters', etc., Bank v. Andrews, 1020. Planters', etc., Bank v. Padgett, 313. Planters', etc., Co. v. Assessor, 770. Planters', etc., Co. v. Olmstead, 1087. Planters' Ins. Co. v. Wicks, 963. Planters' & M. Bank v. Leavens, 624. Planters' & M. M. Ins. Co. v. Selma Sav. Bank, 522, 547, 687, 688, 692, 694, 695. Plaskgnaston Tube Co., 46. Plate Glass Ins. Co. v. Sunley, 212, 235. Piatt v. Archer, 1179. Piatt v. Ashman, 893. Piatt v. Birmingham Axle Co., 501, 699, 700, 1116. Piatt v. Hawkins, 429. Piatt v. Jones, 661. Piatt v. Philadelphia, etc., Co., 1421. Piatt v. Union Pac. R R, 1266, 1267, 1300. Piatt. In re, 861. Platte, etc., Co. v. Do well, 1579. Platte Valley Bank v. Harding, 881. Platteville, Town of, v. Galena, etc., R R. Co., 151. Plemmons v. Southern Imp. Co., 1163. Plimpton v. Bigelow, 20, 609, 615. Plitt v. Cox, 890. Plumb v. Bank of Enterprise, 346, 521. Plumb v. Campbell, 453. cliv TABLE OF CASES. [The references are Plumbe v. Neild, 741. Plymouth v. Painter, 1057. Plymouth Bank v. Bank of Norfolk, 619, 622, 688. . Plymouth R R Co. v. Col well, 1578. Plympton Min. Co. v. Wilkins, 193. Pneumatic Gas Co. v. Berry, 919, 1130, 1161. Pocantico. etc., Co. v. Bird, 1597, 1598. Pochelu v. Kemper, 325. Pocock v. Reddington, 436. Poland v. Lamoille, etc.. R R, 1317. Poland v. Louisville, etc., R R, 1258, 1277, 1370. Polar Star Lodge v. Polar Star Lodge, 859, 969. Polhemus v. Fitchburg R'y, 122^, 1540. Police Jury v. McDonough, 134. Police Jury, etc., v. Thibodaux, etc., Co., 1577. Pollard v. Bailey, 256, 257. 283, Pollard v. First Nat'l Bank. 711, 769. Pollard v. Maddox, 1266, 1275. Pollard v. State, 765. Polleys v. Ocean Ins. Co.. 1110, 1113. Pollitz v. Farmers' L & T. Co., 1307, 1465. Pollock v. National Bank, 506. Pollock v. Pollock, 74a Pollock v. Shultze, 930. Pollock v. Stables, 567. 579. Pomeroy v. New York & N. H. R R Co., 1175. Pond v. Cooke, 112 I. Pond v. Framiugham, etc., Co., 1141, 1412. Pond v. Vt. Valley R R Co., 1135, 1151. Pontchartrain R R v. Heirne, 1116. Pontchartrain R R Co. v. Pauldirjg, 1029. Pontiac, etc., Co. v. Hilton, 877. Pontius, Matter of, 892, 1415. Poock v. Lafayette Bldg. Assoc, 983. Poole v. Middleton, 447. 448, 460, 462. Poole v. West, etc., Ass'n, 390, 481, 1087. Poole's Case, 159, 242. Pooley Hall Colliery Co., Re, 1187, 1253. Pope v. Board of Com'rs, 239, 1492, 1507. Pope v. Brandon, 989. Pope v. Capital Bank, 308. to the foot-paging.] Pope v. Leonard, 260, 284, 290. Pope v. Terre Haute, etc., Co., 1175, 1176. Port v. Russell, 902. Port Edwards, etc., R'y v. Arpin, 223, 246, 625, 639. Port, etc., R R v. N. Y., etc., R R, 1499. Port Huron, etc., R'y v. Judge, 1155, 1417. Port Jervis v. First Nat Bank, 1117. Port Royal, etc.. R R Co. v. Hammond, 1172, 1542, 154a Port of Mobile v. Louisville, etc., R R, 1554. Porter v. Androscoggin R R Co., 1098. Porter v. Bank of Rutland, 18. 430, 1117. Porter v. Beacon, etc., Co., 159. Porter v. Buckfield Branch R R Co., 38. Porter v. Carpenter. 120. Porter v. Park-. 568, 593. Porter v. Pittslmr-;, etc., Co., 904, 947, 1213, 1392, 1395. Porter v. Raymond. 125, 127. Porter v. Robinson, 80S, 807, 1061. Porter v. Rock ford, R I., etc., R R Co., 747. 748, Tin. 750. Porter v. Sabin, lilt. Porter v. Sawyer, 168 Porter v. Sherman, etc., Co., 310. Porter v. Vieta, 172. Porter v. Wonnser, 465, 564, 566. Portland & Oxford Central R. R Co. v. Inhabitants of Hartford, 126, 151. Portland Bank v. Stone, 983. Portland Dry Dock, etc., Co. v. Trustees of Portland, 862. Portland, etc., Co. v. Bobb, 311, 876. Portland, etc., Co. v. Spill man, 223, 226, 228 Portland, etc., R R Co. v. Deering, 1516. Portland, etc., R R Co. v. Graham, 178. Portland, etc., R R Co. v. Grand, etc., R R, 1516. Portsmouth Livery Co. v. Watson, 1173. Portuguese, etc., Mines, Re, 1060, 1062, 1067. Post v. Pulaski County, 132. Post v. Simmons, 598. Post v. Supervisors, 131. Post v. Toledo, etc., R R Co., 295, 674, 684. TABLE OF CASES. civ [Tlie references are Postage Stamp, etc., Co., Re, 909. Postlevvaite v. Port Philip, etc., Co., 958, 1478. Potomac Mfg. Co. v. Evans, 1239. Pott v. Flather, 785, 788. Pott v. Turner, 561. Potter v. Baker, 410. Potter v. Bank of Ithaca, 983. Potter v. Dear, 260. Potter v. N. Y., etc., Asylum, 1078, 1085. Potter v. Rio, etc., Co., 1000. Potter v. Stevens Machine Co., 279, 283. Potter v. Thornton, 991. Potter's Appeal, 83, 435. Potteries, etc., R'y Co. v. Minor, 1255. Potteries, etc., R'y Co., Re, 366. Potterville v. People's R'y, 1566. Potts v. N. J. Arms, etc., Co.. 1414, 1415. Potts v. Wallace, 159, 217, 239, 1074 Potts v. Warwick, etc., Canal Co., 1389, 1578. Poughkeepsie, Bank of. v. Ibbotson, 251, 272, 282, 283, 284, 288, 298, 304. Poughkeepsie, etc., Co., Re, 1577. Poughkeepsie, etc., R. R Co. v. Griffin, 114, 632. Powell v. Adams, 494. Powell v. Jessopp, 467, 665. Powell v. McC&rd, 472. Powell v. Newburgh, 1093. Powell v. North Missouri R R Co., 889, 1545. Powell v. Oregonian R'y, 266, 268, 278, 303, 863. Powell v. Penn. R R, 1537. Powell v. Waldron, 661. Powell v. Willamette, etc., R. R Co., 332, 935. Powell's Appeal, 587, 1262. Power v. Cassidy, 652. Power v. Conner, 1159. Powers v. Inferior Court of Dougherty County, 133. Powis v. Harding, 209, 524. Powles v. Page, 1119. Prairie Lodge v. Smith, 1190. Prall v. Harnil, 443. Prall v. Tilt, 412, 443, 444, 519. Prater's Estate. Re, 408. Pratt v. American Bell Tel. Co., 386, 469. to the foot-paging, ,] Pratt v. Bacon, 1159. Pratt v. Boston & Albany R R Co., 506, 507. Pratt v. Dwelling, etc., Ins. Co., 923. Pratt v. Eaton, 985, 986. Pratt v. Goswell, 681. Pratt v. Hutchinson, 663. Pratt v. Jewett, 859. Pratt v. Machinists' Nat. Bank, 384. Pratt v. Meriden Co., 680. Pratt v. Munson, 1477. Pratt v. Pratt, 720, 721. Pratt v. Short, 982, 985. Pratt v. Taunton Copper Mfg. Co., 506. Pratt's Ex'r v. Nixon, 1293. Pray v. Mitchell, 464. Pray's Appeal, 434. Preachers', etc., Soc. v. Rich, 660, 1019. Prendergast v. Turton. 180, 184. Presbyterian Church v. Cooper, 93. Presbyterian Cong. v. Carlisle Bank, 525, 534, 687, 697. President & Trustees, etc., v. Thompson, 863. President, etc., v. Hamilton, 877. President, etc., v. Myers, 1100. President, etc., v. People, 1012. President, etc., v. Weed, 1166. President, etc., Co. v. Troy, etc., R R, 1499. President, etc., of Franklin Bank v. Harris, 597. President, etc., of Port Gibson v. Moore, 889, 963. President, etc., of Romeo v. Chapman, 1019. President Union Bridge Co. v. Troy & L. R. R Co., 1099. Press, etc., Co. v. State Board, 315. Preston v. Cincinnati, etc., R. R. Co., 65, 277, 1211. Preston v. Cutter, 1086. Preston v. Fire, etc., Co.. 1179. Preston v. Grand Collier Dock Co., x04, 165, 189, 899, 1144. Preston v. Liver|.ool, etc., R'y, 1044, 1538. Preston v. Loughran, 937, 1432. Preston v. Melville, 741, 742. Preston v. Missouri, etc., Co., 1069. clvi TABLE OF CASES. [The references are Preston v. Pangbum, 615. Preston v. Preston, 1132. Preston v. Southwick, 13G5. Preston Nat'l Bank v. George, etc., Co., 1080. Prettyman v. Supervisors, 141, 148. Prettyman v. Tazewell Co., 133. Prewett v. Trimble, 431, 492. Price v. Anderson, 741, 742. Price v. Grand Rapids & Iud. R R Co., 163, 1065. Price v. Great Western, etc., R'y, 1235, 123G, 1355. Price v. Grover, 590. Price v. Minot. 461. 469. Price v. Pittsburgh, etc., R R Co., 100. Price v. Price, 32 Price v. Reed, 600. Price v. Whitney, 353. Price v. Yates, 293. Price's Appeal. 323. Price & Brown's Case, 329. Pridham v. Weddington, 478. Priest v. Essex Hat Mfg. Co., 250, 271, 7:55. Priest v. Gloun, 213. 214. 216. 312. Priest v. White, 54. 68, 205, 1136. Prime, Estate of, 739. Prime's Estate. In re, 1000. Prince v. Lynch, 298. Prince, etc.. Co. v. Prince, etc., Co., 1168. Prince of Wales v. Harding, 1108, 1109. Princess of Reuss v. Bos, 861. Princeton Bank v. Crozer, 610. Princeton, etc, Co. v. First, etc.. Bank. 1000. Printing House v. Trustees, 634. Proprietors, etc., v. Dickinson, 113. Proprietors, etc., v. Frye, 1072. Proprietors, etc., v. Inhabitants, etc., 1019, 1167. Proprietors of Locks, etc., v. Nashua & L R R Co.. 1524, 1525. Prop, of N. Bridge v. Story, 222. Prop, of the Union Lock & Canals v. Towne, 633, 641. Prospect, eta, R R, Matter of, 1498, 1503. Prosper, In re, 664. Prosser v. First Nat'l Bank, 487. to the foot-paging.'] Protection Life Ins. Co. v. Osgood, 82, 338, 587, 780. Prothro v. Meriden, etc., 1069. Prouty v. Lake Shore, etc., R R, 1545. Prouty v. Michigan, etc., R R Co., 367, 374, 375, 376, 1172. Prouty v. Prouty, etc., Co.. 331, 1458. Providence Bank v. Billings, 758, 771. Providence Gas Co. v. Thurber, 1554. 1585 Providence, eta, R R Co. v. Wright. 756. Providence, etc., R R, In re, 1529. Provident Inst v. City of Boston, 762. 763. Provident Inst for Sav. v. Gardiner, 757. Providenl Sav. Bank v. Ford, 1183. Provident Savings Institution v. Ja<. k- son Place Skating & Bathing Rink, 272, 356. tl Provincial Ins. Co. v. Shaw, 343. Provost v. Morgan's, etc., S. Co., 664, 881. Pruyn v. city of Milwaukee, 1235. hand v. Hood. 189. Pugh v. Fail-mount, etc., Co., 1237. Pugh & Shannon's Case, 105, 110, 340, 358 Pulbrook v. Richmond, etc., Co., 850, 853. Pulford v. Fire Dep't 1" Pullan v. Cincinnati, etc.. R R., 1270, ]-::■■',. 1300, 1368, 1370, 1371, 1372, 1406, 1440. Pullman v. Cincinnati, etc., R R, 1270, 1273, 1304. Pullman v. Stebbins, 1140. Pullman v. Upton, 56,329,343, 390, 1166, 1167. Pullman Car Co. v. Missouri P. R R Co., 423. 1545. Pullman Palace Car Co. v. Pennsylvania, 777, 1947. Pulsford v. Richards, 187, 197. Pumptlly v. Green Bay Co., 1528. Purcell v. British, etc., Co., 1181. Purchase v. New York Exchange Bank, 430, 502, 523. 529, 547. Purdy's Case, 220. Purse v. Snaplin, 406. Purton v. New Orleans, etc., R R Co., 892. TABLE OF CASKS. clvii [The references are Pusey v. N. J. R. R. ; 1208. Putnam v. City of Albany, 109, 121, 248. Putnam v. Ruch, 883, 1145. Putnam v. Sweet, 834. Putnam, etc., Bank v. Beal, 1429. Pyle Works, Re, 163, 937, 1271. Pyles v. Riverside, etc., Co., 989. Pynchon v. Day, 679. Pyrolusite, etc., Co., In re, 860. Q. Quad v. Abbett, 503. Quay v. Presidio, etc., R. R, 433, 516. Quebrada R'y, Re, 379, Queen v. Birmingham, etc., R. R, 1168. Queen v. Bradford Navigation Co., 1012. Queen v. Carnatic R. Co., 336. Queen v. Eastern Counties R'y Co., 886. Queen v. General Cemetery Co., 523. Queen v. Grand Junction R'y? 1518. Queen v. Great Northern, etc., R'y Co., 1012. Queen v. Gurney, 496. Queen v. Lancashire, etc., R'y Co., 886. Queen v. Ledyard, 161, 254. Queen v. Liverpool & M., etc., R'y Co., 531. Queen v. London & S. W. R'y, 1518. Queen v. Londonderry & Coleraine R'y Co., 157, 699. Queen v. Manchester, 1012. Queen v. Mariquita Mining Co., 679. Queen v. Murch, 496. Queen v. Saddlers' Co., 1022. Queen v. Smith, 662. Queen v. Stewart, 496. Queen v. Undertakers of the Grand Canal, 680. Queen v. United, etc., Tel. Co., 1594. Queen v. Victoria Park Co., 161, 254. Queenan v. Palmer, 288, 292. Queen's College v. Sutton, 405. Queensburg v. Culver, 133, 136, 137. Queensland, etc., Co., Re, 252, 1426. Quick v. Lemon, 114, 297. Quimby v. "Vermont Central, etc., 1531. Quincey v. White, 449. Quincey v. Young, 449. to the foot-paging.] Quincy v. Chicago, etc., R. R. 1385, 1555, 1560. Quincy v. Steele, 1135, 1136, 1149, 1161. Quincy Bridge Co. v. Adams Co., 748, 1542. Quincy, etc., Co. v. Hood, 1116. Quincy, etc., R. R v. Humphreys, 1399, 1413, 1444. Quincy, etc., R R. Co. v. Morris, 133. Quincy R R Bridge Co. v. County of Adams, 770. Quiner v. Marblehead Social Ins. Co., 430, 448, 516. E. R v. Grimshaw, 808. R. v. Stratton, 663. R. v. Webb, 663. Rabe v. Dunlap, 641, 1129. Racine County Bank v. x\yers, 123. 378. Racine, etc., Co. v. Joliet, etc., Co., 1114. Racine & M. R. R. Co. v. Farmers' Loan & T. Co., S79, 880, 1094, 1355, 1469. 1542, 1545. Radbourn v. Utica, etc., R R. 1462. Rae v. Grand Trunk R R. Co., 1001. Raeder v. Bensberg, 274. Rafferty v. Bank of Jersey City, 881. Rafferty v. Central Traction Co., 1560, 1563, 1565, 1567. Ragan v. Aiken, 1519. Ragland v. Broadnax, 369. Ragland v. McFall, 940, 990. Rahm v. Bridge Mfg., 1246. Raht v. Attrill, 1403, 1437, 1452, 1453. Railroad v. Chamberlain, 1352. Railroad v. Fosdick, 1290. Railroad v. Howard, 1221, 1223, 1247, 1313, 1351, 1471. Railroad v. Manufacturing Co., 1533, 1534, 1536. Railroad v. Orr, 1299. Railroad v. Railroad, 49. Railroad v. Rollins, 963. Railroad v. Schutte, 1276. Railroad v. Soutter, 1204. Railroad Co. v. Becht, 1176. Railroad Co. v. Bradleys, 1321, 1356. Railroad Co. v. Com'rs, 771. clviii TABLE OF CASES. [The references are to the foot-paging.] Railroad Co. v. County of Otoe, 132, 135. Railroad Co. v. Falconer, 138, 143, 152, 1944. Railroad Co. v. Fuller, 1946. Railroad Co. v. Gaines, 771, 1943. Railroad Co. v. Georgia, 774, 1545, 1943. Railroad Co. v. Harris, 1543. Railroad Co. v. Hecht, 1943. Railroad Co. v. Howard, 729, 995, 1245. Railroad Co. v. Jackson, 770. Railroad Co. v. James, 1370. 1372, 1394. Railroad Co. v. Koontz, 1543. Railroad Co. v. Lewis, 993. Railroad Co. v. Maine, 638, 773. Railroad Co. Railroad Co. v. V. V. March, 1548. Maryland, 1946. Railroad Co. v. Peniston, 1951. Railroad Co. v. Pennsylvania, 759. Railroad Co. v. Philadelphia, 1944. Railroad Co. v. Richmond, 1518, 1916. Railroad Co. v. Smith, 380, 296, 350, 368. Railroad Co. v. Soutter, 1347. Railroad Co. v. Tennessee, 1944. Railroad Co. v. Vance, 770. Railroad Co. v. White, 95. Railroad Commission Cases, 1513, 1515, 1949. Railroad Commissioners v. Oregon, etc., Co., 1515. Railroad Commissioners v. Portland, etc., R R Co., 2, 1516. Railroad Tax Cases, Re, 768. Railway v. Swasey, 1356. Railway Co. v. Allerton, 385, 634. Railway Co. v. Ailing, 1160, 1530. Railway Co. v. Jewett, 1416. Railway Co. v. McCarthy, 1532, 1533. Railway Co. v. Philadelphia, 771. Railway Co. v. Piatt, 1533. Railway Co. v. Sioux City, 1572. Railway Co. v. Sprague, 1200, 1214, 1224, 1283. Railway Co. v. Whitten, 1182, 1544. Railway Co. v. Whitton's Adm'r, 1948. Railway Cos. v. Keokuk, eta, Co., 974, 1577. Railway, etc., Pub. Co., Re, 47. Railway Light Co., 1031. Rainey v. Laing, 996. Rainey v. Maas, 1180. Raisbeck v. Oesterricher, 313, 865. Raleigh v. Fitzpatrick, 920. Raleigh, etc., Co. v. Glendon, etc., Co., 1529. Raleigh, etc., R R. Co. v. Connor, 755. Raleigh, etc.. R. R. v. Reid, 759. Ralls v. Douglass, 141, 142, 147. Ramsden v. Boston & A. R R Co., 1006. 1008. Ramsey v. Erie R'y Co., 383, 981, 1136. Ramsey v. Gould, 1142, 1150. Ramsgate, etc., Co. v. Montefiore, 96, 97. Ramskill v. Edwards, 1160. Ramwell's Case, 43, 57. Ranee's Case, 733. Rand v. Hubbell, 702, 707, 739, 740. Rand v. Upper Locks, etc., Co., 1174 Rand v. White Mountains R. R Co., 172, 353. Rand v. Wiley. 164. 459. Rand v. Wilmington, etc., R R, 1386. Randall v. Albany City Nat'l Bank, 578, 785, 790. Randall v. Elwell, 776. 1371, 1373. Randall v. Van Vechten. 1093, 1094, 1095, 1105. Randolph v. Larned, 1415, 1513. Randolph v. Middleton, 1282. Randolph v. N. J. West Line R R, 1279, 1380. Randolph v. Quidnick, 611, 613, 620. Randolph v. State, 674. Randolph v. Wilmington, etc., R R, 1269, 1322, 1346. Randolph, County of, v. Post, 141. Ranger v. Champion^ etc., Co., 683, 1150, 1155. Ranger v. Great, etc., R R Co., 191, 683, 1006, 1007. Rankin v. Hop, etc., Co., 128. Rankin v. McCullough, 605, 606. Rankine v. Elliott, 262, 263. Ransom v. Citizens' R'y, 1561, 1566. Ransom v. Stonington, etc., Bank, 109S, 1165. Ransome v. East. Co.'s R'y, 1519, 1520. Raphael v. Governor, etc., 1226. Raritan R R Co. v. Delaware, etc., Canal Co., 1527. Rashdall v. Ford, 977, 118a TABLE OF CASES. clix Ratcliffe v. Davis, 592, 594. Rathbone v. Parkersburg, etc., Co., 1149. Rathbun v. Northern C. R. R, 1208. Rathbun v. Snow, 962, 1046, 1089, 1109, 1110. Ratterman v. Western U. Tel. Co., 1947. Rawley v. Home, 1123. Rawlings v. Hall, 477, 509. Rawlins v. Wickham, 202. Ray v. Powers, 306, 668. Ray, County of, v. Vansycle, 140, 142. Raymond v. Brodbelt, 406. Raymond v. Clark, 1364, 1383. Raymond v. Leavitt, 449. Raymond v. Palmer, 606, 1129. Raymond v. San Gabriel, 207. Raynell v. Lewis, 661. Read v. Buffum, 108. Read v. Head, 743. Read v. Jaudon, 564. Read v. Joanuon, 1253. Read v. Lambert, 573. Read v. Memphis Gayoso Gas Co., 163, 1071. Reading, etc., Co. v. Reading, etc,, Works, 690, 702, 703, 729, 745, 790, 1475. Reading Industrial Mfg. Co. v. Graeff, 274. Reading Iron Works, In re, 533. Reading, Town of, v. Wedder, 156. Ream v. Hamilton, 475. Reaveley's Case, 107. Reavely, Ex parte, 107. Rece v. Newport, etc., Co., 1001. Receiver, Matter of, 1430. Receiver of Graham, etc., Co. v. Spiel- mann et al., 1429. Receivers of N. J., etc., R'y, 1377. Receivers of Phil. & R R R, In re, 1411, 1449. Reciprocity Bank, Case of, 330, 337, 338, 359, 421. Reciprocity Bank, Re, 105, 336, 390, 629. Rector, etc., Christ Church v. County of Philadelphia, 1942. Republic Ins. Co., In re, 1586. Red River B. Co. v. Clarksville, 1529. Red Rock v. Henry, 143. 151. Red N. Hotel Co. v. Friedrick, 237. Redding v. Godwin, 492, 786, 792. [The references are to the foot-paging.'] Redding v. Wright, 478. Redemption, Bank of, v. Boston, 766. Redfield v. Wickham, 1512. Reding v. Anderson, 668. Redington v. Cornwall, 302, 306. Redmond v. Dickerson, 916. Redmond v. Enfield, etc., Co., 1172, 1426. Redmond v. Hoge, 1421. Reed v. Bank of Newburgh, 823. Reed v. Boston Machine Co., 377, 400. Reed v. Bradley, 1100, 1264. Reed v. Copeland, 413. Reed v. Hayt, 33, 35, 383, 928. Reed v. Head, 740. Reed v. Home Savings Bank, 1009. Reed v. Hoyt, 1062. Reed v. Jones, 831. Reed v. Myers, 1435. Reed v. Paper Tobacco Warehouse Co., 1538. Reed v. Richmond, 90, 234. Reed's Appeal, 71, 1187, 1199, 1212, 1395. Rees v. Conocheaugue Bank, 983, 1166. Reese v. Bank of Commerce, 687, 689. 693, 694, 695, 696. Reese v. Bank of Montgomery, 386, 387, 3S8, 713. Reese v. Fermie, 476. Reese River Silver Min. Co. v. Smith, 193, 194, 198, 200, 201, 203, 209. Reeve v. Dennett, 479, 481. Reeve v. First Nat'l Bank, 1104. Reeves v. Continental R'y Co., 1567. Reeves v. Sently, 1229. Reformed, etc., Church v. Brown, 113. Reg. v. Gov. Stock Co.. 821. Reg. v. Grand Canal, 681. Reg. v. London & St. Catherine's Docks Co., 681. Reg. v. The Saddlers' Co., 677, 682. Reg. v. Wilts. & Berks. Canal Nav., 676, 678, 684. Regents v. Williams, 635, 887. Regents' Canal Iron Works Company Re, 1437. Regents' Co., In re, 1021, 1066, 1195, 1197, 1205, 1206, 1256. Regents', etc., Co., In re, 1396, 1454 Regiua v. Aldman, etc., Ins. Co., 799. Regiua v. Arnaud, 1020. clx TABLE OF CASKS. [The references are Regiua v. Brown et at, 496. Regina v. Carnatic R'y Co., 429, 531. Regina v. Cronmire, 568. Regina v. Esdaille, 496. Regina v. Liverpool, etc., R'y, 533. Regina v. Nash. 398. Regina v. Wing, C93. Rehni v. King. etc.. Co., 1091. Reichwald v. Commercial Hotel Co.. 16. 81, 306. 990. 1046. Reid v. Allen. 277. Reid v. Bank of Mobile, 1224. 1295. Reid v. Eaton Iron Mfg. Co., 727. Reid v. Eaton town Mfg. Co., 32a Reid v. Northwestern R R Co., 1170. Reid's Case, 107. 33a Reiff v. Western, etc., Tel. Co., 856, 1142. Reifsnider v. American, etc., Co., 1179. Reiger v. Beaufort, 149. Reilly v. Oglebay, 803, 853, 919. Reimer Co. v. Rosenberger, Reinach v. Meyer, 1465. Reineman v. Covington, etc., R R Co., 135. Reinhard v. Virginia, etc., Co., 311. 881. Reining v. New York, etc., R R, 1562. Reis v. Rohde, 83a Reitenbaugh v. Ludwick, 790. Relfe v. Life Ins. Co.. 755. Reuifrey v. Rutter, "'Tit. Remington v. King, 81 0. !,'■ min-ton v. Samana Bay Co.. 251. I; unpert v. S. C. R'y, 1166. Renner v. Bank of Columbia, 580. Rennie v. Clarke, 1036. Renuie v. Wynn, 1036. Rennselaer & S. R. R Co. v. Davis. 992, 1524, 1525, 1526. Renshaw v. Creditors, 601. Rensselaer, etc., Co. v. Barton. 113, 174, 220. Rensselaer, etc., R R v. Miller. 1309. Rensselaer, etc., R. R Co. v. Wetsel. 174, 224, 23a Republic, Bank of, v. County of Hamil- ton, 752, 772. Republic Insurance Co., In re. 235, 268, 420. Republic Life Ins. Co. v. Pollak, 756. to the foot-paging.'] Republic Life Ins, Co. v. S%vigert, 217. 264, 417. Reuter v. Electric Tel. Co., 1107. Reuter v. Telegraph Co., 1593. Revere v. Boston, etc., Co., 749, 86a Rex v. Babb, 681. Rex v. Birmingham Canal, 886 Rex v. Buckingham. 684. Rex v. Coopers' Co., 1024. Rex v. Dodd. 663. Rex v. Doncaster. 802. Rex v. Gardner, 1020. Rex v. Head. *42. 1021, 1022. Rex v. Langhorn, 800. Rex v. Miller. 1066. Rex v. Newcastle. '''77. 681. Rex v. Spencer. 842, 1021, 1022. Rex v. Tapponden. 1021. Rex v. Town of Liv.-rpool. 802, 1026. Rex v. Vice-Chancellor. 1101. Rex v. West v [02L Rex v. Worcester Nav. Co.. 531. Reyburn v. Consumers', etc., Co., 1403. qell v. Lewis, 1037. Reynolds v. Feliciana Steamboat Co., 284, 286. Reynolds v. Galliher. etc., Co.. 320. Reynolds v. Myers. 453. 11' Dolda v. Simpson, 971. Reynolds, Widow of, v. Commissioners, etc., 995. Rezet v. McClellan. 602. Rhey v. Evensburg, etc., Co., 90, 108, 114. Rhodes v. Webb, 1076. Rhoner v. First Nat'l Bank, 1175. Rhos, etc.. Co., In re, 1256. Ribon v. Railroad Co., 934, 1145. 1222. 1329, 1470. Rice v. Merrimack Hosiery Co., 295. Rice v. National Bank, E Rice v. Peninsular Club, 1051. 1054, 1091. Rice v. Rock Island R R Co.. 232, 632. Rice v. Rockefeller et al., 526, 532, 533, 647, 872. Rice v. St. Paul, etc., R R, 1318, 1406. Rice's Appeal. 947, 1195, 1270. Rice's Case, 913. Rich v. State Nat'l Bank, 101, 1082. I Richard, etc, Co. v. Brook, 929, 1042, TABLE OF CASES. clxi [Tlie references are to the. foot-paging.} Richards v. Attleborough Nat'l Bank, 1058. Richards v. Beach, 250. Richards v. Brice, 299. Richards v. Chesapeake, etc., R. R., 1325, 1327, 1349, 1350, 1419. Richards v. Coe, 250, 283. Richards v. Crocker, BOO. Richards v. Donagho, 141. Richards v. Farmers', etc., Institute, 1058. Richards v. Home, etc., Assoc, 97. Richards v. Kinsley, 242. Richards v. Merrimack, etc., R. R, 1092, 1261, 1268, 1310, 1312. Richards v. New Hampshire Ins. Co., 990, 1031. Richards v. People, 1418, 1435. Richards v. Town, 763, 765. Richardson v. Abendroth, 273, 279, 329, 353. Richardson v. Buhl, 645, 722. Richardson v. Green, 59, 936, 938, 1201. Richardson v. Kelley, 468. Richardson v. Mass., etc., Assoc, 991, 992. Norfolk, etc., Co., 1392. Pitts, 309, 314. Richardson, 738, 1015. Sibley, 1262, 1266. 1494. Vermont, etc., R. R, 377, 719. 720, 805, 1542. Richardson v. Williamson, 1189. Richardson's Case, 107, 333, 340, 358. Richardson, etc., Co. v. Richardson, etc., Co., 1015. Riche v. Ashbury R'y Carriage Co., 1538. Richelieu Hotel Co. v. International, etc, Co., 105, 112. Richison v. People, 142. Richland, County of, v. People. 146. Rich man v. Manhattan Co., 684. Richmond v. Daniels, 750, 753. Richmond v. Irons, 287, 297, 301. 304, 352, 356. Richmond v. Union Steamboat Co., 580. Richmond's Case, 177, 212, 336, 415. Richmond, City of, v. Richmond & Dan- ville R. R. Co., 771, 772. K Richardson v. Richardson v. Richardson \ Richardson v Richardson v Richmond, City of, v. Scott, 766. Richmond, etc., Co. v. Clarke, 91. Richmond, etc., Co. v. Middletown, 1585. Richmond, etc., Co. v. Richmond, 1597. Richmond, etc, R. R Co. v. Alamance Co., 749. Richmond, etc., R. R. v. Louisiana R. R. Co., 1529, 1532, 1942. Richmond, etc, R. R. v. Payne, 1537. Richmond, etc., R. R v. Snead, 1108. 1190. Richmond, etc, R. R. v. Trammel, 1515. Richmond Factory Ass'n v. Clarke, 234. Richmond Retail Coal Co., Matter of, 316, 648. Richmondville Mfg. Co. v. Prall, 24, 524. Richter v. Frank, 466, 470. Richter v. Jerome, 1306, 1471. Richwald v. Commercial Hotel Co., 863, 1059. Ricker v. American Loan & Trust Co., 658, 1377, 1379. Ricker v. Collins, 1547. Ricketts v. Chesapeake, etc., R'y, 1536. Ricord v. Central Pacific R R. Co., 1009, 1539. Riddington v. Mariposa, etc., Co.. 1176. Riddle v. Bedford Co., 1057, 1059. Riddle v. Harmony Fire, etc., Co., 1026. Riddle v. N. Y., etc., R. R Co., 1179. Riddle v. Philadelphia, etc., R. R. Co., 137. Ridenour v. Mayo, 309, 668. Rider v. Kidder, 412. Rider v. Morrison, 212, 356. Rider v. Tritchey, 271, 278, 356. Rider v. Vrooman, 1367. Rider Life Raft Co. v. Roach, 971. Ridgefield & N. Y. R. R Co. v. Brush. 123, 187, 188, 227. Ridgefield & N. Y. R R Co. v. Reynolds, 128. Ridgely v. Dobson, 661. Ridgway v. Farmers' Bank, 1055, 1185, 1192. Ridley v. Plymouth, 1065, 1083. Rigdou v. Walcott, 495. Riggs v. Commercial, etc., Ins. Co., 18. Riggs v. Cragg, 739. Riggs v. Penn., etc., R R, 1215, 1225, 1303. clxii TABLE OF CASES. [77ie references are Riggs v. Swann. 277. 670. Riker v. AIsop, 1468, 1475. Riker v. Campbell, 786. Rikhoff v. Brown's Rotary, etc, Co., 164. 176, 234. Riley v. Albany Sav. Bank, 1090. Riley v. City of Rochester, 994. Riley v. Packington. 1035. Riley v. Rochester, 991. Rinesmith v. People's Freight R'y Co., 187. Ring v. County of Johnson, 1239. Ringo v. Biscoe, 990. Rio Grande, etc., Co. v. Burns, 100, 314, 320, 534. Ripley v. Evans, 295. Ripley v. Sampson, 271, 331. Risley v. Indianapolis, etc., R R Co., 903. 1076. Ritso's Case. 97. Rittenhouse v. Winch. 945, 1265. Ritter v. Cushman, 576. Ritterband v. Baggett, 661, 1024. Rivanna Nav. Co. v. Dawsons, 418. River Dun Nav. Co. v. North, etc, R'y Co., 1154. Rives v. Dudley, 996. Rives v. Montgomery S. P. R Co., 162, 188, 192. 235. Rivington's Case, 1588. Roanoke, etc., Co. v. Kansas, etc., R R, 1532. Robbins v. Butler, 660, 671. Robbins v. Clay. 955. Robbins v. Waldo, 671. Robert, etc., Min. Co. v. Omaha, etc., 1088. Robert's Appeal. 413. Roberts v. Berdell 781. Roberts v. Cobb, 93. Roberts v. Demens, etc., Co., 1107. Roberts v. Easton, 1564. Roberts v. Mobile & O. R R Co., 126, 167. Roberts' Appeal. C34. 671, 73a Roberts' Case, 123, 12& Roberts, Ex parte. 1036. 1037. Robertson v. Bullions, 968. Robertson v. Rockford, 133, 140. Robey v. Smith, 130L to the foot-paging.] Robins v. Embry, 990. Robinson v. Addison, 406. Robinson v. Alabama, eta, Mfg. Co_ 1289. 1309, 1310. Robinson v. Atlantic, etc., R R, 1381, 1436. Robinson v. Bank of Darien, 154, 261, 299, 305. Robinson v. Beale. 417. Robinson v. Bidwell, 133, 154, 276. Robinson v. Chartered Bank, 448. Robinson v. Dolores, etc., Co., 52, 941. Robinson v. Edinboro' Academy, 113. Robinson v. Fitchburg, etc., R R. Co.. 1113. Robinson v. Hemingway, 849 Robinson v. Hunt. 410. Robinson v. Hurh-y. 585, 600. Robinson v. Iron R'y, 1472. 1475. Robinson v. Jewett, 917. 935. Robinson v. Lane, v Robiuson v. McCracken, 905. Robinson v. Mollett. 566. 579. Robinson v. Natl Bank, etc., 990. Robiuson v. Nat'l Bank of New Berne, 58^ 61 9, Tio. - Robinson v. N -.. 1581. Rutland, etc., R R Co. v. Lincoln, 109. Rutland R R. v. Haven, 399, 78ft Rutledge, Ex parte, 744. Rutten v. Union Pac. R'y, 1808, 1330, 1242. 1388 Rutter v. Tallis, 1422. Ruttman v. Hoyt, 468 Rutz v. Esler & R Manuf. Co., 192, 238. Ryan v. Commissioners, 756. TABLE OF CASES. clxv [Tl.e references are Ryan v. Dunlop, 1086. Ryan v. Hays, 1447, 1482. Ryan v. Leavenworth, etc. R R Co., 423, 710, 903, 1127. Ryan v. Martin. 1017. Ryan v. Ray, 1146. Ryder v. Alton, etc., R. R. Co., 102, 212, 215, 219, 362,712, 833. Ryder v. Bush wick R. R, 396, 534, 1073. Ryers v. Tuska, 465. Ryle v. Ryle, 481, 607. Ryman v. Gerlach, 484, 571. s. Sabin v. Bank of Woodstock, 433, 614, 687, 695. Sabin v. Haylake Ry, 1045. Sackett's Harbor Bank v. Blake, 242, 292. 300. Sackett's Harbor Bank v. Codd, 985. Sacramento, etc., R. R. v. Superior Ct., 1317. Sadler v. Lee, 783, 788. Sadler's Case, 106, 336, 524. Saddle River v. Colfax, 1093. Safety, etc., Co. v. Smith, 1043. Saffold v. Barnes, 190, 209. Safford v. People, 1432. Safford v. Wyckoff, 985, 1106, 1190. Sage v. Central R R., 1307, 1316, 1467, 1474, 1475. Sage v. Dilliard, 638. Sage v. Little, etc., R R, 1405. Sage v. Memphis, etc., R. R, 1340, 1368, 1410, 1411, 1412. Sage v. Railroad, 1357. Sage, Re, 676, 682, 1542. Saginaw, etc., Co. v. Hamilton, 1583. Saginaw, etc., Co. v. Saginaw, 1554, 1583. Sagory v. Dubois, 56, 113, 161, 174, 729. Sahlendecker. Appeal of, 241. Sahlgard v. Kennedy, 1303, 1472. Saint v. Wheeler, etc., Co., 1114. St. Albans v. National Car Co., 753, 755. St Andrew's Bay L Co. v. Mitchell, 1095. St. Cecilia Academy v. Hardin, 1165. ' St Charles, etc., R R Co. v. Assessors, 749. to the foot-paging.] St Clair v. Cox, 1173, 1176. St Croix L. Co. v. Mittlestadt, 111, 387, 922. St. Helen Mill Co.. In re, 1063. St. James Club, Re, 661. St. James Parish v. Newburyport H. R R, 1084, 1094, 1190. St. John v. Erie R> Co., 366, 368, 369, 722. St Johns v. Steinmetz, 1100, 1101. St. John's College v. Purnell, 635. St Johnsbury, First National Bank of, v. Concord, 137. St. Joseph v. Saville, 1535. St Joseph, etc., R R. v. Humphreys, 1444. St. Joseph, etc., R R. v. Shambaugh, 3, 887. St. Joseph, etc.. R. R. v. Smith, 1435. St. Joseph, etc., R. R. Co. v. Buchanan Co., 135. St Joseph, etc., R R. Co. v. Ryan, 1539. St. Joseph Township v. Rogers, 148, 149. St. Lawrence Steamboat Co., In the Matter of the Election of, 20, 822, 823, 827, 839, 841, 849, 850, 851. St. Lawrence, etc.. R. R, Matter of, 1526. St. Louis v. Alexander. 135, 941. St. Louis v. Risley, 1100. St. Louis v. Western, etc.. Co., 1552, 1595. St. Louis, Alton & C. R. R Co. v. Dalby, 1009. St. Louis Ass'n v. Hennessey, 232. St Louis & Cedar Rapids R R. Co. v. Eakins, 126. St. Louis & San F. R'y Co. v. Wilson, 620. St. Louis, etc., Assoc, v. Augustin, 1072. St. Louis, etc., Bank v. Allen, 1948. St Louis, etc., Co. v. Consolidated, etc.. Co., 1178. St. Louis, etc., Co. v. Hilbert. 418. St Louis, etc., Co. v. Jackson, 913. St. Louis, etc., Co. v. Lewright 1528. St. Louis, etc., Co. v. Quinby, 977. St. Louis, etc., Co. v. Sandoval, etc., Co., 177, 1126, 1418, 1423, 1431, 1471. St Louis, etc., Ins. Co. v. Cohen, 1175. St Louis, etc.. Loan Association v. Au- gustin, 803. clxvi TABLE OF CASES. [The references are St Louis, etc., R'y v. Berry, 1545. St Louis, etc., R'y v. Knott, 1548. St. Louis, etc., R'y v. Matthews, 1391. St. Louis, etc., R'y v. Neel, 1509. St Louis, etc., R'y v. Ryan, 1514. St. Louis, etc., R'y v. Weakly, 1534. St. Louis, etc., R'y v. Whitley. 1183. St Louis, etc., R'y v. Williams, 10, 1050. St. Louis, etc., R. R. v. Chenault, 936. St Louis, etc., R. R. v. Cleveland, etc., R'y. 1402, 1443. St Louis, etc., R R v. Dewees, 1416, 1531. St Louis, etc., R R. v. Eakins, 127. St Louis, etc., R, R. v. Foltz, 1528. St. Louis, etc., R R. v. Grove, 1088. St Louis, etc., R R v. Hill, 1520. St. Louis, etc., R R v. Mathers, 1539. St. Louis, etc., R R v. Miller. 1480. St Louis, etc., R R. v. Terre Haute, etc., R R, 1125, 1131, 1489, 1491, 1503, 1504, 1505, 1506. St. Louis, etc., R R Co. v. Tieruan, 50, 917, 924. St Louis, Iron Mt & S. R R Co. v. Berry, 774. St Louis, Iron M., etc., R. R. Co. v. Lof- tin, 13. St Louis Nat'l Bank v. Allen, 1183. St. Louis Nat'l Bank v. Papin. 751, 763, 765. St Louis Perpetual Ins. Co. v. Goodfel- lovv, 517, 687, 689, 692, 693, 695. 699. St Louis R Co. v. Southern R'y Co., 1569. St. Louis R R v. N. W., etc., R'y, 875. St. Louis R. R., etc., Co. v. Harbine, 629. St. Luke's Church v. Matthews, 1057. St. Luke's Church, Re, 7. St. Marylebone Banking Co., In re, 336. St. Mary's Bank v. Mumford, 1116. St. Mary's Bank v. St John, 275, 729, 1058, 1059. St. Mary's Church v. Cagger, 635, 1068. St. Mary's, etc., Ass'n v. Lynch, 802. St Nicholas, The, 1434. St. Paul v. Chicago, etc., R'y, 1171. St Paul, etc., Co. v. Minn., etc., R. R, 388, 1509. St Paul, etc., R'y v. Sage, 1129. to the foot-paging.] St. Paul, etc., R'y v. Todd County, 773. St Paul, etc., R R v. Parcher, 1273. St Paul, etc., R R v. Robbins, 36, 112, 239. St Paul, etc., R R v. United States. 1364. St. Phillip's Church v. Zion, etc., Church, 889. St. Romes v. Cotton Press Co., 441, 484. St Tammany Water-works v. New Or- leans Water-works, 1597. Salaman v. Warner, 449. 500. Salem Bank v. Gloucester, 969, 1094. Salem Irou, etc., Co. v. Danvers, 756. Salem Mill-dam Corp. v. Ropes, 110, 323, 223, 227, 381, 394. Sales v. Bates, 327, 332, 336, 338, 352. Salfield v. Sutter, etc., Co.. 1055. Salisbury v. Black's Adm'rs. 243. Salisbury v. Metropolitan R'y Co., 378, 728, 734, 735, 1112. Salisbury Mills v. Townsend. 438, 528. 709, 717. Salmon v. Hamborough Co., 245, 255, 1169. Salmon v. Richardson, 487. Salomons v. Laing, 422, 11 17, 153a Saloy v. Hibernia, etc., Bank, 485. 594. Salt Company v. East Saginaw, 1942. Salt, etc., Co. v. Mammoth, etc., Co., 1056. Salt Lake City v. Hollister, 953, 1006, 1153. Salt Lake, etc., Bank v. Golding, 760. Salt Lake, etc., v. Hendrickson, 271, 295. 321. Saltmarsh v. Planters', etc., Bank, 893. Saltmarsh v. Spaulding, 319, 920, 1059, 1265, 1293. Saltsman v. Shults, 671. Samainego v. Stiles, 251. Sampson v. Bowdoinham, etc, Corp., 801, 887, 1058, 1064. Sampson v. Shaw, 449, 469. Samuel v. Holladay, 16. 932, 1021, 1061, 1109. 1144, 1296, 1320. Samuels v. Evening Mail, etc., 1010. San Antonio v. Gould, 137. San Antonio v. Jones, 137. I San Antonio v. Lane, 137, 1237. TABLE OF CASES. clxvii [The references are San Antonio, etc., Co. v. Busch, 1214 San Antonio, etc., R'y v. Ruby, 1432. San Benito, etc., v. Southern P. R R Co., 776. San Bernardino, etc., Bank v. Anderson, 1105. San Buenaventura Commercial, etc, Co. v. Vassault, 800, 801. San Diego v. San Diego, etc., R R Co., 931. San Francisco v. Flood, 751. San Francisco v. Fry. 751. San Francisco, City of, v. Mackey. 756. San Francisco, etc.. R R. v. Bee, 961, 965. San Francisco, A. & S. R R Co. v. Cald- well, 1527. San Francisco, etc' Co. v. Pattee, 923. San Joaquin, etc., Co. v. Beecher, 113. San Jose Savings Bank v. Pharis, 299. San Jose, etc., Bank v. Sierra, etc., Co., 1059. San Mateo, County of, v. Southern Pac. R R Co., 635, 8S9, 1020. Sanborn v. Benedict, 470. Sanborn v. Lefferts, 16, 279, 853. Sanders v. Bromley, 744. Sanderson v. ^Etna, etc., Co., 216. Sanderson v. Tinkham, etc., Co., 1063. Sanderson's Case. 344. Sanderson's Patents Association, In re, 861. Sandford v. Handy, 191, 202, Sandford v. Norton. 1248. Sandford v. Railroad. 1142, 15S0. S;mdford v. Sinclair, 1417. Sandon v. Hooper, 1437. Sands v. Kimbark. 888, Sands v. Sanders, 181. Sandy, etc.. Bank v. Merchants', etc.. Bank. 10S6. Sandy River R. R Co. v. Stubbs. 935. Sanford v. Board of Supervisors, 666. Sanger v. Upton, 13, 31. 56, 80, 87, 109, 113, 160. 210, 239, 248, 255, 261, 265, 336. Sanitary, etc.. Co.. In re, 815. Santa Clara County v. Southern Pacific Railroad Co., 768. 1949. Santa Clara, etc., Co. v. Hayes, 644. to the foot-paging.] Santa Clara, etc., Co., In re, 850, 852. Santa Cruz R R Co. v. Schurtz. 223. Santa Cruz R R Co. v. Spreckles, 323, 1185. Santa, etc., Assoc, v. Meredith, 925. 926. Sanxey v. Iowa, etc.. Glass Co.. 1468. Sappington v. Little Rock, etc.. R. R.. 963. Saratoga, etc., Co. v. Hazard. 781. 1201. Sargent v. Boston & L. R R. 158 Sargent v. Essex Mfg. Co., 517, 623. Sargent v. Essex 11 R'y Co., 623, 699. Sargent v. Franklin Ins. Co., 22. 430. 447, 469, 517, 522, 525, 622. 686, 688, 691, 717. 779, 785, 790, 1022. Sargent v. Kansas, etc., R R. 907. 1213. Sargent v. AVebster, 807, 989. 1065. Sargent, Ex parte, 449, 517, 519, 528, 550, 591, 593, 594. Sauerhering v. Iron Ridge, etc., R R Co., 146. Saugatuck, eta, Co. v. Westport. 98. Saunders v. Sioux, etc., Co., 1165. Saunders' Case, 327. Savage v. Ball, 65. 824. Savage v. Medbury. 160. Savage v. Russell, 1167. Savage v. Walshe, 858, Savage Mfg. Co. v. Armstrong. 117:;. Savannah, etc.. R'y v. Pritchard. 1534. Savannah, etc., R. R v. Lancaster. 1099, 1202, 1224, 1227, 1239. 1266. 1294, 1314. 1328. Savannah, etc., R R Co. v. Mayor, etc., 155L Savings Ass'n v. O'Brien. 255. 279, 2-4. 292. 294. Savings Assoc, v. Topeka. 138, 139. Savings Bank v. Bates. 989. Savings Bank v. Creswell. 1393. Savings Bank v. Davis, 1061, 1095. 1096. 1099. Savings Bank v. Hunt, 1022. Savings Bank v. Nashua. 757. Savings Bank. etc. v. Caperton, 1032. Savings Ins. Co. of St. Louis v. O'Brien, 293. Sawyer v. Dubuque, etc., Co.. 957. Sawyer v. Hoag. 240. 247. 24-8. 257. 265. Sawyer v. Methodist Ep. Soc. 16. Sawyer v. Taggart. 473. 475. clxviii TABLE OF CASKS. [The references are Sawyer v. Winnegance, etc., Co., 1105. Saxby v. Easterbrook. 682. Saxton v. Texas, etc., E. R, 1098. Sayler v. Simpson, 68, 965, 1264. Sayles v. Blane, 345, 356. Sayles v. Brown, 293, 391, 392, 828. Sayre v. Glenn, 246. Sayward v. Houghton, 462. Scadding v. Lorans, 807. Scammon v. Kimball, 240. Scarlet v. Academy of Music, 169, 171, 187. Scarth v. Chad wick, 1158. Schaeffer v. Bonham, 147. Schaeffer v. Missouri, etc., Co., 87, 239. Schall v. Bowman, 141. Scheffer v. Nat. Life Ins. Co., 1183. Schenck v. Dart, 412. Scheuck v. Ingraham, 1458. Schenck v. Mercer, etc.. boa, ' 'o., 1115. Scheneck v. Andrews, 47, 72. Schenectady, etc., R R Co. v. Thatcher, 111, 112, 170. 181, 224, 232, 343, 635, 806. Schepeler v. Eisner, 578. Schermerborn v. Talman, 1206. Schetter v. Southern, etc, Co., 1088. Schild v. Central, etc., R R, 1571. Schilling, etc., Co. et al. v. Schneider et al., 52, 1188, 1208. Schillinger, etc., Co. v. Arnot, 1166. Schlieder v. Dielman, 961. Schloss v. Montgomery, etc., Co., 224, 234. Schmid v. New York, etc., R. R, 1482. Schmidla'pp v. Louisiana, etc., Co., 1176. Schmidt v. Abraham, etc., Lodge, 661. Schmidt v. Gunther, 671. Schmidt v. Hennepin, etc., Co, 693. Schmidt v. Market, etc., R'} r , 1574. Schneider v. Turner, 470. Schneitman v. Noble, 1086. Schoeppel v. Corning, 781. Schoharie, etc., R R, Re, 825, 826. Schoharie Valley R R Case, 829, 839, 840, Scholefield v. Redfern, 741. 743, 745. Scholefield's Case, 1031. Scholey v. Central R'y Co., 200, 206, 207. Scholfield v. Union B., 827, 828, 881. to the foot-paging.'] Schollenberger, Ex parte, 1178. School District v. Griner, 1018, 1019. School District, etc., v. Everett, 991. Schorestine v. Iseliu, 1475. Schrader v. Manuf'rs Bank, 296. Schricker v. Ridings, 272. Schroeder's Case, 33, 36, 48, 65. Schultz v. Schoolcraft, etc., R Co., 97. Schumm v. Seymour, 1064. Schurr v. New York, etc., Co., 970. Schutte v. Railroad, 1216. Schuyler Co., Supervisors of, v. People. L33 Schuyler, County of, v. Thomas, 140, 156. Schuyler's, etc., Co., Matter of, 1422, 1428, 1433. Schwanck v. Morris, 207. Schwartz v. Keystone, etc., Co., 1438. Schwenck v. Nay lor, 490. Scipio, Town of, v. Wright, b5& Sco6eld v. Blackmail. 474 Scofield v. L. S., etc.. R'y, 1519. Scofield v. Railroad, 1631, 1599. Scotland Co. v. Mo., Iowa, etc., R'y Co., 759. Scott v. Armstrong. 1430. Scott v. Central Railway, etc., Co. of Georgia, 706, 715. 716. Scott v. Clinton, etc., R R, 1315, 1372. Scott v. Colburn, 1200, 1262. Scott v. De Peyster, 1032. Scott v. Detroit, etc., Society, 316. Scott v. Dixon. 194, 486, 187. Scott v. Eagle Fire Ina Co., 721, 126, 735. Scott v. Elmore, 1423. Scott v. Embury, 1035. Scott v. Grand Trunk R'y Co.. 1536. Scott v. Indianapolis Wagon Works, 467, 609. 611. Scott v. Izou, 652. Scott v. Middleton, etc., R R, 1068, 1081. Scott v. Pequonnock Bank, 24, 517, 618. Scott v. Rogers, 789. Scott v. Texas, etc., Co., 1181. Scott v. Snyder, etc., Co., 194. Scottish N. E. R'y Co. v. Stewart, 886. Scottish Petroleum Co., Re, 201, 1066. Scovil v. Roosevelt, 739. Scoville v. Canfield, 291. TABLK OF CASES. clxix [The references are Scoville v. Thayer, 42, 49, 51, 5G, 58, 63, 160, 162, 241, 244, 261, 381, 394, 395, 400. Screven v. Clark, 1426. Screwman's, etc., Assoc, v. Benson, 662. Scripture v. Francestown Soapstoue Co., 500, 622. Scruggs v. Scottish, etc., Co., 1004. Sea Ins. Co. v. Stebbins, 1428. Seacord v. Pendleton, 311, 669. Seal v. Puget Sound, etc., Co., 1056. Seale v. Baker, 195. Seaman v. Enterprise Fire, etc., Ins. Co., 18. Seaman v. Low, 480. Searing v. Searing, 709. Searles v. Jacksonville, etc., R. R., 1321, 1349, 1417. Sears v. Hotchkiss, 942. Sears v. Kings County El. R'y Co., 77, 1068. Searsburgh T. Co. v. Cutter, 19. Seaton v. Grant, 1139, 1142, 1158. Seaver v. Coburne, 1105. Seawright v. Payne, 32, 325, 972. Secombe v. Milwaukee, etc., R. R, 1480. Secombe v. Railroad Co., 1526. Second Ave. R. R Co. v. Mehrback, 1076. Second, etc., R'y v. Green, etc., R'y, 1568. Second Nat'l Bank v. Hall, 291, 313, 317. Second Nat'l Bank v. Lovell, 317. Second Nat'l Bank v. Martin, 1097. Second Nat'l Bank of Louisville v. Nat'l Bank, 701. Secor v. Singleton, 747, 1159. Secor v. Toledo, etc., R'y, 1436. Securities, etc., Corporation v. Brighton Alhambra, 1449. Security Co. v. Hartford, 14. Security State Bank v. Racine, 125. Sedalia, Warsaw, etc., R'y Co. v. Abell, 224. Sedalia, W. & S. R'y Co. v. Wilkinson, 214. Seddon v. Rosenbaum, 453, 465. Seddon v. Virginia, etc., Co., 203. Sedgwick County v. Bailey, 155. Seeley v. New York National Exchange Bank, 392, 727. to the foot -paging.] Seeley v. San Jose, etc., Co., 1087, 1089, 1161. Seeligson v. Brown, 613, 617. Seibert v. Lewis, 1945. Seibert v. Minneapolis, etc., R'y Co., 1317, 1324, 1335, 1420. Seighortner v. Weissenborn, 659, 671. Seiguouret v. Home Ins. Co., 381. Seizer v. Mali, 398, 399. Self-Acting, etc., Co.. In re, 89. Seligman v. Rogers, 566, 787. Seligman v. St. Louis, etc., R. R. Co., 614. Sellers v. Phoenix Iron Co., 927. Selma & Tenn. R R. Co. v. Roundtree, 219. Selma & T. R. R. Co. v. Tipton, 102, 112, 113, 174, 214, 1058. Selma, etc., R. R. Co., Ex parte, 133. Selma, M. & M. R. R. Co. v. Anderson, 198, 210, 222. Selwyn v. Harrison, 654. Semple v. Bank of British Col., 1002. Semple v. Glenn, 94, 243. Seneca County Bank v. Neass, 1115. 1116. Sercomb v. Catlin, 1169, 1425. Serrell v. Derbyshire, etc., R'y, 1103. Seton v. Slade, 1091. Seventh, etc., Bank v. Shenandoah, etc., R. R, 1389, 1391, 1403. Sewall v. Boston Water-power Co., 504, 506, 508, 545. Sewall v. Brainerd, 1233. Sewall v. Chamberlain, 892. Sewall v. Eastern R. R. Co., 388. Sewall v. Lancaster Bank, 689, 692, 695, 781. Sewall, In re, 1233, 1239. Seward v. City of Rising Sun, 22, 750, 751. Sewell v. Cape May, etc., R R, 1415. Sewell v. East, etc., Co., 956. Sewell's Case, 385, 39Q, 394, 395. Spybell v. Nat'l Currency Bank, 1226. Seybert v. Pittsburgh, 132, 153. Seymour v. Bagshaw, 487. Seymour v. Bridge, 580. Seymour v. Canandaigua & N. F. R R. Co., 1381, 1388, 1384, 1386. dxx TABLE OF CASES. [The references are to the foot-paging.] Seymour v. Detroit Copper, etc., Mills, 844. Seymour v. Hendee, 584. Seymour v. Ives, 786, 790, 791. Seymour v. Sturgess, 116, 160, 161, 261, 263, 291. Seymour, In re, 1074. Shaaber's Appeal, 1181. Shackamason Rank v. Disston, 242. Shackamason Bank v. Dougherty, 242. Shackleford v. Dangerfield, 166, 169, 171, 1015. Shackleford v. New Orleans, etc., R R. Co., 926. Shackley v. Fisher, 160. Shafer Iron Co. v. Iron, etc., Judge, 1177. Shaffer v. Ilahn et al., 1097. Shaffner v. Jeffries, 119. Shales v. Seigmoret, 472. Shalucky v. Field, 301. Shamburg v. Abbott, 669. Shamokin Valley R R v. Livermore, 1380, 1381, 1383. Sharp v. Warren, 671. Sharp's Case, 1038. Sharp & Jenuers Case. 1037. Sharpe v. Belles, 1104. Sharpe v. Dawes, 815, 1051. Sharpe v. National Rank, 597, 607, 780. Sharpless v. Philadelphia, 137. Sharpless v. The Mayor, 104, 131, 137. Sharpley v. South & E. C. R'y Co., 228. Shaughnessy v. Chase, 710, 712, 781, 783. Shaver v. Rear River, etc., Co., 1089, 1093. Shaver v. Hardin, 1294. Shaw v. Rill, 1230, 1238, 1372, 1383. Shaw v. Roylan, 321. Shaw v. Campbell, etc., Co., 634, 1590. Shaw v. Clark, 1118. Shaw v. Dennis, 133. Shaw v. Fisher, 355, 461, 525. Shaw v. Holland, 458, 785, 788, 789. Shaw v. Norfolk R. R Co., 963, 1092, 1261, 1268, 1310, 1313, 1314, 1317, 1334. Shaw v. Port Philip & C. Gold Min. Co., 396. Shaw v. Quincy Min. Co., 1180. Shaw v. Railroad, 1222, 1306, 1313, 1329, 1452, 1471. Shaw v. Rowley, 355, 456, 693. Shaw v. Spencer, 437, 439, 546, 547, 580, 593, 595. Shaw, Ex parte, 484. Shawhan v. Zinu, 1146, 1161. Shawmut Rauk v. Pittsburgh & M. R R Co., 1535. Shawmut Sugar Co. t. Hampden Mut Ins. Co., 1019. Shay v. Tuolumne, etc., Co., 1049. Shea v. Mabry, 1029, 1540. Sheaffs Appeal, 1368. Shears v. Jacobs, 1263. Sheffield & Manchester R'y Co. v. Wood- cock, 167, 518. Sheffield, etc., v. Woodcock, 346. Sheffield, etc., Soc. v. Aizlewood, 103a Sheffield Gas, etc., Co. v. Harrison, 462, 4d;;. Sheffield Nickel Co. v. Unwin, 1245. Shelby v. Chicago, etc., Co., 993. Shelby v. Hoffman, 1001. Shelby Co. Court v. Cumberland, etc., R. R Co., 134. Shelby, etc., Co. v. Roard, etc., 769. Shelby R R, etc.. v. Louisville, etc., R R, 801, 802, 804. Shelby ville & Rushville Turnpike Co. t. Barnes, 633, 1490. Shelbyville Water Co. v. People, 1581, 1597. Sheldon v. Chappell, 968. Sheldon, etc., Co. v. Eichemeyer, eta, Co., 955, 989, 1130, 1133. Shellingtou v. Howland, 250, 251, 281, 283, 303, 345, 353. Shelly, Re, 586. Shelmerdine v. Welsh, 831, 846. Shenandoah Valley R R Co. v. Griffith, 616, 691. Shepard v. Stockham, 462, 710. Shepherd v. Gillespie, 461, 569, 570. Shepherd v. Johnson, 788. Shepherd's Case, 352, 448. Shepley v. Atlantic, etc., R R, 1092, 1267, 1268, 1316, 1317. Sheppard v. Murphy, 569, 570, 580. Sheppard v. Oxenford, 663, 1041. Sheppard v. Scinde, etc., R'y Co., 892. Sheridan v. Sheridan Electric L. Co., 906, 1157. TABLE OF CASES. clxxi [The references are Sheridan, etc., Light Co. v. Chatham Nat'l Bank, 1071. Sheriff v. Lowndes, 634, 810, 1517. Sherlock v. Winnetka, 1205. Sherman v. American Stove Co., 203. Sherman v. Beacon, etc., Co., 683, 1163. Sherman v. Clark, 399. Sherman v. Conn. River Bridge, 1018. Sherman v. Fitch, 1082, 1093, 1097, 1098. Sherman v. Smith, 629. Sherman v. Wells, 1579. Sherman, etc., Co. v. Fletcher, 970. Sherman, etc., Co. v. Morris, 7, 969, 1022, 1080, 1100. Sherman, etc., Co. v. Russell, 970. Sherrard v. Sherrard. 743. Sherrington's Case, 37. Sherwood v. American Bible Soc, 666, 991, 999, 1001. Sherwood v. Buffalo, etc., R R Co., 255, 288. Sherwood v. Meadow Valley M. Co., 510, 546. Sherwood v. Tradesman's Nat'l Bank, 464. Shewalter v. Pierron, 993. Shewalter v. Pirner, 1099. Shickle v. Watts, 75, 87, 240, 250, 255, 301. Shield, Re, 413. Shields v. Casey, 332. Shields v. Ohio, 635, 637, 1513, 1545, 1943. Shillaber v. Robinson, 1320. Ship v. Cresskill, 195, 199, 204, 640. Shipley v. Mechanics' Bank, 530. Shipley v. City of Terre Haute, 154. Shipmau v. ^Etna Ins. Co., 430, 586. Shipman's Case, 346. Shipper v. Pennsylvania R R, 1519. Ship's Case, 639. Shiras v. Evving, 1598. Shirk v. La Fayette, 1301. Shockley v. Fisher, 263, 989. Shoe & Leather Ass'n v. Bailey, 681. Shoemaker v. National Mechanics' Bank, 420, 425, 984. Sholl v. German, etc., Co., 1526. Shorer v. Times, etc., Co., 1165. Short v. Med berry, 274. Short v. Stevenson, 913. to the foot-paging.] Short v. Unangst, 856. Short's Estate, In re, 751. Shorter v. Smith, 1529, 1592. Shortridge v. Bosanquet, 348,448. Shotwell v. Mali, 398, 399. Shotwell v. McKown, 1096. Showalter v. Laredo, etc., Co., 253, 264 Shrewsbury, Earl of, v. North Stafford- shire R'y Co., 952, 1044, 1045. Shrewsbury, etc., R'y Co. v. London, etc., R'y Co., 1510. Shriver v. Stevens, 1089. Shropshire v. Behrens, 1097. Shropshire Union R'ys & Canal Co. v. Queen, 438, 499, 550. Shufeldt v. Carver, 628. Shurtleff v. Wiscasset, 151. Shurtz v. Schoolcraft, etc., R R Co., 110, 222. Shute v. Keyser, 1168. Shuttleworth v. Greaves, 404, 409. Sibbald v. Bethlehem Iron Company, 561, 565, 567. Sibell v. Remsen, 990. Sibley v. Minton, 659. Sibley v. Mobile, 133, 143. Sibley v. Perry, 406. Sibley v. Quinsigamond Nat'l Bank, 24, 518, 549, 618. Sicardi v. Keystone Oil Co., 940. Sichell, Ex parte, 1037. Sichell's Case, 347. Sickels v. Anderson, 164. Sickles v. Richardson, 602,606,1201,1307. Siddall, In re, 655, 656. Sidney's Case, 97. Siebe v. Joshua, etc., Works, 1079. Sierra Nevada, etc., Co. v. Sears, 512. Silk Mfg. Co. v. Campbell, 1161. Silkstone Fall Colliery Co., In re, 801. Sillcocks v. Gallaudet, 578. Silliman v. Fredericksburg, etc., R R, 884, 886, 1213, 1229, 1276. Silloway v. Columbia, etc., Co., 1174. Silva v. Metropolitan, etc., Co., 1076. Silver v. Ely, 19. Silver Hook Road v. Greene, 163, 1071. Silver Lake Bank v. North, 983, 993, 999, 1172. Silverthorn v. Warren R R Co., 776. clxxii TABLE OF CASKS. [The references are Simkins v. Law, 786. Si mm v. Anglo, etc.. Co., 395. Simmons v. Dent. 330. Simmons, etc., Co. v. Doran, HIT. Simmons v. Hill, 347. Simmons v. Joiut, etc., Co., 582, 789. Simmons v. London, etc., Bank. 549. Si mi nons v. Sisson, 10. 304. Simmons v. Taylor, 1215, 1248. 1322, 1346, 1353, 1355, 1359, 1360. Simmons v. Troy Iron Works. 970. Simmons v. Vallance, 406. Simon v. Anglo-American Tel. Co.. 505. Simon v. Sevier, etc., Assoc, 1060. Simons v. First Nat'J Lank. 987. Simons v. Southwestern R R Bank. 137, 430. Simons v. Vulcan, etc., Co., 18, 910. Simouson v. X. Y.. etc., [na Co., 930. Simonson v. Spencer, 279, 283, 286 Simonton v. Kelly, 602. Simonton v. Sibley, 658 Simpson v. Denison, 633, 1245, 1502, 1508. Simpson v. Moore, 707, 739. Simpson v, Reynolds. 052. Simpson v. Taylor, 1204. Simpson v. Westminster Palace Hotel Co., 954, 90S, 97:;. Simpson's Case, 37. Simpson's Claim. 1086. Sims v. Bonner. 617. Sims v. Street Railroad Co., 105, 110, 922. Sinclair v. Gray, 684. Sinclair v. Wayne, etc., T. Co., - Sing Sing, Bank of, In re, 302. Singer v. Given, 248. Singer v. St. Louis, etc., R R.. 12 15, 1296. Singer's Case, 415. Singer, etc., Co. v. Belgart, 1091. Singer, etc., Co. v. Carpenter, 905. Singer, etc., Co. v. Hardee, 1004. Singer Mfg. Co. v. Brown, 1002. Singer Mfg. Co. v. County Com're, 770. Singer Mfg. Co. v. Elizabeth, 145. Singer Mfg. Co. v. McCollock, 1346. Singer Mfg. Co. v. Wright, 768. Singleton v. Southwestern R. R, 1536 Sinking Fund Cases. 027. 029, 630, 638, 886, 1521, 1943. Sinnott v. Chicago &. N. W. R'y, 1563. to thf foot-paging.] Sioux City St. R'y v. Sioux City, 1515, 1572, 1573, 1945. Sioux Falls Nat'l Bank v. Swenson, 76a Sipes v. Seymour, 1040. Sipperly v. Stewart. 580. Sistare v. Best. 425, 428, 562. Sitgreaves v. Farmers', etc., Bank, 515. Sitgreaves v. Marsh, 601. Sixth Ay,.. R I;. Co. v. Kerr, 1508. uess,etc,, Co., Re, 1042. Skiddy v. Atlantic, etc., R R, 370, 1199. 1204, 123::. 1278, 1313, 1328, 1349. 1400, 1454. 1471. Skillman's Estate, In re, 739. Skinner l < 'ity of London M. I - 534, 696, 792. Skinner v. Dayton, 277, 660, 668, 670. skinner v. Maxwell, 1422. Skinner v. Smith, 52, 730, 941, 956 Skowhegan & A. R. R. Co. v. Kinsman, 223. Skowhegan Bank v. Cutler, 348, 853, Wl, 621. Skrainka v. Allen, 56, 59, 729, 1205. Skrainka v. Scharringbausen, 645. Slack v. Maysville, eta, B. U. Co., 134, 187, l II. 117. shirk v. Bighgate Archway Co., 985. slate v. Chamber of Com., 661. Slate Co. v. Savings Bank, 992 Slater Woolen Co. v. Lamb, 972 Slater's Case, 353, B! Slatterly v. St Louis, etc.. Co., 903, 1161. Slattery v. Schwannecke, 1115. Slaughter v. Commonwealth, 998. Slaught' r-House < lases, 1949. Slaymaker v. Bank of Gettysburg, 22, 429. 432. 008. Slee v. Bloom, 58, 177. 239. 251, 205. 267, 279. 282, 290. 821, 858, 803, 864. Slee v. International Bank, 448. Sleech v. Thorington, 405. Sleeper v. Goodwin, 273, 281, 289, 303, 329, 029. Slemmons v. Thompson. 532. Slingsby v. Granger, 409. Slipher v. Earhart, Adm'r, 126, 128, 239. Sloan v. Central Iowa R'y, 1482 Sloan v. Pacific R R., 1513 Slocum v. Prov. S. & G. P. Co., 233. TABLE OF CASES. clxxiii [The references are Sloman v. Bank of England, 183, 504, 506, 507. Small v. Herkimer, etc., Co., Ill, 175, 183, 184. Small v. Minnesota, etc., Co., 955, 1145, 1171. Small v. Saloy, 607. Smallhouse v. Kentucky, etc., Co., 274. Smead v. Indianapolis, P. & C. R. R. Co., 635, 640, 1193, 1243, 1249. Smelser v. Wayne, etc., T. Co., 879. Smith v. Alabama, 1516, 1946. Smith v. Allison, 127. Smith v. Alvord, 998, 1059. Smith v. American Coal Co., 498, 502, 547, 617, 620, 708. Smith v. Anderson, 651, 655, 657, 659, 901, 1078. Smith v. Baker, 429. Smith v. Bangs, 98, 99. Smith v. Bank of Scotland, 1093. Smith v. Bank of Victoria, 922. Smith v. Board, etc., Co., 1115. Smith v. Bolles, 492, 792. Smith v. Bourbon County, 154. Smith v. Bouvier, 464, 468, 473. Smith v. Burley, 757. Smith v. Central Plank-road Co., 1016, 1018. Smith v. Chadwick, 194. Smith v. Chicago, etc., R. R, 963, 1275, 1472, 1480. Smith v. City of Fond du Lac, 149. Smith v. Clark County, 135. Smith v. Coale, 600. Smith v. Colorado Fire Ins. Co., 309. Smith v. Cook, etc., Assoc, 1088. Smith v. Co-operative, etc., Assoc, 1089. Smith v. Cork, etc., R'y, 364, 373, 374, 375. Smith v. County of Clark, 140, 1232. Smith v. Crescent City, etc, Co., 23, 498, 502, 517, 617, 619. Smith v. Danzig, 853, 991. Smith v. Dorn, 1060, 1150. Smith v. Eastern R. R, 1367. Smith v. Erb, 1058. Smith v. Eureka Flour Mills Co., 1185, 1190. Smith v. Exeter, 750, 752. to the foot-paging.] Smith v. Fagan, 922. Smith v. First Nat'l Bank, 764. Smith v. Flint, etc, Ry, 1433. Smith v. Florida, etc., R. R, 1215. Smith v. Forty-nine & Fifty -six Quartz M. Co., 467, 582, Smith v. Gillen, 233. Smith v. Goldsworthy, 394. Smith v. Gower, 237, 863, 864. Smith v. Hallett, 163. Smith v. Heath, 567. Smith v. Heindecker, 245. Smith v. Huckabee, 256, 288, 289, 305, 321. Smith v. Hull, etc., Co., 1092. Smith v. Hurd, 735, 1027. Smith v. 111., etc., R R, 1198. Smith v. Indiana & 111. R'y Co., 168. Smith v. Johnson, 1054, 1193.1 Smith v. Lansing, 921. Smith v. Law, 807, 808, 1061, 1185, 1190. Smith v. Lawson, 1076, 1085. Smith v. Little, 1002. Smith v. Lockwood, 670. Smith v. Long, 928. Smith v. Los Angeles, etc., Assoc, 942. Smith, v. Lowell Meeting-house, 1094. Smith v. Maine Boys Tunnel Co., 184. Smith v. Manhattan Ins. Co., 1461. Smith v. McCullough, 1362. Smith v. McNamara, 1434. Smith v. Mississippi & Ala. R. R. Co., 878, 983. Smith v. Mutual Life of N. Y., 1175. Smith v. Nashville, etc., R R, 428, 438, 445. Smith v. Natchez, etc., Co., 1070. Smith v. Nelson, 1024. Smith v. New York, etc., Ins. Co., 955, 991. Smith v. North American Min. Co., 384, 529, 533. Smith v. Northampton Bank, 608, 711. Smith v. Plank-road Co., 218. Smith v. Poor, 717, 780, 1028, 1159. Smith v. Prattville, etc., Co., 718, 719. Smith v. Proctor, 816. Smith v. Putnam, 923. Smith v. Rathbun, 973, 1029, 1147. Smith v. Reese Co., 203. clxxiv TABLE OF CASES. [The references are to the foot-paging.] Smith v. Rude, etc., Co., 769. Smith v. Sac County, 1227. Smith v. St. Louis, etc., Ins. Co.. 158a Smith v. Savin, 595, 597. Smith v. Sheeley, 880, 991, 993. Smith v. Silver Valley Mining Co., 184, 795, 796, 888. Smith v. Skeary, 990. Smith v. Smith, 1026, 1077, 1082, 1102. Smith v. Sorby, 915. Smith v. South Royalton Bank, 1118. Smith v. Sowles, 93. Smith v. Standard, etc., Co., 977. Smith v. Superior Court, etc., 1413. Smith v. Tallahassee Plank-road Co., 169, 189, 192, 234. Smith v. Tallapoosa County, 1238. Smith v. Thompson, 491. Smith v. Tracy, 488. Smith v. Traders' Nat'l Bank, 5S7, 590, 613, 624, 786. Smith v. Virgin, 659, 668, 671. Smith v. Weed Sewing M. Co., 1172. Smith v. Wells, 1155. Smith v. W. U. Tel. Co., 1593. Smith v. Woodville, 928. Smith's Appeal, 738. Smith's Ex'rs v. Washington, etc., R R, . 1310. Smith R Co. v. McGroarty, 1264 Smoot v. Heim, 612. Smouse v. Bail, 600. Smyth v. Burns, 435. Smyth v. Darley, 800, 1061. Smythe v. Scott. 1105. Snell v. Chicago, 5, 857, 874, 1489, 1590, 1592. Snell's Case, 97, 175, 177. 213, 416. Sniders, etc., Co. v. Troy, 312. Snoddy v. American Nat. Bank, 470. Snook v. Georgia Imp. Co., 639. Snow v. Alley, 451. Snow v. Boston, etc., Co., 1129. Snow v. Indiana, etc., R'y, 1534. Snow v. Russell, etc., Co., 929, 1364. Snow v. Wheeler, 663, 670. Snow v. Winslow, 1452. Snyder v. Studebaker, 880. Snyder v. Tunitas, etc., Co., 417. Snyder's Adm'r v. McComb's Ex'r, 436 Snyder, etc., Co., Re, 208. Soby v. People, 470. Societe, etc., v. Mackintosh, 1102, 1103. Societe Fonciere, etc., v. Melliken, 1180. Societe Generale de Paris v. Tramways Union Co., 499, 517, 700. Societe Generale de Paris v. Walker. 500, 511, 523. Society, etc., v. Meyer, 7, 1026. Society, etc., v. New London, 133, 147. 149, 156. Society, etc., v. Town, etc., 1167. Society of Practical Knowledge, The, v. Abbott, 50. Society for Propagating Gospel v. Young, 1016, 1019. Society for Saviugs v. New Loudon, 1223. Society for the Visitation of the Sick v. M.yer, 7, 1026. Society of Italian Union, etc., v. Monte- donico, 1025. Sodus Bay, etc., R R Co. v. Hamlin, 92. Sodua Bay, etc., R R Co. v. Lapham, 23(i. Solomans v. Laing, 1143, 1502. Solomon v. Pennoyer, 975. Solomon's Lodge v. Montmoclin, 1100. 1101. Solon, Town of, v. Williamsburg Saving Bank, 136. Somerset, etc., R R Co. v. Cushing, 229, 382, 394. Somerset R R Co. v. Clarke, 229. Somerville's Case, 359. Sondheim v. Gilbert, 468. Sons of Progress, In re, 1015. Soper v. Buffalo, etc., R R Co., 1110. 1113. Sorchan v. Mayo, 1420. Souhegan Factory v. McConihe, 1018. 1019. South & N. A. R Co. v. Chappell, 1006. South Australia, Bank of, v. Abrahams. 158, 163, 1253. South Baptist Church v. Clapp, 1098. South Bay Meadow Dam Co. v. Gray. 174, 629. South Beach, etc.. R R, Matter of, 1565. South Carolina Bank v. Hammond, 1108. South Carolina, Bank of, v. Humphreys, 1122. TABLE OF OA8ES. clxxv [The references are South C. Mfg. Co. v. Bank of S. C, 243. 268. South Car. R R. v. People's Sav. Inst, 1365. South Car. R. R, Matter of, 1405. South Cov., etc., R'y v. Gest, 1235. South Cov., etc., St. R'y v. Berry, 1571. South Eastern R'y v. Hibblewhit?, 171. South, etc., Brewery Co., Re, 361. Sou tli, etc.. Co. v. Gray, 1167. South, etc., Co. v. Muhlbach. 1096. South, etc., Iron Co. v. Shaw. 912, 914. South, etc., R R v. Paulk, 1020. South, etc., R. R. Co. v. Morrow, 751. South Georgia, etc.. R. R Co. v. Ayres, 235, 239, 635, 1137. South Jopliu Land Co. v. Case, 912. South London, etc., Co., Re, 358. South Mountain Consol. Min. Co., Re, 43. 239, 248. South School District v. Blakeslee, 802, 807, 811, 1013, 1016. South Spring, etc., Co. v. Amador, etc., Co., 947. South Staffordshire R'y Co. v. Burnside, 182. South Wales R'y Co. v. Redmond, 1006, 1535. South Yorkshire, etc., Co. v. Great Northern R'y, 1510. Southall v. British, etc., Assoc, 906, 1587. Southampton, Mayor of, v. Graves, 677, 681, 6S2. Southampton, etc., Co. v. Richards, 166, 814. Southerland v. Fremont, 117. Southerland, Trustee, v. Lake Superior Ship Canal R R, 1451. Southern California C. Asso. v. Busta- mente, 1100. Southern Cotton Oil Co. v. Wemple, 775. Southern D. Co. v. Houston, etc., R'y Co., 1168. Southern Exp. Co. v. Memphis, etc., R R, 1580. Southern Exp. Co. v. Newby, 1579. Southern Hotel Co. v. Newman, 215. Southern Kansas, etc., R R v. Towner, 10, 134, 949. to the foot-paging.] Southern Life Ins. Co. v. Cole, 4G5. Southern Life Ins. Co. v. Lanier, 34, 219. Southern Pa. Iron & R R Co. v. Stevens, Ex'r, 631. Southern Pacific Co. v. Denton, 1180. Southern Pacific Railroad Co. v. Cali- fornia, 1948. Southern Pacific R R v. Doyle, 1300. Southern Pacific R'y v. Esquibel, 1497. Southern Pacific, etc., v. Orton, 993. Southern Plank-road Co. v. Hixon, 1025. Southern R'y v. Internat. Bridge, 1519. Southgate v. Atlantic, etc., R. R. Co., 1088. Southmayd v. Russ, 280, 285, 286, 296, 350. Southwest, etc., Gas Co. v. Fayette, etc., Gas Co., 1148. Southwestern, etc., R'y v. Martin, 715. Southwestern R'y Co. v. Papot, 423, 478, 713. Southwestern R R Bank v. Douglas, 589. Southwestern R R Co. v. Thomason, 22 445. Southwick v. First Nat. Bank, etc., 1175. Southworth v. Owen ton, etc., Co., 1590. Sowles v. Soule, 755. Sowles v. Witters, 299, 430. Sovereign, etc., Co., The, Re. 415. Sovereign, etc., Ins.. Co., Re, 955. Spackman v. Evans, 87, 177, 180, 212, 217, 814, 1128, 1130. Spackman's Case, 177. Spader v. Mural, etc., Co., 1397. Spalding v. Bank, etc., 1111. Spalding v. Bank of Muskinghan, 988. Spalding v. Paine's Adm'r, 583. Spalding v. Susquehanna County Eank, 1113. Spangler v. Atchison, etc., R. R., 1181. Spangler v. Ind. & 111. Central R. R Co., 157, 158, 167, 168, 171. Spargo's Case, 32, 36. 76. Sparhawk v. Union, etc.. R'y, 973, 1143. Sparhawk v. Yerkes, 661. Sparks v. Despatch, etc.. Co., 1081. 110.3. Sparks v. Lower, etc.. Ditch Co., 323. Sparks v. The Company of Proprietors of the Liverpool Water-works, 184. clxxvi TABLE OF CASES. [The references are to the foot-paying.] Sparks v. Weedon, 411. Sparks v. Woodstock, etc., Co., 312. Sparling v. Parker, 22, 665. Sparrow v. Evansville, etc., R R, 1490, 1507. Spartanburg & A. R R. Co. v. Ezell, 219. Spartanburg & Union R R. Co. v. De Graffeureid, 123, 128. Spear v. Crawford, 15, 112. 113, 239, 994. Spear v. Grant, 248, 256, 730, 731. Spear v. Hart, 711, 714. Spear v. Ladd, 1051, 1055. Special Bank Com'rs v. Franklin Inst, 1458. Speigbt v. Gaunt, 435. Spellier, etc., Co. v. Gei<;or. 1121. Spell ier, etc., Co. v. Leedom, 223. Spence v. Mobile, etc., Ry, 1200, 1205, 1225, 122S. 1277. 1281, 1487. Spence's Case, 332. Spencer v. Clarke 115:'.. Spense v. Iowa Valley Construction Co., B21. Spering's Appeal, 1029, 1032. Sperry v. Jobnson, 129. Speyer v. Colgate. 568, 578 Spies v. Chicago, etc., R. R, 1152. 1222. 1242, 1325. Spiller v. Paris, etc.. Co., 1046. Split Rock Cable Co.. Matter of, 1557. Spofford v. Boston, etc., R R., 1520. Spokane, etc., Co. v. City of Spokane, 1574. Spokane, etc., R'y v. City of S. T., 155a Sponsier's Appeal, 406. Spooner v. Bay, etc., 261. Spooner v. Holmes, 1231. 1232, 1239. Spooner v. Phillips et al., 738. Spotl is wood's Case, 1038. Sprague v. Cocheco Mfg. Co., 438, 503. Sprague v. Hartford & Providence R. R Co., 1543. Sprague v. 111. River R R Co., 631, 632, 1489, 1507. Sprague v. Smith, 1319. Sprague v. Stickney, 1368. Spring v. Bowery Nat'l Bank, 1431. Spring Co. v. Knowlton, 43, 7 1. Spring, etc., Bank v. Hidings, etc., Co., 1097. Spring, etc., Works. In re. 313. Spring Valley Water-works v. Board of Supervisors of San Francisco, 637. 1167. Spring Valley W. W. v. Schottler, 638, 751, 1514. 1598, 1944, 1949. Springfield v. Connecticut R Co., 1528, 1529. Springfield St R'y Co. v. Sleeper, 125. Springfield R'y v. Springfield, 1552. Springport v. Teutonia Savings Bank, 186, 149. Spurlock v. Missouri Pac. R'y Co., 154, 687, 691, 693. Spyker v. Spence, 1111. Squair v. Lookout M. Co., 1128, 1150. Squire v. N. Y. C. R R, 1537. Stace's Case, 37. Stackpole v. Seymour, 530. Stack's Case, 20. Stacy v. Little Rock, etc.. \l. R. Co., 31, 82. Stafford v. American Mills, 1170. Stafford v. Bolton, 1018. Stafford v. Horton, 407. Stafford Bank v. Palmer, 314. Staffordshire, eta, Co., The, Re, S52. Stainbank v. Fernley, 493. Stainland v. Willott, 113. Stalktip v. National Bank, 1077. Stamford Bank v. Benedict. 1095. Stamford Bank v. Ferris. 429, 612. Standard, etc. Co., The, Re, 125:'-. Standard Oil Co. v. Scofield, 967. Standing v. Bowring. 412, 432. Stanhope's Case, 173, 177, 1127. Stanley v. Chester, etc., R'y, 1044. Stanley v. Cleveland, C. & C. R R Co., 1510. Stanley v. Sheffield, etc., Co., 1075. Stanley v. Stanley, 353, 628, 62ft Stanley v. Supervisors, 764. Stanley. Ex parte, 163, Stanton v. Alabama, etc., R R, H ss > 1198, 1199, 1223, 1454, 1455, 1457. Stanton v. Allen, 646. Stanton v. Camp, 1104. Stanton v. Chadwick, 681. I Stanton v. (.'oilier. 597. ■ Stanton v. Embrey, 1327. TABLE OF CASES. clxxvfi [The references are to the fo yt-paginj.] Stanton v. King, 655. Stanton v. Missouri, etc., R'y Co., 1147, 1468. Stanton v. N. Y.. etc., R. R, 1045, 1047. Stanton v. Small, 472. Stanton v. Wilkeson, 27& Stanton v. Wilson, 113. Stanton Iron Co., Re, 654. 843. Stanwood v. Stanwood, 429. Stapleford, etc., Co., In re, 906. Staples v. Gould, 470. Star Fire Ins. Co. v. Palmer, 606. Star R Co. v. Andrews, 1265. Starbuck v. Mercantile, etc., Co., 846. Starin v. Genoa, 136. 147, 153. Stark v. Burke, 251, 263. Stark Bank v. United States Pottery Co., 1084, 1246. Starkweather v. American Bible Soc, 1001. Starr v. Camden & Atl. R R Co., 1530. Starr v. Gregory, etc., Co., 1089. Starrett v. Rockland, etc., R. R Co., 114. State v. , 1537. State v. Accommodation Bank of La., 637. State v. Adams, 638, 1026. State v. American Cotton Oil Trust, 49. State v. American Express Co., 998. State v. American Institute, 1024. State v. Atchison, etc., R R, 49, 71, 867, 873, 1495, 1505. State v. Bailey, 34, 640, 866, 957, 1545. State v. Baltimore, etc., Co., 703, 707, 712, 713, 715, 716, 718, 758, 1208. State v. Bank of Charleston, 875. State v. Bank of Maryland, 988, 1275. State v. Bank of S. C, 866. State v. Barron, 864, 867, 86a State v. Bates, 996. State v. Baumgardner, 819. State v. Beck, 89, 105, 867, 1593. State v. Bell, 1559, 1564. State v. Bell Telephone Co., 1019, 1596. State v. Bentley. 756, 758. State v. Bergen, etc., R'y, 874. State v. Bergenthal, 676. State v. Berry, 775. State v. Bienville Oil Works, 677, 678, 684. State v. Bissell, 134. State v. Bonnell, 800, 808, 837, 855. State v. Boston, C. & M. R Co.. 999. State v. Bo wen, 3. State v. Bradford. 2. State v. Branin, 756, 758. State v. Brassfield, 148. State v. Brown, 638, 1213, 1216, 1219, 1288. State v. Brownstown, etc., Co., 864 State v. Building Assoc, 418, 870. State v. Bull, 883, 888. State v. Butler, 426, 772, 1586. State v. Carteret Club, 1025. State v. Catskill Bank, 19. State v. Central, etc., Assoc, 866, 1589. State v. Cent. O. Mut. R Ass'n, 309. State v. Chamber of Commerce, 1025, 1026. State v. Cheraw & C. R R Co., 14, 867, 531. State v. Chicago, etc.. R'y. 1483, 1515. State v. Cincinnati, etc., R R, 867, 872, 1520, 1583. State v. City of Kokomo, 149. State v. Clark, 135. State v. Cobb, 1188, 1197, 1223, 1224, 1248, 1251. State v. Collectors, 774, 991, 992. State v. Columbia, etc., Co., 869. State v. Columbus Gas Co., 1582, 1583. State v. Commercial Bank, 866, 868, 8691 989, 10S6. State v. Commissioners, etc., 136, 77L. 774, 991, 992. State v. Comptroller, 703, 769. State v. Concord, etc., R R Co., 1511. State v. Conkliu, 1024. State v. Constantine, 819. State v. Corrigan St. R'y, 1550, 1553, 1573. State v. Council Bluffs, etc, Co., 866, 1582. State v. County Court, 142, 147. State v. County of Babaunsee, 144. State v. Crescent City, etc., Co., 101, 214. State v. Curtis, 1023, 1024, 1057, 1059, 1065, 1066. State v. Dallas Co., etc, 142, 147. State v. Dawson, 888. clxxviii TABLE OF CASES. State v. Delaware, etc., Co., 1544, 1595. State v. Dillon, 1066. State v. District Court, 1174. State v. Duff, 1592. State v. East Cleveland, etc., R'y, 1559. State v. Edgefield, etc., R R., 1445. State v. Egg Harbor City, 1596. State v. Essex Bank, 866, 871. State v. Fagan, 816. State v. Farmers', etc., Co., 49, 1220. State v. Farrier, 852. State v. Felton, 1084. 1115. State v. Ferris, 15, 823. 825, 836. 850. State v. Fidelity, etc., Co., 872, 998. State v. First Nat'l Bank. 24, 531, 547, 585, 586, 618. 621, 1012. State v. Flavell, 747. State v. Foley, 1570. State v. Fosdick, 776, 998. State v. Fourth, etc., Co., 875. State v. Fremont, etc., R R, 1515. State v. Garoutte. 15."). State v. Gas Co.. 15s:', State v. George Medical Soc, 1026. State v. Glenn, 1381. State v. Godwinsville, etc., Co., 875, 1012. State v. Grand Lodge, BBS- State v. Granville Alexandrian Soc., 083. State v. Great Works Milling Co., 1013. State v. Greene County, 135, 156.817,819. State v. Greer, 819. State v. Guerrero, 530. State v. Guttenburg, 143. State v. Haight, 762. State v. Hamilton. 748, 1583. State v. Hancock County, 150, 151. State v. Hannibal & St. J. R R Co., 135, 751, 757, 772. State v. Hare, 1589. State v. Hart, 762. State v. Hartford & N. II. R R Co., 1522, 1537. State v. Haven, 507. State v. Holladay, 149, 154. State v. Home Ins. Co., 756. State v. Hunton, 843. State v. Inhabitants, etc., 1563, 1567. State v. Iowa, etc., R'y, 1483, 1492, 1504 State v. Jacksonville St. R R. 1551. 157:5. State v. Jefferson Turnpike Co., 109, 208. [The references are to the foot-paging.] State v. Jennings, 150. State v. Jersey City, 1073, 1524. State v. Keokuk, etc., R R, 774, 1546. State v. Kile, etc., Co., 868. State v. Kingan, 867. State v. Kupersforte, 836. State v. Laclede, etc., Co., 1555, 1559, 1583, 1585. State v. Ladies, etc.. 857. State v.'Lake City. 155. State v. Lancaster Co., 142. State v. Lathrop, 776, 99a State v. Leete, 547. State v. Leffingwell, 130. State v. Lehre, 98, 99, 108, 814. 836, 840. State v. Lime, 153. State v. Linn Co., 135. State v. Lusitanian Portuguese Society, etc.. 1036. Stat.' v. Macon County Court, 135. 142, 147. State v. Madison, eta, R'y Co., B66 st it" v. Maine, etc., R R Co., 635. stat.' v. Marietta, etc., R R, 1460. state v. Mayhew, 758. Maw v. Mayor, etc., 836, 1550, 1567, 1598. State v. McBride, *94. 1481. Stat.' v. M.Daniel, 20, 434, 834, 836, 842, 849. Stat.' v. McGrath, 391, 1014. stat- v. Merchant, 385, 863, 864. 1545. State v. Merchants', etc., Co., 873. State v. Merchants', etc., Trust Co., 871. stat.' v. Merchants' Ex., 1023. State v. Metz. 1542. State v. Mexican, etc., R'y, 1363, 1383. State v. Miller, 638, 771. 1553. State v. Milwaukee, etc., R'y Co.. 2, 866, 1583. State v. Minn., etc., Co.. 48. 418, 867, 868. State v. Missouri, etc.. R'y. 1521. State v. Mobile, etc.. R R, 1519. State v. Montclair R'y Co., 1528. State v. Moore, 871. State v. Morgan, 1266. State v. Morris & Essex R R Co., 771, 1006, 1011. 1599. State v. Morristown Fire Ass'n, 13, 321. State v. Murfreesboro, 1012. I State v. Nebraska Distilling Co., 645. TABLE OF CASES. clxxix [77ie references are State v. Nebraska Telephone Co., 1596. State v. Nemaha Co., 134. State v. N. H. & N. R R., 1523. State v. New Orleans Gas Light Co., 500, 511, 709, 866, 1363. State v. Noncannah, etc., Co., 884. State v. North Louisiana, etc., R. R Co., 399, 479. State v. Northern Central R'y Co., 1368, 1370, 1371, 1383, 1542, 1543. State v. Noyes, 887. 1516. State v. Osawakee Township, 138, 139. State v. Overton, 1024. State v. Passaic, etc., Soc, 1012, 1574. State v. Paterson & T. Co., 865. State v. Pawtucket, etc.. Corp'n, 866. State v. Penn., etc., 866, 1579. State v. People's, etc., Assoc, 531, 866, 870, 1589. State v. Petway, 759. State v. Phillips, 807. State v. Phipps, 644. State v. Pipher, 869. State v. Pittsburgh, etc., Co., 995. State v. Porter, 1063, 1065. State v. Railroad, 1521, 1523. State v. Railroad Com'rs. 1394. State v. Railway Co., 867. State v. Ramsey, 751. State v. Real Estate Bank, 867. State v. Rice, 986. State v. Rives, 863, 889, 890, 1513. State v. Robinson, 745. State v. Roggen. 144. State v. Rohlffs, 829. State v. Rombauer, 530. State v. St. Louis, etc., Co.. 530. State v. Saline, etc., Court, 131. State v. Scott, 1528. State v. Scougal. 1601. State v. Seaboard, etc., R R. 769. State v. Security Bank, 1012. State v. Seneca Co. Bank, 867. State v. Sherman, 275, 1275. State v. Sibley, 635, 640, 888. State v. Simmons, 763, 773. State v Sioux City & P. R R Co., 1522. State v. Smith, 110, 382, 387, 421, 588, 825, 827, 828, 830, 834. 841, 850, 1060. State v. Societe, etc., 869. to the foot-paging] State v. Southern Minn. R. R Co.. 1523. State v. Sowerby, 872. State v. Standard, etc., Assoc, 866, 1589. State v. Standard Oil Co., 11, 643, 872. State v. Sullivan Co., 135. State v. Swearingen, 849. State v. Telephone Co., 1018, 1596. State v. Thomas, 755. State v. Thompson, 817. State v. Timken. 53, 531. State v. Tombeckbee Bank, 867. State v. Town of Clark, 152. State v. Trenton, 1557, 1571. State v. Tudor, 821. State v. Tunis. 757. State v. Union Township, 136. State v. United, etc., R. R, 1525. State v. Urbana Mut. Ins. Co., 985. State v. Vanderbilt, 1499, 1504, 1505. State v. Wapello, 134. State v. Warren Foundry & M. Co., 467, 531, 611, 613,620. State v. Washington Social Lib. Co., 983. State v. Webb, 871. State v. West, etc., R'y Co., 867. State v. Western, etc., Co., 956. State v. Western, etc, Soc, 872. State v. Western Union Tel. Co.. 776. State v. White's, etc., Co., 865. State v. Whitesides, 137. State v. Woodruff, etc., Co., 777. State Bank v. Bell, 1095. State Bank v. Comegys, 1092. State Bank v. Cox, 484. State Bank v. Gill, 610. State Bank v. State, 866, 889. State Bank v. U. S. Pottery Co.. 1191. State Bank of Ohio v. Fox, 418. 421. State Bank of Ohio v. Knoop, 625, 626, 747, 1942. State Bank of Va. v. City of Richmond. 748. State Board of Agriculture v. Citizens' St. R'y Co., 1247. State Fire Ins. Co.. In re, 276. 392. 393. 925. State Freight Tax Case, 1945. State Ins. Co. v. Gennett, 527, 528. 586, 622. State Ins. Co. v. Redmond, 219. clxxx TABLE OF CASKS. [Tlie references are State Ins. Co. v. Sax, 586, 618. State Ins. Co. v. Waterhouse, 1177. State Ins. Co., In re, 58, 630, 1587. State of Conn. v. New Haven, etc., Co., 1515. State of Florida v. Anderson, 1251. State of Florida v. Jacksonville, etc., R. R. 1155, 1421. State of Indiana v. "VVoram, 971, 1020, 1245. • State of Louisiana v. American Cotton Oil Trust, 653. State of Louisiana v. Bank of Louisiana, 719. State of Maryland v. Baltimore & Ohio R R Co., 1941. State of Michigan v. Howard, 315. State of Minnesota v. Young. 140. State of Nevada v. Leete, 824. State of Nevada v. Pettinelli, 797, 79s, 807, 813, 814, 825. State of Nevada v. Wright. 799. State of Ohio v. Bonnell, 811. State of Ohio v. Brice, 1053. State of Ohio v. Franklin Bank of Co- lumbus. 418, 769. State of Ohio v. Sherman, 1515. State of Pennsylvania v. Wheeling, etc.. Bridge Co., 1945. State of Tennessee v. Davis, 1086. State of Tennessee v. Whitworth, 758. State Railroad Tax Cases, 768. 1940. State Savings Association v. Kellogg, 251, 281, 282. 303. State Tax on Foreign-held Bonds, Case of, 751. 77D. 1201. 1942. State Tax on Railway Gross Receipts, 1946. State Treasurer v. Auditor-General. 770. Staten I. R. T. R R Co., Re, 221, 1525. Staver v. Flack, 432. Steacy v. Little Rock & Ft. Smith R R Co., 81. Steam Engine Co. v. Hubbard. 293. Steam Navigation Co. v. Weed, 983. Steamboat Co. v. McCutcheon, 991, 993. Steamship Co. v. Railroad Co., 1476. Steamship Co. v. Tugman, 1182. Steamship Dock Co. v. Heron's Adm'x, 686, 688. to the foot-paging] Stearic Acid Co., Re, 802. Stearns v. Allen, 1105. Stearns v. Marsh, 603. Stears, Ex parte, 853. Stebbins v. Leowolf, 470, 474. Stebbins v. Merritt, 797, 800, 803, 804, 806, 812, 1070, 1098. Stebbins v. Phoenix Ins. Co., 547, 687, 689, 691, 692. Stedman v. Eveleth, 251, 274. Steele v. Harmer, 1191. Steele v. Oswego, etc., Co., 1102. Steele v. Sturges, 1422. Steel's Case. 201. Steers v. Lashley, 477. Stein v. Bienville, etc., Co., 1597, 1945. Stein v. Howard, 09, 389. Stein v. Mayor, etc., 133. Steiner's Appeal, 1262, 1266. Steinmetz v. Versailles R R Co., 162, Hi: 1 ,. Stelphon v. Ware, 243. Stenton v. Jerome, 575, 604, 605. Stephens v. Benton, 1188. Stephens v. Bernays, 264, 287. Stephens v. De Medina, 456. Stephens v. Follett, 346, 391, 392. Stephens v. Fox, 255, 266, 267, 296. Stephens v. James, 654. Stephens v. Overstoltz, 275. 293. Stephens v. St. Louis, etc., R R, 1181. Stephenson v. Dawson, 405. Stephenson v. N. Y.. etc., R R Co., 1089. Stephenson v. Pold, 654. Stephenson, Ex parte, 46. Stephenson's Case, 88. Sterett v. Denver, etc.. R R. Co., 1176, Sterling v. Jaudon, 574, 604. Sterling v. Mariette Co., 1113. Sterling v. Wilkinson, 412. Sterling's Appeal, 1584. Sternberg v. State, 1572. Sternberger v. Bernheimer, 567. Sterne v. Wisconsin Cent R, R, 1315, 1324. Stetson v. City Bank of New Orleans, 860, 893. Stetson v. City of Bangor, 749, 760. Stettaner v. New York, etc., Co., 678, 683. TABLE OF CASES. clxxxi [The references are Steubenville, etc., R R Co. v. North Township, 136. Stevedores' Beneficial Association, The, In re, 7. Stevens v. Anson, 135. Stevens v. Buffalo & N. Y. R R Co., 1383. Stevens v. Carpe, etc., Co., 1168. Stevens v. Corbitt, 125. Stevens v. Davison, 1021, 1156, 1501, 1506. Stevens v. Eden Meeting-house Society, 797. 798, 803. Stevens v. Erie R'y Co., 1524. Stevens v. Great W. R'y, 1537. Stevens v. Hill. 1055, 1071. Stevens v. Hurlbut Bank, 577, 597, 604, 605, 780. Stevens v. Louisville, etc., R. R., 1276. Stevens v. Mid-Hants R'y, 1466, 1478. Stevens v. Midland, etc., R'y Co., 366. 1010. Stevens v. N. Y., etc., R. R Co., 1233. Stevens v. Phoenix Ins. Co., 318, 1178, 1182. Stevens v. Pratt, 987, 997. Stevens v. Rutland & Burlington R R Co., 626, 627, 633, 639, 640, 1142, 1538. Stevens v. South Devon R'y, 364, 306, 372, 374, 723. Stevens v. Union T. Co., 1325. Stevens v. Watson, 1207, 1365, 1383, 1385. Stevens v. Wilson, 462. Stewards of M. E. Church v. Town, 188. Stewart v. Austin. 640. Stewart v. Cauty, 452, 458, 565, 577, 786. Stewart v. Chesapeake & Ohio Canal Co., 1242, 1325, 1409. Stewart v. Drake, 574, 575, 578. Stewart v. Dunham, 1135. Stewart v. Erie, etc., Trans. Co., 1125, 1133, 1511, 1533. Stewart v. Firemen's Ins. Co., 445, 745. Stewart v. Garrett, 475. Stewart v. Huntington, 454, 1110, 1111. Stewart v. Huntington Bank, 1113. Stewart v. Jones, 1513. Stewart v. Lansing, 1227. Stewart v. Lay, 262, 269, 280, 286, 288, 305. to the foot-paying.] Stewart v. Lehigh V. R R Co., 948, 999, 1520. Stewart v. Mahoney Min. Co., 827. Stewart v. National Bank, 984. Stewart v. National Union Bank, 420. Stewart v. Polk Co., 134. Stewart v. Robinson, 655. Stewart v. St. Louis, etc., R R, 65, 67, 929, 1109, 1219. Stewart v. Schall, 475. Stewart v. Trustees of Hamilton College, 111. Stewart v. Walla Walla, etc., Co., 342, 522. Stewart, Appeal of, 435. Stewart's Case, 177, 195, 207, 639, 1127. Stewart, etc., Co. v. Missouri, etc., Co., 1392. Stewart's Trustees v. Evans, 331. Stickney v. Stickney, 430. Stiles v. Cardiff Steam Nav. Co., 1009. Stiles v. Western R R. Co., 1113. Stilphen v. Ware, 298, 301. Stinchfield v. Little, 1096, 1105. Stinson v. Thornton, 438. Stivers v. Carmicheal, 310. Stock's Case, 1037. Stock, Ex parte, 89, 849, 1036. Stockdale v. Moginn, 670. Stockdale v. South Sea Co., 440. Stocken's Case, 164, 176, 178. Stocker v. Wedderburn, 462. Stokes v. Detrick, 1270. Stockholders v. Board of Supervisors, 754. Stockton v. Russell, "457, 832. Stockton, Att'y-Gen'l, v. Central R Co. of N. J. et al., 645, 873, 1497, 1511. Stockton's Case, 179. Stockton, etc., Bank v. Staples, 991. Stockton, etc., R R. Co. v. Stockton. 133. Stockton Malleable Iron Co., In re, 692. Stockwell v. St Louis M. Co., 524. Stoddard v. Shetucket Foundry Co., 34, 35, 713, 715, 717. Stoddert v. Port Tobacco Parish, 1051. Stoker v. Schwab, 880. Stokes v. Detrick, 955, 1100. Stokes v. Lebanon, etc., Co., 116, 174, 176. Stokes v. N. J., etc., Co., 1076. clxxxii TABLE OF CASES. [T7ie references are Stokes v. Phelps Mission, 930. Stokes v. Scott, 134. Stokes v. Stickney. 293. Stokes v. Stokes, 598. Stone v. American Life Ins. Co., 1192. Stone v. Berkshire Soc, 1018, 1094. Stone v. Cartright, 1033. Stone v. Chisolm, 289. Stone v. City & County Bank, 209. Stone v. Framington, 864. Stone v. Great Western Oil Co., 113, 167. Stone v. Hackett, 412. Stone v. 111. Cent. R R Co., 998. Stone v. Mississippi, 1944. Stone v. Reed, 732, 960. Stone v. Wiggin, 251. Stoneham, etc., R. R Co. v. Gould, 182, 222. Stoney v. American Life Ins. Co., 1191. Stoops v. Greensburgh, etc. Co., 232. storm v. Waddel, 609. Storrs v. Flint, 654. Storrs v. Pensacola, etc., R Co., 1515. Story v. Furmau, 279, 286, 288, 630. Story v. Jersey, etc., Co., 639. Story v. N. Y. El. R. R, 156& Story v. Salomon, 469, 472, 562. Stourbridge Canal Co. v. Whaley, 1577. Stout v. Lye, 1344, 1351. Stout v. Sioux City, etc., R R Co., 1171, 151.;. Stout v. Yaeger, etc., Co., 940. Stout v. Zulick, 313. Stoutimore v. Clark, 878. Stover v. Flack, 108, 269, 330, 333, 465. Stow v. Wyse, 800-SO& Stowe v. Flagg, 2, 114. Stowe v. Reed, 709. Stowell v. Stovvell, 123. Stoystowu. etc., Co. v. Craver, 1054, 1063. Straffon's Case, 331, 346, 347. Strafford Nat'l Bank v. Dover, 765. Strait v. National Harrow Co., 646, 649. Straker v. Wilson, 741. Strang v. Montgomery, etc.. R. R, 1481. Strange v. Houston & T. C. R R. Co., 483. 497, 499. Strantou Iron & Steel Co.. Re, 448. Strasburg v. Echternacht, 461. Strasburg R. R. Co. v. Eichteruacht, 114. to the foot-paging.] Stratford v. Jones, 576, 603. Stratford & M. R*y Co. v. Stratton, 167. Stratton v. Allen, 939. Stratton v. European, etc., R'y, 1319 < 1480. Straus v. Chicago, etc., Co., 1175, 1588. Straus v. Eagle Ins. Co., 983, 1190. Stray v. Russell, 570, 579. Street v. Morgan. 570. Streeter v. Sumner, 338. Stribling v. Bank of the Valley, 58. Strick v. Swansea Canal, 1519. Strickland v. Railroad Co., 135. Strickland v. Symons, 655. Stringer, l'x parte, 692. Stringer's Case, 727, 733. Strohen v. Franklin, etc., Ass'n, 662. Stromeyer v. Combes, 1145. Strong v. Brooklyn Crosstown R R Co., 392. 39:;. 72a Strong v. McCagg, 859, 873. Strong v. Nafl, etc., Ass'n, 576. Strong v. Smith. 826* 828, 839. Strong v. Southworth. 287. Strong v. Wheaton, 267, 283, 284, 292, 397. Strong'a Appeal, 361. Strothers v. Drexel, 458. Strout v. Natoma Water & Min. Co., 586, 621. Stryker v. Cassidy, 'J71. Stuart v. Boulware, 1158. Stuart v. Gay, 1358. Stuart v. James, etc., Co., 1332. Stuart v. Mechanics' & Farmers' Bank, 19. Stuart v. Valley R R Co., 92, 97, 215, 219. Studdert v. Grosvenor, 821, 969. Studebaker, etc., Co. v. Montgomery, 878. Studley, Ex parte, 1037. Stupart v. Arrowsmith, 862. Sturge v. Eastern Union R'y, 362, 366, 374. Sturges v. Carter, 751. Sturges v. Keith, 781, 785, 786, 787, 790. Sturges v. Knapp, 1303, 1318. Sturges v. Stetson, 42, 44, 54, 55, 183, 479. Sturges v. Vanderbilt, 855. TABLE OF CASKS. clxxxiii [Tlie references are Sturgis v. Board of Trade, 1026. Sturgis v. Crescent, etc.. Co., 854, 1164. Sturgis v. Vanderbilt, 731. Stutz v. Haldeman, 87. Stutz v. Handley, 58, 59, 189, 241, 246, 251. 311. 345, 391, 804, 878. Stuyvesant v. Pearsall, 1552. Submarine TeL Co. v. Dickson, 1595. Suburban Hotel Co., In re. 861. Suburban R. T. Co. v. Mayor, 1557. Succession of Boullemet, 440. Sudlovv v. Dutch R. R. Co., 184. Sugden v. Alsbury, 742. Sullivan v. Campbell, 277, 671. Sullivan v. Metcalf, 193. Sullivan v. Portland, etc., R R, 864, 1131, 1132, 1317, 1329. Sully's Case, 1043. Sulphur Springs, etc., Co. v. St. Louis, etc., Co.. 883. Sumbre County v. National Bank, 765. Summerfield v. Pritchard, 684. Summerlin v. Fronteriza, etc., Co., 455, 463, 492, 1039, 1042. Summers v. Sleath, 239. Sumner v. Marcy, 104, 266, 295, 426, 972, 983. Sumner v. Stewart, 569. Sumrall v. Mut. Ins. Co., 635. Sumrall v. Sun, etc., Co., 640, 8S8. Sun, etc., Ins. Co. v. Mississippi, etc., Co.. 1165. Sunapee v. Eastman, 1018. Sunderland Marine Ins. Co. v. Kearney, 277. Sunflower Oil Co. v. Wilson, 1442. Supervisors v. Galbraith. 140, 149. Supervisors v. Kennicott, 1357. Supervisors v. Schenck, 145. Supervisors v. Stanley, 760, 764, 765, 766. Supervisors v. Wisconsin, etc., R R Co., 135. Supervisors of Fulton County v. Missis- sippi & Wabash R. R Co., 631, 633. Supervisors of Schuyler Co. v. People, 133. Supply, etc., Co. v. Elliott, 621. Supreme Lodge, etc., v. Knight, 1024 Supreme Sitting of the Order of Iron Hall v. Baker, 1413. to the foot-paging.] Susquehanna & Bath. T. R Co. v. Peo- ple, 1012, Susquehanna, etc., Co. v. Bonham, 1266, 1578. Susquehanna, etc., Co. v. General Ins. Co., 1058. 1262. Susquehanna, etc., Co. v. West, etc., Co., 1944. Susquehanna Ins. Co. v. Perrin, 1109. Sussex R R. Co. v. Morris, etc., R R Co., 1510 Sutherland v. Lake Superior, etc., Co., 1348, 1350. Sutherland v. Olcott, 381, 385. Sutliff v. Cleveland, etc.. R. R.. 383. Sutton v. Bank of England, 523. Sutton v. Tatham, 579, 580. Sutton's Case, 269. Suydam v. Jenkins, 790. Suydam v. Morris Canal & B. Co., 983. Swain v. West Philadelphia, etc., R'y. 397. Swan v. North British Aus. Co., 504, 506, 508, 780. Swan v. Watertown Ins. Co., 1002. Swan v. Williams, 1527. Swan, etc., Co. v. Frank, 732, 857, 961. Swan, Ex parte, 504, 506, 508. Swann v. Clark, 1455. Swann v. Wright's Ext, 1393, 1482. Swansea Dock Co. v. Levien, 162. 803. Swansea Vale R'y Co. v. Budd, 682. Swartwout v. Michigan Air Line R R Co.. 119, 120, 226, 231,238. Swasey v. American Bible Soc, 660. Swatara R R v. Brune, 188. Swazey v. North Carolina R R, 1276. Swazy v. Choate, etc.. Co., 101. Sweatland v. 111., etc., Tel. Co., 1113. Sweeney v. Bank of Montreal, 437. Sweeney v. Grape Sugar Co., 931. Sweeny v. Sturges, 683, 1165. Sweet v. Hulbert, 132, 135. Sweet v. Morrison, 1548. Sweeting v. Pearce, 570, 580. Sweney v. Talcott, 310, 324. Sweny v. Smith, 178, 179, 182, 183. Swentzel v. Penn. Bank, 1029. Swepson v. Bank, etc., 940. Swett v. Stark, 1229. olxxxiv TABLE OF CASES. [ITie references are Swift v. Beers, 984. Swift v. Jewsbury, 102. Swift v. Smith, 948, 1050, 1051, 1208, 1228. Swift v. State, 67a Swift's, etc., Works v. Johnson, 1423. Swigert, In re, 775. Swim v. Wilson, 510. Switzerland, Bank of, v. Bank of Tur- key, 859. Sword v. Wicket-sham, 880. Sykes v. Beadon, 651. Sykes v. People, 1015, 1017. Sykes' Case, 159, 165, 680. Sylvester v. Downer, 1248. Symon's Case, 107, 334, 359. Syracuse Savings Bank v. Seneca Falls, 148, 151. Syracuse Water Co. v. Syracuse, 1597. Syracuse, etc., R. R Co., Matter of, 53, 840, 113$ 1219. T. T.. W. & W. R R Co. v. Elliott. 1521. Taber v. Chicago, etc., R'y, 12S7. Taber v. Cincinnati, L. & C. R R, 1263, 1268. Tabler v. Sheffield, etc., Co., 1112. Tabor v. Goss, etc., Co., 280. Tackerson v. Chapin, 784 Taft v. Brewster, 1106. Taft v. Chapman, 508. Taft v. Harrison, 847. Taft v. Hartford, etc., R R Co., 360, 361, 868, 369, 374. Taft v. Presidio, etc., Co., 433, 499, 515, 1114. Taft v. Ward. 294, 668. Taggard v. Curtenius, 600. Taggart v. Newport St. R'y Co., 1563. Taggart v. Western Md. R R Co., 118, 123, 124, 219, 234, 243, 632, Tahiti Cotton Co., Re, 52a Take's Case, 195, 208. Talbot v. Dent. 134. Talbot v. Hudson, 1526. Talbot v. Scripps, 1148. Talbott v. Silver Bow Co., 763. Talcott v. Olcott, etc,, Co., 925, 929. to Vie foot -paging.] Talcott v. Pine Grove, 135. Talcott & Co. v. McCormick Harvesting Machine Co., 1175. Talladega Ins. Co. v. Peacock, 1085, 1262. Tallassee, etc., Co., In re, 1367. Tallediga Ins. Co. v. Landers. 887. Tallmadge v. Fishkill Iron Co., 242, 257, 300. Tall man v. Baltimore, etc., R R, 1180. Tallman v. Butler Co., 75a Talmage v. Pell, 104, 425, 666, 984. Talmage v. Third Nat. Bank. 484. Talman v. Rochester City Bank, 983. Talty v. Freedman's Sav., etc., Co., 592, 59a Tama, etc., Co. v. Hopkins, 128, 241, 243, 254, 364. Tammany Water-works v. New Orleans Water-works, 1944. Tan in T v. ( Iregory, 532. Tanner v. Tanner, 404 Tanner's Case, 1038. Tantum v. West 476. 477. Tappan v. Bailey. 668, 67ft Tappan V. Merchants' Nat'l Bank. 75i 754, 762, 707. Tar River, etc., Co v. Neal, 113, 174, 231. Tarbell v. Page, 233, -13. Tarbox v. Gorman, 1122. Tarlton v. Baker. 469. Tarpey v. Deseret Salt Co., 1001. Tarquand v. Marshall. 734 Tasker v. Wallace, 33, 82. Tatem v. Wright. 770. 1001. Tatterdell v. Fareham, etc., Co., 1072. Taunton v. Royal Ins. Co., 1587. Taurine Co., In re. 357. Taussig v. Hart. 566, 572, 576, 590, 591. Tax Cases, 757, 758. 759. Tax-payers of Kingston, Ex parte, 135. Tax-payers of Milan v. Tennessee, etc., R R Co., 137. Taylor v. Agricultural & M. Assoc, 1073, 1097, 1185. Taylor v. Albemarle, etc., Co., 1085. Taylor v. Ashton. 199. Taylor v. Atlantic, etc., R'y, 1204, 1303, 1345, 1405. 1481. Taylor v. Blair, 400. TABLE OF CASES. clxxxv ['Hie references are Taylor v. Burlington, etc., R. R., 1375, 1387, 1391. Taylor v. Cheever, 602. Taylor v. Chichester, etc., R'y Co., 952, 953, 994. 1125, 1132. Taylor v. Columbian Ins. Co., 1424. Taylor v. Coon, 117. Taylor v. Fletcher, 128. Taylor v. Grand Trunk R'y, 1011. Taylor v. Granite, etc., Ass'n, 1176. Taylor v. Great Indian P. R'y Co., 484, 517, 579. Taylor v. Griswold, 798, 818, 820, 821, 1022. Taylor v. Higgie, 1098. Taylor v. Holmes. 1148. Taylor v. Hughes, 93, 347, 414 Taylor v. Hutton, 1053. ; Taylor v. Ifill, 344. 670. Taylor v. Jones, 609. Taylor v. Ketchum, 576, 590. Taylor v. Life Ass'n, 1426. Taylor v. Miami Ex. Co., 418, 834, 1146. Taylor v. Midland R'y Co., 504, 506. Taylor v. Newberne. 136. Taylor v. North, 117, 184. Taylor v. North Star, etc., Co., 958, 1133. Taylor v. PhiL, etc., R R Co., 55, 799, " 1240, 1399, 1418, 1440, 1451. Taylor v. Solomon, 934, 1144 Taylor v. South, etc., R. R. Co., 55, 363, 400. 1127, 1128, 1131, 1243. Taylor v. Stray, 579. Taylor v. Taylor, 331. Taylor v. Ypsilanti, 133, 135. Taylor, Ex parte, 913. Taymouth v. Koehler, 1064, 1069. Tazewell, County of, v. Farmers', etc., Trust Co., 933. 1150. Teachout v. Des Moines, etc., R'y, 1551, 1556. Teachout v. Van Hoesen, 480, 916. Teake v. Jackson, 665. Teal v. Walker, 1398. Teall v. Consolidated, etc., Co., 1056. Teasdale's Case, 180, 213, 394, 414, 416. Tees Bottle Co., Re, 517. Teitig v. Boesman, 1064, 1295. Telegraph Co. v. Davenport, 506, 508. 526. Telegraph Co. v. Texas, 1001, 1595, 1946. to the foot-paging.] Telegraph Construction Co., Re. 630. Telford, etc., Co. v. Gerhab, 779. Tempest v. Kilmer, 102,458, 464, 785, 78a Temple v. Lemon, 222. Temple Grove Seminary v. Cramer, 772, 973. Templin v. Chicago, etc., R R, 1075. Ten Broeck v. Winn, etc., Co., 1109. Tenant v. Dudley, 15S9. Tench v. Great Western R'y Co., 1008. Tennant v. City of Glasgow Bank, 200, 209, 353. Tennaut v. Stoney, 654. Tennessee v. Bank of Com., 759. Tennessee v. Pullman Southern Car Co., 1946. Tennessee Bond Cases. 1276. Tennessee, etc., Co. v. Kavanaugh, 1599. Tennessee, etc., R R. v. East Ala., etc., R'y, 1270. Tenney v. Foote, 472, 475, 477. Tenney v. Lumber Company, 1098, 1102. Tenney v. New Eng. Protection Union, 661. Tenth Ward Nat'l Bank v. City of New- ark, 762. Terbell v. Lee, 1353. 1359, 1471. Terhune v. Midland R. R., Co., 1146. Terhune v. Skinner, 965. Terrell v. Allison, 1349, 1359. Terrell v. Branch Bank of Mobile, 1119. Terrell v. Hutton, 1045. Terrell v. Taylor, 869. Terrell, In re, 650. Terrell's Case, 1047. Terry v. Anderson, 250, 251, 302, 1943. Terry v. Bank of Cape Fear, 244, 300, 306. Terry v. Birmingham, etc., Bank, 607, 685. Terry v. Calnan, 292, 301. Terry v. Eagle Lock Co., 386, 387, 707. Terry v. Little, 256, 257, 284, 288, 289, 321. Terry v. McLure, 301. 302, 303. 304 Terry v. Tubman, 251, 289, 301, 302. Texas, etc., Assoc, v. Kerr, 662. Texas, etc., Co. v. Bledsoe, 1448. Texas, etc., Co. v. Bloom, 1448. Texas, eta, Mortgage Co. v. Worsham, 1182. clxxxvi TABLE OF CASES. Texas, etc.. R'y v. Bailey, 1448. Texas, etc., R'y v. Cox, 1432, 1433, 1435, 145G. Texas, etc., R'y v. Geiger, 1447. Texas, etc., R'y v. Gentry, 787, 1067, 1210, 1265, 1278. Texas, etc., R'y v. Marlor, 1243. Texas, etc., R'y v. Marshall, 152. Texas, etc., R'y v. Southern Pac. R'y, 644, 1511. Texas, etc., R'y v. Watts, 1448. Texas, etc., R'y v. White, 1448. Texas, etc., R R. v. Robards, 1538. Texas, etc., R R, v. State, 1342. Texas Printing, etc., Co. v. Smith, 102. 103. Thaclier v. King, 275, 279, 280. Thacker v. Hardy, 469, 472, 473, 474. Thackrah v. Haas, 432. Thames, etc., R'y v. Rose, 1066. Thames Tunnel, etc., v. Sheldon. 15, 87. Thatcher v. Wesc River N. Bank, 1018. Thayer v. Butler, 339. Thayer v. Middlesex Ins. Co., 1067, 1070, Thayer v. New England Lithographic Co., 295. Thayer v. Tyler, 1178, 1588. Thayer v. Union Tool Co., 279. Thebus v. Smiley, 241, 289, 299, 300, 305, 353. Thielens v. Dialogue, 598. Thigpen v. Mississippi, etc., R. R Co., 113, 124, 188. Third Ave. R. R Co. v. New York El. R. R. Co., 1530. Third Ave. R. R. Matter of, 1567. Third Ave. Savings Bank v. Dimock, 1261. Third Nat'l Bank v. Boyd, 786. Third Nat'l Bank v. Eastern R R, 1197. Third Nat'l Bank v. Elliott, 919. Third Nat'l Bank v. Gregory, 294. Third Nat'l Bank v. Harrison, 472. 477, etc., 1120, 1183. Third Nat'l Bank v. Marine 1081. Thomas v. Brownville, etc., R. R 1213, 1215, 1216, 1219. Thomas v. Chisholm, 10, 995. [The references are to the foot-paging.'] Thomas v. City of Glasgow Bank, 106, 336. Thomas v. Citizens' Horse R'y, 98, 1262, 1264, 1265, 1293. 1296. Thomas v. Clarke, 664. Thomas v. Dakin, 2, 5, 666, 1016. Thomas v. Ellmaker, 661. Thomas v. Hoblen, 1147, 1152. Thomas v. Merchants' Bank, 1176. Thomas v. Musical, etc., Union, 662. Thomas v. Mutual, etc., Union, 1024. Thomas v. New York & Greenwood, etc., R'y. 1212. Thomas v. Peoria, etc., R'y, 931, 1441. Thomas v. Placerville, etc., Co., 1174. Thomas v. Tort Hudson, 135. Thomas v. Railroad Co., 6, 1153, 1497, 1504. 1505. Thomas v. Sternheimer, 786. Thoinns v. Sweet, 985. Thomas' Case, 178, 179, 212, 331, 416. Thomae, etc., Co. v. Simon. 1565. Thompkins v. Butterfield. 1088. Thonipkins v. Little Rock, etc., R'y, 1271. Thompson v. Abbott, 963. Thompson v. Alger, 465. 470. Thompson v. Bell, 1090. Thorn pson v. Bemis, etc.. Co., 730. Thompson v. Brown, 653. Thompson v. Candor, 880. Thompson v. City of Peru, 134, 141. Thompson v. Cummings, 470. Thompson v. Erie R Co., 371, 373, 375, 682, 684, 1194. Thompson v. Greeley, 984, 1429. Thompson v. Guion, 233, 629, 63a Thompson v. Holladay, 583. Thompson v. Huron Lumber Co., 894, 990, 1264. Thompson v. Jewell. 284. Thompson v. Kelley, 136, 140. Thompson v. Lambert, 1130, 1185, 1192, 1248, 1261. Thompson v. Lee County, 131, 132, 147, Co., 1231. Thompson v. McKee. 1086. Thompson v. Meisser, 248, 286, 299, 300. Thompson v. Moxey, 417. Thompson v. Natchez, etc., Co., 1293. TABLE OF CASES. clxxxvii [Tlie references are Thompson v. N. Y., etc., R R. Co., 1578. Thompson v. Page, 113. Thompson v. Patrick, 591. Thompson v. Penn. R R, 1563. Thompson v. People, 885. Thompson v. Perrine. 144, 1944. Thompson v. Pittston, 139. Thompson v. Reno Savings Bank, 109, 110, 160, 230, 238, 243, 249, 258. Thompson v. St. Nicholas Nat'l Bank, 596, 783, 1197. Thompson v. Scott, 1433, 1447, 1456. Thompson v. Society of Tammany, 1025. Thompson v. Stanley, 1137. Thompson v. Swoope, 1001. Thompson v. Toland, 437, 573, 590, 591, 594, 597, 789. Thompson v. Universal, etc., Co., 1191. Thompson v. Waters, 2, 1000, 1001. Thompson v. White, etc., R. R, 1382, 1383, 1395. Thompson v. Williams, 1061. Thompson v. Young. 1092. Thompson v. Natchez Water & Sewer Co., 1409. Thompson's Appeal, 738. Thompson's Estate, In re, 738. Thompson, Matter of, 967. Thompson Nat. Bank Cases, 337. Thomson v. Davenport, 570. Thomson v. Lee County, 1239. Thomson v. McGregor, 1460. Thomson v. Pacific Railroad Co., 1945, 1951. Thomson's Appeal, 743. Thomson's Case, 37. Thorington v. Gould, 1057, 1100. Thorington v. Montgomery, 1948. Thornburgh v. Newcastle & Danville R. R. Co., 187, 199. Thorndike v. Locke, 465. Thorne v. Travelers' Ins. Co., 1005. Thornton v. Balcom et al., 310, H89. Thornton v. Lane, 250, 303. Thornton v. Marginal Freight R'y Co., 861. Thornton v. Nat'l Exchange Bank, 987. Thornton v. St. Paul, etc., R'y, 450, 455. Thornton v. Wabash R'y Co., 864, 1474. Thoroughgood's Case, 90. to tlw foot-paging.] Thorp v. Woodhull, 24, 33, 101, 220, 522, 5S4. Thorpe v. Hughes, 202. Thorpe v. Rutland & Burlington R'y, 626, 1515. Thouron v. East Tenn., etc., R'y, 932, 1135, 1158, 1500, 1505, 1506. Thrasher v. Pike Co., etc., R R. Co., 114. Throop v. Hatch, etc., Co., 941. Thurber v. Crump, 455. Thurber v. Thompson, 73. Thurman v. Cherokee R. R, 1447. Thurn v. Alta Tel. Co., 1593. Thurston v. Duffy, 73. Thweatt v. Bank of Hopkinsville, 994. Ticonic Water-power Mfg. Co. v. Lang, 109, 123, 127, 226. Tidewater Co. v. Coster, 1526. Tifft v. Porter, 404, 406. Tifft v. Quaker, etc., Bank, 1041. Tift, In re, 1168. Tileston v. Newell, 1049. Tilford, etc., Co. v. Gerhab, 617. Tilkey v. Augusta, etc., R R., 454, 906. Tilley v. County of Cook, 580. Tillinghast v. Troy, etc., R R. 1314, 1322, 1328, 1340. Tilsonburg, etc., Co. v. Goodrich, 92, 94, 215. Timlow v. Philadelphia & Reading Rail- road Co., 11. Tingley v. Bellingham, etc., Co.,, 1056, 1097. Tinker v. Van Dyke, 292. Tinkler, In re, 742. Tinsley's Case, 475. Tioga R R Co. v. Blossburg, etc., R R Co., 998. Tippecanoe Co., Board of, v. Lafayette, etc., R R Co., 1150. Tippets v. Walker, 22, 1105. Tippling v. Pexall, 2. Tipton, County of, v. Locomotive Works, 156. Tisdale v. Harris, 24, 464 Titcomb v. Kennebec, etc., Co., 891, 1587. Titcomb v. Union Marine Ins. Co., 610, 695. Titus v. Cairo, etc., R R Co., 1054, 1074, 1075. clxxxviii TABLE OF CASES. [The references are Titus v. Cortelyou, 679. Titus v. Ginheimer, 1370. Titus v. Great, etc.. Road Co., 395. Titus v. May bee, 1370. Titus v. Poole, 792. Titus v. President, etc., of G. W. Turn- pike Road, 27. Tobacco Pipe Makers v. Woodraffe, 1022. Tobey v. Hakes, 531. Tobey v. Robinson, 42, 53, 450. Tobey v. Russell. 262. Tobin v. Western U. T. Co.. 159a Tobin. etc.. Co. v. Fraser, 922. Tockerson v. Chapin, 491. Todd v. Kentucky, etc., R'y Co., 1391. Todd v. Emly. 661. Todd v. Taft, 460. Todd, County of, v. St. Paul, etc., R R. Co.. 774. Tolchester, etc., Co. v. Steintneier, 1009. Toledo, Bank of, v. International Bank, 881. Toledo, etc., Co. v. Thomas. 1174 Toledo, etc., R*y v. Beggs, 1432. Toledo, etc., R"y v. Pennsylvania Co., 1524. Toledo, etc., R R v. Hamilton, 1364, 1390, 1395. Toledo, etc., R R v. Hinsdale, 126. Toledo, etc., R. R. v. Johnson, 234, 877. Toledo, etc., R R Co. v. Prince, 1089. Toledo, etc., R R Co. v. Rodreques, 1089. Toll-bridge Co. v. Betsworth. 1112, 1113. Toll-bridge Co. v. Osborn, 756. 774. 1428. Tolleson v. Peopled Saw Bank, 1428. Tom v. First Society, etc., 1164. Toinbigbee R R Co. v. Kneeland, 1173. Tomblin v. Callen, 474. Tome v. King, 1459. Tome v. Parkersbuig, etc., R R Co., 395, 397, 398. Tomkinson v. Balkis, etc.. Co.. 534. Tomkinson v. South, etc., R'y Co., 1248, 1538. Tomlin v. Tonica & Petersburg R R Co., 170, 171. Toml.inson v. Branch. 770, 773, 1943. Tomlinson v. Bricklayers', etc., 955. Tomlinson v. Bury, 405, 407, 412. Tomlinson v. Jessup, 638, 773, 1943. to the foot-paging.'] Tomlinson v. Miller. 465. Tomlinson v. Tomlinson. 22. Tommey v. Spartanburg, etc., R R, 1390, 1396. Tompkins v. Little Rock, etc., R'y, 1276, 1277, 1368. Thompson v. Huron Lumber Co., 1354, 1429. Tonawanda, etc., R R Co. v. N. Y. R R. 845, loll. Toner v. Fulkerson, 276. 321. Tonic, etc., R R. Co. v. Stein, 100, 188, Tonssig v. Glenn, 94. Tooke, Ex parte. 693. Topeka Bridge Co. v. Cummings, 222. Topeka, etc., v. Hale. 189. 214, 345. Topeka, etc., v. Martin. 109L Topham v. Greenside. etc., Co., 1251. Tophff v. McKendree, 452. Topouce v. Corinne, etc., Co., 930. Topping v. Bickford. 1095. Torbett v. Godwin. 275. Toronto, etc., Co. v. Chicago, etc., R R, 436. Torrey v. Bank of Orleans, 566, 923. Torry v. Baker, 856. Tot ten v. Tison, 360, 371. Toucey v. Bo wen, 280, 282. Touche v. Metropolitan R'y. etc, Co., 1045. Tourine Co., In re, 1072. Towar v. Hale, 665. Town v. Bank, etc., Raisin, 862. Town Council, etc., v. Elliott, 449. Town of Cicero v. Clifford, 1232. Town of Concord v. Portsmouth Sav- ings Bank, 153. Town of Douglass v. Niantic Savings Bank, 150. Town of Duanesburgh v. Jenkins. 147. Town of Dundas v. Desjardins Canal Co., 127s. Town of East Lincoln v. Davenport, 155. Town of Genoa v. Woodruff, 1237. Town of Lyons v. Chamberlain, 136. Town of Mentz v. Cook, 136. Town of Middletown v. Boston, etc., R R, 14S8. Town of Newark v. Elliott, 995. TABLE OF CASES. clxxxix [Tlie references are Town of Plainview v. Winona, etc., R R Co., 140. Town of Platteville v. Galena, etc., R R. Co., 151. Town of Queensbury v. Culver, 133. Town of Reading v. Wedder, 156. Town of Scipio v. Wright. 133. Town of Solon v. Williamsburg Savings Bank, 136. Town of Springfort v. Teutonia Savings Bank. 136. Town of Windsor v. Hallett, 146, 150. Towne v. Rice. 1228. Townes v. Nichols, 530. Townsend v. Fulton, etc., Co., 1600. Townsend v. Goewey, 663, 668, 669. Townsend v. Gray, 970. Townsend v. Martin, 405. Townsend v. Mclver, 524. 526. 528, 531. Townsend v. U. S. Trust Co., 739. Townsend's Case, 96. Townsend, In re, 822. 1526. Townsend, Matter of, 999, 1527. Township of Pine Grove v. Talcott, 135. Tracy v. Guthrie, etc., Soc, 1072, 1073, 1089. Tracy v. Talmage. 421, 425. 666, 984. Tracy v. Yates, 350. 351. 352. Trade Auxiliary Co. v. Yickens. 981. Tradesmen's Nat'l Bank v. Manhattan, etc., Co., 1077. Traders', etc., Bank v. Lawrence, etc., Co., 1392. Traders', etc., Ins. Co. v. Brown, 17, 708, 891, 1587. Traders' Nat'l Bank v. Lawrence Mfg. Co., 1206, 1295. Trafford v. Boehm, 433. Transportation Co. v. Beatty, 944. Transportation Co. v. Parkersburg, 1599, 1946. Transportation Co. v. Wheeling, 1946. Trask v. Jacksonville, etc., R R., 1225. Trask v. Maguire, 747. 74& Trask v. Peekskill, etc.. Co., 1507. Trask v. Railroad, 1216. Traver v. Eighth R R Co., 1018. Travers v. Kansas Pac. R'y, 1011. Travers v. Leopold, 586. Travis v. Standard, etc., Ins. Co., 1009. to the foot-paging.'] Treadwell v. Salisbury Manuf. Co., 858, 958. Treasurer v. Commercial Coal Min. Co., 461. Treat v. Hiles, 665. Tied wen v. Bourne, 228, 665. Tregear v. Etiwanda, etc.. Co., 583. Tremain v. Guardian, etc., Ins. Co., 1158. Trent etc., Road Co. v. Marshall, 1019. Trenton Bank v. Haversteck. 1020. Trenton, etc.. Co. v. Woodruff, 1116. Trenton Ins. Co. v. Johnson, 468. Trester v. Missouri Pac. R'y, 1528. Trevor v. Whitworth, 414. Trimmer v. Penn., etc.. R. R Co., 1154. Trinder v. Trinder, 407, 408. Trinity I hurch Wardens, etc., v. Hall, 1015. Tripp v. Appleman. 355. Tripp v. New. etc.. Co., 1112. Tripp v. Northwestern Nat'l Bank, 988, 1068. Trippe v. Huncheon, 296. Trisconi v. Winship, 644. 975. Trott v. Sarchett, 126, 188 Trott v. Warren. 887, 1070, 1093. Troup's Case, 1186. Trowbridge v. Scudder, 313. Troy, etc.. R R. v. Boston, etc., R'y, 1498, 1504, 1530. Troy, etc.. R. R Co. v. Kerr, 94, 174, 235, 632, 636, 863. Troy, etc., R R Co. v. McChesney, 174, 1058. Troy, etc., R R. Co. v. Tibbits, 97, 114. 120, 121. 174. 378. Troy, etc., R R Co. v. Warren. 108. 110. Troy & Greenfield R. R Co. v. Newton, 36. 226. 227, 229. Troy Ins. Co. v. Carpenter, 1113. 1115. Troy Iron & Nail Factory v. Corning, 661. Trust Nat'l Ins. Co. v. Salisbury. 1302. Trustees v. Greenough, 1158, 1309, 1356, 1357. 1458. Trustees, etc., v. Bosseiux, 1032. Trustees, etc., v. Flint, 1023. Trustees, etc., v. Gibbs. 887. Trustees, etc., v. Hart's Ex'rs, 666. Trustees, etc., v. McKechnie, 1271, 1295. cxc TABLE OF CASES. {The references are Trustees, etc., v. Stewart, 93. Trustees, etc., v. Tufts, 405, 411. Trustees, etc., in Lerant v. Parks, 1019. Trustees M. E. Church v. Troyon, 1018. Trustees of Canandaigua Academy v. McKechnie, 1100. Trustees of Dartmouth Colloge v. Wood- ward, 626, 1941. Trustees of Eminence v. Deposit Bank, 762. Trustees of Free School v. Flint, 323, 325. Trustees of N. W. College v. Schwalger, 1016. Trustees of the Louisiana Paper Co. v. Waples, 261. Trustees of the Presbyterian Society v. Auburn & Rochester R. Co., 11. Trustees of the School District v. Gibbs, 840. Trustees of Smith Charities v. Connelly, 1078. Trustees of Vernon v. Hills, 245. Trundy v. Hartford, etc., Co., 1054. Tryon v. White, etc., Co., 1055. Tuchband v. Chicago, etc., R R, 1176. 1177. Tuckahoe Canal Co. v. Tuckahoe R R Co., 1578. Tuckahoe, etc., R'y Co. v. Baker, 1415. Tucker v. Aiken, 749. Tucker v. Ferguson, 1943. Tucker v. Gilman, 262, 342. Tucker v* St. Louis, etc., R. R Co., 1089. Tucker v. Wilson, 601. Tucker's Case. 97. Tucker, etc., Co. v. Fairbanks, 1106. Tuckerman v. Brown, 212. Tully v. Tranor, 789. Tumacacori, In re, 861. Tunesma v. Schuttler, 289. Tunis v. Hestouville, etc., RR, 822, 828, 838. Tunison v. Detroit, etc., Co., 1090. Turgeau v. Brady, 1416. Turnbull v. Payson, 91, 93. Turnbull v. Prentiss Lumber Co., 257. Turner v. Commissioners, etc., 134. Turner v. Grangers' L & H. Ins. Co.. 209. Turner v. Hannibal, etc., R R ; 1448. to the foot-jHiging.] Turner v. Indianapolis, etc., R'y, 1339, 1347, 1358, 1400, 1422, 1441. Turner v. May, 460, 463. Turner v. North Beach & M. R R Co., 1010, 1011. Turner v. Ontonagon, etc., Co., 664. Turner v. Peoria, etc., R. R., 1454. Turner v. Turner, 408. Turnpike Co. v. Davidson County, 1591. Turnpike Co. v. Illinois, 890, 991, 1592. Turnpike Co. v. McKean, 1070. Turnpike Co. v. State, 866, 1593, 1942. Turquand v. Marshall, 1031. Tuscaloosa Mfg. Co. v. Cox, 981. Tuscaloosa, etc., Co. v. Perry, 190. Tuskaloosa, etc., Association v. Green, 861. Tussand v. Tussand, 1015. Tuthill, etc., Co. v. Shaver, etc.. Co.. 1111. Tuttle v. Michigan Air Line Co., 235, 634, 801, 802, 803, 1494. Tuttle v. Walton, 687, 691, 695, 699. Tutweiler v. Tuscaloosa, etc., Co., 174, 1145, 1147, 1157. Tweedy v. Bogart, 615. Twelfth, etc., Co. v. Phil., etc., R. R, 1530. Twelfth Street Market v. Jackson, 1064, 1076. Twin Creek, etc., Co. v. Lancaster, 112, 113. Twin Lick Oil Co. v. Marbury, 937. Twycross v. Grant, 193, 910, 912. Tylee v. Yates, 984. Tyler v. Beecher, 1526, 1527. Tyler v. Savage, 195, 202, 482, 492. Tyng v. Clarke, 297. Tyng v. Commercial, etc., Co., 987. Tyrrell v. Bank of London, 906, 913. Tyrrell v ; Washburn, 66S, 670. Tysen v.* Wabash R'y, 965, 1194, 1228, 1273, 1407, 1547. Tyson v. Mahone, 1146. Tyson v. School Directors, 139. IT. Uline v. N. Y. C, etc., R R. 1562. Ulrich v. N. Y„ etc., R R, 1537. Ulster, etc., Inst v. Fourth, etc., Bank, 433. TABLE OF CASKS. CXC1 [TJic references are Ulster R'y v. Banbridge R'y, 940, 1183. Umsted v. Buskirk, 256, 257, 259, 269, 278, 289, 290, 305. Uncas National Bank v. Rith, 12G9. Underbill v. Gibson. 977. Underbill v. Santa Barbara, etc., Co., 1100, 1103. 1110, 1186. 1189. Underwood v. New York, etc., R R Co., 713. Underwood, etc., Co. v. Pelican, etc., Co., 1600. Union Agric. & Stock Ass'n v. Mill, 632. Union Bank v. Geary, 1165. Union Bank v. Jacobs, 1185, 1190. Union Bank v. Knapp, 1070. Union Bank v. Laird, 547, 687, 689, 692, 693, 697. Union Bauk v. McDonougb, 98. Union Bank v. Owen, 19. Union Bank v. Ridgely, 1021, 1024, 1058, 1068. 1093. 1095, 1096. Union Bank v. State, 753, 758. Union Bank v. Wando Mining Co., 297. Union Bank, etc.. v. Ellicott, 955. Union Bank of Tennessee v. State, 22. Union Bridge Co. v. Troy & L. R. R. Co., 1099. Union Canal Co. v. Gilfallan, 1479. Union Canal Co. v. Lloyd, 1114, 1122. Union Canal Co. v. Yonng, 884. Union Cattle Co. v. International Trust Co., 602, 1197, 1223, 1224. Union Cement Co. v. Noble, 1165. Union Central L I. Co. v. Tbomas. 1002. Union Depot R Co. v. Southern R'y Co. et al., 1569. Union, etc., Co. v. Jenkins, 112, 113, 174. Union, etc., Co. v. Southern, etc., Co., 71, 806, 1196, 1206, 1216, 1224, 1226, 1373. Union, etc., Co., Re, 394. Union, etc., Ins. Co. v. Keyser, 1022. Union, etc.. Ins. Co. v. Union, etc., Co., 1239, 1283, 1336, 1352, 1360, 1410, 1417. Union, etc., R R Co. v. East, etc., R R Co., 1528. Union Gold, etc., Co. v. Rocky, etc., Bank, 984, 1049, 1070, 1087, 1089, 1098, 1100, 1101, 1185, 1186. Union Hill Company, Ex parte, 803. Union Hill, etc., Co., Re, 807. In the foot-paging.] Union Hotel Co. v. Hersoe, 101, 10",, 110, 122, 123, 236, 632. Union H. Co. v.'Plume, etc., Co., 970. Union I. Co. v. St Louis, etc., R'y, 1336. Union Ins. Co. v. White, 1109. Union Ins. Co., In re. 799, ^10, 816, 817. Union Iron Co. v. Pierce, 293, 030. Union Lock & Canal Co., Prop, of, v. Towne, 633. 641. Union L. & T. Co. v. Southern Cal., etc., Co., 1394, 1401, 1574. Union Manuf. Co. v. Pitkin, 1095. Union Mutual, etc., Ins. Co. v. White, 1074. Union Mutual F. I. Co. v. Keyser, 986. Union M. L. Ins. Co. v. Frear Stone Manuf. Co., 49, 56, 189, 248. Union Mut. L. I. Co. v. McMillan, 1005. Union Natl Bank v. Byram, 20, 612. Union Nat'l Bank v. Carr, 473. Union Nat'l Bank v. Chicago. 767. Union Nat'l Bank v. Miller, 1182. Union Nat'l Bank v. Wheeler, 1207. Union Nat'l Bank v. Hunt, 420, 479. Union & P. Bank v. Farrington. 587. Union Pacific R'y v. Chicago, etc., R'y. 804, 890, 951, 1050, 1056, 1071. 1100, 1509. Union Pacific R'y Co. v. Leavenworth, etc., R'y Co.. 1530. Union Pacific R R. Co. v. Durant, 905. Union Pacific R R. Co. v. Hall, 1522, 1950. Union Pacific R. R Co. v. McComb, 1182. Union Pacific R. R. Co. v. Credit Mobilier, 904, 931. Union Pacific R R. Co. v. Smith, 138, 139. Union Pacific R. R. Co. v. United States, 726. Union R R Co. v. Dull, 904/ Union Rubber Co. v. Hibbard. 320. Union Sav. Ass'n v. Seligmr.n. 330. Union Screw Co. v. Amer., etc., Co., 711. Union Trust Co. v. Chicago, etc., R R, 1455. Union Trust Co. v. 111. Mid. R'y. 1399, 1402. 1410, 1450, 1453, 1456. 1490, 1505. cxcu TABLE OF CASES. [The references are Union Trust Co. v. Monticello. etc., R R, 1233, 1234. Union Trust Co. v. Morrison, 1243, 1287, 1306. 1360, 1361. 1364, 1371, 1374, 1396. Union Trust Co. v. N. Y., etc., R R. 74, 1194. 1213, 1215, 1217. 1229, 1272. Union Trust Co. v. Rockford, etc., R R, 1343. Union Trust Co. v. Rochester & Pitts- burgh R R Co., 932. 1542, 1547. Union Trust Co. v. St. Louis, etc., R'y, 1277. 1323, 1337. 1405. Union Trust Co. v. Souther. 1399. Union Trust Co. v. Southern Nav. Co., 1305. Union Trust Co. v. Walker, 1400. Union Turnpike Co. v. Jenkins. 1106. Union Turnpike Co. v. McKean, 220. Union Water Co. v. Murphey's Flat Flumiug Co., 983, 1261. United, etc., Assoc, v. Benshimol, 887 United, etc., Co. v. Boston, etc., Co.. 1383. United Fire Association v. Bensraan. t 1021. United Lines Tel. Co. v. Boston, etc., Co., 426. 1214. United Service Co.. In re, 862. United Soc. v. Eagle Bank, 214. United Society v. Underwood, 1031. United States v. Amedy, 1019. United States v. American Bell Tel. Co., 1178. United States v. B. & O. R R Co., 1012. United States v. Berry, 843. United States v. Britton. 421, 496. United States v. Central Pac. R R, 726. United States v. City Bank, etc., 1086. United States v. Columbian Ins. Co., 830. United States v. Cutts, 515, 518, 547, 585, 586. United States v. Dailaun, 244, 250, 254, 255, 288. United States v. Deveaux, 2. United States v. Distillery, 17, 1012. United States v. Fox, 1001. 1020. United States v. Globe Works, 731. United States v. Insurance Co., 1167, 1173. United States v. Jefferson Co., 143. United States v. Jellico, etc., Co., 650. to the foot-paging.] United States v. Kane, 1437. United States v. Kansas Pac. R R, 726. United States v. Knox, 304. United States v. Louisville,' etc., Canal Co., 829, 1418, 1578. United States v. Masich, 1411. United States v. McKeldon, 800, 806. 808. United States v. Memphis, etc., R R Co., 1169. United States v. Nelson, 650. United States v. New Orleans, etc., R. R., 133, 1335. 1375, 1383, 1386, 1387. United States v. Patterson, 650. United States v. Planters' Bank, 154. United States v. Railroad Bridge Co., 1529. United States v. Railroad Co., 755, 758. United States v. San Pedro, etc., Co., 1117. United States v. Sioux City & Pac. R. R, 726. United States v. Southern P. R R, 889, 1180. United States v. Trans-Missouri Freight Assoc, 648, 1512. United States v. Trinidad Coal Co., 2, 995. United States v. Union Pacific Railroad Co.. 874, 1277. 1522, 1948. United States v. Vaughan, 469, 517, 548, 617. United States v. W. P. R R Co., 1126. United States v. Walters, 748, 1020. United States v. Western U. Tel. Co., 873, 1593, 1595. United States Bank v. Dana, 1055. United States Bank v. Dandridge, 1058, 1068, 1086, 1094, 1106. United States Bank v. Dunn, 1075. 10S6. United States Bank v. Lyon County, 493. 1201. United States Bank v. Stearns, 1166. United States, etc., Agency, Matter of, 1015. United States, etc., Co. v. Reed, 926, 1130. United States Exp. Co. v. Back man, 1579. United States Exp. Co. v. Henderson, 685. United States Exp. Co. v. Lucas, 1003. United States Ins. Co. v. Shriver, 1117. TABLE OF CASKS. CXC111 [27ie references are to the foot-paging.] United States Life Ins. Co. v. Adams, 1005. United States Mortgage Co. v. Grass, 987, 1000. United States Mortg. Co. v. Sperry, 987. United States R Stock Co. y. Atlantic, etc., R R Co., 931. United States Rolling-stock Co., Matter of, 1345, 1454, 1542. United States Trust Co. v. Brady, 2, 986. United States Trust Co. v. Harris, 421, 1430. United States Trust Co. v. Lee, 1000. United States Trust Co. v. N. Y.. etc., Ry, 859, 1399, 1402, 1408, 1421, 1459. United States Trust Co. v. United States Fire Ins. Co.. 431. United States Trust Co. v. Wabash Ry, 1371, 1380. Unity Insurance Co. v. Cram, 97. 309. Universal, etc., Co. v. Tabor, 256, 261. Universal Stock Exch. v. Stevens, 468. University v. People, 771, 1943. Unthank v. Henry County T. Co., 171. Upfill's Case, 1037. Upper, etc., Co. v. Whittaker, 1177. Upson, etc., R R v. Sharmon, 1488, 1504 Upton v. Burnham, 56, 239, 343, 345, 524, 525. Upton v. Englehart, 196, 200, 210. Upton v. Hansbrough, 56, 195, 230, 248, 265, 343. Upton v. Hubbard, 1424. Upton v. Jackson, 390, 640. Upton v. Tribilcock, 56, 61, 80, 87, 111, 112, 189, 196, 210, 239, 265. Uruguay, etc., Ry Co. In re, 862. Utica Bank v. Hilliard, 683. Utica Bank v. Smalley, 19, 687, 689, 694. 699, 708, 1166. Utica, etc., Co. v. Til man, 1167. Utica, etc.. R R Co. v. Brinkerhoff, 93. Utica Ins. Co. v. Bloodgood, 985. Utica Ins. Co. v. Caldwell, 19, 985. Utica Ins. Co. v. Kip, 985. Utica Ins. Co. v. Scott, 985. Utley v. Clark-Gardiner L M. Co., 1002. M Vaca, etc., R R v. Mansfield, 1101. Vail v. Hamilton, 421, 830, 1264, 1272. Vail v. Jameson, 989. Vail v. Reynolds, 488, 792. Vail v. Rice, 580. Vale Mills v. Spalding, 348. Valk v. Crandall, 34, 113. Vallams v. Fletcher, 103. Vallance, Ex parte, 22. Valle v. Ziegler, 752, 757. Valley Bank & Savings Institution v. Sewing Society, 864. Valley Nat'l Bank v. Crowell, 587. Valley Ry Co. v. Lake Erie Iron Co., 426. Valpy, Ex parte, 911. Van Aernam v. Bleistein, 671, 1008. Van Aernam v. McCune, 1008. Van Allen v. Assessors, 20, 26, 760, 761, 764 Van Allen v. Illinois, etc., R R Co., 91, 101, 165, 383. Van Allen, In re, 1430. Van Amburgh v. Baker, 854 Van Blarcom v. Broadway, 585. Van Blarcom v. Daget, 745. Van Cise v. Merchants' Nat'l Bank, 622. Van Cott v. Van Brunt, 36, 62, 64, 65, 74. 79, 297, 1210. Van Doren v. Olden. 739. Van Dresser v. Oregon, etc., Nav. Co., 1183. Van Dyck v. McQuade, 714. 722, 1032, 1130. Van Dyke v. Stout, 99. Van Gestel v. The Van Gestel Electric- Street Car Co., 66. Van Glahn v. De Rosset, 861. Van Hastrup v. Madison, 132. Van Hoffman v. Quincy, 132, 1942. Van Hook v. Somerville, etc., Co.. 1070. Van Hook v. Whitlock, 283, 288, 304 Van Horn v. Corcoran, 309. Van Home v. Newark, etc., R'y, 1560. Van Kleuren v. Central R R, 1381. Van Leuven v. First Nat'l Bank, 1103. Van Ness v. Fisher, 659, 671. CXCIV TABLE OF CASES. [The references are Van Norman v. Central Car, etc., Co., 716. Van Norman v. Jackson County Circuit Judge, 608, 609, 611. Van Pelt v. U. S., etc., Co., 255. Van Riper, Ex parte, 291, 292. Van Sandan v. Moore, 321, 666. Van Schmidt v. Huntington, 858. Van Slyke v. State, 764. Van Valkenburgh v. Thomas ville, etc., R R Co., 904. Van Voorhis v. Rea, 591. Van Weel v. Winston, 191, 1141, 1200, 1331, 1332. Van Wickle v. Camden & A. R R Co., 1524 Vaunatta v. State Bank, 986. Vance v. Bank of Ind., 1166. Vance v. Erie R'y Co., 1007, 1009. Vance v. McNabb, etc., Co., 960. Vance v. Phoenix Ins. Co., 1029. Vance v. Tourne, 579. Vandall v. South Francisco Dock Co., 971. Vandenburgh v. Broadway R'y Co., 817, 826, 839, 841. Vandenheyden v. Mallory, 430. Vanderbilt v. Bennett, 823, 846, 848. Vanderbilt v. Central R R, 1438; 1447, 1456. Vanderwerker v. Glenn, 93, 243, 264. Vane v. Cobbald. 197, 1041. Vane v. Newcombe, 274, 1390, 1395. Vannemare v. Young, 311. Vansands v. Middlesex County Bank, 547, 689, 690, 691, 695. Vansant v. Roberts, 1019. Van tine v. Morse, 613. Varnum v. Hart, 941. Vatable v. N. Y„ L. E. & W. R R, 184, 864, 1474. 1477. Vater v. Lewis, 878. Vaughan v. Wood, 598. Vaupell v. Woodward, 465, 582, 600. Vawter v. Griffin, 464. Vawter v. Ohio & Miss. R R Co., 239. Veazie v. Mayo, 1516. Veeder v. Baker, 293. Veeder v. Lima, 137. Veeder v. Mudgett, 249, 301, 390, 391, 392. to the foot-paging] Veiller v. Brown, 353, 356. Venango Nat'l Bank v. Taylor, 990. Venner v. Atchison, etc., R R Co., 631, 632, 1492. Vennor v. Atchison, etc., R R, 1144. Vergennes, Bank of, v. Warren, 1099, 1100. Vermilye v. Adams Exp. Co., 580, 1224. Vermilye, In re Assignment of, 568. Vermilyea v. Fulton Bank, 1146, 1165. Vermont Central R R Co. v. Clayes, 34, 35, 219. Vermont, etc., R R v. Vermont Central R R, 640, 1356, 1381, 1386, 1418, 1419, 1425, 1445, 1453, 1463, 1465, 1501. Vernon v. Hovey, 156. Vernon v. Manhattan Co., 1122. Vernon Society v. Hills. 1057. • Verplauck v. Mercantile Ins. Co., 418, 859, 1157, 1163, 1169, 1417. Vick v. La Rochelle, 216. Vick v. Lane, 259. Vickers, Ex parte, 193. Vicksburg v. Tobin, 1946. Vicksburg, etc., R R v. McCutchen, 1388. Vicksburg, S. & T. R R v. McKean, 192, 218, 234, 343. Victoria, etc., v. Fraser, 1088. Vidal v. Girard's Ex'rs, 968, 994. Vigers v. Pike, 1130. Vilas v. Milwaukee, etc., R'y, 1275, 1480. Vilas v. Page, 962, 1120, 1373, 1393, 1449, 1451. 1456, 1480. Vilas v. Reynolds, 1097. Vinal v. Continental, etc., Co., 893. Vinas v. Merchants' M. I. Co., 1006, 1008. Vincennes University v. State of In- diana, 1942. Vincent v. Bramford, 273. Vinton's Appeal, 738, 744. Virginia, Bank of, v. Adams, 250, 253. Virginia, Bank of, v. Craig, 441. Virginia, etc., Co. v. Hale, 683. Virginia, etc., Co. v. Mercantile T. Co., 1208. Virginia, etc., Nav. Co. v. United States, 1019. Virginia, etc., R R Co. v. County Comm'rs, etc., 125. TABLE OF CASES. cxcv yilie references are Virginia, etc., R'y v. Washington, 1536. Vivian v. Mortlock, 410. Vogler v. Ray, 667. Vollans v. Fletcher, 1041. Von Hess v. Mackaye, 616, 1201. Von Hoffman v. City of Quincy, 1942. Von Schmidt v. Bourn, 782, 783. Von Schmidt v. Huntington, 259, 671. Voorhees v. Bonesteel, 430. Voorheis v. People's, etc., Co., 1170. Voorhis v. Terhune, 610. Vorhees v. Receiver of Bank, etc., 230. Voris v. McCready, 565. Vose v. Bronson, 1188, 1313. Vose v. Cowdrey, 1474. Vose v. Grant, 248, 730, 731. Vose v. Reed, 1407. Vovvell v. Thompson, 583, 828. Vredenburg v. Behan, 314. Vreeland v. N. J. Stone Co., 87, 191, 203, 206. w. Wabash, etc., v. Beers, 1942. Wabash, etc., R'y v. Central T. Co., 1336, 1339, 1343, 1349, 1350. 1413, 1420, 1440. Wabash, etc., R'y v. Ham, 965, 1195, 1273, 1545. Wabash, etc., Ry v. Illinois, 1514, 1946. Wabash, etc., R. R. v. Jaggerman, 1536. Wabash, etc., R R v. Peyton, 1535. Wabash R Co. v. Dykeman, 1416. Waco, etc., R R v. Shirley, 1278. Waddill v. Alabama, etc., R. R Co., 983. Wadsworth v. St. Croix Co., 151. Wadsworth v. Supervisors, 143. Wagar v. Stone, 1410. Wagenen v. Clark, 262. Wagner, etc.. Institute Appeal, 638, 772. Wagoner v. Loo mis, 767. Wagstaff v. Wagstaff, 407. Wahlig v. Standard, etc , Co., 1083. Wainwright v. Weske, 494. Wait v. Mining Co., 1057. Wait v. Nashua, etc., Assoc, 1074. Wait v. Smith, 1024 Waite v. Coombes, 408. Waite v. Dowley, 76L to the foot-paging.] Waite v. Whorwood, 436. Wakefield v. Fargo, 273, 274, 333, 338, 342. Wakefield Bank v. Truesdall, 1085. Wakefield, etc., Co., Re, 731. Wakeman v. Dalley, 324, 490. Walburn v. Chenault, 67. Walburn v. Ingilby, 663, 681, 682. Walden Nat. Bank v. Birch, 420. Waldo v. Chicago, St P. & F. D. L R R Co., 194, 202. Wales v. Stetson, 626. Walker v. Bartlett, 354, 467, 517. Walker v. Cincinnati, 137, 140. Walker v. City of Springfield, 1005. Walker v. Continental Insurance Co., 1170. Walker v. Grain, 257, 279. Walker v. Detroit Transit R'y Co., 26, 428, 519, 532, 548. Walker v. Devereaux, 98, 105, 830. Walker v. Flemming, 1057. Walker v. Granite Bank, 682, 684. Walker v. Joseph, etc., Co., 336, 412, 430. Walker v. Lewis, 272, 321. Walker v. Mackie, 409. Walker v. Mad River, etc., R'y, 981. Walker v. Milne, 22. Walker v. Mobile, etc., R R Co., 110, 198, 200. Walker v. Ogden, 183, 184. Walker v. Quincey, etc., R'y, 1458. Walker v. Southeastern R'y, 1007, 1010. Walker v. Wait, 672. Walker v. Wilmington, etc., R R, 1091, 1109. Walker's Case, 352, 976. Wall v. Schneider, 472, 413. Wall v. Thomas, 650. Wall v. Tomlinsou, 429. Wallace v. Berdell, 602. Wallace v. First Parish, etc.. 1069. Wallace v. Lincoln, etc.. Bank. 1(130. 1121, 1150. 1159. Wallace v. Long Island R R, 931, 1499. 1505. Wallace v. Loomis, 3, 880, 1016, 1217. 1407, 1450. Wallace v. Townsend, 101, 214. Wallace v. Walsh, 8, 852, 855, 1063. CXCV1 TABLE OF CASES. [The references are Waller v. Bank of Kentucky, 1094. Waller v. Thomas, 661. Wallingford Mfg. Co. v. Fox, 114, 163. Walls v. Bailey, 580. Wallworth v. Holt, 1144, 1162. Wain's Assignees v. Bank of North America, 534, 690. Walnut v. Wade, 147, 149, 150, 1231, 1236, 1238. Walradt v. Maynard, 716. Walser v. Seligman, 250, 251, 258. Walsh v. Barton, 1100, 1380, 1385. Walsh v. Memphis, etc., R R Co., 258, 259, 289. Walsh v. Seager, 202. Walsh v. Sexton, 413. Walsh v. Stille, 437, 439. Walsh v. Trustees, etc., 2. Walsh v. Union Bank, 359. Walstab v. Spottiswoode, 1040. Walters v. Anglo, etc., Co., 1414, 1418, 1461, 1463. Walters v. Comer, 477. Walter's Case, 336, 347, 524 Walter's Second Case, 117, 337, 415. Waltham Bank v. Waltham, 749. Walton v. Coe, 281. Walton v. Grand, etc., Co., 1453. Walton v. Oliver, 324. Walton v. Riley, 311, 878, 879. Walton v. Walton, 403, 404, 411. Walton, Ex parte, 524. Walworth v. Brackett, 232, 798. Walworth, etc., Bank v. Farmers', etc., Trust Co., 1075, 1082. Wandsworth, etc., Co. v. Wright, 837. Wann v. W. U. T. Co., 1593. Wanneker v. Hitchcock, 826, 829. Wannell v. Kern, 482. Wapello v. B. & M. R. R Co., 134, 154. Ward v. Brigham, 1040. Ward v. Davidson, 926, 935, 936. Ward v. Davis, 665. Ward v. Farwell, 866, 867, 868, 1589. Ward v. Gar fit's Case, 348. Ward v. Griswoldville Mfg. Co., 160, 161, 229, 255, 261. Ward v. Johnson, 973, 1257. Ward v. Kitchen, 434, 435. Ward v. Londesborough, 103, 1040. to the foot-paging.] Ward v. Salem St R'y, 917. Ward v. Sea Insurance Co., 859, 860. Ward v. SittiDgbourne, etc., R'y, 728, 729. Ward v. Society, etc., 858. Ward v. Southeastern R'y Co., 429, 529. Ward v. Van Duser, 567. Ward v. Vosburgh, 468, 470, 472, 474. Ward's Case, 96, 97, 348, 415. Warde, In re, 436. Wardell v. Railroad Co., 904, 942. Wardell v. Union, etc., R R, 1216. Warden, etc., Shrewsbury v. Hart, 1016. Wardens, etc., v. Rector, etc., 930. Wardens, etc., Trinity Ch. v. Hall, 1015. Wardens of Christ Church v. Pope, 812. Warder, etc., Co. v. Jack, 310, 970. Wardrobe v. California Stage Co., 1010. Ware v. Bazemore, 1148. Ware v. Galveston City Company, 534 Ware v. Grand, etc., R'y Co., 639. Ware v. Hamilton, etc., Co., 1004 Ware v. McCandlish, 742. Warfield v. Marshall, etc., Co., 931, 937, 1187. Waring v. Cahawba Co., 16. Waring v. Mayor, etc., of Mobile, 634 Warner v. Bates, 490. Warner v. Beers, 2, 666. Warner v. Callender, 256, 258, 290. Warner v. Hopkins, 1141. Warner v. Mower, 800, 801, 802, 808, 990, 1108. Warner v. Rising, etc., Co., 1235, 1237, 1238, 1406. Warner v. Stebbins, 965. Warnock v. Davis, 1589. Warr v. Bank of West Tennessee, 990. Warren v. Brandon Mfg. Co., 621. Warren v. Davenport Fire Ins. Co., 18. Warren v. Hewitt, 475. Warren v. King, 369, 370, 722. Warren v. Ocean Ins. Co., 1058. Warren v. Pastlewaite, 409. • Warren's Estate, In re, 739. Warren Mfg. Co. v. ^Etna Ins. Co., 1001. Warwick R R Co. v. Cady, 222, 229. Wasatch Min. Co. v. Jennings, 901, 921, 922. Waseca Co. Bank v. McKenna, 767. TABLE OF CASES. CXCVll [Tlie references are Washburn, etc., Co. v. Bartlett, 1004. Washington v. Emory, 434, 435. Washington v. Raleigli, etc., R. R., 1534. Washington Bank v. Lewis, 1054, 1119. Washington Bank v. Palmer, 18. Washington Benevolent Soc. v. Bacher, 1026. Washington Bridge Co. v. State, 1577. Washington, etc., R. R v. Alexandria, etc., R. R, 1311. 1320, 1468, 1469. Washington, etc., R. R v. South, etc., R. R., 1357, 1461. Washington, etc., R R, Matter of, 1549, 1565. Washington, etc., T. Co. v. State, 866, 1593. Washington Ius. Co. v. Price, 19. Washington Turnpike v. Cullen, 1106. Washington University v. Rouse, 1942. Wasmer v. Delaware, etc., R. R, 1535. Wasson v. First Nat'l Bank, 761, 763, 764. Water Valley Mfg. Co. v. Seaman, 182, 195, 218. Waterbury v. Merchants' Union Ex. Co., 659, 666, 670, 671, 672, 859, 1142, 1154. Waterbury, In re, 1168. Waterford, W. W. & B. R'y Co. v. Dal- biac, 225. Waterhouse v. Comer, 1437. Waterhouse v. Jamieson, 46, 81, 82. Waterhouse v. London, etc., R. R Co., 395, 506. Waterlow v. Sharp, 1192. Waterman v. Buckland, 469. Waterman v. Chicago, etc., R. R, 928, 1066. Waterman v. Sprague Mfg. Co., 989. Waterman v. Troy, etc., R R Co., 377, 378. Watertown, Bank of, v. Watertown, 666. Watertown, National Bank of, v. Lon- don, 667. Waterville, Bank of, v. Belster, 1166. Water-works Co. v. Burkhart, 1526. Waters v. Gilbert, 1070. Watjen v. Green, 159, 1193. Watkins v. Dorsetr, 609. Watkins v. Evans, 93. Watkins v. National Bank, 860, 141 a to the foot-paging.] Watkins, Ex parte, 310. Watson v. Bennett, 1095. Watson v. Eales. 181, 344. Watson v. Earl of Charlemont, 205. Watson v. Miller, 570. Watson v. Spratley, 21, 22, 467, 665. Watson, Ex parte, 212. Watt v. Railroad, 1330. Watts v. Salter, 225, 1041. Watt's Appeal, 972, 1029, 1131, 1133, 1263. Waugericu v. Aspell, 216. Waugh v. Beck, 477. Waukou, etc., R R. Co. v. Dwyer, 111, 159. Wausau, etc., Co. v. Plummet, 16. Wayne Pike Co. v. Hammons, 927, 1150, 1156. Waynesville Nat'l Bank v. Irons, 1117. Wear v. Jacksonville, etc., R R Co., 123, 127, 168. Weare v. Gove, 977. Weatherford, etc., Co. v. Granger, 1047. Weaver v. Barden, 484, 545, 548. Weaver v. Field, 1341. Weaver v. Huntingdon, etc., Coal Co., 611. Weaver v. Weaver, 761. Webb v. Baltimore, etc., Co., 125, 218, 239, 465. Webb v. Burlington, 744, 751. Webb v. Challoner, 563. Webb v. Com'r of Heme Bay, 985. Webb v. Earle, 366, 374. Webb v. Graniteville Mfg. Co., 441. Webb v. Heine Bay, 1107, 1254. Webb v. La Fayette Co., 148. Webb v. London, etc., Railway, 1038. Webb v. Ridgely, 832, 843. Webb v. Vermont, etc.. R R, 1322. Webb v. Weatherhead, 665. Webber v. Townley, 674. Weber v. Fickey, 27, 188, 258. 300, 524 Webster v. Grand Trunk R'y Co., 780, 784. Webster v. Hale, 404. Webster v. Sturges, 472, 475, 476. Webster v. Turner, 858, 863. Webster v. Upton, 56, 80, 111, 210, 233, 265, 343, 353, 525. Webster's Case, 180, 639. CXCV1U TABLE OF CASES. [TTie references are Weckler v. First Nat'l Bank, 563. Weed v. Little Falls, etc., Co., 112fi. Weed v. Snow, 984, 1193. Weeks v. Love, 283, 288, 305. Weeks v. Propert, 978, 1188. Weeks v. Silver, etc., Co., 173, 184, 323. Week's Case, 414. Weems v. Georgia, etc., R R., 193, 196. Weetjen v. St. Paul, etc., R R, 1330, 1365. Weetjen v. Vibbard, 919, 1323. Wehrbauer v. Nashville, etc., R R, 424, 1081. Wehrman v. Reakirt, 250, 280, 283, 286, 352, 356. Weidenfeld v. Allegheny, etc., R R, 1148. Weidenfeld v. Sugar, etc., R R, 1073, 1527. Weidenger v. Spruance, 629. Weightman v. Clark, 133, 142. Weigley v. Coal Oil Co., 274. W^ihl v. Atlanta, etc., Co.. 937, 1423. Weikersheim's Case, 329, 430. Weinman v. Wilkinsburg. etc., R'y Co., 346. Weir v. Barnett, 205, 491, 976, 1033. Weir v. Bell, 205. Weir v. St. Paul, S. & F. R R Co., 1527. Weismer v. Village of Douglass, 138, 139. Weiss v. Mauch Chunk, etc., Co., 36, 113, 274. Weisser v. Denison, 1019. Welch v. Importers', etc., Bank, 15, 311, 325, 864, 882, 904, 1067, 1140, 1265. Welch v. Old Dominion, etc., R'y, 795, 882, 884, 955. Welch v. Post, 131. Welch v. Sage, 1224, 1225. Weld v. Barker, 466. Weld v. City of Bangor, 755. Welfiey v. Shenandoah, etc., Co., 1016. Welland Canal Co. v. Hathaway, 882. Weller v. Pace Tobacco Co., 447, 533, 617, 846. Wellersburg, etc., Co. v. Hoffman, 98. Wellersburg, etc., Co. v. Young, 87. Welles v. Cowles, 22. Welles v. Graves, 287. Welles v. Larrabee, 328, 330. to the foot -paging.] Welles v. Stout, 300. Well man v. Chicago, etc., R'y, 1514 Wellman, etc., v. Ciancimino, etc., Co., In re, 839. Wellman v. Howland Coal & Iron Works, 258. Wells v. Abernethy, 785. Wells v. Gates, 660, 668. Wells v. McGeoch, 478. Wells v. Monihan, 672. Wells v. Northern Pacific R'y, 1580. Wells v. Oregon R'y, etc., Co., 1013, 1580. "Wells v. Pontiac Co., 147. Wells v. Rahway, etc., Co., 1065, 1067. Wells v. Robb, 253, 669. Wells v. Rodgers, 163, 807. Wells v. Southern, etc., R'y, 274, 1390. Wells v. Supervisors, 131, 135. Wells v. Yates, 668. Wells, etc., Co. v. Northern Pac. R'y Co., 315. Wells, Fargo & Co. v. Welter, 564. Wellsborough v. New York, etc., R. R Co., 148. Wellsborough, etc., P. R Co. v. Griffin, 1274, 1482, 1483, 1590. Welsh v. First Div., etc., R R, 1235, 1236, 1237. Welsh v. Plumas Co., 888, 1590. Wemple v. St. Louis, etc., R R Co., 239. Wenlock v. River, etc., Co., 1254. Wentz v. Lowe, 309. West v. Camdon, 844. West v. Carolina, etc., Ins. Co., 864, 877, 1016. West v. Crawford, 113, 114, 223, 315. West v. Crawfordsville & A. T. Co., 196. West v. Eureka, etc., Co., 1165. West v. Madison Co. Agric, etc., 1261, 1263. West v. People, 398. West v. Wentworth, 788. West v. West Bradby, etc., Co., 939. West, Ex parte, 200, 206. West Bank of Scotland & its Liquida- tors v. Baird and others, 1059. West Branch Bank v. Armstrong, 693, 695, 699, 700. West Branch Bank v. Chester, 1238, 1338. TABLE OF CASES. CXC1X [The references are West Branch, etc., Canal Co.'s Appeal, 782, 787. West Cornwall v. Moffatt, 87. West Devon Mine Case, 681, 684. West Devon, etc., Mine, In re, 677, 683. West, etc., Bank v. Ford, 1167. West, etc., Bank v. Kitson, 977. West, etc., Bank v. Shawnee, etc., Bank, 1086. West, etc., Bank v. Thompson, 1120. West, etc., Co.'s Appeal, 484 West, etc., Cong. v. Ottesen, 798. West, etc., Land Co. v. Montgomery Land Co., 1081. West, etc., R v. Mowatt, 44, 51. West, etc., R'y v. Supervisors, 1943. West, etc., Savings Bank v. Ford, 879. West London Commercial Bank v. Kit- son, 1191. West London, etc., Bank, Re, 216. West Nashville, etc., Co. v. Nashville Sav. Bank, 81. West Philadelphia Canal Co. v. Innes, 342, 343. West River Bridge Co. v. Dix, 1528, 1529, 1577, 1941. West St. Louis S. Bank v. Shawnee» etc., Bank, 1086, 1243. West Virginia Trans. Co. v. Volcanic Oil, etc., Co., 1600. Westhury & Sons v. Twigg & Co., 1432. Westchester, etc., v. Jackson, 368, 370, 374, 376, 715. Westcott v. Fargo, 667, 671. Westcott v. Minnesota, etc., Co., 173. Westerfield v. Radde, 1076. Western Bank v. Baird, 852. Western Bank v. Gilstrap, 1085. Western Bank v. Mills, 985. Western Bank of Scotland v. Addie, 191, 194, 195, 203, 205, 207, 478, 1008. Western Bank of Scotland v. Tallman, 34, 35. Western Boatmen's Benev. Assoc, v. Kribben, 982. Western Cottage Organ Co. v. Reddish, 982. Western, etc., Ass'n v. Starkey, 645. Western, etc., Co. v. Cousley, 1043. Western, etc., Co. v. Massachusetts, 1947. to the foot-paging.] Western, etc., Co. v. Peytona, etc., Coal Co., 1308. Western, etc., Co. v. Purnell, 210. Western, etc., Co. v. Rogers, 1594 Western, etc., R R's Appeal, 884. Western, etc., T. Co. v. Atlantic, etc., T. Co., 1433, 1480. Western, etc., Tel. Co. v. Union, etc., R'y Co., 309, 906. Western, etc., R R. v. Exposition, etc., 1537. Western Maryland R'y Co. v. Franklin Bank. 1192. Western Paving, etc., Co. v. Citizens', etc., Co. of Ind., 1572, 1573. Western Pennsylvania R R v. Johnson, 1382. Western R. R Co. v. Avery, 243. Western R R v. Babcock, 1093. Western R R Co. v. Bayne, 1076. Western R. R Co. v. Nolan, 1324, 1331. Western Transportation Co. v. Scheu, 768. Western Transportation Co. v. Stevens, 769. Western Union TeL Co. v. Alabama, 777, 1947. Western Union TeL Co. v. Amer. U. TeL Co., 1594. Western Union Tel. Co. v. Atlantic, etc., TeL Co., 1481, 1594 Western Union Tel. Co. v. B. & O. Tel. Co., 1111, 1594. Western Union Tel. Co. v. Burlington, etc., R'y, 1365, 1386, 1594, 1595. Western Union TeL Co. v. Carew, 1593. Western Union Tel. Co. v. Chicago, etc., R R, 1593. Western Union Tel. Co. v. Eyser, 1006, 1011. Western Union Tel. Co. v. Lieb, 778. Western Union Tel. Co. v. Mayer, 778, 1001. Western Union Tel. Co. v. Massachu- setts, 777. Western Union Tel. Co. v. Mazer, 997. Western Union Tel. Co. v. Pendleton, 1946. Western Union Tel. Co. v. Rich, 1540. Western Union TeL Co. v. U. P. Ry, 6. cc TABLE OF CASES. [The references are Western Union Tel. Co. v. Ward, 1593. Westfield Bank v. Cornen, 1119. Westmoreland Bank v. Klinesmith, 1113. Weston v. Bear River, etc., Min. Co., 586, 621, 622, 699. Weston v. City of Charleston, 14, 759. Weston v. Columbus Southern R'y Co., 199. Weston v. Foster, 1531. Weston v. Ives, 661. Weston v. New Guston Co., 959, 1478. Weston's Case, 107. 333, 335, 342, 357, 358, 359, 448, 686, 908. Westropp v. Solaman, 567, 579. Wetherbee v. Baker, 65, 77, 188, 250, 257, 258. Wetmore v. Parker, 996. Wetmore v. St Paul, etc., R R, 1313, 1329, 1468, 1473, 1475. Wetumpka v. Wetumpka, 144. Wetumpka & Coosa R. R Co. v. Bing- ham, 635, 888. Weyer v. Second Nat. Bank of Frank- lin, 22, 443, 445, 545, 547. Weymouth v. Roselius, 1341. Weymouth, etc., Co., Re, 731. Whaley Bridge, etc., Co. v. Green, 910, 912, 914. Wheat v. Bank of Louisville, 1075. Wheatcroft's Case, 128, 213. Wheatland v. Taylor, 144. Wheatley v. Silkstone, etc., Co., 1254. Wheaton v. Rampacker, 466. Wheeler v. Faurot, 350, 351, 352, 355. Wheeler v. Friend, 468. Wheeler v. Frontier Bank, 628. Wheeler v. Millar, 24, 87, 239, 242, 249, 261, 266, 267, 272, 297, 300, 301. Wheeler v. Newbould, 604. Wheeler v. New Haven, etc., Co., 425. Wheeler v. Northwestern S. Co., 711. Wheeler v. Perry, 739. Wheeler v. Pullman, etc., Co., 815, 860, 947. Wheeler v. San Francisco & A. R R, 1532, 1535. Wheeler v. Thayer, 264. Wheeler, Matter of, 385, 391, 812, 813, 821, 851. to the foot-paging.'] Wheeler, Re, 386. Wheeler, etc., Co. v. Boyce, 1009. Wheeling, City of, v. Mayor of Balti- more, 1162. Wheeling, etc., Bridge Co. v. Wheeling Bridge Co., 1945. Wheelock v. Kost, 230, 330. Wheelock v. Moulton, etc., 22, 1049. Wheelwright v. St. Louis, etc., Co., 1343. Wbelan v. Lynch, 564, 568, 787. Wheless v. Second Nat'l Bank, 1007, 1009, 1010. Whelpley v. Erie R'y Co., 401. Whight v. Shelby R. R Co., 188. Whipple v. Parker, 667. Whitaker v. Eighth, etc., R. R, 1570. Whitaker v. Grummond, 217. Whitaker v. Hartford, etc., R. R Co., 1236, 1237. Whitaker v. Smith, 273. Whitbeck v. Mercantile, etc., Bank, 764. White v. Barber, 476. White v. Baxter, 567. White v. Blum, 254, 285. White v. Boyce, 495. White v. Brownell, 660, 661. White v. Campbell, 879, 889. White v. Carmarthen, etc., R'y Co., 1144, 1186. White v. Crow, 1168. White v. Drew, 465. White v. Franklin Bank, 985, 986. White v. Geraerdt, 1170. White v. How, 1192. White v. Howard, 666, 996, 1000, 1001. White v. Keokuk, etc., R R, 1394. White v. N. Y., etc., Soc, Re, 822. White v. Price, 439, 443, 444, 532, 783, 784. White v. Rankin, 339, 621. White v. Salisbury, 456, 517, 547, 579, 785. White v. Schuyler, 461. White v. Smith, 472, 562, 577, 790. White v. State, 1020. White v. Syracuse R. R Co., 423, 635, 637. White v. Vermont & Mass. R R Co., 1198, 1222. White v. Westport Cotton Mfg. Co., 1092, 1095. TABLE OF CASES. ccl [The references are White v. Winchester, 406, 410. White v. Wood, 55, 382, 1476. White, Ex parte, 1204. White's Bank v. Toledo Ins. Co., 694, 982. White's Case, 106, 336, 348, 352. White's, etc., Co. v. Davidson County, 875. White, etc., Co. v. Pettes, etc., Co., 916, 940. White, etc., Co. v. Southwestern, etc., Assoc, 1004. White, etc., R R. Co. v. Eastman, 116. White, etc., R R v. White, etc., R R, 864, 1222. White Mts. R R Co. v. Eastman, 174, 188, 189, 213, 229. White River T. Co. v. Vermont Cen. R R Co., 1591. White Water Valley Co. v. Vallette. 995, 1092, 1206, 1309, 1259, 1261, 1268, 1278, 1300. Whitehall v. Jacobs, 67. Whitehall & R R R Co. v. Myers, 187, 637. Whitehaven, etc., Co. v. Reed, 398. Whitehead v. Buffalo, etc., R'y Co., 1174. Whitehead v. Vineyard, 1277, 1383. Whitehead v. Whitehead, 743. Whitehouse v. Moore, 566, 580. Whitehouse v. Sprague, 668. Whitehouse's Case, 195, 208. Whitehouse & Co., Re, 240. WhiteJey's Case, 213. Whitely Partners, In re, 108. Whiteright v. American Tel. & Cable Co., 505. Whitesell v. Boston, 750. Whitesides v. Hunt, 471, 472, 473, 475. Whitewell v. Warner, 1036, 1091. Whitfield v. Southeastern R'y Co., 1007, 1008. Whitford v. Laidler, 1104. Whiting v. Hovey, 8, 988. Whiting v. N. Y., etc., R R, 1383. Whiting v. Sheboygan, etc., R R Co., 137. Whiting v. Smith, etc., Co., 1088. Whiting v. Town of Potter, 145. Whiting v. Union Trust Co., 1099. to the foot-paging. .] Whiting v. Wellington, 1068. Whitley v. Harrison, 1019. Whitman v. Bowden, 671, 903, 1132. Whitman v. Granite Church, 1070. Whitman v. Porter, 242. Whitman v. Proprietors, etc., 93, 94. Whitman Gold & S. M. Co. v. Baker, 999. Whitney v. Atlantic & St. Lawrence R R, 1535. Whitney v. Butler, 348. Whitney v. Fairbanks, 493, 1147,1150. Whitney v. Hyman, 308. " Whitney v. Leominster Sav. Bank, 972. Whitney v. Madison, 748, 764. Whitney v. May, 1552. Whitney v. Mayo, 1144. Whitney v. New York, etc., R R... 1362, 1388, 1421. Whitney v. Page, 354. Whitney v. Peay, 1214. Whitney v. Phcenix, 739, 744 W T hitney v. Ragsdale, 753. Whitney v. South, etc., Co., 1091. Whitney v. Union Trust Co., 1092, 1099 T 1100, 1106, 1272, 1295. Whitney v. Wyman, 311, 1046, 1104. Whitney Arms Co. v. Barlow, 296, 952, 971. Whitney Nat'l Bank v. Parker, 765, 768. Whittemore v. Amoskeag Nat'l Bank, 1144. Whittemore v. Beekman, 739. Whittenton Mills v. Upton, 967. Whittlesey v. Delaney. 934. Whittlesey v. Frantz, 111, 1018. Whitwell v. Warner, 306, 941, 1087, 1093. Wichita, etc., Co. v. State, 995. Wickenv. Evans, 651. Wickersham v. Brittan, 840. Wickersham v. Chicago, etc., Co., 1116. Wickersham v. Chittenden, 854, 902, 926, 975, 1144, 1150. Wickersham v. Murphy, 840. Wicks v. Adirondack Co., 1231. Wicks v. Hatch, 575, 604, 606. Wicks v. Monihan, 672. Widener v. Railroad, 1237. Widow Conant v. Millaudon, 826, 840, 841, 843. ecu TABLE OF CASES. [The references are Widow of Reynolds v. Commissioners, etc., 995. Wiestling v. Marthim, 1587. Wigan v. Fowler, 985. Wigfield v. Potter, 651, 655. Wiggin v. Freewill Baptist Church, 800, 807, 808. Wiggins Ferry Co. v. East St. Louis, etc., R'y, 1551. Wiggins Ferry Co. v. O. & M. R'y, I 509 - Wight v. Shelby R R. Co., 99, 192, 197. Wight v. Springfield, etc.. R R. Co., 20, 849. Wilbur v. Atlantic, etc., R'y Co., 1544. Wilbur v. Lynde, 937. Wilbur v. N. Y., etc., Co., 1042. Wilbur v. Stockholders of the Corp., 158, 160, 254, 255, 256. 257, 258, 261. Wilbur v. Stoepel, 467, 844, 943. Wilby v. West Cornwall R'y Co., 1532. Wilcox v. Brickel, 1150. Wilcox v. Toledo, etc., R R Co., 879. Wilcox, Ex parte, 1067. Wild v. Bank, 1085. Wild v. Passamaquoddy Bank, 10, 1058, 1085. Wild v. Davenport, 654. Wilday v. Sandys, 741. Wilder v. Shea, 1368. Wilder v. Virginia, etc., Co., 1135. Wildey v. Mid-Hants R'y Co., 1252, 1254 Wildman v. Wildman, 22, 429. Wilds v. St Louis, etc., R R, 1292, 1333. Wiles v. Suydam, 283, 290, 293, 303. Wiley v. Board of Education, 1097. Wiley v. Inhabitants, etc.; 1070. Wilkes Barre, City of, v. Wyoming, etc., Soc, 1279. Wilkes Barre, etc., Bank v. City of Wilkes Barre, 14, 773. Wilkie v. Rochester, etc., R'y, 1148, 1154. Wilkins v. Thorne, 184, 1172. Wilkinson v. Anglo, etc., G. M. Co., 96. Wilkinson v. Bauerle, 920, 939, 988, 989. Wilkinson v. Culver, 1428. Wdkinson v. Delaware, L. & W. R R Co., 1543. Wilkinson v. Dodd, 1159. Wilkinson v. Fleming, 1319. Wilkinson v. Lloyd, 456. to the foot-paging.] Wilkinson v. Providence Bank, 530. Wilkinson's Case, 195, 208. Willamette, etc., Co. v. Bank, etc., 1269. Willamette, etc., Co. v. Hatch, 1947. Willamette, etc., Co. v. W T illiams, 1175. Willard v. Denise, 1114. Willard v. Gould, 1081. Willard v. Pike, 749. Willard v. White, 571, 595. Willcock, Ex parte, 589, 1065. Willey v. Parratt, 1041. Williams v. Archer, 783, 785, 789. Williams v. Bank of Michigan, 315, 670, 879. Williams v. Benet, 189. Williams v. Boice, 732, 735. Williams v. Carr, 475, 476. Williams v. Cheney, 1005, 1085. Williams v. Chester, etc., R R. Co.,, 1083. Williams v. Citizens' R'y, 1563, 1567. Williams v. Colby, 965. Williams v. College Corner & Richmond Gravel Road Co., 680. Williams v. Colonial Bank, 485, 519. Williams v. Cresswell, 997, 1173, 1950. Williams v. Duanesburgh, 136. Williams v. Duck River, etc., R R Co., 137. Williams v. Evans, 70, 344, 454. Williams v. Fulleiton, 717. Williams v. German, etc., Ins. Co., 1063. Williams v. Gil man, 580. Williams v. Great Western R'y Co., 19. Williams v. Gregg, 1031. Williams v. Hall, 134. Williams v. Halliard, 1132. Williams v. Hanna, 345, 350, 457. Williams v. Hintermeister, 1168. Williams v. London, etc., Bank, 549. Williams v. Lowe, 686. Williams v. McDonald, 984, 1029. Williams v. McKay, 984, 1029, 1032. Williams v. Mechanics' Bank, 547, 586, 618. Williams v. Meyer, 160, 243, 459. Williams v. Missouri, K. & T. R R Co., 1182. Williams v. Montgomeiy, 447, 848. Williams v. Morgan, 1308, 1309, 131 4. 1457, 1458. TABLE OF CASES. CC111 [Tlie references are Williams v. Page, 103, 1041. Williams v. Parker, 377. Williams v. Patrons of Husbandry, 940. Williams v. Peel, etc., Co., 783, 788. Williams v. People, 142. Williams v. Pigott, 1036, 1037. Williams v. Planters' Ins. Co., 1007, 1010. Williams v. Prince of Wales Ins. Co., 681, 682, 684. Williams v. Reynolds, 609. Williams v. Riley, 984. Williams v. Roberts, 147. Williams v. St. George, etc.. Co., 1045. Williams v. Salmond, 103, 1041. Williams v. Savage Mfg. Co., 384, 418, 421, 683. Williams v. Searcy, 69, 454. Williams v. Smith, 19. Williams v. Supervisors of Albany, 765. Williams v. Taylor, 66, 459. Williams v. Traphagen, 241. Williams v. Uncompabgre, etc., Co., 1103. Williams v. United States Trust Co., 604, 605. Williams v. Western Union Tel. Co., 13, 83, 707, 718, 722. Williams' Case. 328, 339, 340, 357, 358. Williams, Ex parte, 1195, 1419. Williamson v. Kokomo, etc., Ass'n, 880, 881. Williamson v. Mason, 484, 563. Williamson v. New Albany, etc., R. R, 1290, 1358, 1368, 1383, 1406, 1409. Williamson v. New Jersey Southern R R. Co., 583, 1203, 1328, 1370, 1383, 1386, 1387, 1391. Williamson v. Smoot, 608. Williamson v. Wadsworth, 273. Williamson, Ex parte, 862, 1186. Williamson's Adm'r v. Washington, etc., R R, 1370. Williamsport Gas Co. v. Pinkerton, 1203. Willink v. Morris Canal & B. Co., 1384, 1386, 1432. Willis v. Fry, 395. Willis v. Phila., etc., R R Co., 395, 397. Willis v. Plaskett, 407. Willis v. St. Paul, etc., Co., 275. Willis v. Toledo, etc., R'y Co., 1091. Willis' Appeal, 466. to the foot-paging.] Williston v. Michigan Southern, etc., R R. Co., 364, 369, 375, 728, 1172. Willitts v. Waite, 1424. Willmott v. London, etc., Co., 1251. Willoughby v. Chicago, etc., Co., 427, 645, 1144, 1158. Willoughby v. Comstock, 604, 606, 666. Willoughby, Re, 742. Wills v. Fisher, 452. Wills v. Murray, 524, 1061, 1063. Wilmer v. Atlanta, etc., R'y, 1321, 1324, 1337, 1341, 1346, 1405. Wilmer v. Atlantic, etc., R R, 1283, 1315, 1324. Wilmington, Bank of, v. Wollaston, 1022. Wilmington C. & R R. R Co. v. Thomp- son, 231. Wilmington, etc., R. R v. Alsbrook, 771, 774. Wilmington, etc., R R. v. Downward, 963. Wilmington R R Co. v. Reid, 626, 747, 758, 759, 771, 774, 1274, 1942. Wilson v. Academy of Music, 821, 1021. Wilson v. Atlantic, etc., R R Co., 500, 532. Wilson v. Baker, 1018. Wilson v. Bank of Montgomery Co., 386, 389. Wilson v. Barney, 1461. Wilson v. Blackbird Creek M Co., 1524. Wilson v. Boyce, 1277, 1380. Wilson v. Brownsmith, 406. Wilson v. California, etc., Co., 260, 1164. Wilson v. Cancadia, 144. Wilson v. Curzon, 1038. Wilson v. Furness R'y Co., 1540. Wilson v. Gaines, 774. Wilson v. Harman, 743. Wilson v. Keating, 461, 463. Wilson v. Kings, etc., R R, 1045, 1090. Wilson v. Little, 23, 583, 585, 586, 603, 604, 605, 789. Wilson v. Maddison, 409. Wilson v. Martin, etc., Co., 1176. Wilson v. Matthews, 78S. Wilson v. Meiers, 972. Wilson v. Metropolitan, eta, R'y, 1078. CO IV TABLE OF CASES. [The references are Wilson v. Pittsburgh, et Wilson v. Pi r.tral Br 358 - - Wilson v. ; te -~>6. Wilson v. Bt Louis, etc.. R. R. - ilamani Wilsou ■ - nlaub. I - Wi - S _:nan. 253. Shreveport, 135. Wife ^tanhope. 1041. Stockholder etc.. 267, 206 , ! Wilson v. Tesson. 33S 381 Wilson v. Welch. 1304, 1418 son v. Whil Wilson v. Wi..- Valley R R Ca, 168, - Wilson- J 884, 744. 118 Wife . ional Rank. ■ 7,118 Wiltbauk's Appeal ] J J & Wiltz v. Pet - - Winans v. Gibbs, etc., Mfg.. Co.. 1431 Winaos r. Has Winch v. Birkenl . R'y, 1145. 15 Wincham, In re. 109. Winchester v. Bait, fc S . R R. HIT. Winchester v. Metier. I Winchester, etc.. R R v. Coif el L 138a Winchester & L. T. Co. v. VimonL 1266. Wincock v. Turpin. 855s 88ft Windham Provident Institution, etc.. v. • SSI Windram v. French. 79. 480. Windsor, Town of. v. Hallett. 146, 150. Winfield v. Barton, 250. Wing v. Harvey. 1115. Wing v. Hoi laud TL C ,68 Winget v. Qnin Boo, 662. Wingfield v. Peel, i Winn v. Macon, 133. Winne v. Ulster, etc.. Inst.. 1118. Winslow v. Fletch. . 614, 615. Winsor v. Bailey, 1142. 1144. 1147. Winsor, Ex parte, 717. Winsor, etc.. Co. v. Chicago, etc.. R R Winston v. Tennessee, etc., R R Ca, 137 to the foot-paging.] Winter v. Baldwiu. Dter v. Belmont Min. Co.. MO. Winter v. City Council of Montgomery. 147. 151. Winter v. Litti 181 Winter v. Montgomery, eta, Ca, 438, 509. 511. Winters v. Armstrong. £ MB, SSI Winters v. Muscogee R R C Winthrop Iron C •. v. M. ek Wintringham v. Rosenthal. 88, i:. V,. v. Wisconsin. ')0 all v. Greenville, etc., R R Ca, 1591. ■.all v. Sampson, U Witherhead r. ADei then v. Buckley. 1538 Witman v. Porter. 668. Witnu-r v. Schk 06. Witmer. Appeal of. Witte v. Derby Fishing Ca. 1093. 116a Witter v. Grand Rapids, etc.. Co.. 1056, 126a Witter v. Miss.. Ouachita & Red River R R Ca, 631, 6aa Witters v. Sowers, 1031. Witt- re y. & wles, 105, 875, 887, 300. 331, 7. 351, 412. 734. 1116. Witts v. Steere, 741. 742. Woerishoffer v. North River Con. Ca. 1424. Wolcot v. Heath. 4 ] Wolf v. Under woe I Wolff v. New Orleans, 136. Wolffe v. Perry man. 472. Wolffe v. Underwood. I Wolverton v. T W< :.. :.'-. eta, Union v. Taylor, 1055. neon v. Fen-. Wontnet v. Bhairp, 887, 225. 228. d v. Argyle. 1" Wood v. Bedford, etc.. R. R, 1266, 1500, 15 d v. Boney. d v. CI. - :c R F " - - of Oxford. 1 36. d v. Consolidated, etc.. Co.. 1197, .- TABLE OF CA8ES. CCV [77te references are to the foot -paging.] Wood v. Coosa, etc., R R Co.. 93, 94, | Woodruff v. Jewett, M4& MBj 219, 232. Wood v. Cory, etc., Co., 52, 70, 805, 1126, 1138, 1212, 1220, 1221. Wood v. Draper, 670, 747. Wood v. Dubuque, etc.. R R, 961, 1305. 1473, 1480, 1481. Wood v. Dummer, 248, 260, 729, 732, 889. Wood v. Finch, 661. Wood v. Goodwin, 1347, 1360, 1389. Wood v. Guarantee, etc., Deposit Co., 1235, 1395, 1403. Wood v. Hayes, 573, 591. Wood v. Jefferson Co. Bank, 1167. Wood v. Lary, 373, 1208. Wood v. Lost, etc., Co., 928. Wood v. McCardel, etc., Co., 1392. Wood v. Meyer, 1262. Wood v. Oregon Development Co., 1419. Wood v. Railroad Co., 1548. Wood v. Smith, 593. Wood v. Union, etc., Ass'n, 400. Wood v. Whelan. 1046, 1100, 1101, 1261. 1293, 1295. 1384. Wood v. Wiley, etc., Co., 879, 1095. Wood v. Woad. 1026. Wood's Appeal, 442, 548, 593, 594, 595. Wood's Case, 124. Wood's Claim, 63. Wood's, etc., Co., Re, 925. Wood, etc., Co. v. Cold well, 1003. Wood, etc.. v. Lawrence County, 1215. Wood Hydraulic, etc., v. King, 1059. Wood Mowing Co., Walter A., v. Cald- well, 1002. Wood fork v. Union Bank, 630, 888. Woddhouse v. Commonwealth Ins. Co., 630. Woodhouse v. Crescent MuL Ins. Co., 4*4. Woodhull's Case, 31. Woodman v. York, etc., R R Co., 1098, 1367. Wood roof v. Howes, 417, 919, 946, 1145, 1153. Woodruff v. Dubuque, etc., R R Co., 822, 846. Woodruff v. Erie R'y, 1436, 1442, 1443, 1498. Woodruff v. Harris, 622. Woodruff v. McDonald, 92, 480. Woodruff v. X. Y. etc., R. R.. I 1308. Woodruff v. Rochester, etc.. R R, 1091, 154& Woodruff v. Trapnall, 629, 1942. Woodruff v. Wentworth, 844. Woodruff, Estate of. 739. Woodruff & Beach Iron Works v. Chit- tenden. 279, 299. Woods v. De Figaniere, 682. Woods v. Hicks, 321. Woods v. Lawrence County, 133, 1214. Woods v. Pittsburgh, etc., R R, 1350. Woods v. Wicks, 292. Woodson v. Murdock. 1276. 1277. Woodstock Iron Co. v. Extension Co., 123. Woodworth v. Blair, 1350. W T oollaston's Case, 177, 178, 179. 180. W^oolmer v. Toby, 1040. W r oolsey v. Independent Order, etc., 1026. Woonsocket Union R R Co. v. Sher- man. 127. W T ooster v. Nevills, 482. W T ooster v. Sage, 494. Wooster, Bank of, v. Stevens, 266. Worcester v. Norwich, etc., R R, 151& Worcester, etc., Co. v. Willard, 113, 11"). 174. Worcester, etc., Co.. In re, 277. Worcester & N. R. R Co. v. Hinds. 22s». Work v. Bennett, 591, 596, 790. Work v. Ogden, 603. W T orkingman"s Banking Co. v. Rauten- berg, 986. Worral v. Harford. 654. W^orrall v. Judson, 15, 345, 353. Worrell's Appeal, 434 Worth v. Commissioners, 750, 751. Worth v. Phillips. 471. Worthington v. Sebastian, 150. Worthington v. Tormey. 574. 604. Worthington, etc., Co. v. Pfister, etc., Co., 941. Woven Tape Skirt Co., Matter of, 88 Wright v. Bank of Metropolis, 788. Wright v. Bishop, 141. CCV1 TABLE OF CASES. [The references are to the foot-paging.} Wright v. Bundy, 1059, 1293, 1295. Wright v. Carter, 1589. Wright v. Central California Colony Water Co., 819, 839. Wright v. Commonwealth, 810, 817, 819. Wright v. Kentucky, etc., R'y, 1364, 1395. Wright v. Lanckton, 1095. Wright v. Lee, 318, 796, 988, 1050, 1102. Wright v. Liverpool & G. Ins. Co., 1175. Wright v. McCormick, 257, 278, 280, 288, 305. Wright v. Milwaukee, etc., R'y, 1480, 1502. Wright v. Nagle, 1944. Wright v. Ohio, etc., R. R., 1232. Wright v. Oroville M. Co., 933. Wright v. Pipe Line Co., 426. Wright v. Shelby R R. Co., 218. Wright v. Stelz, 748, 764. Wright v. Tuckett, 711, 743. 745.' Wright v. Vermont, etc., R R. Co., 377. Wright v. White, 740. Wright v. Wood, 454 Wright v. Wynockie, etc., Co., 1390. Wright's Appeal, 395, 396, 398. 479. Wright's Case, 201, 208, 213, 801. Wrysgan, etc., Co., In re, 664, 665. Wullenwaher v. Dunnigan, 153, 190. Wurtzbarger v. Anniston, etc., Mills, 189. Wyatt v. Larimer, etc., Co., 1600. Wyatt v. Ohio, etc., R R, 1447. Wych v. Meal, 683, 1146. Wylde v. Northern R R of N. J. & E. R'y Co., 1533, 1536. Wyles v. Suydam, 285. Wylie v. Missouri Pac. R R., 1198. Wylie v. Speyer, 1233. Wylly v. Collins, 654. Wyman v. American Powder Co., 31, 101, 278, 779, 785, 787. Wyman v. Fiske, 469, 475, 476, 477. Wyman v. Hallowell, etc., Bank, 1112. Wyman v. Penobscot & K. R R, 1535. Wynkoop v. Seal, 567. Wynne v. Price, 355, 461, 463, 525, 569. Wynne's Case, 1588. Wyoming, etc., Assoc, v. Talbott, 620. Wyscaver v. Atkinson, 140. Y. Yard v. Durant, 1948. Yardley v. Clothier, 1430. Yates v. Boston, etc., R R, 1470. Yates v. Madden, 410. Yates v. Van De Bogert, 890. Yazoo, etc., R R v. Board, etc., 772. Yeager v. Scrantou, etc., Bank, 160. Yeager v. Wallace, 1428, 1431. Yeaton v. Eagle, etc., Co., 417. Yeaton v. United States, 294. Yelland's Case, 524. Yellow, etc., Co. v. Stevenson, 1077, 1082, 1120. Yellow, etc., Co. v. Wood Co., 1600. Yerkes v. Saloman, 469, 472, 476. Yetts v. Norfolk R'y Co., 165, 1539. Yoebel v. Wolf, 652. Yoeland, etc., Re, 335. Yolo, Bank of, v. Weaver. 305, 1068. York v. Passaic, etc., Co., 464. York & C. R. R, Co. v. Pratt, 223. York & Maryland L. R R Co. v. Wi- nans. 1535. York & North Midi. R'y Co. v. Queen, 886. York Co. v. Central R R, 1537. York County v. Small, 1057. York, etc., Co., Re, 415. York, etc., R'y Co. v. Hudson, 922, 1540. York, etc., R R Co. v. Ritchie, 178, 1071. York Tramways v. Willows, 171. Youghiogheny Shaft Co. v. Evans, 271, 283. Young v. Clarendon Township, 143. Young v. Drake, 1142. 1151. Young v. Erie Iron Co., 48, 81, 83. Young v. Farwell, 294. Young v. Fox, 482. Young v. Harrison, 1577. Young v. M'Kay, 345. Young v. Montgomery, etc., R R, 1247, 1276, 1278, 1299, 1314, 1349, 1419, 1420. Young v. Moses, 891. Young v. New York & Liverpool Steam- ship Co., 259. Young v. Northern, etc., Iron Co., 1367. TABLE OF CASES. CCVll [27ic references are Young v. Providence, etc., Co., 1171. Young v. Rollins, 963. Young v. Rondout, etc., Co., 784, 1154, 1498. Young v. Rosenbaum, 280, 285, 286. Young v. South, etc., Iron Co., 615. 621. Young v. Toledo, etc., R R, 806,, 1494, 1506. Young v. Towere, 1164. Young v. Vough, 687, 692, 698, 700, 701. Young v. Wempe, 287. Young, Ex parte, 472, 474, 476. Youngblood v. Georgia Imp. Co., 634, 639. ' Youngman v. Elmira, etc., R R, 1280, 1321, 1381, 1513. Younkin v. Collier, 584, 624. z. Zabriskie v. Cleveland, C. & C. R R Co., 74, 423, 634, 801, 1108, 1130, 1139, 1213, 1244, 1247. to the foot-paging.'] Zabriskie v. Hackensack & N. Y R. R Co., 627, 631, 636, 637, 640, 858, 1130. Zabriskie v. Railroad Co., 132. Zack v. Pennsylvania R R Co., 1524. Zambrino v. Galveston, etc., R'y Co., 1179. Zanesville v. Zanesville, etc., Co., 1582. Zanesville, etc., Co. v. Zanesville. 1582. Zebley v. Farmers', etc., Co., 1468. 1474. Zelaya Min. Co. v. Meyer, 50. Zihlman v. Cumberland Glass Co., 1068. Zimmer v. Schleehau", 278. Zimmer v. State, 1517, 1545. Zimmerman v. Jewett, 846. Zion Ch. v. St. Peter's Ch., 1166. Zirkel v. Joliet Opera House Co., 49, 217. Zoedone Co., Re, 47. Zuccani v. Nacupoi, etc., Co., 1474. Zulick v. Markbam, 510, 573. Zulueta's Claim, 337, 414, 416. STOCK AND STOCKHOLDERS, BONDS, MORTGAGES, AND GENERAL CORPORATION LAW. PART I. ISSUE OF AND LIABILITY ON STOCK. CHAPTER I. DEFINITIONS AND SCOPE OF THE WORK 1. Definition of corporation. 2. Definition of charters, general and special. 3. Definition of powers, express and implied. 4. The certificate of incorporation under the general act cannot legally contain any powers, re- strictions or provisions except those called for by the statute. 5. Mistakes, irregularities and illegali- ties in becoming incorporated. 6. A corporation is not a partnership ; but where the corporation is a mere " dummy," its existence is sometimes disregarded and its acts held to be the acts of its offi- cers and stockholders. §7. Classes of corporations and the class considered herein. Corporations having a capital stock. Definition of capital stock. Definitions of corporator, sub- scriber, shareholder and stock- holder. Relation of stockholders towards the corporation. Shares of stock defined — What law governs. Classes of stock. Certificates of stock. 15. Definition of bond, mortgage, deed of trust, debenture, articles of as- sociation, memoranda of associa- tion, scrip, certificate book, trans- fer book, stock ledger, underwrit- ing, founders' shares. 9. 10. 11. 12. 13. 14. § 1. Definition of corporation. — A corporation is an artificial person like the state. It is a distinct existence — an existence separate from that of its stockholders and directors. Chief Justice Marshall, in the Dartmouth College Case, 1 defined a corporation as 1 Dartmouth College v. Woodward, 4 Wheat., 518, 636 (1819). The supreme court of the United States has said that " An incorporated company is an association of individ- (1) uals, acting as a single person and by their corporate name ; " and again. " Private corporations are but associa- tions of individuals united for some com- mon purpose, and permitted by the law §2.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. " an artificial being, invisible, intangible, and existing only in con- templation of law." A corporation can be created by or under legislative enactment, and by that alone. 1 § 2. Definition of charters, general and special— A charter is the instrument which creates the corporation. It formerly was granted by the king. Later it was granted by an act of the legislature — a separate act being passed for each charter. At present the con- stitutions of many of the states require that in all possible cases the to use a common name, and to change its members without a dissolution of the association." United States v. Trin- idad Coal Co., 137 U. S., 160 (1890). The following cases give definitions of a corporation : Ohio Tns. Co. v. Nun- nemacher, 15 Ind., 295 (1860) ; Ohio, etc., R R Co. v. Wheeler, 1 Black (U. S.), 286, 295 (1861), per Taney, C. J. ; Board, etc., Tippecanoe Co. v. Lafayette, etc., R. R Co., 50 Ind., 85, 108 (1875) ; Rail- road Commissioners v. Portland, etc., R R Co., 63 Me., 269, 277 (1872) ; Thomp- son v. Waters, 25 Mich., 214, 223 (1872) ; Baltimore, etc., R R Co. V. Fifth Bap. Church, 108 U. S., 317, 330 (1882); Peo- ple v. Assessors of Watertown, 1 Hill, 616, 620 (1841); Thomas v. Dakin, 22 Wend., 9, 70, 104 (1839); Warner v. Beers, 23 Wend., 103, 123, 124 (1840); Head v. Providence Ins. Co., 2 Cranch (U. S. S. C), 127, 167 (1804); Bank of U. S. v. Deveaux, 5 Cranch, 61, 88 (1809), per Marshall, C. J. ; Louisville, etc., R. R Co. v. Letson, 2 How., 497, 552 (1844) ; 2 Kent, Com., 268 ; State v. Milwaukee, etc., R'y Co., 45 Wis., 579, 592 (1878). In Tippling v. Pexall, 2 Bulst., 233 (1613), "The opinion of Manhood, chief baron, was this, as touching corpora- tions : that they are invisible, immortal, and have no soul. A corporation is a body aggregate ; none can create souls but God ; but the king creates them, and therefore they have no souls." The domicile of a corporation is en- tirely distinct from the domicile of its officers or stockholders. Perry v. Round, etc., Assoc, 22 Hun, 293 (1880). See, also, cases in ch. XLV, infra, where the jurisdiction of the federal courts was at issue. It is well to state here that a joint- stock corporation and a joint-stock as- sociation are essentially different. Both have a capital stock, and both are man- aged by boards of officers and meetings of the stockholders. But a joint-stock company is unincorporated and is but a partnership. See ch. XXIX 1 Franklin Bridge Co. v. Wood, 14 Ga., 80 (1853); United States Trust Co. v. Brady, 20 Barb. 119 (1855); Penn. R R Co. v. Canal Com'rs, 21 Pa. St., 9 (1852); Stowe v. Flagg, 72 111., 397 (1874) ; Hoad- ley v. County, etc., Essex, 105 Mass., 519 (1870); State v. Bradford, 32 Vt, 50 (1859) ; McKirn v. Odom, 3 Bland's Ch. (Md.), 407, 417 (1829). In England certain colleges have power to create corporations. No such power exists in this country. Medical Inst v. Patterson, 1 Denio, 61 (1845). Congress has constitutional power to incorporate a bank. McCullough v. State of Md., 4 Wheat., 316 (1819). Con- gress may incorporate interstate rail- roads. California v. Pacific R R Co., 127 U. S., 1, 39 (1888). No particular form of words is requi- site to create a corporation. Denton v. Jackson, 2 John. Ch., 320 (1817). Yet a statute which seems to create a corpo- ration may be construed not to have that effect. See Walsh v. Trustees, etc., 96 N. Y., 427 (1884), holding that the trustees of the Brooklyn bridge are not a corporation, but that the property be- longs to the two cities of New York and Brooklyn. CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§2. legislature shall pass general acts whereby, by the simple filing of a prescribed instrument, persons may form a corporation without applying to the legislature at all. These general acts specify the contents of the instrument to be filed, and specify also the powers of the corporation. A charter is special where a special act of the legislature creates the corporation. A charter is under the general act when it consists of a certificate of incorporation filed with the public authorities in accordance with a general act of the legislature allowing corporations to be formed in that manner. The general laws of the state apply to a corporation organized under a special act so far only as the former are consistent with the latter. 1 1 The provisions of the general statutes relative to corporations are not appli- cable to a special charter so far as the provisions of the special charter seem to be inconsistent with those of the gen- eral statutes. See State v. Bowen, 30 Barb., 24 ; affirmed on other points, 21 N. Y., 517; also Hollis v. Drew, etc., Seminary, 95 N. Y., 166, 173; Lefevre v. Lefevre, 59 N. Y, 434 ; Clarkson v. Hud- son River R R Co., 12 N. Y., 304 ; John- son v. Hudson River R. R. Co., 49 N. Y, 455 ; Burroughs v. Burroughs, 68 N. Y., 259. A general statute reserving the power to amend or repeal charters is a part of all special charters passed subsequently. Griffin v. Kentucky Ins. Co., 3 Bush (Ky.), 592 ; approved in Louisville Water Co. v. Clark, 143 U. S., 1 (1892). The charter of a company formed under the general law consists not only of its articles of association, but also of the general statutes of the state under which the organization takes place. People v. Chicago Gas T. Co., 22 N. E. Rep., 798 (111., 1889). " Corporations organized under the general law are vested with the powers conferred by the general act, and those contemplated by the certificate, and such incidental powers with respect to the general and special powers as are necessary, in the sense of convenient, reasonable and proper." Ellerman v. Chicago Junction, etc., Co. et al., 23 Atl. Rep., 287 (N. J., 1891). Special powers may be given to an old corporation although a new constitu- tion prohibits special charters. Wallace v. Loomis, 97 U. S., 146 (1877). Although a constitutional provision requires incorporations under general acts if at all, yet an old charter existing prior to the constitutional provision may be amended by the legislature after such constitutional provision. Farns- worth v. Lime Rock, etc. ; R R, 22 Atl. Rep., 373 (Me., 1891). An old special charter may be amended although a new constitution forbids the grant of special charters. St. Joseph, etc., R. R. v. Shambaugh, 17 S. W. Rep., 581 (Mo., 1891). Concerning the abuses which grow out of the granting of special charters, see Cook on The Corporation Problem, pp. 110-113. In New York the legislature is to decide whether a special or general in- corporation law shall be enacted. Peo- ple v. Bowen, 21 N. Y, 516 (1860); Gil- bert El. R. R Co., 70 N. Y. 361 (1877 1 A charter cannot be sold, mortgaged or assigned, although the property and power to operate the property may be. See Part VI, infra. In the case Citizens' Bank v. Board of Assessors, 54 Fed. Rep., 73 (1893), the court held that the acceptance by the corporation of an act which compelled the corporation to accept the terms of a new constitution did not have that effect In the case Citizens' St R Co. v. Mem- phis, 53 Fed. Rep., 715 (1893), the court 3 § 3.J DEFINITIONS AND SCOPE OF THE WORK. [CH. I. The state creates the corporation upon the application of indi- viduals, who are called incorporators. The incorporators then organize the corporation. The functions of the incorporators there- upon cease and stockholders proceed to contribute the capital and elect directors. The directors then start and continue to keep in operation the powers of the corporation. § 3. Definition of powers, express and implied. — The powers of the corporation are given by the charter, and these powers are ex- press or implied. The express powers are those which are expressly specified in the charter or the statutes under which the corporation was incor- porated. The implied powers of a corporation are those which naturally arise from the nature of the business. Thus a corporation has im- plied power to buy, hold and sell necessary real estate and other property in its corporate name; to sue and be sued in that name; to do business in its corporate name without rendering its stock- holders liable as partners for its debts ; to govern its officers, agents and business by by-laws ; to issue transferable shares of stock to its stockholders; to have its business managed by directors instead of by the stockholders as in a partnership; to continue business although its stockholders die or sell their stock; to borrow money and give bills, notes and acceptances ; to issue negotiable bonds ; to assign for the benefit of creditors ; and, except in quasi-\mb\\c cor- porations, such as railroads, to give a mortgage. 1 held that a charter granted without the 278, n., adds : (6) The power to expel reserved right to amend or repeal did members. 1 Kyd on Corp., 13, 69. 70, not become subject to the right to has a different summary of incidents, amend or repeal, although it had en- The greatest and most vital features tered into a consolidation after a con- of modern corporations, however,— stitutional provision was passed re- features that have become prominent serving this right in all cases. The since those authors wrote,— and the consolidation was held not to have dis- features that have rendered possible the solved the old corporation. universal use and great achievements 1 The definition of a corporation of corporations, are two in number : throws some light upon its nature, but (1) The limited liability conferred, by a still clearer idea is obtained by consid- implication, by the granting of a char- ering the inherent powers of corpora- ter. (2) The right of the corporation to tion. 1 Blackstone's Com., 475, says that issue shares of stock and the right of the inseparable incidents or powers of the members to transfer them, all corporations aggregate are : (1) To A corporate franchise may mean have perpetual succession. (2) To sue either the power to act as a corporation, and be sued, and grant and receive in or may mean the right which a corpo- the corporate name. (3) To purchase ration has to operate a franchise, such and hold lands and chattels. (4) To as a railroad's right of way. The for- have a common seal. (5) To make by- mer is not property. It is not an ele- laws. Chancellor Kent, in II Com., ment of value in estimating the value CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§3. The theory of a corporation is that it has no powers except those expressly given or necessarily implied. But this theory is no longer strictly applied to private corporations. A private corpo- ration may exercise many extraordinary powers, provided all of its stockholders assent and none of its creditors are injured. There is no one to complain except the state, and the business being en- tirely private the state does not interfere. Thus fifty years ago the courts would summarilv have declared it illegal for a business corporation to become an accommodation indorser of commercial paper. But to-day if all the stockholders assent thereto and cred- itors are not injured, such an act is held to be legal. 1 Again the old theory of a corporation was that it could not give away its assets. But the modern view is that a private corpora- tion may do so if all its stockholders assent and if creditors are paid. Public policy does not require business corporations to con- fine themselves strictly to their express and implied powers. 2 In the case of railroad corporations, however, public policy does intervene and does limit the implied powers. A railroad com- pany has no implied power to sell, lease or mortgage its road, or to charge such rates for service as it sees fit, or to charge one man more than another for the same service. 3 of the majority of the stock. Johnson v. Kirby, 65 Cal., 482 (1884). It is not an asset. A bank franchise does not pass to its assignee for the benefit of credit- ors, and the court will deny his applica- tion to sell it. Fietsam v. Hay, 13 N. E. Rep., 501 (111., 1887). For various defini- tions of franchise, see Wait on Insolvent Corporations, § 12. It has been said that the essence of a corporation consists of a capacity (1) to have perpetual succession under a spe- cial name and in an artificial form ; (2) to take and grant property, contract obligations, sue and be sued, by its cor- porate name as an individual ; and (3) to receive and enjoy in common grants of privileges and immunities. Thomas v. Dakin, 22 Wend., 1. The supreme court of Illinois, speaking of the above, says : "The first two describe the franchises which belong to the incorporators ; the last those which belong to the corpora- tion." Snell v. Chicago, 24 N. E. Rep., 532 (111., 1890). » See § 774, infra. 2 The New York court of appeals said in the case Kent v. Quicksilver Mining Co., 78 N. Y. 159, 186 : " A bank has no authority from the state to engage in benevolent enterprises ; and a subscrip- tion, though formally made, for a char- itable object would be out of its pow- ers ; but it would not be otherwise an illegal act ; yet if every stockholder did expressly assent to such an application of the corporate funds, though it would still be in one sense ultra vires, no wrong would bedone, no public interest harmed ; and no stockholder could object, or claim that there was an infringement of his rights, and have redress or protection. Such an act, though beyond the power given by the charter, unless expresly prohibited, if confirmed by the stock- holders could not be avoided by any of them to the harm of third persons. This arises from the principle that the trust for stockholders is not of a public nature." See also § 774. 3 See Part VI, infra. § 4.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. " Every public grant of property, or of privileges or franchises, if ambiguous, is to be construed against the grantee and in favor of the public," and especially so as regards corporations organized under general laws. 1 § 4. The certificate of incorporation under the general act cannot legally contain any powers, restrictions or provisions except those called for by the statute.— Frequently the incorporators desire to obtain more powers than the statute specifies, or to restrict unal- terably some of the powers possessed by the corporations, or to regulate in some unalterable way the business of the company. For the purpose of doing so they insert in the certificate of incor- poration under the general act special provisions not called for by the act which authorizes the incorporation. The law is clear that the articles of association of a corporation organized under a general act are allowed to contain only those matters and statements which are required by the statute itself. The incorporators are not at liberty to insert additional provisions and regulations. If such additional provisions and regulations are inserted they are void. The law does not recognize them. They do not constitute a part of the charter, but are rejected as surplus- age and extraneous matter. If the articles of association contain the matters required by the statute and also contain additional matters, the former are sufficient to sustain the charter, and the additional matter does not vitiate the legitimate part of the articles, but the additional matter is disregarded by the law as though it had not been written. All of the decisions hold that any state- ments of restrictions inserted in the articles of association, outside of the statements required by the general act allowing the incor- poration, are unauthorized and void. 2 In New York, New Jersey and under the National Banking Act i Central Trans. Co. v. Pullman's Car Crary, 418 (1880); Ancient Club v. Mil- Co., 139 U. S., 24, 49 (1891). ler, 7 Lansing, 412 ; People v. Utica Ins. 2 Eastern Plank Road Co. v. Vaughan, Co., 15 Johns., 358 (1818). 14 N. Y., 546 (1856) ; Oregon R'y Co. v. A provision cannot be included in a Oregonian R'y Co., 130 U. S., 1, 25 charter under the general act, whereby (1889) ; Albright v. Lafayette, etc., Asso- stockholders are to vote according to ciation, 102 Pa. St., 411 (1883) ; Becket v. their stock. Commonwealth v. Nicker- Uniontown, etc., Assoc, 88 id., 211 ; son, 10 Phil., 55 (1873). Grangers', etc., Ins. Co. v. Kamper, 73 For many decisions on this subject Ala., 325; Thomas v. Railroad Co., 101 see ch. XIII, §§ 231-234, notes. U. S., 71 (1879); Penn. R. R. Co. v. St. The by-laws cannot modify the articles Louis, etc., R. R. Co., 118 U. S., 290, 307 of incorporaton in any of the particulars (1886) ; Bigelow v. Gregory, 73 111., 197 ; required by statute to be stated in the Rochester Ins. Co. v. Martin, 13 Minn., articles of incorporation. Guinness v. 54 ; Western U. T. Co. v. U. P. R'y, 1 Mc- Land Corp., L R, 22 Ch. D., 349 (1882). 6 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§5- such special provisions are allowed, 1 and a broad public policy fa- vors the allowance of them, but under the usual general incorporat- ing act they are void. The certificate of incorporation may, however, provide that the business shall be two or more of the kinds of business which are authorized by the statute. 2 § 5. Mistakes, irregularities and illcfjalities in lecoming incorpo- rated. — Often it happens that mistakes are made in organizing a corporation. The certificate of incorporation may be defective, or it may not be filed or published as required by the statutes, or the corporation itself may be irregularly organized thereafter. Com- plicated questions then arise as to the rights and liabilities of the various parties. Stockholders cannot set up such irregularities as a defense to an action by the corporation to enforce their subscriptions to stock. 3 Corporate creditors cannot hold the stockholders liable as partners by reason of the irregular incorporation. 4 Indeed, the general rule now is, with few exceptions, that no one can question Concerning the advisability of allow- ing the incorporators to insert provis- ions in the articles of incorporation restricting and regulating the powers of the corporation or directors or stock- holders, see Cook on the Corporation Problem, pp. 90. 91. In incorporating under the general act no powers can be placed in the arti- cles of incorporation except such powers as the general act authorizes. People v. Chicago Gas L. Co., 22 N. E. Rep., 798 (111., 1889). Where a land company is incorporated under the general act, and the general act does not provide for any statement in the articles of association as regards the amount of debts which the corpora- tion may incur, a provision inserted in the articles of association that " the in- debtedness of the company shall not ex- ceed $500 at any time " is not a part of the charter. The provision is at the most merely a by-law. The court said : "We think that the limitation of $500 in the charter of the corporation cannot be regarded of any more force than a by-law/' Sherman, etc., Co. v. Morris. 2:1 Pac. Rep., 5G9 (Kan.. 1890). A provision in the charter that the stock shall be divided in a certain way is binding upon the corporation so far as it is concerned, and upon the parties thereto, but may be contradicted by other evidence of what the agreement really was. Bates v. Wilson, 24 Pac. Rep., 99 (Colo., 1890). Provisions for internal management should not appear in a charter. In re The Stevedores' Beneficial Association. 14 Phila. Rep., 130 ; Re M. E. Patterson Memorial Church, 41 Leg. Int., 253 ; Re St. Luke's Church, id., 74 ; Re Central Democratic Ass'n, 46 Leg. Int, 380; Boos' Appeal, 109 Pa. St., 596. 1 See Part VI, infra; also, Society, etc., v. Meyer, 52 Pa. St., 125. 2 Bird v. Daggett, 97 Mass., 494 (1867). A statement in the articles of incor- poration that the company may carry on such business as it thinks to be for the benefit of the stockholders is void. Re Crown, etc., Bank, 62 L.T. Rep., 823 (1890). Charters for enumerated objects "and other purposes " will be rejected. In re Journalists' Fund, 8 Phila. Rep., 272. So as to mining for "minerals." Re Glenwood Co., 6 Pa Co. Ct Rep., 575. 3 See § 183. infra. 4 See §§ 231-239, infra. 6.] DEFINITIONS AND SCOPE OF THE WORK. [CH. the regularity of the incorporation except the state, where the statutes allow incorporation and the company has endeavored to incorporate and is acting as a corporation. 1 But where the pur- pose for which the corporation is organized is illegal or not speci- fied in the act authorizing the incorporation, then the rule is dif- ferent. 2 § 6. A corporation is not a partnership; out where the corpora- tion is a mere "dummy,'"' its existence is sometimes disregarded and its acts held to oe the acts of its officers and stockholders. — A corporation is an entity and existence separate from its officers and stockholders. And the inclination of some writers to assimilate a corporation as nearly as possible to a partnership and to apply to the former the rules applicable to the latter leads only to con- fusion and is contrary to the law. 3 The difference between a corporation and a partnership and the advantages of a corporation over a partnership as a means of doing business are very marked and should not be limited by construc- tion. 4 i See § 637, infra. 2 See chapter XIII, infra. The organization of a company to carry on the lottery business in foreign countries was held legal in Macuee v. Persian, etc., Corp., 62 L. T. Rep., 894 (1890). 3 The house of lords in England has pointed out the fact that there is no real analogy between an ordinary partner- ship and a corporation. Birch v. Crop- per, 61 L. T. Rep., 621 (1889), refusing to apply the analogy and saying that to apply it would in the case before it " work inequality and injustice and not equity." A trading corporation is governed by the ordinary rules of partnership, ex- cept so far as special conditions may be inserted into their constitution by the legislature or by their own articles of association. Oakes v. Turquand, L. R., 2 H. L., 325, as referred to in Whiting v. Hovey, 13 Ont. App. Cas., 7 (1886). In speaking of the fact that decisions concerning municipal corporations and the powers of their officers are not at all applicable to private corporations. Chief Justice Ruger, in Wallace v. Walsh, 125 N. Y., 26, 36 (1890), said : "It is manifest that no analogy exists between the action of a body of men invested with the exercise of political power under special conditions, and the action of the trustees of a private cor- poration in the conduct of its ordinary business operations. The one relates to the execution of powers, and the other to the performance of duties and the en- joyment of privileges. The one is con- trolled by the principles governing the relations of principal and agent, and the other to the general rules regulating the consequences following a neglect or dis- obedience of the requirements of stat- utes affecting private relations. In the one case the question as to what is a good execution of a power is involved, and in the other as to what may be con- sidered an adequate performance of a duty. These questions are manifestly controlled by different rules, and that which is required in one is not an authority for the requirements of the other.''' 4 In his work on The Corporation Prob- lem, pp. 2, 3, the author describes these differences as follows : " The partnership has been found to be clumsy, dangerous and insufficient. 8 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§6. A corporation is an entity, an existence, irrespective of the per- sons who own all its stock. The fact that one person owns all the stock does not make him and the corporation one and the same person. 1 Although one railroad corporation owns all the stock of another railroad corporation, yet the separate existence of the two corporations continues and they are not thereby merged. 2 If unsuccessful it brings ruin upon all of its members, because each partner is liable absolutely for all debts. Any mem- ber may bind the firm by his contract and each one has an equal voice in de- ciding its policy. Its capital and credit, and consequently its amount of busi- ness, are limited necessarily by the capi- tal and credit of a very few men — the members themselves. The death of a member or the transfer of his interest dissolves the firm. Any member may arbitrarily cause a dissolution at any time, and the insolvency of a member renders the partnership property sub- ject to levy of execution for his debt. Upon the death of a partner the surviv- ing partners have the sole charge of wind- ing up the business, and the executor of the deceased partner is not allowed to come in. A partner may withdraw his money only at a sacrifice, or by long and expensive proceedings. He cannot conveniently sell his interest or borrow money upon it. New partners cannot readily or safely be admitted. "The partnership is restricted in its capital, dangerous in its liabilities, nar- row in its exclusion of new members, too free in its mode of making con- tracts, and too contracted in its oppor- tunities for withdrawal. It is becoming obsolete as a mode of doing business on a large scale. " In a corporation all this is changed. The members are not liable for the debts. The amount already invested may be lost, but the private fortunes of the stockholders are not involved. The business is done and contracts made not by all, but by a select few, called direct- ors. A large capital is created by the union of funds from many sources. A person may safely invest in many en- terprises and yet not take part in the management nor watch the business of any one of them. The leading spirit in an enterprise may hold a majority of the stock and may admit associates, em- ployees or strangers as holders of a minority of the stock, and yet he will retain the management as though he were the single owner of the concern. Persons may easily buy into or retire from the enterprise. Dissolution is not brought about by the death or with- drawal or dissatisfaction of a stock- holder. The insolvency of a stockholder does not affect the business of the cor- poration. Upon the death of a stock- holder his executor votes his stock and has a voice in the continuation of the business. A stockholder may sell or pledge his interest readily and intelli- gibly by reason of the reports, dividends and market quotations of his stock. The corporation is a protection in that the liability is limited ; it is capable in that it renders possible the collection of a great capital; it is efficient because the directors and they alone govern its policy and its contracts ; and it is con- venient because it is easy to sell or buy or pledge, or bequeath ones interest ir the concern." i § 709, infra. - Although one railroad owns or con- trols all the stock of another railroad, yet the former is not personally liable for the negligence, debts, etc., of the latter. Atchison, etc., R. R v. Cochran, 23 Pac. Rep., 151 (Kan., 1890). A railroad company owning all the stock and bonds of another company does not own the property of the latter and cannot sue on a cause of action be- 9 6.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. Not only is the identity of the corporation preserved as distinct from its stockholders, but it is also distinct from its promoters, in- corporators and antecedents. It is not liable on the contracts and obligations of its promoters. 1 Nor is it liable for the debts of a prior corporation to whose property it succeeds by foreclosure sale. 2 "Where a partnership or a corporation is merged into another cor- poration, the creditors of the former may pursue the property but they cannot hold the corporation liable for the debt, 3 unless the latter took with such notice that it may be held to account. 4 But there are occasions where the courts will ignore the corpo- rate existence and will hold that its acts are the acts of its stock- holders and vice versa the same as in a partnership. Thus where an individual organizes a corporation to violate a contract which longing to the latter. Fitzgerald v. Mis- souri P. R'y, 45 Fed. Rep., 812 (1891). Where one corporation owns all the stock of another corporation, the prop- erty of the latter is not subject to a mortgage given by the former, but an independent first mortgage may be given by the latter company. Central T. Co. uKneeland, 138 U. S., 414 (1891). A bridge owned by a bridge corpora- tion is not to be taxed as railroad prop- erty, even though its stock is owned by the stockholders in a railroad corpora- tion, and the stock has been pledged to such railroad corporation and the bridge itself leased to the latter. St. Louis, etc., R'y v. Williams, 13 S. W. Rep., 796 (Ark., 1890). Although a new railroad corporation is clearly a " dummy " corporation, its incorporators and officers being officers in another railroad corporation and its expenses being paid by the latter com- pany, still it is a legal corporation. Southern Kan., etc., R R v. Towner, 21 Pac. Rep., 221 (Kan., 1889); 23 id., 151. The fact that one corporation owns a large amount of stock in another corpo- ration does not affect the identity of the two. Ex parte Fisher, 20 S. C, 179 (1882). As to the power of one corporation to buy the stock of other corporations, see §§ 315-317, infra. Concerning the lia- bility, see, also, § 643, infra. But in Nebraska a " dummy " domes- tic corporation cannot condemn land for a foreign corporation. Koenig v. Chicago, etc., R R, 43 N. W. Rep., 433 (Neb., 1889). A railroad company owning practi- cally all the stock of another company may lease the line of the latter company to another company. Chicago, etc., R'y v. Union Pac. R'y, 47 Fed. Rep., 15 (1891). Where a railroad company causes a telegraph company to be incorporated and subscribes to all its stock and ap- points all its officers and holds it out as the future owner of a telegraph system which the railroad owns, and then sells that system to someone else, a person contracting witli the telegraph com- pany on the faith of the scheme being carried out may hold the railroad com- pany liable on the contract on the prin- ciple of a principal being liable on the contracts of its agent Interstate Tel. Co. v. Bait. & O. T. Co., 51 Fed. Rep., 49 (1892). A domestic corporation cannot obtain a patent to a mining claim under the federal statutes, unless all of its stock- holders are citizens of the United States, and are severally and individually quali- fied and competent to make the location. Thomas v. Chisholm, 21 Pac. Rep., 1019 (Colo., 1889). See, also, chs. 13, 38, 39, 43. i See § 707, infra. 2 See§643, infra. 3 See § 667, infra, and ch. II. * See § 727, infra. 10 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 7. he himself would not be allowed to violate, the court will enjoin the corporation as though it were the person himself. 1 So, also, where a director causes the corporation to give a valuable contract to a corporation in which he is secretly interested, this is the same as though he were interested in a firm which received that con- tract. 2 This same principle applies to trade combinations of corpora- tions called "Trusts." 3 The corporate existence will be disre- garded and the acts and contracts of the persons holding all the stock will be considered the acts and contracts of the corporation itself where the effect is the same as though the corporation had acted or contracted as a corporation. Hence where all the stock is combined with all the stock of other combinations in order to form a combination which is illegal, the state will forfeit the char- ter of the corporation, although technically it is not a party to the agreement. 4 § 7. Classes of corporations and the class considered lierein. — For the better understanding of the law of corporations, and for the treatment of special branches of that law, the early writers, like Kyd, Blackstone, Kent, Angell and Ames, and many subse- quent authors, subdivided corporations into distinct classes. These subdivisions have been made on various principles of classification. When divided with respect to the members of corporations they are aggregate and sole. As regards their functions they are public, such as cities and towns; quasi-^whWc, such as counties and school districts; and private; and again private corporations are divided into ecclesiastical and lay ; and still further, lay corporations are divided into eleemosynary or charitable, and civil, the latter of which include all private corporations that are created for tem- poral purposes, such as banking, insurance, trading, railroad, man- ufacturing, turnpike, bridge and canal corporations, and certain educational institutions. 5 i See ch. XXXIX, infra. Co., 3 Out, 284, and again in the case of 2 id. The Pittsburgh & Lake Erie Railroad 3 Seech. XXIX, infra. Co. v. Bruce, 6 Out, 23. ... So in *Id. ; also, State v. Standard Oil Co., the case of The Trustees of the Presby- 30 N. E. Rep., 279 (Ohio, 1892;. terian Society v. The Auburn & Roch- 5 Concerning the question of whether ester Railroad Co., 3 Hill, 567, it is said a railroad company is a private corpo- that a railroad company is not public, ration, the court said in Pierce v. Com- nor does it stand in the place of the monwealth, 104 Pa. St., 155 (1883) : public ; it is but a private corporation "Railroad and canal companies are over whose rails ihe public may travel private corporations. This we have de- if they choose to ride in its cars. In- cided in point twice within the last two deed, we regard it as a misnomer to at- years; once in the case of Timlow v. tach even the name ' guast-public cor- The Philadelphia & Reading Railroad poration ' to a railroad company, for it 11 § 7.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. A domestic corporation is one that has been organized under the laws of the state referred to. A foreign corporation is one that has been organized under the laws of another state or of a foreign government. An alien corporation is one that has been organized under the laws of a foreign government. 1 At an early day private corporations for business purposes were few in number and of little importance in the law. Chancellor Bland states that no instance of such a corporation in the colonial times of America can be found. 2 In England, also, at that time, private corporations for profit were of small consequence. But the past seventy-five years have completely reversed the relative im- portance of the different classes of corporations, and, at the present time, private corporations for temporal purposes have completely overshadowed all other kinds. With this change there is a decided tendency to re-classify the sub- ject, and the modern treatises on corporation law have recognized the fact that old classifications are to be disregarded, and that cor- porations are to be divided into joint-stock corporations, or those having a capital stock, and corporations without a capital stock. Indeed, the modern text-books on corporations treat very little of the older classes of corporations and the principles w T hich govern them, but fully and explicitly of corporations having a capital stock. This change is due largely to the remarkable growth of the law regulating the one prominent difference between the two classes. That feature is that corporations with a capital stock have stock and stockholders, while corporations without a capital stock have none, and are governed largely by principles of law that have changed little since the days of Blackstone, Kyd and Kent. It is with this feature of modern corporations, that of stock and stock- holders, as distinguished from the characteristics of the early cor- porations, which have sunk into comparative unimportance, 3 that the present work is concerned. has none of the features of such corpo- 1 An English corporation is an alien rations, if we except its qualified right corporation. Eureka, etc., Co. v. Rich- of eminent domain, and this it has be- mond, etc., Co., 2 Fed. Rep., 829 (1880). cause of the right reserved to the public The residence of a corporation is the to use its way for travel and transporta- town or city specified in its articles of tion. Its officers are not public officers, incorporation. Rossie Iron "Works v. and its business transactions are as pri- Westbrook, 59 Hun, 345 (1891). ' vate as those of a banking house. Its 2 McKim v. Odoni, 3 Bland's Ch. (Md.), road may be called a gttasf-public high- 407, 418 (1828). For a list of the first way, but the company itself is a private incorporated business companies in corporation and nothing more." America, see Harvard Law Review, A mining and manufacturing corpo- Nov. 1888, p. 165. ration is a private corporation. Wolffe 3 The subject of municipal corpora- te. Underwood, 8 S. Rep., 774 (Ala.. 1891). tions would seem to form an exception 12 OH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§§ S, 9. § 8. Corporations having a capital stock — The questions which arise in connection with corporations having a capital stock may be divided into two groups. The first includes those principles of law which affect all corporations, whether they have a capital stock or not. Of such a kind are the old questions of how a cor- poration shall contract; whether a seal be necessary; whether and how it may act through an agent; the right to sue and be sued in various courts ; and to hold and dispose of property. These ques- tions, capacities and incidents, for the most part, have become so well settled as to give rise to comparatively little litigation at the present day. 1 On the other hand, it is believed that the modern law of corpo- rations, as regards its litigated questions, its unsettled principles, its new problems and its rapidly crystallizing results, is the law of stock and stockholders. This law involves the issue of stock and the rights, duties, liabilities and miscellaneous incidents of stock- holdership. Indeed, it may be said that the law of stock and stock- holders is the proper standpoint from which to treat of general corporation law. It is upon this theory that the present edition of this work has been written. 2 § 9. Definition of capital stock.— Capital stock is the sum fixed by the corporate charter as the amount paid in or to be paid in by the stockholders for the prosecution of the business of the corpora- tion and for the benefit of corporate creditors. 3 The capital stock is to be clearly distinguished from the amount of property pos- to this statement, were it not that the 143, 146 (1881); Mutual Ins. Co. v. Su- great and deservedly successful work of pervisors, etc., 4 N. Y., 442 (1851) ; Judge Dillon on Municipal Corporations Bailey v. Clark, 21 Wall., 2S4 (1874), has clearly stated, and thereby settled, where Field, J., says " it applies only most of the difficult subjects connected to the property or means contributed by with that branch of the law. the stockholders as the fund or basis for i The first edition of this treatise did the business or enterprise for which the not include these subjects. The pres- corporation or association was formed." ent edition, however, has been extended Jones v. Davis, 35 O. St., 474, 476J1880) ; so as to include all subjects of corpora- Burrall v. Bushwick R R. Co., 75 N. Y., tion ] aw . 211 (1878), where Folger. J., defines it as 2 See the preface for an explanation " that money or property which is put of the author's ideas on this subject. in a single corporate fund by those who, 3 For various definitions see Barry v. by subscription therefor, become mem- Merchants' Ex. Co., 1 Sand. Ch., 280, bers of a corporate body." Williams v. 305 (1844) ; Christensen v. Eno, 106 N. Y, Western Union Tel. Co., 93 N. Y, 162, 97, 100 (1887) ; Hightower v. Thornton, 188 (1883), where Earl, J., tersely says 8 Ga., 486, 500 (1850); Hanuibal & St. it is "the property of the corporation Joseph R R. Co. v. Shacklett, 30 Mo., contributed by its stockholders or other- 551. 558 (I860) ; St. Louis, Iron M., wise obtained by it, to the extent re- etc, R R Co. v. Loftin, 30 Ark., 693, quired by its charter." Sanger v. Up- 709(1875); Bent v. Hart, 10 Mo. App., ton, 91 U. S., 56, 60 (1875); State v. 13 §io.] DEFINITIONS AND SCOPE OF THE WORK. [CH. sessed by the corporation. Occasionally it happens that, under the terms of statutes relating to taxation which have been drawn without regard to the technical meaning of words, the courts will construe the capital stock to mean all the actual property of the corporation. 1 But this is for the purpose of carrying out the intent of the statute, and is not the real meaning of the term. At com- mon law the capital stock does not vary, but remains fixed, although the actual property of the corporation may fluctuate widely in value and may be diminished by losses or increased by gains. The term "stock" 2 has been used at times to indicate the same thing as capital stock. Generally, however, it means shares of stock, and in this sense it is used in this treatise. § 10. Definitions oj corporator, subscriber, shareholder and stock- holder. — A corporator is one of those to whom a charter is granted, or of those who file a certificate of incorporation under a general incorporating statute. 3 A subscriber is one who has agreed to Morristown Fire Ass'n, 23 N. J. L, 195 ; State v. Cheraw & C. R. R. Co., 16 S. C, 524 (1881). A savings bank corporation may be formed without any capital stock, the profits going to depositors. Huntington v. Sav. Bank, 96 U. S., 388 (1877). Such is the statute law of New York. The word " capital " has been defined as " the property or means contributed by the stockholders as the fund or basis for the business or enterprise for which the corporation was formed." Iron R'y v. Lawrence, etc., Co., 30 N. E. Rep., 616 (Ohio, 1892). Definition of capital stock. People v. Coleman, 126 N. Y., 433 (1891). "Capital stock of a corporation is a different thing from shai-es of stock. The capital stock represents the prop- erty and assets of the company, which may consist in whole or in part of real estate. The certificates or shares of stock are the evidence of an interest which the holder has in the corporation, and it is well settled that this interest is personal property." "Wilkes Barre, etc., Bank v. City of Wilkes Barre, 24 AtL Rep., Ill (Pa., 1892). Where the charter prescribes that the debts shall not exceed one-half of the capital stock, capital stock means the paid-in capital stock and not the capi- tal stock as stated in the charter. Le- high, etc., R'y Co.'s Appeal, 18 Atl. Rep., 498 (Pa.. 1889). 1 Ohio & M. R R. Co. v. Weber, 96 111., 443 (1880) ; City of Philadelphia v. Ridge Ave. R. R Co., 102 Penn. St., 190 (1880) ; Security Co. r. Hartford, 23 Atl. Rep., 699 (Conn., 1891). 2 Burr v. Wilcox, 22 N. Y, 551, 555 (1860) ; People v. Commissioners, etc., 23 N. Y, 192, 220 (1861) ; Bailey v. Railroad Co., 22 Wall, 604, 637 (1874). Formerly government bonds were called "stock," both in England and in this country. Bank of Commerce v. New York, 2 Black, 620 (1862); Weston v. City of Charleston, 2 Pet, 449 (1829); Cava- nagh's Law of Money Securities (2d ed.), 488-494. This use of the term still pre- vails in England, but is generally obso- lete in this country, although the se- curities of the city of New York are still called " stock." In tax statutes. " stock " may be de- fined to mean shares of stock. Lock- port v. Weston, 23 Atl. Rep., 9 (Conn., 1891). 3 Chase v. Lord, 77 N. Y, 1-11 (1879), the court saying: "Corporators exist before stockholders, and do not exist with them. When stockholders come 14 OH. I.] DEFINITIONS AND SCOPE OF - THE WORK. [§H. take stock from the corporation on the original issue of such stock. 1 A shareholder in this country means the same thing as a stock- holder, and the terms are used interchangeably to indicate one who owns stock in a corporation and has been accepted as a stock- holder by the corporation. 2 A stockholder does not stand in the attitude of a partner towards the corporation. § 11. Relation of stockholders towards the corporation. — A cor- poration may contract with its stockholders to the same extent and in the same manner that it may with any other persons. 3 in, corporators cease to be." Cf. Lady Bryan's Case, 1 Saw., 349. In Pennsyl- vania, under a peculiar statute, it has been held that the incorporators thereof need not be subscribers. See Densmore Oil Co. v. Densmore, 64 Penn. St., 43, 54 (1870). It has frequently been held that where a statute authorizes persons to form a corporation, although the statute does not, in express terms, say that they must be of full age, yet it is implied that they shall be of full age. Matter of Globe, etc., Assoc, 63 Hun, 263 (1892). Cf. 67 L. T. Rep.. 85. A married woman is not at common law qualified to act as an incorporator nor as treasurer. 9 Ry. & Corp. L. J., 107. A corporation is legally organized al- though the incorporators are not share- holders as required by statute. Welch v. Importers', etc., Bank, 122 N. Y., 177 (1890). 1 Busey v. Hooper, 35 Md., 15 ; Spear v. Crawford, 14 Wend., 20, 23. In The Thames Tunnel Company v. Sheldon, 6 Barn. & C, 341 (1827), the word " sub- scriber" is elaborately defined, and it is held to mean only such persons as have entered into an express contract to take up a certain definite number of shares. See, also, a definition at some length by Cooley, J., in Peninsular, etc., R R Co. v. Duncan, 28 Mich., 130 (1878). Subscribers are stockholders, although no certificates have been issued to them and no payments made. McComb v. Barcelona, etc., Assoc, 10 N. Y. Supp., 546 (1890). " It is the payment which makes the subscriber a stockholder." Bates v. Great Western Tel. Co., 25 N. E. Rep., 521 (111., 1890). A " subscription" for stock is differ- ent from a sale." A "subscription " ap- plies to an original issue. Bates v. Great Western Tel. Co., 25 N. E. Rep., 521 (III., 1890). 2 See Rosevelt v. Brown, 11 N. Y. 148, 150 (1854); State v. Ferris, 42 Conn., 560 (1875); Adderly v. Storm, 6 Hill 624 (1844); Worrall v. Judson, 5 Barb, 210 (1849). Where the registered holder is merely a nominal holder he will not be entitled to special privileges, such as free admission to a place of amuse- ment. Appeal of American Acad., etc. 108 Pa. St, 510 (1885). A person is held to be a stockholder, although no certificate has been issued to him. See § 192, infra. Moreover, he may be held to be a stockholder, al- though he has sold and transferred his certificate of stock, if such transfer has not been recorded on the corporate stock- book. See chapter XV. infra. * Hartford & N. H. R. R Co. r. Ken- nedy, 12 Conn., 499, 509 (1838); Gordon v. Preston, 1 Watts, 385 (1833); Cent nil R R, etc., Co. v. Claghorn, 1 Speers' Eq. (S. C), 545, 562 (1844). Thus, where one subscribed for stock and paid for it by mortgages payable at times mutually agreed upon between the parties, "this was merely a mode of payment." " He stands in two ca- pacities : one as debtor to the associa- tion, one as stockholder in it. These capacities are independent of each 15 §11.] DEFINITIONS AND SCOPE OF THE WORK. [CH. A stockholder, as a creditor of the corporation, may obtain secu- rity for his debt in exclusion of other creditors. 1 A stockholder has no legal title to the property or profits of the corporation until a dividend is declared, or a division made on the dissolution of the corporation. 2 He may sue the corporation or be sued by it, both at law and in equity. 3 However, he has a direct interest in the corporation, and at times may take the part of the corporation in prosecuting or defending its suits. 4 The stockholder is not liable for the debts of the corporation. 5 The admissions or declarations of stockholders do not bind the corporation ; 6 nor do the admissions of one stockholder bind an- other stockholder. 7 Notice to individual stockholders is not notice to the corporation, other." Ely v. Sprague, 1 Clark's Ch. (N. Y.), 351 (1840); Longley v. Stage Line Co., 23 Me., 39 (1843), holding that where a creditor consented, as a stock- holder, to the re-organization of the company which had become indebted to him under the former organization, lie had not thereby forfeited his right to recover from the newly-organized cor- poration, to which he had become a subscriber ; American Bank r. Baker, 4 Met. (Mass.), 164, 176 (1842), holding that a corporation vote to compromise certain securities to the detriment of a member who was also a creditor could not be regarded as consented to by him in his absence. 1 Reichwald v. Commercial Hotel Co., 106 111., 439 (1883). - 1 Hyatt v. Allen, 56 N. Y., 553 (1874); Jones v. Terre Haute, etc., R R. 57 N. Y.. 196 (1874); Brundage v. Brundage, 1 N. Y. Supr. (T. & C), 82 (1873); Good- win v. Hardy, 57 Me., 143(1869); Minot v. Paine, 99 Mass., 101 (1868); Granger v. Bassett, 98 Mass., 462 (1868); Phelps v. Farmers", etc., Bank, 26 Conn., 269 (1857) ; Burroughs v. N. C. R R Co., 67 N. C, 376 (1872) ; Curry v. Woodward, 44 Ala., 305 (1870) ; Lockhart v. Van Alstyne, 31 Mich.. 76, 78 (1875). See, also, ch. XXXII, on Dividends. 3 "VVariDg v. Cahawba Co., 2 Bay (S. C), 109 (1797), where this right of a stockholder was the question directly in litigation; Rogers v. Danby Univ. Soc, 19 Vt„ 187 (1847); Culberston V. Wabash Nav. Co., 4 McLean, 544 (1849) ; Peirce r. Partridge, 44 Mass., 44 (1841) ; Barnstead v. Empire Min. Co., 5 Cal. 299 (1855); Ex parte Booker, 18 Ark., 338 (1857); Sanborn v. Lefferts, 58 N. Y, 179 (1874) ; Cary v. Schoharie, etc., Co., 2 Hun, 110 (1874); Wausau, etc., Co. v. Plummer, 35 Wis., 274 ; Sawyer r. Methodist Ep. Soc, 18 Vt, 405 (1846) : Dunstan v. Imperial, etc., Co., 3 B. & Ad., 125 (1822); Gifford v. New Jersey, etc., Co., 2 Stock. Ch., 171 (1854); Sam- uel V. Holladay, 1 Woolw., 400, 418 (1869). A stockholder may collect his debt the same as other creditors. Lang v. Dougherty, 12 S. W. Rep., 29 (Tex., 1889). See, also, 30 Pac, Rep., 882. A stockholder who is also a director may nevertheless sue to compel his cor- poration to abate a nuisance. Leonard v. Spencer. 108 N. Y, 338 (1888). ♦Part IV is on this subject It is. however, a general rule that a stock- holder cannot usually come in as a party and defend a suit in which the corpora- tion is the defendant, even though the corporation is unable or unwilling to defend. See § 659, infra. 6 See chapter XIII. e See § 726, infra. "Simmons v. Sisson, 26 N. Y., 264 (1863). 16 CH. I.] DEFINITIONS AND SCOPE OF THE WOEK. [| 11. and their knowledge of facts is not notice of those facts to the cor- poration. 1 Service of process on a stockholder is not service on the corporation. 2 A stockholder in an insurance company has the same rights that a stockholder, in any other corporation has. 3 The stockholder is an individual, distinct from the corporation in its contracts and transaction of business. The mere fact that he is a stockholder does not make him an agent to contract for it or bind it by his acts. 4 One person may own all the stock, and yet the existence, rela- tions and business methods of the corporation continue. 5 The stockholders, assembled together in a corporate meeting, have the powers to elect officers; make by-laws; increase or reduce the capital stock, if the statute permits; authorize auxiliary or funda- mental changes in the charter, if constitutional: and perform a few other acts for and in behalf of the corporation. But there their powers cease. The forming of corporate contracts; the manage- ment of corporate business ; the employment and direction of agents ; the brino-iriff or defending of suits, and all the infinite details of cor- porate management, are under the control of the directors and their agents. The stockholders have no power herein, either individually or in meeting assembled. 6 A stockholder is chargeable with notice of entries made upon the corporate books, if they were made in his presence and he presum- ablv assented thereto. 7 1 See § 727, infra. ticm, who aided in the perpetration of 2 See g 752, infra. the fraud, was a stockholder in the cor- s Thus, a shareholder in an insurance poration. Grand Rapids, etc., Co. v. company, conducted on both the stock Cincinnati, etc., Co., 45 Fed. Rep., 671 and the mutual-insurance plan, is en- (1891). titled to all the rights in the guaranty 5 See §§ 708, etc. accumulations that a stockholder in any 6 See § 712, infra. other corporation has in the corporate " The property of a corporation is not assets. Traders', etc., Ins. Co. v. Brown, subject to the controf of individual 8 N. E. Rep, 134 (Mass., 1886). members, whether acting separately or 4 See g§ 708, etc, infra- jointly. They can neither incumber nor Where the law permits punishment transfer that property, nor authorize or confiscation of property, but not others to do so. The corporation — both, the conviction of a stockholder the artificial being created — holds the for violation of the internal revenue property, and alone can mortgage or law prevents a confiscation of the cor- transfer it; and the corporation acts poration property. United States v. Dis- only through its officers, subject to the tillery, 43 Fed. Rep., 846 (1890). conditions prescribed by law." Humph- Damages may be recovered by a cor- revs v. McKissock, 140 U. S., 304 (1891). poration for a fraud practiced upon it. 7 See § 727, infra. even though an agent of the corpora- (2) 17 §11.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. A shareholder in a corporation which does not properly insure its property has such an insurable interest in that property that he may recover upon a policy thereon taken in his own name, for an amount which, added to the company's insurance, would cover his interest. 1 At common law the stockholder, on account of his interest in the corporation, was not a competent witness for the corporation in a suit in which the corporation was a party. 2 In some states, how- i Warren v. Davenport Fire Ins. Co., 31 Iowa, 464 (1871), distinguishing Phil- lips v. Knox County Ins. Co., 20 Ohio, 174 (1851). Cf. Seaman v. Enterprise Fire, etc., Ins. Co., 18 Fed. Rep., 250; S. C, 5 McCrary, 558 (18S3). Contra, Riggs v. Commercial, etc., Ins. Co., 51 N. Y. Super. Ct, 466 (1884). See Green- hood on Public Policy, 255 ; Angell on Fire & Life Insurance, ch. XI, and cases cited. A stockholder has an insurable inter- est in the property of the corporation. Riggs v. Commercial, etc., Ins. Co., 125 N. Y., 7 (1890). -' Porter v. Bank of Rutland, 19 Vt., 410 (1847) ; McAuley v. The York, etc., 6 Cal., 80 (1854). See cases in next note. In Pierce v. Kearney, 5 Hill, 82 (1843), a shareholder was held incompetent to testify that the defendant, in an action to enforce a statutory liability of stock- holders, was a stockholder. Compare, however, In the Matter of Kip, 1 Paige, 601 (1829), involving the testimony of a corporator and pew- holder in a church corporation ; Moke- lumne, etc., v. Woodbury, 14 Cal., 265, in which, in deciding upon the compe- tency of a stockholder as a witness, the court held that " members of a corpo- ration who are answerable personally for the corporate debts and liabilities stand in the same position in relation to the creditors of the corporation as if they were conducting their business as a common partnership." To same ef- fect, Mitchell v. Beckman, 64 Cal., 117 (1883). The president, though a stockholder, is a competent witness for the company if he is willing to testify, since his pri- vate interest is greater than his stock- holder interest. Church v. Sterling, 16 Conn., 388 (1844). A stockholder in a company which is a creditor of a party to a suit may tes- tify in behalf of the latter. Simons v. Vulcan, etc., Co., 61 Pa. St., 202 (1869). The purchase by a bank of its own stock, in order to enable the stockholder to testify for it, was upheld, though its charter prohibited it from purchasing goods, etc. Farmers', etc.. Bank u Champlain Trans. Co., 18 Vt., 131 (1846). Washington Bank v. Palmer, 2 Sandf. Super. Ct., 686 (1850), and New York, etc., R R. Co. v. Cook, id., 732 (1850), are both to the effect that a stockholder is not a party to the action, nor a per- son for whose immediate benefit it is prosecuted, within meaning of the code. He is therefore a competent witness. A stockholder need not testify against his corporation. Bank of Oldtown v, Houlton, 21 Me., 501 (1842). A stockholder, under the New York statute, cannot testify to a personal com- munication between the corporation and a deceased person. Keller v. West, etc., Co., 39 Hun, 348 (1886). A witness who is agent of a corpora- tion, the latter being a party to the suit, is entitled to the same privilege as to libelous statements made by him as witness that, a party has. Nissen v. Cramer, 10 S. E. Rep., 676 (N. C, 1890). The plaintiff in a suit against a corpo- ration may offer a stockholder as a wit- ness. Hart v. New Orleans, etc., R. R, 1 Amer. St R'y Dec, 4 (La., 1841). 18 CH. I.J DEFINITIONS AND SCOPE OF THE WORK. [§H. ever, this rule lias been changed by statute; and in others it is easily evaded by a formal transfer of the certificate of stock to an- other person. 1 A stockholder is incompetent to serve as a judge - or juror ^ in a case where the corporation is a party. A stockholder or director of an insolvent corporation is competent and qualified to act as its receiver or assignee. 4 A director need not necessarily 1 That a transfer will render the trans- ferrer competent, see 111. Ins. Co. v. Mar- seilles Mfg. Co., 6 111., 236 (1844); Union Bank v. Owen, 4 Humph. (Tenn.), 338 (1843); Bell v. Hull, 6 M. & W., 699 (1840); 1 Greenleaf's Evidence, § 429. He is competent though the transfer has not been registered. Bank of Utica V. Smalley. 2 Cow.. 770 (1824); Gilbert v. Manchester Iron Mfg. Co., 11 Wend., 627 (1834); Delaware, etc.. R R Co. v. Irick, 23 N. J. Law, 321 (1852); and al- though he expects to buy it back ; but there must be no agreement expressly to that effect Utica Ins. Co. v. Cad- well, 3 Wend., 296 (1829); State v. Cats- kill Bank, 18 Wend.. 406 (1837). Contra. Carver v. Braintree Mfg. Co.. 2 Story, 432 (1843,). - Dinns v. Prop, of Grand Junction Canal, 3 H. L. Cases, 759 (1852). where the lord chancellor was a stockholder in the defendant company, and had af- firmed a decree by the vice-chancellor in the case. The house of lords reversed the decision on this ground. Cooley on Constitutional Limitations. §§ 410, 411; Washington Ins. Co. v. Price, 1 Hopk. Ch. (N. Y.), 1 (1823), Chancellor Sandford therein refusing to follow Chancellor Kent in Stuart i\ Mechanics' & Farm- ers' Bank, 19 Johns., 496, 501 (1822). In Peninsular Ry Co. r. Howard, 20 Mich., 18 (1870), the court say: "It is not a matter of discretion with the judge or other person acting in a judicial capac- ity, nor is it left to his own sense of propriety or decency ; but the principle forbids him to act in such capacity at all when he is thus interested, or when he may possibly be subject to the temp- tation,"' In New York the statute now prevents an interested judge from sit- ting. N. Y. Code of Civil Procedure, §§ 828, 839. See Cregin v. Brooklyn. etc, R R Co., 19 Hun, 349 (1879). Being related to a stockholder does not dis- qualify. Searsburgh T. Co. i\ Cutter, 6 Vt, 315 (1834). A judge is not disqualified merely be- cause he formerly owned stock. Nich- olson v. Showalter, 18 S. W. Rep., 326 (Tex., 1892). 3 Page v. Contocook Valley R R Co., 21 N. H, 438 (1850) : Peninsular R R Co. v. Howard, 20 Mich., 18 (1870); Fleeson v. Savage S. M. Co., 3 New. 157 (1867); Silver v. Ely. 3 Watts & S. (Penn.t. 420 (1842). Cf. Williams r. Smith, 6 Cow.. 166 (1826). The incompetency extends to the son of a stockholder. Georgia R R Co. v. Hart, 60 Ala.. 550 (1878). A per- son donating to the railroad is incompe- tent to serve in condemnation proceed- ings. Michigan Air Line Ry Co. v. Barnes, 40 Mich., 383 (1879). But the fact that the corporation is interested in a subsequent case on the same facts does not render the stockholder incompetent Commonwealth v. Boston, etc., R R Co., 57 Mass.. 25 (1849). Objection to competency must be raised at the trial. It cannot be raised for first time by motion for new trial. Williams r. Great Western Ry Co., 3 H. & N„ 869 (1859). The fact that a juror and plaintiff are both stockholders in the same corpora- tion is no cause for challenge in a suit not involving the corporation. Brittain v. Allen. 2 Dev. Eq. (N. C), 120 (1829). A juror is qualified although his wife is related to a stockholder. Butler v. Glens, etc., R R, 121 N. Y„ 112 (1890). * Covert i". Rogers, 38 Mich.. 363 (1ST - : Re Eagle Iron Works, 8 Paige, 385 19 §12-] DEFINITIONS AND SCOPE OF THE WORK. [CH. be a stockholder, unless a statute or the charter expressly so pro- vides. 1 § 12. Shares of stock defined— What law governs — A share of stock may be defined as a right which its owner has in the man- agement, profits and ultimate assets of the corporation. By the court of appeals of New York it is said that •' the right which a shareholder in a corporation has, by reason of his ownership of shares, is a right to participate according to the amount of his stock in the surplus profits of the corporation on a division, and ultimately on its dissolution, in the assets remaining after payment of its debts." 2 . (1840), modifying S. C, 3 Edw. Ch., 385 (1840) ; Bowery Bank Case, 16 How. Pr., 56 (1857). Cf. Attorney-General v. Bank of Columbia, 1 Paige, 511 (1829), § 2429, N. Y. Code of C. P., expressly authoriz- ing such appointments. In Atkins v. Wabash, etc., R Co., 29 Fed. Rep., 161 (1886), however, the court removed the receivers, and said : " Re- ceivers should be impartial between the parties in interest; and stockholders and directors of insolvent corporations should not be appointed unless the case is exceptional and urgent; and then only on consent of the parties whose iaterests are to be intrusted to their charge." See, also, chapter LI, infra. In New Jersey a corporate officer is held to be ineligible to the position of receiver. Freeholders v. State Bank, 28 N.'J. Eq., 166 (1877) ; McCullough v. Mer- chants', etc., Co., 29 N. J. Eq., 217 (1878). The court will not appoint as counsel for the receiver the counsel for the party who obtained the receivership. Emmons v. Davis, etc., Co., 16 Atl. Rep., 157 (N. J., 1888). i Wight v. Springfield, etc., R R Co., 117 Mass., 226 (1875) ; Re St Lawrence Steamboat Co., 44 N. J. L, 529, 541 (1882) ; State v. McDaniel, 22 Ohio St., 354 (1872). Cf. Bartholomew v. Bentley, 1 Ohio St, 37 (1852) ; Despatch Line v. Bel- lamy Mfg. Co., 12 N. H., 205, 223 (1841) ; Cumming v. Prescott, 2 Younge & C, 488 (1837) ; Stack's Case, 33 K J. (Ch.), 731 (1864). 2 Plimpton v. Bigelow, 93 N. Y, 592, 599 (1883). To same effect see Burrall v. Bushwick R R Co., 75 N. Y, 211, 216 (1878); Kentu Quicksilver Mining Co.. 78 N. Y, 159 (1879); Jermain v. Lake Shore, etc., R R Co., 91 N. Y, 483, 492 (1883): Field v. Pierce, 102 Mass., 253, 261 (1869) ; Jones v. Davis, 35 Ohio St, 474,477 (1880); Bradley v. Bauder, 36 id., 28, 35 (1880); Bent v. Hart, 10 Mo. App., 143 (1881); Harrison v. Vines, 46 Tex., 15, 21 (1876); Brightwell r. Mal- lory, 10 Yerg. (Tenn.), 196 (1836); Barks- dale v. Finney, 14 Graft, 338, 357 (1858) : Van Allen v. Assessors, 3 Wall, 573, 585 (1865) ; Union Nat'l Bank v. Byram, 22 N. E. Rep., 842 (111., 1889). "The interest of each stockholder consists in the right to a proportionate part of the profits whenever dividends are declared by the corporation during its existence under its charter, and to a like proportion of the property remain- ing upon the termination or dissolution of the corporation, after payment of its debts." Gibbons v. Mahon, 132 U. S., 549 (1890). Chief Justice Shaw, by way of a defi- nition of a share of stock, says : " The right is, strictly speaking, a right to par- ticipate, in a certain proportion, in the immunities and benefits of the corpora- tion; to vote in the choice of their officers, and the management of their concerns ; to share in the dividends of profits, and to receive an aliquot part of the proceeds of the capital on winding up and terminating the active existence and operations of the corporation." 20 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§12. It is said that the rights which a share of stock secures to its owner are the rights " to meet at stockholders' meetings, to partic- ipate in the profits of the business, and to require that the corpo- rate property shall not be diverted from the original purpose." 1 In England a share means the same as it does in this country; but the word "stock" there signifies a number of paid-up shares, so united that the owner may divide it and transfer it in large or small quantities, irrespective of the number and par value of the shares which have been thus merged into "stock." 2 Hence a share of stock may be defined as a proportional part of certain rights in the management and profits of the corporation during its existence, and in the assets upon dissolution. 3 It has been well settled that shares of stock are personaltv and not realty. A share of stock is not real estate, has nothing to give it the character of real estate, is not land, nor an hereditament, nor an interest in either of them. 4 Fisher v. The Essex Bank, 5 Gray. 373, 378 (1855). Cf. Arnold v. Ruggles, 1 R I., 165 (1837). 1 Forbes v. Memphis, etc., R R Co., 2 Woods, 323, 331 (1872). Cf. Payne V. Elliott, 54 Cal., 339 (1880). Mr. Justice Sharswood says : "A share of stock is an incorporeal intangible thing. It is a right to a certain proportion of the cap- ital stock of a corporation — never real- ized except upon the dissolution and winding up of the corporation — with the right to receive in the meantime such profits as may be made and de- clared in the shape of dividends." Nei- lerr. Kelley, 69 Penn. St., 403, 407 (1871). See, also. Bridgman v. City of Keokuk, 33 N. W. Rep., 355 (Iowa, 1887). 2 Norrice v. Aylmer, L. R,, 7 H. L, 717, says : " Shares are not necessarily con- verted into stock as soon as they are paid up ; they may exist either as paid- up shares or as not paid-up shares. But, as regards stock, that can only exist in the paid-up state. . . . There is a certain extent of change as well as con- solidation in these paid-up shares. They are changed from ordinary shares in this respect, that they are no longer in- capable of being subdivided." Stock " is a fund or capital which is capable of being divided into and held in any irregular amount Thus, the or- dinary government funds (consols, new threes, etc.) are called 'stocks,' because a person can buy them in any amount (such as £99 19s. lid. as well as £1 A share or debenture, on the other hand, is of a fixed amount (such as £10. £50, £100), and is incapable of subdivision or consolidation.^ Rapalje & Lawrence's Law Die, p. 1224. Shares may be con- verted by the company into stock, so as to enable their holders to dispose of them in small or irregular amounts. Hurrell & Hyde on Joint-Stock Com- panies, 47. 3 Oakbank Oil Co. v. Crum, L R, 8 App. Cas., 65 (1882). As to the situs of stock see K. 56 (1832) ? Lowe v. Thomas, 5 De G., article in 45 Alb. L J., 330; 147 U. S., M. & G., 315 (1854); Hotham v. Sutton, 360; 135 id.. 538; 7 S. Rep., 90. 15 Ves., 320 (1808) ; Atkins v. Gamble, 42 » See chapter XXVIX Cat, 86 (lb71) ; Wilson v. Little, 2 N. Y, 23 § 13.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. cordance with the law of the domicile of such stockholder. 1 In reference to transfers of stock, the law of the forum governs. 2 Legal proceedings against the stock may be initiated at the domi- cile of the corporation. 3 In regard to shares of stock owned by married women, the pay- ment of dividends is governed by the law of the domicile of the corporation ; 4 but the legality of transfers is governed by the law of her domicile. 5 A guardian's sale of stock is governed by the law of the state of the guardianship. 6 A certificate of stock is not necessary to the complete ownership of the stock ; 7 nor is payment of the subscription necessary thereto. 3 But the corporation is bound, upon demand, to issue a certificate of stock to one who is entitled to it; 9 and, if it refuses, the stock- holder may bring suit in equity to compel its issuance;' or he may sue it in an action at law for damages. 11 As regards the common-law and statutory liability of a stock- holder on his stock, the law of the domicile of the corporation determines the extent of the liability, while the law of the forum determines the method of enforcing that liability. 12 § 13. Classes of stock. — The capital stock of a corporation may be either common or preferred. By common stock is meant that stock which entitles the owners of it to an equal pro rata division of profits, if any there be; one shareholder or class of shareholders having no advantage, priority or preference over any other share- holder or class of shareholders in the division. By preferred stock is meant stock which entitles its owners to dividends out of the 1 See chapter XXXIV. Dickinson v. Central Nat'l Bank, 129 The case of Glenn v. Clabaugh, 3 Atl. Mass., 279 ; Sibley v. Quiusiganiund Nat'l Rep., 902 (1886), holds that the insolvent Bank, 133 Mass., 515 (1882) ; State v. First laws of Maryland cannot discharge a Nat'l Bank, etc., 89 Ind., 302(1883); Hoi- Ma ry land subscriber to a Virginia cor- brook v. New Jersey, etc., Co., 57 N. Y., poration. The validity of a contract to 616 (1874). sell stock under the statute of frauds is 4 See § 542, infra. determined by the lex loci contractus. 5 See § 319, infra. Tisdale v. Harris, 37 Mass., 9 (1838). *See § 328, infra. 2 See chapter XXII. -Wheeler v. Millar, 90 N. Y., 353 3 See chapter XXVII, and §§ 361, 362, (1882); Burr v. Wilcox, 22 N. Y, 551, infra; and, in general, see Noyes v. 555 (1860) ; Thorp v. Woodhull, 1 Sand. Spaulding, 27 Vt., 420 (1853); Rich- Ch., 411 (1844). mondville Mfg. Co. v. Prall, 9 Conn., 8 Wheeler v. Millar, supra. 487(1833); Black v. Zacharie, 3 How., 9 See § 192, infra. 483 (1845). As regards national banks, 10 Id. see Scott v. Pequonnock Nat'l Bank, 15 u Id. Fed. Rep., 494 (1883); Continental Nat'l 12 See chapters XI and XII. Bank v. Eliot Nat'l Bank, 12 Rep., 35; 24 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 14. net profits before or in preference to the holders of the common stock. Common stock entitles the owner to a pro rata of dividends equally with all other holders of the stock except preferred stock- holders; while preferred stock entitles the owner to a priority in dividends. By watered or fictitious stock is meant stock which is issued as fully paid up, when, in fact, the whole amount of the par value thereof has not been paid in. If am*" amount less than the whole face value of the stock has not been paid, and the stock has been issued as full paid, then the stock is watered to the extent of the deficit. Watered stock is, accordingly, stock which purports to represent, but does not represent, in good faith, money paid in to the treasury of the company, or money's worth actually contrib- uted to the working capital of the concern. The issue of such stock may be lawful, but sometimes it is in fraud of the rights of some interested party, as, e. g., creditors of the corporation, certain shareholders or classes of shareholders. 1 By deferred stock or bonds is meant stock or bonds the payment of dividends or interest upon which is expressly postponed until some other class of shareholders are paid a dividend, or until some certain obligation or liability of the corporation is satisfied. 2 By overissued or spurious stock is meant stock issued in excess of the full amount of capital stock authorized by the charter of the corporation. 3 Such stock is void even though issued in good faith. In Massachusetts some classes of corporations issue what is there known as special stock. This is a peculiar kind of stock, essentially local in character, provided for by statute, and unknown before the year 1S55. Its characteristics are that it is limited in amount to two-fifths of the actual capital; it is subject to redemption by the corporation at par after a fixed time, to be specified in the certifi- cate ; the corporation is bound to pay a fixed half-yearly sum or dividend upon it as a debt ; the holders of it are in no event liable for the debts of the corporation beyond the amount of their stock, and the issue of special stock makes all the general stockholders liable for all debts and contracts of the corporation until the spe- cial stock is fully redeemed. 4 § 14. Certificates of stock. — A certificate of stock is from one point of view a mere muniment of title, like a title deed. It is not the stock itself, but evidence of the ownership of the stock; that is to say, it is a written acknowledgment by the corporation of the interest of the shareholder in the corporate property and fran- chises ; it operates to transfer nothing from the corporation to the « See chapter III. 3 See §§ 291, 298. 2 See § 762, infra, and chapter IIL * See chapter XVI, infra. 25 §14-] DEFINITIONS AND SCOPE OF THE WORK. [CH. L shareholder, but merely affords to the latter evidence of his rights. It should be clearly apprehended that the certificate is not the stock, but merely written evidence of the ownership of shares. 1 Accordingly it follows that shares have no "ear-marks" — that one share cannot be distinguished from another share — but that it is only the certificates which are distinguishable one from the other by their numbers and in other ways. 2 The certificate, there- fore, has value in itself only as evidence, and, apart from the shares which it represents, it is utterly worthless. 3 And even as evidence it is not in every case essential; it is merely a convenient voucher, which the shareholder has a right to receive if he asks for it. 4 One element of its value to the shareholder is that it is prima facie evi- dence of his title. 5 The right of every shareholder to demand and receive from the company a certificate is generally conceded. 6 When certificates are executed by a part only of the officers required by law to sign them, they may be void. 7 But a certificate issued to an officer of the corporation who is a shareholder, although the certificate is contemplation the certificate was merely an additional and convenient evidence of the ownership of the stock." Cin- cinnati, etc., R R Co. v. Pearce, 28 Ind., i Hawley v. Brumagim, 33 Cal., 394 (1867) ; Campbell v. Morgan, 4 Bradw., 100 (1879); People's Bank v. Kurtz, 99 Penn. St., 344 (1882) ; Hubbell v. Drexel, 11 Fed. Rep, 115 (1882); Van Allen v. Assessors, 3 Wall., 573, 598 (1865) ; Burr v. Wilcox. 22 N. Y. 551 (1860) ; Birming- ham Nat'l Bank v. Roden, 11 S. Rep., 883 (Ala., 1892). "Stock is one thing, and certificates another. The former is the substance, and the latter is the evi- dence of it." Hawley v. Brumagim, supra. * Hubbell v. Drexel, supra. 3 Payne v. Elliot, 54 Cal., 339. 4 Johnson v. Albany, etc., R. R. Co., 40 How. Prac, 193 (1870). Cf. Arnold v. Suffolk Bank, 27 Barb., 424 (1857), a case in which the distinction between a re- fusal on the part of a corporation to issue a certificate in a certain form and a refusal to recognize the owner of shares as owner — a denial of his prop- erty in the stock — is clearly drawn. The supreme court of Indiana have noted the distinction to the effect that a certificate is not the title, but only evi- dence of the title, to shares. The court say : " The certificate did not constitute the title to the stock. ... In legal 502 (1867). 5 Broadway Bank tt McElrath, 13 N. J. Eq., 24 (1860) ; Courtright v. Deeds, 37 Iowa, 503 (1873); Walker v. Detroit Transit, etc., Co., 47 Mich., 338 (1882). e Buffalo, etc., R R. Co. n Dudley, 14 N. Y., 336, 347 (1856) ; National Bank v. Watsontown Bank, 105 U. S., 217 (1881). A valid certificate may be issued out of the state in which the corporation ex- ists. Courtright v. Deeds, 37 Iowa, 503 (1873). See § 61. The failure of the corporation to issue a certificate is no defense to an action to collect the subscription. See § 192, infra. The certificate of stock need not be under seal. Halstead v. Dodge, 51 N. Y. Super. Ct., 169 (1884). There is no com- mon-law rule requiring certificates of stock to have the corporate seal placed upon them. Coddington v. Railroad, 103 U. S., 409 (1880), dictum. '' Holbrook v. Farquier, etc., Co., 3 Cranch, C. C, 425 (1829). See § 363. 26 OH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 15. signed bv that officer, is valid. 1 It is not, however, essential to the existence of the corporation that certificates of stock shall be issued. 2 "Without a certificate the shareholder has a comphte power to transfer his stock, 3 to receive dividends, 4 and to vote. 5 and he is in- dividually liable as a stockholder. 6 A certificate of stock may be a valid subject of a donatio causa mortis, of a legacy, a contract of sale, a pledge, or a gift. 7 Under the English statute an issue of stock by a corporation has reference only to the issue of the cer- tificates, and means an original putting out of the shares. 8 In Xew York, making out and mailing the certificates has been held to con- stitute a due issuing thereof. 9 And in Maryland, the stub of a book from which certificates have been detached is evidence of their regular isssue. 10 Certificates of stock are not negotiable instruments. They have sometimes been said to have a ^cm-negotiability, but this phrase- ology throws little light upon the real character of the transfer- ability of stock. It may be said in general that by the operation of the law of estoppel the purchaser of a certificate of stock, in good faith and for value, may take it free from many claims of previous holders which would be allowed to come in, in the case of a sale of an ordinary chose in action. 11 § 15. Definition of bond, mortgage, deed of trust, debenture, arti- cles of association, memoranda of association, scrip, certificate bool; transfer bool; stock ledger, underwriting, founders' shares. — A bond of a corporation is an instrument executed under the seal of the corporation, acknowledging the loan and agreeing to repay the same upon terms set forth therein. A coupon bond is one that has coupons attached, usually in the form of promissory notes to pay an amount of money equal to the annual or semi-annual interest on the bond. A registered bond is one whose negotiability is tempo- rarily withdrawn by a writing on the bond that it belongs to a specified person, and by a registry to that effect at an office speci- fied by the company. 1 Titus v. President, etc., of the G. W. 6 Agricultural Bank v. Wilson, 24 Me., Turnpike Road, 61 N. Y., 237 (1874). 273 (1844) ; Mitchell v. Beckman, 64 Cat, 2 Chester Glass Co. v. Dewey, 16 Mass., 117 (1883). 94 (1819) ; Burr v. Wilcox, 22 N. Y., 551 ' See chapter XVIII. (I860). 8 East Gloucestershire R'y Co. n Bar- •> First National Bank v. Gifford, 47 tholomew, L. R., 3 Exch., 15 (1867); Iowa, 575 (1877); National Bank v. Wat- Bush's Case, L. R, 9 Chan., 554 (1874). sontown Bank, 105 U. S., 217 (1881). Cf. d Jones r. Terre Haute, etc., R. R Co., Brigham v. Mead, 10 Allen. 245 (1865). 17 How. Pr., 529 (1859). * Ellis v. Proprietors of Essex Merri- »° Weber v. Fickey, 47 Md., 196 (1877). mack Bridge, 2 Pick., 243 (1824). » See chapter XXIV. 5 Beckett v. Houston, 32 Ind., 393 (1869). 27 § 15.] DEFINITIONS AND SCOPE OF THE WORK. [CH. I. A mortgage given by a corporation may be similar to the ordi- nary mortgage given by an individual. But usualty a corporate mortgage is made in the form of a mort- gage deed of trust. Such a deed of trust is a mortgage, the mort- gagee, however, being a trustee for bondholders, and the bonds being secured by the mortgage deed of trust. The trustee may be an individual but generally is a trust company. Where the mort- gage is to secure a large number of bonds, it is almost necessary that a deed of trust be used. Otherwise the mortgage would run to the bondholders, who are constantly changing, and many of whom are soon unknown to the corporation mortgagor. Moreover in foreclosing such a mortgage serious difficulties would arise. Hence where a corporation gives a mortgage to secure bonds, this mortgage is made in the form of a deed of trust. The word " debenture " has no definite legal meaning. It may be applied to any promise or security of the company to pay money. It may be a mere promise to pay, or a covenant under seal to pay, or a mortgage or charge under the seal of the company. " Debenture stock " is an English term and means borrowed money consolidated into one mass for the sake of convenience. Instead of each lender having a separate bond or mortgage, he has a cer- tificate entitling him to a certain sum, being a portion of one large loan. 1 In this country the same thing is done by issuing to a bond- holder a certificate entitling him, and him alone, to a specified sum and interest in exchange for bonds to the same amount which he delivers to the company at the time when he receives the certifi- cate. Articles of association are similar to by-laws, and are for the reg- ulation and management of the corporation. Memoranda of association are the same as the American articles of incorporation required to be filed under general statutes for incorporations. 2 In England scrip is a written acknowledgment by a corporation that the holder will be entitled to certain shares of stock and a certificate therefor when the unpaid instalments on such shares are all paid in. They are negotiable instruments. 3 1 Lindley on Company Law, p. 195. Guiness v. Land Corporation of Ireland, 2 Deed of settlement is a term that was L R, 22 Ch. D., 369. used in England, prior to 1862, to indi- 3 Goodwin v. Robarts, L. R, 1 App. cate the same as the modern articles of Cas., 476 (1876) ; Rumball v. Metropoli- association and memoranda of associa- tan Bank, L. R, 2 Q. R Div., 194 (1877). tion. See Burrows v. Smith, 10 N. Y., In this country scrip generally means ^50, 555 (1853); Rapalje & Lawrence's a kind of dividend: e. g., land scrip Law. Die, 361 ; London Financial Asso- dividend entitling the holder to take so ciation v. Kelk, L R, 26 Cb, D., 107; much land; and a scrip dividend en- 28 CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 15k. The certificate hook of a corporation contains t>be printed, litho- graphed or engraved certificates of stock, which are filled out and signed by the proper officers and then delivered to the stockhold- ers. A stub in the book, opposite each certificate, states the name, amount, date, etc., of the certificate which is issued. When the certificate is returned, upon a transfer to a new person, it is can- celed and attached to the old stub. On the back of the certificate a blank form for a transfer of the stock represented by it is given. The transfer hook is for the purpose of keeping a record of trans- fers of stock. The entries in it correspond to the transfers on the backs of the canceled certificates of stock. The entries in the transfer book are generally made by a clerk as attorney in fact for the transferrer. The form of transfer on the back of the certifi- cate contains such a power of attorney. The stock ledger contains a statement of how much stock the past and present stockholders have owned or now own. Underwriting means an agreement, made before the shares are brought before the public, that in the event of the public not tak- ing all the shares or the number mentioned in the agreement, the underwriter will take the shares which the public do not take. 1 Founders' shares are shares which take the profits after certain dividends are paid on the other shares. They are a sort of de- ferred stock. They are issued to the founders or promoters of the enterprise. They are unknown in America. In England they often acquire a great value. So enormous have been the profits of some of the trust and in- vestment companies that their founders' shares, which divide the surplus after payment of a moderate maximum dividend on the ordinary shares, are worth almost fabulous sums of money. The Trustees, Executors and Securities Insurance Company is the most remarkable illustration, with its founders' shares quoted on the market at something like seven thousand five hundred per cent. Founders' shares in the Foreign and Colonial Debenture, the Im- perial Bank of Persia, the London Produce Clearing, the United States Debenture, and the North of England Trustee Debenture and Assets all command an extraordinary premium. Founders' shares are often given as a gift to eminent persons who consent to act as directors and to be held out to the public as such. titling the holder to future dividends the ' The underwriter is liable on the same as stock receives, but without the stock. Re Licensed, etc, Ass'n, CO L. T. voting privilege of stock. See chapter Rep., 684 (1889> XXXII, infra. 29 CHAPTER II. STOCK MAY BE ISSUED LEGALLY FOR MONEY OR PROPERTY, OR EY A STOCK DIVIDEND. 16. Different methods of issuing stock. 17. First method: Issue by money subscription. 18. Second method: Issue for prop- erty, labor or construction work. 19. When such subscriptions are not legal. 20. What property may be received. 21. Payment in property as a favor, not as a contract right. 22. Sale of stock for property. 23. 24. 25. 26. 27. English statute governing issue for property. Performance of contract to pay in property — Obligation of the corporation to issue the stock. Third method : Issue by stock divi- dend. Pledge of stock by the corporation. Issue of stock for partnership property, or the property of an- other corporation. § 16. Methods of issuing stock — There are in general three meth- ods of issuing stock. It may be issued, first, by means of subscrip- tions, payable in cash, the subscription being made in writing, or by acts equivalent thereto. 1 Second, the issue may be by means of subscriptions, payable in labor, property, or both. Third, the issue may be by a stock dividend. §17. First method: Issue by money subscription. — An issue of stock by means of a subscription, payable in cash, is the most sim- ple and safe method of issuing stock. In the absence of any agree- ment to the contrary, an ordinary subscription for stock is deemed a cash subscription, and payment in money may be enforced. The subscription contract is generally made by a writing duly signed by the subscriber. The writing itself is contained in books opened by the corporation or by commissioners appointed in conformity with a statute, or it is made without formality on subscription lists or separate sheets of paper. A subscription, payable in cash, may arise also from the mere acts or declarations of a party. A person having assumed the posi- tion of a subscriber or stockholder is frequently held to be bound as such. Any act or declaration, sufficient to indicate an intent on the part of the person to be a subscriber, and an acceptance by the corporation of the person as such, is equivalent to a written sub- scription, and the person is bound as a subscriber. 2 § 18. Second method: Issue for property, labor or construction work. — The issue of stock for labor, property, contract work, or 1 See chapter IV. 2 Id. 30 CH. II.] METHODS OF ISSUING STOCK. [§ L8. any valuable consideration other than money, has given rise to much controversy and litigation. In England a long line of decis- ions, under the Companies Act, has established the principle that stock need not necessarily be paid for in cash, but that it may be paid for in money's worth. 1 Such, also, was the rule at common law. 2 The well-established rule now is that a subscription for stock, payable by its terms in property or labor, or both, is a good and legal subscription. If the property is taken at a valuation made without fraud, the payment is as effectual and valid as though made in cash to the same amount. An issue of stock for property is one which finds support, not only in the decisions, but in the daily transactions of corporations, 3 and the law does not compel the cor- poration and the subscriber to go through the useless form of a payment by the corporation to the subscriber of the value of the 1 See many cases in chapter III. Stacy v. Little Rock, etc., R. R Co., 5 Dill., 348, 376 (1876). 2 Woodhall's Case, 3 De G. & Sm., 63 (1849) ; Burkinshaw v. Nichols, L. R, 3 App. Cas., 1004, 1012 (1878), where, pay- ment having been made in property, the court said: "If there had been no statutory enactment forbidding a trans- action of that kind, it is a transaction which might be properly valid." Cf. dictum in Sanger v. Upton, 91 U. S., 56, 60 (1875). "It is not now questioned that a corporation may issue its stock by way of payment in the purchase of prop- erty. This is on the principle that there is no need for the roundabout process of first issuing the stock for money, and then paying the money for the prop- erty. But it is necessary that the prop- erty so taken be considered reasonably worth the par value of the stock paid for it." Chouteau v. Dean, 7 Mo. App., 210 (1879); Wyman v. Araer. Powder Co., 62 Mass., 168 (1851) ; Reichwald v. Commercial Hotel Co., 106 111., 439 (1883); Haydon v. Atlanta Cotton Fac- tory, 61 Ga., 234 (1878). " Whatever may have been formerly held, it is now es- tablished that subscriptions to corpo- rate stock need not, in the absence of statutory provisions requiring it, be paid for in cash. The principle is now gen- erally accepted, both in England and America, that any property which the corporation is authorized to purchase, or which is necessary for the purposes of its legitimate business, may be re- ceived in payment for its stock. Any payment, whether it be in money or money's worth, so that it be in good faith, will give the shares so paid for the status of paid-up stock. In the language of Lord Justice Gifford, in Drummond's Case, 4 Ch. App., 772: 'If a man contracts to take shares he must pay for them, to use a homely phrase, in meal or in malt ; he must either pay in money or money's worth ; if he pays in one or the other that will be a satis- faction.' . . . The contract to re- ceive in payment the latters patent, plows, material and other assets of its predecessor, Unthank & Coffin, was therefore not ultra vires.'" Coffin v. Ransdall, 11 N. E. Rep, 20 find., 1887). holding, also, that payment for stock by transferring to the corpora- tion the property and assets of a part- nership was legal, provided that a fair valuation was placed upon the property so conveyed. If such property is over- valued, the dangers incurred thereby are various. See ch. Ill : 20 S. W. Rep., 965. 3 Foreman v. Bigelow, 4 Cliff., 508, 544 (1878). 31 §19-1 METHODS OF ISSUING STOCK. [CH. II. property, and an immediate repayment of the same money by the subscriber to the corporation on his subscription. 1 There is some doubt as to whether an oral agreement of the cor- porate agents that a subscription may be paid in property is bind- ing upon the corporation. Under the well-established rule that parol evidence will not be allowed to add to or vary a written agreement, it has been held that such an oral agreement with the agent cannot be admitted in evidence. 2 When, however the parol agreement is made subsequently to the act of subscribing, and is supported by a sufficient consideration, it is valid and enforceable. 3 §19. When such subscriptions arc not legal. — A subscription payable by its terms in labor or property is in the nature of a con- ditional subscription. Accordingly, in certain states, where a per- centage or fixed amount of the capital stock must be subscribed for before a charter can be obtained, and where, by the decisions of the courts, such preliminary subscriptions must be absolute and unconditional, a subscription payable by its terms in labor or prop- erty, being conditional to that extent, cannot form a part of the preliminary subscription. 4 In such states, however, subscriptions to the remainder of the capital stock, the part subscribed after the charter has been or may be obtained, may be conditional, and may, by their terms, be payable in property or labor. 5 On the ground that subscriptions payable in property or labor are conditional, it has been held also that a subscription payable in labor or prop- erty is not to be counted in ascertaining whether the full capital stock has been subscribed/* in order to enforce subscriptions for stock. 1 Seawright r. Payne, 6 Lea (Tenn.), 283 (188U); Brant v. Ehlen, 59 Md., 1 (1882); Spargo's ( ase, L. R., 8 Ch. App., 412 (1873); Boot ioe Co. v. Hart. 56 N. H., 548 (1876). [ aj nl< at in property by subscribers v. held riot allowable in Neuse River Nav. Co. v. Coui'rs of Newbern, 7 Jones' Law (N. C), 275 (1859); also Henry v. Vermillion & Ash- land R. R. Co., 1 J Ohio, 187 (1843), al- though the latter case seems to involve an oral agreement to allow such payment, and to have been decided on that ground. There is a long line of cases sustaining the validity of an issue of stock for money's worth instead of money itself. They are given in this and the following chapter. So well established has this principle of law become that the few cases holding to the contrary can no longer be considered good law. "That in the absence of fraud an agreement may ordinarily he made by which stock- holders could be allowed to pay for their shares in patents, mines or other property, to which it is not easy to as- sign a determinate value, would appear to be well settled." New Haven, etc., Co. v. Linden Spring Co., 142 Mass., 349 (1886). 2 See § 137, infra. 3 Id. * See §§ 79, 180, infra. 5 See § 82, infra. 6 See § 180, infra. 32 CH. II.] METHODS OF ISSUING STOCK. [§20. §20. What property may he received. — A corporation may re- ceive in payment of its shares of stock any property which it may lawfully purchase, 1 and, in general, may receive any consideration which is suitable and applicable to the purposes for which the cor- poration was organized. 2 A railroad corporation may receive pay- ment in contract work, in right of way, or in any kind of material or labor applicable to its construction. 3 A manufacturing corpo- 1 Brant v. Ehlen, 59 Md., 1 (1882) ; The American Silk Works v. Sale-man, 4 Hun, 135 (1875). In Louisiana the general act for in- corporation prescribes that the articles of incorporation shall state the time when and the manner in which " the stock shall be paid for." See New Or- leans, etc., R. R Co. v. Frank, 1 South Rep., 310 (La., 1887). 2 See Green's Brice's Ultra Vires (2d ed.), 145; Angell & Ames (11th ed.), § 517. "Payment of stock subscrip- tions need not be in cash, but may be in whatever, considering the situation of the corporation, represents to that corpo- ration a fair, just, lawful and needed equivalent for the money subscribed." Liebke v. Knapp, 79 Mo., 22 (1883). Pay- ment in newspaper advertising of the enterprise upheld in this case. The sub- scription may, by its terms, be payable in plank for a plank-road company, and the subscriber is a stockholder before payment is completed. Haywood, etc., Co. v. Bryan, 6 Jones' Law (N. C), 82 (1858). Payment in Confederate bonds redeemable in cotton upheld. Schro- der's Case, L R., 11 Eq. Cas., 131 (1870). So, also, payment in stock in a coal cor- poration carrying on a supplementary business. East, etc., R. R. Co. v. Light- house, 6 Rob. (N. Y.), 407 (1868). Pay- ment by a patent-right has been upheld. Edwards v. Bringier Sugar Extracting Co., 27 La. Ann., 118 (1875); and in an- other case, under a statute not upheld. Tasker v. Wallace, 6 Daly, 364 (1876). Payment may be by canceling a debt of the company past due. Carr v. Le Fevre, 27 Pa. St., 413 (1856); Reed v. Hayt 51 N. Y. Super. Ct., 121 (1884). Or (3) 33 not yet due. Appleyard's Case, 49 L J. (Ch.), 290 (1880). Payment, however, to a bank in its own currency was not up- held, it being statutory that only specie could be received. King v. Elliott, 13 Miss., 428 (1845). Payment by check cannot be objected to by another sub- scriber. Thorp v. Woodhull, 1 Sandf. Ch., 411 (1844). Stock may be issued to the president in payment of past salary and debts. Reed t?. Hayt, 4 Ry. & Corp. L. J., 135 (N. Y, 1888). 3 " We can see no objection whatever to a railroad company issuing stock and taking in payment materials or labor or lands necessary for its road." Clark v. Farrington, 11 Wis., 306 (1860). As to payment in stock for construction work, see, also, Wood on R'ys, § 282. " The corporation had a right to accept pay- ment of stock in labor or materials, in damages which the company were lia- ble to pay, or in any other liability of the company, provided these transac- tions were entered into and carried out in good faith." Phil. & West Chester R R. Co. v. Hickman, 28 Pa. St, 318 (1857); Bedford County v. Nashville, C. & St Louis R R. Co., 14 Lea(TeDn.), 525 (1884), holding, also, that thirty yeai-s delay in demanding the stock is no bar to the right To same effect, payment being in services, Kobogum v. Jackson Iron Co., 43 N. W. Rep., 602 (Mich., 1889). Payment may be in cross-ties. Ohio, Ind. & 111. R R Co. v. Cramer, 23 Ind., 490 (1864). Or in real estate and serv- ices. Cm., Ind. & Chicago R R Co. V. Clarksou. 7 Ind., 595 (1856). Or in serv- ices and materials. Phillips v. Coving- ton & Cin. Bridge Co., 2 Mete. (Ky.), 219 (1859). Or by construction of the road. §21.] METHODS OF ISSUING STOCK. [ch. n. ration may receive payment in the good-will of a business or the stock in trade. 1 Land may be taken in payment when the corpo- ration would be allowed to purchase the same. 2 Promissory notes may also be taken, under the corporate power, to give credit and extend the time of payment of debts. 3 § 21. Payment in property as a favor, not as a contract riglxt. — There is an important distinction to be made between payments in See § 17. One railroad having power to consolidate with another may, in pay- ment therefor, issue stock to the con- tractors who are constructing the latter. Branch v. Jesup, 106 U. S., 468 (1882). A corporation may agree to give $5,000 of stock to one who will borrow $15,000 for it Arapahoe, etc., Co. v. Stevens, 22 Pac. Rep., 823 (Colo., 1889). A contract that subscriptions shall be payable in land is illegal by statute in Alabama, but after subscription payment in land may be allowed. Knox v. Childersburg L. Co., 5 South. Rep., 579 (Ala., 1889). i Pell's Case, L. R., 5 Ch., 11 (1869). 2Goodin v. Evans, 18 Ohio St, 150 (1868); Cin., Ind. & Chicago R R Co. v. Clarkson, 7 Ind., 595 (1856) ; Peck v. Coal- field Coal Co., 11 Bradw. (111.).. 88 (1882) ; Brant v. Ehlen, 59 Md., 1 (1882) ; Jones' Case, L. R, 6 Ch. App., 48 (1870) ; May- nard's Case, 22 W. R., 119. In Foreman v. Bigelow, 4 Cliff., 508, 544 (1878), the court say : " Argument to show that the transaction of issuing the stock in pay- ment for the mineral land would have been valid ... is scarcely neces- sary." In Indiana formal acceptance by the directors is necessary. State v. Bailey, 16 Ind., 46 (1861) ; Junction R. R. Co. v. Reeve, 15 Ind., 236 (1861) ; Day- ton, etc., R. R. Co. v. Hatch, 1 Disney, 84 (1855) ; Carr v. Le Fevre, 27 Penn. St, 413 (1856) ; Johnson v. N. Y. & Erie R. R Co.. 2 Sand., 39 (1848). A corporation receiving a deed of land in payment of stock subscription is protected in its title to the land the same as any other bona fide purchaser of it would be against a former vendor's lien for the purchase- money. Frenkel v. Hudson, 2 South. Rep., 758 (Ala., 1887). 3 Stoddard v. Shetucket Foundry Co., 34 Conn., 542 (1868) ; Ogdensburgh, etc., R. R Co. v. Wooley, 3 Abb. Ct of App. Dec, 398 (1864); Magee v. Badger, 30 Barb., 246 (1859); Goodrich v. Reynolds, 31 111., 490 (1863) ; Vermont Central R R. Co. v. Clayes, 21 Vt, 30 (1848) ; Hardy v. Merriweather, 14 Ind., 203 (1860); Pacific Trust Co. v. Dorsey, 72 Cal., 55 (1887). In Wisconsin a corporation may accept in payment of stock a note se- cured by a mortgage on real estate. Clark v. Farrington, 11 Wis., 306 (1860); Blunt v. Walker, 11 Wis., 234 (1860); Cornell v. Hichens, 11 Wis., 353 (1860); Lyon v. Ewings, 17 id., 61 (1863) ; An- drews v . Hart, id., 297 ; Western Bank of Scotland v. Tallman, 17 Wis., 530 (1863). In Tennessee payment in notes is not upheld, but the subscriber is to be credited with the amount collected on such notes. Moses v. Ocoee Bank, 1 Lea (Tenn.), 398 (1878). In New York the payment of a subscription by one's own note is prohibited by statute. 1 R S., ch. 18, title 4, § 2. Payment by bond and mortgage was upheld in Valk v. Crandall, 1 Sandf. Ch., 179 (1843), and in Leavett v. Pell, 27 Barb., 322 (1858). Also in Pennsylvania, Leighty v. Sus- quehanna & Waterford T. Co., 14 S. & R. (Pa.), 434 (1826), although the pay- ment was contrary to statute ; also, Peo- ple v. Stockton, etc., R. R. Co., 45 Cal., 306 (1873). But a worthless note is not payment. Bouton v. Dament, 123 111., 142 (1887). A company authorized by statute to sell stock for cash may sell it for the bonds of the vendee, and may enforce the bonds. Southern Life Ins. Co. v. Lanier, 5 Fla., 110 (1853). 34 CH. II.] METHODS OF ISSUING STOCK. [§ 22. property, where the subscription itself, by its terms, allows such payment, and a payment in property, which is allowed, as a matter of favor, by the corporation, the subscription itself being silent as to the mode of payment. 1 The latter class of transactions have been uniformly upheld, except when positively prohibited by stat- ute, and payment has even been held to be valid, although the statute required it to be in money or in cash. 2 § 22. Sale of stoclc for property. — The issue of stock for prop- erty, labor or contract work need not necessarily be accompanied with the formality of a subscription. 3 Frequently the issue is $ spoken of as a sale of the stock for the property received in pay- 1 Many of the cases which apparently are cases of subscriptions, wherein the subscriber has expressly stipulated that he may pay in property or labor, will be found, on close examination, to be ab- solute subscriptions payable in cash. Afterwards the corporation, although not obliged so to do, accepts property or labor instead of the cash. This kind of transaction is almost universally up- held by the courts when entered into and carried out in good faith. Such payment is upheld even in opposition to the express terms of a statute requiring payment in cash. See § 23. Many of the American cases, also, are plainly cases in which payment in property was allowed by the corporation, not as a right but as a matter of favor. The courts uphold such agreements because they are similiar to offsets of accounts, and the delays, uncertainties, special privileges, and other objections to sub- scriptions payable in terms in property and labor are obviated. See Boot & Shoe Co. v. Hoit, 56 N. H., 548 (1876); Stoddard v. Shetucket Foundry Co., 34 Conn., 542 (1868), where the court say, " that the defendant could have insisted upon the plaintiff's payment for his stock in cash is unquestionable." See, also, Vermont Central R. R Co. v. Clayes, 21 Vt, 30 (1848) ; Boston, etc., R R Co. v. Wellington, 113 Mass., 79 (1873). A subscription may be made and then by another contract be paid up by a lease of a railroad. Coe v. East, etc., R R., 52 Fed. Rep., 531 (1892). In New York rail- road corporations must require payment in cash of a certain percentage of the subscription at the time of subscribing. Laws 1850, ch. 140, §§ 2, 4. Ninety per cent, may be paid in such manner as the directors may require. Id., § 7. Even here, however, the courts hold that the ten per cent may be paid by property actually received. Beach v. Smith, 30 N. Y., 116 (1864), where payment was by services rendered. The court said : " Was it necessary, for any purpose, that the ceremony of paying money by the company to the defendant, and by the defendant of the same money back again, should be gone through with? It seems to me not." 2 See p. 36, note 4. 3 A charter provision authorizing the opening of stock subscription books does not amount to a prohibition against any other mode of becoming a stock- holder. " If a railroad could sell its stock for the right of way, for lands for depot purposes, for iron, or anything essential to the accomplishment of its purpose, it might do so." It is a legal issue of stock without subscription. Western Bank of Scotland v. Tallman, 17 Wis., 530 (1863). See, also, Clark v. Farrington. 11 Wis., 306 (1860); Reed v. Hayt, 51 N. Y. Super. Ct, 121 (1884). In Jackson v. Traer, 20 N. W. Rep, 704 (1884), stock having been issued in payment of contract work, the court say: "We have seen no case which recognizes a difference between those stockholders who become such in pur- 35 § 23.] METHODS OF ISSUING STOCK. [CH. II. ment. Sometimes the issue is by means of a contract, whereby, upon the completion of certain work, the party is to be entitled to the stock. The New York court of appeals stated the law clearly when it said, in respect to such issues, that " the right of the offi- cers of a railroad corporation to enter into an agreement to build its road and pay for the construction of the same in stock or bonds cannot be seriously questioned, and contracts of this description are frequently made for such a purpose." x It is doubtful, however, whether any clearness of ideas is ob- tained, under any circumstances, by calling an original issue of stock a sale of stock. Such a transaction is not a sale of stock. A sale of stock means a transfer of stock after the stock has been issued, or an agreement to transfer the same. Such original issues of stock as are occasionally spoken of as being sales of stock might better be considered as informal subscriptions arising by the acts or declarations of the parties, and payable in property by the terms of the contract. 2 § 23. English statutes on issues of stock for property.— In Eng- land the payment for stock in property, labor or contract work is regulated largely by act of parliament. The statute requires that payment shall be in cash, unless the contract allowing payment in property is registered at a specified public registry. 3 Nevertheless, even where no registry is made, the courts have held that a pay- ment in property is equivalent to a payment in cash, where the property has been actually delivered. 4 Such a payment in prop- suance of a written agreement and First, where payment is actually made those who become such by the mere ac- in property, if fairly made, it is upheld, ceptance of stock issued to them." under the principles laid down in sec- iVan Cott v. Van Brunt, 82 N. Y., tion 16. See Jones' Case, L. R, 6 Ch. 535 (1880). See, also, Eppes v. Miss., App., 48 (1880) ; Maynard's Case, 22 W. Gainesville & Tuskaloosa R R Co., 35 R, 119 (1877) ; payment by colliery, Re Ala., 33 (1859); Brady v. Rutland & Boylan Hull Colliery Co., L. R, 5 Ch. Burlington R R Co., 3 Blatch., 25; App., 346 (1870); Drummond's Case, S. C, 24 Vt, 660 ; Troy & Greenfield L. R, 4 Ch. App., 772 (1869) ; Schroder's R R Co. v. Newton, 8 Gray, 596 (1857) ; Case, L. R, 11 Eq. Cas., 131 (1870) ; Pell's McMahon v. N. Y., etc., R R Co., 20 Case, L. R, 5 Ch., 11 (1869); by services, N. Y., 463 (1859), construing such a con- Ex parte Clarke, L. R, 7 Eq., 550. The tract. amounts on each side must be payable 2 See "Weiss v. Mauch Chunk Iron Co., presently and in cash. Fothergill's Case, 58 Penn. St., 295 (1868) ; St. Paul, etc., L. R, 8 Ch. App., 270 (1873) ; so that the R. R. Co. v. Robbins, 23 Minn., 440 transaction is in the nature of a set-off. (1877); Clark v. Continental Improve- Forbes' Case, L. R, 5 Ch. App., 270 (1870) ; ment Co., 57 Ind., 135 (1877). 64 L. T. Rep., 61. Conveyance of a lease s Companies Act, Amendment 1867, held to be a good payment. Spargo's 30 and 31 Vic, ch. 131, § 25. Case, L. R, 8 Ch. App., 407 (1873). A 4 Under this statute three classes of second class of unregistered agreements cases of unregistered contracts arise : to take pay in property turn upon the 36 CH. II.] METHODS OF ISSUING STOCK. [§24. erty, however, is as a matter of favor, and not as a matter of right. 1 It is to be distinguished from the payment in property which the subscriber may not yet have made, but has a right to make in the future. The one is an executed contract. The other may still be an executory contract. § 24. Performance of contract of payment in property — Obliga- tion of the corporation to issue the stock. — Subscriptions payable in property are not subject to calls, and a demand for the property must be made b} r the corporation. 2 Upon failure of the subscriber to furnish the property, or upon insolvency of the corporation, such subscriptions become payable in cash. 3 A payment of part of the subscription in cash does not waive the right of the sub- scriber to pay the balance in property. 4 The stock may be issued to a contractor before his work in pay- ment therefor has been completed. 5 If the corporation prevents the completion of the contract or refuses to fulfill, the contractor may hold it liable for damages or may have specific performance. question whether the agreement that payment shall be in property is a con- dition precedent or subsequent to the subscription. If the condition is pre- cedent, and must be performed before the subscription can be enforced, none of the parties are bound, even though the corporation becomes insolvent Pel- latt's Case, L. R, 2 Ch., 527 (1867); Stace's Case, L. R., 4 Ch. App., 682 (1869). The third class is where the contract to pay in property is construed to be a condition subsequent. The con- dition being subsequent the party must pay ; and if the corporation becomes in- solvent, he must pay in cash. Elking- ton's Case, L. R, 2 Ch. App., 527 (1867) ; Simpson's Case, L. R, 4 Ch. App., 184 (1868) ; Bridger's Case, L. R, 5 Ch. App., 305 (1870); Thomson's Case, 34 L. J. (Ch.), 525 (1865) ; Fisher's Case, 53 Law Times Rep., 832 (1886); Sherrington's Case, 34 Weekly Rep., 49 (1865). See, also, §§ 47, 78. i See § 16. 2 See § 89, infra. 3 See § 89, infra. * Id. 5 Pendleton, etc., Co. v. Mahan, 18 Pac. Rep., 563 (Oreg., 1888). If a corporation accepts an absolute order upon it by the contractor to deliver to a third person certain stock, it cannot afterwards de- cline to issue the stock on the ground that the contractor has not performed his work. Appeal of Hite, etc., Co., 12 Atl. Rep., 267 (Pa., 1887). The courts of Massachusetts will not, at the suit of a foreign construction company, enjoin a foreign railroad company and a resident from the issue by the railroad company to the resident of bonds and stock which the railroad company has contracted to deliver to the construction company. The suit should be at the residence of the rail- road company. Kansas Con. Co. v. To- peka, etc., R R, 135 Mass., 34 (1883). Where property is deeded to trustees to deed to a corporation for part of the stock, the remaining stock to be for working capital, the cestui que trust are entitled to the stock before the rest is sold. The statute of limitations does not run. Philes v. Hickies, 18 Pac. Rep., 595 (Ariz., 1888). If the corporation prevents the com- pletion of the contract the contractor may recover as damages the value of the work already done and also the prof- its lost. Mayers v. York & Cumber- land R R Co., 2 Curtis, 28 (1854). If 37 §§ 25-27.] METHODS OF ISSUING STOCK. [cH. Ik §25. Third method of issue: By stock dividend,— The third method of issuing stock is bv a stock dividend. It is allowable when an amount of cash or property equal to the amount of the par value of the stock so divided is added permanently to the cap- ital stock of the corporation. A stock dividend can be made only when the whole of the capital stock has not been issued, or when it may be increased. It can never increase the capital stock be- yond the amount as limited by legislative enactment. An issue of stock by a stock dividend is prohibited by constitutional or legis- lative enactment in some states. In England it has been a ques- tion of doubt whether stockholders can be compelled to accept a dividend of stock. These questions, however, are discussed else- where. 1 § 26. Pledge of stoclc oy a corporation. — It is now settled that a corporation may pledge its unissued stock to secure the debts of the corporation. 2 It is also clear that, for non-payment of the debt so secured, the pledgee may sell the stock; 3 and such sale is legal even though the stock does not sell for its full par value. 4 § 27. Issue of stoclc for partnership property or the property of another corporation. — A copartnership may, of course, sell its stock to a corporation and take shares of stock in payment. But if the partnership is in a failing condition at the time of the trans- fer, the creditors of the firm may disregard the sale and levy an execution on the property itself. 5 The same rules apply to a sale by one company to another. 6 the corporation refuse to issue the stock him necessary. Moore v. Hudson River according to contract the contractor R R Co., 12 Barb., 156 (1851). may recover as damages the viarket If in organizing and issuing the stock value of the stock Porter v. Buckfield the amount to be issued for the property Branch R R Co., 32 Me., 539 (1851); is not what the contract calls for, the Barker v. Rutland & "Washington R R vendor may compel a specific perform- Co., 27 Vt, 766 (1855). If the contract ance. Bailey v. Champlain, etc., Co., 46 provides for payment to the contractor N. W. Rep., 539 (Wis., 1890). See, also, in stock, without stating that the stock §§ 61, 335. is to be taken at its par value, the con- l See § 51, ch. XXXIL tractor may demand the stock at its 2 See § 465, infra. market value ; and if it is worthless, he 3 See § 476, infra. may then demand money in lieu thereof. 4 See § 465, note. Hart v. Lauman, 29 Barb., 410. The 5 This subject and the numerous com- contractor cannot, however, complain plicated questions connected with it are because the capital stock has been in- considered in chapter XL, infra; also § 6. creased, nor is a tender of the stock to 6 Id. 38 CHAPTER III. "WATERED" STOCK— STOCK ISSUED ILLEGALLY FOR MONEY, PROP- ERTY, OR BY A STOCK DIVIDEND. IT IS THEN CALLED " WA- TERED " OR FICTITIOUSLY PAID-UP STOCK A. NATURE OF "WATERED STOCKS § 28. Objects of issuing fictitiously paid- up stock. 29. Methods of issuing "watered" stock — Forfeited stock. 30. Dicta in regard to such issues. 31. Fictitious stock may be voidable. B. WATERED STOCK ISSUED FOR CASH. 32. First method of issue: By dis- count in cash. 33-34. Dangers attending this method. •C WATERED STOCK ISSUED FOR PROP- ERTY OR CONSTRUCTION WORK WHICH IS OVERVALUED. 35. Second method : Issue of stock for property taken at an overvalu- tion. D. WHO MAT COMPLAIN AND AGAINST WHOM COMPLAINT MAY BE MADE. 36. Liability on "watered" stock, and who may enforce it 37. Who may complain of an issue of stock as " paid up," when it has not been fully paid? 38. Right of the corporation itself to complain. § 39. Stockholders participating in the act cannot complain. 40. Transferees of participating stock- holders cannot complain. 41. Stockholders dissenting at the time of the issue may complain. 42. Corporate creditors as complain- ants where the issue is for money. 43. Corporate creditors as complain- ants where the issue is for prop- erty or construction work. 44 Who is liable, and the character of the liability — Liability of the corporation. 45. Liability of persons to whom stock is issued for cash at less than par. 46-47. Liability of persons to whom stock is issued for property taken by the corporation at an overvaluation. 48. Liability of the officers of the cor- poration. 49. Liability of the persons purchas- ing the stock with notice. 50. Liability of the bona fide trans- ferees without notice. E. ISSUE OF WATERED STOCK BY A STOCK DIVIDEND. 51. Third method: dends. Issue by stock divi- A. NATUKE OF WATERED STOCK. § 28. Object of issuing fictitiously paid-up stock. — The issue of shares of stock as " paid up," when in fact they are not paid up, gives rise to some of the most complicated questions connected with the law of corporations. A share of stock is supposed, in theory, to represent its par value in money or money's worth, paid in or to be paid in to the corpo- ration. Accordingly, when it is issued as paid up, it is bought and sold in open market on the supposition that the corporation has received its full par value. 1 Upon this basis, transactions in paid-up 1 The reasons why the par value of in to the corporation are stated by the stock is required by the law to be turned supreme court of the United States, in 39 §28.] "watered" stock. [CH. III. stock, involving many millions of dollars, are of daily occurrence in the commercial centers of the country. The facilities which ex- ist for the sale of properly issued stock are equally available for the sale of fictitiously paid-up stock, until it has become well un- derstood and expected that railroad and business corporations will make these issues of stock. 1 The issue is generally to the organ- izers or other co-operators, in ostensible payment for property or construction work. It is no unusual thing for a newly-organized railroad corporation to issue to a construction company bonds and stock whose par value is many times the value of the construction work done. 2 These bonds and the stock are then sold to the pub- lic at a profit, large or small, according to the prospects of the en- terprise/and the skill of the parties who are manipulating the cor- poration. Soon, however, default is made in the payment of the interest on the bonds, and this is followed by corporate insolvency, Handley v. Stutz, 139 U. S., 417, 428 (1891), as follows : "The stock of a corporation is sup- posed to stand in the place of actual property of substantial value, and as being a convenient method of repre- senting the interest of each stockholder in such property, and to the extent to which it fails to represent such value it is either a deception and fraud upon the public, or an evidence that the original value of the corporate property has be- come depreciated. . . If it be once admitted that a corporation may issue stock without receiving a consid- eration therefor, and where it does not represent actual or substituted value in corporate assets, there is apparently no limit to the extent to which the original stock may be 'watered,' except the caprice of the stockholders." Concern- ing the subject of watered stock, see, also, Cook on The Corporation Problem, pp. 24-33. 1 " According to the estimate of the most widely acknowledged statistical authorities upon railways, through the methods of sale or hypothecation, $3,700,000,000 of purely paper values have been sold to the public." Hudson on The Railways and The Republic, 274 (1886), a book that deals with the rail- way problems of the day from an anti- railway point of view. See, also, Preface to Poor's Manual for 1884. 2 Jeans on Railway Problems, 311 (1887), says : " In 1872 the difference be- tween the total cost of American rail- ways and their equipment, and the total capital of the system, was $85,250,000. In 1884 this sum had been increased to upwards of $162,000,000. In 1872 the watered capital amounted to an average of about $1,800 per mile, but in 1884 the average of such capital was only $1,343 per mile. At the end of 1884 fully ten per cent of the total capital embarked in American lines was additional to the actual cost of the railways and their equipment, and the greater part of it may be regarded as representing ' wa- tered ' stock." Atkinson on the Distribution of Prod- ucts (2d ed., 1886), page 259, says : " The elimination of what has been called ' watered stock and bonds ' against which the silly crusade of the so-called anti-monopolists has been directed, is therefore in process of accomplishment by methods far more potent than any possible legislative acts, namely, by the triple competition of water-ways. Sec- ond. The competition of one railway with another. Third. The competition of product with product in the greater markets of the world." 40 CH. III.] " WATERED " STOCK. [§29. foreclosure, receivership and re-organization. The issue of ficti- tiously paid-up stock is the favorite device of corporate promoters, organizers and manipulators in carrying out their plans of realizing enormous gains from small investments, and in accumulating great fortunes at the expense of the public. Occasional^, too, the issue is made for the purpose of concealing large and unreasonable prof- its, which, if known, might cause the public to regulate and dimin- ish the source of income. In such cases a stock dividend is gener- ally resorted to. § 20. Methods of issuing " watered " stock — Forfeited stock.— All stock which has been issued as paid-up stock, but whose full par value has not been paid in to the corporation in money or money's worth, is watered to the extent that the par value exceeds the value actually paid in. There are three different ways in which watered stock is issued : It is done bv issue of certificates of stock for an amount of money less than the par value of the stock, the certificates asserting on their face that the full value has been paid in ; or for property or construction work taken at a fraudulent overvaluation ; x or by a stock dividend, the equivalent par value of which has not 1 Mr. Simon Stern, in the Cyclopaedia of Political Science, Political Economy and United States History, vol. Ill, p. 527, describes this method of issuing " watered " stocks and bonds as follows : " A line from one point to another, say a distance of one hundred miles, is surveyed. It is ascertained that it will cost about $15,000 a mile to build, in- cluding acquisition of land, and about $5,000 a mile to equip ; a total of $20,000 a mile. Application is then made for town and county aid, which aid is generally represented by investment in the stock of the road. The first purpose is to give as little as possible in the way of value in return for such money aid, and it is therefore necessary to inter- pose between the stock and the prop- erty a sufficient number of mortgages to make prospective value of the stock of little or no value. A construction company is then organized, which takes the town and county aid as part of its capital? and the railway corporation, instead of making its contract on the basis of cash, issues to the construction company, say first-mortgage bonds of $20,000 a mile, or possibly $25,000 a mile ; second-mortgage bonds of $20,000 a mile, and stock of an equal value — making a total capitalization of $65,000 a mile, instead of $20,000 at which the road could be constructed. The con- struction company is composed gener- ally, directly or indirectly, of the offi- cers of the road and their friends, who build the road upon the basis of cash ob- tained by negotiating through bankers the securities represented by the bond issues of the railroad company ; they acquire the stock for little or nothing, and also frequently a large proportion, if not the whole, of the second mort- gage; and in prosperous times they may succeed in building and equipping the road on the issue of the bonds se- cured by the first mortgage alone. By this system the road comes into exist- ence laboring under the necessity to earn, over and above operating ex- penses, interest on a funded debt about double the cost of the enterprise, and, if possible, to earn dividends on the stock beyond that sum." 41 30.] ''watered" stock. [ch. m. been permanently added to the capital stock. Each of these three methods, as was shown in the preceding chapter, may be the means of issuing stock which had been paid up in good faith. Each, also, is available for the issue of " watered " stock. The second method particularly — that of taking property at an overvalua- tion — is well calculated to conceal the fictitious character of the issue, and to accomplish the purposes of the participants. "Where, however, a corporation has acquired shares of its own capital stock, either by purchase or by forfeiture for non-payment of calls, it may re-issue and sell the same at market prices. 1 § 30. Dicta in regard to such issues. — There are various opin- ions, generally dicta, contained in the cases, as to the character of stock issued as paid up, when in fact it has not been paid for. The customary expression is that such an issue is a fraud upon the law and upon the public and upon the stockholders ; or that it is against public policy; or is a fraud on subsequent purchasers of the stock so issued. 2 Other cases, however, and cases of high authority, hold that an issue of stock as full paid-up stock, under an agree- ment that the full par value shall not be paid, is not necessarily a fraudulent transaction, but that as between the parties thereto it is a legal and valid agreement, and violates no principle of public policy. 3 iRamwell's Case, 50 L. J. (Ch.), 827 (1881), where the stock had been for- feited. See, also, to same effect, dic- tum in Otter v. Brevoort, etc., Co., 50 Barb., 247 (1867); People v. Albany, etc., R. R., 55 Barb., 344, 371 (1869). But where a subscription is not paid, and the stock is transferred to the cor- poration as " treasury stock " and then sold below par, the purchaser is liable for the unpaid par value. Ailing v. Ward, 24 N. E. Rep., 551 (111., 1890). It is not necessary that treasury stock be placed in the names of trustees for the benefit of the company. See §§ 309- 314 2 In Barnes v. Brown, 80 N. Y., 527, 534 (1880), the court said in a dictum: "It is not claimed, and could not be claimed, that the corporation or its di- rectors could create any valid stock by issuing the same without any consider- ation. The directors assuming to issue stock in that way would perpetrate a wrong upon the corporation and its stockholders, and a fraud upon every person who took such stock as full -paid stock, relying upon the appearances, and deceived thereby." In the case of Sturges v. Stetson, 1 Biss., 246 (1858), the court said : " The subscription of stock by plaintiff, for less than the price of the shares fixed in the charter, was void, as against law and the power of the di- rectors." See, also, Ex parte Daniell, 1 De G. & J., 372 (1857); Oliphant v. Woodhaven, etc., Co., 63 Iowa, 332 (1884) ; Tobey v. Robinson, 99 III, 222, 228 (1881) ; Osgood v. King, 42 Iowa, 478 (1876). 3 In Scoville v. Thayer, 105 U. S., 143 (1881), the court say: "It is conceded to have been the contract between him and the company that he should never be called upon to pay any further as- sessments upon it [the stock]. The same contract was made with all the other shareholders, and the fact was known to all. As between them and the company this was a perfectly valid 42 CH. III.] " WATERED " STOCK. [§30. The explanation of this is, as will be shown hereafter, that such issues are open to attack in some cases and in other cases they are not. It depends altogether on who complains of the issue and against whom complaint is made. The issue may be fraudulent as to one party while it is free from fraud as to another party. The general statement of law that watered stock is illegal throws little light upon the important questions of the rights, risks and liabilities growing out of such issues of stock. The stockholder and the practitioner wish to know whether such stock is void or is voidable, or is valid. They wish to know, also, what are the rights and remedies of the various parties involved. If the stock is valid, then the question arises whether any one is liable for that part of the par value which has not been paid, and also who may bring suit to enforce that liability. It is w T ell settled that watered stock is not illegal and void per se, unless it is declared to be void by constitutional or statutory pro- agreement It was not forbidden by the charter or by any law or public pol- icy." In the case of In re Ambrose, etc., Co., L. R, 14 Ch. Div., 390, 394-5, where paid-up stock was issued for property taken at a gross overvalua- tion, the court said : " It seems to me impossible to say that, however wrong the transaction was in respect to other persons, there was anything wrong as between the company and the vendors." In Flinn v. Bagley, 7 Fed. Rep, 785 (1881), the court held that it was only as a fraud upon future creditors that ex- ception could be taken to an issue of stock at a discount. In Lorillard v. Clyde, 85 N. Y., 384 (1881), the court held it legal for the parties, as between them- selves, to issue paid-up stock for prop- erty taken at a valuation agreed upon between themselves. The court said : «' If it had appeared that the organi- zation of the corporation in this way was a device to defraud the public, by putting valueless stock on the mar- ket, having an apparent basis only, a different question would be presented." See, also, Otter v. Brevoort Co., 50 Barb., 247-256 (1867), dictum; Spring Co. v. Knowlton, 103 U. S., 49-58 (1880), dic- tum. There have also been various dicta in the cases and text-books that the issue of "watered" stock by mining com- panies is a customary, and hence legal, issue. There is no reason, however, why stock issued for a mine should be issued more recklessly than stock issued for a patent-right. The case generally cited as holding that mining companies may legally issue watered stock is lie South Mountain Consol. Min. Co., 7 Saw., 30 (1881) ; S. C, 4 Fed. Rep., 403. In this case, however, it is stated that corporate creditors were protected "by the personal liability of each shareholder for his pro rata share of the indebtedness of the corporation." Aff'd, 14 Fed. Rep., 347 (1882). Under the Minnesota statute author- izing mining corporations to sell their unissued stock as the corporation may see fit, and providing that if it is issued thus, as paid up, no further liability shall exist, the sale of shares of a par value of $2 for six cents exempts the purchaser from further liability to any o ie, including corporate creditors. Ro;S v. Silver, etc., Co., 29 N. W. Rep., 591 (Minn., 1886) ; Ross v. Silver, etc., Co., 31 N. W. Rep., 219 (Minn., 1887). See, in general, Kimberly v. Arms, 129 U. S., 512, 530 (1889). 43 §31.] "wateeed" stock. [ch. III. visions. Nearly all the cases assume this to be the rule, and do not discuss it. Even when a constitution or statute declares such stock to be void, it is rarely possible to apply the statutory law. A few cases speak of such stock as being void; but, inasmuch as the rem- edies given in those cases were remedies for the rescission of con- tracts for fraud, they do not establish the proposition that the issue was void absolutely. 1 § 31. Fictitious stock may be voidable. — Is stock voidable when fraudulently issued as paid up? There are few cases on this ques- tion, but the tendency of the courts is to hold that such issues of stock may be avoided by a withdrawal of the issue and a cancella- tion of the certificates. Thus a court of equit}', on the application of a dissenting stockholder, has decreed that stock falsely issued as paid-up stock should be delivered up to the corporation for cancel- lation. 2 Where, however, the stock has passed into the hands of bona fide purchasers for value, such purchasers are entitled to re- tain the stock. Some cases intimate that the stock fictitiously is- sued may be canceled, except a part whose par value would equal the amount actually paid in b} r the persons receiving it. 3 Many cases hold also that the transaction is in the nature of a fraudulent contract, and that it may be rescinded for fraud ; in which case the stock would have to be returned to the corporation. So far as the right of the corporation to issue stock below par is concerned, the courts have frequently held that the issue is an ultra vires act. 4 But an ultra vires act is not always void abso- 1 Sturges v. Stetson, 1 Biss., 246 (1858) ; be no question that this remedy is avail- Fosdick v. Sturges, 1 Biss., 255 (1858); able. Gilman, etc., R R. Co. v. Kelly, 77 111., * Fisk v. Chicago, etc., R R Co., 5a 426 (1875) ; Campbell v. Morgan, 4 Barb., 513 (1868), where the court says : Bradvv. (111.), 100 (1879). See, also, § 47. "It is not a question of good faith, or of 2 Gilman, etc., R R Co. v. Kelly, 77 honest intention, or of wise policy, or 111., 426 (1875). In this case it was ad- skilful or discreet management on the mitted that the stock was issued gratui- part of the directors. It is a question tously and for the purpose of enabling of power." In West, etc., R v. Mowatt, the construction company to own a 12 Jur., pt 1, 407 (1848), the court sus- majority of the stock, thereby control- tained a demurrer to a bill for specific ling the corporation. performance of a contact to take shares 3 Sturges v. Stetson, 1 Biss., 246, 254 from the corporation at a discount, the (1858). The court said, in a dictum, court holding that the contract was that stock taken at less than par, with ultra vires. In Ex parte Daniell, 1 knowledge, is subject to the right of De G. & J., 372, the court says: "It was other stockholders, being such at the very properly admitted . . . that time of its issue, "to have it reduced the directors of the company had no to the charter value of the shares. This power to pass the resolution " issuing would take from him nearly one-third the stock for less than its par value, of his shares." In Fosdick v. Sturges, 1 In Brown's Case, 2 De G., F. & J., 275. Biss., 255 (1858), the court say there can 295 (1860), it is held to be "beyond the 44 ch. in.] "watered" stock. [§§ 32 :!4. lutely, and it is voidable only at the instance of persons standing in a certain relation towards the act. Who can avoid the act will be explained hereafter. B. WATERED STOCK ISSUED FOR CASH. § 32. First method of issue: By discount in cash. — As already stated, paid-up stock may be improperly issued in three different methods : by part cash payment ; by taking property at an over- valuation ; by an invalid stock dividend. An issue of paid-up stock for cash, upon payment of only part of the par value of the stock, is not often made, inasmuch as the real nature of the transaction is readily discovered and easily remedied. Sometimes the corporation makes the issue under a contract with those receiving it that no more than a certain percentage of the par value will be called for. Again, a release is sometimes made by a resolution of the directors or stockholders, after subscrip- tions have been made and partly paid, discharging the subscribers from any further liability on such subscriptions. The proceedings are generally spread upon the corporate records ; certificates are 'issued, asserting on their face that they are paid up; and all in- quiries at the corporate office are answered by a substantiation of that assertion. § 33. Dangers attending this method. — There are various dangers and liabilities growing out of such a transaction. The stock is liable to be canceled. 1 The person to whom it was issued, 2 or his transferee with notice, 3 or the corporate officers participating in the act, 4 may, under certain circumstances, each be held liable per- sonally for the unpaid par value of the stock. They may be liable to the corporation itself, 5 or to the corporate creditors, 6 or to bona fide transferees of the stock. 7 A bona fide transferee of such stock, however, is not liable. 8 But it has been held that the corporation may refuse to allow a trans- fer on the corporate transfer book of stock so issued. 9 § 34. In England there has been great doubt on this subject. 10 It formerlv was held that, where a contract for the issue of stock for cash at a discount is regularly registered with the public registrar, as provided by statute, then the person to whom the functions and in excess of the powers " 6 See §§ 42, 43. of the directors. 7 See S 40. i See § 81. 8 See § 50. 2 See §§ 46, 47, 167. 9 People v. Sterling Mfg. Co., 82 111.. 3 See § 4ft. 457 (1876). 4 See § 48. " See § 43. 5 See § 38. 15 §34.] " WATEKED " STOCK. [CH. III. stock was thus issued by contract as paid-up stock was not liable to the corporation, nor corporate creditors, nor any other person, for the unpaid par value of the stock, and his transferee was likewise protected. 1 The latest authority in England, however, is in accord with the American rule, and holds that stock cannot be issued for cash at a discount. 2 i Re Ince Hall Rolling Mills Co., 30 W. R, 945 (1882) ; S. C, L. R, 23 Ch. D., 545. The court refused to hold liable the person receiving the stock, but in a dictum said: "Assuming that the con- tract was ultra vires, what would bo the result? If it is ultra vires it must be set aside in toto, the consequence being that these gentlemen would be entitled to be relieved of their shares and receive back the money paid upon them." In the case of Guest v. Wor- cester R. R Co., L R, 4 C. P., 9 (1868), where stock had been issued as paid-up stock to a corporate creditor as security for his debt, nothing having been paid on such stock, the court said it did " not entertain a shadow of a doubt," and that the holder was not liable thereon. In Baron De Beville's Case, L R, 7 Eq. Cas., 9 (1868), " paid-up " shares had been issued to De Beville. who had subscribed for " paid-up " shares, but had paid no part of the par value thereof. The court held him not liable. In this case the corporation had authority to issue ordi- nary shares for cash, and "paid-up" shares for property or services. See, also, Gold Co., L. R, 11 Ch. D., 701 ; James v. Eve, 6 H. L. Cas., 335 ; Plask- gnaston Tube Co., L. R, 23 Ch. D., 542. Ex parte Daniell, 1 De Gex & Jones, 372 (1857), is not strictly in accordance with the preceding authorities, but in Daniell's case the issue was to a director who was acting in a fiduciary capacity. The case is so distinguished in Carling's Case, L. R, 1 Ch. D., 115 (1875). In Re Dronfield Silkstone Coal Co., L. R, 17 Ch. Div., 76 (1880), on page 97, the court says : " If the company could not question it, neither can a creditor ; for he can obtain nothing but what the company can get from the sharehold- ers." See, also, Re Ambrose Lake T. & C. Min. Co., L. R. 14 Ch. D., 390 (1880) ; Re Ince Hall Rolling Mills Co., 30 W. R, 945 (1882), where the court said the same as in the preceding case. In Waterhouse v. Jamieson, L. R, 2 H. L. (Sc), 29, the court said, page 37: "I take it to be quite settled that the rights of creditors against the shareholders of a company, when enforced by a liquidator, must be enforced by him in right of the com- pany ; what is to be paid by the share- holders is to be recovered in that right." Cf. remarks of the lord chancellor, page 32. 2 Re Addlestone, etc., Co., 58 L. T. Rep., 428 (1887). In Ex parte Stephenson, 15 L. R, Ir., 51 (1885), it was held that, upon dissolution of the corporation, the stock- holders are entitled to the remaining as- sets in proportion to the amounts paid by them, without regard to the " water " in the stock. An issue of stock in England for cash at less than par is invalid, even though the contract is duly registered under the Companies Act The holders are liable for the unpaid par value. Re London, etc., Co., 59 L. T. Rep., 109 (1888). In England an issue of stock for cash at a discount is illegal, and a holder may sue to rescind the issue to him and for repayment of the money paid. Re Almado, etc., Co., 59 L T. Rep., 159(1888), overruling Re Ince, etc., Co., 23 Ch. D., 545, n., and Re Plaskgnaston, etc., Co., id., 542. A person subscribing for and taking stock for cash at less than par cannot repudiate the same and cancel the sub- 46 OH. III.] " WATERED " STOCK. [§ 35. 0. WATERED STOCK ISSUED FOR PROPERTY OR CONSTRUCTION WORK WHICH IS OVERVALUED. § 35. Second method: Issue of stoclc for property taken at an overvaluation. — A second method of issuing stock as paid up, when it is not actually paid up, is by its issue for property taken at an overvaluation. This method is the most frequently employed, the most difficult to prove, and the least easy to remedy. A large amount of litigation and confusion has been experienced and gone through with in determining the principles of law which should govern such transactions. The questions which have perplexed the courts were, first, what constituted an overvaluation sufficient to invalidate the contract; second, what remedy should be applied when the contract was invalidated. It is now well settled that in order to invalidate an issue of stock which is issued for property taken at an overvaluation, it must be shown not only that there was an overvaluation, but also that such overvaluation was intentional and consequently fraudulent. 1 The property is not to be considered as overvalued merely be- cause, subsequently, it turns out to be so. The various circum- stances under which the valuation was made should be considered in determining the lona fides of the transaction. 2 scription on the ground that he sup- remedy. Coffin v. Ransdell, 11 N. E. posed that the issue was legal. Re Rail- Rep.. 20 (Ind., 1887). way, etc., Pub. Co., 61 L. T. Rep., 94 In Phelan v. Hazard, 3 Dill. 45 (1ST- . (1889). Cf. Re Zoedone Co., 60 id. (1889) ; Judge Dillon thoroughly reviews the Re Midland, etc, Co., 60 id., 666(1889). authorities and says : "The coutract is An agreement of the company that valid and binding upon the corporation stock may be issued at a certain figure and the original shareholders unless it below par is not such a " contract " as is rescinded or set aside for fraud ; and upon being duly filed authorizes such . . . while the contract stands uuim- an issue. Re New Eberhardt Co., 62 peached, the courts, even where the L. T. Rep., 301 (1889). rights of creditors are involved, will i Brant v. Ehlen, 59 Md., 1 (1882). In treat that as a payment which the par- this case the court said : "So long as the ties have agreed should be payment." transaction stands unimpeached for See, also, Brant v. Ehlen, supra, fully fraud, courts will treat as a payment explaining the meaning of the term that which the parties themselves have trust fund as applied herein. Crawford agreed shall be a payment, and this, too, v. Rohrer, 59 Md., 599 (1882). incases where the rights of creditors 2Schenck r. Andrews, 57 N. Y., 133 are involved." New Haven, etc., Co. v. (1874). In Coit v. North ( !ar. ( told Amal. Linden Spring Co., 142 Mass., 349 (1886). Co., 14 Fed. Rep., 12 (1882), the court Where the plaintiff does not allege said corporators '" ought not to be made fraud in the valuation the action fails, liable individually for the debts of the An action framed on the theory of un- company at the instance of creditors, paid subscriptions is ineffectual as a because, at a later day, the estimate 47 §§ 36, 37.] " WATERED " STOCK. [CH. III. D. WHO MAY COMPLAIN AND AGAINST WHOM COMPLAINT MAT BE MADE. § 36. Liability on " watered " stock, and ivho may enforce it— "When it has been established that the overvaluation of the prop- erty taken in payment for stock was intentional and fraudulent, the questions then arise, what liability has been incurred, who is liable, and what is the remedy? The clearest method of investigat- ing and presenting the law in answer to these questions is by con- sidering, first, who may complain of the transactions — who may be the party plaintiff or complainant ; second, who is liable in such a transaction — who is to be made the defendant. Incidentally also there arise questions as to the extent of that liability, and the remedy to be applied. § 37. Who may complain of an issue of stock as "paid up" when it has not been fully paid!— The state.— As already indicated, the issue of stock as paid-up, when not actually paid up, is an act ultra vires of the corporation. The commission of ultra vires acts by a corporation, to the detriment of the public, renders its charter liable to forfeiture, at the instance of the state. The issue of fictitiously paid up stock, with a view to defrauding the public, might constitute a misuse of the corporate rights and privileges. In such a case, however, it has been held that the state would not forfeit the charter of the corporation. But a very pal- pable case of fraud will justify the forfeiture. 1 fairly put upon the property at that tract" See, also, Schroder's Case, L. time has become modified by subse- R, 11 Eq. Cas., 131 (1870). quent events, and will not amount to Where a mine is turned in at a large the value which they set upon it." valuation for stock, no fraud is proved On appeal the court, in affirming the by the mere fact that the mine subse- judgment below (see 119 U. S., 343) quently turns out to have been worth <1886), said: "Where full-paid stock is only one-fifth of that amount Fraud issued for property received, there must exists only when intentional overvalu- be actual fraud in the transaction to en- ation, "or such reckless conduct in the able creditors of the corporation to call placing of this value, without regard to the stockholders to account" To same its real worth, as would indicate, with- effect, Mege's Case, 10 W. N. (Eng.), 208 out explanation, an intent to defraud." <1875). Young v. Erie Iron Co., 31 N. W. Rep., In Carr v. Le Fevre, 27 Pa. St, 413 814 (Mich., 1887). (1856), the court said that if the direct- 1 Quo warranto does not lie against a ors " took lands at a prospective value, corporation merely because it issues its never realized, it is nothing more than stock below par. State v. Minn., etc, many individuals and corporations have Co., 41 N. W. Rep., 1020 (Minn., 1889). done before. Such an error in manage- In Holman v. State, etc., 5 N. E. Rep., ment or in their judgment of the value 556, 702 (Ind., 1886). the state caused a of a purchase, made without fraud, charter to be forfeited because the sub- forms no ground for rescinding the con- scribers for stock were insolvent at the 48 22 si CH. III. J 44 WATERED " STOCK. [§38. Moreover, when a corporation is guilty of an ultra vires act, and such act is detrimental to the interests of the public, it is possible that the attorney-general may file an information for the purpose of enjoining or setting aside such act. 1 Such a proceeding, how- ever, would be difficult to maintain. § 38. Might of the corporation itself to complain. — The corpora- tion itself, after issuing its stock as paid-up stock, and declaring it "so to be, cannot subsequently repudiate that declaration and agree- cment and proceed to collect, either from the person receiving the stock or his transferee, the unpaid part of the par value. It is es- - topped from so doing. 2 > i time of subscribing, thereby perpetrating than quo warranto, see People v. Bal- ^~a fraud on the public. See, also, State lard, 134 N. Y., 269 (1892). v. Atchison, etc., R. R, 38 N. W. Rep., 43 °- In the case of Scoville v. Thayer, 105 (Neb., 1888). The case Jersey City G. L. U. S., 143 (1880), the court said, in a. Co. v. Dwight, 29 N. J. Eq. 242, was dictum: "No call could have been made overruled by Railroad v. Railroad, 32 by the company under its agreement N. J. Eq., 755, according to Elizabeth- town G. L. Co. v. Green, 18 Atl. Rep., 844 (N. J., 1890) ; affirmed, 24 id., 560. The state may bring an action to for- feit a charter where the corporation commences business before the full cap- ital stock is subscribed. People v. Natl. Sav. Bank, 11 N. E. Rep., 170 (111., 1887). The state cannot enjoin private par- with the shareholders, unless to pay its creditors. . . . The shares were is- sued as paid up, on a fair understand- ing, and that bound the company." The issue had been at a discount. See, also, Union, etc., Co. v. Frear, etc., Co., 97 111., 537 (1881), dictum. In the case of Granite Roofing, etc., Co. v. Michael, 54 Md., 65 (1880), stock was is- ties from dealing in "watered" stock, sued as paid up for cash, although not State v. American Cotton Oil Trust, 3 actually paid. The corporation passed S. Rep, 409 (La., 1888); People v. Natl, under the control of purchasers of the Sav. Bank, 11 N. E. Rep., 170 (111., 1887); affirmed on rehearing, 22 id., 288 (1889). See, also, Columbus, etc., R. R. v. Burke, 20 Week. L. Bull., 287. Quo tvarranto failed in Common- wealth v. Central P. R'y, 52 Pa. St., 506 (1866), where a large amount of "wa- tered " stock was issued. Contra, 12 S. Rep., 377. 1 See § 635, infra. The state will not be allowed to inter- vene in a foreclosure suit for the pur- stock, who caused the corporation to' sue the original subscribers for the un- paid par value of the stock. The court said : " While the law may rejeet, as illegal and fraudulent, that which the parties have agreed upon, ... it will not arbitrarily incorporate, in lieu thereof, terms in the contract to which the parties have never assented." In the case of Re Ambrose, etc., L. R, 14 Ch. Div., 390 (1880), where all the stock- holders acquiesced and there were no pose of preventing it on the ground that creditors' rights involved, the court held the bonds are illegal and void, and that that the corporation could not hold the on a re-organization a greater issue will directors liable for the profits made by be made. State v. Farmers', etc., Co., 17 them. In Zirkel v. Joliet Opera House S. W. Rep, 60 (Tex., 1891). Co., 79 111., 334 (1875), the corporation Concerning the power of the state to had released the subscriber after the object to an ultra vires act of a private subscription had been made. The re- corporation by any proceeding other lease being without consideration, and (4) 49 38.] " WATERED " STOCK; [CH. III. Where, however, actual fraud enters into the transaction, then the corporation is not estopped from having the agreement set aside. The person receiving the stock can then be compelled to return the stock or its market value, and take back that which he gave to the corporation for it. But the corporation cannot hold him liable for the par value of the stock. 1 not a contract, was held void, and the corporation was allowed to recover. The case of The Society of Prac. Knowl. v. Abbott, 3 Beav., 559 (1840), was dis- tinguished in Re British S. P. B. Co., L. R, 17 Ch. D., 467 (1881), the latter case holding that no one is liable on fic- titiously paid up stock where all acqui- esced and there was no intent to bring in new stockholders. This is held to be the rule even though new stockholders were subsequently brought in. In the case of Harrison v. Union Pac. R'y Co., 13 Fed. Rep., 522 (1882), where plaintiff sued to recover on bonds guar- antied by the defendant, the court said : "The intention of the Arkansaw Valley Railway Company was to sell the stock to Harrison for less than its par value ; i. As to receivers, see 20 S. W. Rep.. 1015. Where all the stockholders unite in the issue of watered stock to the presi- dent for his own use. and assent to a contract between him ami the company, the corporation itself cannot subse- quently complain. Arkansas, etc., Co. v. Farmers', etc., Co., 22 Pac. Rep., 054 (Colo., 1889). The corporation itself cannot com- plain. First Nat'l Bank r. Gustin, etc.. Co., 44 N. W. Rep., 198 tMinn., 1890). The city court of New York in Zelaya Min. Co. u. Meyer, 8 N. Y. Supp., 487 (1890), held that where a corporation agrees to and does issue its stock below par, the corporation itself cannot levy assessments for the unpaid par value. 1 See § 47. It is to be noticed, how- ever, that there are few well-defined cases on this principle of law. Most of the cases on the liability of the director herein involved the additional fact that the director received some of the stock himself. In the case of Continental Tel. Co. v. Nelson, 49 N. Y. Super. Ct, 197 (1883), the president was sued by the cor- poration itself for issuing stock in pay- ment of labor, the par value of the stock being worth over twice the value of the labor. The court held that he was liable only for the actual market value of the 50 CH. III.] "watered" stock:. [§39. The corporation has also a remedy herein against its directors who issued the stock either fraudulently or in an ultra vires man- ner. 1 This liability is similar to their general liability to the cor- poration for fraudulent, negligent or ultra vires acts on their part. 2 The measure of their liability herein is not the par value of the stock, less the value actually received therefor by the corporation, but it is the actual or market value of the stock, less the propertv or cash actually received by the corporation on the stock so issued. It has also been held that the corporation cannot, in a court of equity, compel a person, who agreed to take stock at a discount, to carry out the contract, inasmuch as it is ultra vires? Where the corporation contracts to issue stock to a contractor for work to be done in the future, and such work is not completed, various complications arise. This subject, however, is considered elsewhere. 4 § 39. Stockholders participating in the act cannot complain. — Stockholders in a corporation, who participate or aid in the issue of paid-up stock, upon payment of less than its par value, or who have knowledge of the act and acquiesce therein, cannot after- wards complain of. the transaction, either in their own behalf or in behalf of the corporation. They are bound by estoppel or acquies- cence. 5 stock in excess of the value of the labor, and submitted the question to the jury. A corporation cannot refuse to trans- fer stock on the ground that the vendor fraudulently induced the company to issue the stock to him where the com- pany has been guilty of laches in not seeking a remedy before the transfer. The vendee in this case was a director. American, etc., Co. v. Bayless, 15 S. W. Rep., 10 (Ky., 1891). Although the incorporators of a New Jersey company have contracted to issue sixty per cent, of its stock to a person for two patents, yet the board of direct- ors after the company is organized may refuse to carry out the agreement, one patent being worthless and the other not having been perfected. Trie court said : " To justify a corporation in issuing stock under our act for property pur- chased, there should be an approxima- tion, at least, in true value of the thing purchased to the amount of the stock which it is supposed it represents." 51 Edgerton v. Electric, etc., Co., 24 AtL Rep., 540 (N. J., 1892). 1 See § 48. 2 See Part IV. 3 West. R R. Co. v. ^Mowatt, 12 Jur., pt I, 407 (1848). 4 See ch. XLVI and § 24. s In Re Gold Co., L. R., 2 Ch. Div., 701, 712, the court says : " It could not be a fraud upon, or a wrong to, the existing stockholders, because every one of them was a party to the transaction." See, also, Scoville v. Thayer, 105 U. S., 143 (1881); Lorillard v. Clyde, 86 N. Y., 384 (1881) ; Hall v. Brooklyn El. R R, N. Y. L. J., April 30, 1892. But in the case of Knowlton v. Congress, etc., Co., 14 Blatch., 364, 368 (1877), the court said in a dictum: "Can there be any doubt that, up to the time of the abandon- ment of the scheme by the defendant, the plaintiff could have resorted to a court of equity and restrained further proceedings and vacated the proceed- ings already taken? The cases are nu- §39.] " WATERED " STOCK. [CH. III. The cases are in conflict on the question whether the party re- ceiving stock at a partial discount of its par value may repudiate the transaction and recover from the corporation the money he merous where courts of equity have interfered to prevent the consummation of a wrong, upon the motion of a party who was instrumental in its inception." Affirmed, 103 U. S., 49. The issue of stock in that case was held to be abso- lutely void by statute. A participating stockholder cannot complain, even though he or his as- signee is a corporate creditor. Callanan v. Windsor, 42 .N. W. Rep., 652 (Iowa, 1889); Lewis v. N. Y, etc., Iron Co., N. Y. L. J., April 30, 1890. A purchaser of stock that has voted for an issue of "watered" bonds and stock is estopped from complaining, even though the issue was prohibited by the constitution of the state (Pennsyl- vania). Wood v. Corry, etc., Co., 44 Fed. Rep, 146 (1890). A participating stockholder cannot as a corporate creditor enforce the lia- bility. Callanan v. Windsor, 42 N. W. Rep., 652 (Iowa, 1889). A purchaser of stock who voted in favor of a re-organization scheme can- not object to the scheme as being ultra vires, there being nothing illegal per se. in it. Hollins v. St. Paul, etc., R. R, 9 N. Y. Supp., 909 (1889). In the case of Skinner v. Smith, 134 N. Y, 240 (1892), $40,000 of stock was is- sued for letters patent Afterwards, with the consent of all the stockholders, the transaction was rescinded, the stock being returned and the patents retrans- f erred. A license to manufacture under t'.ie patents was then transferred to the company for $350,000 in stock. The court found that the transaction was in good faith and with no intent to de- fraud future stockholders, and that the license was an adequate consideration for the stock. The court held that there was nothing illegal in the transaction. A stockholder cannot have a receiver appointed and mortgages set aside where all the stock is "water," even though the controlling party has made the mortgages to himself and is about to sell the assets of the company to an- other company controlled by himself, and has levied an assessment on the stock of the old company in order to sell out the stock. Robinson v. Dolores, etc., Co., 29 Pac. Rep., 750 (Colo., 1892). A person to whom watered stock has been issued as full-paid stock is not such a bona fide stockholder as may compel a creditor to return bonds which were illegally issued. The stock is void under the Wisconsin statutes. Hinckley r. Pfister, 53 N. W. Rep., 21 (Wis., 1892). A conditional sale of stock, the condi- tion being that the sale shall be complete for fifty cents on the dollar, when the stock is worth par, is valid. Until the stock is worth par, no further sum is re- coverable by a creditor who as a stock- holder participated. Callanan v. Wind- sor, 42 N. W. Rep., 652 (Iowa, 1889). A person who buys stock in a com- pany, knowing that the stock was issued without consideration, cannot compel another stockholder to return his stock to the company for cancellation or to ac- count for dividends. Clark v. American Coal Co., 53 N. W. Rep., 291 (Iowa, 1892). Where three persons own all the stock of a company, two of them may buy the stock of the third and give the com- pany's notes in partial payment for the same. The transaction is legal inas- much as none is injured and all consent. Neither subsequent purchasers of the stock, nor those who become stockhold- ers after the notes are paid, nor stock- holders who consent to the arrangement, can complain of it. Schilling, etc., Co., et al. v. Schneider etal., 19 S. W. Rep., 67 (Mo., 1892). Where about one-half of the capital stock is issued as full-paid stock for property, the real value of which is one- 52 CH. III.] " WATERED " STOCK. [§40- has already paid thereon. 1 It is certain, however, that where the stockholders participating in the issue use the stock to rob a rail- road and bribe a judge, and then disagree among themselves, the courts will not render aid to one as against the others. 2 § 40. Transferees of participating stockholders cannot complain. Not only the participating and acquiescing stockholders, but also their transferees, are bound by the participation or acquiescence. The transferee cannot claim to have greater rights than his trans- ferrer, as regards a general remedy invalidating the whole trans- action. He cannot bring suit in behalf of the corporation and other stockholders against the party or parties participating in the issue, inasmuch as his own title is tainted with the same fraud. 3 quarter of the par value of the stock, and then subsequently the remaining stock is sold for cash at one-quarter of its par value, as between the stockhold- ers and the corporation, the remaining seventy-five cents on the dollar cannot be collected from the parties to whom the stock was issued for cash, it having been agreed at the time of the issue that the stock should be full-paid and non- assessable. Green v. Abietine, etc., Co., 31 Pac. Rep., 100 (Cal., 1892). 1 The case of Clarke v. Lincoln Lum- ber Co., 49 Wis., 655 (1884), holds that a participating subscriber cannot with- draw and recover back sums already paid. See, also, Goff v. Hawkeye, etc., Co., 62 Iowa, 691 (1883). Knowlton v. Congress & Empire Spring Co., 57 N. Y., 518, 537 (1874), holds the same, the court saying : " Such parties are left in the position the}* have placed themselves." The latter case was decided otherwise in the federal courts (14 Blatch., 364, and 103 U. S., 49), it being there held that a recovery might be had where others are repaid. A person to whom stock is issued for cash at a discount may sue to have his subscription canceled. Re Goedone Co., 60 L. T. Rep., 383 (1889). Mandamus will not issue to compel the issue of stock at a discount, in per- formance of a resolution by the stock- holders that such issue shall be made. Equity will not aid the fraud. State v. Timken, 28 N. J. Law, 87 (1886). 2 Tobey v. Robinson, 99 111., 202 (1881). The courts will not aid a stockholder as against directors' breaches of trust, where the business is illegal and the stock fictitious and "watered." Le Warne v. Meyer, 38 Fed. Rep., 191 (1889). 3 Parsons v. Hays, 14 Abb. N. C, 419 (Super. Ct., 1883); Nott v. Clews, 14 Abb. New Cases (N. Y.), 437 ; Ffooks v. Southwestern R'y, 1 Sm. & G, 142 (1853) ; Re British, etc., Co., L R, 17 Ch. D., 467 (1881); Flagler Co. v. Flagler. 19 Fed. Rep., 468 (1884, Circ. Ct. Mass.); S. C, 14 Abb. New Cases (N. Y.), 435 ; In re Syracuse, etc., R. R. Co., 91 N. Y., 1 (1883) ; Kent v. Quicksilver, etc., Co., 78 N. Y., 159, 188 (1879). The purchaser of stock which was issued to directors cannot complain that the directors were guilty of fraud in the issue. Barr v. N. Y., etc., R. R, 125 N. Y„ 263 (1891). See, also, Langdon v. Fogg, 18 Fed. Rep., 5 (1883). Contra, Parson v. Joseph, 8 S. Rep., 788 (Ala., 1891). In the late case of Foster v. Seymour, 23 Fed. Rep., 65 (1885, U. S. Circ. Ct. Wallace, J.), an issue of stock for property at an over- valuation is distinctly held to be no fraud upon the corporation, nor upon the stockholders, all of whom partici- pated. " A purchaser of the stock would not be injured by the transaction unless he paid more for it than it was worth ; and every purchaser would stand upon the particular circumstances of his purchase." A suit against the -33 40.] "watered" stock. [CH. IU. But the Nor can he bring an action against the corporation. 1 transferee is by no means without a remedy. He may bring an action for damages against those who, knowing the facts, induced him to purchase, or those who made it possible for the fraud to be practiced, or who actually assisted in perpetrating the fraud upon him. 2 The transferee has other remedies. If the transfer to him was from one of the participants, he may rescind the transfer and re- cover back the price paid by him ; 3 or, if the contract of purchase is not yet completed, he may refuse to take the stock. 4 guilty parties, who were the directors, to compel them to account for a fraud- ulent disposition of corporate property, will not lie. The fraud is not corporate ; it is personal. See, also. § 733. i In Re Gpld Co., L. R., 11 Ch. D., 701 (1879), the court said: "It was not a wrong done by the company or to the company." In Re Ambrose Lake T. & C. Min. Co., L. R, 14 Ch. D., 390, 397 (1880), the court says: "There would be no liability on the part of the company, as such." 2 The leading case on this principle of law is Cross v. Sackett, 6 Abb. Pr. R, 247 (1858), argued by eminent counsel and decided by learned judges. A bona fide purchaser in open market, from an innocent holder of stock issued as paid up for property taken at an over- valuation, sued a director, being also an original stockholder, for damages. The court in its ' decision said : " When a party projects and publicly promulgates the scheme of a joint-stock company ; when he causes the usual books to be opened, and allows or causes the inscrip- tion of a person as an owner of an in- terest to a definite amount and value therein, which is false within his own knowledge ; when he embodies such false statements in a certificate of this right directly issued and of the same effect as if signed by himself; when he accompanies that certificate by a writ- ten power authorizing a transfer at large by the party to whom he has given the certificate ; when that repre- sentation induces an innocent person to advance his money, — the defendant's own individual act has created the priv- ity of contract, . . . and he must be held responsible to any one who has been deceived." The plaiutiff must prove that a repre- sentation was made that the stock was paid up, and that he relied thereon, and that the representation was false and fraudulent. McAleer v. McMurray, 58 Penn. St., 126(1868); Priest v. White, 1 S. W. Rep., 361 (Mo., 1886). The court, in In re Ambrose Lake Tin & Cop. Min. Co., L. R, 14 Ch. D., 390, 397 (1880), said that the transferee has a remedy against the person who, in any way, made the misrepresentations to him. Re Gold Co., L. R., 11 Ch. D., 701, pp. 713, 714, is to the same effect. In Barnes v. Brown, 80 N. Y., 527 (1SS0). the plaintiff, being under contract to re- ceive paid-up stock from defendants, received such, and afterwards disco t- ered that its par value had not been paid in to the corporation. The court held that he could recover damages from the defendant for the fraud. « Fosdick v. Sturges, 1 Biss., 255 (1858). In this case the certificate was brought into court to be disposed of as the court should direct. 4 Sturges v. Stetson, 1 Biss., 246, 253 (1858), the court holding that an action for the price of such stock is in the nature of a bill in equity for the specific performance of a contract, and the de- fendant may defeat it by avoiding the contract altogether, although the cer- tificates have been transferred to him. 54 CH. III.] "watered" stock. 41, 42. § 41. Stockholders dissenting at the time of the issue may com- plain. — Stockholders, being such when an issue of paid-up stock is improperly made, and not assenting to or acquiescing in it, may bring suit in a court of equity to annul and set aside the whole transaction. 1 It has been held that the issue may be canceled. 2 The dissenting stockholders' rights and remedies herein, in their scope and details, are similar to the rights and remedies of stock- holders in other cases of ultra vires acts or fraud to the injury of the corporation — a subject fully treated in the fourth part of this work. 3 §42. Corporate creditors as complainants where the issue is for money. — According to well-established rules of law in America, To same effect, Coolidge v. Goddard, 77 Me., 579. i In Fisk v. Chicago & Rock Isl. R. R. Co., 53 Barb., 513 (1868), the court en- joined any transfer of the stock, and appointed a receiver to receive what the corporation had realized from the stock, and to use the funds in retiring the stock and paying damages caused thereby. In Sturges v. Stetson, 1 Biss., 246, 254 (1858), and Fosdick v. Sturges, 1 Biss., 255, 259 (1858), the court in dicta said that the issue could be withdrawn, leaving with the guilty parties so much stock as the money paid by them would equal the par value of. Stockholders may restrain the issue of deferred "bonds," i. e., irredeemable bonds entitling the holder to interest after a certain dividend is paid to the stockholders, it being merely a scheme to issue stock below par. Taylor v. Phil., etc., R R. Co., 7 Fed. Rep., 386 (1881). Compare ch. 46, infra. In New York, by statute, income bonds with voting privileges may be issued. Laches on the part of the dissenting stockholder will bar his remedy. Taylor v. South, etc., R R Co., 13 Fed. Rep., 152 (1882). 2 Campbell v. Morgan, 4 Bradw. (111.), 100 (1879); Gilman, Peoria & Spring. R. R Co. v. Kelly, 77 111., 426 (1875). A dissenting stockholder may cause an issue of stock to be canceled where it was issued for land at five times its real value, and then the capital stock was doubled and the increase issued f< r nothing. Parson v. Joseph, 8 S. Rep., 788 (Ala., 1891). A dissenting stockholder may cause to be canceled certain stock which was issued without consideration to a con- struction company in which the direct- ors are interested. Gilman, etc., R R. v. Kelly, 77 111., 426 (1875). Where the president, in order to get control of the corporation, causes a meeting of the board of directors to vole stock in payment for services and prop- erty whose value is much less than the par value of the stock, the stock being voted to outside parties, but thereafter secretly transferred to the president, a stockholder may compel him to return the stock to the corporation for cancel- lation. Such an issue is also illegal by the statutory law of the state. Perry v. Tuscaloosa, etc., Co., 9 South. Rep., 217 (Ala., 1891). The issue of new stock by the corpo- ration cannot be enjoined where neither the corporation nor any of its directors are parties to the action. "White v. "Wood, 129 N. Y., 527 (1892). 3 They cannot have the corporation wound up therefor. In re Gold Co., L. R, 11 Ch. D.. 701 ; Morrison v. Globe Panorama Co., 28 Fed. Rep., 817 (1886). See, also, § 701, infra; 68 L. T. Rep., 163 (1893). 05 §^2.] " WATERED " STOCK. [CH. III. corporate creditors may object to certain transactions, which, as between the corporation and its stockholders and third persons, may be valid and binding. This right of corporate creditors is an essentially American doctrine. It is based on the principle, first enunciated by Judge Story, that the capital stock of the corpora- tion is a trust fund, to be preserved for the benefit of corporate creditors. That principle of law, when applied to a transaction whereby stock is issued as paid up, when it is in fact not paid up, enables corporate creditors to object to the act, and, in certain cases, to undo what has been done, and, in other cases, to compel payment of the actually unpaid part of the par value of the stock. Where the issue of stock was for cash, under an agreement that only part of the par value need be paid, corporate creditors may compel the persons receiving the stock to pay the unpaid full par value. 1 A resolution by a corporation that upon the stockholders paying 1 The leading case on this point is Sagory v. Dubois. 3 Sandf. Ch. Rep., 466, 499 (1846), where the court said: " The defendant being liable by force of his subscription for the stock, the res- olution of the directors . . . not to make any further calls upon the shares was unavailing to discharge his liabil- ity in respect of the association and its creditors." In Scoville v. Thayer, 105 U. S., 143 (1881), the court said that a contract whereby stockholders are to pay but part of the par value of their stock to the corporation, " though bind- ing on the company, is a fraud in law on its creditors, which they can set aside : when their rights intervene and their claims are to be satisfied, the stockholders can be required to pay then- stock in full." Upton v. Tribilcock, 91 U. S. 4 45 (1875), is the first of a series of cases growing out of the failure of the Great Western Insurance Com- pany of Illinois. The other cases are Sanger v. Upton, 91 U. S., 56 (1875); Webster v. Upton, 91 U. S., 65 (1875); Chubb v. Upton, 95 U. S., 666 (1877); Pullman v. Upton, 96 U. S., 328 (1877); Hawley v. Upton, 102 U S., 314 (1880); Upton v. Burnham, 3 Biss., 431 (1873) ; S. C, 3 Biss., 520, and Upton v. Hans- brough, 3 Biss., 417 (1873V. Great West- ern Tel. Co. v. Gray, 14 N. E. Rep , 214 (111.. 1887). This series of cases estab- lished for the federal courts the rule given above. See, also, Flinn v. Bag- ley, 7 Fed. Rep., 785 (1881), giving full review of the American and English doctrine herein ; In re Glen Iron Works, 17 Fed. Rep., 374 (1883); Union M. L. Ins. Co. v. Frear Stone Mfg. Co., 97 III, 537 (1881), also reviewing the doctrine; Hickling v. Wilson, 104 111., 54 (1882); Northrop v. Bushnell, 38 Conn., 498 (1871): Fisher v. Seligman, 7 Mo. App., 388 (1879); Eyerman v. Krieckhaus, 7 Mo. App., 455 (1879); Skrainka v. Allen, 7 Mo. App., 434 (1879); Pickering v. Templetou, 2 Mo. App., 424 (1876); Christensen v. Eno, 21 Weekly Dig, 202 (1885): Mann v. Cooke, 20 Conn., 178 (1850); Myers v. Seeley, 10 Natl. Bank. Reg., 411 ; 20 S. W. Rep., 1015. Where the directors of an insurance company issue to themselves all the stock at one-third of its par value, and upon an increase of the capital vote to themselves, for services in selling the increase, one share for every two shares sold, they are liable upon corporate in- solvency for the unpaid par value of the first issue, and the par value of the stock received as compensation. Their transferee with notice was held not liable. Freeman's Assignee v. Stine, 15 Phil., 37 (1881). 56 CH. III.] "watered" stock. [§42. in a portion of the par value of the stock the capital shall be deemed to be fully paid is wholly ineffectual as against the credit- ors of the company-. 1 In order to enforce a liability where stock is issued as full-paid stock for cash at less than the par value, it is not necessary to prove that fraud entered into transaction, where the issue was for cash, since there is no possibility of mistaken judgment in the value of the thing received in payment. 2 It has been held that the custom of the country will exempt stockholders from liability on stock issued as paid up when it was not paid up. Such a decision, however, is inconsistent with the great weight of authority, and must be considered poor law. 3 1 " It is the settled doctrine of this court that the trust arising in favor of credit- ors by subscriptions to the stock of a corporation cannot be defeated by a simulated payment of such subscrip- tion, nor by any device short of an act- ual payment in good faith. And while any settlement or satisfaction of such subscription may be good as between the corporation and the stockholders, it is unavailing as against the claims of the creditors. Nothing that was said in the recent cases of Clark v. Bever, 139 U. S., 96; Foggu Blair, 139 U. S., 118; or Handley v. Stutz, 139 U. S., 417, was intended to overrule or qualify in any way the wholesome principle adopted by this court in the earlier cases, espe- cially as applied to the original sub- scribers to stock. The later cases were only intended to draw a line beyond which the court was unwilling to go in affixing a liability upon those who had purchased stock of the corporation, or had taken it in good faith in satisfaction of their demands." Camden v. Stuart, 144 U. S., 104 (1892) ; 20 S. W. Rep., 1015. Persons taking stock from the corpo- ration for cash at forty cents on the dol- lar cannot avoid liability to corporate creditors for the remaining sixty cents by setting up that unknown to them the stock had previously been issued to a contractor for work to be done, and that he appointed the corporation his agent to sell the stock at forty cents on t'ie dollar. Their subscription to the stock was an original subscription and bound them. Bates v. Great Western Tel. Co., 25 N. E. Rep., 521 (111., 1890). Where property is sold to the com- pany for stock and cash, the cash may be credited on other subscriptions. Re Jones, etc., Co., Lim., 61 L. T. Rep., 219 (1889). 2 Flinn v. Bagley, 7 Fed. Rep., 785 (1881). 3 Re South Mountain Consol. Min. Co., 7 Sawyer, 30 (1881). In this case it is stated that corporate creditors were protected " by the personal liability of each shareholder for his pro rata share of the indebtedness of the corporation." See comments on this case, supra, % 30. The English rule is now the same as the American. See § 34, supra. Stock, however, which is purchased by the corporation, after its original issue, may be sold by the corporation at a discount. The corporation may then sell the same as an individual stock- holder. Otter i«. Brevoort, eta, Co., 50 Barb., 247 (1867); Barnwell's Case, 50 L. J. (Ch.), 827 (1881), where the stock came to the corporation by forfeiture. See, also, § 29, supra. In many cases stock is issued to a patentee for his pat- ent, and he then donates and turns back to the corporation a part of this stock to be sold at a reduced price for the benefit of the corporate treasury. Lake Superior Iron Co. v. Drexel, 90 N. Y., 87. This transaction is legal ; and it is not at all necessary that the stock so donated 57 42.] "wateked" stock. [CH. III. But the amount collected must be to the extent and for the pur- pose of paying corporate creditors' claims only. 1 A resolution dis- charging stockholders from all liability on stock after thirty per cent, of the par value has been paid, and then suffering a forfeiture of the stock, is void so far as corporate creditors are concerned. 2 It is legal for the company to pay a cash commission to a person who procures subscriptions, even though that commission is de- ducted from the subscription price. 3 Where a railroad corporation is in financial straits, and its stock worth nothing, it is legal for the corporation to settle with one of its creditors by issuing stock to him at twenty cents on the dollar. Other corporate creditors cannot afterwards hold him liable for the remaining eighty cents on the dollar. 4 be placed in the names of trustees for the benefit of the corporation. It may be transferred to the corporation direct In Stribling v. Bank of the Valley. 5 Rand. (Va.), 132, where the bank took a note for its own stock at a price in ex- cess of the market value of the stock, the court held the note to be usurious. It is a question for the jury whether fraud exists in sale of stock, represented to be paid \ip, when part of the pay- ments had been by dividends from the corporation. Kruger v. Andrews, 35 N. W. Rep., 245 (Mich., 1887). But where the corporation has an ac- cumulated profit, and that profit is by agreement with the stockholders ap- plied to unpaid subscriptions, such stock is then paid up. Kenton, etc., Co. v. McAlpin, 5 Fed. Rep., 737 (1880). Where the capital stock is reduced, and subscribers cancel unpaid subscrip- tions and take paid-up stock to the ex- tent of their payments on the old stock, old corporate creditors may hold them liable on the former. In re State Ins. Co., 14 Fed. Rep., 28 (1882). The presumption is that a corporate creditor did not know and acquiesce in the issue of " watered " stock. Stutz v. Handley, 41 Fed. Rep., 531 (1890). As affecting corporate creditors herein, the statute of limitations does not com- mence to run until judgment is recov- ered by the corporate creditors against the corporation. Christensen v. Quin- tard, 36 Hun, 334 (1885). For other cases on the right of corpo- rate creditors to sue, see § 735, infra. i Scoville v. Thayer, 105 U. S., 143, 155, (1881). 2 Slee v. Bloom, 19 Johns. Rep., 456 (1822). 3 Re Licensed, etc., Assoc, 60 L. T. Rep., 684 (1889). A corporation may agree to give $5,000 of stock to one who will borrow $15,000 for it Arapahoe, etc., Co. v. Stevens, 22 Pac. Rep., 823 (Colo., 1889). A commission of fifteen per cent may be paid by the company to those who agree to take all the stock not subscribed for by the public. Re Licensed, etc., Assoc, supra. * Clark v. Bever, 139 U. S., 96 (1891). After deciding that nothing in the Iowa statutes forbids the issue of stock below par, the court says : "If the legislature had intended that the acquisition of stock at less than its face value should be conclusive evidence in every case that the stock, as between creditors and stockholders, is 'unpaid,' it would have been easy to so declare, as has been done in some of the states. If such a rule be demanded by consid- erations of public policy, the remedy is with the legislative department of the government creating the corporation. A rule so explicit and unbending could 58 CH. III.] " WATERED " STOCK. [§42. "Where stock is given by the company gratuitously as a " bonus " to persons who are induced thereby to purchase the bonds of the company, it has been held that such persons are liable to corporate creditors for the par value of such stock. 1 But in New York a different rule prevails and the stockholder is not liable. 2 In the federal courts it is the law that an embarrassed corpora- tion may, upon an increase of its stock, put such stock upon the market and sell it for the best price that can be obtained, and that the corporation may throw in as a bonus a certain amount of full- paid stock to the purchaser of its bonds, and there will be no liabil- ity on the stock. 3 be enforced without injustice to any one, for all would have notice from the statute of the will of the legislature." A limitation on the extent of this case is laid down in that the stockhold- ers are liable, " unless it appears that they acquired the stock under circum- stances that did not give creditors and other stockholders just ground for com- plaint." Affirming 31 Fed. Rep., 670 (1887). To same effect, Morrow v. Iron, etc., Co., 87 Tenn., 262, 276 (1888). 1 A " bonus " of paid-up stock to a di- rector who loans money to the com- pany and takes its notes and bonds as collateral is not legal, the issue of the stock being the original issue. The court, in a dictum, stated that the di- rector was liable for the full par value of the stock. Richardson v. Green, 133 U.S., 30(1890). Persons purchasing bonds from a company and taking stock as a " bonus," the stock being unissued until that time, are liable for the par value of the stock. Stutz v. Handley, 41 Fed. Rep., 531 (1890) ; reversed on other grounds, 139 U. S., 417; Haldeman v. Ainslie, 82 Ky., 395. Where the stockholders increase the stock and distribute part of it among . themselves as full-paid stock, but give nothing for it, they may be held liable by corporate creditors for the par value thereof. Handley v. Stutz, 139 U. S.. 417 (1891); Skrainka v. Allen, 76 Mo., 384 In a suit for contribution in the fed- eral court by a Missouri stockholder, who has been compelled by the Missouri courts to pay for stock issued to him as a " bonus," the court will follow the Missouri decision rather than a New York decision holding that the same " bonus " created no liability. Allen v. Fairbanks, 45 Fed. Rep., ^45 (1891). A distribution gratis of stock among the stockholders has been held to be an unauthorized reduction of the capital stock, and it will be ordered to be re- turned. Holmes v. Newcastle, etc., Co., 45 L. J. (Ch.). 383 (1875). 2 In New York it is held that unissued shares of stock may be issued gratui- tously to stockholders; also bonds of the company ; and they are not liable for the par value or any part thereof to the corporation or corporate creditors, unless they agree to pay therefor or the statute requires payment. A subscrip- tion is otherwise, since it is a contract. Even though the stockholder has sold such stock and bonds, he is not liable to corporate creditors for the amount re- ceived from the sale. He has received nothing from the corporation except a promise to pay. (Skrainka v. Allen, 7 Mo., 434; S. C, 76 id., 384, not followed.) Christensen v. Enu, 106 N. Y, 97 (1S87) : Christensen v. Quiutard, 8 N. Y. Supp., 400 (1890). s Handley v. Stutz, 139 U. S., 417 (1891). The court said: '"To say that a cor- 59 §§ 43, 44.] " WATERED " STOCK. [CH. III. Where the capital stock of the corporation is increased, the in- srease is not a trust fund for the benefit of corporate creditors who were such before the increase was made.' In Minnesota the doctrine is clearly and boldly announced that the issue of stock for cash at less than par is legal and that noth- ing more can be collected on such stock, except by corporate cred- itors who have relied, or can fairly be presumed to have relied, on the representation that the capital stock is as stated; in other words, that it was paid in full. 2 Inasmuch as a corporation may pledge its unissued stock to a corporate creditor, the pledgee cannot be held liable thereon on the ground that the stock was " watered." 3 §43. Corporate creditors as complainants where the issue is for property or construction work.— The rights of corporate creditors where stock has been issued for property taken at an overvaluation are considered elsewhere. 4 § 44. Who is liable, and the character of the liability— Liability of the corporation — The corporation itself, it has been intimated, is not liable to any person by reason of the issue of its stock as poration may not, under the circum- stances above indicated, put its stock upon the market and sell it to the high- est bidder, is practically to declare that a corporation can never increase its capital by a sale of shares, if the original stock has fallen below par. The liability of a subscriber for the par value of increased stock taken by him may depend somewhat upon the circumstances under which, and the purposes for which, such increase was made. If it be merely for the purpose of adding to the original capital stock of the corporation, and enabling it to do a larger and more profitable business, such subscriber would stand practically upon the same basis as a subscriber to the original capital. But we think that an active corporation may, for the pur- pose of paying its debts, and obtaining money for the successful prosecution of its business, issue its stock and dispose of it for the best price that can be ob- tained." iCoit v. North Car. Gold Amal. Co., 14 Fed. Rep., 12 (1882); aff'd, 119 U. S., 343 (1886). Only those who become corporate creditors after an increase of stock is voted can hold liable the subscribers to such increase which was issued without value received. Handley v. Stutz, 139 U. S., 417 (1891). 2 The basis of the creditor's suit is not contract, but fraud. Creditors who were such before the watered stock was is- sued cannot complain of it Nor can a subsequent creditor complain if he knew of the issue of watered stock. Nor will one who purchased claims after the corporation became insolvent and a receiver was appointed be al- lowed to complain. Hospes v. North- western, etc., Co., 50 N. W. Rep., 1117 (Minn., 1892). 3 See § 465, infra. Unissued stock may be issued by the corporation as a pledge to secure a loan, and the corporation cannot set up that it was issued at less than par in viola- tion of the constitution. The issue is good in the hands of the pledgee to the extent of the loan. Gasquet v. Crescent City B. Co., 49 Hun, 496 (1892). * See §§ 46, 47, infra. 60 OH. III.] " WATERED " STOCK. [§§ 45, 4G. full-paid stock, when, as a matter of fact, it has not been fully paid. 1 It is very certain that the stockholder has no remedy herein against the corporation, since his remedy is against the corporate officers, as in other cases of breach of trust by them. As regards corporate creditors, they cannot complain provided the corporation remain solvent and able to pay its debts. If, on the other hand, it becomes insolvent, it would be no object to them to bring suit against the corporation. § 45. Liability of persons to whom stock is issued for cash at less than par. — Where stock is issued for cash at less than par, the parties taking it are liable to corporate creditors for the unpaid par value thereof, 2 unless the issue was subsequent to the commence- ment of business and the real value of the stock was paid in to the corporation in order to enable it to go on with its business instead of becoming insolvent. 3 A representation of the corporate agents to the person receiving the stock, that full payment will not be required, is immaterial, and constitutes no defense. 4 §46. Liability of persons to whom stock is issued for property taken by the corporation at an overvaluation.— A dissenting stock- holder may object to such an issue, inasmuch as it decreases the value of his stock. He may have the transaction set aside, and the person receiving the stock compelled to return it or pay over its actual market value, less the value of property given for it. 5 The person receiving stock at a discount is liable also to a bona fide transferee of that stock. 6 Corporate creditors, however, are the persons who generally complain. The company becomes bankrupt and they are not paid. They then find that the capital stock did not represent cash; it was paid for by property taken by the corporation at a valua- tion much greater than its real value. The company being insolv- ent and its property gone, the corporate creditors seek to hold the stockholders liable. They seek to hold the stockholders liable for the par value of the stock, less the real value of the property which was turned into the corporation. During the past ten years there i In the case of In re Ambrose L. T. done by the company or to the com- & Cop. Min. Co., L. R, 14 Ch. D., 390, pany." See, also, Lewis v. Meier, 14 397 (1880), the court says : " There would Fed. Rep., 311 (1882). Cf. § 157, infra. be no liability on the part of the com- 2 See § 42. pany as such." In Re Gold Co., L. R, 3 See § 42. 11 Ch. D., 701 (1879), where the pro- * Upton v. Tribilcock, 91 U. S., 45 ceeding was to compel a winding up of (1875) ; Ogilvie v. Knox Ins. Co.. 22 the company on account of an improper How., 380 (1859). issue of paid-up stock, the court re- 5 See § 41. fused to support the proceeding, and 6 See§ 40, and Fisher t\ Seligman, 7 said, pp. 713, 714, " it was not a wrong Mo. App., 383 (1879) 61 §46.] " WATERED " STOCK. [CH. III. has been a vast amount of litigation on this subject. The courts still disagree in their -conclusions, but a careful study of the cases will show that upon authority as well as principle the stockholders cannot be held liable in such a case, unless the property was of so trifling a character that it practically had no value whatever. This class of cases has arisen under two aspects; first, at common law ; and second, under statutes. At common law it is well settled that corporate creditors cannot hold stockholders liable on stock which has been issued for prop- erty, even though the property was turned over to the corporation at an agreed valuation which was largely in excess of the real value of the property, provided the property had some substantial value. There have been cases which refuse to follow this rule, but it is clearly established by the great weight of authority. The reason of the rule is that if "the payment by property was fraudulent, then the contract is to be treated like other fraudulent contracts. It is to be adopted in toto, or rescinded in toto, and set aside. Both parties are to be restored as nearly as possible to their original po- sitions. The property or its value is to be returned to the person receiving the stock, and he must return the stock or its real value. Another reason for the rule is that the stock had no value when it was issued for property. " If, when disposed of by the railroad company, it was without value, no wrong was done to creditors." Such is the language of the supreme court of the United States. 1 1 The leading case on this subject, per- the railroad company, it was without haps, is Van Cott v. Van Brunt, 82 N. value, no wrong was done to creditors." Y, 535 (1880), a case that has been se- Even the Missouri constitution and stat- verely criticised, but which is not only utes do not change this rule, in accordance with general principles It is legal for a railroad company to of law governing the rescission of con- issue bonds and stock in payment for tracts, but is in strict accordance with the construction of its road. If all the the authorities and cases on the subject parties assent no one can complain, of paid-up stock. " As the stock was issued as a part of The most important case, however, is the consideration for construction, it the recent one of Fogg v. Blair, 139 U. cannot be said that it was taken without S., 118 (1891), holding that where all the value given." The par value is imma- stock and a large quantity of bonds are terial. " The fact that they were cre- issued by a railroad corporation to its ated for an expenditure less than the par contractor in payment for the construe- value of the aggregate issues of capital tion of the road, the contractor is not stock and bonds does not affect the liable to corporate creditors on the question at all." Barr v. N. Y., etc., stock, even though the bonds were a R R, 125 N. Y., 263 (1891). sufficient consideration for building the Stockholders cannot be held liable for road, unless the corporate creditors the difference between the par value of prove that the stock at the time of its their stock and the actual value of prop- issue had a real or market value. The erty turned in to the corporation in court said: "If, when disposed of by payment of the stock, unless fraud is 62 CH. III. J " WATERED " STOCK. [§46. There is nothing sacred about the par value of stock. Moreover, in business circles it has become customary to capitalize property at a reasonably high figure. This is due to the fact that it is easier to sell stock at less than par than at par, and also to the fact that, proved. "If the transaction was an honest one, the difference in value be- tween the property constituting the con- sideration of the sale and the stock had no legal significance. . . . The val- uation of property in making the ex- change, either on the one side or the other, cannot be supervised or controlled by a court of chancery ; for. in the ab- sence of deceit, or some other corrupt constituent, the bargain between the parties cannot be disturbed." Bickley v. Schlag, 20 Atl. Rep., 250 (N. J., 1890). Where stock is issued for construc- tion work the persons receiving the stock cannot be held liable on the theory of the stock not having been paid up, unless fraud is charged and proved. The statements of one of the officers to tax commissioners are not admissible as evidence of the cost of the work. The act of the company in crediting each of the directors with one thousand dollars on their subscriptions in payment of services rendered and money ad- vanced was upheld. Clow v. Brown, 31 N. E. Rep, 361 (Ind., 1892). Where a corporation issues its stock, as full paid, in payment for coal lands, and the stock is sold to a purchaser for value, the purchaser is not liable to creditors of the corporation on the stock on the ground that it is not full-paid stock, even though the land was taken at a great overvaluation, there being no actual fraud in the transaction. The text as stated above was quoted with approval. Du Pont v. Tilden, 42 Fed. Rep., 87 (1890). In Coffin v. Ransdell, 1 Corp. & L. J., 326 (Ind., 1887), the court sustained the rule given in the text, and said : "Sup- pose it to be true that, in consummat- ing the arrangement, the property of Unthank & Coffin was turned into the corporation at an overvaluation, and that the defendant and the other cor- porators participated in the alleged wrong. The transaction was the result of an agreement which the parties had the right, as between themselves, to make. Shall he be capriciously pun- ished by being made liable ex contractu upon a contract which he never made? If the defendant has participated in a fraud whereby creditors of the corpora- tion who exercised ordinary business sagacity had suffered damages, whatever redress such creditors may now obtain while their representative retains the defendant's property must be sought by an action ex delicto.'''' See, also, Conti- nental Telegraph Co. v. Nelson, 18 Weekly Dig., 48 (1883) ; S. C, 49 N. Y. Super. Ct., 197; Crawford v. Rohrer, 59 Md., 599 (1882); Brant v. Ehlen, 59 Md., 1 (1882) ; Morrison v. Globe Pano- rama Co., 28 Fed. Rep., 817 (1886). Judge Dillon, in Phelan v. Hazard, 5 Dill., 45, reviewed the authorities and sustained the principles enunciated herein. Before any recovery can be had in this class of cases the transaction must be set aside. Scoville v. Thayer, 105 U. S., 143, 156 (1881) ; Wood's Claim, 9 W. R, 366 (1861). In Anderson's Case, L. R, 7 Ch. D., 75, stock was issued to a promoter for property taken at an overvaluation. This action was to render him liable for the par value of the stock, less the real value of the property. The court said, pp. 94, 95, 104: "I am not going to alter men's contracts unless the pro- visions of an act of parliament compel me to do so. . . . You cannot alter the contract to such an extent as to say, though you have bargained for paid-up shares, we will change that into a bar- gain to take shares not paid up, and put you on the list of contributories on that ground. ... If you set aside 63 §46.] " WATERED " STOCK. [CH. III. by a large capitalization, dividends are kept low enough to avoid the cupidity of possible competitors and the interference of legis- latures. To such an extent is this practice carried of issuing stock for property at an overvaluation, that the investing public and this allotment of shares, you must set it aside altogether, and then you can- not make them a contributory ; and if you do not set it aside altogether you must adopt it, and the utmost you can do is, as I said before, that you can take away any profit from the person who has improperly made it." In Cur- vie's Case, 3 De G., J. & S., 367 (1863), the court said that the transaction " was either valid or invalid. If valid, it is clear that neither he [the person receiving the stock] nor his alienees can be called upon to contribute in respect of those shares. If invalid, I cannot see my way to hold that either a court of law or a court of equity could do more than treat the purchase as void, and undo the transaction altogether. It could not, as I apprehend, be com- petent either to a court of law or to a court of equity to alter the terms of the purchase, or treat as shares not paid up shares which were given as paid-up shares in part consideration of the pur- chase. Fraud — assuming there was fraud — would of course warrant the court in treating the purchase as void, or in undoing it ; but it could not, I conceive, authorize any court to sub- stitute other terms." See, also, Bar- nett's Case, L. R., 18 Eq., 507 (1874), where the issue had been canceled by the corporation. In Van Cott v. Van Brunt, cited supra, a case very similar in its facts to those of the preceding case, the court said : " The conclusion of law was erroneous that the scheme was fraudulent as against the company and against the creditors, and that the defendants were only entitled to credit for the actual outlay, paid or in- curred, and were liable for the amount unpaid on the stock. The result must be that the defendant was not liable to pay the par value of the stock received by him under the contract for building and equipping a portion of the road." Page 542. This case has been severely criticised as being contrary to estab- lished principles of law. In Phelan v. Hazard, supra (1878), Judge Dillon thoroughly reviews the authorities, and says : " The contract is valid and binding upon the corporation and the original shareholders unless it is rescinded or set aside for fraud ; and . . . while the contract stands uuim- peached, the courts, even where the rights of creditors are involved, will treat that as a payment which the par- ties have agreed should be payment" See, also, Brant v. Ehlen, 59 Md., 1 (1882), fully explaining the meaning of the term trust fund as applied herein. Crawford v. Rohrer, 59 Md., 599 (1882). In Coit v. Gold Amal. Co., 119 U. S., 343(1886, affirming 14 Fed. Rep., 12), where this question clearly arose, the court said that the creditors could riot hold the stockholders liable unless there was an intentional and fraudulent over- valuation. The court said that " where full-paid stock is issued for property re- ceived, there must be actual fraud in the transaction to enable creditors of the corporation to call the stockholders to account ; a gross and obvious over- valuation of property would be strong evidence of fraud." The court held that although a machine and a license to use a patent were put into the company in payment for $100,000 of stock, yet there was no fraud. To same effect, Mege's Case, 10 W. N. (Eng.), 208(1875). In Carr v. Le Fevre, 27 Pa, St, 413 (1856), the court said that if the direct- ors " took lands at a prospective value, never realized, it is nothing more than many individuals and corporations have done before. Such an error in manage- 64 CH. III.] " WATERED " STOCK. [§46. persons who give credit to corporations rather expect it, and they no longer rely upon the nominal capitalization of the com- pany. Experience has taught them that they must investigate the real financial condition of the company, and invest or give credit upon that alone. ment or in their judgment of the value of a purchase, made without fraud, forms no ground for rescinding the con- tract." See, also, Schroder's Case, L R, 11 Eq. Cas., 131 (1870). The doctrine laid down in Van Cott v Van Brunt, supra, was approved in Coe v. East, etc., R R, 52 Fed. Rep., 531 (1892), In the case Stewart v. St Louis, eta, R R. Co., 41 Fed. Rep., 738, where a railroad road-bed worth $2,000 was turned in to a corporation for $200,000 of its notes and $3,600,000 of its stock, the court held that the notes were good and could be collected. The corporate creditor's bill may be by- one, but must be in behalf of all. Cleve- land, etc., Co. v. Texas, etc., R'y Co., 27 Fed. Rep., 250 (1886). In passing upon the legality of an issue of $500,000 of stock for a road that had just been sold under a mortgage for $100,000, the court said in Common- wealth v. Central Pass. R'y, 52 Pa. St, 506, 515 (1886) : " In all such cases the determination of the amount of stock must be an arbitrary adjustment As we have said, the cost of the property is no fair measure of what the stock rep- resents, and if the real value be adopted as the standard, it is no standard at all. It varies with the estimates of wit- nesses, and the franchises are incapable of valuation. ... If that was a sum greater than the actual value of the company's franchises and property, as it was greater than the cost, we are una- ble to see how the public was affected by the exaggerated estimate." A few cases seem to be in conflict with the above authorities. Thus, in Wetherbee v. Baker, 35 N. J. Eq., 501 (1882), the defendant neither owned nor conveyed to the corporation the prop- erty which he alleged constituted pay- (5) 65 ment Savage v. Ball, 17 N. J. Eq., 142 (1864), held that the validity of an elec- tion is not affected by the question whether the stock voted was issued for value or not In North Carolina it has been held that the value of the property turned in in payment for the stock may be ascer- tained by the court, and the stockholders held liable for the par value of the stock less the real value of the property, if such property was fraudulently over- valued. Clayton v. Ore, etc., Co., 14 S. E. Rep, 36 (N. C, 1891). In the case First Nat'l Bank v. Gustin, etc., Co., 44 N. W. Rep, 198 (Minn., 1890), there is a dictum to the effect that in certain cases bona fide creditors may enforce payment of the difference between par value of the stock and the real value of the property turned in as payment for it in full. It has been held that the person re- ceiving the stock becomes liable for profits made thereby. Four Mile V. R R Co. v. Bailey, 18 Ohio St., 208 (1868). Where a railroad worth $112,000 is sold to a new corporation for $1,120,000 of bonds and all its capital stock, the transaction is fraudulent The bond- holders may obtain judgment against the company on their bonds and then compel the stockholders to pay the full par value of their stock. Preston v. Cin- cinnati, etc., R R Co., 36 Fed. Rep., 54 (1888). See Lloyd v. Preston on p. 67, sub. In Osgood v. King, 42 Iowa, 478 (1876), where stock was issued for land grossly overvalued, the court held the vendor liable for the par value of the stock less the actual value of the land. The per- son receiving the stock was a director at the time. In Jackson v. Traer, 64 Iowa, 469 (1884), overruling S. C, 16 N. W. Rep., §46.] " WATERED " STOCK. [CH. III. The fact that the person to whom the stock is issued returns a part of it as a gift to the corporation or to trustees for the cor- poration to sell the same below par and put the proceeds in the corporate treasury for a working capital does not necessarily prove that the property was overvalued. The person receiving the stock may have been willing to sacrifice a part of his stock and property in order to make the rest more valuable. 1 In no case can a corporate creditor complain where, at the time when he contracted with the company, he knew that the stock had been issued for property taken at an overvaluation. 2 120 (1884), the stock was not issued to the construction company for the pur- pose of constructing the corporate works, but was issued after the con- struction was finished, and a cash debt was due them, which was paid by an issue of the stock to pay that debt al- ready due. The supreme court of the United States, in Clark v. Bever, 139 U. S., 96 (1891), refused to follow the decision in Jackson v. Traer, 64 Iowa, 469. In Chisholm Bros. v. Forney, 65 Iowa, 140 (1884), where full-paid stock was issued for a patent-right, in good faith, but the patent-right subsequently turned out to be worthless, Jhe stockholders were held liable to corporate creditors as though no payment had been made. Where $100,000 of stock was issued for patents worth $16,000, and $50,000 of the stock was transferred by the patentees to a trustee for all the stock- holders, a subscriber for $1,500 of stock, who pays the company therefor $500, is liable to corporate creditors for $1,000, even though the $1,500 of stock was a part of the $50,000 of stock that the inventors retained and directed the company to issue to defendant The defendant was not a bona fide sub- scriber or transferee, but was one of the promoters and was president of the company. Fraud cannot be alleged in defense. Boulton Carbon Co. v. Mills, 43N.W. Eep., 290 (Iowa, 1889). In the following case a very peculiar device was successful. Stock was issued conditionally that its issue be complete and binding when it became worth par, and that the price then to be paid for it to the company should be fifty cents on the dollar. The stock was issued and partly paid for, but never reached par in value. Held, that a participating stockholder, who was also a creditor could not, nor could his assignee, enforce any liability. Callanan v. Windsor, 42 N. W. Rep., 652 (Iowa, 1889). J Lake Superior Iron Co. v. Drexel, 90 N. Y., 87 (1882) ; Williams v. Taylor, 120 N. Y., 244 (1890). The person to whom stock has been issued in payment for property may do- nate a part of it as a bonus to go with bonds sold at par directly from the corporation to the person taking the bonus. The value of the property in this case was not proved. Davis v. Montgomery, etc., Co., 8 S. Rep., 496 (Ala., 1890). In the case of Van Gestel v. The Van Gestel Electric Street Car Co. (N. Y. L. J., July 3, 1890), the court enjoined a company from disposing of such stock contrary to the contract 2 Bank of Fort Madison v. Alden, 129 U. S., 373 (1889). A corporate creditor who took the note of the corporation in payment of an antecedent debt, and took with full knowledge of the facts as to the issue of the stock for property, cannot com- plain. A corporate creditor cannot com- plain as to stock issued subsequently to the debt First Nat'l Bank v. Gustin, etc., Co., 44 N. W. Rep., 198 (Minn., 1890). An issue of stock for an old franchise and uncompleted road-bed of a railroad 66 CH. III.] " WATERED " STOCK. [§ 48. There is a limit, however, beyond which the courts will not go in sustaining the issue of stock for property taken at an overvalua- tion. If the property which is turned in is practically worthless, or is unsubstantial and shadowy in its nature, the courts will hold that there has been no payment at all, and that the stockholders are liable on the stock. 1 is valid although the par value of the stock is much more than the value of the property. All the stockholders hav- ing assented thereto, and there being no creditors, the transaction is valid. A holder of bonds issued long subse- quently, and who purchased with knowl- edge of the facts, cannot complain and hold the stockholders liable. Walburn v. Chenault, 23 Pac. Rep., 657 (Kan., 1890). See 20 S. W. Rep, 1015. A stockholder who is also a creditor, and who became such with full knowl- edge that the stock was paid for by property at an overvaluation, cannot as a creditor compel other stockholders to make payments on their stock as being partly unpaid. Whitehall v. Jacobs, 44 N. W. Rep., 630 (Wis., 1890). A person who buys an old railroad bed for $2,000, which is all it is worth, and then forms a corporation of which he is a director, and sells the road-bed to the company for $200,000 in company notes and $3,600,000 of its stock, may collect the notes if all parties at the time knew all the facts and consented thereto. Stewart v. St. Louis, etc., R. R, 41 Fed. Rep., 736 (1887). JThe supreme court of the United States, in the case of Camden v. Stuart, 144 U. S., 104 (1892), held liable for un- paid subscriptions the subscribers to $150,000 of stock who had turned in therefor a contract for real estate and a health resort which a year prior thereto they had taken. The court did not allow any value for the contract and threw out the good-will, and said (p. 115) : "The experience and good-will of the partners, which it is claimed were trans- ferred to the corporation, are of too un- substantial and shadowy a nature to be capable of pecuniary estimation in this connection. It is not denied that the good-will of a business may be the sub- ject of barter and sale as between the parties to it, but in a case of this kind there is no proper basis for ascertaining its value, and the claim is evidently an afterthought The same remark may be made with regard to the contract of January 30, and the loss of time and trouble to which the parties were sub- jected, which are now claimed to be ele- ments of value in the property contrib- uted to the corporation, but of which no account was made at the time." In the case of Lloyd v. Preston, 146 U. S., 630 (1892), affirming 36 Fed. Rep., 54 (1888), where the owner of a railroad sold it to a newly-organized corporation for stock and bonds, the par value of which were fifty times the real value of the railroad, the court held that the bondholders and other creditors who had obtained judgment against the cor- poration, the execution being returned and satisfied, might hold the party re- ceiving the stock liable thereon on the ground that the subscription price of such stock has never been paid. The court said : " The entire organization was grossly fraudulent from first to last, without a single honest incident or redeeming trait." The court also said : " It having been found, on convincing evidence, that the overvaluation of the property transferred to the railway com- pany by Harper, in pretended payment of the subscriptions to the capital stock, was sc gross and obvious as, in connec- tion with the other facts in the case, to clearly establish a case of fraud, and to entitle bona fide creditors to enforce actual payment by the subscribers, it 67 " WATERED " STOCK. [CH. III. The remedy of the corporate creditor is in equity. An action at law for fraud or for conspiracy is difficult to maintain. 1 § 47. The preceding section contains the common law on the liability of persons who pay for stock in property taken at an overvaluation. The common law sustains the transaction and hence renders easy the issue of watered stock. Now in former days watered stock did much harm. It deceived people and induced them to buy the stock or bonds, or to extend credit to the com- pany, on the supposition that the capital stock had really been paid for at actual par value. Hence, when it became clear that the common law did not prevent the issue of watered stock, but compelled the public to rely, not upon statements of the capital stock, but on an investigation of the actual condition of the com- pany, a demand arose for statutes and constitutional provisions to protect the people from watered stock. This demand gave rise to certain constitutional provisions which have been enacted in several states. These provisions are very similar in their wording, and are substantially as follows: "No corporation shall issue stocks or bonds except for money, labor done or money or property actually received ; and all fictitious increase of stock or indebtedness shall be void." 2 It is now over twenty years since the first of these provisions was enacted, and yet it may be said that these constitutional provisions have decidedly failed to remedy the evil which they were expected to cure. They are so sweeping in their effects, and so disastrous to innocent holders of corporate securities, that the courts are re- luctant to declare void the stock and bonds which have passed into bona fide hands. The provision is held to be applicable and effective only when the issue is entirely fictitious. It does not interfere only remains to consider the effect of fraud and deceit. Priest r. White, 1 the defenses set up." S^e, also, Garrett S. W. Rep., 361 (Mo., 1886). v. Kansas, etc., Co., 20 S. W. Rep., 965 It is difficult for a corporate creditor (Mo., 1892). to seek collection by making out a con- Where an insolvent partnership trans- spiracy. Brackett V. Griswold, 13 N. Y. fers its assets to a newly-created corpo- Supp., 192 (1891). ration in payment for its shares of stock, 2 See Constitution of 111. (1870), art. XI, and the corporation assumes all the § 13; Neb. (1875), art. XI, § 5; Mo. debts of the partnership, the payment (1875), art XII, § 8; Penn. (1875), art for the stock is fraudulent per se. A XVI, § 7 ; Texas (1876), art XII, § 6 ; corporate creditor may hold the stock- Colorado (1876), art. XV, § 9; Arkansas, holders liable on the subscription as art. XII, § 8; Alabama, art XIV, § 6: though no payment had been attempted. Louisiana (1879), art 238. In the last Sayler, Assignee, v. Simpson, 4 Ry. & state any corporation issuing such stock Corp. L. J., 195 (Ohio, 1888). shall forfeit its charter. See, also, Part 1 The corporate creditor's remedy VII, infra. herein is not by an action at law for 68 CH. III.] " WATERED " STOCK. [§47. with the customary methods of starting the corporate enterprise by the issue of stock and bonds in payment for the construction of the corporate works, and, except in Alabama, it may be said that the courts have construed away the language and purpose of the provision. 1 i Peoria, etc., R. R. Co. v. Thompson, 103 111., 187 (1882). In this case bonds and cash were given to the contractors in payment for the construction of the road. The transaction was upheld. In California the supreme court in Stein v. Howard, 65 Cal., 616 (1884), has held that the constitutional prohibition does not prevent the issue of stock at less than its par value. The meaning of " fictitious " is defined to be that given in Webster's Dictionary. The court said : "Of the shares proposed to be issued there is no one share upon which a per- son can place his finger and say, that share is or will be feigned, imaginary, not real ; counterfeit, false, not genuine." An injunction to restrain such an issue of new increased stock was refused. In New Castle R. R. Co. v. Simpson, 21 Fed. Rep., 535 (1884), the court, in passing on the provision in the Pennsylvania con- stitution, held that a contract giving a construction company $300,000 of stock and $300,000 of bonds for work worth but $180,000 will be set aside, although $40,000 of work has been done. The construction company will be repaid the $40,000 in cash. See S. C, 23 Fed. Rep., 214 (1885), holding that the con- tractor may recover back not only this, but also a reasonable compensation and interest Receiving the subscriber's note in pay- ment for stock does not render the stock void, under this constitutional provision. Pacific Trust Co. v. Dorsey, 13 Pac. Rep, 148 (Cal., 1887) ; Pacific Trust Co. v. Dor- sey, 12 Pac. Rep., 49 (Cal., 1886). The supreme court of the United States in Memphis, etc., R. R. Co. v. Dow, 120 U. S., 287 (1887), held that this provision did not invalidate a transac- tion upon the reorganization of a com- pany after a foreclosure of its property. 69 and a purchase of the property by a committee for the bondholders, whereby they took in payment of such property the bonds and stock of the new corpo- ration, even though the stock alone of the new company thus taken was, at its par value, equal to the value of the prop- erty involved. If the tangible property of the corpo- ration is actually in excess of the par value of the capital stock, then a stock dividend to the extent of that excess would be legal, but the proceedings to declare the stock dividend must show these facts or the dividend will be en- joined. Fitzpatrick v. Dispatch, etc., Co., 83 Ala., 604 (1887). The court very judiciously changed the reasoning of its opinion as reported in 2 S. Rep, 727. Where all the stock and a large quantity of bonds are issued by a rail- road corporation to its contractor in payment for the construction of the road, the contractor is not liable to cor- porate creditors on the stock, even though the bonds were a sufficient consideration for building the road, unless the corporate creditors prove that the stock at the time of its issue had a real or market value. "If when disposed of by the railroad company it was without value, no wrong was done to creditors." Even the Missouri constitution and statutes do not change this rule. Fogg v. Blair, 139 U. S., 118 (1891). A contract calling for "original ground floor or treasury stock " means any of the stock that is issued, where the statutes prohibit fictitious stock. All the stock is then presumed to be "ground floor" stock and to represent at par the actual value received. Williams v. Searcy, 10 S. Rep., 632 (Ala., 1891). Land may be turned in in payment for stock even at an overvaluation where §47.] " WATERED " STOCK. [CH. III. The trouble with such remedies is, that they attempt to cure the evil after it has been consummated, instead of attempting to pre- vent its occurrence. the valuation is set forth in the incor- poration papers under the Pennsylvania act. Cock v. Bailey, 23 Atl. Rep., 370 (Pa., 1892). Stock issued as full paid for no con- sideration whatsoever is void under the constitutional provision that stock shall be issued only " for labor done, services performed, or money or property actu- ally received." The original holder of such stock cannot institute a suit to remedy a wrong done to the corporation by its president Arkansas, etc., Co. v. Farmers', etc., Co., 22 Pac. Rep, 954 (Colo., 1889). A contract by a corporation that it will issue its stock for one-fifth of its par value is void under the Alabama consti- tutional prohibition. The subscriber having sold his contract to another per- son cannot collect on such sale. Will- iams v. Evans, 6 S. Rep., 702 (Ala., 1889). See, also, concerning the rule in Ala- bama, Knox v. Childersberg, etc., Co., 5 S. Rep, 579 (Ala., 1889). The person to whom stock ha3 been issued in payment for property may do- nate a part of it as a bonus to go with bonds sold at par directly from the cor- poration to the person taking the bonus. The value of the property in this case was not proved. Davis v. Montgomery, etc., Co., 8 S. Rep., 496 (Ala., 1890). Where parties pay $5,000 on a $55,000 contract to buy land and then organize a corporation and turn this contract into the corporation for $250,000 of stock issued as full paid, the company agreeing to pay the other $50,000, they are liable to corporate creditors for the difference between $250,000 and the value of the property. The constitution and statute of Alabama forbid such a transaction. Elyton, etc., Co. v. Birm- ingham, etc., Co., 9 S. Rep., 129 (Ala., 1891). In the case of Coe v. East, etc., R R, 52 Fed. Rep., 531 (1892). the court held that the above provision in Alabama against watered stock and bonds did not invalidate bonds, although $10,000 of bonds and $10,000 of stock were issued for every mile of road constructed, even though it cost much less than $20,000 cash per mile. Where $100,000 of bonds and $125,000 of stock are issued in payment of con- struction work of the value of $121,000, the bonds are valid and may be en- forced by bona fide purchasers. Wood v. Cony, etc., Co., 44 Fed. Rep., 146 (1890). This last case held also that only the state could object to an issue of "watered " stock and bonds as being in violation of this constitutional pro- vision. The constitutional provision in Ala- bama forbidding the issue of stock or bonds except for value, and the stat- utory provision requiring subscriptions to railroad stock to be paid in money, labor or property at their money value, does not prevent one railroad company selling its property to another railroad company for bonds and stock of the lat- ter, and the value placed upon the prop- erty may be its net earning power and the cost of rebuilding it. It is immate- rial that the original cost was much less. Grant tt East, etc., Co. of Ala., 54 Fed. Rep., 569 (1893). Although the statutes authorize the directors to dispose of the capital stock at any time remaining unpaid in such manner as the by-laws may prescribe, yet this does not authorize the issue of stock for cash at less than par. Mathis v. Pridham, 20 S. W. Rep., 1015 (Tex., 1892). Where stock is issued as full paid for labor done and the good faith is not questioned and the consideration was performed, the stockholders cannot be held liable on the stock as not being paid up in full. Holly Mfg. Co. v. New ?0 CH. III.] " WATERED " STOCK. [§47. Statutes are found in some of the states on this subject. There have been a large number of decisions under these various statutes, and those decisions have been confused with the cases which were decided on the common law alone. The following are some of these statutes: In New York directors in manufacturing corporations are made personally liable for all corporate debts, if, in the reports which they are required to file, they misstate facts. Accordingly, if they state the capital stock to have been paid up, when in fact it was paid for by property taken at a fraudulent overvaluation, then the penalty applies. Most of the New York cases on watered stock have arisen under this statute. Under this statute the court of appeals were at first in doubt whether proof of a mere overvalu- ation of the property was sufficient to set aside the payment as a full payment, or whether it was necessary for the plaintiff to prove Chester, etc., Co., 48 Fed. Rep., 879 (1891). The issue of stock in violation of this provision of the constitution renders the charter liable to forfeiture by the state. State v. Atchison, etc., R R, 38 N. W. Rep., 43 (Neb., 1888). A contractor who receives bonds in payment of construction work and sells them cannot claim that they are void as contrary to the statute prohibiting "watered" bonds. Reed's Appeal, 16 Atl. Rep., 100 (Pa., 1888). Where a consolidated company of New York and Pennsylvania issues bonds in New York, fictitiously, such bonds cannot be enforced in Pennsyl- vania, since they are void by its consti- tution. A foreclosure in New York of the mortgage securing the bonds may be set aside and the bonds declared void. Pittsburgh, etc., R R Co.'s Ap- peal, 4 Atl. Rep., 385 (Penn., 1886). The fact that a contractor received stock and bonds four times in par value the value of the work is not fatal, where no fraud is alleged and the actual cost of the work is not alleged. But where the contractor then entered into a contract whereby the mortgage was to be foreclosed, and he was to partici- pate in the property purchased at the sale, all for the purpose of cutting off other creditors, he is liable to them. Cleveland, etc., Co. v. Crawford, 9 R'y & Corp. L. J., 171 (Chicago, 1891). In regard to the constitutional pro- vision against the issue of fictitious bonds and stock, the supreme court of Alabama has said : " The constitutional provision, standing by itself, does not require that the amount of money, or the value of the labor or property, for which stock or bonds are issued, shall correspond with the face value of the stock or bonds for which it is issued." Hence the court held that bonds might be issued at less than their par value, provided that some substantial value was paid for them, such value to be fair and reasonable, and " not a mere trick or device to evade the law." Nelson v. Hubbard, 11 S. Rep., 413 (Ala., 1892). It is legal for a company to issue $67,000 of bonds and $67,000 of full-paid stock even to one of its directors for $67,000 in cash, if this was all that the whole $134,000 of securities were worth and if all the directors and stockholders knew of it and agreed to it The pro- vision in the California constitution rel- ative to watered stock and bonds does not invalidate them. Union, etc., Co. v. Southern, etc., Co., 51 Fed. Rep., 840 (1892). 71 §47.] "watered" stock. [CH. Til. also that the overvaluation was intentional and fraudulent. 1 Later cases, however, have firmly established the principle that not only must proof be given that there was an overvaluation of the prop- erty or services rendered, but proof also must be given that such overvaluation was intentional and consequently fraudulent. 2 The property is not to be considered as overvalued merely be- cause, subsequently, it turns out to be so. The various circum- stances under which the valuation was made should be considered in determining the bona fries of the transaction. 3 The questions as to whether there was an overvaluation of the property, and whether that overvaluation was intentional and fraudulent, are generally questions of fact to be submitted to the jury. 4 Where, however, the overvaluation is so great as to bear evidence upon its face that it was intentional and fraudulent, the court will hold that, unless the transaction is reasonably explained, there is no question of fact for the jury, but that, as a matter of law, the overvaluation Avas fraudulent. Various cases which have arisen under this stat- ute are given in the notes below. 5 1 Boynton v. Hatch, 47 N. Y., 225 held, as a presumption of law, that the (1872). Three of the judges held that proof of fraud was necessary, and three that it was not necessary. All con- curred in holding that proof of over- valuation was competent and neces- sary. a Douglas v. Ireland, 73 N. Y., 100 (1878); Schenckv. Andrews, 57 N. Y, 133 (1874); Boynton v. Andrews, 63 N. Y, 93 (1875) ; Lake Superior Iron Co. v. Drexel, 90 N. Y, 87 (1882). 3Schenck v. Andrews, 57 N. Y, 133 (1874). In Coit v. North Car. Gold Amal. Co., 14 Fed. Rep., 12 (1882), the court said corporators " ought not to be made liable individually for the debts of the company at the instance of cred- itors, because, at a later day, the esti- mate fairly put upon the property at that time has become modified by sub- sequent events and will not amount to the value which they set upon it" Af- firmed, 119 U. S., 343 (1886). * Boynton r. Hatch, 47 N. Y, 225 (1872); Lake Superior Iron Co. v. Drexel, 90 N. Y, 87 (1882). 5 Thus, where stock for $300,000 was issued for property which the jury found to be worth $64,000, the court transaction was fraudulent. Tou jlas v. Ireland, 73 N. Y, 100 (1878). In another case, involving the same facts, the trial court submitted the question to the jury. Brockway v. Ireland, 61 How. Pr., 372 (1880). In another case, where stock for $100,000 was issued for property worth not more than $50,000, the court held that, in the absence of evidence to ex- plain the presumption of fraud, there was no question for the jury, and that the transaction was fraudulent upon its face. Boynton v. Andrews, 63 N. Y, 93 (1875). An issue of $190,000 of stock for property worth $27,500 was held to be a fraudulent overvaluation, as a mat- ter of law. Osgood v. King, 42 Iowa, 478 (1876). The case of Lake Superior Iron Co. v. Drexel, 90 N. Y, 87, tends to make the valuation of the property a question for the jury exclusively. In that case stock for $2,500,000 was issued for property in a patent; $900,000 of the stock was returned to the corpora- tion as a gift. The court held that the question of fraud was for the jury. This case was followed in Draper v. Beadle, 16 "Weekly Dig., 475 (1883), 72 CH. III.] " WATERED " STOCK. [§*7. Under the ~New York statute stockholders also are liable in cer- tain companies to double the amount of their stock until a certifi- cate is filed to the effect that the capital stock is all paid in. 1 Supm. Ct. N. Y., Gen. T. In Bolz v. Eidder. 19 Weekly Dig., 463 (1884), N. Y. Cora. PI., the remarkable rise in value of a patent-right from $1,000 to $100,000, when sold for stock issued in payment therefor, was held to be only presump- tively fraudulent, and may be explained sufficiently to raise a question for the jury. The directors in estimating the value of property may take the opinion of experts and rely thereon. Brockway v. Ireland, 61 How. Pr., 372 (1880). See, also, Knowles v. Duffy, 40 Hun, 485 (1886). Of. Thurston v. Duff y. 38 Hun, 327 (1885). Under the New York statute, where patents worth $75,000 are transferred to the corporation in payment for $300,000 of stock, and $100,000 of the stock is at once donated to the company by the inventor, and other stock is at once sold by him for about one-third of the par value, the only fraudulent intent that need be proved is that the directors knew that the patents were not worth $300,000. National Tube, etc., Co. v. Gil- fillan, 124 N. Y, 302 (1890). In determining whether property is worth the par value of stock which is issued for it, the intrinsic or market value is the test, but the jury may con- sider also " its value for the use to which it was to be put, and the adaptability of it to any specific purpose, and any pe- culiar advantages it then had." Hunt- ington v. Attrill, 118 N. Y, 365 (1890). The evidence of experts as to the value of similar property is not admissible. Id. Under the New York statute, where property worth but $60,000 is turned in for $1,000,000 of stock and $200,000 of bonds, the act is fraudulent. Blake v. Griswold, 103 N. Y. 429 (1886), sustain- ing a finding of the special term to that effect. See, also, Hatch v. Attrill, id., 383 (1890). In the case Chittenden v. Thaunhau- ser, 47 Fed. Rep., 410 (1891). the court held the directors liable under the stat- ute for a false report, where $1,500,000 of stock was issued for mines and prop- erty which was offered for sale at about the same time for $150,000. In Ferguson v. Gill, 64 Hun, 284 (1892), $100,000 of stock was issued for a patent which turned out to be worthless. The statute made the directors liable if they knew this fact. The court held that the officers were entitled to prove the c on versation at which the value was fixed upon. In Thurber v. Thompson, 21 Hun, 472 (1880), the court said the jury should have before them "evidence of the prob- able enhanced value growing out of the contemplated improvements made and to be made by the company, and of the public improvements which were ex- pected to add largely to the value of the land for the new objects and pur- poses to which it was to be devoted. It would be extremely unjust to such a company as this to hold that farming lands upon which the site of a city or town is about to be established, and 1 It has been held that an issue of $300,000 of full-paid stock for a right to apply for patents, if found by the jury to be an intentional overvaluation of that right, subjects a transferee of any of the shares, taking with notice of all the facts, to this statutory liability in New York to an amount equal to the par value of the stock. National, etc., Co. v. Gilfillan, 46 Hun, 248 (1887). Under the statute creating a double liability until the stock is fully paid, a creditor may show that propert}' was taken at an overvaluation knowingly and fraudulently and may then enforce the liability. Goodrich v. Dorman, 14 N. Y. Supp., 879 (1891). 73 § 47.] " WATERED " STOCK. [CH. III. In Ohio, by statute, an issue of stock to a director, directly or indirectly, for less than the par value thereof, is void. 1 In Maine the statutes are construed so as to render stockholders liable to corporate creditors where property is taken in payment at an overvaluation. 2 So also in Wisconsin. 3 which are brought for that purpose, and mapped, platted and subdivided into city or village lots, are -to be viewed, upon a question of overvaluation, merely as agricultural land." See, also, Huntington v. Attrill, 42 Hun, 459 (1886), (aff'd, see supra), where land costing $80,000 was turned in for $700,000 of stock. The finding of the jury that the act was fraudulent was sustained on appeal. And where property worth but $60,000 is turned in for $1,000,000 of stock and $200,000 of bonds, the act is fraudulent as a matter of law. Blake v. Griswold, 103 N. Y., 429 (1886). In New York, under the statute allow- ing the incorporation of manufacturing companies, it has been assumed that an issue of stock as paid up for cash, at less than its par value, is void. Spring Co. v. Knowlton, 103 U. S., 49 (1880); Knowlton v. •Congress and Empire Spring Co., 14 Blatch., 364 (1877); Knowlton v. Congress, etc., Co., 57 N. Y, 518 (1874). These three decisions arise from the litigation of a single case. After being reversed in the New York court, it was removed into the federal court. In all three decisions the inva- lidity of the stock was conceded by both parties. The federal courts dif- fered from the state courts, and held that a person partly paying for such illegal stock may recover back such payment, although he had allowed the stock to be forfeited for non-payment of further calls. Under the New York Manufacturing Company Act providing for the issue of stock for property " to the amount of the value thereof," the value of the property must equal the par value of the stock. Gamble v. Queens, etc., Co., 123 N. Y, 91 (1870), the court referring to and affirming Van Cott v. Van Brunt, 82 N. Y., 535, as being a decision sus- taining the common-law right to issue stock below par. In estimating the value of property turned in to a corporation in payment of stock a fair profit to the contractor is to be allowed. Id. Section 3313 of the Revised Statutes of Ohio sets forth that " all capital stocks, bonds, notes or other securities of a company purchased of a company by a director thereof, either directly or indirectly, for less than the par value thereof, shall be null aud void." In Zabriskie v. Cleveland, C. & C. R. R. Co., 23 How., 381 (1859), this provision was held hot to affect the liability of a guarantor of such bonds. But in Union Trust Co. v. N. Y., etc., R. R. Co.. 1 R'y & Corp. L. J., 50 (Ohio Com. PI., 1887), the court, in applying this statute, held that, where fifty mill- ions of paid-up stock and fifteen mill- tion of bonds are given to a syndicate, of which a director is a member, for eighteen millions of money, the stock and bonds and the mortgage securing the bonds are void. - In Maine it is held that where prop- erty purchased by individuals for $6,667.67 is turned in to the corporation for $240,000 of full-paid stock, the stock- holders are liable on the stock as though the subscription price had not been paid. This decision is made under the statute that property shall be taken "at a bona fide and fair valuation thereof." In this case a part of the stock was turned back as treasury stock and sold at a small figure. The court expressly stated that its decision was based on the statute and that alone. Libby v. Tobey, 19 Atl. Rep., 904 (Me., 1890). 3 In Wisconsin under the statutes and 74 nr. in.] " WATERED " STOCK. [§47. A statute prohibiting the sale of stock below par does not pre- vent the corporation from pledging it, and a sale of the stock by the pledgee below its par value is legal. 1 There have been decisions under the Missouri statutes in addition to those under the constitutional provision referred to above. And various other states have statutes on this subject. 3 also under the common law as under- stood by the courts of that state, stock- holders who paid for their stock by turning in mining property known to them to be worth only one-tenth of the par value of the stock are liable for the remaining nine-tenths of the par value to corporate creditors. The question of whether the creditors knew all the facts is a matter to be set up in defense. Gogebic Inv. Co. v. Iron, etc., Co., 47 N. W. Rep., 726 (Wis., 1891). i Peterborough, etc., R. R Co. v. Nashua, etc., R R Co., 59 N. H., 385 (1879). 2 In Missouri a contractor who was paid in bonds and stock was held liable to corporate creditors for the par value of the stock over and above the mai-ket price of all the bonds and stock so given, where such value was greater than a reasonable price for the contract work. The court said " that where an agree- ment is entered into between a con- tractor and a corporation, whereby the former is to perform work for, or fur- nish material to, the latter, and to take unpaid stock in part or in full payment, that such contractor, whether for labor or material, can only charge therefor the reasonable market value for such labor or material thus given in ex- change ; and that all agreements by the corporation to pay more than such rea- sonable compensation will be disre- garded and held for naught by the courts where the rights of creditors intervene ; and this is the case even though no fraud be proven." Shickle v. Watts, 7 S. W. Rep., 276 (Mo., 1888). Where all the stock and a large quan- tity of bonds are issued by a railroad corporation to its contractor in payment for the construction of the road, the contractor is not liable to corporate creditors on the stock, even though the bonds were a sufficient consideration for building the road, unless the corporate creditors prove that the stock at the time of its issue had a real or market value. "If, when disposed of by the railroad company, it was without value, no wrong was done to creditors." Even the Missouri constitution and statutes do not change this rule. Fogg v. Blair, 139 U. S., 118 (1891). In the case of Northwestern, etc., Ins. Co. v. Cotton, etc., Co., 46 Fed. Rep, 22 (1891), the court held that where prop- erty worth $157,000 is turned into a cor- poration for $200,000, payable in $125,000 of stock and $75,000 of bonds, the cred- itors of the company might hold the parties liable on the stock, as though it were unpaid stock, and the creditor is presumed not to have known of the transaction when he contracted the debt. 3 See part VII, infra. In the case Brown v. Duluih, etc., R'y, 53 Fed. Rep, 889 (1893), the court re- fused to enjoin an issue of stock and refused to cancel stock already issued although $900,000 of bonds and $945,000 of stock were issued for construction work which cost $580,000. The court so held, although the statute required the stock to be fully paid, and prohibited issues except for property actually re- ceived. The plaintiff, however, was a holder who purchased with full knowl- edge of the facts. The court said : " This statute was not intended to pre- vent or interfere with the usual method of raising money to build railroads or for any legitimate corporate purpose. It is not to be construed as obstructive tO §47.] " WATERED " STOCK. [CH. III. In England, in 1863, the Companies Clauses Consolidation Act 1 prohibited the issue of new stock for a price less than its par value. An amendment thereto in 1869 2 struck out this prohibition, and gave power to the directors to issue stock on such terms and con- ditions as they saw fit. The Kailway Companies Act 3 of 1867 is to the same effect. In England the issue of stock for property or services is largely regulated by statute. On account of the many frauds perpetrated upon the public by the issue of stock for property taken at a gross overvaluation, parliament, in 1867, passed an act requiring all con- tracts whereby stock was issued for property or services to be publicly registered, under penalty of the payment being void. 4 Difficulty then arose as to what was the status and liability of a person receiving stock for property, in case the contract therefor was not publicly registered, as required by act of parliament. The courts finally decided that, if the sums due reciprocally were ex- pressly offset, then that the stock was to be deemed paid for, not- withstanding the statute. 5 But a mere general understanding that to the extent of restricting and hamper- ing corporations in their internal man- agement, and embarrass them in pro- curing means to carry out the legitimate purposes of the corporation ; and unless it appears that, under the guise of build- ing its road, bonds and stock of the de- fendant company are to be issued and put upon the market fraudulently that do not and are not intended to represent money and property, this corporation is not prohibited from entering into a real transaction based upon a present con- sideration, and having reference to legit- imate corporate purposes." The court also said that "such a provision does not necessarily indicate a purpose to make the validity of every issue of stock or bonds by a corporation depend upon the inquiry whether the money, prop- erty or labor actually received therefor was of equal value in the market with the stock or bonds so issued." i See 26 & 27 Vict, ch. 118, § 21. 2 See 32 & 33 Vict., ch. 48, § 5. 3 See 30 & 31 Vict, ch. 127, § 27. « 30 & 31 Vict, ch. 131, § 25. " Every share in any company shall be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof in cash, unless the same shall have been otherwise de- termined by a contract duly made, in writing, and filed with the registrar of joint-stock companies at or before the issue of such shares." Where the stock- holders apply long after incorporation for leave to file with the public register the contract whereby stock is issued for property, the court will require them first to provide for existing debts. Re Darlington, etc., Co., 56 L. T. Rep., 627 (1887). A mere vote of stock to a director in compensation for his services does not render him liable thereon for failure to register the contract, unless he knows of the entry of his name as holder of the shares or accepts certificates for the same. Arnot's Case, 57 L. T. Rep., 353 (1887), s Pell's Case, L. R., 5 Ch. App., 11 (1869) ; Ex parte Clarke, L. R, 7 Eq. Cas., 550 (1869); Nicoll's Case, L. R, 7 Ch. Div., 533 (1878). See, also, § 23. In Spargo's Case, L. R, 8 Ch. App., 407 (1873), the court said : " If the parties account with each other, and sums are stated to be due on one side, and sums to an equal amount due on the other 7$ CH. III.] " WATERED " STOCK. [§4S. the property is payment for the stock is insufficient. The prohibi- tion in the statute then applies, and payment in cash will have to be made upon a winding up. 1 The point decided by these cases seems to have been misapprehended in a few American cases. 2 Frequently actions herein are against corporate officers who di- rectly or indirectly received the stock. 3 This class of cases is con- sidered in the next section. § 48. Liability of the officers of the corporation. — There is great difficulty in defining clearly and accurately the liability of the corporate officers herein. This is because the officers may have committed an ultra vires or fraudulent act; or may have partici- pated in the profits as promoters; or may have received a gift of part of the stock from the parties to whom they issued it. There are few cases holding a director liable for loss to the cor- poration where an issue of its stock for money or property less in value than the par value of the stock has been made. Such an ac- tion would be similar in its character to the numerous cases against directors for their frauds and ultra vires acts. 4 In a suit of this character, however, against an officer of the cor- poration, he is liable not for the par value of the stock, less the value of the property or labor received therefor, but at the most side on that account, and those accounts are settled by both parties, it is exactly the same thing as if the sums due on both sides had been paid." See, also, Maynard's Case, 22 Week. R, 119; Be Vulcan Iron Works, Law Times, May, 1885, p. 61. i Dent's Case, L. R, 15 Eq. Cas., 407 (1873); Fothergill's Case, L. R, 8 Ch. App, 270 (1873); Crickmer's Case, L. R, 10 Ch. App., 614 (1875); Rowland's Case, 42 L. T. (N. S.), 785 (1880). Per- son taking stock at a discount for property overvalued may withdraw. Re Midland, etc., Co., 60 L. T. Rep., 666 (1889). 2 See Wethcrbee v. Baker, 35 N. J. Eq., 501 (1882). 3 A statement filed with the state com- missioner as required by statute, in re- gard to the amount of the paid-up stock, is not such a representation as will sus- tain an action for damages for fraudulent representations inducing a person to take the notes of the company. Hun- newell v. Duxbury, 28 N. E Rep., 267 (Mass., 1891). In an action by a treasurer for pay for his services it is no defense that the corporation with a capital fixed at $1,000,000 had $50,000 paid in in cash to comply with the statute, and then the remaining capital stock, $950,000, together with the cash so paid in, were issued for two patents, and that the treasurer checked out therefor the said $50,000, being the part unexpended at that time. Sears v. Kings Count}' El. R'y Co., 31 N. E Rep, 490 (Mass., 1892). The fact that the corporate officers have filed a false statement as to the amount of paid-up capital stock will not sustain an action for damages for fraud in inducing a party to take the notes of the corporation. Representa- tions as to the credit of a corporation must be in writing in order to be ac- tionable under the Massachusetts stat- ute. Hunnewell v. Duxbury et ah, 31 N. E. Rep, 700 (Mass., 1892). * See Part IV. 77 §48.] " WATERED " STOCK. [CH. III. he can be held liable only for the market value of the stock, less the value of the labor or property received by the corporation. 1 Where, however, the directors receive a part of the stock them- selves, either by its issue directly to themselves, or by being secret partners with those to whom it is issued, or by a gift to them from the parties to whom it is issued, then the directors may be com- pelled to account to the corporation for the stock actually received by themselves. In such a case, however, the directors, as such, cannot be made liable on the watered stock issued to third persons and still retained by them. The directors are liable only to the extent that they themselves received stock. This liability arises from the prin- ciple of law that a director must account to his corporation for any secret gift that may be made to him by persons contracting with the corporation ; and must account also for profits made by his secret participation in contracts between the corporation and third persons. 2 In such cases the director is liable to the corporation or its creditors, not for the par value of the stock received by him, but for the actual value of the stock, or for the profit or price which he received therefor. 3 i Continental Tel. Co. v. Nelson, 49 N. Y. Super. Ct, 197 (1883), where the ques- tion as to what was the market value was submitted to the jury. See, also, Nott v. Clews, 14 Abb. N. C. (N. Y.), 437, overruling a demurrer. In this case, however, the directors had received part of the stock as a gift. See, also, Os- good v. King, 42 Iowa, 478 (1876) ; but see Flagler, etc., Co. v. Flagler, 19 Fed. Eep., 468 (1884); Langdon v. Fogg, 18 Fed. Rep., 5 (1883); S. C, in state court, 14 Abb. N. C. (N. Y), 435. 2 See §§ 649, 650, and cases in notes thereto. s In Carting's Case, L. R, 1 Ch. D., 115 (1875), where the person receiving stock for property taken at an overvaluation gave part of it to a corporate director, the court held that the corporation could demand of the director either the stock, or the profit realized by him, or the profits thereby lost by the corpora- tion, but could not compel him to pay the full par value of the stock. In De Ruvigne's Case, L. R, 5 Ch. D., 316 (1876), where shares of stock were is- sued as paid up to a person for services palpably overvalued, and he transferred a part of the stock to a director, De Ruvigne, the court said : " If the com- pany attempt to make the appellant [director] a contributor, and they al- lege fraud in the original agreement by which he was to take the shares, they must either throw over the agreement altogether, or they must take it alto- gether ; they cannot adopt it as to one part and reject it as to the rest." The court said the director could be held liable for breach of trust and be made to pay to the corporation the selling value of the shares ; and since some of the stock was sold at par, he was charge- able with the par value of the stock so received by him. In Anderson's Case, L. R, 7 Ch. D., 75, 94, the court held that, if shares were improperly issued to a director at a dis- count, the contract might be set aside and the consideration returned, or the profits realized by him might be re- covered. In Currie's Case, 3 De Gex, J. & S., 367 (1863), where shares were taken both directly and indirectly by the corporate officers for property and services grossly overvalued, the court held that the transaction might be un- 78 CH. III.] U WATERED " STOCK. [§48. There is still another class of cases, in which a director acts also as a promoter of the company and receives stock for his services. He then is liable to account to the corporation therefor, not only as a director, but also as a promoter. 1 Another class of cases may exist where the directors vote stock to themselves in payment for their services to the company. 2 Whether the directors are liable herein to purchasers of stock or to corporate creditors in an action for deceit is an open question. 3 done altogether for fraud, but there was no liability on their part to con- tribute anything on the shares. The only remedy is to set aside the transac- tion and recover the profits thereof. Langdon v. Fogg, 18 Fed. Rep., 5 (1883) ; S. C, 14 Abb. N. C. (N. Y.), 435, holding that the directors are not liable to the corporation for the par value of stock issued to their dummy for property and then transferred to themselves. See, also, § 650, infra, and cases in notes. In the case of Re Ambrose Lake T. & C. Minn. Co., L. R, 14 Ch. D., 390 (1880), it was held that where all the stockholders acquiesced, and there were no creditors' rights involved, the cor- poration cannot recover from its direct- ors profits realized by them from shares issued to them as paid up in considera- tion of property taken at a gross over- valuation. The corporation was held to be in no position to complain. In Van Cott v. Van Brunt, 82 N. Y., 535 (1880), where the facts were very much the same as in the preceding case, the court said : " If the defendant [director and president] had realized a sum be- yond the amount actually expended, there might have been, perhaps, some ground for claiming that the arrange- ment would inure to and for the bene- fit of the company." Page 541. 1 See the important case of Chandler v. Bacon, 30 Fed. Rep., 538(1887); also, § 651, infra, and cases cited. In Iowa where "watered" stock is given as a gift by the patentees to a promoter, who afterwards became the first president of the company, he is liable to corporate creditors for all the "water" there is in the stock. Boulton Carbon Co. v. Mills, 43 N. W. Rep., 290 (Iowa, 1889). 2 See § 657, infra. 3 See §§ 157, 158, 355. A sale or pledge of stock stamped "non-assessable," when in fact it was ,not legally paid paid up, renders liable for false representations the president and secretary who made such sale or pledge and who knew that it was not paid-up stock. Windram v. French, 24 N. E. Rep., 914 (Mass., 1890). In Bartholomew v. Bentley, 15 Ohio, 659 (1846), certain persons incorporated a bank, incurred large debts, then sold their stock to the bank and left the creditors nothing. A creditor brought an action on the case for fraud. The court sustained the action, and said : "If the defendants, with the design to defraud the public generally, have knowingly combined together and held forth false and deceptive colors, and done acts which were wrong, and have thereby injured the plaintiff, they must make him whole by refunding to the full extent of that injury ; and they cannot place between him and justice. with any success, the charter of the German Bank of Wooster, whether it be valid or void, forfeited or in esse. Neither a good nor a bad thing may be falsely used for purposes of deception, and made a scapegoat for responsibility. Nor is it material that there should have been an intention to defraud the plaintiff in particular. If there was a general design to defraud all such as could be defrauded by taking their pffper issues, it is sufficient, and the plaintiff may maintain his suit, provided he has 79 §§ 49, 50.] "watered" STOCK. [ch. III. The officers of the corporation who participate in the issue of stock as paid up, when it has not been fully paid, are liable to per- sons purchasing such stock for damage thereby suffered. 1 In Massa- chusetts, by statute, corporate officers are made liable for corporate debts, if they issue stock for property at an unfair valuation of the latter. 2 § 49. Liability of the persons purchasing the stoelz ivitli notice. — It seems to be generally assumed, as a matter of course, that per- sons purchasing stock, with notice that it had not been paid up, although in fact it had been issued as paid up, are liable on such stock to the same extent that their transferrers were liable. 3 §50. Liability of the hona fide transferees without notice.— A bona fide purchaser for value and without notice of stock issued by a corporation as paid up cannot be held liable on such stock in any way, either to the corporation, corporate creditors, or other persons, even though the stock was not actually paid up as represented. Such a purchaser has a right to rely on the representations of the cor- poration that the stock is paid up. Difficulty sometimes arises in determining what will constitute a sufficient representation that the stock is paid up. A representation by the corporate agents that the full par value will not be required is insufficient.* The word " non-assessable," stamped or printed or written on the face of the certificate, is not a sufficient representation that the stock is paid up, so as to protect a bona fide purchaser thereof, where the certificate also shows that only twenty per cent, has been paid thereon. 5 taken the paper and suffers from the > Cross v. Sackett, 6 Abb. Pr„ 247 fraud. ... The act incorporating (1858); Re Gold Co., 11 Ch.D., 701 (1878). the president and directors of the Ger- See, also, § 47, supra. man Bank of Wooster, admitting it to 2 Statutes of Mass., Acta of 1875, ch. be in force, conferred no authority upon 177, § 2. any person to hold out false colors to 3 Upton v. Tribilcock, 91 U. S., 45 •deceive the public, no authority to issue (1875). But they are not liable if any bills without the means of redeeming prior owner was bona fide and without them ; and those who combined to use notice. Barrow's Case, L. R, 14 Ch. D., it for the purposes of swindling acted 432(1880). A transferee of "watered" for themselves rather than as agents of stock taking with notice is liable the the bank." same as his transferrer. Boulton Car- Creditors of a corporation cannot hold bon Co. v. Mills, 43 N. W. Rep., 290 the directors liable for fraud, deceit, ' (Iowa, 1889). etc., in forming a sham corporation, 4 Webster v. Upton, 91 U. S., 65 (1875) ; when no misrepresentations can be Upton v. Tribilcock, 91 U. S., 45 (1875). traced to them. Mere statements as to 3 Webster v. Upton, 91 U. S., 65, 71 the amount of capital stock are insum- (1875); Sanger v. Upton, id., 56 (1875). cient Brackett v. Griswold, 112 N. Y., -454 (1889). 80 CH. III.] " WATERED " STOCK. [§50. "Where, however, a statement is made on the face of the certifi- cate that it is paid-up stock, the honaf.de purchaser of the certifi- cate need not inquire further, but may rely on that representation, and is protected thereby against liability. 1 A purchaser of stock is entitled to rely on statements in the cor- porate books that the stock is paid up. 2 The law goes still further, and holds that where a person in open market, in good faith and without notice, purchases certificates, such stock is to be deemed "paid up "in his hands, and he is protected as a,hona fide pur- chaser, even though there is nothing on the face of the certificates stating that they are paid up. 5 This can now be laid down as the 1 This principle of law was clearly laid down, explained and sustained in the recent case of Young v. Erie Iron Co., 31 N. W. Rep., 814 (Mich., 1887). In Water- house v. Jamieson, L R, 2 H. L. (Sc), 29, where the stock was purchased in open market, the court said : " Here the appellant is a bona fide holder of shares upon which, no doubt, there was a false statement made by the company, of which he had no knowledge, and as to which he was under no obligation to inquire, and therefore he cannot be sub- jected to liability by having imputed to him a knowledge of the falsehood." In Brant v. Ehlen, 59 Md., 1 (1882). the court said : " Where shares are issued by the company to the subscriber as full-paid shares, and are sold by the subscriber as such, there is no ground on which a promise can be implied, on the part of the purchaser without no- tice, to be answerable either to the com- pany or its creditors, should the repre- sentations on the faith of which he purchased prove to be false. He could not be held liable on the ground of con- tract, because he never agreed to pur- chase any other shares than full-paid shares ; and if it be said that the shares were fraudulently issued, he could not be held liable on the ground of fraud, because he was in no sense a party to the fraud." In Steacy v. Little Rock & Ft Smith R. R Co., 5 Dill., 348 (1879), Judge Dillon examined, at considerable length, the reasons of the rule protect- ing bona fide purchasers of stock issued (6) as paid up, and sustained the rule itself. See, also, Burkinshaw v. Nichols, L. R, 3 App. Cas., 1004 (1878). One case, Myers v. Seeley, 10 Nai'l Bankr. Reg., 411, lays down a different doctrine. The court says : " The assignee of shares can be in no better condition t T ian the assignor. . . . The question is .simply whether the stock has been really paid in full to the corporation. The assignee may have paid for it to the assignors, and may have relied or the representa- tions of the latter, and of officers of the company, that the shares bought were fully paid, yet creditors are not bound thereby ; and if the stock was not fully paid, the holder is liable to creditors for the amount remaining unpaid." This case must ue considered poor law. See 68 L. T. Rep.. 15. 2 Erskine v. .Loewenstein, 11 Mo. App, 595 (1884). 3 Keystone Bridge Co. v. McCheney, 8 Mo. App., 496(1880); Foreman v. Bige- low, 4 Cliff., 508 (1878), as explained in 8 Mo. App., 496: Johnson v. Sullivan, 15 Mo. App., 55 (1884), where the court says : " If any presumption of fact arises from the face of a stock certificate in custom- ary form, as was the one in this case, it is that the stock . . is fully paid up." See, also, Erskine v. Loewenstein, 82 Mo., 301 (1884) , Cleveland, etc., Co. v. Texas, etc., R'y Co. , 27 Fed. Rep. 250 (1886). If a certificate of stock is silent on its face as to whether it is full paid or not, a bona fide purchaser is protected in considering it full-paid stock. West 81 50.] " WATERED " STOCK. [Cff. ITT. established rule. It is based on sound public policy, favoring, as it does, the transfer of personal property, and the quasi-nego- tiability of stock, and discountenancing secret liens and construct- ive notice. A purchaser in open market of stock represented to be paid up by a statement to that effect on the certificate is presumed to be a bona fide purchaser. Hence there has arisen the well-estab- lished rule, both in America and England, that a bona fide pur- chaser for value, and without notice, of stock issued as paid up, is not liable for any part of the par value which may not have been paid. 1 Nashville, etc., Co. v. Nashville Sav. Bank, 6 S. W. Rep., 340 (Term., 1888). Cf. Burkinshaw v. Nichols, L R, 3 App. Gas., 1004, 1017 (1878). In Brant v. Ehlen, 59 Md., 1 (1882), the court say : " The purchaser is not bound to suspect fraud when everything seems fair. . . Any other doctrine would virtually de- stroy the transferable nature of such shares, and paralyze the whole of the dealings in the stock of the corpora- tions." A party purchasing a certificate of stock which does not state whether it is paid up or not may assume that it is paid up, and will be protected in that assumption. Dn Pont v. Tilden, 42 Fed. Rep., 87 (1890). An inquiry by a purchaser of stock of corporate officers, as to whether it was full-paid stock, must be made to officers having authority to speak for the cor- poration. Browning v. Hinkle, 51 N. W, Rep, 605 (Minn., 1892). 1 In Re British Farmers' Pure Unseed Cake Co., L. R., 7 Ch. D., 533 (1878); aff'd, L. R, 3 App. Cas. r 1004 0880), the court held that, if the bona fide pur- chaser were not protected, "no person buying shares in the market, as paid-up shares, would be safe, for he would get nothing more than a certificate to show they are paid up. ... ubviously such a construction would destroy the transferable nature of shares altogether." See, also, Foreman v. Bigelow, 4 Cliff., 508 (1878); McCracken v. Mclntyre, 1 Duv. (Can.), 479 ; Stacey v. Little Rock &Ft. S. R R. Co., J Dill., 348 (1878); Jackson v. Slido, etc., Co., 1 Lea (Tenn.), 210; Brant V. Ehlen, 59 Md.. 1 (1883); Waterhouse v. Jamieson, L. R, 2 H. L (Sc), 29. Cf. Crickmer's Case, L R., 10 Ch. App., 614. Contra, Myers v. Seeley, 10 Nat'l Bank. Reg., 411. It is immate- rial that the payment in stock issued as paid up turns out to have been valueless. The bona fide purchaser is protected, and the corporation must allow registry by him. Protection Life Ins. Co. v. Os- good, 93 111., 69 (1879). In the case of Wintringham v. Rosenthal, 25 Hun, 580 (1881), the court held that a bona fide purchaser of stock, which he purchased supposing it to be paid up, is not liable for the unpaid par value. The stock was issued by a bank, evidently on a cash subscription. This case practically over- rules Mann v. Currie, 2 Barb., 294 (1848). The general railroad act of New York (Laws 1850, ch. 140, § 10) prescribes that each stockholder shall be liable " to an amount equal to the amour': unpaid on the stock held by him." In the case of Tasker v. Wallace, 6 Daly, 364, 374 (1876), the court held that under this statute, " as between a stockholder and a cred- itor, it is wholly immaterial whether he was a bona fide and innocent purchaser of stock which the vendor assured him had been paid." This remark was, it seems, a dictum, and being by an inferior court is doubtful as an authority. The representation, moreover, was not on the face of the certificate, nor was it made by the corporation. In the case DH. III.] " WATERED '' STOCK. [§51. Where a subscriber who has not yet taken out his certificate of stock instructs the corporation to issue the certificates to a desig- nated transferee, the latter has been held to be the original allottee of that stock, and, if the stock was irregularly issued as paid-up stock, he cannot claim to be a bona fide transferee without notice. 1 A contrary rule has been laid down in other cases, however, and would seem to be more in accordance w T ith justice. 2 E. ISSUE OF WATERED STOCK BY A STOCK DIVIDEND. § 51. Tliird method: Issue by stock dividends. — The third method of issuing fictitiously paid up stock is by a wrongful use of the power to issue stock dividends. It seems to be generally conceded that if the capital stock and the actual property of the corpora- tion is not permanently increased to the extent of the par value of the stock distributed as a dividend, then that the issue of stock by such dividend is irregular, and under certain circumstances fraud- ulent. 3 In some of the states stock dividends are prohibited by constitu- tional or statutory provisions. 4 of Hubbell v. Meigs, 50 N. Y.. 480, 489 cases, condemns such dividends. . . . (1872), where the purchaser of Wiscon- No harm is done to any person, provided sin railroad stock sued his vendor for the dividend is not a mere inflation of damages for deceit on the ground, the stock of the company, with no cor- air.ong others, that the stock had been responding values to answer to the stock issued fictitiously as paid up, the court distributed. ... So long as every said : '* It is unnecessary to determine dollar of stock issued by a corporation whether the corporation was authorized is represented by a dollar of property, by its charter to sell its stock at less than no harm can result to individuals or the par, or whether, in so 'selling, its officeio public from distributing the stock to did not violate their duty. The plaintiff the stockholders." Howell v. Chicago & was a bona fide purchaser, and, being Northw. R'y Co., 51 Barb.. 378 (1868), is such, acquired a valid title to the stock to the same effect In Bailey v. Rail- transferred to him." road Co., 22 Wall., 604, the court said i Rowland's Case, 42 L. T. (N. S.), 785 that net earnings, however expended or (1880); Potter's Appeal, Weekly Notes, 1878, p. 81 ; Re Vulcan Iron Works, Law Times, 1885. p. 61. * Young v. Erie Iron Co., 31 N. w! Kep., 814 (Mich., 1887); Carling's Case, L. R, 1 Ch. D., 115 (1875). See, also, § 62, infra. 3 In Williams v. Western Union Tel. Co., 93 N. Y, 189 (1883), the court said that a stock dividend " could be declared by a corporation without violating its letter, its spirit or its purpose. . . . There is no public policy which, in all invested, " belong to the stockholders, and may be distributed as they may di- rect, in dividends of stock or by a sale of property." See, also, ch. 32. Whe:e the company is under obligations to issue stock to represent interest on sub- scriptions until dividends are declared, a stock dividend does not stop the inter- est Hardin County v. Louisville, etc., R R, 17 & W. Rep., 860 i_ -_.l!> /„i^i u ~„« ^P Co., 32 Gratt, 146 (1879). Especially where the loose sheets are subsequently bound up into a volume and make part of the records of the corporation. Woodruff v. McDonald, 33 Ark., 97 (1878). Ex parte Besley, 2 Mac. & G., 176, in which the defendant was liable to be a subscriber and liable to creditors of a railway although he had not signed any subscription paper or book, but had at- tended meetings of the provisional com- mittee as a member thereof, and had paid small assessments ordered by it. Carlisle v. Saginaw, etc., 27 Mich., 315 (1873). Where the law required sub- scriptions to be made " in the manner to be provided by its by-laws," a sub- scription made before such by-laws were adopted was declared to be void. New Brunswick, etc, v. Muggeridge, 4 Hurl. & N., 160 (1859). Defendant had agreed in writing to accept shares he desired to subscribe for, and had paid the sum required in advance, but he did not sign the articles of association subsequently sent to him for his signa- ture. In an action for calls he was held not to be a shareholder although his name had been placed as such upon the company's register. The decision rested upon a clause in the Joint-Stock Com- panies Act, 1856, to the effect that no person shall be deemed to have accepted any share unless his acceptance be in writing. Tilsonburg, etc., Co. v. Goodrich, 8 Ontario Rep., 565 (1885), which was an " The defend- subscription paper will be valid. People v. Stockton, etc., R R Co., 45 Cal., 306 (1873) ; Ashtabula, etc., R R Co. v. Smith, 15 Ohio St, 328 (1864) ; Brownlee n Ohio, etc, R. R Co., 18 Ind., 68 (1862) ; Buffalo, etc, R R. Co. v. Gifford, 87 N. Y., 294 (1882); Hamilton, etc, Co. v. Rice, 7 Barb., 157 (1849); Stuart v. Valley R R ant" (although one of the projectors and original subscribers) "was not a party to the petition, and he is not by the terms of the [general] statute a member of the company, and he has done nothing since the patent, by at- tending meetings or otherwise, which can have relation to his agreement to 92 CH. IV.] SUBSCRIPTIONS METHOD PARTIES — ENFORCEMENT. [§ 55. ficient to release him. 1 Parol conditions or agreements in refer- ence to subscriptions which are absolute on their face are generally not sustained. 2 The right of a stockholder to withdraw from his subscription is also discussed elsewhere in this volume. 3 And many other defenses which have been raised to defeat actions for the collection of subscriptions are considered elsewhere. 4 §55. Proof of subscription. — It is presumptive evidence that one is a subscriber or stockholder when his name appears on the books of the company in either of these capacities. 5 And so also it is said that the commissioners' books are prima facie evidence of the subscriptions found in them," and likewise as to the original subscription paper. 7 And again, entries in the proper books by take stock." The court with regret held that he was not a stockholder. As to enforceability of subscriptions, not for stock, but as a gift to enter- prises, see Smith v. Sowles, 10 Atl. Rep., 536 (Vt, 1887) ; McCabe v. O'Con- nor, 28 N. W. Rep., 573 (Iowa, 1886) ; Broadbent v. Johnson, 13 Pac. Rep., 83 (Idaho, 1882), where subscription was to a railroad ; Gaus v. Reimensnj'der, 2 Atl. Rep., 425 (Pa.), note ; Grand Lodge v. Farnhara. 11 Pac. Rep., 592 (Cal., 1886); Roberts v. Cobb, 9 N. E. Rep., 500 (N. Y.\ note (1886); Utica. etc.. R. R, Co. v. Brinkerhoff, 21 Wend., 139 (1839); Watkins v. Evans, 63 Mass., 537 (1852). See, also, 117 id.. 456 (1875) ; Pres- byterian Church v. Cooper, 20 N. E. Rep., 352 (N. Y., 1889); Cottage, etc., Church v. Kendall, 121 Mass., 529 ; Liv- ingston v. Rogers, 1 Caines, 585(1804); Trustees, etc., v. Stewart, 1 N. Y., 581 (1848); Amherst Academy v. Cowls, 23 Mass., 427 (1828). A subscriber or donator of money to a factory cannot prevent its moving away if it is a losing enterprise. Ayres v. Dutton, 49 N. W. Rep„ 897 (Mich., 1891). i See § 196, infra. 2 See ch. IX. A defendant, it is said, however, who is sued on a subscription absolute, may show that he agreed orally to subscribe conditionally, and placed his name on blank paper, and that the secretary of the corporation subsequently, without his knowledge, subscribed the name unconditionally to a subscription paper. See § 137, infra. And it is held that when a corporation invites and accepts subscriptions as a loan, to be repaid in full and the sub- scription canceled, it cannot repudiate such a contract and treat the subscrip- tion so induced as absolute. See § 247, n., infra. 3 See §§ 167-170, infra. * See ch. X. s Hoagland v. Bell. 36 Barb., 57 (1861) ; Turnbull v. Payson, 95 U. S, 418(1877); Hamilton, etc., Co. v. Rice, 7 Barb., 157 : Pittsburg, etc., R R. Co. v. Applegate, 21 West Va., 172 (1882); Taylor v. Hughes, 2 Jones & Lat. (Irish Chan.), 24, 55 (1844); McHose v. Wheeler, 45 Penn. St., 32 (1863). Cf. Coffin v. Col- lins, 17 Me., 440 (1840); Whitman v. Proprietors, etc., 24 id., 236 (1844) ; Rock- ville, etc., Co. v. Van Ness, 2 Cranch, C. C, 449(1824); Mudgett v. Horrell, 33 Cal., 25 (1867). Or when a certificate has been issued to him, which he pro- duces. Boardman v. Lake Shore, etc., R. R, Co., 84 N. Y, 157 (1881); Agricult- ural Bank v. Burr, 24 Me., 256; Van- derwirken v. Glenn, 6 S. E. Rep, 806 (Va., 1888); Lewis, Adm'r, v. Glenn, 6 S. E. Rep., 866 (Va., 1888). 6 Rockville, etc., Co. v. Van Ness, 2 Cranch, C. C, 449(1824) ; Wood v. Coosa, etc., R R Co., 32 Ga. 273 (1861). 7 Partridge v, Badger, 25 Barb., 146 (1857). 93 § 55.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [cH. IT. commissioners duly appointed to take subscriptions are evidence against the subscribers. 1 So corporate books to which a subscription has been transferred by authority of the subscriber are evidence of the subscription, 2 and also the books that contain the original sub- scriptions. 3 Entries on the stock ledger and corporate books are competent evidence of an issue of stock to a person. 4 But the presumption that one is a stockholder, arising from the fact of his name being found in the stock and transfer book, may be met by proof to the contrary. 5 When, however, the books of the corporation have been destroyed or lost, a certified copy of the recorded list of the i Wood v. Coosa, etc., R R Co., 32 Ga., 273 (1861). 2 Iowa. etc.. R R Co. v. Perkins, 28 Iowa, 281 (1869); Hawley v. Upton, 102 U. S., 314 (1880). Cf. Whitman v. Pro- prietors, etc., 24 Me.. 236 (1844). 3 Marlborough, etc., R R Co. v. Ar- nold, 9 Gray, 159 (1858). Cf. Mudgett v. Horrell, 33 Cat, 25 (1867). The subscription books are prima facie evidence of stockholdership. Seniple r. Glenn, 9 S. Rep., 265 (Ala., 1891). In enforcing a subscription, stock- holdership is proven by showing the name on the subscription list and prov- ing payment of several assessments. Glenn v. McAllister's Ex'rs, 46 Fed. Rep., 883(1891). The stock book and a subscription list are sufficient to prove stockholdership in the absence of rebuttal testimony. Glenn v. Liggett, 47 Fed. Rep., 472 (1891). But entries in the cash book are not ad- missible, nor the report of the treasurer of the corporation. Id. Stockholdership may be proved by ad- missions of the stockholder, and the testimony of the treasurer, and by the record book purporting to contain copies of the original minutes. The stock book could not be found. Congdon v. Winsor, 21 Atl. Rep., 540 (R I., 1891). 4 Chapman v. Porter, 69 N. Y., 276 (1877). s Mudgett v. Horrell, 33 Cal., 25 (1867). Cf. Brewers', etc., Ins. Co. v. Burger, 10 Hun, 56 (1877). The stock books are sufficient to prove stockholdership, if the name contained therein is the same as defendant's and was entered as his name. Liggett V. Glenn, 51 Fed. Rep., 381 (1892). The corporate books are not admis- sible to prove stockholdership. Howard v. Glenn. 11 S. E. Rep., 610 (Ga., 1890). The books of the corporation are prima facie evidence of stockholder- ship. Lehman v. Glenn, 6 S. Rep., 44 (Ala., 1889); Lehman v. Semple, 6 S. Rep., 44 (Ala., 1889). A mistake in entering the name of the subscriber on the corporate books may be fatal to proving stockholdership by the books. Where the subscription is denied, the best evidence is the sub- scription itself, and until it is accounted for, the stock ledger is inadmissible in evidence. If the action is on the writ- ten subscription, recovery can be on that alone. Taussig v. Glenn, 51 Fed. Rep., 409 (1892). Where there is no law authorizing a paper containing the subscriptions to the capital stock of a corporation to be filed in the office of the secretary of state, a copy thereof, certified under the seal of the secretary of state, is not ad- missible as evidence, in a suit by the corporation, to charge the defendant as stockholder. Troy, etc., R R Co. v. Kurr, 17 Barb., 581, 600 (1854) ; Tilson- burg, etc., Co. v. Goodrich, 8 Ontario (Q. B. Div.), 565 (1885). Cf. Bouchaud v. Dias, 3 Denio, 238 (1846;; Dick v. Balch, 8 Peters, 30 (1834). 94 CH. IV,] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [§ 5G. names of shareholders, required by statute to be filed in the office of the register of deeds, is ])rima facie evidence as to the fact of subscription and ownership of the shares. 1 So it is said that the stock book of a corporation is not admissible in evidence in an ac- tion by a creditor of the corporation against one alleged to be a stockholder for the purpose of proving that he is such stockholder. 2 In order to let in secondary evidence of a subscription, there must be proof of an original subscription and of the loss of the book or paper, or the absence of the original paper satisfactorily accounted for. 3 But parol evidence is admissible to show that a certificate has been issued to one by a wrong Christian name. 4 The mere erasure of a subscription will not of itself prevent a recovery upon it. 5 Various other principles of evidence relative to proving one to be a subscrib3r are given in the notes below. 6 1 Cleveland v. Burnham, 55 Wis., 598 (1 885). A corporation may, by suit, com- pel its agents to deliver up subscrip- tion lists, or in lieu thereof be liable tbemselves on the subscriptions. Peo- ple's, etc., Co. v. Babinger, 4 S. Rep., 82 (La., 1888). 2 Mudgett v. Horrell, 33 Cal., 25 (1867). 3 Pittsburgh, etc., R. R. Co. v. Gaz- zam, 32 Penu. St., 340 (1858) ; Graff v. Pittsburgh, etc., R. R. Co., 31 id., 489 (1858); Hays v. Pittsburgh, etc., R. R. Co., 38 Penn. St., 81 (1860). 4 Cleveland v. Burnham, 55 Wis., 598. 5 Johnson v. Wabash, etc., Co., 16 Ind., 399 (1861). And where one took a book for subscriptions from an agent of the corporation, and subscribed himself and persuaded others to subscribe, and kept the book some months, but finally, because of a difference with the agent about the payment for his services, cut his name out of the book and returned it to the company, it was held, in an action by the company for the amount of his subscription, that he was bound thereon just as though he had left his name on the list of subscribers. Greer v. Chartiers R. R. Co., 96 Penn. St., 391 (1880); Railroad Co. v. White, 10 S. C, 155 (1878). It has been held, however, in New York, that where the statutory certifi- cate inquired by law to be filed in order to obtain incorporation remains in the hands of a subscriber, or either of them, a subscriber may erase or modify his subscription as he sees fit, even though he had previously induced others to subscribe. Burt v. Farrar, 24 Barb., 518 (1857). 6 See cases in notes to the preceding sections of this chapter; also the follow- ing cases : Galveston Hotel Co. v. Bolton, 46 Tex., 633 (1877), where the original subscrip- tion paper was lost and the name of the defendant did not appear on the books of the company, and he had not paid the stipulated advance, nor participated in any action of the company, but had acknowledged verbally to the secretary his obligation to pay. Held, that the evidence was not sufficient to meet the proof that he was a legal subscriber. Pittsburgh, etc., v. Applegate, 21 W. Va., 172 (1882). where, in the absence of the subscription list, the company's stock book was held to be admissible in evidence as tending to show that de- fendants were stockholders. Citing cases. Iowa, etc., v. Perkins, 28 Iowa, 281 (1869). Defendant attended a township meeting called to obtain subscriptions to a railroad company. The names of subscribers were written by the parties soliciting upon a slip of paper, being au- thorized to do so by the subscribers. The meeting then gave authority to an offi- 95 § 50.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [CH. IT. §56. The English rule. — In England the contract of subscrip- tion for shares is entered into in a somewhat more technical or formal manner. An application, in the first instance, is made in writing for specified number of shares, which application is held to be a mere offer, open for acceptance by the corporation for only a limited time. 1 If the application be accepted, the corporation formally allots to the applicant the desired number of shares, and gives him a notice of the allotment. The notice is of the essence of the contract. An allotment without notice is not sufficient to bind the applicant as a contributory or a shareholder. 2 If the no- tice of allotment is sent by mail, the allottee becomes bound from the time of posting the letter, whether he received it or not. 3 And cer of the company to transcribe the subscriptions into the company's book. Held, that the bonk thus became the original contract of subscription, and was admissible in evidence without proof of loss of the slip. Haynes v. Brown, 36 N. H., 545(1859). The absence of records being sufficiently accounted for to make parol evidence admissible, defendant's attendance at meetings of the corporation and his act- ing as president were accounted compe- tent proof of his being a stockholder. Corporate stock book, containing list of stockholders, number of shares owned by each, amount paid and amount due, and containing defendant's name among others, is sufficient evidence of balance due on unpaid subscription. Glenn v. Orr, 2 S. E. Rep., 538 (N. C, 1887). A contract between the defendant, who is sued as a stockholder, and his at- torney relative to defending the action is inadmissible to prove stockholdership. Liggett v. Glenn, 51 Fed. Rep., 381 (1892); Dorsheimer v. Glenn, id., 404. 1 Ramsgate, etc., Co. v. Montefiore, L. R., 1 Exch., 109 (1866); In re Bowron, L. R, 5 Eq., 428 (1868), and the cases generally cited, infra, in this section. A subscriber may withdraw before allotment by a legally convened meet- ing of the directors. Re Portuguese, etc., Mines, 62 L. T. Rep., 88 (1889). But not where the allotment is made irregu- 2 Hebbs' Case, L R, 4 Eq., 9 (1867) ; Gunn's Case, L. R, 3 Chan., 40 (1867) ; In re Peruvian R'y Co., L. R, 4 Chan., 302 (1869); Pellatt's Case, L. R. 2 Chan., 527(1867); Ward's Case, L. R, 10 Eq., 659 (1870); Harris' Case, L. R, 7 Chan., 587 (1872) ; Household, etc., Co. v. Grant, L. R, 4 Exch. Div., 216 (1879). The mere act of signing the memorandum of association does not make one a stockholder. Mackley's Case. L. R., 1 Ch. Div.. 247 (INT")). A mere allotment without an entry of the name on the stock registry does not render the per- son liable as a stockholder. Nicoll's Case, L. R. 29 Ch. Div.. 421 (1883> Nor is one a stockholder unless he signs the deed of settlement Irish Peat Co. v. Phillips, 1 Best & S., 598 (1861). Nor will a certificate be issued till then. Wilkinson r. Anglo, etc., G. M. Co., 18 Q. B., 728(1852). Although an allotment of stock may be illegal by reason of notice not having been given of a directors' meeting, yet the allotment may be confirmed by a subsequent legally called meeting. Re Portuguese, etc., Mines, Limited, 63 L T. Rep.. 423 (1890). 3 Harris' Case, L. R, 7 Chan., 587 (1872); Household, etc., Co. v. Grant, L R, 4 Exch. Div., 216(1879); Town- send'sCase. L. R. 13 Eq., 148; Hebbs' Case, L. R, 4 Eq., 9 (1867). Contra, British, etc., Telegraph Co. v. Colson, larly before, but regularly confirmed L. R, 6 Exch., 108 (1871); In re Constan- after, the withdrawal. Id., 179. tinople, etc., Co., 19 W. R, 219 (1870). 96 ' CH. IV.] SUBSCRIPTIONS METHOD PARTES — - ENFORCEMENT. [§57. if the allottee knew of the fact of the allotment, and especially if he acted or suffered others to act upon the assumption that he was a shareholder, a formal notification may be unnecessary to bind him. 1 The application being in the nature of an offer or a proposition may be withdrawn at any time before it has been regularly ac- cepted, and it must be accepted within a reasonable time, or the party making it cannot be held bound; 2 and although the applica- tion should be in writing, the withdrawal of it may be oral. 3 It seems to be well settled in England, that, in order to make the con- tract to take up shares completely binding, there must be the ap- plication in writing, the allotment of the shares to the applicant, and a communication to him of notice of the allotment. 4 § 57. Subscriptions taken by commissioners.— Although the stat- ute provides for subscription, either by an original subscription to the articles of association, or, after the incorporation, by a subscrip- tion in books to be opened by commissioners, nevertheless it has been held that a subscription in some other way is binding. 5 The iLevita's Case, L. R, 3 Chan., 36 (1867); In re Peruvian R'y Co., L R., 4 Chan., 322 (1869); Richards v. Home, etc., Assoc, L. R, 6 C. P., 591 (1871); Pellatt's Case, L. R, 2 Chan., 527 (1867). 2 Ward's Case, L. R, 10 Eq., 659 (1870) ; Best's Case, 2 De G., J. & S., 650 (1865); Ramsgate, etc., Co. v. Monte- fiore, L. R, 1 Exch., 109 (1866) ; Chap- man's Case, L. R, 2 Eq., 567 (1866) ; Ritso's Case, L. R, 4 Chan. Div., 774 (1877) ; Wilson's Case, 20 L. T. (N. S.), 962 (1869). 3 Wilson's Case, 20 L. T. (N. S.), 962 (1869). * Adams' Case, L. R., 13 Eq., 474; Hebbs' Case, L. R, 4 Eq., 9 (1867) ; Pel- latt's Case, L. R, 2 Chan., 527(1867); Roger's Case, L. R, 3 Chan., 637 (1868) ; Tucker's Case, 20 W. R, 89 (1871). Cf. Bloxam's Case, 33 Beav., 529, distin- guished in Pellatt's Case, supra. But under the twenty-third section of the Companies Act of 1862, the decisions are uniform that whenever one signs the memorandum of association he becomes a share owner, and must be put on the list of coutributories, although no shares may have been allotted to him. In re London, etc.. Co., L. R, 5 Chan. Div., 525 (1877) ; Evan's Case, L. R, 2 Chan., (7) 97 427 (1867); Sidney's Case, L. R, 13 Eq., 228 (1871) ; Levick's Case, 40 L. J. (Chan.), 180 (1870); Hall's Case, L. R. r> Chan., 707 (1870), distinguishing Snell's Case, L. R., 5 Chan., 22 (1869). An al- lotment to a person who has not applied for shares is not binding. Re The Northern, etc., Co., Limited, 63 L. T. Rep., 369 (1890). & Buffalo, etc., R R. Co. v. Gifford, 87 N. Y., 294 (1882) ; Stuart v. Valley R R. Co., 32 Gratt, 146 (1879). Contra. Troy. etc., R. R. Co. v. Tibbits, 18 Barb., 297 (1854) ; Parker v. Northern, etc., R R. Co., 33 Mich., 23 (1875); Unity Insur- ance Co. v. Cram, 43 N. H, 636 (1862) ; Schultz v. Schoolcraft, etc., R Co., 9 Mich., 269 (1861). But when the stat- utes provide for commissioners, it is said they must all be present in order to the valid performance of the judicial duties assigned to them. Crocker v. Crane, 21 Wend., 211 (1839). It is said that in the taking of subscriptions the commissioners act ministerially, but in the distribution or allotment of shai'es they act judicially ; and that a distribu- tion of shares by commissioners not sufficient in number to constitute a legal board is void. Crocker v. Crane, supra. It has been held that the commission- §58.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IV. commissioners may themselves be subscribers to the stock, 1 but they can have no priority of right to subscribe over others, and no subscriptions can lawfully be taken with closed doors. The books must be open, and the public must have an opportunity to sub- scribe. 2 The commissioners have only such general powers as are necessary to validate the subscriptions to the stock. Their author- ity and functions cease upon the organization of the corporation. 3 § 58. Subscriptions in excess of the capital stock — In general, after the full amount of stock provided for in the act of incorpo- ration has been subscribed, any further subscriptions are void. 4 Where, by statute, the commissioners do not properly apportion stock, in cases involving an excess of subscriptions, an aggrieved subscriber may apply to a court of equity for relief. 5 But, after the organization of the corporation, the duty to appor- ers may limit the amount of stock which any one subscriber may take, and will, in a proper case, be sustained therein on grounds of public policy, al- though the power so to act is not specif- ically conferred upon them by the stat- ute. Brower v. Passenger R. R Co., 3 Phila., 161 (1858). And accordingly fic- titious subscriptions for the pupose of evading such a limitation of the amount of stock to be taken by a single sub- scriber are illegal and void. Perkins v. Savage, 15 Wend., 412 (1836). Commis- sioners to take subscriptions may refuse to allow one person to subscribe for half of the stock, and may refuse to accept a subscription from a person as trustee. Thomas v. Citizens', etc., R'y, 1 Araer. St. R'y Dec, 299 (Pa., 1858). i Walker v. Devereaux, 4 Paige, 229 (1833). 2 Brower v. Passenger R'y Co., 3 Phila., 161 (1858). When the amount of the subscription is not limited, the commis- sioners, in the absence of other express provision, may usually decide when enough stock has been subscribed, and their decision is practically conclusive as an exercise of discretion. Saugatuck, etc., Co. v. Westport, 39 Conn., 337, 348 V1872). Their failure to take the statu- tory oath will not invalidate the sub- scriptions taken by them, if they are in other essential respects regular. Holl- man r. Williamsport, etc., Co., 9 Gill & J., 462 (1838). 3 James v. Cincinnati, etc, R R Co. 2 Disney (Cin. Super. Ct), 2G1 (1868); Peninsular, etc., R R Co. v. Duncan, 28 Mich., 130 (1873) ; Hardenburgh v. Farm- ers', etc.. Bank, 3 N. J. Eq., 68 (1834); Walker v. Devereaux, 4 Paige, 229(1833); Crocker r. Crane, 21 Wend., 211 (1839); Wellersburg, etc., Co. v. Hoffman, 9 Md., 559 (1834); Smith v. Bangs, 15 III., 399 (1854); State v. Lehre, 7 Rich. Law, 234 (1851). The corporation may by suit set aside illegal subscriptions — the subscribers not being qualified. Union Bank V. Mc- Donough, 5 La., 63 (1833). ♦Lathrop v. Kneeland. 46 Barb., 432 (1866); Mackley's Case, L R, 1 Chan. Div., 247 (18751 5 Walker v. Devereaux, 4 Paige, 229 (1833); Meads v. Walker. Hopk. Ch.,587 (1825). Cf. Haight r. Day, 1 John. Ch., 18 (1814). Where an apportionment is provided for in the event of an excess of subscrip- tions, it is said that the contract of sub- scription is not complete until the ap- portionment is made ; that there can be neither stockholders nor corporation prior to the apportionment Walker v. Devereaux, 4 Paige, 229 (1833); Crocker v. Crane. 21 Wend.. 211 (1839); Burrows v. Smith, 10 N. Y„ 550 (1853). Cf. Buf- OH. IV.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [§§ 59, 60. tion the stock, if there has been an oversubscription, belongs to the corporation and not to the commissioners. 1 And, in the absence of statutory authority, the commissioners, even before organization, have no general power, if they receive excessive subscriptions, to reduce proportionally all the subscriptions and apportion the stock. It is their only duty to take subscriptions up to the full amount of the prescribed capital, and to refuse anything beyond that. 2 Neither can the corporation, if it has issued the full amount of the stock, recover on subscriptions in excess. The subscriber acquires no title by such a subscription, and corporate creditors can enforce no lia- bility thereon. 3 § 59. Subscriptions and organization where there is a special charter and no commissioners are provided for. — This subject is considered elsewhere. 4 § 60. Subscriptions delivered in escrow. — Subscriptions for shares may be made and delivered in escrow to an agent of the corpora- tion who is engaged in taking subscriptions, 5 or to a director of the corporation. 6 But a delivery in escrow to a commissioner is bad, and a subscription so delivered is absolute. 7 Delivery of a falo, etc., R R Co. v. Dudley, 14 N. Y., 336, 346 (1856). Where a resolution was passed by a board of directors, entitling a promoter to have a certain number of shares al- lotted to him, and the available shares had been disposed of before his bill for specific performance was filed, held, he had no ground for coming into equity. Ferguson v. Wilson, L. R, 2 Ch. App., 77, 87 (1866). 1 State v. Lehre, 7 Rich. Law, 234 (1854), where an application for man- damus to compel commissioners to re- apportion stock agreeably to the charter of a company, and for quo warranto against officers claimed to have been illegally elected, was refused, the appel- late court holding that the commission- ers had no power to re-apportion stock after the subscribers had become a body corporate. Smith v. Bangs, 15 111., 399 (1854). In this case, after the commis- sioners had closed the subscription books and called a meeting, at which directors were chosen, they re-opened the books to receive further subscrip- tions. On the application of one of the directors they were restrained by in- junction, the court holding that their powers were at an end. 2 Van Dyke v. Stout, 8 N. J. Eq., 333 (1850). 3 Burrows v. Smith, 10 N. "Y., 550 (1853); Oler v. Baltimore, etc., R R Co., 41 Md„ 583 (1874). When the corpora- tion has accepted subscriptions in excess of the capital stock, corporate officers cannot buy in shares of the stock at a discount and then re-issue them to pro- vide for the oversubscription, charging the corporation par for the stock bought in, and thereby realizing a profit to themselves individually on the transac- tion. East New York, etc., R R Co. v. Elmore, 5 Hun, 214 (1875). < Seech. XXXVI, infra, 5 Cass v. Pittsburgh, etc., R R Co., 80 Penn. St, 31 (1875). 6 Ottawa, etc., R R Co. v. Hall, 1 Bradw. (111.), 612 (1878). ^ Wight v. Shelby R R Co., 16 R Mon., 4 (1855). It is the rule in Ken- tucky that, to become effectual as an escrow, the delivery must be to a third person. Wight v. Shelby R R Co., 99 § 61.] S DESCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IV. subscription in escrow, to become absolute on performance of cer- tain conditions by the corporation, differs from a conditional sub- scription in this : that a subscription in escrow is, strictly speaking, no subscription. As in the case of a deed delivered in escrow, no estate passes until the second delivery. So, in the case of a sub- scription delivered in escrow, there is no subscription until a second delivery, and the depositary can only deliver it up on performance of the condition. 1 So, also, a subscriber may show by parol an agreement with an agent of the corporation that his subscription to blank paper should not be a subscription until he had seen and approved the heading of the subscription paper. 2 § 61. Liability of the corjwration for refusal to issue a certificate of stoclc. — The corporation is bound, upon demand, to deliver to a stockholder a certificate of stock representing his interest in the corporation. 3 If it refuses to issue the certificate the stockholder may bring suit in equity to compel its issuance, 4 or he may recover supra. But in Pennsylvania it seems the rule is otherwise. Cass v. Pitts- burgh, etc., R R Co., supra. And so in Illinois. Ottawa, etc., R R Co. v. Hall, supra. Cf. Price v. Pittsburgh, etc., R R Co., 84 111., 13, 36 (1864). 1 Ottawa, etc., R R Co. v. Hall, 1 Bradw. (111.), 612 (1878). It is competent to show by parol that a subscription was delivered in escrow. The court of appeals of Illinois declares that a con- trary rule is not sustained by any re- spectable authority. Ottawa, etc., R R Co. v. Hall, supra. Cf. Tonic, etc., R R Co. v. Stein, 21 111., 96 (1859). 2 Bucher v. Dillsburg, etc., R R Co., 76 Penn. St., 306 (1874). This, however, amounted to a parol condition — a sub- ject fully treated in chapter IX, infra. 3 Fletcher v. McGill, 10 N. E. Rep., 651 (Ind., 1887). The stockholder is entitled to a certifi- cate of stock. Rio Grande, etc., Co. v. Burns, 17 S. W. Rep., 1043 (Tex., 1891). A statute authorizing the issue of cer- tificates of stock when it is fully paid up does not prevent the issue of such certificates before it is fully paid up. Green v. Abietine, etc., Co., 31 Pac. Rep., 100 (Cal., 1892). The subscriber for stock is not en- titled to a certificate until he has paid for the stock in full. Baltimore, eta, Co. v. Hambleton, 26 Atl. Rep., 279 (Md., 1893). Where a prospective corporate officer issues certificates of stock in the pros- pective corporation, a person who loans money on such stock as collateral secu- rity may hold such officer liable for issuing the stock before the corporation was organized. Merchants' Nat. Bank v. Robison, 30 Pac. Rep., 985 (Utah, 1892). The duty of the corporation to issue a certificate is considered also in §3 192. 197. A subscriber for stock who has paid ten per cent cannot sue a consolidated company, into which his company has been merged, for a certificate, even though the articles of consolidation pro- vide for the issue of one share of the latter company for every two shares of the old company, unless he has first de- manded the certificate and has offered to pay the remaining ninety per cent, or asks for a certificate of stock not paid up. Babcock v. Schuylkill, etc., R R, 133 N. Y., 420 (1892). 4 Appeal of Rowley, 9 Atl. Rep., 329 (Pa., 1887); Chester Glass Co. v. Dewey, 16 Mass., 94 (1819); Ferguson v. Wilsou, 100 CH. IV.] SUBSCRIPTIONS METHOD PARTIES — ENFORCEMENT. [§ 61. of the corporation in assumpsit the value of the shares at the time of the demand. 1 The fact that the corporation has not issued a certificate to a stockholder for thirty years and that he has not insisted on his right as such is no bar to his suit to establish his stockholdership. 2 In case the full capital stock has been issued, then, of course, specific performance of an agreement to issue more shares cannot be had. 3 The liability of a corporation to issue stock to the sub- scribers thereof does not necessarily devolve upon another corpora- tion which succeeds to its debts, liabilities and franchises. 4 L. R, 2 Ch., 77 (1866). Cf. Thorp v. Woodhull, 1 Sand. Ch., 411 (1844). A corporation cannot be compelled by the subscriber for stock to issue a cer- tificate therefor before it has been fully paid up, the stock being a part of the increased capital stock. Baltimore, etc., Co. v. Hambleton, 26 Atl. Rep., 279 (Md., 1893). If in organizing and issuing the stock the amount to be issued for the property is not what the contract calls for, the vendor may compel a specific perform- ance. Bailey v. Champlain, etc., Co., 46 N. W. Rep.,539 (Wis., 1890). See, also, § 24. 1 " A subscriber for shares of stock, in case the contract of subscription was regularly entered into, may, if the cor- poration refuse to issue him a certifi- cate, have his action in equity for specific performance, or he may recover of the corporation, in assumpsit, the value of the shares at the time of the demand." Birmingham Nat. Bank v. Roden, 11 S. Rep., 883 (Ala., 1892), quoting the text Wyman v. American Powder Co., 62 Mass., 168 (1851). But to entitle one to recover back money advanced to a cor- poration for shares, upon the ground of a failure to issue the certificate, the subscriber must, before suit, rescind the contract and demand the money. Swazy v. Choate, etc., Co., 48 N. H., 200 (1868). See, also, 141 U. S., 227. 2 Bedford County v. Nashville, etc., R R, 14 Lea (Tenn.), 525 (1884) ; Kobogum v. Jackson Iron Co., 43 N. W. Rep., 602 (Mich.. 1889). 3 Finley, etc., Co. v. Kurtz, 34 Mich., 89 (1876*. Where a bank contracted to give a person a certain amount of stock if he would do business with it, and he did so, the bank is liable in damages for refusal to deliver the stock. Rich n State Nat'l Bank of Lincoln, 7 Neb., 231. For the refusal of the corporation to issue original stock to a subscriber, the measure of damages is the difference between the price contracted for and the market value on the day when the issue ought to have been made. Van Allen v. Illinois, etc., R R Co., 7 Bosw., 515 (1861). For another rule as to the measure of damages, and one more in favor of the plaintiff, see Baltimore, etc., R'y Co. v. Sewall, 35 Md., 238 (1871); and see, also, ch. XXXV. In Louisiana the universal legatee may pay for, and de- mand, the certificate of stock subscribed for by his ancestor. The executor has no power to cancel the subscription, and the stock cannot be appropriated by a subsequent subscriber, who subscribed for it by consent of the executor. State v. Crescent City, etc., Co., 24 La. Ann., 318 (1872). Cf. Wallace v. Townsend' 43 Ohio, 537. If a mistake has been made by which the certificates and stock have been issued to the wrong person, a court of equity will remedy it O'Meara v. North Am. Min. Rev., 2 Nev., 112 (1866). 4 Conant v. National, etc., Co., 8 Jones & S. (N. Y. Super. Ct), 83 (1875). In England it seems that directors are not individually liable to subscribers for the breach by the corporation of its Ferguson v> agreement to issue stock, 101 § 62.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IT. § 62. Substitution of stockholders before the incorporation — Alteration of the subscription paper.— There has been some con- troversy as to the legality of one person being substituted for an- other as a subscriber before the incorporation and issue of the stock. If the facts are such that a cancellation of the subscription is legal, then doubtless the substitution is legal. 1 But where such is not the case, then it would seem that the substitution is merely a transfer of the stock, and the transferrer, in that case, should be held liable to the same extent as in other cases of transfer of stock. 2 In California it is held that no substitution of stockholders is legal; but the weight of authority clearly sustains a contrary rule. 3 If the vendor afterwards obtains the certificates and sells them again to others, he is liable to the first person to whom he sold his interest, 4 and is liable also to the latter if the corporation is never formed. 5 If the corporation is duly formed, the vendor may com- pel the vendee to pay for the subscription transferred. 6 Where articles are materially altered without the consent of all the subscribers, after their subscription and before the complete organization of the company, such articles are not binding upon the non-consenting subscribers.' Wilson, L. R, 2 Chan., 77 (1866). But see, also, Swift v. Jewsbury, L. R, 9 Q. B., 301 ; Betts v. De Vitre, L. R, 3 Chan., 429, 441 (1868); Henderson v. Lacon, L. R, 5 Eq., 249 (1867) ; Eagles- field v: Marquis of Londonderry, 25 Week. Rep., 190. iSee §§ 167-170, infra, on cancella- tion. See, also, dictum, in Ryder v. Al- ton, etc., R R. Co., 13 111., 516, 521 (1851). Cf. Selma, etc., R R Co. v. Tipton, 5 Ala., 787 (1843), to the effect that a subscriber cannot withdraw. 2 Seech. XV. « Baltimore City R'y Co. v. Sewell, 35 Md., 238 (1871); Tempist v. Kilmer, 3 C. B., 249 (1846) ; Hunt v. Gunn, 13 C. B. (N. S.), 226 (1862) ; Merrimac, etc., Co. v. Levy, 54 Penn. St., 227 (1867). Contra, Hawkins v. Mansfield Gold Mining Co., 52 Cal., 513 (1877); Mor- rison v. Gold Mountain G. M. Co., 52 Cal., 306 ; Coleman r. Spencer, 5 Blackf. (Ind.), 197 (1839). See, also, Chater v. San Francisco S. F. Co., 19 Cal., 219 (1861). A substitution of stockholders after organization by canceling some sub- scriptions and filling in others is illegal. There should be a transfer. Cartwright v. Dickinson, 12 S. W. Rep., 1030 (Tenn., 1890). An alteration of a subscription list by a subscription being changed and an- other name substituted releases other subscribers who signed before the altera- tion. Texas Printing, etc., Co. v. Smith, 14 S. W. Rep., 1074 (Tex., 1889). See, also, on this subject, § 169 and § 50. 4 Beckitt v. Bilbraugh, 8 Hare, 188 (1850). 5 Kempson v. Saunders, 4 Bing., 5 (1826). But the latter is not liable to take the shares nor to indemnify his vendor. Jackson v. Cocker, 4 Beav., 59(1841). e Mahan v. Wood, 44 Cal., 462 (1872). And may collect a note given in pay- ment. ' Burrows v. Smith, 10 N. Y., 550 (1853). See, also, 16 S. E. Rep., 877 ; 17 id., 305. An alteration of a subscription list by a subscription being changed and an- other name substituted releases other 102 CH. IV.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [§§ 63, 64. § 63. Bight to recover bade money advanced on shares upon a failure to organize the company. — Where one Las advanced money in good faith to the promoters of a company, as a deposit or assess- ment upon shares subscribed for to be subsequently issued, and the enterprise contemplated by the proposed incorporation is aban- doned, or the company for any reason fails to be incorporated, such subscriber may recover back the money so advanced. 1 Nor is he obliged to submit to the deduction of any part thereof to be ap- plied to the payment of the expenses incurred by the promoters in attempting the incorporation. 2 B. WHO IS COMPETENT TO SUBSCRIBE FOR STOCK. § 64. Corporations generally not. — Upon general common-law principles any one who is competent to enter into ordinary con- tracts may make a valid subscription .for stock in an incorporated company. A subscription for stock is a contract; and, in general, any one who can contract may subscribe. The corporation itself, however, cannot be a subscriber to its own stock. 3 It is con- clusively settled that municipal corporations may lawfully sub- subscribers who signed before the alter- ation. Texas Printing, etc., Co. v. Smith, 14 S. W. Rep., 1074 (Tex., 1889). A change in the subscription by sev- eral of the subscribers does not release the others. Gibbons v. Grinsel, 48 N. W. Rep., 255 (Wis., 1891). An increase in the capital upon incorporation does not release. Id. 1 Nockels v. Crosby, 3 Barn. & C, 814 (1825); Ward v. Lord Londesborough, 12 C. B., 252 (1854); Asphitel v. Ser- combe, 5 Exch., 147 (1850) ; Williams v. Salmond, 2 Kay & J., 463 (1856) ; Chaplin v. Clarke, 4 Exch., 403 (1849). Cf. Val- lams v. Fletcher, 1 Exch., 20 (1847); Grand Trunk, etc., R'y Co. v. Brodie, 9 Hare, 823 (1852); Kempson v. Saunders, 4 Bing, 5, where a vendee recovered from his vendor money paid for stock in a company which was never organ- ized. And see, also, Williams v. Page, 24 Beav., 654 (1857). "A bill in equity lies to recover back money paid on a bubble." Colt v. Woollaston, 2 P. Wms., 154 (1723) ; Green v. Barrett, 1 Sim., 45 (1826). See, also, "the bubble act," 6 Geo. I., ch. 18 ; also § 705, etc., infra. Where a subscriber for stock pays for the stock before the company is organ- ized, he may recover back the money if the company is not organized. Bradford v. Harris, 26 Atl. Rep., 186 (Md., 1893). Where promoters agree to sell stock in a proposed corporation upon a tender of the price by a certain day, such ten- der need not be made if the company is not organized. The proposed purchaser may recover back the consideration. Manistee, etc., Co. v. Union, etc., Bank, 32 N. E. Rep., 449 (III., 1892). 2 Nockels v. Crosby, supra. But see, contra, Williams v. Salmond, supra. 3 Thus, where a number of individuals attempted to organize a corporation with a capital stock of seventy-two thousand five hundred shares, of the par value of $100 each, and six differ- ent persons subscribe for one share each, and one person then subscribes for the corporation as follows : " Oregon Cen- tral Railroad Company, by G. L. Wood, Chairman, seventy thousand shares, seven million dollars," it was held that this subscription was void, and that the corporation could not be created by 103 §64:.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [cil. IV. subscribe for the stock of private corporations, when authorized by- statute to do so. 1 It is not equally clear that one private corpora- tion may subscribe for the stock in another such corporation. On the contrary, such subscriptions are ultra vires and void unless clearly within the ordinary objects and business of the subscribing- corporation. 2 A railroad corporation cannot subscribe for shares of stock in another railroad company ; 3 nor can a steamship com- pany be held liable upon a subscription for stock in a dry-dock company; 4 nor can a manufacturing company legally subscribe to the stock of a bank for the purpose of carrying on the banking busi- ness. 5 All such contracts are, in general, ultra vires and not en- such subscriptions. Holladay v. Elliott, 8 Oregon, 84 (1879). See, also, § 251, infra. And again it has been held that where the directors of a company, in order to make up the required amount of capital stock, subscribed as trustees for the corporation itself, they are liable for calls on the amount so subscribed. In the same case a bill by a member of the corporation on behalf of himself and all the other members except the defendants, praying that this transac- tion, although it had been sanctioned unanimously at a meeting of the com- pany, might be declared fraudulent and void, was sustained, although some of the members, on behalf of whom the bill was filed, had been present and voted at that meeting. Preston v. Grand Collier, etc.. Co., 11 Sim., 327 (1840). Allibone v. Hager, 46 Pa St., 48 (1863), where the court held it no defense to an action by a creditor of a corporation that defendants had subscribed for stock in their own names, but really as agents for the corporation itself. 1 Sharpless v. The Mayor, 21 Penn. St., 147 (1853), and the long train of decis- ions following. The matter of munici- pal subscriptions is fully considered in chapter VI. 2 Thus, for example, a banking corpo- ration cannot lawfully subscribe for stock in a railway corporation. Nassau Bank v. Jones, 95 N. Y., 115 (1884), holding that the bank could not recover the profits on such subscription which was made in the name of its agent ; nor for stock in any other corporation, the business of which is wholly other than banking. Franklin Co. v. Lewiston Bank, 68 Me., 43 (1877); Mechanics' Bank v. Meriden Agency, 24 Conn., 159 (1855); Talmage v. Pell, 7 N. Y., 328 (1852). Cf. First National Bank v. Na- tional Exchange Bank, 92 U. S., 122 (1875); and see Royal Bank of India's Case, L. R, 4 Chan., 252 (1869) ; Joint- stock, etc., Co. v. Brown, L. R, 8 Eq., 381 (1869); Berry v. Yates, 24 Barb., 189 (1857), holding that one insurance com- pany cannot subscribe to another. For a failure of proof to show that a corpo- ration was a subscriber for stock, see McMillan v. Carson, etc.. Co., 12 Phil., 404 (1878). An owner of land cannot defeat its condemnation by showing that a corporation subscribed to part of the capital of the corporation seeking to obtain the land. In re Rochester, etc., R R, 110 N. Y., 119 (1888) ; Union Hotel v. Herr, 79 N. Y., 454 (1880). See, also, §§ 315-317, infra. 3 Maunsell v. Midland Great Western R'y Co., 1 Hem. & M., 130 (1863). One railroad company has no implied power to subscribe to the capital of another, and cannot do so indirectly by having individuals subscribe and then indemni- fying the individuals. Logan v. Earl of Courtown, 13 Beav., 22 (1859); and see ch. XIX. 4 New Orleans, etc., Steamship Co. v. Dry Dock Co., 28 La. Ann., 173 (1876). 5 Sumner v. Marcy, 3 Woodb. & M., 105. 104 CH. IV.] SUBSCRirriONS — METHOD — PARTIES — ENFORCEMENT. [§§ 65, 66. forceable. 1 A construction company, however, is presumed to have power to subscribe for the stock of a railroad which it is building. 2 A railroad company has no power to donate its funds to a fair. 3 A hotel compan}' may subscribe to a military encampment enter- prise.* § 65. Commissioners, directors, partners, etc., as subscribers. — Commissioners may be subscribers to the capital stock. 5 So, also, may directors and corporate officers subscribe; and a director, in the absence of fraud or fraudulent intent, may subscribe for the whole of the unsubscribed stock in his own name and for his own benefit. 6 A partner, if the act be within the scope of the partner- ship business, may bind his firm by a subscription in the firm name. 7 But if it is not within the scope of the partnership business, the person so signing is liable personally ; and whether or not the sub- scription was within the scope of the partnership business may be a question for the jury. 8 § 66. Married women as subscribers. — At common law a married woman could not subscribe for stock, and any person subscribing in her name was himself personally liable on the subscription. 9 But now, in England, and "generally in the United States by statute, a married woman may bind her separate estate by such a subscription ; 10> and when it appears that the contract was with the wife, having been made directly and solely with her, the husband is not bound." 1 See Part IV, on ultra vires contracts ingston v. Pittsburg, etc., R R. Co., 2 in general. Grant's Cas., 219; State v. Beck, 81 Ind., 2 In re Rochester, etc., R'y Co., 45 501 (1882). Where partners are stock- Hun, 126 (1887). holders, and all stockholders join in 3 See ch. XL, infra. sureties to notes to aid the corporation, * Richelieu Hotel Co. v. International, one partner may bind the firm by sign- etc, Co., 29 N. E. Rep., 1044 (La., 1892). ing its name also as surety. Morse v. 5 Walker v. Devereaux, 4 Paige, 229 Hagenah, 32 N. W. Rep., 634 (Wis., 1887). (1833). 8 Id. 6 Sims v. Street Railroad Co., 37 Ohio 9Pugh & Sharman's Case, L. R, 1& St, 556 (1882). See, also, § 653. But Eq., 566 (1872). neither the commissioners (Brower v. 10 Witters v. Sowles, 32 Fed. Rep, 767 Passenger R'y Co., 3 Phila,, 161), nor any (1887) ; Mrs. Matthew-man's Case, L. R, original stockholder (Curry v. Scott, 54 3 Eq., 781 (1866); Luard's Case, 1 De G., Penn. St., 270 — 1867), have any priority F. & J., 533 (1860) ; Pugh & Sharman's of right over the other subscribers, or Case, supra; Butler v. Cumpstqu, L. R, the public generally, in the matter of 7 Eq., 16 (1868) ; In the Matter of the subscription for stock. Of. § 70. Reciprocity Bank, 22 N. Y., 9 (I860). 7Maltby v. Northwestern, etc., R R See §§ 250, 319. Co., 16 Md., 422 (1860); Ogdensburgh, "Angas' Case, 1 De G. & Sm., 560 etc., R R Co. v. Frost, 21 Barb., 541 (1849): Dalton v. Midland, etc., R'y Co., (1856); Union Hotel Co. u Hersee, 79 13 C. B., 474 (1853); S. C, 22 L. J.(C. P.X N.. Y., 454 (1880). Otherwise if not 177 ; Luard's Case, supra; Ness v. Angas, within the partnership business. Liv- 3 Exch., 805 (1849). 105 § 67.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IV. The recourse of the corporation or the corporate creditors is, in such a case, to her separate estate only. 1 In England a husband has been held liable on his wife's subscrip- tion to the capital stock of an incorporated company, the subscrip- tion having- been made before marriage. 2 § 67. Infant as subscriber. — A subscription for stock by an infant is a contract to be governed by the general rules of law that apply to the contracts of infants generally. In general, the subscriptions of infants are voidable rather than void. He may repudiate it at majority, and thereby entirely escape liability ; or he may ratify it, and thereby become as fully bound as though the subscription had been made after majority. 3 Accordingly it is a settled rule that, where one subscribes for shares in the name of an infant, he is lia- 1 Biggart v. City of Glasgow Bank, 6 Rettie (Scotch Ct of Sessions Cases), 470 (1879): Mrs. Matthewman's Case, L. R, 3 Eq., 781 (1866). 2 Burlington's Case, 3 De G. & Sm„ 18 (1849), where the husband was held liable, although he bad not fulfilled the conditions of the deed of settlement entitling him to become a member, but had only received dividends on the wife's shares. Luard's Case, 1 De G, F. & J., 533 (1860), holding that where a woman, being a registered owner of stocks be- fore marriage, attempted to deed them in trust so as to exclude the husband, but the trustees did not accept, and they continued in her name until the liquidation of the company, the husband should be placed with the wife on the list of contributories. White's Case, 3 De G. & Sm., 157 (1850), was decided on special facts under the terms of a deed of settlement which regulated the rights of the hus- band and wife as to shares in her name. In this case a restricted liability for a limited time was imposed upon the hus- band, he having done some acts in rela- tion to the shares, but not sufficient to constitute an entire acceptance. Sadler's Case, 3 De G. & Sm., 36 (1849), holding the husband liable when the shares came to the wife by legacy be- fore marriage, although neither she nor the husband paid the covenanted calls, received any dividends, or otherwise acted as members. Kluht's JCase, id, 210 (1850), where the husband was held liable for losses during, but not for losses before and after, the coverture. He had not com- plied with necessary preliminaries for becoming a member, although he had done some acts in relation to the shares of the wife. And also upon a legacy of stock to her during coverture, where it appeared that the stock had been transferred to her, and the transfer duly accepted by her and her husband, and that she only had signed the dividend warrants and drawn the dividends, the proceeds being applied to ordinary household expenses. Thomas v. City of Glasgow Bank, 6 Rettie (Scotch Ct of Sessions Cases), 607 (1879). 3 Lumsden's Case, L. R., 4 Chan., 31 (1868), where an infant transferred shares after coming of age, and did not attempt to repudiate his remaining shares until four months after the wind- ing-up order, being nine months after his majority. He was held to have af- firmed his holding. Ebbett's Case, L. R, 5 Chan., 302 (1870), where a holding for fourteen months after majority without repudi- ating the shares was held to be an ac- quiescence, though the shareholder had never acted as such. Baker's Case, L. R., 7 Chan., 115 106 CH. IV.] SUBSCRIPTIONS — METHOD PARTIES ENFORCEMENT. [§ 68. ble personally to the corporation or the corporate creditors on the subscription. 1 An infant's subscription must be repudiated within a reasonable time after coming of age or he will be held to have ratified it. 2 §68. Subscription by agent. — A valid subscription may, of course, be made through an agent. 3 The subscriptions of the orig- (1871), where a company was in process of being wound up, when an infant, holding shares as trustee, attained his majority, and he promptly repudiated the shares when the notice of a call was sent him four months afterwards. Subsequently he, by letter, authorized the official liquidator to use his name in proceedings against the cestui que trust. Held, that by the letter he had not re- tracted his repudiation of the shares. Mitchell's Case, L. R, 9 Eq., 863 (1870). An infant holding shares as trustee, who took no steps to repudiate them for two years after coming of age, was held to be a contributory. Wilson's Case, L. R, 8 Eq., 240 (1869). An infant holding shares in a trust, who came of age after the winding-up order was made, was held not to be a con- tributory, though he had made no for- mal repudiation, but had not done any act of acquiescence, except that his so- licitors, acting for him and others, had opposed an order for a call. Hart's Case, L. R, 6 Eq., 512 (1868). "Where notice of intention to put the name of a female infant upon the list of contributories of a corporation in process of being wound up was served during infancy, and more than two years after her majority a summons for a call was made, when she applied to have her name removed from the list, it was held she was not precluded by the delay. Pirn's Case, 3 De G. & Sm.. 11 (1849), where a son who, after the death of his father, discovered that shares had been taken in his own name, was held not to be a contributory, although, at the re- quest of an officer of the company, he had surrendered the shares for ex- change for others. See §§ 250, 318. 1 Weston's Case, L. R, 5 Chan., 614 (1870) ; Richardson's Case, L. R, 19 Eq., 588 (1875) ; Reaveley's Case, 1 De G. & Sm., 550 (1848); Ex parte Reavely, 1 Hall & Tw., 118 (1849); Capper's Case, L. R, 3 Chan., 458 (1868); Castelo's Case, L. R, 8 Eq., 504 (1869); Symon's Case, L. R, 5 Chan., 298 (1870); Reid's Case, 24 Beav., 318 (1857); Curtis' Case, L. R, 6 Eq, 455 (1868). 2 Dublin, etc., R'y Co. v. Black, 7 Railway & Canal Cas., 434 (1852); S. C, 8 Exch., 181. Infancy is a personal de- fense. Beaidsley v. Hotchkiss, 96 N. Y., 201 (1884). Where an infant allows his name to-remain on the register after he becomes of age, he thereby ratifies his subscription. Cork, etc., R'y Co. v. Cazenove, 10 Q. B., 935 (1847). A court will not presume that an infant sub- scriber has avoided his contract; and hence a defense of infancy, in an action on a subscription, without an allegation of avoidance, is ineffectual, and the plaintiff may have judgment. Leeds, etc., R'y Co. v. Fearnley, 4 Exch., 26 (1849). But it has been held that repu- diation before coming of age avoids the contract of subscription ab initio; and hence a plea of infancy and of repudia- tion while an infant, and of notice to the company that the stock was at their disposal, is a good defense to an action on a subscription. Newry, etc., R'y Co. V. Coombe, 3 Exch., 565 (1849); S. C, 18 L, J. (Exch.), 325; Parson's Case, L. R. 8 Eq., 656. s Musgrave v. Morrison, 54 Mo., 161 (1880); Burr v. Wilcox, 22 N. Y., 551 107 68.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IV. inal incorporators may be made by an agent. 1 No person can be made a subscriber to the capital stock of a corporation, and be sub- jected to the liabilities of a subscriber, by a subscription in his name, made by another without authority, but assuming to act as (I860); Rhey v. Evensburg, eta, 27 Pa. St., 261 ; In re N. Y., etc., Co., 35 Hun, 220 (1885). Where bonds are purchased by one for several, they are liable to contribute therefor. Musgraver. Buck- ley, 114 N. Y., 506 (1889). If both the principal and agent are incorporators, and the agent subscribes in his own name, the principal cannot claim the stock, inasmuch as he has sworn in the articles of incorporation that all the incorpoi'ators werebonajide subscribers. Appeal of Rowley, 9 Atl. Rep., 329 (Pa., 1887). In re Whitely Partners, L. R., 32 Ch. D., 337. A subscription by one of sev- eral heirs in the name of the " estate " is not binding on any of the heirs where a statute requires such subscription to be several. Troy, etc., R. R Co. v. War- ren, 18 Barb., 310 (1854). Davidson v. Grange, 4 Grant's Ch. (U. Can.), 377 (1854). In this case a sub- scription by an agent in his own name was held to constitute him a trustee for his principals. Stater. Lehre, 7 Rich. Law, 234(1854), holding that a statute forbidding any person from subscribing for shares in the name of another person did not ex- clude a subscription by an agent for his principal. Cox's Case, 4 De G., J. & S., 53 (1863), was decided under the Companies Act, but the court was inclined to think the result would have been the same inde- pendent of that statute. It was there held that where a subscriber, in addi- tion to his own shares, had caused a large number to be registered in the names of mere nominees for him, in order to delude the public as to the number of members, he was rightly placed on the list of contributories for all the shares when the company was wound up. This case was distinguished in King's Case, L. R, 6 Ch. App., 196 (1871). On this question of " dummies," see ch. XIV. See, also, brief in 15 Ohio St, 332. If such subscriptions are prohibited by the corporate charter, the principal cannot recover back money which he has given to the agent to subscribe. Perkins v. Savage, 15 Wend., 412 (1836). Mere authority to an agent to sub- scribe is not a subscription in itself. Granger, etc., Co. v. Vinson, 6 Oregon, 172 (1876). Also, New Brunswick, etc., Co. v. Muggeridge, 4 Hurl. & N., 160 (1859). In New York it is a penal offense for a person to subscribe for another who does not intend to pay, or to subscribe in the name of a fictitious person. N. Y. Penal Code, § 590. Where one subscribes for stock in his own name, in pursuance of a verbal agreement between himself and an- other that the stock should belong to them jointly, and that he should hold it on joint account, and, the company subsequently becoming insolvent, the stockholders are called on to contribute an amount equal to their stock, it was held, in New York, that the nominal owner of the stock might have contri- bution from the joint owner. Stover v. Flack, 30 N. Y., 64 (1864) ; Orr v. Bige- elow, 14 N. Y, 556 (1856). The parties had covenanted that plaintiffs should subscribe for stock, pay ten per cent thereon, and then assign it to defend- ant who engaged to indemnify them from further liability. Defendant re- fused to take the shares, and the cor- poration recovered judgment against » In re N. Y, etc., R'y Co., 99 N. Y, 12 (1885). 108 CH. IV.] SUBSCRIPTIONS METHOD — ■ PARTIES ENFORCEMENT. | § 68. his agent. Such a subscription is not binding on the principal. 1 But such an unauthorized subscription may be adopted and ratified by the person in whose name it was made without warrant of au- thority, in such a way as to make it valid and binding. 2 A person plaintiffs for the balance of the subscrip- in general, a question for the jury. Philadelphia, etc., R R Co. v. Cowell, 28 Penn. St., 329 (1857). Cf. Fox v. Clifton, 6 Bing., 776 (1830). It is held that silence or failure to object to the subscription for a considerable time after knowledge of it is brought to the subscriber is evidence of a ratification. McHose v. Wheeler, 45 Pa. St., 32 (1863); Thompson v. Reno Savings Bank. 10 Am. & Eng. Corp. Cas., 203 (1885); San- ger v. Upton, 91 U. S., 56 (1875). Contra, Hume v. Commercial Bank, 9 Lea, 728 (1882). And giving a proxy to vote the stock may be sufficient to ratify such a subscription. McCully v. Pittsburgh, etc., R. R. Co., 32 Pa. St., 25 (1858). Contra, McClelland v. Whiteley, 11 Biss., 444 (1883). But a mere declaration to strangers, by the person in whose name the subscription had been made, that he had taken that amount of stock, is not a ratification of the subscription. Rut- land, etc., R R. Co. v. Lincoln, 29 Vt, 206 (1857). And even the fact that one whose name had been in this way put down as a subscriber was a director in the corporation was held not. in se, to imply knowledge that his name was on the books as a subscriber. In re Win- cham, etc., Co., L. R, 9 Chan. Div., 329 (1878). Cf. Fox v. Clifton, 6 Bing., 776 (1830). But as a rule it is believed that accepting the office of a director would. in this country, be held a sufficient rati- fication of such a subscription, in the absence of any other. This is expressly declared to be the rule in Tennessee and elsewhere. Moses v. Ocoee Bank, 1 Lea, 398 (1878); Danbury, etc., R R. Co. v. Wilson, 22 Conn., 435 (1853). Cf. Fry v. Lexington, etc., R. R. Co., 2 Mete. (Ky. >, 314 (1859). Contra, Hume v. Commer- cial Bank, 9 Lea, 728 (1882). But where an agent takes stock as agent, on condition that it is to be sub- tion. In this action plaintiffs had judg- ment against defendant upon the cove- nant, the measure of damages being held to be the balance paid by them, and not that sum less the market value of the stock. A state subscribing through its officers is bound by their acts as direct- ors. State v. Jefferson T. Co.. 3 Humph. (Tenn.), 305 (1842;. Colt v. Clapp, 127 Mass., 476 (1879), where one who had verbally agreed to purchase stock for the joint benefit of himself and others refused to divide the stock, he was held accountable to the others for their re- spective shares of dividends paid thereon in actions for money had and received. 1 Ticonic, etc., Co. v. Lang, 63 Me., 480 <1874); Pirn's Case, 3 De G. & Sm., 11 <1849) ; Henessey's Case, 3 id., 191 (1850) ; Ex parte Hall, 1 Macn. & G., 307 (1849). Drover v. Evans, 59 Ind., 454, holding that where an agent to make a sub- scription exceeds his authority the prin- cipal is not bound by it. Cf. Chapman & Barker's Case, L. R., 3 Eq., 361 (1867). And this is equally the rule when it is sought to charge one by such a subscription, not in his indi- vidual capacity, but only in the capacity of trustee for another. Ex parte Hall, supra. 2 Musgrave v. Morrison, 54 Md., 161 (1880) ; Mississippi, etc., R R Co. v. Har- ris, 36 Miss., 17 (1858), where the defend- ant promised to pay ; Jones v. Milton, etc., Co., 7 Ind., 547 (1856), where the principal subscribed over again ; Phila- delphia, etc., R R Co. v. Cowell, 28 Penn. St., 329 (1857), where the defendant ac- quiesced for seven years ; Putnam v. City of Albany, 4 Biss., 365 (1869), where the city ratified. What acts or omissions, short of ex- press ratification, will in law suffice to bind one upon such a subscription, is, 109 §§ ('.<», 70.] SUBSCRIPTIONS— METHOD PARTIES— ENFORCEMENT. [CH. IV. subscribing for shares as agent for another, and in that other's name, but without authority, thereby becomes himself a subscriber in place of the person whose name he signs, or his unauthorized subscription may subject him to an action of damages. 1 - § 69. Subscriptions taken by an unauthorized agent of the cor- poration.— A subscription taken by a person who has no authority from the corporation to take subscriptions is not in general enforce- able. 2 But it has been held that such a subscription may, by accept- ance and ratification on the part of the corporation, be validated, and the subscriber made liable as though the subscription had been regularly taken. 3 §70. Unissued or increased capital stock — Eight to subscribe therefor. — Where the whole capital stock or a part of the author- ized capital stock is offered for subscription and a part only of the amount so offered is subscribed for, the remainder may be taken by any person, even though that person is a director in the company. 4 But where the part offered for subscription is not taken, or where a part of the authorized capital is offered and is all taken, and subsequently it is resolved to issue more of the authorized cap- ital, or where the capital stock is increased under the statutes and the increase is about to be issued, then a different rule prevails. Every existing stockholder then has the right to subscribe at par for such a proportion of the stock to be issued as his old holdings bear to the amount of stock then outstanding. 5 Any other rule would enable the parties in control to seize the new stock, in some cases for gain because the stock is worth more than par, and in other cases so as to acquire increased votes at a coming election. In either case this would work a fraud on the other stockholders. 6 mitted to the principal, and, "if ap- Bank, 10 Am. & Eng. Corp. Cas., 203 proved, to be taken out in the purchase (Nev., 1885) ; § 249, infra. of thread." the principal is not bound 2 Essex, etc., Co. v. Collins, 8 Mass., where he declines to accept, even though 292 (1811); Shurtz v. Schoolcraft, etc., he did not notify the corporation of his R R Co., 9 Mich., 269 (1861) ; Carlile v. refusal. Merrick, etc., Co. v. Philadel- Saginaw, etc., R R Co., 27 id., 315 (1873). phia, etc., Co., 8 Atl. Rep., 794 (Pa., 18S7). Contra, Northeastern R R Co. v. Rod- 1 Salem, etc., Corp. v. Ropes, 9 Pick, riques, 10 Rich. Law, 278 (1857). 187 (1829). In some jurisdictions it is 3 Walker v. Mobile, etc., R R Co., held that by such a subscription the sub- 34 Miss., 245 (1857); Mobile, etc., R R. scriber makes himself personally liable Co. v. Yandal, 5 Sneed, 294 (1858) ; as a subscriber. Union Hotel Co. v. Judah v. American, etc., Co., 4 Ind., Hersee, 79 N. Y., 454 (1880); State v. 333. Smith, 48 Vt, 266 (1876). See, also, Troy, * Sims v. Street R R, 37 Ohio St., 556 etc., R R Co. v. Warren, 18 Barb., 310 (1882). Also, § 65, supra. (1854); Pugh & Sharman's Case, L. R, »See ch. XVII, § 286. 13 Eq., 566 (1872) ; McHose v. Wheeler, 6 Where a director issues to himself. 45 Pa. St., 32 ; Thompson v. Reno, etc., at par, stock belonging to the corpora- 110 CH. IV.] SUBSCRIPTIONS METHOD PARTIES — ENFORCEMENT. [§71. C. AN ACTION LIES TO COLLECT SUBSCRIPTIONS. § 71. A snhscription for shares implies a promise to pay for them, and this promise sustains an action to collect, without proof of any particular consideration. — This rule of law is sustained by the great weight of authority. The signing of the subscription paper is an implied promise to pay the subscription. 1 There have been various opinions of the courts as to the consid- eration supporting this implied promise which sustains an action to collect the subscription. It has been held that the right to mem- bership in the proposed corporation, and the probable advantages to be derived from membership in the company, constitute the con- sideration. 2 tion and which is worth more than par, the transaction is voidable, but if all the stockholders acquiesce therein for a long time, the acquiescence of the ex- ecutors of a deceased stockholder binds the estate. St Croix L. Co. v. Mittle- stadt, 44 N. W. Rep., 1079 (Minn.. 1890). Where, long after the company has commenced to do business, it has dis- posed of its property and is ready to de- clare a five hundred per cent dividend, the directors issue to themselves at par that part of the original capital stock which never had been issued, it is a fraud on the remaining stockholders. Arkan^ sas, etc., Soc. v. Eichholtz, 25 Pac. Rep., 613 (Kan., 1891). See, also, 14 N. J. Eq., 380. 1 Upton v. Tribilcock, 91 U. S., 45 (1875); Hawley v. Upton, 102 U. S., 314 (1880); Webster v. Upton, 91 id., 65 (1875); Buffalo, etc., R R. Co. v. Dudley, 14 N. Y., 336 (1856) ; Small v. Herkimer, etc., Co., 2 N. Y., 330 (1849); Lake On- tario, etc., R R Co. v. Mason, 16 id., 451 (1857); Dayton v. Borst, 31 id, 435 (1865); Northern R. R Co. v. Miller, 10 Barb., 260, 268 (1851); Waukon, etc., R. R Co. v. Dwyer, 49 Iowa, 121 (1878); Nulton v. Clayton, 54 id., 425 (1880): Miller v. Wild Cat, etc., Co., 52 Ind., 51 (1875); Mitchell v. Beckman, 64 Cal., 117 (1883); Merrimac, etc., Co. v. Levy, 54 Penn. St, 227 (1867); Beene v. Ca- hawba, etc, R R Co., 3 Ala.. 660 (1842); Fry v. Lexington, etc., R R Co., 2 Mete. Ky.), 314 (1859); Gill v. Kentucky, etc.. 1 Co., 7 Bush, 635 (1870); Mt Sterling, etc., Co. v. Little, 14 id., 429 (1879); Chase v. East Tenn. R. R. Co., 5 Lea (Tenn.), 415 (1880). Even though the corporation has the power to forfeit the shares for non-payment. Hughes v. Antietam, etc., Co., 34 Md, 316 (1870); Dexter, etc., Co. v. Millerd, 3 Mich., 91 (1854). 2 Lake Ontario, etc., R R. Co. v. Mason, 16 N. Y., 451 (1857); Fort Edward, etc., Co. v. Payne, 17 Barb., 567(1854); Ham- ilton, etc., Co. v. Rice, 7 id, 157 (1849); Schenectady, etc., R R. Co. v. Thatcher, 11 N. Y, 102, 10S (1854); Barnes v. Perine. 12 id., 18 (1854); Osborn v. Crosby, 63 N. H., 583 (1885) ; Bullock v. Falmouth, etc., Co., 3 S. W. Rep., 129 (Ky., 1887). See, also, Stewart v. Trust- ees of Hamilton College, 2 Denio, 43 (1845); Hamilton College v. Stewart, 1 N. Y, 581 (1848); Dutcher's Manuf'g Co. v. Davis, 14 Johns., 238; Whittlesey?-. Frantz, 74 N. Y, 456. li It is well set- tled," said Hand, J., in the case of Fort Edward, etc., Co. v. Payne, 17 Barb., 567 (1854), "that a subscription to the capital stock of any company, from the membership of which a shareholder may derive pecuniary advantage, gives to the subscriber such an interest, or will support a promise to pay for the shares. Such an enterprise is a com- bination of means for mutual profit. and is in no sense a gift or promise with- out consideration." And elsewhere it i-- 11 § 72.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [CH. IV. It has been held, also, that the stock to be received and the prob- able dividends thereon constitute the consideration. 1 Again, the consideration has been said to be the mutual obliga- tion of all the subscribers to take and pay for their stock. 2 And, ao-ain, it has been held that a consideration is conclusively implied from the fact of subscription itself; that it is implied by law; and that the law thereby creates a duty and liability to pay for the stock. 3 The particular motive of a subscriber inducing him to subscribe is immaterial. The consideration which exists in law cannot be allowed to be governed bv the ideas of the subscriber. 4 The as- signee of a subscription may enforce it. 5 §72. This rule prevails in regard to subscriptions taken before incorporation as well as to those taken after incorporation. — Such, undoubtedly, is the rule sustained by the great weight of authority. 6 said that " the advantage to be derived from being a member of such a com- pany, and of the consequent right to participate in the pecuniary dividends, is a positive benefit ; and where the agreement secures that advantage to the subscriber, on the organization of the company, the objection of a want of consideration cannot be made with success." Hamilton, etc., Co. v. Rice, 7 Barb,, 157 (1849), adopted by Brown, J., in Lake Ontario, etc., R R Co. v. Mason, 16 N. Y., 451, 463 (1857). 1 Schenectady, etc., R R. Co. v. Thatcher, 11 N. Y., 102, 107 (1854) ; Bish v. Bradford 17 Ind., 490 (1861); New Albany, etc., R. R Co. v. Fields, 10 id., 187 (1858); Fry v. Lexington, etc., R R ■Co., 2 Mete. (Ky.), 314 (1859). That the interest acquired by subscribing for shares of the capital stock is a good con- sideration for the promise to pay for them. Union, etc., Co. v. Jenkins, 1 Caines, 381 (1803) ; Selma, etc., R R Co. v. Tipton, 5 Ala., 7S7 (1843) — a full and learned opinion. Cf. Goshen, etc., Co. v. Hurtin, 9 Johns., 217 (1812) ; Daubury, etc., R R Co. v. Wilson, 22 Conn., 435 (1853) ; East Tennessee, etc., R R Co. v. Gammon, 5 Sneed, 567. And again, that the prior proceedings and acts of the parties are a legal basis for the promise to pay; also, that the partial 1 execution of the purpose designed by the charter is a sufficient consideration. Kennebec, eta, R R Co. i\ Palmer, 34 Me., 366 (1852); McAuley v. Billenger, 20 Johns., 89(1822); Amherst Academy v. Cowls, 23 Mass., 427 (1828) ; Ohio, etc., College v. Higgins, 16 Ohio St, 20 (1864). ( 7'. McCully v. Pittsburgh, etc., R R Co., 32 Penn. St., 25 (1858). In Minnesota the implied promise to issue the stock is declared to be the consideration for the promise to pay for it. St Paul, etc., R R Co. v. Robbins, 23 Minn., 439 (1877). And in Kentucky it is held that the promise by each of the subscribers is a sufficient consideration for the promises of the others. Twin Creek, etc., Co. v. Lancaster, 79 Ky., 552. 2 Spear v. Crawford, 14 Wend., 20 (1835); Cole v. Ryan, 52 Barb., 168 (1868) ; Upton v. Tribilcock, 91 U. S., 45 (1875) ; Northern, etc., R R Co. v. Mil- ler, 10 Barb., 260 (1851). 3 East Tenn., etc., R. R Co. v. Gam- mon, 5 Sneed (Tenn.), 567. *DL River R R Co. v. Zimmer, 20 111., 654 (1858) ; Miller v. Wild Cat, etc., Co., 52 Ind., 51. 64 (1875) ; Andover, etc., Co. v. Gould, 6 Mass., 39, 44 (1809); Parker v. Northern, etc., R R Co., 33 Mich., 23 (1875). »See§ 111. 6 Richelieu Hotel Co. u Interna- 12 CH. IV.] SUBSCRIPTIONS METHOD PARTIES ENFORCEMENT. [§ 72. It has been held, also, that the corporation may bring- an action at law for damages against a subscriber to a preliminary subscription tional, etc., Co., 29 N. E. Rep., 1044 (111., v. Davis, 14 id., 238 (1817) ; Spear v. 1892); West v. Crawford, 21 Pac. Rep., Crawford, 14 Wend., 20 (1835); Har- 1123 (Cal., 1889); Marysville, etc., Co. v. leva, etc., Co. v. Seixas, 2 Hall (N. Y. Johnson, 29 Pac. Rep., 126 (Cal., 1892); Super. Ct), 504 (1829;: Nulton v. Clay- San Joaquin, etc., Co. v. Beecher, 29 Pac. ton, 54 Iowa. 425 (1880); Worcester, Rep., 785 (Cal., 1892) ; McCormick v. etc., Co. v. Willard, 5 Mass., 80 (1809) ; Great Bend, etc., Co., 29 Pac. Rep.. 1147 Stanton v. Wilson, 2 Hill, 153 (1841): (Kan., 1892) ; Minneapolis, etc., Co. v. Sagory v. Dubois, 3 Sandf. Chan., 486 Crevier, 40 N. W. Rep.. 507 (Minn., 1888) ; (1846) ; Palmer r. Lawrence, 3 Sandf. Reformed, etc., Church v. Brown, 17 Super. Ct, 161 (1849); Twin Creek, etc., How. Pr., 287 (1859) ; Penobscot, etc., R Co. v. Lancaster, 79 Ky., 552 (1881); R Co. v. Dummer, 40 Me., 172 (1855); Minn., etc., Co. v. Davis, 41 N. W. Rep, Athol, etc., Co. v. Carey, 116 Mass., 471 1026 (Minn., 1889). Cf. Thompson v. (1875); Ashuelot, etc., Co. u Hoit, 56 N. Page, 1 Mete. (Mass.), 565 (1840); Ives v. H., 548 (1876); Cross v. Pinckneyville, Sterling, 6 id., 310 (1843); Robinson v. etc., Co., 17 111., 54 (1855); Griswold v. Edinboro' Academy, 3 Grant's Cas., 107 Trustees, etc., 26 id., 41 (1861) ; Stone v. Great Western, etc., Co., 41 id., 85 (1866); Proprietors, etc., v. Dickinson, 6 Gray, 586 (1856); Heaston v. Cincinnati, etc., R R. Co., 16 Ind., 275 (1861); Mil- ler v. Wild Cat, etc., Co., 52 Ind., 51 (1875); Eastern, etc., Co. v. Vaughan. 14 N. Y., 546 (1856) ; Buffalo, etc., R R. Co. v. Gifford, 87 id., 294 (1882) ; Same v. (1861) ; Edinboro' Academy v. Robinson, 37 Penn. St., 210 (1860); Hutchins v. Smith, 46 Barb., 235 (1865); Valk v. Crandall, 1 Sandf. Chan., 179 ; People's, etc., Co. v. Balch, 8 Gray, 303 (1857); Chater v. San Francisco, etc., Co., 19 Cal., 219 (1861); Highland, etc, Co. v. McKean, 11 Johns., 98 (1814) ; Tar River, etc., Co. v. Neal, 3 Hawks (N. C), 520 Clark, 22 Hun, 359 (1880); Peninsular, (1825); Klein v. Alton, etc., R. R Co., 13 etc., R. R Co. v. Duncan, 28 Mich., 130 111., 514 (1851); Banet v. Same, 13 id., (1873); Buffalo, etc.. R. R. Co. v. Dud- 501 (1851); Sanger v. Upton. 91 U. S., 56 ley, 14 N. Y, 336 (1856): Dayton v. (1875); Kidwilly, etc., Co. v. Roby, 2' Borst, 31 id., 435(1865); Rensselaer, Price (Eng.), 93 (1815) ; Weiss v. Mauch etc., Co. v. Barton, 16 id., 457 (1854): Chunk, etc., Co.. 58 Pa, St.. 295 (1868).. Lake Ontario, etc.. R. R. Co. v. Mason. The bringing of a suit by the corpora- 16 id., 451 (1857); Essex, etc., Co. v. Tuttle, 2 Vt, 393 (1830); Kirksey v. tion to collect a subscription constitutes an acceptance of the subscription by Florida, etc., R R. Co., 7 Fla., 23 (1857); the corporation. Buffalo, etc., R R. Co. Beene v. Cahawba, etc., R R Co.. 3 y. Clark, 22 Hun, 359 (1880). A sub- Ala., 660 (1842); Selma, etc., R R Co. scription to a corporation to be organ- ic. Tipton, 5 id., 787 (1843); Hartford, ized is enforceable by the corporation, etc., R R Co. v. Kennedy, 12 Conn., Auburn, etc., Ass'n v. Hill, 32 Pac, Rep, 499 (1838); Thigpen v. Mississippi, etc., 587 (Cal., 1893). The corporation may R R Co., 32 Miss., 347(1856); Gill v. collect a subscription to its stock ob- Kentucky, etc., Co., 7 Bush (Ky.), 635 tained prior to the incorporation, the (1870); Instone v. Frankfort, etc., Co., subscriber having attended meetings 2 Bibb (Ky.), 576 (1812); Cucullu r. and acquiesced in expenditures. Inter- Union Ins. Co., 2 Rob. (La.), 573 (1842); national, etc., Assoc, tt Walker, 47 N. W. Union, etc., Co. v. Jenkins, 1 Caines, Rep, 338 (Mich., 1890). It has been held 381 (1803) ; Goshen, etc., Co. v. Hurtin, that a corporation can defeat a sub- 1) Johns., 217(1812); Dutchess, etc.. Co. scriber's action for stock by proving (8) 113 § 73.] SUBSCRIPTIONS METHOD — PARTIES ENFORCEMENT. [CH. IV. list who refuses to take and pay for the stock; 1 and that the measure of damages for such a breach of contract to subscribe for stock is the difference between the par and market value of the stock involved. 2 § 73. In Neiv York a contrary rule prevails. — It has been held by the New York court of appeals that where the preliminary subscription did not purport to run to the company, but was merely an agreement among the signers to subscribe to its stock, the com- pany could not enforce the agreement as a subscription. 3 In that state there is no implied contract to pay for stock, not even though it is given to stockholders as a bonus. 4 The liability on stock de- tliat it never accepted his subscription. Starrett v. Rockland, etc., R R v Co., 65 Me., 374 (1876). But no formal accept- ance by the corporation is necessary in order to enforce a subscription. Stras- burg R R. Co. v. Eichternacht, 21 Pa. St, 220 (1853) ; Miller v. Wild Cat, etc., Co., 52 Ind., 51 (1875); Thrasher v. Pike County, 25 III, 393; Mt. Sterling, etc., Co. v. Little, 14 Bush, 429(1879); Cali- fornia, etc., Co. v. Schafer, 57 CaL 396 (1881); Poughkeepsie, etc.. Co. v. Griffin, 24 N. Y., 150 (1860); Troy, etc., R R Co. v. Tibbits, 18 Barb., 297 ; Charlotte, etc., R R Co. v. Blakely, 3 Strobh. L, 245 (1848); Pittsburgh, etc., R R Co. v. Gazzam, 32 Pa. St., 340 (1858) ; Walling- ford, etc., Co. v. Fox, 12 Vt, 304 (1840) ; Stoweu Flagg, 72 111., 397(1874); Goff v. Winchester College, 6 Bush, 443 (1869); Perkins v. Union, etc., Co., 12 Allen, 273 (1866); Dayton, etc., Co. v. Coy, 13 Ohio St., 84 (1861). See, also, va- rious cases in the first part of this chap- ter, and Brownlee v. Ohio, etc., R R., 18 Ind., 68 (1862); Kilner v. Baxter, L. R, 2 C. P., 174 (1866). A subscription be- fore incorporation is enforceable, where defendant paid for one or more shares after incorporation. Bell's Appeal, 8 Atl. Rep., 177 (Penn., 1887). Where a subscriber before incorporation is offered the stock by the corporation on certain conditions which he refuses, he is not liable as a stockholder. Medler v. Albuquerque, etc., Co., 28 Pac. Rep., 551 (N. M., 1892). A subscription with an express promise to pay to an agent speci- fied upon the incorporation of the com- pany is collectible by him. West v. Crawford, 21 Pac. Rep., 1123 (Colo., 1889). i Quick v. Lemon, 105 111., 578 (1883) : Thrasher v. Pike Co., etc., R. R. Co., 25 id., 393 (1861) ; Rhey v. Ebensburg, etc., R R Co., 27 Pa. St, 261 (1856); Mt Sterling, etc., R R Co. v. Little, 14 Bush, 429 (1879). 2 Thrasher v. Pike Co., etc., R R Co., 25 111., 393 (1861). It seems, also, that such an action of damages might be brought by one of the signers of the pre- liminary agreement against any other signer who refused to take and pay for stock after the incorporation of the company, and that the measure of dam- ages in this case would be, not the amount subscribed, but the damage sustained by the person suing. Lake Ontario, etc., R. R Co. v. Curtiss, 80 N. Y., 219 (18S0). In Pennsylvania a statute which authorized a corporation to trans- fer a subscription from one enterprise to another has been held unconstitutional. Pittsburgh, etc., R R Co. v. Gazzam, 32 Pa. St, 340 (1858). It is elsewhere said that a subscription preliminary to organization is no contract but merely a means of bringing the parties to- gether. Poughkeepsie, etc., R R Co. v. Griffin. 24 N. Y, 150 (1860). 3 Lake Ontario, etc., R. R Co. v. Cur- tiss, 80 N. Y, 219 (1880). See, also, § 705, etc., infra, on promoters' contracts gen- erally. 4 See § 42, supra. 114 CH. IV.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [§ 74. pends upon express contract only. 1 Hence where the corporation is not in existence when the contract is made between the parties, it, not being a party to the contract, cannot enforce the subscription. 2 § 74. In Netv England a subscription for stock cannot be en- forced unless the subscriber expressly promised to pay, or the charter expressly obligated him to do so. — Such is the rule in New England. It grew out of the peculiar charters of the early turnpike companies, which had shares of stock not limited in amount, but indefinite, so that, as a result, if a subscriber were liable at all, he was liable for the whole capital stock, except so far as it had already been paid in by himself and others. Consequently, inasmuch as these charters gave to the corporation the right to forfeit stock for non- payment of subscriptions, the courts held that an action to collect did not lie, and that the remedy by forfeiture was the only remedy of the corporation. 3 This rule has become firmly established in the 1 Liability on the subscription price of stock in New York depends on contract only. Glenn v. Garth, 133 N. Y., 18 (1892). 2 This difficulty was experienced in so- liciting subscriptions for a proposed World's Fair corporation in October, 1889. The form of contract finally used was, in substance, as follows : " The undersigned, in consideration of the advantages which will result to us respectively from concert of action, and from other good causes and considera- tions, and the efforts to be made by Samuel Babcock [giving names], to pro- cure the subscriptions hereinafter pro- vided for, and the organization of a corporation to control and manage such exposition, do agree each for himself to pay to the said Samuel D. Babcock and his associates hereinabove named, or at their request, to said corporation, the respective amounts set opposite our names upon the following terms and conditions, to wit: " Such subscription shall not be bind- ing until such corporation shall be or- ganized. "No subscription shall be binding until the said Samuel D. Babcock and his associates above named shall have succeeded in obtaining subscriptions hereto in the amount of at least $5,000,000. " Such subscription shall be a prelimi- nary or guarantee fund to be paid in in instalments of not more than one- quarter of their respective amounts at any one time upon calls for the same, made at intervals of not less than three months by the said Samuel D. Babcock and his associates, or, if they shall so de- termine, by the said corporation. " Samuel D. Babcock and his associates hereinabove named having been thus contracted with by the subscribers be- cause of their having been selected as a finance committee aforesaid in and of said exposition, it is hereby further agreed that all stipulations in the agree- ment made dependent upon the ar tion of said Babcock and his associates, shall be considered as fully met by the action of the majority of them: and in case of vacancy by death, resignation, or otherwise, such vacancy shall be filled by these subscribers." See 74 N. Y., 72 ; 44 id., 126. 3 Worcester, etc., Turnpike Co. v. Willard, 5 Mass., 80 (1809); Andover, etc., Turnpike Co. v. Gould, 6 Mass., 40 (1809) ; New Bedford, etc., Turnpike Co. v. Adams, 8 id., 138 (1811); Essex, etc., Co. v. Collins, 8 id., 292 (1811) ; Frank- lin, etc., Co. v. White, 14 id., 286 (1817). 115 § 75.] SUBSCRIPTIONS — METHOD — PARTIES ENFORCEMENT. [CH. IV. New England states, and still prevails in its application to all classes of corporations. 1 §75. Professor Collin's rules on this subject. — Professor Collin, of the Cornell Law School, states the law on this subject as follows : " The following propositions are given as the substantially har- monious net result of much confusion in cases and text-books. Ram- bling remarks may be found contrary to each proposition, but very few reported cases have been decided contrary to any one of these propositions upon the facts coming within it, and I believe every proposition can be sustained in any state or federal court : "(a) A preliminary agreement to form a corporation and take stock therein is not a contract by the subscribers with each other, and cannot be enforced by one or more against any other, but only by the corporation. " (b) Such an agreement, not made as a step authorized by stat- ute in the process of forming the corporation, is a mere offer to the corporation not yet in existence, and is revocable by any subscriber until the birth of the corporation, which operates as an acceptance of the offer, and thereafter the subscription, if not previously re- voked, is irrevocable and may be enforced by the corporation. " (c) Such an agreement, made as a step authorized by statute in the process of forming the corporation, is made valid by the statute, 1 Kennebec, etc., R. R, Co. v. Kendall, ise to pay for them. Buckfield, etc, 31 Me., 470 (1850) ; Belfast, etc., R. R R R. Co. v. Irish, 39 Me., 44 (1854) ; Co. v. Moore, 60 id., 561 (1871); New Penobscot, etc.. R. R. Co. v. Bartlett, Hampshire, etc., R R. Co. v. Johnson, 12 Gray, 244 (1858). See, also, Seymour 30 N. H., 390 (1855); White, etc., R R v. Sturgess, 26 N. Y„ 134 (1862); Fort Co. v. Eastman, 34 id., 124 (1856) ; Essex, Edward, etc., Co. v. Payne, 17 Barb, etc., Co. v. Tuttle, 2 Vt., 393 (1830); Con- 567 (1854); Pittsburgh, etc., R R Co. v. necticut, etc., R. R. Co. v. Bailey, 24 id., Gazzam, 32 Pa. St, 340 (1858). It is to 465 ; Atlantic, etc., Mills v. Abbott, 9 be noticed that this rule was established Cush., 423 (1852) ; Katama, etc., Co. v. before the announcement of that great Jernegan, 125 id., 156 (1879); Boston, principle of American law, that the capi- etc. R R Co. v. Wellington, 113 id., 79 tal stock of a corporation is a trust fund (1873) ; Buckfield, etc., R R Co. v. Irish, for the benefit of its creditors. 39 id., 44 (1854); Russell v. Bristol, 49 When "neither the general laws nor Conn., 251 (1881). Cf. Odd Fellows, etc.. the act by which the plaintiffs were Co. v. Glazier, 5 Harr. (Del.), 172 (1848) ; incorporated, nor any by-laws of the Stokes v. Lebanon, etc., Co., 6 Humph., company, created any forfeiture of the 241 (1845) ; City Hotel v. Dickinson, 6 shares for the non-payment of the as- Gray, 586 (1856) ; Belfast, etc., R R. Co. sessments, . . . the legal effect of v. Cottrell, 66 Me., 185 (1876); Katowa his (defendant's) subscribing for the Land Co. v. Holley, 129 Mass., 540 (1880) ; stock is to render him liable in assump- Mechanics', etc., Co. v. Hall, 121 id., sit even where there is no express prom - 272 (1876). In Maine an agreement to ise to pay." Essex, etc., Co. v. Tuttle, 9 " take and fill " a number of shares has Vt., 393 (1830). been held equivalent to an express prom- 116 CH. IV.] SUBSCRIPTIONS METHOD — PARTIES ENFORCEMENT. [§76. and is binding upon each subscriber from the time of signing and is irrevocable thereafter, but can be enforced only by the corporation. " (d) An agreement to pay money to trustees, to be by them paid to a corporation thereafter to be created, the trustees to return to- the subscribers stock in the corporation accordingly, is a valid con- tract between the subscribers and the trustees. "(e) The distinction made between a present subscription and an agreement to subscribe to the stock of a corporation thereafter to be created is unsound in principle, and disappears as mere dicta upon a thorough sifting of the cases. " (f) The damages recoverable by the corporation upon a sub- scription is the amount of the subscription ; and all discussion of any other measure of damages, such as difference between par and market value of stock subscribed, arises from a misconception of the situation, and disappears from the net result of the authorities." § 76. Stockholders' agreements to guarantee company debts. — An agreement of stockholders to be responsible for future debts of the corporation can be enforced, but the corporation and all the parties are to be made parties defendant. 1 A modification of the contract between the subscribers and a contractor does not release the former where they accept the work upon the completion of the contract. 2 1 Farmers' Nat. Bank v. Harmon, 14 which they agree to pay the contractors Fed. Rep., 593 (1883). If the plaintiff is who are parties to the contract a speci- one of the parties to the agreement his fied sum, is a joint undertaking on the remedy is in equity. Id.. 4 id., 612. subscribers' part The contractors may An agreement of stockholders to in- hold them liable as partners, the agree- demnify, protect and save harmless in ment not limiting their liability to the proportion to their stock other stock- number of shares taken by each. An holders who sign corporate notes con- immaterial alteration after a part have strued and the remedy explained. Tay- signed does not release any one. The lor v. Coon, 48 N. W. Rep., 123 (Wis., agreement of the contractors to hold 1891) ; Taylor v. North, id., 126. each subscriber liable only on his sub- Stockholders who sign corporate scription if he would pay that is with- notes are co-sureties and not guarantors, out consideration and void. Any sub- Southerland v. Fremont, 12 S. E. Rep., scriber could expressly limit his liability 237 (N. C, 1890). to his subscription. Davis v. Shafer, 50 An agreement of stockholders that if Fed. Rep., 764 (1892). See Doud v. Bank, a creditor of the corporation will release 54 id., 846. Of. Davis v. Barber, 51 id., 148. certain security they will give other se- 2 Gibbons v. Ellis, 53 N. W. Rep., 701 curity or that the debt will be paid is a (Wis., 1892). contract of guaranty and not an origi- An agreement of stockholders that nal undertaking. Home Nat. Bank v. certain corporate notes will be paid is Waterman, 25 N. E. Rep., 648 (111., 1890). released by taking new notes from the A subscription agreement prior to in- corporation extending the debt. Home corporation, in which the parties state Nat. Bank v. Waterman's Estate, 29 N. the number of shares taken, and in E. Rep., 503 (111., 1891). 117 CHAPTER V. CONDITIONAL SUBSCRIPTIONS. 77. 78. 79. 80. 81. 82. Definition. Conditions subsequent. Conditional subscriptions before incorporation. In New York such subscription is void ; in Pennsylvania the con- dition is void. Oral conditions are void. Conditional subscriptions after in- corporation. 83. What may be the condition. 84. Acceptance of the subscription by the corporation. 85. Construction of the condition. 86-87. Performance of the condition. 88. Waiver. 89. Notice and calls on conditional subscriptions. § 77. Definition of conditional subscription — A conditional sub- scription is one on which payment can be enforced by the corpo- ration onty after the occurrence or after the performance by the cor- poration of certain things specified in the subscription itself. 1 Oral agreements made with the subscriber to the effect that payment will not be required except on certain events or contingencies are sometimes spoken of as conditions to the subscription, but more properly are mere variations of a written contract, and are treated elsewhere. 2 § 78. Conditions precedent and conditions subsequent. — A con- ditional subscription is also to be distinguished from a subscription on a condition subsequent. A subscription on a condition subse- quent contains a contract between the corporation and the sub- scriber, whereby the corporation agrees to do some act. It thereby combines two contracts : one the contract of subscription, the other an ordinary contract of the corporation to perform the specified acts. 3 The subscription is valid and enforceable whether the con- 1 A conditional subscription has often been spoken of as "a continuing offer which is final and absolute when ac- cepted." Taggart v. Western Md. R R. Co., 24 Md., 563 (1866); Ashtabula & New London R. R Co. v. Smith, 15 Ohio St., 328 (1864) ; Lowe v. Edgefield & K. R. R Co., 1 Head (Tenn.), 659 (1858). 2 See ch. IX ; also § 81. 3 Thus, adding to a subscription the words, " to be expended between the Connecticut river and the east line of the state," has been held to form a con- tract to that effect, but not to make the subscription conditional. Lane v. Brain- erd, 30 Conn., 565 (1862 ; Henderson & Nashville R, R. Co. v. Leavell, 16 B. Monroe (Ky.), 358 (1855). So, also, of words requiring a certain location or route to be adopted. Henderson & Nash- ville R R Co. v. Leavell, supra; the court saying, however, that if the route is laid out otherwise, before payment, probably the subscriber would be dis- charged ; if changed after payment, it 118 CH. V.] CONDITIONAL SUBSCRIPTIONS. [§78. ditions are performed or not. 1 The condition subsequent is the same as a separate collateral contract between the corporation and the subscriber, for breach of which an action for damages is the remedy. 2 The distinction between such a contract and the or- could be enjoined. Laches will bar the right to such an injunction. Chapman v. Mad River & Lake Erie R. R. Co., 6 Ohio St, 119 (1856). A more frequent requirement is a certain location of the route, and also the construction of a part of the whole of the road. The first requirement is construed to be a condition precedent, tbe second a condi- tion subsequent, since the payment of the subscription itself is necessary to carry out the requirement Chamber- lain v. Painesville & Hudson R R Co., 15 Ohio St., 225 (1864) ; Belfast & Moose- head Lake R'y Co. v. Moore, 60 Me., 561, 576 (1871); North Mo. E. R. Co. v. Wink- ler, 29 Mo., 318 ; Bucksport & Bangor R R. Co. v. Inhabitants of Brewer, 67 Me., 295 (1877); McMillan V. Maysville & Lexington R. R Co., 15 B. Monroe, 218 (1854) ; Swartout v. Mich. Air Line R R Co., 24 Mich., 389 (1872), where Judge Cooley says : " It is only reason- able to infer that they would have ex- pressed that intent more clearly, and would have indicated with definiteness what stage the work should reach, be- fore their liability should become fixed." So also in Miller v. Pittsburgh & Con- nellsville R R Co., 40 Pa. St., 237 (1861), where the court say : " It is a most ex- traordinary defense ; for it presupposes that the company were to build their road without money, and to deliver it, a finished work, to the stock subscribers, who were then to pay their subscrip- tions." In Pittsburgh & Steubenville R R Co. v. Biggar, 34 Pa. St, 455 (1859), a condition, " provided the road goes within half a mile of Florence," was held to be a condition subsequent. A condition that alterations shall be or- dered only by a vote of the directors is a condition subsequent Bucksport & Bangor R R Co. v. Buck, 68 Me., 81 (1878). So also of a condition that com- missioners should be appointed to see that other conditions are complied with. Shaffner v. Jeffries, 18 Mo., 512 (1853). And a condition that the money sub- scribed shall be expended on a certain part of the road. Lane v. Brainerd, 30 Conn., 565 (1862). A condition that a depot shall be established at a certain place is a condition subsequent Pa- ducah, etc., R. R. v. Parks, 8 S. W. Rep., 842 (Tenn., 1888). A condition that bonds will be issued as a " bonus " to a stockholder is void. It is a condition subsequent. The subscription is en- forceable. Morrow v. Nashville, etc., Co., 10 S. W. Rep., 495 (Tenn., 1889). Condition construed subsequent John- son v. Georgia, etc., R R. Co., 8 S. E Rep., 531 (Ga., 1889). For the English cases on conditions precedent and sub- sequent to subscriptions for stock, see ch. II, supra. 1 A condition subsequent " will not defeat an action for the recovery of the money, notwithstanding it had not been performed when the action was com- menced." Belfast & Moosehead Lake R'y Co. v. Moore, 60 Me., 561, 576 (1871). " A failure to perform an independent stipulation, not amounting to a condi- tion precedent, though it subject the party failing to damages, does not ex- cuse the party on the other side from the performance of all stipulations on his part" Mill Dam Foundry v. Hovey, 38 Mass., 417, 437 (1839). 2 The subscriber is left to the ordinary remedies for breaches of contracts. A subscriber cannot avoid payment as against a corporate creditor although the subscription was on condition that if the subscription exceeded one-half the cost of a certain building, only so much of the subscription should be called for as would equal that half. The subscriber cannot forfeit what he has paid and re- 119 §79.] CONDITIONAL SUBSCRIPTIONS. [CH. dinary conditional subscriptions — that is, subscriptions on condi- tions precedent — is sometimes difficult to determine. The supreme court of Maine has said that the question whether a condition in a subscription " be precedent or subsequent is a question purely of in- tent, and the intention must be determined by considering not only the words of the particular clause, but also the language of the whole contract, as well as the nature of the act required and the subject-matter to which it relates." l The courts, in accordance with well-established rules, favor conditions subsequent. 2 § 79. Conditional subscriptions not allowed in subscriptions to obtain incorporation. — Conditional subscriptions made before the incorporation of a company, and taken for the purpose of secur- ing such incorporation, as prescribed by statute, are of doubtful validity. The weight of authority holds that subscriptions taken for the purpose of complying with a statute which grants a charter only upon a certain amount of stock being subscribed cannot be conditional, but must be absolute. 3 This is clearly the rule in New York and Pennsylvania, and is founded in justice. 4 fuse to pay the remainder. Mathis v. subscriptions." Boyd v. Peach Bottom Pridham, 20 S. W. Rep.. 1015 (Tex., 1892). R'y Co., 90 Pa. St., 169 (1879). « Any A condition that the subscriptions other rule would lead to the procure- when collected shall be used to build ment from the commonwealth of valu- factories which should be leased was en- able charters without any absolute cap- forced in Porter v. Carpenter, 23 Atl. ital for their support and thus give rise Rep., 523 (N. H., 1874). See, aleo, § 97, infra. 1 Bucksport & B. R R Co. v. Inhab- itants of Brewer, 67 Me., 295 (1877). "The situation and relation of the par- ties to each other, the object sought to be attained, and the subject-matter to which the agreement relates, are mate- rial . . . and indispensable aids" in deciding whether the condition be precedent or subsequent. Chamberlain r. Painesville & Hudson R R Co., 15 Ohio St., 225 (1864). 2 Chamberlain v. Painesville & Hud- son R. R. Co., 15 Ohio St, 225 (1864); Swartout v. Mich. Air Line R R. Co., 24 Mich., 389 (1872). 3 " A subscription to the stock of a public corporation, made before letters patent are issued and an organization effected, must be considered absolute and unqualified, and any condition at- tached thereto void. Commissioners have no authority to receive conditional to a system of speculation and fraud which would be intolerable." Caley v. Phila. & Chester County R. R Co., 80 Pa. St., 363 (1876). See, also, Erie, etc., Co. v. Brown, 25 Pa. St, 156 (1855): Nippenose Mfg. Co. v. Stadton, 68 Pa. St., 256 (1871); Pittsburgh, etc., R R Co. v. Stewart, 41 Pa St, 54 (1861); Troy & Boston R R Co. v. Tibbits, 18 Barb., 297 (1854). That conditional sub- scriptions are not to be counted in as- certaining whether the whole capital stock has been subscribed, which must be shown before another absolute sub- scriber can be made liable, see § 180. 4 Some of the old cases uphold condi- tional subscriptions made previous to and for the purpose of incorporation. Chamberlain v. Painesville & Hudson R R Co., 15 Ohio St., 225 (1864). It is doubtful, however, whether any well- considered case, under the present gen- eral laws allowing the incorporation of railroads, would sustain such a sub- 120 CH. V.] CONDITIONAL SUBSCRIPTIONS. [§§ 80-82. § 80. In New York the subscription is void; in Pennsylvania the condition is void. — The New York and Pennsylvania cases differ, however, in regard to the effect of a conditional subscription to stock before and for the purpose of incorporation. In New York the whole subscription is void absolutely. It is as though not made, and cannot be enforced either by the corporation or by the would-be subscriber. 1 In Pennsylvania a different rule prevails. The condition is void, but the subscription itself is treated as an absolute unconditional subscription, and may be enforced by the corporation. 2 The commissioners are held to have only limited statutory powers, of which the subscriber is bound to take notice, and the express powers do not give authority to the commissioners to take conditional subscriptions. They have no right to receive various kinds of subscriptions, and any conditions are held to be void as a fraud upon the state, upon corporate creditors, and upon other subscribers. 3 § 81. Oral conditions are void. — Under the general rule of evi- dence that a written agreement cannot be varied or added to by parol, it is not competent for a subscriber to stock to allege that he is but a conditional subscriber. 4 The condition must be inserted in the writing in order to be effectual. Where, however, the parol agreement or condition is made subsequently to the making of the contract, and upon a sufficient consideration, it has been upheld. 5 § 82. Conditional subscriptions after incorporation are valid. — A conditional subscription to stock, taken and accepted by a corpo- ration after its incorporation, is legal and valid by the common-law scription. The weight of authority is burgh & Steuben ville R. R. Co., 44 Pa. decidedly in favor of absolute subscrip- St, 358 ; Pittsburgh & Steubenville R. tions. R Co. v. Biggar, 34 Pa. St., 455 (1859) ; 1 Troy & Boston R R. Co. v. Tibbits, Same v. Woodrow, 3 Phil, 271 (1858). 18 Barb., 297 (1854); In re Rochester, Tbe subscription itself, however, is not etc., R. R. Co., 50 Hun, 29 (1888), where binding if it is not reported by the com- the subscription was to be paid in land, missioners and used to obtain the char- 2 " Where one subscribes to the stock ter. Ligonier Valley R. R. Co. v. Will- of a public corporation, prior to the pro- iams, 35 Leg. Intel., 40 (1878). In the curement of its charter, such subscrip- federal courts, Burke v. Smith, 16 Wall., tion is to be regarded as absolute and 390, 396 (1872), favors the Pennsylvania unqualified, and any condition attached rule, while Putnam v. City of New AI- thereto is void." Caley v. Phila, & bany, 4 Biss., 365, 383 (1869), favors the Chester Co. R R Co., 80 Pa. St, 363 New York rule. In both cases the opin- (1876). " The subscription is valid and ions are dicta. See, also, Ellison v. Mo- binding, and the condition null and bile & O. R. R. Co., 36 Miss., 572 (1858). void." Boyd v. Peach Bottom R'y Co., 3 Same cases. 90 Pa. St., 169 (1879). To the same * See §§ 137, 138. effect, see Bedford R R. Co. v. Bowser, 5 Id. 48 Pa. St, 29 (1864); Barington v. Pitts- 121 §83.] CONDITIONAL SUBSCRIPTIONS. [CH. of all the States. In Pennsylvania the legality of such conditional subscriptions is clearly declared and sustained. 1 In New York, also, conditional subscriptions have been upheld, 2 but not where the con- dition is one that affects the route of a turnpike or railroad com- pany. In other states the legality of such subscriptions is rarely questioned, but is generally assumed to be admitted. 3 § 83. What condition may be attached to a subscription — Any condition which can be legally performed or complied with by the corporation may be the condition to a subscription for stock. 4 The condition may be that payment shall be in labor or materials; 5 it 1 " It is no longer to be doubted that an incorporated company, after it has obtained its letters patent and effected its organization, may receive conditional subscriptions to its stock." Pittsburgh & Connellsville R. R Co. v. Stewart, 41 Pa. St, 54 (1861); Caley v. Phila. & Chester County R. R Co., 80 Pa. St., 363 (1876); Phila., etc., R R Co. v. Hick- man, 28 Pa. St., 318 (1857). After incor- poration conditional subscriptions may be received, although the letters patent have not been issued and cannot be until ten per cent, of the capital stock is subscribed. The conditional subscrip- tion cannot, however, form any part of such percentage. Hanover Junction & Susquehanna R R Co. v. Haldernan, 82 Pa. St, 36 (1876). 2 Ordinary conditional subscriptions were treated as valid in Union Hotel Co. v. Hersee, 79 N. Y. 454 (1880) ; Bur- rows v. Smith. 10 N. Y., 550 (1853) ; Mor- ris Canal & Bkg. Co. v. Nathan, 2 Hall, 239 (1892). But the condition that a particular location of the proposed road should be adopted has been held to be contrary to public policy, since im- proper means would thereby influence the question of location. Butternuts & Oxford Turnpike Co. v. North, 1 Hill, 518 (1841); Fort Edward, etc., Co. v. Payne, 15 N. Y, 583 (1857) ; Macedon & Bristol Plank Road Co. v. Snediker, 18 Barb., 317 (1854); dictum in Dix v. Shaver, 14 Hun, 392 (1878). However, in the case of Lake Ontario Shore R R Co. v. Curtiss, 80 N. Y, 219 (1880). a condition of this kind was involved, and no objection was made to its validity. Subscriptions conditional, in that pay- ment is to be permitted in property, labor or contract for construction, have been repeatedly passed upon in New York and upheld. See ch. II. 3 " Except in New York, conditional subscriptions, in the absence of a special prohibition, so far as we have observed, have been sustained as authorized and not in conflict with public policy." Ashtabula & New London R R Co. v. Smith, 15 Ohio St, 328 (1864). See, also, § 97, infra; New Albany & Salem R R Co. v. McCormick, 10 Ind., 499 (1858); McMillan v. Maysville & Lexington R R Co., 15 B. Monroe, 218 (1854); Dayton, etc., R R Co. v. Hatch, 1 Disney, 84 (1855). A conditional subscription to the stock of a railroad company is legal. Baltimore, etc., R R Co. v. Pumphrey, 21 Atl. Rep., 559 (Md., 1891). Conditional subscriptions may be received. Arm- strong v. Karshuer, 24 N. E. Rep., 897 (Ohio, 1890). If the condition is ultra vires of the corporation, the subscrip- tion is not enforceable, there having been no performance. Pellatt's Case, L R, 2 Ch., 527 (1867). 4 The subscriber "may agree to take and pay for the stock absolutely or upon such condition as he may choose to incorporate into his subscription." Penobscot & Kennebec R R Co. v. Dunn, 39 Me., 587 (1855); Mathis v. Pridham, 20 S. W. Rep., 1015 (Tex., 1892). 5 See ch. II. 122 CH. v.] CONDITIONAL SUBSCRIPTIONS. [§ 83. may require the expenditure of the subscription on a particular part of the enterprise ; l it may stipulate that a certain amount or the whole of the capital stock shall be subscribed before calls are made on the subscriptions; 2 or it may limit the time within which certain things specified therein must be done. 3 In most states the condition to a subscription may require the route of a railroad to be located on a particular line. 4 In New York such a conditional subscription has been held to be void, on the ground of public pol- icy, inasmuch as the discretion of the directors, in laying out the route, would thereby be influenced by considerations other than those of a purely public nature. 5 In general, however, subscriptions to the capital stock of a cor- poration may be conditional as to the time, manner or means of payment, or in any other way not prohibited by statute, or the 1 Milwaukee & Northern 111. R. R Co. also, Caley v. Phil. & Chester County v. Field, 12 Wis., 340 (1860); Hanover Junction & Sus. R. R Co. v. Haldeman, 82 Pa St, 36 (1876). 2 Phil. & West Chester R. R Co. v. Hickman, 28 Pa. St, 318 ; Penobscot & Kennebec R. R Co. v. Dunn, 39 Me., 587 (1855); Hanover Junction & Sus. R. R. Co. v. Haldeman, supra; Union Hotel Co. v. Hersee, 79 N. Y., 454 (1880). Even though the charter allowed the commencement of business upon the subscription of a less sum. Ridgefield 6 N. Y. R R. Co. v. Brush, 43 Conn., 86 (1875). 3 Ticonic Water-power Mfg. Co. v. Lang, 63 Me., 480 (1874), holding also that time herein is of the essence of the contract See, also, Morris Canal & Banking Co. v. Nathan, 2 Hall (N. Y), 239 (1829). See, also, § 87. 4 Fisher v. Evansville, etc., R R Co., 7 Ind., 407 (1856) ; Conn. & Passumpsic R. R Co. v. Baxtar, 32 Vt, 805 (1860) ; Cumberland Valley R. R Co. v. Baab, 9 Watts, 458 (1840) ; Evansville, etc., R. R Co. v. Shearer, 10 Ind., 246 (1858); Jew- ett v. Lawrenceburgh, etc., R R Co., 10 Ind., 539 (1858); Missouri Pacific Ry Co. v. Taggard, 84 Mo., 264 (1884) ; Wear v. Jacksonville, etc., R R Co., 24 111., 595 (1860); Taggart v. Western Md. R R Co., 24 Md., 563 (1866) ; Racine County Bank v. Ayers, 12 Wit'., 512 (1860). See, R R Co., 80 Pa. St., 363 (1876). Loca- tion may be required to be subject to the approval of the subscriber. Rob- erts' Case, 3 De Gex & Sm., 205 (1850) : aff d, 2 Mac. & G., 196. See, also, Mans- field, etc., R. R Co. v. Brown, 26 Ohio St, 224 (1875) ; Same v. Stout 26 Ohio St., 241 (1875) ; Chamberlain v. Paines- ville, etc., R R Co., 15 Ohio St, 225 (1864) ; North, etc., R R Co. v. Winkler. 29 Mo., 318 (1860) ; Spartanburgh, etc., R R Co. v. De Graffensied, 12 Rich. L. 675 (1860) ; Des Moines, etc., R R Co. v. Graff, 27 Iowa, 99 (1869). A subscrip- tion or note, not for stock, but abso- lutely as a gift to the corporation, in consideration of a particular route being adopted, has been upheld. Stowell v. Stowell, 45 Mich., 364 ; First Nat'l Bank V. Hendrie, 49 Iowa, 402 (1878). A sub- scription or donation to a railroad, conditional on the location of a depot, is enforceable by the company. Berry- man v. Cincinnati S. R'y, 14 Bush (Ky.), 755 (1879). See § 650. A construction company, under contract to coustruct a road by the shortest route, cannot col- lect a sum promised by a third person for a deflection of the route. Wood- stock Iron Co. v. Extension Co., 129 U. S., 642 (1889- 5 See § 82, n. 123 §84.] CONDITIONAL SUBSCRIPTIONS. [CH. V. rules of public policy, and not beyond the corporate powers of the corporation to comply with. 1 § 84. Acceptance by the corporation is necessary. — The accept- ance by the corporation of a conditional subscription is necessary to the formation of the contract. 2 Until such acceptance the con- ditional subscription is but a continuing offer. After acceptance the subscriber is bound, until performance of the condition by the corporation, to await such performance; he cannot withdraw the conditional subscription after it has been accepted. It seems, how- ever, that if the performance of the condition is delayed unreason- ably by the corporation, the conditional subscriber will be thereby released from his obligation. 3 1 Conditions inconsistent with the charter are void. Thigpen v. Miss., etc., R. R Co., 32 Miss., 347 (1856). The con- ditions which may be legally made to a subscription are practically limited only by the power of the corporation to con- tract. A few of the conditions which have been passed upon by the courts have been given. Many minor ones are involved in the cases, and present a great variety of conditions, correspond- ing, as they do, to the wishes and mo- tives of individuals subscribing to the stock of the different kinds of joint- stock corporations. The condition of a subscription may be that the subscriber b:a made secretary. Mogridge's Case, 58 L. T. Rep., 801 (1888). 2 Junction R. R. Co. v. Reeve, 15 Ind., 236 (1860), where the subscription was payable in land. See, also, Gait's Ex'rs v. Swain, 9 Gratt. (Va.), 633 (1853). "When the offer was accepted the minds of the parties met and the con- tract was complete. . . The ac- ceptance by the plaintiff constituted a sufficient legal consideration for the en- gagement on the part of the defend- ants." Taggart v. Western Md. R. R Co., 24 Md., 563 (1866). By the entry of the subscription on the corporate record an acceptance is implied. New Albany & Salem R. R. Co. v. McCor- mick, 10 Ind.. 499 (1858). Acceptance by the president of the corporation, and a subsequent ratification by the direct- ors of all his acts, is sufficient. Pitts- burgh & Connellsville R. R Co. v. Stewart, 41 Pa. St, 54 (1861). The de- livery and acceptance may be proved by parol. ' Mansfield & New Lisbon R R Co. v. Smith, 15 Ohio St, 328 (1864). Where it is delivered in escrow to the agent of the corporation, there can be no acceptance of it by the corporation, so long as such delivery continues. Cass v. Pittsburgh, Va & Charleston R'y Co., 80 Pa. St, 31 (1875). It may be revoked while still in the hands of a corporate agent Lowe v. Edgefield & K. R R Co., 1 Head (Tenn. ), 659 (1858). The sub- scribers cannot withdraw unless there is unreasonable delay. Armstrong v. Karshuer, 24 N. E. Rep., 897 (Ohio, 1890). 3 Where, the condition not being per- formed, the subscriber notifies the sec- retary of his withdrawal from the sub- scription, he is released. Wood's Case, L. R, 15 Eq., 236 (1873). "The objec- tion to a continuing offer, that it sus- pends indefinitely the liability of the conditional subscribers, is sufficiently answered by the consideration that all such offers are subject to retraction, and may be recalled if their acceptance is unreasonably deferred." Taggart v. Western Md. R R Co., 24 Md., 563 (1866). See query and briefs in Mans- field, Coldwater & Lake Mich. R R Co. v. Stout, 26 Ohio St., 241 (1875), which holds that the question of acceptance is immaterial where performance of the condition has been completed by the corporation. 124 CH. V.] CONDITIONAL SUBSCRIPTIONS. ; : 35, 86. § 85. Construction of conditional subscription. — Conditional sub- scriptions, like other contracts, are to be construed reasonably and according to the intent of the parties, as indicated by the language used in the contract. 1 The circumstances under which the sub- scription was made are also to be taken into consideration. 2 If two interpretations are possible, that which facilitates the enterprise is preferred to that which retards it. 3 If the meaning is ambiguous, it is for the jury to say what the interpretation is to be. 4 § 86. Performance of the condition. — A condition to a subscrip- tion for stock must be performed or complied with before the sub- scriber can be compelled to pay such subscription. 5 A substantial performance of the condition is sufficient." A failure to perform is not excused by reason of unforeseen difficulties arising from 1 The whole contract is to be taken to- gether, and is "to have a reasonable construction according to the intent of the parties." People's Ferry Co. v. Balch, 74 Mass., 303 (1857). " The lan- guage was chosen by them to express their mutual intent, and such construc- tion must be given thereto as will carry into effect that mutual understanding. . . . We are to ascertain what the parties understood and intended by this language, and may not deviate therefrom, whether that contract, as so interpreted, be wise or unwise for either party." Memphis, Kan. & Col. R R. Co. v. Thompson, 24 Kan., 170 (1880). 2 "The contract must be interpreted by the light of the circumstances which existed at the time it was made, and not of those which arose afterwards." Monadnock R. R. v. Felt, 52 N. H., 379 (1872); Detroit, L. & L. M. R. R Co. v. Starnes, 38 Mich., 698 (1878). 3 Ashtabula & New Lisbon R. R. Co. v. Smith, 15 Ohio St, 328 (1864). < Connecticut R. R Co. v. Baxter, 32 Vt, 805 (1860). » Porter v. Raymond, 53 N. H., 519 (1873); Monadnock R R v. Felt, 59 N. H., 379 (1872) ; Montpelier & Wells River R. R. Co. v. Langdon, 46 Vt., 284 (1873) ; Ashtabula & New Lisbon R R. Co. v. Smith, 15 Ohio St, 328 (1864) ; Phil. & West Chester R. R Co. v. Hickman, 28 Pa. St, 318 (1857); Burrows v. Smith, 10 N. Y., 550. Upon the performance of the condition by the promisee the contract ij clothed with a valid consid- eration, which relates back, and the promise at once becomes obligatory." Des Moines Valley R. R Co. v. Graff. 27 Iowa, 99 (1869). Upon fulfillment of the condition that a certain amount be subscribed, the subscription may be col- lected. Security State Bank v. Racine, 48 N. W. Rep., 262 (Neb., 1891). A contract of subscription to a railroad company when certain things are done by it is collectible when these things have been done. Lesherv. Karshner, 24 N. E. Rep., 882 (Ohio, 1890). A conditional subscrip- tion may be enforced after the condition has been performed. Webb v. Balti- more etc., Co., 26 Atl. Rep., 113 (Md., 1893). e O'Neal v. King, 3 Jones' L (N. C), 517 (1856). See, also, Virginia, etc., R R. Co. v. County Comm'rs, etc., 8 Nev., 68 (1870); Springfield St. R'y Co. v. Sleeper, 121 Mass., 29 (1876); People v. Holden, 82 111., 93 (1876). Performance must be within a reasonable time. Ste- vens v. Corbitt, 33 Mich., 458 (1S76). Subscription on express condition that it shall be payable only in case the whole amount is subscribed cannot be collected, where the whole amount was made up by including the subscriptions of married women who had not paid. Appeal of Hahn, 7 Atl. Rep., 482 (Pa, 125 87.] CONDITIONAL SUBSCRIPTIONS. Tch. V. floods and natural causes. 1 A conditional subscriber is not a stock- holder or member of the corporation until after the condition is performed. 2 Whether or not the condition has been performed is a question of fact. 3 Performance may be proved by parol or by the records of the corporation. 4 § 87. Where the condition is that the work shall be begun, con- tracted for or completed within a certain time, time is of the es- sence of the contract, and any failure to perform within the time so specified defeats the subscription. 5 A condition that the road 1886). Condition that subscription shall be payable only when a sum deemed sufficient by the directors has been sub- scribed is not fulfilled when the direct- ors fixed a sum, and then later reduced the sum to the amount subscribed. Only unconditional subscriptions are to be counted. Brand v. Lawrenceville, etc., R. R Co., 1 S. E. Rep., 255 (Ga., 1887). If performance turns on a writ- ing, question is for the court Id. Rea- sonable performance is all that is re- quired. Thus completion of a blast furnace, as a condition, is satisfied by completion by lessee. Appeal of Cor- nell, 6 Atl. Rep., 258 (Pa, 1886). Condi- tion that company shall construct a road from and to specified points is not fulfilled by construction of part of the way and running over another railroad for the remainder of the distance. Brown v. Dibble, 32 N. W. Rep., 656 (Mich., 1887). Contra, People v. Holden, 82 111., 93. In the case of Martin v. Pensacola & Geo. R R Co., 8 Fla., 370, 390 (1859), it is stated, in a dictum, that a strict compliance is necessary. But see Branham v. Record, 42 Ind., 181 (1873). A subscription to an enterprise, condi- tional upon the performance of that en- terprise by certain named parties and a conveyance of the results to a corpora- tion, may be enforced by such parties upon due performance. Brewer v. Stone, 77 Mass., 228 (1858> A subscrip- tion to a railroad, conditional upon its completing the road, is not enforce- able by a consolidated company which succeeds to and completes the road. Toledo, etc., R R v. Hinsdale, 15 N. E Rep., 665 (Ohio, 1888). Substantial com- pliance with condition is sufficient. Cra- vens v. Eagle, etc., Co., 21 N. E. Rep., 981 (Ind., 1889). 1 Memphis, Kan. & Col. R. R Co. v. Thompson, 24 Kan., 170 (1880). 2 Chase v. Sycamore & Courtland R R Co.. 38 111.. 215 (1865); Slipher v. Ear- hart. Adm.. 83 Ind., 173 (1882) ; Evans- ville, Ind. & Cleveland S. L. R. R Co. v. Shearer, 10 Ind., 244 (1858). 3 Je\vett v. Lawrenceburgh & U. M. R R. Co., 10 Ind., 539 (1858). And is a question for the jury. St. Louis & Cedar Rapids R R Co. v. Eakins, 30 Iowa, 279 1870). 4 By parol. St. Louis & Cedar Rapids R R. Co. v. Eakins, 30 Iowa, 279 (1870). By corporate records. Penobscot & Kennebec R R Co. v. Dunn, 39 Me., 587 (1855). Contra, Phil. & West Ches- ter R R Co. v. Hickman, 28 Pa. St, 318 (1857). Performance must be alleged in the complaint or declaration. Trott v. Sarchett, 10 Ohio St., 241 (1859) ; Roberts v. Mobile & O R R Co., 32 Miss., 373 (1856) ; Henderson & Nashville R R. Co. v. Leavell, 16 B. Monroe, 358 (1855). 8 Burlington & Missouri River R. R Co. •£>. Boestler, 15 Iowa. 555 (1864), per Dillon, J. ; Freeman v. Mack, 67 Ind., 99 (1879J; Memphis, Kan. & Col. R R. Co. v. Thompson, 24 Kan., 170 (1880); Portland & Oxford Central R R Co. v. Inhabitants of Hartford, 58 Me., 23 (1870). An agreement to pay a corpora- tion a certain sum if it built and started a factory within a certain time is not collectible if the contract is not fulfilled within that time. Bohn Manuf. Co. v. 126 CH. V.] CONDITIONAL SUBSCRIPTIONS. [§ 88. shall be " permanently " located on a specified route is satisfied by the adoption of that route by the directors. 1 Where the question of whether performance has been completed rests in the decision of the directors, their conclusion cannot be questioned, unless fraud or bad faith is proved. 2 A condition that the subscription shall be applied to a particular portion of the road is satisfied by the com- pletion of that portion. 3 Any fraud on the part of the corporation in the performance of the condition may be shown by parol. 4 All of several conditions must be performed before calls are made. 5 But if one part of the subscription be free from condition, that part may be collected independently. 6 Where, after part payment by the conditional subscriber, the corporate plans are changed, so that the condition is not complied with, the money, it has been held, may be recovered. 7 § 88. Waiver of tlie condition. — A conditional subscriber to the stock of a corporation may waive the condition and performance thereof, and thus become liable on his subscription, as though it had been originally an absolute one. The waiver may be by an oral statement or agreement of the subscriber. 8 Certain acts of the subscriber have been held to indicate an intent to waive a condition to the subscription, and to be equivalent to a direct waiver. Thus acting as a director, 9 or as president of the corpora- Lewis, 47 N. W. Rep.. 652 (Minn., 1891). a certain point is satisfied by its being If the directors certify that the condi- so located. Wear v. Jacksonville & tion was performed [within the specified Savannah R. R Co., 24 111., 593 (1860). time, the subscriber may prove the 2 Cass v. Pittsburg, Va. & Charleston falsity of their certificate. Morris Canal R'y Co., 80 Pa. St., 31 (1875). & Bkg. Co. v. Nathan, 2 Hall (N. Y.), 3 Nichols v. Burlington & Louisa 239 (1829). Upon the failure of the cor- County Plank-road Co., 4 Greene (Iowa), poration to comply with this condition 42 (1853). the subscription ceases to have any * New York Ex. Co. v. De Wolf, 31 vitality "by its own limitation." Ti- N. Y., 271 (1865). conic Water-power & Mfg. Co. v. Lang, 5p or ter v. Raymond, 53 N. H., 519 63 Me., 430 (1874). In the case, however, (1873). of Missouri Pacific R'y Co. v. Taggard, 6 St. Louis, etc., R R Co. v. Eakins. 84 Mo., 264 (1884), a completion of the 30 Iowa, 279 (1870). road within a reasonable time after the « Jewett v. Lawrenceburgh & L T . M. R time specified in the condition was held R Co., 10 Ind., 539 (1858). to be a substantial performance, and 8 Hanover Junction & Sus. R R Co. sufficient, the grading having been com- v. Haldeman, 82 Pa. St, 36 (1876). See, pleted in the specified time. See, also, also, Woonsocket Union R R Co. v. Moore v. Campbell, 12 N. E. Rep., 495 Sherman, 8 R I.. 564 (1867). (Ind., 1887), where the condition was iu- 9 Lane v. Brainard, 30 Conn., 565 serted in a promissory note. (1862). i Smith i\ Allison, 23 Ind., 366 (1864) ; Where a person subscribes for pre- and see cases in § 78. So also a condi- ferred stock, but no preferred stock is tion that the road shall cross another at provided for, and he becomes a director 127 89.] CONDITIONAL SUBSCRIPTIONS. [CH. tion, 1 paying the whole of the subscription, 2 giving an absolute promissory note without conditions in payment of the subscription, 3 have each been held to constitute a waiver of the condition to a sub- scription. But mere silence is not a waiver, 4 nor pa}^ment of part of the subscription, 5 nor aid in the attempt to start the enterprise, by soliciting subscriptions and being elected to a corporate office." § 89. Notice of performance and calls. — There is some doubt as to whether, upon performance of the condition, the subscriber is entitled to notice of such performance. The better rule seems to be that he is entitled to such notice, and that a general " call " for the payment of part or all of the subscriptions for stock does not apply to conditional subscribers, unless the condition has been per- formed, and the fact of performance has been brought to the at tention of the subscriber. 7 and acts as such for several years, he is liable on such stock to corporate cred- itors, as though it were a subscription for common stock. Tama, etc., Co. v. Hopkins, 44 N. W. Rep., 797 (Iowa. 1890). 1 Dayton & Cincinnati R. R Co. v. Hatch, 1 Disney (Ohio), 84 (1855). 2 Parks v. Evansville, Ind. & Cleveland S. L. R. R. Co., 23 Ind., 567 (1864). 3 Chamberlain v. Painesville & Hud- son R. R. Co., 15 Ohio St., 225 (1864) ; Sli- pher v. Earhart, Adm., 83 Ind., 173 (1882); Evansville, etc., R R Co. v. Dunn, 17 Ind., 603 (1861) ; Keller v. John- son, 11 Ind, 337 (1858); O'Donald v. Evansville, etc., R R. Co., 14 Ind., 259 (1860). But not where the note was given by reason of false representations that the condition had been complied with. Parker v. Thomas, 19 Ind., 213 (1862); Taylor v. Fletcher, 15 Ind., 80 (1860). 4 Burlington & Mo. River R. R. Co. v. Boestler, 15 Iowa, 555 (1864); Bucks- port & Bangor R. R. Co. v. Inhabitants of Brewer, 67 Me., 295 (1877). In Ore- gon it is held that where the condition was the subscribing of a certain amount within a certain time, which was not done, but was performed soon after that time, the conditional subscriber is bound, where he did not cause his sub- scription to be stricken from the books. Lee v. Granger, etc., Co., 11 Pac. Rep., 270 (1886). Subscribers obtaining stock on condition that a building contract be given to them cannot rescind for non- performance by the company, where the subscribers have long delayed re- scission, after such refusal of the com- pany to perform. Rankin v. Hop, etc.. Co., 20 L. T. Rep., 207 (1869). Failure of a subscriber conditionally, for a long time, to have his name taken off the list, renders him liable on the wind-up. Wheatcroffs Case, 29 L. T. Rep., 324 (1873). » Pittsburgh & Connellsville R R Co. v. Stewart, 41 Pa. St., 54 (1861); Robert's Case, 2 Mac. & G., 196 (1850); Jewett v. Lawrenceburgh & U. M. R R. Co., 10 Ind., 539 (1858). But see Appeal of Mack, 7 Atl. Rep., 481 (Pa., 1886), where, however, a substantial performance had been made. SRidgefield & N. Y. R. R. Co. v. Rey- nolds, 46 Conn., 375 (1878). 7 Chase v. Sycamore & Courtland R R Co., 38 111., 215 (1865); Trott v. Sar- chett, 10 Ohio St.. 241 (1859). Contra, Nichols v. Burlington & Louisa Count}' Plank-road Co., 4 Greene (Iowa), 42 (1853); Spartanburg & Union R R Co. v. De Graffenreid, 12 Rich. L (S. C), 675 (1860), holding that no "call" is necessary, and that interest runs from the time of performance. 128 CH. V.] CONDITIONAL SUBSCRIPTIONS. [§89. Subscriptions payable in property are not subject to calls, and a demand for the property must be made by the corporation. 1 Upon failure of the subscriber to furnish the property, or upon insolv- ency of the corporation, such subscriptions become payable in cash. 2 1 Ohio, eta, R R Co. v. Cramer, 23 Ind., 490 (1864). Payment cannot be required in instalments. Id. But upon demand the subscriber must ascertain when and where the materials are to be delivered. McClure v. People's R R Co., 90 Pa. St., 269 (1879). 2 Haywood, etc., R R Co. v. Bryan, 6 Jones (N. C), 82 (1858); Sperry v. Johnson, 11 Ohio, 452 (1842). See § 18, n. 3. In one case, however, it was held that the subscriber was liable only in damages to the extent of the market value of the stock. Daj-ton & Cin. R R Co. v. Hatch, 1 Disney, 84 (1855). Subscription on condition of being ap- pointed secretary is not enforceable on wind-up, the appointment not having been made. Rogers' Case, L. R, 3 Ch., 633 (1868). (9) 129 CHAPTER VI. MUNICIPAL SUBSCRIPTIONS. § 90. A municipal corporation has no implied power or authority to subscribe for stock in any other corporation. 91. The legislature may authorize municipal subscriptions to pub- lic but not to private enter- * prises. 92. Constitutional provisions prohib- iting municipal subscriptions. 93. Change in the state constitution, or the general statutory laws, after the municipal corporation has voted to subscribe. 94. Statutory formalities must be substantially complied with. 95. Submission to popular vote. 96. What officer or agent of the mu- nicipality may make the con- tract of subscription. Municipal subscriptions may be conditional. When may a municipal subscrip- tion be paid in bonds instead of money? A municipal corporation as a stockholder. A municipality may enforce de- livery of stock to itself in a proper case. Division of the municipality after the subscription. 102, 103. Consolidation of companies after the municipal aid is voted. 97. 98. 99. 100. 101. § 90. A municipal corporation has no implied power or authority to subscribe for stock in any other corporation. — A municipal corpo- ration, being in its nature anil purposes a very different legal insti- tution from an ordinary private corporation, being indeed but a mode or department of government — "an investing the people of a place with the local government thereof," ' — it is plain that the general rules of law applicable to private corporations having capi- tal stock are, for the most part, applicable when the rights, duties, powers and liabilities of municipal corporations are sought to be accurately determined. 2 It is proposed to consider the right of a municipality to enter into the contract of subscription to the capital stock of other corporations, and of the liabilities, rights and duties growing out of such a subscription. The subject practically narrows itself to the right of municipal corporations to subscribe to the stock of railway corporations, inasmuch as this right, wherever it exists, is almost universally exercised in favor of these corporations, and the adjudicated cases almost all present phases of the question applying to them. It is a well-settled rule of law that municipal corporations have iCuddon v. Eastwick, 1 Salk., 183 (1871); State v. Leffingwell, 54 Mo., 458 (1704) ; Dillon on Munic. Corp., §§ 19, 20. (1873); Norton v. Peck, 3 Wis., 714 2 People v. Morris, 13 Wend., 325 (1854); Ottawa v. Carey, 108 U. S, 110 (1835) ; People v. Hurlbut, 24 Mich., 44 (1883). 130 CII. VI.] MINICIPAL SUBSCRIPTIONS. [§ 00. no implied right or authority to subscribe for the stock of any other incorporated company. 1 In order, therefore, to establish the valid- ity of a municipal subscription to the stock of a railway company, an express grant of authority from the legislature must be shown. 2 The right to subscribe is derived from the legislative enactment; and whether or not an enabling act is sufficient to validate a sub- scription is a question of law for the court, not for the jurv. 3 Every holder of municipal bonds issued to raise money to pay such a subscription, whether lie receives them directly from the town or county, or from the railway company to which they may have been delivered, or takes them from some prior holder in the ordinary course of business, is chargeable with notice of the stat- utory provisions under which they were issued. 4 The right to make a donation to a railroad or other work of 1 " To become stockholders in private corporations," says Judge Dillon, " is manifestly foreign to the usual pur- poses intended to be subserved by the creation of corporate municipalities." Dillon on Munic. Corp., £ 161 ; Kelley v. Milan. 127 U. S., 139 (1888). See, also. Kenicott v. Supervisors, 16 Wall., 452 (1872); Thompson v. Lee County, 3 id., 327 (1865); BelL v. Railroad Co., 4 id., 598 (1866); Wells v. Supervisors, 102 U. S., 625 (1880) : Lamoille, etc., R R Co. v. Fairfield, 51 Vt, 257 (1878); Barnes v. Lacon, 84 111., 461 (1877), holding that a vote of the people of a town to subscribe for stock without the authorization of law is not binding upon the town. To same effect, Allen v. Louisiana, 103 U. S., 80 (1880): Pennsylvania R R Co. v. Philadelphia, 47 Penn. St, 189 (1864); City of Jonesboro' v. Cairo, etc., R. R Co., 110 U. S., 192 (1883), holding that a general power to borrow money and issue bonds therefor does not confer the right to subscribe for stock, even with the sanction of the voters at a general election. Cf. Gelpcke v. Dubuque, 1 Wall.. 220 (1863) ; Campbell v. Paris, etc., R R. Co., 71 111., 611 (1874); East Oakland v. Skinner, 94 U. S., 255 (1876) ; City of Lynchburg v. Slaughter, 75 Va., 57 (1880); Brodie v. McCabe, 33 Ark., 690 (1878). A municipal corporation cannot enforce a penal bond, given to it by a plank-road company, conditioned that the latter will use to build its road cer- tain bonds issued by the former, it ap- pearing that the aid to the plank-road company was ultra vires of the munici- pality. City Council, etc., v. Montgom- ery, etc., Co., 31 Ala., 76 (1857). Attor- ney-general may restrain municipality from illegally issuing bonds to a rail- road company. State v. Saline, etc., Court, 51 Mo., 350 (1873), reviewing the English and American cases. 2 Sharpless v. The Mayor, 21 Penn. St, 147 (1853) ; Leavenworth Co. v. Miller, 7 Kan., 479 (1871). Cf. Welch v. Post. 99 111., 471 (1881); Marsh v. Fulton Co.. 10 Wall., 676 (1870), holding that the power to subscribe to the stock of a railroad is not sufficient to authorize a subscrip- tion to a new incorporation of a part of it; La Fayette v. Cox, 5 Ind.. 38 (1854); Dillon on Munic. Corp., § 161 ; Ottawa v. Carey, 108 U. S., 110 (1883); Lewis v. City of Shreveport, 108 id., 282(1883). 3 Post v. Supervisors, 105 U. S.. 667 (1881): Leavenworth Co. i: Miller, supra. 4 Ogden V. County of Daviess 102 U. S., 634 (1880) ; Lewis v. City of Shreve- port 108 id., 282 (18S3); City of Ottawa v. Carey. 108 id., 110 (188:!): McClure v. Township of Oxford, 94 id., 429 (1876 . This is the settled rule of the supreme court of the United States on this point. 131 91.] MUNICIPAL SUBSCRIPTIONS [CH. VI. internal improvement must equally be derived from the act of the legislature. Without such express authority of law, a dona- tion or issue of bonds as a gift to a railroad company is invalid and void. 1 § 91. The legislature may authorize municipal subscriptions to public but not to private enterprises.— It was long a question whether the legislature had the constitutional right to authorize a municipality to subscribe money, or donate it, in furtherance of any enterprise not governmental in its nature. It has been con- tended with great ability and learning that such a right does not inhere in the legislative branch of the government in this country, and consequently that such assumed grants are unconstitutional and void. 2 But it is now a well-settled rule that the legislature has the constitutional power to authorize a municipal corporation, by its charter or an express act, to subscribe to the stock of a railway or other ^wa^'-public corporation, and to issue and sell its bonds for that purpose. 3 The inclination of municipalities to repudiate i Dixon County v. Field, 111 U. S., 83 (1884). The power of the legislature to au- thorize a municipality to donate funds or bonds herein is absolutely denied in Hanson v. Vernon, 27 Iowa, 28 ; Sweet v. Hulbert, 51 Barb., 312 (1868). Cf. Commissioners v. Miller, 7 Kan., 479. The railroad cannot collect, as a dona- tion, money which was voted as a sub- scription. Crooks v. State, 4 N. E. Rep., 589 (Ind., 1886). A gift of bonds is invalid. So, also, of a subscription payable in bonds where part of the bonds are turned back for the stock. Post v. Pulaski County, 49 Fed. Rep., 628 (1892). 2 Cooley on Const Lim., pp. 261-266; Dillon on Munic. Corp., §§ 12, 117, 153. For the rule in Michigan, Iowa and New York, see next note. Concerning the public phases of mu- nicipal aid to railroads, see Cook on The Corporation Problem, pp. 99-101. 3 So held by the supreme court of the United States. Knox County v. Aspin- wall, 21 How., 539 (1858); Zabriskie v. Railroad Co., 23 id., 381 U859); Amey V. Mayor, 24 id., 364, 376 (1860); Curtis v. Butler Co., 24 id., 435 (1860) ; Gelpcke v. Dubuque, 1 Wall., 175 (1863) ; Mercer Co. v. Hackett, 1 id., 83 (1863) ; Seybert v. Pittsburgh. 1 id.. 272 (1863) ; Van Has- trupr. Madison, 1 id., 291 (1863); Have- meyer v. Iowa Co., 3 id., 294 (1865); Thompson v. Lee County, 3 id., 327 (1865); Rogers v. Burlington, 3 id., 654 (1865), holding that power "to borrow money for any public purpose" gives authority to borrow to aid a railroad company ; Mitchell v. Burlington, 4 id., 270 (1866) ; Von Hoffman v. Quincy, 4 id., 535 (1866) ; Campbell v. Kenosha, 5 id., 194 (1866), holding that a subscrip- tion may be validated by subsequent legislation, and such validation may be by implication; holding that levy of tax and payment of interest validates bonds irregularly issued ; Meyer v. Mus- catine, 1 id., 384 (1863) ; Lee County v. Rogers, 7 id., 181 (1868) ; Beloit v. Mor- gan, 7 id., 619 (1868); City of Kenosha v. Lamson, 9 id., 477 (1869); Railroad Co. v. County of Otoe, 16 id, 667 (1872); S. C, 1 Dillon, 338, holding that, unless restrained by provisions of the consti- tution of a state, its legislature may au- thorize a county to issue bonds and do- nate them to the railroad company which will give it a valuable connec- tion with some other region. As to the legislative power, donations and sub- 132 C1I. VI.] MUNICIPAL SL'CSCRIPTIOXS. [§01- their obligations after receiving the benefits of those obligations has been thwarted bv the courts. And the result is a satisfactorv one. Any other decision would have checked the growth of the country, unsettled investments, and brought upon American munic- scriptions for stock stand on the same ground. Town of Queensbury v. Cul- ver, 19 Wall., 83 (1873); Woods v. Law- rence Co., 1 Black, 380 (1861), holding that where, by statute, the grand jury of a county is required to fix the amount of the subscription, their act in pursu- ance thereof cannot afterwards be ques- tioned by the county as to such amount ; and if payment is to be made as may be agreed upon, an issue of bonds for that purpose is binding upon the county ; Oilman v. Sheboygan, 2 Black, 510 (1862), holding that a statute authoriz- ing a city to borrow money, and to tax property to pay it, does not constitute such a contract with the bondholders that the state cannot afterwards modify the taxation even by the exemption of portions of taxable property ; Olcott v. Supervisors, 16 id., 678 (1872); Rock Creek v. Strong, 96 U. S., 271 (1877) ; Hickory v. Ellery, 103 id., 423 (1880); Clay Co. v. Society for Savings, 104 id., 579 (1881) ; Taylor v. Ypsilanti, 105 id., 60 (1881) ; Lewis v. Barbour Co., 105 id., 739(1881); Amoskeag National Bank v. Ottawa, 105 id., 667 (1881); Woods v. Lawrence Co., 1 Black, 386 ; Oilman t\ Sheboygan, 2 id., 510 ; Town of Scipio v. Wright, 101 U. S., 665 (1879). And in the circuit and district courts of the United States. Long v. New London, 9 Biss., 539 (1880); Sibley v. Mobile, 3 Woods, 535 (1876); United States v. New Orleans, 2 id., 230 (1876). Alabama — Stein v. Mayor, etc.. 24 Ala., 591 (1854); Opelika v. Daniel, 59 Ala., 211 (1877); Ex parte Selma, etc., R. R. Co., 45 id., 696 (1871) ; Gibbons v. Mobile, etc., R R Co., 36 id., 410 (1860). Arkansas — Mississippi, etc., R R. Co. v. Camden, 23 Ark., 300 (1861) ; English v. Chicot Co., 26 id., 454 (1871); Jackson- port v. Watson, 33 id., 704 (1878). California — Robinson v. Bidwell, 22 Cat. 379 (1863); People v. Coon, 25 id, 635 (1864); Napa Valley R R Co. v. Napa County, 30 id., 435 (1866); Stock- ton, etc., R R, Co. v. Stockton, 41 id., 147 (1871). Colorado — People v. Pueblo Co., 2 Col., 360 (1874). Connecticut — Bridgeport v. Housa- tonic R. R Co.. 15 Conn., 475 (1843), holding that a subscription made by a city without authority may be made valid by subsequent legislative action ; in this case the validating statute was passed upon the application of the city making the subscription ; Beardsley i\ Smith, 16 id., 368 (1844); Society, etc., v. New London. 29 id., 174 (1860); Doug- lass v. Chatham, 41 id., 211 (1874). Florida — Cotton v. Leon Co.. 6 Fin., 610 (1856). Georgia — Winn v. Macon. 21 Ga.. 275 (1857); Powers v. Inferior Court of Dougherty County, 23 id., 65 (1857). Illinois — Shaw v. Dennis, 5 Gilm., 405 (1849) ; Prettymau v. Tazewell Co., 19 111., 406 (1858), holding that an in- junction on the ground of fraud at an election authorizing a subscription will not be granted to one who delays until others have actod upon the faith that the municipal corporation will aid an enterprise; Robertson v. Rockford. 31 id., 451 (1859); Supervisors of Schuyler Co. v. People, 25 id.. 181 (1860); Butler v. Dunham. 27 id., 474 (1861); Dunnovan V. Green, 57 id.. 63 (1870): Madison Co. v. People, 58 id.. 456 (1871); Chicago, etc., R R Co. v. Smith. 62 id.. 268(1871); Decker v. Hughes, 68 id.. 33 (1873); Quincy, etc.. R. R Co. v. Morris, 84 id., 410 (1877); Chicago, etc., R R. Co. v. Aurora, 99 id.. 205 (1881); Olcott v. Su- pervisors, 16 Wall., 678 (1872). But see Weightman v. Clark, 103 U. S., 256 (1880). Indiana — City of Aurora v. West, 9 Ind, 74 (1857); S. C, 22 id., 88; Evans- 133 § oi.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. ipalities the disgrace and disastrous loss of credit which arise from repudiation. The act of the legislature authorizing a municipal subscription, however, will not avail to validate such a contract, unless it is duly ville, etc., R R Co. v. Evansville, 15 id., 395(1860); Board of Bartholomew Co. v. Bright, 18 id., 93 (1862); Thompson v. City of Peru, 29 id., 305(1868); Lafay- ette, Muncie, etc., R. R Co. v. Geiger, 34 id., 185 (1870); John v. Cincinnati, etc., R R Co., 35 id., 539 (1871); Com- missioners of Crawford Co. v. Louis- ville, etc., R R Co., 39 id.. 192 (1872) ; Mt. Vernon v. Hovey, 52 id., 563 (1876); Indiana, etc., R R Co. v. Attica, 56 id., 476 (1877) ; Williams v. Hall, 65 id., 129 (1879) ; Bittinger v. Bell, 65 id., 445 (1879) ; Brocaw v. Gibson Co., 73 id., 543 (1881) ; Peed v. Millikan, 79 id., 86 (1881). Iowa— "In Iowa, up to 1858, it was held that such acts were constitutional ; but from that time up to 1869 they %vere held to be unconstitutional, when the court seems to have undergone a radi- cal change, and from that time to the present the constitutionality of such measures has been sustained." Wood on Railways, p. 264, citing Dubuque Co. v. Dubuque, etc., R R Co., 4 Greene (Iowa), 1 (1853); State v. Bissell, 4 id., 328 (1854); Clapp v. Cedar Co., 5 Iowa, 15 (1857); McMillen v. Lee Co., 6 id., 391 (1858). The above authorities, prior to 1858, hold these acts constitutional, as do the following, handed down since 1869 : Stewart v. Polk Co., 30 Iowa, 9 ! (1870): Bonnifield v. Bidwell, 32 id.. 149; Jordan v. Hayne, 36 id., 9(1872); Muscatine, etc., R R Co. v. Horton, 38 id.. 33 (1873); Wapello v. B. & M. R R Co., 44 id., 585 (1876); McMilleu v. Boyles, 6 Iowa, 304 (1858); Games v. Robb, 8 id., 193 (1859) ; Chamberlain v. Burlington, 19 id.. 395, holding that a charter authorizing a city to borrow money for " any public purpose " does not confer power to aid in constructing a railroad ; particularly King v. Wilson, 1 Dillon, 555 (1871), as to how far the federal courts will follow the state courts as to the constitutionality of such statutes. While the following cases, decided between 1858 and 1869, hold such acts unconstitutional and void Stokes v. Scott, 10 Iowa, 166 (1859) State v. Wapello, 13 id., 388 (1862) Myers v. Johnson, 14 id., 47 (1862). See, also, in general, Doon Township v. Cum- mins, 142 U. S.. 366 (1892). Kansas — City of Atchison v. Butcher, 3 Kan., 104 (1865) ; Leavenworth Co. v. Miller, 7 id., 479 (1871); Southern, etc., R. R Co. v. Towner, 21 Pac. Rep., 220 (Kan., 1889); Morris v. Morris Co., 7 id., 576 (1871) ; State v. Nemaha Co., 7 id., 542 (1871) ; Barnes v. Atchison, 2 id., 454 (1864) ; Leavenworth, etc., R R Co. v. Douglas Co., 18 id., 169 (1877) ; Turner v. Commissioners, etc., 27 Kan., 314 (1882), holding that, where the amount of bonds voted to be issued was in ex- cess of the amount which a township might legally issue, the vote was a nul- lity only as to the excess. Kansas City, etc., R R v. Richmond T., 25 Pac. Rep., 595 (Kan., 1891): Hutchinson, etc., R R v. Fox, 28 Pac. Rep.. 1078 (Kan., 1892). Kentucky —Talbot v. Dent, 9 B. Mon., 526 (1849); Slack v. Maysville, etc., R R Co., 13 id., 1 (1852) ; Maddox v. Graham. 2 Mete, 56 (1859) ; Shelby Co. Court v. Cumberland, etc., R R Co., 8 Bush, 209 (1871), holding that a subscription not authorized by law may be validated by later legislation; Allison v. Versailles, etc., R R Co., 10 id., 1 (1873) ; Chaffee County v. Potter, 142 U. S., 355 (1892); Christian, etc., Court v. Smith, 13 S. W. Rep., 276 (Ky., 1890): Christian Co. Court v. Smith, 12 S. W. Rep., 134 (Ky., 1889). A railroad cannot be taxed to aid in paying a municipal subscription to its construction. Louisville, etc., R R v. Com'th, 12 S. W. Rep., 1064 (Ky., 1890). Louisiana— Police Jury v. McDon- 134 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§91. passed in accordance with all the constitutional formalities; 1 and after a subscription is made, any act of the legislature restricting or abridging the taxing power so as to deprive the municipality of ough. 8 La. Ann., 341 (1853); Parker v. Scogin. 11 id.. 629 (1856). Of. Wilson v. Shreveport, 29 id., 673 (1877). Maine — Augusta Bank v. Augusta, 49 Me., 507 (1860) ; Stevens v. Anson, 73 id.. 489 (1882). Massachusetts — Supervisors v. Wis- consin, etc., R. R Co., 121 Mass., 460 (1877), holding that the legislature of Wisconsin has power to authorize counties to subscribe for stock in aid of railroads and to issue bonds therefor. Michigan — In Michigan the courts hold that statutes authorizing munici- pal corporations to subscribe to the stock of a railroad or vote bonds to it are void, and the subscription and bonds are void. People v. Salem, 20 Mich., 452 (1870) ; Thomas v. Port Hud- son, 27 id., 320 (1873); Bay City v. State Treasurer, 23 id., 499 ; People v. Detroit, 28 id., 228 (1873). But see Talcott v. Pine Grove, 1 Flippin (U. S.), 120 (1871), where the position taken by the court of Michigan was held to be so contrary to precedent and so unexpected as to operate as a surprise upon the commu- nity ; S. C. affirmed, sub nom. Town- ship of Pine Grove v. Talcott, 19 Wall., 660 (1873), which was adhered to in Taylor v. Ypsilanti, 105 U. S., 60 (1881). See, also, Chickaming v. Carpenter, 106 U. S., 663 (1882). Minnesota — Davidson v. Ramsey Co., 18 Minn., 482 (1872) ; State v. Clark, 23 Minn., 422 (1877) ; Kimball v. Lakewood, 41 Fed. Rep., 289 (1890). Mississippi — Strickland v. Railroad Co.. 27 Miss., 209; New Orleans, etc., R. R Co. v. McDonald, 53 Miss., 240 (1876); Wells v. Supervisors, 102 U. S., 625 (1880) ; Madison County v. Priestly, 42 Fed. Rep., 817 (1890). Missouri — St. Louis v. Alexander, 23 Mo., 483 (1856) ; St Joseph, etc., R R. Co. v. Buchanan Co., 39 Mo., 485 (1867): State v. Macon County Court. 41 id., 1 (1867); Chillicothe, etc., R R. Co. o. Brunswick, 44 id.. 553 (1867) : State v. Linn Co., 44 id., 504 (1869); Same v. Sul- livan Co.. 51 id., 522 (1873); Osage Val- ley, eta, R. R Co. v. Morgan County. 53 id., 156(1873): Smith v. Clark County. 54 id., 58 (1873) ; State v. Greene County, 54 id., 540 (1874) ; State v. Hannibal, etc., R R, 13 S. W. Rep. 505 (Mo.. 1890)t Nebraska — Hallenbeck v. Hahu. 2 Neh., 377 (1873) ; Reineman r. Coving- ton, etc., R R Co.. 7 id., 310 (1878). holding that, if a county votes aid to a railroad in excess of the sum allowed by the law. such act is void and will not authorize the issue of any bonds what- ever; Railroad Company v. County ot Otoe, 16 Wall., 667 (1872 . Nevada — Gibson v. Mason, 5 Nev., 283(1869); Dixon County v. Field, 111 U. S., 83 (1884); Lincoln County v. Lim- ing, 133 U. S., 529 (1890). New Hampshire — Perry v. Keane, 56 N. H., 514 (1876> New Jersey — Bernards Township v. Morrison. 133 U. S., 523 (1890). New York — In New York the courts have unwillingly sustained the validity of such grants. Clarke v. Rochester. 28 N. Y, 605 (1864); Grant v. Courter, 24 Barb., 232 (1857) ; Benson v. Albany. 24 id., 248(1857); People v. Henshaw. 61 id., 409 (1870) ; Ex jwte Tax-payers of Kingston, 40 How. Prac. 444 (1870) ; Gould v. Town of Oneonta. 71 N. Y., 298(1877); Sweet V. Hurlburt, 51 Barb., 312 (1868), denying the constitutional- ity of a donation of bonds. O/. People v. Batchellor, 53 N. Y.. 128 (1873), hold- ing that a municipal corporation cannot be compelled by the legislature, against its consent and that of its tax-payers, to become a stockholder in a corporation i Amoskeag Nat'l Bank v. Town of Ottawa, 105 U. S., 667 (1881). 135 §91.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. the power to pay the bonds is unconstitutional and void. 1 In Cali- fornia the courts go even to the extent of holding that the legis- lature may compel a municipality to subscribe to the stock of a which is private in character (as here, a railroad) — a statute for such a purpose is void ; Queensburg v. Culver, 19 Wall., 82 (1873), in which the New York doc- trine is denied by the supreme court of the United States. But the law is clear, in New York, that such statutes and subscriptions thereunder are constitutional. Bank of Rome v. Rome, 18 N. Y, 38 (1858); Starin v. Genoa, 23 N. Y, 439 (1861); Town of Solon v. Williamsburg Saving Bank, 21 N. E. Rep., 168 (N. Y., 1889); Alvord v. Syracuse Sav. Bank, 98 N. Y., 599 (1885), holding that the legislature may give to the bonds a negotiability which is not given to them by the court ; Craig v. Town of Andes, 93 N. Y, 405 (1883), holding that bonds, even in bona fide hands, are void where part of the consents thereto were conditional, even though the bond recites that all legal steps to comply with the law were taken ; Town of Lyons v. Chamberlain, 89 N. Y, 578 (1882), where the person to whom illegal bonds were issued was held to account for them ; Cagvvin v. Town of Hancock, 84 N. Y, 532 (1881), holding that the town may set up that a majority did not vote for the issue of the bonds ; that the federal decisions will not be followed ; that an innocent holder is not protected, and that " the bonding acts are now regarded as hos- tile to a sound public policy ; " Town of Springfort v. Teutonia Sav. Bank, id., 403 (1881), also holding that the affidavit of assessors as to the vote is only prima facie evidence. To same effect see Dodge v. County of Platte, 82 N. Y, 218 (1880), declaring void certain Missouri municipal bonds ; Duanesburgh v. Jen- kins, 57 N. Y, 177 (1874), sustaining the constitutionality of bonding acts and reviewing the New York cases ; People v. Mitchell, 35 id., 551 (1866) ; S. C, 45 Barb., 208 ; People v. Spencer, 55 N. Y., 1 (1873) ; Williams v. Duanesburgh, 66 id., 129(1876); Horton v. Thompson, 71 id., 513(1878); affirmed, 101 U. S., 665. In New York an effectual remedy against the illegal bonding of a town in aid of a railroad is found in holding lia- ble to the town the parties who pro- moted the aid, for all sums paid by the town to bona fide holders of the bonds. Farnham r. Benedict, 107 N. Y, 159 (1887). A suit in equity to cancel ille- gal municipal bonds does not lie, except where the defendant fails to allege that there is a remedy at law. Town of Mentz v. Cook, 108 N. Y, 504 (1888). Long delay may bar the right of a mu- nicipality to have such bonds canceled. Calhoun v. Millard, 121 N. Y, 69 (1890). See, also, in general, Town of Solon v. Williamsburgh, etc., Bank, 114 N. Y., 122 (1889) ; Brownell v. Town of Green- wich, id., 518 (1889). North Carolina — Taylor v. Newberne, 2 Jones' Eq., 141 (1855); Caldwell v. Burke Co., 4 id., 323 (1858) ; Hill r. Com- missioners of Forsyth Co., 67 N. C, 367 (1870); Wood v. Com'rs of Oxford, 2 S. E. Rep. (N. C, 1887); McDowell v. Rutherford, etc., Co., id., 351 (N. C, 1887); Goforth v. Same, id, 361 (id.). Ohio — Cincinnati, etc., R R Co. v. Clinton Co., 1 Ohio St, 77 (1852); Steu- benville, etc., R R Co. v. North Town- ship, 1 id., 105 (1852) ; Cass v. Dillon. 2 id., 607 (1853); Thompson v. Kelley, 2 id., 647 (1853) : State v. Union Township, 8 id., 394 (1858); State v. Com'rs, etc., 11 Ohio St, 183 (1860); Commissioners of Knox Co. v. Nichols, 14 id., 260 (1863) ; Fosdick v. Perrysburg. 14 id., 472 (1863) ; Same v. Goshen, 14 id., 569 (1863); i Wolff v. New Orleans, 103 U. S., 358 Ala., 145 (1881); Hays v. Dowes, 75 Mo., (1880). Cf. Edwards v. Williamson, 70 250 (1881). 136 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§ 91. railway company and to issue its bonds in payment thereof. 1 But this extreme view is disapproved in JSew York 2 and in Illinois, 3 the courts in these states taking the better ground that, while it is competent for the legislature to authorize a municipal subscription in a proper case, there is no power anywhere to compel such a subscription or donation. Walker v. Cincinnati, 21 id., 14 (1871) ; Virginia — Goddin v. Crump. 8 Leigh, S. C, sub nom. Cincinnati v. Walker, 1 120 (1837) ; Board of Sup"rs v. Randolph, Cin., 121 (1871). 16 S. E. Rep., 722 (Va., 1893). See, also, Pennsylvania — Commonwealth v. Goshorn v. Ohio County, 1 West Va., McWdliams, 11 Penn. St., 61 (1849); 308(1865). Brown v. Commissioners, 21 Penn. St., Wisconsin — Clark v. Janesville, 10 37 (1853); Sharpless v. Philadelphia, 21 Wis., 136 (1860); Bushnell v. Beloit, 10 id., 147 (1853); Moers v. Reading, 21 id., id., 195 (1860); Foster v. Kenosha, 12 188(1853); Commonwealth v. Allegheny Wis., 616; Veeder v. Lima, 19 id., 280 Co., 32 id., 218 (1858); Same v. Pitts- (1865); Fisk v. Kenosha, 26 id., 23 (1870) ; burgh, 34 id., 496 (1859): Same v. Same, Phillips v. Albany, 28 id., 340 (1871); 41 id., 278 (1861); Same v. Perkins, 43 Rogan v. Watertown, 30 id., 259(1872); id., 400; Pennsylvania R. R. Co. v. Phil- Lawson v. Milwaukee, etc., R. R Co., 30 adelphia, 47 id., 189 (1864) ; Riddle v. id., 597 (1872) ; Oleson v. Green Bay, etc., Philadelphia, etc., R. R Co., 1 Pittsb., 36 id., 383 (1874). Cf. Whiting v. She- 158 (1872); County v. Brinton, 47 Pa. St, boygan, etc., R. R Co., 25 id., 167 (1870). 367(1864). Municipal gift of land to a railroad. South Carolina — Copes v. Charleston, Northern P. R. R Co. v. Roberts, 42 10 Rich. Law, 491 ; County of Lancaster Fed. Rep., 734 (1890). A county cannot v. Cheraw, etc., R R., 5 S. E. Rep, 338 donate land to a railroad. Ellis f. North- (S. C, 1888) ; State v. Whitesides, 9 S. E. em, etc., R R, 45 N. W. Rep., 811 (Wis., Rep., 661 (S. C, 1889) ; Floyd v. Perrin, 1890). 8 S. E. Rep, 14 (S. C, 1888). The leading cases upon the constitu- Tennessee — Tax-payers of Milan v. tionality of statutes authorizing mu- Tennessee, etc., R R. Co., 11 Bax., 329; nicipal subscription to railroads are County of Wilson v. National Bank, 103 Goddin v. Crump, 8 Leigh, 120 (1837) — U. S., 770 (1880); Nichols v. Nashville, 9 which is said by Judge Dillon to be the Humph., 252 (1848); Louisville, etc., R. first in the long series; Leavenworth R Co. v. County Court, 1 Sneed, 637 County v. Miller, 7 Kan., 479 (1871); (1854) ; Williams v. Duck River, etc., R. Slack v. Maysville & Lexington R R R Co., 9 Bax., 488 (1876) ; Clay v. Haw- Co., 13 B. Mon., 1 (1852) ; Knox Co. v kins, 5 Lea, 137 (1880); Lauderdale Co. Aspinwall, 21 How. (U. S.), 539 (1858); v. Fargason, 7 id., 153 (1881) ; Winston Sharpless v. Mayor, 21 Penn. St., 147 v. Tennessee, etc., R R Co., 57 Tenn. (1 (1853). Bax.), 60 (1873). i Napa Valley R R Co. v. Napa Texas — San Antonio v. Jones, 28 County, 30 Cal., 435 (1866). Texas, 19 (1866) ; Same v. Lane, 32 id., 2 People v. Batchelor, 53 N. Y., 128 405 (1869); Same v. Gould, 34 id., 49 (1873). Cf. Queensburg v. Culver, 19 (1870). WalL (U. S.), 82 (1873). Vermont — Bennington v. Park, 50 3 Cairo, etc., R R Co. v. Sparta, 77 Vr., 178 (1877) ; First National Bank of 111., 505 (1875). St Johnsbury v. Concord, 50 id., 257 (1877). 137 § 91.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. While it may be conceded that, from a constitutional standpoint as well as from that of public policy and expediency, there are grave objections to the existence or exercise of this power, which has plainly been monstrously abused, 1 it is clear that the courts, almost universally, as has been shown, have taken and will continue to hold the most liberal views as to the legislative prerogative in this respect. Such authority inhering in the legislature is generally conceded. A municipality which has not yet been incorporated cannot hold an election and vote a subscription for stock. The subscription is void. 2 But a de facto municipal corporation recognized by the leg- islature cannot defeat its bonds by alleging irregular incorporation. 3 It is no objection to the validity of the legislative act, or the mu- nicipal subscription, that the subscription is made to a railway company not yet in existence, 4 or to the company that first builds the road. 5 It must not be overlooked, however, that municipalities never have the power, by virtue of any of these legislative enactments, to tax themselves for the benefit of enterprises or objects which are private in their nature. Municipal subscriptions can only be made to the stock of companies of an essentially public character. This is a rule conclusively settled and plainly salutary. 6 Questions i Dillon on Munic. Corp., §§ 12, 117, (1875); Railroad Co. v. Falconer, 103 id, 157; Cooley on Const. Lim., $ 261 et seq. 821 (1880). Contra, Rubey v. Shain, 54 2 Clark v. Janesville, 13 Wis., 414 Mo., 207 (1873); People v. Franklin, 5 (1861); S. C, 10 id., 136; Rochester v. Lans. (N. Y.), 129(1871). Alfred. 13 id., 432 (1861); Berliner v. 5 North v. Platte County, 45 N. W. Waterloo. 14 id.. 378 (1861). See Lewis Rep., 692 (Neb., 1890). v. Clarendon, 5 Dillon, 329 (1878), to ef- 6 Loan Association v. Topeka, 20 feet that, if authority is given "to any Wall, 655 (1874); Weismer v. Village of incorporated town or city " to subscribe Douglass, 64 N. Y., 91 (1876) ; Bissell v. for stock, it is not limited to such towns Kankakee, 64 111., 249 (1872); Brewer as are incorporated when the act was Brick Co. v. Brewer, 62 Me., 62 (1873); passed. Allen v. Inhabitants of Jay, 60 id., 124 3 Comanche County v. Lewis, 133 U. (1872); Lowell v. Boston, 111 Mass., 463 S. ; 198 (1890). (1873); State v. Osawakee Township, 14 4 In the County of Daviess v. Huide- Kan., 418 (1875); McConnell v. Hamm, koper it is held that county bonds in the 16 id., 228 (1876); Union Pacific R R. hands of a bona fide holder for value Co. v. Smith, 23 id., 745 (1880); Clark v. are not rendered void by the fact that, Des Moines, 19 Iowa, 199 (1865) ; Fred- at the time the vote authorizing the erick v. Augusta, 5 Ga., 561 (1848): subscription was taken, the company Commercial Bank v. City of Iola, 2 to be benefited was not created accord- Dillon, 353 (1873); Savings Assoc, v. ing to law. 98 U. S., 98 (1878). To Topeka, 3 id., 376 (1874). Cf. Bloodgood same effect, James v. Milwaukee, 16 v. Mohawk, etc., R. R, Co., 18 Wend., Wall., 159 (1872). See, also, Concord v. 9, 65 (1837). [Compare with this case Portsmouth Savings Bank, 92 U. S, 625 Chapman v. Gates, 54 N. Y„ 132, 144 138 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§92. involving the distinction between public and private uses are con- stantly arising when the validity of municipal bonds is the issue, and the courts very consistently adhere to the rule that municipal aid can lawfully be extended only to railways, or other enterprises of a distinctly public or qiiasi-])ub\ic character. 1 § 92. Constitutional provisions prohibiting municipal subscrip- tions. — The unchecked exercise of this power on the part of the state legislatures- has entailed upon the people of the states such a burden of taxation 2 that in many states are found constitutional prohibitions rendering it unlawful for municipal corporations to make subscriptions or lend their credit to any incorporated com- (1873).] Osborne v. Adams Co., 109 U. S.. 1 (1883) : & C, 106 U. S., 181 ; Ot- tawa v. Carey, 108 U. S., 110 (1883); Freeland v. Hastings, 10 Allen, 570 (1865); Jenkins v. Andover, 103 Mass., 91 (1869) ; People v. Salem, 20 Mich., 452 (1870); Curtis v. Whipple, 24 Wis., 350 (1869); Cook v. Manufacturing Co., 1 Sneed (Tenn.), 698 (1854); Cooley on Const. Lim., § 212. 1 A municipal donation to a private manufacturing concern is void. Cole v. La Grange, 113 U. S., 1 (1884). Aid to bridge manufacturing and iron-works company held void. Loan Assoc, v. Topeka, 20 Wall., 655 (1874). Same as to hydraulic works. Weismer v. Doug- lass, 64 N. Y.. 91 (1876). Also to linen company. Bissell v. Kankakee, 64 111., 249 (1872). Also exempting manufact- uring companies from taxes for ten years. Brewer Brick Co. v. Brewer, 62 Me., 62 (1873). Also loan of credit to saw-mill and box factory. Allen v. In- habitants, 60 Me., 124 (1872). Also to loan to persons rebuilding after a fire. Lowell v. Boston, 111 Mass., 454. Or to relieve the destitute poor. State v. Osawkee, etc., 14 Kan., 418 (1875). Or to aid in constructing a woolen mill. McConnell v. Hamra, 16 Kan., 228 (1876). Or to build a dam. Union Pac. R. R Co. v. Smith. 23 id., 745 (1880). Or to construct a toll-bridge. Clark v. Des Moines, 19 Iowa, 199 (1865). To aid a company which manufactures bridges, plows, stoves, etc. Commercial Bank v. City of Iola, 2 Dill., 353 (1873); Sav- ings Ass'n v. Topeka, 3 Dill, 376 (1874). Cf. Bloodgood v. Mohawk, etc., R. R. Co., 18 Wend., 9, 65 (1837) ; Chapman v. Gates, 54 N. Y., 132, 144 (1873). Or to aid a steam-grist mill. Osborne v. Adams Co., 109 U. S., 1 (1883); S. C, 106 U. S., 181. Or to aid the development of a water-power. Ottawa v. Carey, 108 U. S., 110 (1883). Or to repay to persons money paid by them for substitutes in the army. Freeland v. Hastings, 10 Allen, 570. As to tax for a school-house, see Jenkins v. Andover, 103 Mass., 94 (1869). As to payment of money on ac- count of drafting of soldiers, see Thomp- son v. Pittston, 59 Me., 545; Tyson v. School Directors, 51 Pa. St., 9 (1865). Aid to a private school is void (Curtis' Adm'r v. Whipple, 24 Wis., 350); or to a manufacturing company. Cook v. Manuf'g Co., 1 Sneed (Tenn.), 698; Cooley on Const. Lim., § 212. A munic- ipality has no power to invest in the stock of a steamship company (Penn., etc., v. Philadelphia, 47 Pa. St., 189) ; nor to operate free ferries (Jacksonport v. Watson, 33 Ark., 704); but a sub- scription to a turnpike company has been held legal. Clark v. Leathers, 5 S. W. Rep.. 576 (Ky., 1887); City of Aurora v. West, 9 Ind., 74; S. C, 22 id., 88. And to obtain a water supply. Frederick v. Augusta, 5 Ga., 561 (1848). -' Dillon on Munic. Corp., §g 156, 160. The sum of municipal indebtedness in this country is said to exceed one thou- sand millions of dollars, and the amount is constantly increasing. 139 §92.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. pany or enterprise, not strictly and exclusively governmental in its nature and constitution. This is the case in Pennsylvania, 1 Ohio, 2 Illinois, 3 New York, 4 Indiana, 5 Missouri, 6 Mississippi, 7 and in some other states. 8 In general it will be found that these consti- tutional provisions forbid in terms any subscription or lending of credit by any municipality in the state, or by the state itself, to any company, association or corporation whatsoever. Sometimes the prohibition is absolute, and at other times two-thirds or a majority of the qualified electors of the municipality must vote to render such aid. The constitutional or statutory provisions which prohibit municipal subscriptions are construed to be prospective only, un- less they contain express words making them retroactive. 9 This i Amend, to Const. 1857, § 7, art. II ; Pennsylvania R R Co. v. Philadelphia, 47 Penn. St., 189 (1864). 2 Const., art VIII, § 6; Walker v. Cin- cinnati, 21 Ohio St, 14 (1871) ; Cass v. Dillon, 2 id., 607 (1853); Fosdick v. Per- rysburg, 14 id., 472 (1863) ; Thompson v. Kelly, 2 id., 647 (1853); Wyscaver v. At- kinson, 37 id., 80 (18811 3 Const 1870 ; Concord v. Portsmouth Savings Bank, 92 U. S., 625 (1875) ; Lou- isville v. Savings Bank, 104 U. S., 469 (1881) ; Harter v. Kernochan, 103 U. S., 562 (1880); Fairfield v. County of Galla- tin, 100 U. S., 47 (1879); Chicago, etc., R R Co. v. Pinckney, 74 111., 277 (1874) ; County of Moultrie v. Rockingham Ten Cent Savings Bank, 92 U. S., 631 (1875) ; Robertson v. Rockford, 21 111., 451. The constitutional prohibition in Illinois against lending credit applies to the state only, and not to counties or cities. 4 Amend. Const, Jan. 1, 1875; People n Fort Edward, 70 N. Y., 28 (1877) ; Dodge v. County of Platte, 82 id., 218 (1880), reversing S. C, 16 Hun, 285. 5 Const, art. X, § 10; Lafayette, etc., R R Co. v. Geiger. 34 Ind., 185 (1870) ; John v. Cincinnati, etc., R R Co., 35 id., 539 (1871) ; Aspinwall v. Jo Daviess Co., 22 How. (U. S.), 364 (1859); Brocaw v. Board of Commissioners, 73 Ind., 543 (1881). 6 Const, art XI, § 14 ; County of Schuy- ler v. Thomas, 98 U. S, 169(1878); Smith v. County of Clark, 54 Mo.. 58 (1873); County of Macon v. Shores, 97 U. S., 140 272 (1877) ; County of Ray v. Vansycle, 96 id., 675 (1877) ; County of Scotland v. Thomas, 94 id., 682 (1876). 7 Const, art. XII, § 14 ; Supervisors v. Galbraith, 99 U. S, 214 (1878); Hayes v. Holly Springs, 114 id., 120(1885); Gre- nada Co. v. Brogden, 112 id., 261 (1884). Cf. State of Minnesota v. Young, 29 Minn., 474 (1881). Where municipal aid bonds were issued under an unconstitu- tional statute, but are enforced by the United States courts in favor of bona fide holders, the municipality may re- cover back from the railroad company or its successor the amounts so paid to such bona fide holders. Town of Plain- view v. Winona, etc., R R Co., 32 N. W. Rep., 745 (Minn., 1887). In the case of Walker v. Cincinnati, 21 Ohio St, 14 (1871), the building of the Cincinnati Southern Railway by the city of Cin- cinnati was held legal, notwithstanding the State constitution forbade the legis- lature from authorizing any city, etc., becoming "a stockholder in any joint- stock company, corporation or associa- tion whatever." 8 Walker v. Cincinnati, 21 Ohio St., 14 (1871); S. C, 8 Am. Rep., 24, and 11 Am. Law Reg. (N. S.), 346, and the note by Judge Redfield. Where the statutes limit the amount of debt which a county may incur in aid of railroads, and aid is voted to the full amount, subsequent aid is void. Chicago, etc., R'y Co. v. Free- man, 16 Pac. Rep.. 828 (Kan., 1888). s s County of Moultrie u Rockingbam CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§92. principle is frequently applied when the constitutional enactment is passed after a municipal subscription is voted but before it is actually completed. 1 It has been held that a provision restricting the power of a state to make subscriptions in aid of railroads cannot be construed so as to prohibit the municipal subdivisions of the state from subscrib- ing. 2 And a restriction as to the power of a county will not be held applicable to a city. 3 School districts have no power to sub- Ten Cent Savings Bank, 92 IT. S., 631 (1875); Grenada Co. v. Brogden, 112 id., 261(1884); Fairfield «. County of Gal- latin, 100 id., 47 (1879) ; County of Ran- dolph v. Post, 93 U. S., 502 (1876) ; Ralls v. Douglass, 105 U. S., 728(1881) ; County, etc., v. Nicolay, 95 U. S., 619 (1877), hold- ing that when authority had been granted to a county in Missouri to sub- scribe, the power was not subject to a constitutional amendment requiring the assent of two-thirds of the voters of the county ; County, etc., v. Gillett, 100 U. S., 585, following and approving last case ; County, etc., v. Foster, 93 U. S., 567 (1876), to same effect, same constitution ; Louisiana v. Taylor, 105 IT. S., 454, to same effect, same constitution ; Durkee v. Board of Liquidation, 103 id., 646 (1S86); Howard County v. Paddock, 110 id., 384 (1884); Dallas County v. McKen- sie, 110 id., 686 (1884). The legislature cannot, after the adoption of a constitu- tional amendment prohibiting munici- palities from voting aid. remedy defects in votes taken before the amendment was adopted. Katzenberger v. Aberdeen, 121 IT. S., 172 (1887) ; Decker r. Hughes, 68 111., 33 (1873), holding that, where a new state constitution has been adopted, the old one governs as to bonds issued under its authority though not actually issued until after the adoption of the new one; County v. Moultrie, 105 IT. S., 370 (1881), holding that where a dona- tion in aid of a railroad had been voted by a county before the adoption of the new constitution of Illinois, bonds to pay it might be issued after its adoption. In Louisville r. Savings Bank, 104 IT. S., 469 (1881), it was held that the court would even take cognizance of the frac- tions of a day in order to do justice in such a case. Schall v. Bowman, 62 111., 321 (1872) ; Richards v. Donagho, 66 id.. 73 (1872); Wright v. Bishop, 88 id., 302 (1878). Contra, Jeffries v. Lawrence, 42 Iowa, 498 (1876); Falconer v. Buffalo, etc., R R. Co., 69 N. Y., 491 (1877); List r. Wheeling, 7 West Va., 501 (1874). Of. Hayes v. Holly Springs, 114 U. S., 120 (1885) ; Hendricks v. Jackson Co., 2 Mc- Crary, 615 (1880). 1 For cases involving a construction of the Illinois constitution and its effects on previous donations, see Fairfield v. Gallatin Co., 100 U. S., 47 (1879) ; Chi- cago, etc., R. R Co. v. Pinckney, 74 111., 277 (1874); Lippincott v. Pana, 92 id., 24 (1879): Middleport v. JEtna. Ins. Co., 82 id., 562 (1876). Cf. County of Moultrie v. Fairfield, 105 IT. S., 370 (1881); Enfield v. Jordan, 119 U. S., 680 (18S7). -'Pattison v. Supervisors, 13 Cal., 175 (1859); New Orleans «. Graihle, 9 La. Ann., 561 (1854); Slack v. Maysville, etc., R. R. Co., 13 B. Mom. 1 (18 Leavenworth Co. v. Miller, 7 Kan., 479 (1871); Prettymau v. Supervisors, 19111., 406 (1858). The courts are inclined to hold that a limit on the rate of taxation that a city may levy does not apply to a tax in aid of municipal subscriptions to railroads. Cf. People v. State Treasurer, 23 Mich., 499 (1871); Pitzmau v. Free- burgh, 92 HI., Ill (1879). 3 Thompson v. City of Peru, 20 Ind., 305 (1868); City of Aurora n West, 9 Ind., 74. Statute may prescribe that the aid voted shall not bind property outside of a town in the county, unless 141 §93.] MUNICIPAL SUBSCRIPTIONS. [CH. YT. scribe to the stock of a railway, and bonds issued to pay such a subscription are void. 1 § 93. Change in the slate constitution or the general statutory law after the municipal corporation has voted to subscribe. — Constitu- tional provisions or general statutes prohibiting municipal corpora- tions from subscribing to the stock of other corporations, or from lending their credit thereto, are, as we have seen, 2 prospective in their application. That which a corporation has the constitutional or statutory right to do, and which it has done in pursuance of that right or authority, cannot be affected or undone by subsequent constitu- tional change or amendment, or by the passage of general statutes. This is a fundamental rule of constitutional law. 3 If it be held a constitutional provision prohibiting these subscriptions has been passed. Richison v. People, 5 N. E. Rep. 121 (111., 1886). To the same effect, with regard to the constitution of 1875 of Nebraska, see State v. Lancaster Co., 6 Neb.. 214 (1870); and as to constitution of Missouri of 1865, see Louisiana v. Taylor, 105 U. S., 454 (1881); County of Cass v. Gillett, 100 id., 585 (1879); County of Scotland v. Thomas, 94 id., 682 (1876) ; County of Ray v. Vansycle. 96 id., 675 ; County of Calloway v. Fos- ter, 93 id., 567 (1876) ; County of Ralls v. Douglass, 105 U. S., 728 (1881). in which bonds issued under a city charter with- out a popular vote were held valid not- withstanding the provisions of a consti- tution adopted afterwards, but in force when the bonds were issued, required a submission of such matters to a vote; State v. Macon Co., 41 Mo., 453 (1867% to the same effect; State v. County Court, etc., 51 Mo., 522 (1873), to the same effect Cf. State v. Dallas Co., etc.. 72 Mo., 329 (1880), where a later statute was held to have taken away the power under a former one. A statute passed subsequently to a constitutional prohi- bition may legalize irregular subscrip- tion before prohibition. Bolles v. Brim- field, 120 U. S., 759 (1887). The repeal of the act authorizing a tax for munici- pal aid before any money has been ex- pended by the railroad, excepting a small sum for surveys, prevents a lessee the residents outside of the town vote in favor of it. Kentucky Union R'y Co. v. Bourbon Co., 2 S. W. Rep., 687 (Ky., 1887); Dillon on Munic. Corp., § 162, citing Butz v. Muscatine, 8 Wall, 575 (1869) ; Learned v. Burrington, 2 Am. Law Reg. (N. S.), 394, and note ; Leav- enworth v. Norton, 1 Kan., 432 (1863) ; Barnes v. Atchison, 2 id., 454 (1864). And see Commonwealth v. Pittsburgh, 34 Penn. St., 496 (1859) ; Amey v. Alle- ghany City, 24 How. (U. S.), 364 : Fos- dick v. Perry burg, 14 Ohio St., 472 (1863) ; Cumberland v. Magruder, 34 Md., 381 (1871); Assessors v. Commissioners, 3 Brewst. (Pa), 333 (1869) ; State v. Gut- tenburg, 38 N. J. L, 419. i Weightman v. Clark, 103 U. S., 256 (1880). 2 §92. 3 See, in regard to the Illinois consti- tution, County of Clay v. Society for Savings, 104 U. S., 579 (1881); People v. Logan County, 63 111., 374(1872) ; County of Moultrie v. Savings Bank, 92 U. S., 631 (1875) ; Louisville v. Savings Bank, 104 id., 469 (1881) ; Nelson v. Haywood County, 11 S. W. Rep., 885 (Tenn., 1889); Choisser v. People, 29 N. E. Rep., 546 (111., 1892). An irregular vote to issue bonds before constitutional provision is enacted cannot be legalized by legisla- tive act afterwards. Williams ?>. Peo- ple, 24 N. E. Rep., 647 (111., 1890). Where the original subscription was conditional the condition cannot be waived after 142 Oil. VI.] MUNICIPAL SUBSCKIPTK >NS. [§W. that a popular vote does not give the company proposed to be ben- efited a vested right to the subscription by the municipality, and that until the subscription is actually made the contract is unexe- cuted, and therefore obligatory upon neither party, there is ground for holding that a constitutional prohibition, taking effect after the election, but before the subscription is made pursuant to authority conferred by the popular vote, will be sufficient to invali- date the subscription. This was the view taken by the supreme court of the United States in the case of Aspinwall v. Commission- ers of the County of Daviess, 1 and affirmed in some later cases. 2 There are cases of authority, however, in favor of the rule that, after the corporation has, by a popular vote at an election lawfully held, voted to subscribe for stock, subsequent changes of the con- stitution or the general statutes will not affect the right of the municipality to go on and complete the contract, to make the formal subscription, and to issue the bonds or levy the special tax to pay the calls. 3 § 94:. Statutory formalities rnusfbe substantially complied with. — A substantial compliance with the formalities prescribed by a stat- ute authorizing a municipal subscription to stock is all that the law requires; but such a compliance is requisite to the validity thereof. 4 of the railroad enforcing payment when the taxes were not assigned to the lessee. Barttel v. Meader, 33 N. W. Rep., 446 (Iowa, 18S7). i 22 How., 33 1 (1859). 2 Norton v. Brownsville, 129 IT. S,, 479 (1889); Wadsworth v. Supervisors. 102 U. S., 534 (1880). See, also, Railroad Co. v. Falconer, 103 id., 821 (1880); Ger- man Bank v. Franklin County, 128 U. S., 526 (1888); Eddy v. People, 20 N. E. Rep., 83 (111., 1889). 3 United States v. Jefferson Co., 5 Dil- lon, 310 (1878); Maenhant v. New Or- leans, 3 Woods, 1 (1876) ; Sibley v. Mobile, 3 id., 535 (1876): Nicolay v. St. Clair County, 3 Dillon. 163 (1874); Huideko- per v. Dallas County, 3 id., 171 (1875). Cf. Red Rock v. Henry, 106 IT. S., 596 (1882), and cases in note 5, supra. 4 Bonds issued by municipalities to aid railroads are valid only when issued in compliance with the statute authorizing them. Young v. Clarendon Township, 132 U. S., 340 (1889); Hoff v. Jasper County, 110 U. S., 53 (1884>, following the ruling in Anthony r. Jasper County. 101 U. S., 693 (1879), where it was held that a bona fide holder of bonds could not maintain an action on bonds not registered with the state auditor as re- quired by statute : Bissell v. Spriug Val- ley, etc., 110 TJ. S., 162 (1884), holding that when a statute required bonds to be attested by the county clerk under the seal of the county, bonds issued without his signature were not valid: Hamlin v. Meadville, 6 Neb., 227(1877 . holding that a vote authorizing a sub- scription gives no power to make a do- nation ; Cairo, etc., r. Sparta. 77 111.. 505 (1875), where bonds were authorized by a vote upon a proposition that they should run twenty years, when the stat- ute submitted a proposition to be voted upon for bonds to run not exceeding /< u years. The court refused to compel the city to issue them ; Mustard v. Hoppers, 69 Ind., 324, where an election, and a tax voted and levied in pursuance of it, were held not invalidated on account of a canvass of the votes which was not 143 94.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. But not every failure to observe all the formalities prescribed by the statute is sufficient to invalidate a subscription. When the omission is invalidate the subscription. 1 a matter of form more than of substance, it will not entirely regular ; People v. Dutcher, 56 III, 144 (1870), holding that when the statute does not prescribe a mode of election it should be held in accordance with the law of the organization of the municipality; People v. Logan County, 63 111., 374 (1872). This case was an ap- plication for mandamus to compel a subscription. A demurrer to an answer alleging that the vote in favor of sub- scription was obtained by fraudulent votes with the knowledge of the corpo- ration to be benefited was overruled ; Pana v. Lippincott, 2 Bradw. (111.), 466 (1877), where a vote taken at a special town meeting, when the statute required it to be taken at a regular meeting, was held not to confer authority to subscribe ; People, etc., v. Smith, 45 N. Y., 77 (1871), holding that, when the act requires a petition of tax-payers, the power is per- sonal to them and cannot be exercised b}- an agent; Wetumpka v. Wetumpka, 63 Ala., 611 (1879), holding that a judg- ment on bonds issued by a municipality is conclusive upon it as to the validity of the bonds and as to all defenses which might have been urged against it at law ; but in a bill in equity to enforce a statu- tory trust by which the property, etc., of the municipality was pledged to pay them, it may show that the bonds were issued in violation of the conditions of the statute ; Munson v. Lyons, 12 Blatch., 539 (1875), holding that an objection which would be good in a direct review of the proceedings — as here that the petition of tax-payers gave the authorities no jurisdiction — may be of no avail as against bona fide holders of bonds; Thompson v. Perrine, 103 U. S., 806 (1880); County of Jasper v. Ballou, 103 TJ. S., 745, and Mass., etc., Can. Co. v. Cherokee, 42 Fed. Rep., 750 (1890), hold- ing that a subsequent statute may cor- rect errors. See, also, Carroll County v. Smith, 111 U. S„ 556 (1884) ; Hawley v. Fairbanks, 108 U. S., 543 (1883); Bu- chanan v. Litchfield, 102 U. S., 278(1880) ; People v. Hurlburt, 46 N. Y., 110 (1871): People v. Suffern, 68 N. Y, 321 (1877); Wilson v. Cancadia, 15 Hun, 218 (1878) ; Angel v. Hume, 17 Hun, 374 (1879) ; Peo- ple v. Hutton, 18 Hun, 116 (1879); Peo- ple v. Barrett, 18 Hun, 206 (1879) ; Wheat- land v. Taylor, 29 Hun, 70 (1883). Mu- nicipal subscription, authorized by stat- ute, to corporation to construct locks and dams, and duly made, cannot be enforced to pay for repairing old locks and dams. Jessamine County v. Swi- gert's Adm'r, 3 S. W. Rep., 13 (Ky., 1887). Where judgment is taken by default the facts alleged cannot be disputed in the mandamus proceedings. Harsh man v. Knox County, 122 U. S., 306 (1887). Vote of municipal aid is void if grantee is in alternative. State v. Roggen, 33 N. W. Rep., 108 (Neb., 1887). In Kansas a tax-payer cannot enjoin the board from declaring the vote on municipal aid. He must wait and enjoin the sub- scription. State v. County of Babaunsee. 12 Pac. Rep., 942 (Kan., 1887); Peoples Town of Santa Anna, 67 111., 57 (1873), where an election was held illegal be- cause held without a registration of voters as required by law ; People v. Town of Laena, 67 111., 65 (1873), a similar case ; Chicago, etc., v. Mallory, 101 111., 583, where an election presided over by one moderator with one clerk, when the law required three judges and two clerks, was held void, conferring no au- thority upon a town to issue bonds. Municipal bonds issued without the order of the grand jury as required by statute are not collectible by an owner who does not show he is a bona fide holder. Frick v. Mercer County, 21 Atl. Rep., 6 (Pa., 1891). i Pana v. Bowler, 107 U. S., 529 (1882), 144 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§94. Many of these defenses, however, are defeated by the fact that the municipality is estopped from setting up the illegality, there having been long delay, or the recitals on the bonds themselves having represented that the legal formalities were duly observed. 1 holding that the fact that an election was irregularly conducted could not avail as a defense to bonds in the hands of a bona fide holder, the court refusing to follow the ruling of the Illi- nois supreme court in Lippincott v. Pana, 92 111., 24 (1879), which declared the bonds void ; Commissioners, etc., v. Thayer, 94 U. S., 631 (1876), where the court said : " Defects, irregularities or informalities which do not affect the re- sult of the vote do not affect its valid- ity;" Belfast, etc. v. Brooke, 60 Me., 568 (1872), where a call for a town meet- ing "to see if the town will loan its credit to aid in the construction " of a railroad named was held to give reason- able notice that a proposition to sub- scribe for its stock would be acted upon ; Draper v. Springport, 104 U. S., 501 (1881), in which the absence of a seal was held not to affect the right of a bona fide holder to recover upon bonds issued in payment of a subscription ; Clarke v. Hancock Co., 27 111., 305 (1862), where the informality consisted in sub- mitting two propositions by one vote, and it was held not to invalidate bonds in hands of bona fide holders; Super- visors v. Schenck, 5 Wall., 772 (1866), where bonds issued under a vote or- dered by a " county court," instead of by the " board of supervisors," were held valid because taxes had been levied and interest paid upon them by the proper authorities for nine years before the claim was made that they were void. Cf. County of Jasper v. Ballou, 103 U. S., 745 (1880); Pana v. Bowler, 107 TJ. S., 529 (1882) ; Johnson v. Stark, 24 111., 75 (1860) ; Singer Manuf'g Co. v. Eliza- beth, 42 N. J. L., 249 ; New Haven, etc., v. Chatham, 42 Conn., 465 (1875), where a vote which should have been by bal- lot was taken by division of the house, and no objection was made thereto until a railroad had in good faith issued bonds which were to be guarantied by the town. 1 Nugent v. Supervisors, 19 Wall., 241 (1873), is the leading case. It holds that the delivery of the municipal bonds to the railroad in exchange for the stock, together with the levy of a tax to pay the interest on the bonds, and the act of the municipality in voting as a share- holder, estop it from denying the legal- ity of the subscription. Menasha v. Hazard, 102 TJ. S., 81 (1880), where bonds were issued to be valid when it was certified on them that certain con- ditions had been performed. Such a certificate was held to estop the town from denying their validity; Whiting v. Town of Potter, 2 Fed. Eep., 517 (1880), in which it was held that retain- ing railroad stock received for bonds, and paying interest on the bonds for a long time, estopped a municipality from questioning their validity, such acts being a direct ratification of the issue; Lamb v. Burlington, etc., 39 Iowa, 333 (1874), holding that voting a tax in aid of a railroad, and remaining silent for a year, during which the road was completed upon the faith of the tax, and until the benefits accruing from the completion were realized, estopped a township from denying the validity of the tax ; Leavenworth, etc., v. Douglas Co., 18 Kan., 169 (1877), where the failure of a railroad to com- ply with the conditions of an agree- ment by which it was to receive bonds was a matter of public knowledge, and the county issuing the bonds made no objection, but paid interest on the bonds for years, these circumstances were considered a ratification of the acts of the county officers in issuing them ; (10) 145 §94.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. The meeting must be duly called and by the proper officer; 1 the notice of the meeting must be duly posted for the full time pro- vided in the act. Lyons v. Munson, 99 U. S., 684 (1878), holding that where, under the act of New York, the county judge decides upon an application of tax-payers, his judgment recited in the bonds cannot be attacked by the town in an action on bonds by a bona fide holder, and the town is estopped to deny their validity on that account: Hackett v. Ottawa, 99 U. S., 86, holding that, when bonds purport on their face to have been is- sued to provide for a loan for munici- pal purposes, the city is estopped from setting up against an innocent pur- chaser for value that they were void because the proceeds were appropriated to other purposes — as for a donation to a private corporation ; Pendleton Co. v. Amy, 13 Wall., 297 (1871), holding that where the issue of bonds by county officers, without previous fulfillment of conditions, would be a misdemeanor, the presumption is that the conditions were fulfilled; and the receiving of stock in payment and holding it for seventeen years work an estoppel ; First Nat'l, etc., v. Wolcott, 19 Blatch., 370 (1871), where the retaining of stock re- ceived for bonds, and paying interest on the bonds, was held, as against bona fide holders, to be a ratification of the act of commissioners in issuing them, the recital on them being that they were issued in pursuance of a certain statute; Block v. Commissioners, 99 U. S., 686 (1878), in which a county was held estopped from asserting that a ma- jority of the electors had not voted in favor of the issue of bonds, the bonds having been issued three years after the vote was declared and recorded; Carroll Co. v. Smith, 111 U. S., 556 (1883), holding that a recital in a bond that it is authorized by a particular statute does not estop the municipality from setting up that it was not authorized by a proper majority of voters, — in this case two-thirds. See, also, Amey v. Allegheny, 24 How., 364; Cagwin v. Hancock, 84 N. Y., 532 (1881), rev'g S. C. 22 Hun, 291; Orleans v. Piatt, 99 U. S., 676 (1878). i Town of Windsor v. Hallett, 97 Ill. r 204(1880); County of Richland v. Peo- ple, 3 Bradw. (111.), 210 (1878); Jackson- ville, etc., R. R. Co. v. Virden, 104 111., 339 (1882) ; Bowling Green, etc., R. R. Co. v. Warren Co., 10 Bush (Ky.), 711 (1874). But see Sauerhering v. Iron Ridge, etc., R. R. Co., 25 Wis., 447 (1870) ; Commissioners v. Baltimore, etc., R R. Co., 37 Ohio St., 205 (1881). 2 McClure v. Township, etc., 94 U. S., 429 ; Harding v. Rockford, etc., 65 111., 90 (1872), where bonds were held in- valid because the notice of election was posted less than thirty days, as required by law ; Packard v. Jefferson Co., 2 Col., 338 (1874), holding that a change in the proposition to vote bonds which is in effect a new proposition cannot be le- gally voted upon at an election already called, there not being sufficient time remaining before the election to give the required notice ; McClure v. Town- ship, etc., 94 U. S., 429 (1876), in which bonds were declared void because the election by which they were authorized was not held pursuant to a notice of thirty days, as required by the act ; An- derson v. Beal, 113 U. S., 227 (1884), holding that, if the bonds on their face recite that they were issued in pursu- ance of a vote held on a certain day, the statement is equivalent to one that the vote was regular in form as to prior notice, and the municipal corporation is estopped from showing that it was held without proper notice in an action by a bona fide holder ; George v. Ox- ford, etc., 16 Kan., 72 (1876), holding that when an election authorizing the 146 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§95. §95. Submission to popular vote. — While the legislature may authorize a municipality to make a subscription to the stock of a railway or other corporation without submitting the question to a vote of the people, 1 it has the power to direct that the question shall be so submitted. Such an act does not amount to a delesra- tion of legislative powers. 2 When it is provided that a subscrip- tion can be made only upon the petition of a certain proportion of issue of bonds was held upon insufficient 23 id., 456 (1861) ; Bank of Rome v. Vil- notice, and the facts appeared upon the face of the bonds, the bonds were void ; Williams v. Roberts. 88 111., 11 (1878), where an election called by twelve vot- ers instead of twenty, as required, upon a ten days' notice, where the statute re- quired twenty days, was held a nullity. See, also, Wells v. Pontiac Co., 102 U. S., 625 (1880) ; Lincoln v. Cambria Iron Co., 103 U. S., 412 (1880). But where the notice was required by the statute to be " posted by the town clerk or supervis- ors," it was held that this did not require a posting by these officers in person, but that it was sufficient if they procured others to post the notice. Lawson v. Milwaukee, etc., R R. Co., 30 Wis., 597 (1872); Phillips v. Albany, 28 id., 340 (1871) ; Jones v. Hurlburt, 13 N. W. Rep., 5 (1882). lOtoe County v. Baldwin, 111 U. S., 1 (1883); Thompson v. Lee County, 3 Wall, 327 (1865); County of Ralls v. Douglass, 105 U. S., 728 (1881); State v. Macon County Court, 41 Mo., 453 (1867); State v. County Court of Sullivan County, 51 id., 522 (1873). Cf. State v. Dallas County, 72 id., 329 (1880); Mc- Callie v. Chattanooga, 3 Head (Tenn.), 317 (1859); Chicago, etc., R. R Co. v. Aurora, 99 111., 205 (1881); Burr v. Char- iton Co., 2 McCrary. 603 (1880). In this case a charter of a railroad authorized it to receive subscriptions from coun- ties without a vote of the people. Bonds so issued were held valid though a prior special act required a vote of tax-payers as a condition precedent to such sub- scriptions. 2Starin v. Town of Genoa, 23 N. Y., 439 (1861); Gould v. Town of Sterling, lage of Rome, 18 id., 38 (1858); S. C, 19 id., 20 (1859); People v. Batchellor, 53 id., 128, 138 (1873); Town of Du burgh v. Jenkins, 57 id., 177, 192 I Hobart v. Supervisors, 17 Cat, 23 (1860) ; Slack v. Maysville, etc., R. R. Co.. 13 B. Mon., 1 (1852); Winter v. City Coun- cil of Montgomery, 65 Ala.. 403 (1880). In Harrington v. Plainview, 27 Minn.. 224 (1880), it is held that, where a sub- mission to the people is provided for, it must be to the legal voters of the mu- nicipality, and cannot lawfully be con- fined to resident tax-payers, whether legal voters or not. Cf. Babcock v. Helena, 34 Ark., 499 (1879); Walnut v. Wade, 103 U. S, 683 (1880). Again, where a popular vote, taken in accord- ance with a statute, authorized a sub- scription to a designated railway, and the bonds were issued to a consolidated road including the first — these facts appearing on the face of the bond — the invalidity of the transaction was held to appear on the face of it. County of Bates v. Winters, 97 U. S, 83 (1877). Cf. Chicot Co. v. Lewis. 103 id., 164 (1880); Schaeffer v. Bonham, 95 111.. 368 (1880). But where a town is au- thorized to subscribe not exceeding a certain sum to a designated railroad. several subscriptions made at different times and authorized by as many elec- tions, the aggregate not exceeding the amount named in the act, are valid. Empire v. Darlington, 101 U. S., 87 (1879). See. also, Hurt v. Hamilton. 25 Kan., 76 (1881); Society for Savings?-. City of New London, 29 Conn., 171 (1860); First Nat. Bank v. Concord. 50 Vt. 257. 147 §95.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. the legal voters, 1 there must be a substantial compliance with the spirit as well as the letter of the act. 2 When the enabling act provides for municipal aid to railways and other quasi-\)ub\\c enterprises upon the assent of a majority or two-thirds of the legal voters of the town or county, this is con- strued universally to mean that the measure is to be approved by a majority or a two-thirds vote, as the case may be ; that is to say, by a majority or two-thirds of the voters who vote at the election called for the purpose, and not two-thirds or a majority of all the qualified electors in the territory. Those who fail to vote against the measure are not considered nor counted as having the power to vote. 3 1 E. g., in New York. People v. Hul- bert, 59 Barb., 446 ; People v. Peck, 62 id., 545 ; People v. Oliver, 1 Thomp. & C, 570 (1873); People v. Hughitt, 5 Lans., 89 (1871); People v. Franklin, 5 id., 129 (1871); People v. Smith, 45 N. Y., 772 (1871) ; Wellsbbrough v. New York, etc., R R Co., 76 id., 182 (1879). Cf. St. Joseph Township v. Rogers, 16 Wall., 644 (1872); Syracuse Savings Bank v. Seneca Falls, 21 Hun (N. Y), 304 (1880) ; Faris v. Reynolds, 70 Ind., 360 (1880). 2 People v. Smith, 45 N. Y, 772 (1871); Craig v. Andes, 93 N. Y, 405 ; People v. Oldtown, 88 111., 202 (1878). If the stat- ute requires a written application by ten legal voters before the clerk should call an election, such application is neces- sary to the validity of the election, and without proof of it the municipality cannot be compelled to issue bonds. Monadnock R. R Co. v. Petersboro, etc., 49 N. H., 281 (1870), holding that a town cannot delegate its power to authorize subscriptions to a committee; and a statute requiring the vote of " two-thirds of the legal voters present and voting at " the meeting must be strictly obeyed. Mercer Co. v. Pittsburgh, etc., 27 Pa. St., 389 (1856), in which a statute designated the grand jury of a county to decide upon a subscription. It was held that the grand jury could not delegate the power so conferred to county commis- sioners, and that the commissioners could only subscribe in accordance with the decision of the grand jury. Where the municipal bonds recite that the vote was on an application of fifty voters, where the statute required that the ap- plication should be by voters and tax- payers, held, that the bonds were void, where the application was not by tax- payers. Gilson v. Dayton, 123 U. S., 59 (1887). Municipal bonds issued on a vote of a minority of the voters, instead of a majority, as required by the statute, in aid of a railroad, are void. Onstott v. People, 15 N. E. Rep., 34 (111., 1888). In Prettyman v. Supervisors, 19 III., 406, 414 (1858), a case of subscription by a county to railroad stock, a tax-payer waited four months before alleging fraud in the election. Held equivalent to acquiescence, and too late. See, also, People v. Van Valkenburg, 63 Barb., 105 (1872); Evansville, etc., R R Co. v. Ev- ansville, 15 Ind., 395 (1860); Chicago, etc., R R Co. v. Mallory, 101 111., 583 (1882). For the manner in Indiana of contesting an election, see Goddard v. Stockman, 74 Ind., 400 (1881). 3 County of Cass v. Johnson, 95 U. S., 360 (1877); Carroll Co. v. Smith, 111 U. S., 556 (1884) ; County of Cass v. Jordan, 95 id., 373 (1877) ; Hawkins v. Carroll Co., 50 Miss., 735 (1874) ; Louisville, etc., R R Co. v. Tennessee. 8 Heisk., 663 (1875); State v. Brassfield, 67 Mo., 331 (1878) : Webb v. La Fayette Co., 67 id., 353 (1878); People v. Chapman, 66 111., 137 (1872); People v. Harp, 67 id., 62 (1873); 148 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§96. The legislature may render effective a prior vote of a munici- pality, taken without statutory authority, in aid of a railroad. If the state courts vary in their decisions on municipal aid to rail- roads the federal court will decide upon its own judgment. 1 § 96. What officer or agent of the municipality may make the contract of subscription. — In the absence of any express provision in the enabling act the proper persons to execute the contract of subscription for a municipal corporation are those whose duty it is to execute other contracts for and in the name of the municipality. Dunnovan v. Green. 57 111., 63, holding that a statute which authorizes a sub- scription, provided a majority of votes are in favor of it, means a majority of votes cast, not a majority of all voters ; Culver v. Fort Edward, 8 Hun, 340 (1876), holding that, if the statute re- quires a vote of the majority of taxable inhabitants, the consent of a majority who attended the meeting is not suffi- cient; Walnut v. Wade, 103 U. S., 683 (1879), holding that "inhabitants," as used in an enabling act, meant legal voters; St Joseph v. Rogers, 16 Wall., 644 (1872), where a law of Illinois, re- quiring a vote of "a majority of the legal voters of any township " in one section, and a majority " voting at such election," was construed to mean a majority of those voting at the elec- tion ; People v. Oliver, 1 T. & C. (N. Y.), 570 (1873), holding that "tax-payers" includes all persons whose names are on the assessment roll as such, though wrongfully taxed — as non-residents ; Milner v. Pensacola, 2 Woods, 632 (1875), where a statute required the " consent of a majority of the corporation com- prising " the cit}*. A defense to an ac- tion on the bonds by an innocent holder, that only a minority of citizens voted, was held not good ; Melvin v. Lisenby, 72 111., 63 (1874), holding that the pre- sumption is that the vote cast at an elec- tion held according to law is the vote of the whole number of legal voters; Reiger v. Beaufort 70 N. C, 319 (1874), where a majority of votes cast at an election was held sufficient under a statute requiring a majority of the voters qualified to vote, although a ma- jority of all the voters of the town did not vote. If petition must be signed by a majority of freeholder, minors and married women, etc., are to be counted. State v. City of Kokomo, 8 N. E. Rep., 718 (Ind., 1886). See, also, Cagwin v. Hancock, 84 N. Y., 532 (1881). And for a contrary rule, well argued out, see Harshman v. Bates Co., 92 IT. S., 569 (1875) [overruled, however, in County of Cass v. Johnson, 95 U. S., 360 (1877)], and the dissenting opinions of Miller and Bradley. JJ, in County of Cass v. Johnson, 95 U. S., 360, 370 (1877). As to the right of a voter or signer to revoke his consent once granted, see Spring- port v. Teutonia Savings Bank, 84 id., 403 (1881) ; People v. Sawyer, 52 N. Y, 296 ; People v. Wagner, 1 Thomp. & C, 221 (1873); People v. Hatch, 1 id., 113 (1873). Cf. First Nat. Bank v. Dorset, 16 Blatch., 62 (1879) ; Noble v. Vincennes, 42 Ind., 125 (1873) ; and see Hannibal v. Fountleroy, 105 U. S., 408 (1881). 1 Anderson v. Township of Santa Anna, 116 U. S., 356 (1886). Cf. State v. Holladay, 72 Mo., 499 ; Smith v. City of Fond du Lac, 8 Fed. Rep., 2S9 ; McCall v. Town of Hancock, 10 id., 8. The fact that the proposition to vote aid is defeated at one election does not pre- vent the calling of another election to submit the question again. Supervis- ors v. Galbraith, 99 U. S., 214 (1878); Society, etc., v. City, etc., 29 Conn., 174. Nor does a vote of aid to one railroad prevent a subsequent vote of aid to an- other railroad. Chicot Co. v. Lewis, 1C3 U. S., 164. 149 §96.] MUNICIPAL SUBSCRIPTIONS. [CH. YI. A subscription is a contract, to be executed in general in the ordi- nary wav in which any other contract may properly be made. But the act authorizing the subscription frequently provides by whom and in what manner the contract shall be executed. When this is the case the provisions of the statute are to be strictly complied with. 1 It has been held that, in order to constitute a valid municipal subscription to the stock of a railway company, it is not necessary that there be an actual act of subscribing. 2 1 Walnut v. Wade, 103 U. S., 683 agents of a municipality have a discre- (1880); Town of Douglass v. Niantic Savings Bank, 97 111., 228 (1881); Town of Windsor v. Hallett, 97 111., 204 (1880> The commissioners cannot bind the municipality by a modification of the subscription voted by it. Bell v. Railroad Co., 4 Wall., 598 (1866). A subscription for a municipality by officers in a sup- posed office which does not constitu- tionally exist is void. Norton v. Shelby County. 118 U. S., 425 (1886). So, for example, where the act provides for the appointment of a board of commis- sioners to make the subscription, they only are competent to make it; they are for this purpose the agents of the municipality for which they act; they may insert conditions into the contract which, unless repudiated by the corpo- ration, are valid, and will bind all par- ties concerned ; their powers are to be exercised jointly, and therein all must act — a ma jority not being sufficient by their act to bind the municipality; their acts, when once fully performed, are final and binding, and cannot be recalled or revoked. Danville v. Mont- pelier, etc., R R Co., 43 Vt, 144 (1870). Cf. First Nat Bank v. Arlington, 16 Blatch.. 57 (1879); Bank v. Concord, 50 Vt. 257; People v. Hitchcock, 2 T. & C. (N. Y.), 134 (1873) ; State v. Han- cock County, 11 Ohio St., 183 (1S60); S. C, 12 id.. 596. Cf. Jackson County v. Brush. 76 111., 59 (1875); Kankakee v. Mtna Life Ins. Co., 106 U. S., 668 (1882) ; Bis- sell v. Township of Spring Valley. 110 U. S., 162 (1884); In re Bradner, ^7 N. Y., 171 (1881). If the officers or tion with reference to the subscription to make it or not, as they may think best under the circumstances, their ex- ercise of that discretion is final, and cannot be reviewed or questioned. Mercer County r. Pittsburgh, etc., R R. Co., 27 Penn. St, 389 (1856). Cf. Fal- coner v. Buffalo, etc., R R Co., G9 N. Y., 491 (1877); First Nat Bank v. Concord, 50 Vt, 257 (1877). 2 Nugent v. Supervisors, 19 Wall., 241 (1873), holding, also, that a resolution by a duly authorized board of agents, declaring a subscription made, is, upon the acceptance of the subscription in that shape by the railway company, and a notice to the municipality of the acceptance, a good and binding sub- scription, although there was no sub- scription made in the books of the company. To same effect see County of Moultrie v. Rockingham Ten Cent Sav. Bank, 92 U. S., 631 (1875) ; Couuty of Cass v. Gillett, 100 id., 585 (1879). Cf. State v. Jennings, 4 Wis., 549. The board whose duty it is to make the sub- scription may do so through the county clerk. Chicago, etc., R. R. Co. v. Put- nam, 12 Pac. Rep., 593 (Kan., 1887). The bonds, if signed on Sunday, will be invalid, although the signature is by the proper officer. De Forth v. Wisconsin, etc., R R Co., 52 Wis., 320 (1881); Bank, etc., v. Town, etc., 84 N. C, 169 (1881), where an omission of commissioners to sign bonds was held not fatal, the requirement bein/; direct- ory. 150 CH. VI.] MUNICIPAL SLliSCKIPTIONS. [§9T. But the vote of the tax-payers or inhabitants, as the case may be, is not a subscription, nor does it amount to a subscription; nor does it in general vest in the company for whose proposed benefit the vote was taken a right to have a subscription made. 1 It has been held that the officers authorized to make the sub- scription have a certain amount of discretion in fixing the terms of payment. 2 § 97. Municipal subscriptions may be conditional. — A municipal corporation may annex to its subscription any condition that an individual subscriber might lawfully prescribe, and may, in con- sequence, make the payment of the subscription depend upon the performance thereof. 3 Moreover, a municipal corporation is en- 1 Cumberland, etc., R R Co. v. Barren Co., 10 Bush (Ky.), 604 (1874); Bates Co. v. Winters, 97 U. S.. 83 (1877). A mere vote of the municipality is not a subscription. If the road is foreclosed before subscription, no suit lies to col- lect Board of Coninrrs v. Cottingharn, 17 N. E. Eep., 855 (Ind., 1888) ; County of Bates v. Winters, 97 U. S., 83 (1877), holding that where, after an election in favor of making a subscription, the county court made an order for a sub- scription, and its agent reported that the railroad company had no stock-books, for which, and other reasons, he did not make the subscription, it was held that these acts were not final and self-exe- cuting, and did not constitute a sub- scription ; Wadsworth v . St Croix Co. , 4 Fed. Rep., 378 (1880). 2 Syracuse, etc., v. Seneca, etc., 86 N. Y., 317 (1881), where it was held that after regular proceedings had been taken to bond a town, the commissioners, under the law, had a right to make the bonds payable at one time or at different times: Winter v. City Council, etc., 65 Ala., 403 (1880), where a vote authorized the issue of bonds to an amount not ex- ceeding $1,000,000, and it was held that the corporate authorities had discre- tionary power to issue them for a less amount. 3Brocaw v. Gibson Co., 73 Ind., 543 (1881); Portland, etc., R R Co. v. In- habitants of Hartford, 58 Me., 23 (1870). A municipality authorized to vote a subscription to the stock of a railroad company may impose conditions that shops be built in the town. Casey v. People, 24 N. E. Rep., 570 (111., 1890); Chicago, etc., R R Co. v. Aurora, 99 111., 205 (1881), holding that if of two conditions one is legal and the other unauthorized, and they are severable, the illegal one may be rejected and the bonds issued held good as to the other ; Noesen v. Port Washington, 37 Wis., 168 (1875) ; Perkins v. Port Washington, 37 id., 177 (1875); Town of Platteville v. Galena, etc., R R Co., 43 id., 493 (1878), holding that, where a town accepted a written proposition from a railroad company, the terms and construction of it were not allowed to be modified by reason of representations made by the company to the voters before the elec- tion. Foote v. Mount Pleasant, 1 Mc- Crary, 101 (1878). In this case the pro- ceeds of city bonds issued in payment of a subscription to a railroad were to be expended within the county limits. It was held that as between the city and the road or its assignees with notice, the bonds could not be enforced if no part of the proceeds had been so ex- pended. Atchison, etc., R R Co. v. Phil- lips Co., 25 Kan., 261 (1881). Cf. Mom- phis, etc., R. R C<\ v. Thompson, 24 Kan., 170 (1880); Red Rock r. Henry. 106 U. S. ( 596 (1882); Shurtleff v. Wis- casset, 74 Me., 130 (1882); State v. Han- 151 § 97.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. titled to the benefit of any implied conditions to which an individ- ual subscriber would be entitled. 1 Where a condition precedent has not been fulfilled the subscrip- tion is not enforceable, and bonds issued in payment will be in- valid even in the hands of lonaftde holders; as, for example, where the location of a railway in a certain place is the condition, and the location is not made as required by the condition. 2 But if it be a condition subsequent, as where a town subscribed for stock in a railway company upon condition that the road should " be built through the town on the line as run by the engineer, with a suita- ble depot for the convenience of the public," a failure to perform is not a defense to an action to collect assessments. 3 cock Co., 11 Ohio St, 183 (1860). In this case commissioners who were au- thorized to subscribe for stock in a rail- road to run through their county and to issue bonds therefor, and who had sub- scribed for the stock, were allowed, as against a proceeding to compel them to issue bonds, to set up the defense that the road had not been located in their county. A certificate of the municipal authorities that the condition has been complied with renders the bonds issued on that certificate valid and enforceable, though the certificate was a fraud on the municipality. Oregon v. Jennings, 119 U. S., 74 (1886); People, etc., v. Hol- den, 82 111., 93 (1876). In this case com- pleting a road, except about one mile, and operating its trains for that distance over another road so as to supply all the wants of the public, was held a substan- tial compliance with a'condition requir- ing its completion. Hodgman v. St Paul, etc., 23 Minn., 153 (1876), holding that a condition calling for the comple- tion of a road to a certain point did not require the building of a bridge across a river, other facilities for crossing it being provided. See, also, on conditional subscriptions, Concord v. Portsmouth, etc., 92 U. S., 625 (1875); Railroad Co. v. Falconer, 103 U. S., 821 (1880); ch. V, supra. In the case of Madison County Court v. Richmond, etc., R R Co., 80 Ky., 16 (1882), it is held that, while a county may make such conditions as may seem proper to it before submitting 1 the question of a subscription to a pop- ular vote, the county court cannot, after the vote is taken, require other condi- tions, or alter those already imposed, or by a second election change the terms of the contract of subscription as orig- inally made and entered into. See, also, Carroll v. Smith, 111 U. S., 556 (1884). 1 Lamb v. Anderson, 54 Iowa, 190 (1880). 2 Mellen v. Town of Lansing, 19 Blatch., 512 (1871); Chicago, etc., R, R. Co. v. Marseilles, 84 111., 145 (1876); Bucksport, etc., R R Co. v. Brewer, 67 Me., 295 (1877). 3 Belfast etc., R, R Co. v. Brooks, 60 Me., 568 (1872). Cf. Chicago, etc., R. R Co. v. Schewe, 45 Iowa, 79 (1876). As to a subsequent breach of a condition at- tached to the subscription, see People v. Rome, etc., R R. Co., 103 N. Y., 95 (1886). A contract to keep certain shops, etc., permanently in a place, in consid- eration of local aid, may be disregarded by the railroad after many years, when its terminus changes, etc. Texas, eta, R'y v. Marshall, 132 U. S., 393 (1890). Lessees of purchaser of railroad pur- chased at foreclosure sale are not bound by contract of first railroad company, made with municipalities voting aid in reference to depots. People v. Louis- ville, etc., R R Co., 10 N. E. Rep., 657 (III., 1887). See, also, People v. Holden, 82 111., 93 (1876); Hodgman v. St Paul, etc., R R. Co., 23 Minn., 153 (1876); State v. Town of Clark, 23 id., 422(1877) ; State 52 CH. VI] MUNICIPAL SUBSCRIPTIONS. [§98. § 98. When may a municipal subscription l)c paid in bonds in- stead of money? — The express power of a municipality to sub- scribe for stock does not authorize it to issue negotiable bonds therefor. 1 But where a municipal corporation is authorized to sub- scribe to the stock of a railway or other corporation, or to lend its credit thereto, and to issue bonds to that end, it may, in the exer- cise of its proper discretion, instead of selling the bonds and apply- ing the proceeds to the payment of the subscription, deliver the bonds themselves to the railway company in exchange for an equivalent amount of the stock. 2 In ]STew York a contrary view prevails, and there is force in the lS"ew York argument that only thus can the full par value of the bonds be realized for the purposes of the enterprise. 3 v. Lime, 23 id.. 521 (1877). See, also, §78, supra. In New York it is held that, where a town imposes as a condition precedent to its subscription that the road be located and constructed through the town, the commissioners have no power to accept any agreement from the company or any substitute in lieu of full compliance. Falconer v. Buffalo, etc., R. R Co., 69 N. Y.. 491 (1877). Where the agent of the railroad repre- sented that a depot was to be con- structed at a certain place, a failure to so construct is good ground for enjoin- ing the issue of municipal aid bonds. Wullenwahur v. Dunnigan, 47 N. W. Rep., 420 (Neb., 1890). Cf. ch. IX As to the right to revoke a consent by pop- ular vote, see § 94, supra. 1 Norton v. Dyersburg, 127 U. S., 160 (1888). Even though a municipal cor- poration be authorized by statute to sub- scribe to the stock of a railroad, yet it cannot issue its negotiable bonds to pay such subscription, there being no statu- tory authority for the issue of such bonds. Hill v. Memphis, 134 U. S., 198 (1890). 2 Meyer v. The City of Muscatine, 1 Wall., 384, 392(1863); Seybertv. Pitts- burgh. 1 Wall., 272 (1863); Evansville, etc., R R Co. v. City of Evansville, 15 Ind., 395 (1860); Curtis v. County of Butler, 24 How. (U. S.). 435 ; Common- wealth v. Pittsburgh, 41 Penn. St., 278 ; Town of Concord v. Portsmouth Savings Bank, 92 TJ. S., 625 (1871); AspinwaU u Jo Daviess Co., 22 How.. 364 (1852), where, before the authorized subscrip- tion was made, a new constitution was adopted making such subscript : ons void unless paid in cash ; held, that bonds issued to pay a subscription made after the new constitution was adopted were void. Statutory authority to raise money by tax and appropriate it to aid of railroad does not authorize issue of bonds by the municipality therefor. Concord v. Robinson, 121 U. S.. 165 (1887). Where a town issues bonds in- stead of paying money, as required by statute, and the bonds are declared void, the holder is not subrogated to the right of the railroad to the money itself. ^Etna, etc., Ins. Co. v. Middleport, 124 U. S., 534 (1888). sstarin v. Genoa, 23 N. Y, 439 (1861); Bank of Rome v. Village of Rome. 19 id., 20 (1859); Horton v. Town of Thomp- son, 71 id., 513 (1863), holding that, if the bonds were turned over to the rail- road, the latter would sell them for what they would bring, which would generally be less than par. For decis- ions to the effect that, at common law, a municipal corporation cannot sell its bonds at less than par, see Neuse River Nav. Co. v. Com'rs. 7 Jones (N. C), 275 ; Dan. Neg. Instr. (3d ed.), § 1533; County of Armstrong v. Brinton, 47 Pa. St, 367 153 §§ 99, 100.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. §99. A municipal corporation as a stockholder. — When a mu- nicipal corporation subscribes to the stock of a railway company, it becomes a stockholder in just the same sense as any individual subscriber; is entitled to the same rights, privileges and emolu- ments; and is subject to the same burdens of duty and liability as other holders of the stock. 1 This doctrine is established as an unquestioned rule of law by the long line of cases, both in the state and federal courts, which involve the validity of municipal bonds issued in aid of railway or other corporations. § 100. A municipality may enforce delivery of stoclc to itself in a proper case. — Under the same circumstances and conditions, and to the same extent, as any other subscriber, a municipal corpora- tion may compel a railway or other corporation to deliver to it stock to which the subscribers in general are entitled. Whatever would prevent an individual subscriber from enforcing such de- livery will equally prevent a municipality in a like case. 2 A mu- lock v. Missouri Pac. R'y Co., 2 S. W. Rep., 219 (Mo., 1886). See, also, ch. XXXVIII. A judgment creditor may reach a municipal subscription payable in bonds by mandamus, after acquiring the company's right thereto. . Smith v. Bourbon County, 127 U. S., 105 (1888) A municipality as a stockholder may assent to the sale of the railroad by the corporation to another reorganized cor- poration. Foster v. Chesapeake, etc., R'y, 47 Fed. Rep., 369 (1891). A munici- pality's stock in a corporation cannot be reached by a judgment creditor of the municipality except by proving that the subscription was legal. Hughes v. Com'rs.. 12 S. E. Rep., 465 (N. C, 1890). Where stock in a railroad is owned by a part of a county, that part becomes a municipality for the purpose of owning and voting the stock. Hancock v. Louis- ville, etc., R. R., 145 U. S., 409 (1892). Exe- cution or garnishee process cannot be levied on stock held by an individual as trustee, where the debt is his individual debt, nor can it be levied on the divi- dends from such stock. So held where stock was owned by a city in trust for the citizens. Hitchcock v. Galveston W. Co., 50 Fed. Rep., 263 (1880). 2 Wapello Co. v. Burlington, etc., R (1864): Gould r. Town of Sterling, 23 X. Y., 456, 460 (1861). J Shipley v. The City of Terre Haute. 74 Ind., 297 (1881) ; Kreiger v. Shelby R. R. Co. (Ky., 1886), 25 Am. & Eng. R. R Cas., 528 (1886); Gray v. The State, 83 Ind., 567 (1880); 1 Dan. Xeg. Instr., § 436 : Murray v. Charleston, 96 U. S., 432 (1877). See, also, Curran v. The State. 15 How., 304; Robinson v. Bank of Darien, 18 Ga., 65: County of Mor- gan r. Allen, 103 U. S., 498 (1880); United States v. Planters' Bank, 9 Wheat., 904; Morgan County v. Thomas, 76 111., 120 (1875); State v. Holladay, 72 Mo., 499; Marshall v. Western, etc., R R., 92 X. C, 322 (1885); County of Morgan v. Allen, 103 U. S., 498 (1880), holding that the creditors of an insolvent corpo- ration may enforce the liability of municipal corporations upon their bonds ; Robinson v. Bidwell, 22 Cal., 379 ; People v. Coon, 25 Cal., 635, holding that the individual members of a municipal corporation have no such interest in stock in a railroad subscribed for by it as will disable the legislature from authorizing it to compromise with the railroad. A foreclosure of the railroad on a mortgage closes out the stock which a municipality has therein. Spur- 154 CH. VI.] MUNICIPAL SUBSCRIPTIONS. [§■§ 101-103. nicipal corporation, as a subscriber, is in no better position than an individual subscriber in this respect. 1 § 101. Division of the municipality after the subscription. — We find a line of cases in the reports of some of the western states which deals with the questions which have grown out of the sub- division of towns and counties in those states, after a donation or subscription has been made to some railway or other corporation, and before the bonds have been issued, or before they have become due and payable. It is, of course, not competent for the legislature so to divide a municipality as to release all or any part of it from the obligation of any contract into which the whole had previously entered. 2 When a town or county is divided, or some part of it annexed to some other town or county, after the undivided municipality has voted a subscription, and it is provided in the act by which the division is accomplished that each part shall remain liable for the previous municipal indebtedness, such provision is held to mean nothing more than that, as concerns the subscription voted, each part is liable for its proportion only of the debt according to the valuation of the property of the undivided municipality at the time the vote was taken. 3 This rule, however, cannot affect the cred- itors right to hold liable the whole of the old municipality. §§ 102, 103. Consolidation of companies after the municipal aid is voted. — When the company proposed to be benefited unites or is consolidated with another company or companies of a similar char- acter, after the aid of a municipality has been voted and before the subscription has been paid — the company having before the elec- tion the right to consolidate — the bonds may lawfully be issued to or sold for the benefit of the new or consolidated company. 4 When, R. Co., 44 Iowa, 585 (1876). In this case debts of the county; but the legislature the stock was to be issued only when may apportion the. debt between the old fully paid. and the new counties ; McBride v. llar- 1 Pittsburgh, etc., R R Co. v. Alle- din County, 58 la., 219 (1882), holding that gheny Co., 79 Pa. St., 210 (1875). Cf. a county is not responsible for expenses State v. Garoutte, 67 Mo., 445 (1878). incurred by one of the townships eompris- 2 Sedgwick County v. Bailey, 11 Kan., ing it in voting taxes in aid of a railroad- 631(1873). Cf. State v. Lake City, 25 4 Livingston County v. Portsmouth Minn., 404 (1879); Marion County v. Bank, 128 U. S., 102 (1888); New Buffalo Harvey County, 26 Kan., 181 (1881); v. Iron Company. 105 U. S.. 73 (1881); Henderson v. Jackson County, 12 Fed. Bates Count}' v. Winters. 97 U. S., 83; Rep, 676 (1881). County of Scotland v. Thomas, 94 id., 3 Hunt v. Hamilton, 25 Kan., 76 (1881). 682 (1876) ; Town of East Lincoln v. See, also, Eagle V. Beard, 33 Ark., 497 Davenport, 94 id., 801 (1876); Wilson v. (1878), holding that, in the absence of Salamanca, 99 id., 499 (1878); Empire statutory provision, the detached part of v. Darlington, 101 id., 87 (1879), holding a county is released from liability fur the that, where stock in a railroad had been 155 § 103.] MUNICIPAL SUBSCRIPTIONS. [CH. VI. however, the consolidation works such a fundamental change in the constitution and purpose of the original corporation that individ- ual subscribers are thereby released, a subscription by the munic- ipality will be invalidated, 1 but otherwise not. 2 It is accordingly said that municipal bonds voted and delivered to a corporation under a changed name are not by such change invalidated. 3 subscribed for by a township under statutory authority, an additional sub- scription after it was consolidated with another road and under a new name was valid ; Menasha v. Hazard, 102 id., 81 (1880); Harter v. Kernochan, 103 id., 562 (1880), holding that where township records showed that bonds were directed to be issued and delivered to a consoli- dated company, although the act au- thorizing them and the vote under it contemplated the issue to one of the consolidated companies, the township was estopped to deny their validity; County of Tipton v. Locomotive Works, 103 id., 523 (1880) ; State v. Green County, 54 Mo., 540 (1874); Vernon v. Hovey, 52 Ind.. 563 (1876). See, also, Nugent v. Su- pervisors, 19 Wall., 241 (1873); County of Henry v. Nicolay, 95 TJ. S., 619 (1877). In this case a railroad company had, after the subscription, transferred its franchises to another company. In a suit upon the bonds, paid for the stock, in hands of an innocent purchaser, the bonds were upheld. County of Schuyler v. Thomas, 98 id., 169 (1877). Cf. Harsh- man v. Bates County, 92 U. S., 569 (1875). A municipal aid cannot be enforced where the railroad company sells all its property to another company. Cantillon v. Dubuque, etc,, R R Co., 35 N. W. Rep, 620 (Iowa, 1887). 1 Lynch v. Eastern, etc., R R Co., 57 Wis., 430 (1883). Harshman v. Bates County, supra, will hardly be followed. It does not accord with the current de- cisions. See Crooks v. State, 4 N. E. Rep., 589 (Ind., 1886). 2 Atchison, etc., R R Co. v. Phillips Co., 25 Kan., 261 (1881); Society, etc, v. New London. 29 Conn.. 174 (1860). In this last case the new company was sub- stantially the same as the one to which the subscription was made. The couit held the issue of the bonds to the new company valid ; Illinois, etc., v. Barnett, 85 111., 313 (1861), holding that the legal purchase of another road will not inval- idate subscriptions; Howard Co. v. Booneville, etc., 108 U. S., 314, holding that the defense, after paying interest for several years, that the road con- structed was not the one to whose stock the subscription was authorized, was not good, it appearing that it was a branch of the road referred to in the act: Commonwealth v. Pittsburgh, 41 Penn. St., 278 (1861); Lewis t>. Claren- don, 5 Dillon, 329 (1878); Chickaming v. Carpenter, 106 U. S., 063 (1882). 3 Town of Reading v. Wedder, 66 111., 80 (1872); Commonwealth v. Pittsburgh. 41 Pa. St., 278. In the case of Marsh v. Fulton Co., 10 Wall., 676 (1870), where the legislature 60 amended the charter of a railway company as to divide the road into three divisions, and each di- vision was made a new company, so that there were three distinct corpora- tions in place of the original corpora- tion, it was held by the federal supreme court that a subscription of stock and issue of county bonds, authorized by a popular vote to be made to the original corporation, could not legally be made to one of the three new corporations. Consolidation with another railroad no defense to the county, where the statute authorizing it existed at time of county vole. Chicago, etc., R R Co. v. Put- nam, 12 Pac. Rep., 593 (Kan., 1887); County, etc., v. Locomotive, etc., 103 U. S., 523 (1880), holding that if a munic- ipal corporation consents to a consolida- tion of roads it is estopped from denying the validity of its bonds in the hands of a bona fide holder. 156 CHAPTER VII. CALLS. § 104. 105. 106. 107. 108. 109. 110. 111. 112. Definition of call. CaJl is generally necessary. "When a call is unnecessary — Payment in advance. In New York no call is required. In case of corporate insolvency no call is necessary. Who has authority to make calls. Calls by directors. Assignment of subscriptions by corporation before or after call. Interest runs from the time the call is due. § 113. Stockholder cannot question ad- visability of call. 114. Calls must be impartial and uni- form. 115. Method of making calls — No formalities necessary. 116. Time, place, amount aud per- son to whom payable. 117. Notice of calls — Cases holding it not necessary. 118. Cases holding it to be neces- sary. 119. Methods of serving notice of calls. 120. Demand, waiver, pleadings, etc. § 104. Definition of call. — A " call " may be defined to be an offi- cial declaration, by the proper corporate authorities, that the whole or a specified part of the subscriptions for stocks is required to be paid. 1 The term, however, is used with different meanings, and may refer to the resolution of the officials that a part or the whole of the subscription must be paid, or to the resolution and notifica- tion thereof, or the combination of facts making the parties called on liable to an action for the non-payment of the money called.- An assessment is a term often used to designate the same thing as a call, but sometimes refers to payments sought to be recovered from the stockholders, above and in addition to the par value of the stock. An instalment is one of the several part payments into which a single call may be divided. iBraddock v. Phil., Marlton & Med- ford R R Co., 45 N. J. L, 363 (1883), holding also that a direction by the di- rectors to the president to collect the subscriptions is a call. In the case of Spangler v. Ind. & 111. Central R. R Co.. 21 111., 276 (1859), a call or assessment is rather vaguely defined as "a rating or fixing of the proportion by the board of directors, which every subscriber is to pay of his subscription, when notified of it and when called in." Newry & Enniskillen Ry Co. v. Edmunds, 2 Ex. Rep., 118 (1848). holds that a call is an application to each shareholder for a proportion of his share. 2 Queen v. Londonderry & Coleraine R'y Co., 13 Q. B.. 998. In Amberg N. & B. & E. J. R'y Co. v. Mitchell, 4 Ex. Rep., 540 (1849), it is said "the word call is capable of three meanings: it may either mean the resolution, or its notification, or the time when it be- comes payable. It must mean either one of these three." 157 § 105.] CALLS. [CH. VII. § 105. Callis generally necessary. — As a general rule a call must be made in order to render a subscription or any part thereof due and payable to the corporation. A contract of subscription, unlike other contracts to pay money, is a promise to pay ; but, by implica- tion of law, the payment is to be only at such times, and in such part payments, as may be designated by the corporate authorities in a formal declaration known as a " call." l In other words, the subscription is a debt payable at a future time. 2 The time when it shall be paid is indefinite until fixed by a call. 1 " No action can be maintained against a stockholder for an instalment on his subscription until the board has directed the call to be made." Banet v. Alton & Sangamon R. R Co., 13 111., 504 (1851) ; Spangler v. Ind. & 111. Cen- tral R. R Co., 21 111., 276 (1859); Brad- dock v. Phil., Marlton & Medford R R. Co., 45 N. J. L., 363 (1883). In the case of Grosse Isle Hotel Co. v. L' Anson's Ex'rs, 42 N. J. L,, 10 (1880); aff'd, 43 N. J. L., 442 (1881», the court said a sub- scription for stock " imports an agree- ment not to pay at once the whole sum representing the value of the shares subscribed for, but a stipulation to pay such sum when called for by the direct- ors, in amounts duly assessed." And in Bank of South Australia v. Abrahams, L. R, 6 Privy Council App., 262 (1875), the court said: "The company has no absolute right, and the shareholder is under no absolute liability, to pay. The right only arises if, and when, calls are made by the directors. . . . The due making of the call by the resolution of a board of directors is an essential con- dition precedent." To the same effect, see Wilbur v. Stockholders of the Corpn., 18 Bankr. Reg., 178. Where, by statute or charter, payment is to be in such manner and proportion and times as the directors may order, there can be no suit to collect until after a call. Gris- sell's Case, L. R, 1 Ch. App., 528, 535 (1866) ; Ala. & Fla. R R Co. v. Rowley, 9 Fla., 508 (1861). Even where the stock is fraudulently issued as paid up, in payment for property, and the transac- tion is impeached for fraud, a call is nec- essary before the subscription can be en- forced. Granite Roofing Co. v. Michael. 54 Md., 65 (1880). Where, however, for failure to furnish the property due on a subscription, a suit for damages is brought by the corporation, no call need precede such suit An allegation of a general demand suffices. Cheraw & Chester R R Co. v. Garland, 14 S. C, 63 (1879): Ohio, Ind. & 111. R R Co. v. Cramer, 23 Ind., 490 (1864). A call is not applicable to stock which was sub- scribed for after the call was made. Pike v. Shore Line, 68 Me., 445 (1878). A subscription payable " in such instal- ments and at such times as may be de- cided by a majority of the stockholders or board of directors," etc.. is not collect- ible until the instalments and times have been so fixed. North, etc., Co. v. Spullock, 14 S. E. Rep., 478 (Ga., 1892). 2 The subscription " is a present debt, payable at a future day." Pittsburgh & Connellsville R R Co. v. Clark, 29 Pa. St, 146 (1857). The subscription " cre- ates a debt, but the debt does not ac- crue due until a call is made." Gris- selFs Case, L. R, 1 Ch. App., 528, 535 (1866). In In re China Steamship & Coal Co., 38 L. J. (Ch.), 512 (1869), the court say : " The moment a call is made it is a debt due in every respect," although it cannot be collected by suit until later. The bankruptcy act does not release an applicant thereunder from liability for calls made after his release in bank- ruptcy. Glenn v. Howard, 3 Atl. Rep. r 895 (1886). 158 CH. VII.] CALLS. [§§106, L07. § 10G. When a call is unnecessary — Payment in advance. -If, however, a subscription contains a promise to pay upon a certain day, no call is necessary; but the subscriber is bound to pay, at all events, upon the day named. 1 So, also, if by statute or the charter the subscription becomes payable at a certain specified time, a call is hereby dispensed with, and is not required. 2 A stockholder, on the other hand, is not obliged to wait for a call even when entitled to it. He may pay at any time. 3 § 107. Neiv York rale. — In New York it seems that a different rule prevails. In that state there is a tendency to hold that no call is necessary before suit is brought on a subscription for stock. The subscriber's obligation to pay, and the time and manner of pay- ment, must be sought for in the contract itself. Unless the contract provides for calls, the subscription is payable absolutely and at once, or as soon as the corporation is duly organized. 4 Accordingly, in an 1 Estell v. Knightstown & Middletown Turnpike Co., 41 Ind., 174 (1872) ; New Albany & Salem R. R Co. v. Pickens, 5 Ind., 247 (1854) ; Ross v. Lafayette & Indianapolis R. R Co., 6 Ind., 297 (1853) ; Breedlove v. Martinsville &F.RR Co., 12 Ind., 114 (1859); Waukon & M. R R. Co. v. Dwyer, 49 Iowa, 121 (1878). Where a subscriber gives a note in payment of the subscription an indorsee may en- force the note, although no calls have been made on subscriptions. Ruse v. Bromberg, 7 S. Rep., 384 (Ala., 1889). 2 Phoenix Warehousing Co. v. Badger, 67 N. Y., 294 (1876). 3 Marsh v. Burroughs, 1 Woods, 463 (1871); Pool's Case, L, R., 9 Ch. D., 322 (1878). But if such payment is by the directors themselves, and it is im- mediately repaid to them for fees, the corporation being insolvent, the trans- action will be set aside. Syke's Case, L. ;R, 13 Eq. Cas., 255 (1871). So, also, a payment in advance, on an agreement that such payment shall be only a loan if the corporation is successful, but shall be a payment of the subscription if the corporation becomes insolvent, is held to be a loan, though insolvency occurs. Barge's Case, L. R, 5 Eq. Cas., 420 (1868). Frequently a subscription is paid, before a call, by applying to its payment money due the subscriber from the corporation. Adamson's Case, L. R., 18 Eq. Cas., 670 (1874). A subscription for bonds, the amount being payable on call, may be paid at once and the bonds demanded. Watjen v. Green, 21 Atl. Rep., 1028 (N. J., 1891). Where the pur- chase price of stock is to be in ten equal payments and interest is to be allowed if payment is made in advance, the interest may be collected. Porter v. Beacon, etc., Co., 26 Atl. Rep., 216 (Pa.. 1893). A stockholder who offers to pay his subscription in full, which olTer is declined by the corporation, is not thereby released from his obligation if he continues to act as a stockholder. Potts v. Wallace, 146 U. S., 689 (1892). 4 Lake Ontario, Auburn & N. Y. R. R. Co. v. Mason, 16 N. Y, 451 (1S59); Phoe- nix Warehousing Co. v. Badger, 67 N. Y, 294, 300 (1876). In the former case, however, calls were made and no- tice given by advertisement iu a news- paper. In the latter case, by the terms of the charter, all subscriptions were due at the time when suit was com- menced. Hence, in both cases, the statements in reference to calls have the appearance of dicta. In Mann v. Pentz, 3 N. Y, 415 (1850), it was held that a receiver could not collect uncalled sub- scriptions, since " the only condition upon which he (the subscriber) could 159 § 108.] CALLS. [CH. VII. action brought to collect a subscription, it is not necessary to allege that a call has been made, unless the terms of the subscription or the provisions of the corporate charter expressly provide for calls. These rules, however, seem not to have been directly passed upon in New York, and it is doubtful whether they can be considered as clearly established in that state. 1 § 108. In case of corporate insolvency no call is necessary. — "When a corporation becomes insolvent, and there exist subscrip- tions which have not been fully paid in, the directors frequently neglect or refuse to make the calls necessary for the purpose of paying the corporate debts. In such cases a court of equity will disregard the formality of a call, and will order the unpaid sub- scriptions to be paid to a receiver for the benefit of the corporate creditors. 2 The courts very properly hold that it is not discretion- have been made liable to the corpora- tion was by regular calls made in pur- suance of tlie charter." See, also, Bauton v. Dry Dock, etc., Co., 4 E. D. Smith, 420 (1855) ; Seymour v. Sturgess, 26 N. Y., 134 (1862) ; Savage v. Medbury, 19 N. Y., 32 (1859) ; Williams v. Meyer, 41 Hun, 545 (1886). See, also, Howland v. Edwards, 24 N. Y. 307 (1862). 1 These rules seem to be peculiar to New York. The decisions in some of the other states hold, however, that no notice of calls is necessary. See § 117. Practically, such a rule is equivalent to requiring no call at all, since in both oases collection is made only by direc- tion of the directors or other officers, and in both cases the subscriber need not be informed of such directions. 2 " It is well settled that when stock is subscribed to be paid upon call of the company, and the company refuses or neglects to make the call, a court of equity may itself make the call, if the interests of the creditors require it" •Scoville v. Thayer, 105 U. S, 143 (1881); Glenn v. Williams, 60 Md., 93 ; Glenn v. Sample, 80 Ala., 159 (1885). "A com- pany call is but a step in the process of collection, and a court of equity may pursue its own mode of collection, so that no injustice is done to the debtor." Hatch v. Dana, 101 U. S., 205 (1879). No call is necessary before stockholders are 160 liable to creditors on their unpaid sub- scription, even though the charter pro- vides for a call. Hill v. Merchants' Ins. Co., 134 U. S., 515 (1890). See, also, Myers v. Seeley, 10 Natl. Bank. Reg., 411 ; Sanger v. Upton, 91 U. S., 56 (1875) ; Wilbur r. Stockholders, etc., 18 Bank. Reg., 178. Where the corporation, being indebted, has the power to call, and does not choose to exercise it, equity at the instance of creditors will exercise it. Marsh r. Burroughs, 1 Woods, 463 (1871) ; Boeppler t\ Menown, 7 Mo. App., 447 (1885); Adler v. Milwaukee Pat B. Mfg. Co., 13 Wis., 57 (1860) ; Glenn v. Dodge, 3 Cent Rep., 283 (1886) ; Great W. Tel. Co. v. Gray, 14 N. E. Rep., 214 (111., 1887); Ward v. Griswoldville Mfg. Co., 16 Conn., 593 (1844) ; Miller's Case, 54 L. J. (Ch.), 141 (1885); Henry v. Vermilion & Ashland R. R v Co., 17 Ohio, 187 (1848) ; Ogilvie v. Knox Ins. Co., 22 How., 380 (1859) ; Curry v. Woodward, 53 Ala, 371 (1875); Chandler v. Keith, 42 Iowa, 99 (1875); Shackley v. Fisher, 75 Mo, 498 (1882). The filing of the bill in the suit in equity is equivalent to a call. Hatch v. Dana, 101 U. S., 205 (1879) ; Thomp- son v. Reno Sav. Bank, 7 Pac. Rep., 68 ; 19 Nev., 103, 171, 242, 291, 293 (1886). See, also, Yeager v. Scranton, etc., Bank, 14 Weekly N. Cas., 296 (1884). A late case holds that a decree in a chancery suit is equivalent to a call. Glenn v. OH. VII.] CALL8. [§ 103. ary with the directors to say whether the company's debts shall be paid or not. And this is the rule even though the statute provides that calls shall be made by the directors. 1 There has been some doubt as to whether the writ of mandamus would lie to compel the directors to make the call, 2 but the au- thorities seem to hold that the writ will not lie for this purpose. The usual procedure to collect unpaid subscriptions is an order of a court of equity made in a suit brought by corporate creditors for the purpose of applying corporate assets to corporate debts. 3 Saxton, 68 Cal.. 353 (1886). If the court orders that notice of the call be given the receiver cannot collect by suit un- less such notice is given. Franklin Sav- ings Bank v. Fatzinger, 4 Atl. Rep., 913 (Pa, 1886). Where the whole of the un- paid subscriptions are needed to pay cor- porate debts, no assessment, even by the court, is necessary. But, unless the evi- dence clearly shows such necessity, it is for the jury to say whether the whole unpaid subscription shall be paid. Citi- zens', etc., Co. v. Gillispie, 9 Atl. Rep., 73 (Pa., 1887, citing cases). See § 207. Where an assignment is made by the corporation for the benefit of creditors, the statute of limitations begins to run within a reasonable time, even if no call is made. Glenn v. Dorsheimer, 24 Fed. Rep., 536. Cf. § 195. In Missouri it has been held that there can be no garnish- ment of an unpaid subscription until after a call has been made. Parks v. Heman, 7 Mo. App., 14 (1879). In New York there are a few dicta to the effect that calls by the directors are necessary before unpaid subscriptions can be en- forced for the benefit of corporate cred- itors. Seymour v. Sturgess, 26 N. Y., 134 (1862); Mann v. Pentz, 3 N. Y, 415 (1850). But the prevailing rule is sus- tained in Sagory v. Dubois, 3 Sandf. Ch., 466 (1846), where the court say: "The articles, it is true, in effect require that calls should be made by the directors, and probably the association could not maintain an action at law until such calls were regularly made ; but that does not impair the remedy in behalf of the receiver." 1 Glenn v. Saxton, supra; Crawford v. Rohrer, 59 Md., 599 (1882). Contra, Paper Co. v. Waples, 3 Woods, 34 (1877), where the charter prescribed that calls should be only by a three-fourths vote of the stockholders. 1 " A chancellor will compel the di- rectors to make the calls required by the charter whenever his aid is invoked by creditors or the representatives of creditors." Germantown Passenger R'y Co. v. Fitler, 60 Pa. St, 124 (1869). The three English cases usually cited on this point do not hold that a man- damus lies herein. Queen v. Victoria Park Co., 1 Ad. & E1.(N. S.),544; Queen v. Ledyard, id., 616; King v. Katharine Dock Co., 4 Barn. & Ad., 360 (1832). In the case of Dalton & Morgantown R R, Co. v. McDaniel, 56 Ga, 191 (1876), the court held that a mandamus was unnecessaiy. on the ground that the remedy by bill was easier and more complete, and that justice would be better administered in this way by an account of all the corporate debts, and of all liabilities of solvent stockholders, taken by a master in chancery. In Hatch v. Dana, 101 U. S., 205 (1879), the court say a mandamus " can avail only when there are directors. The remedy in equity is more complete." In Ward v. Griswoldville Mfg. Co., 16 Conn., 593 (1844), the court refused a mandamus because it would enforce the collection of only a few debts, whereas the remedy in equity would enforce all proportionately. 3 •' Under such circumstances, before there is any obligation upon the stock- (11) 161 §§ 109, 110.] CALLS. [CH. VII § 109. Who has authority to make calls.— A call, in order to be legal and enforceable, must be made by the proper corporate au- thorities. Generally, the power to make calls is vested in the directors or in the stockholders at large. Unless the charter or a statute makes provision therefor, the question as to who shall make calls is a question of internal arrangement. If no provision whatever is made for the exercise of the power it devolves upon the directors, on the general principle that they alone have power to manage and superintend the financial matters of the corporation and to exercise all corporate powers, except those required to be exercised at corporate meetings. 1 Even though the statute author- izes calls by the stockholders, yet the directors also have the same power. 2 §110. Calls foj directors.— Where the power to make calls is vested in the directors, a call made by those who are • directors de facto will be upheld. 3 The directors, in whom the power to make holders to pay without an assessment and call by the company, there must be some order of a court of competent jurisdiction, or, at the very least, some authorized demand upon him for pay- ment." Scoville V. Thayer, 105 U. S., 143 (1881). In bankruptcy, it seems, the assignee, by succeeding to all the rights of the corporation, may make a call and enforce it. Hatch v. Dana, 101 U. S., 205 (1879). See, also, §§ 202, 207, infra. At common law a court of equity could not make calls for benefit of corporate creditors. Dictum, Grain's Case, L. R, 1 Ch. D., 307, 323 T1875). i Budd v. Multnomah St R'y Co., 15 Pac. Rep, 659 (Oreg., 1887). The direct- ors may make calls " as they may do all things, except such as are to be done by the shareholders at a general meeting." Ambergate, N. & B. & E. J. R'y Co. v. Mitchell, 4 Ex. Rep., 540 (1849). 2 Id. In Ex parte Winsor, 3 Story, C. C, 411 (1844), it was held, however, that where the charter gave to the cor- poration the power to assess stock it must be exercised exclusively by the stockholders in meeting assembled. On the other hand, in Rives v. Montgomery S. P. R Co., 30 Ala., 92 (1857), the court held that stockholders who by charter have power to make calls may delegate that power to the directors. See, also, Healey, Law and Pr. of Companies, 109. 3 -'An illegal election of directors can- not be set up in resistance of the pay- ment of stock, but would be a case for a quo u-arranto to oust the illegally elected directors." Eakright v. Logans- port & N. Ind. R R Co., 13 111., 404 (1859) ; Johnson v. Crawfordsville R R Co., 11 Ind., 2S0 (1858); Fairfield C. T. Co. v. Thorp, 13 Conn., 173 (1839) ; Stein- metz v. Versailles R R Co., 57 Ind., 457 (1877); Macon R R Co. v. Vason, 57 Ga., 314 (1876); Atherton r. Sugar, etc, Co., 67 Ind., 334 (1879). In the case, however, of People's Mut Ins. Co. v. Westcott, 80 Mass., 440 (1860), a call by directors elected at a meeting held without notice was declared invalid and not enforceable. A call may be enjoined on the ground that the directors were illegally elected. Moses v. Tompkins, 4 S. Rep., 763 (Ala., 1888). 'In England the courts will inquire into the right of directors to their office, in cases involv- ing the validity of calls. Swansea Dock Co. v. Lewien, 20 L J. (Ex.), 447 (1851). If the directors were not legally elected, their calls and forfeitures of stock based thereon will be set aside. Garden Gully, etc., Co. v. McLister, L R, 1 App. Cas.. 39 (1875). See Healey on Companies. 162 CH. VII.] CALLS. [§ HI- calls is vested, cannot delegate their authority. 1 It is a power the exercise of which involves a discretion which cannot be exercised by others. A call by a minority meeting of the directors, no quo- rum being present, is void. 2 § 111. Assignment of subscription ~by corporation oefore or after call. — The unpaid and uncalled subscriptions for stock cannot be mortgaged or sold by the corporation. If the transfer by the directors were allowed, "the consequence would be that the discre- tion which they are bound to exercise Avould be wholly defeated and put an end to." 3 The power of making calls, being a discre- 110. If the corporate organization was not regular, and the directors were not legally elected, their call is not enforce- able. Howbeach, etc., Co. v. Teague, 5 H. & N., 151 (1860). Directors elected at a meeting called on thirteen days' notice instead of fourteen as required by stat- ute may make calls, where their elec- tion has been confirmed by a subsequent annual general meeting. Briton, etc., Assoc, v. Jones, 61 L, T. Eep., 384 (1889). 1 Rutland & Burlington R R Co. v. Thrall, 35 Vt. 536 (1863), the court say- ing : '' Where the charter requires the directors to do some specific act there seems to be a stronger reason why they should be held incapable of delegating such authority than when mere general powers are conferred on them." See, also, Banet v. Alton & Sangamon R R Co., 13 111., 504 (1851); Pike v. Shore Line, 68 Me., 445 (1878); Silver Hook Road v. Greene, 12 R. I, 164 (1878), where it was delegated to the treasurer ; Mut F. Ins. Co. v. Chase, 56 N. H, 341 (1876), citing authorities; Monmouth Mut F. Ins. Co. v. Lowell, 59 Me., 504 (1871). But where the power is dele- gated and exercised, the call may be ratified by the directors, and will then be valid. Read v. Memphis Gayoso Gas Co., 8 Heisk. (Tenn.), 545 (1872); Rut- land & B. R R Co. v. Thrall, 35 Vt., 536 (1863). Although the directors can- not delegate the power to make a call, yet they may delegate the power "to determine the amount of some of the instalments, and to designate the times of payment" Banet v. Alton & S. R R Co. (1851), supra. It is not necessary to allege that the directors were duly elected. Miller v. Wild Cat G. Road Co., 52 Ind., 51 (1875); Steinmetz v. Versailles & O. T. Co., 57 Ind., 457 (1887). But proof must be given that the proper authorities made the call. N. J. Mid- land R'y Co. v. Strait, 35 N. J. L, 322 (1872). 2 Price v. Grand Rapids & Ind. R R Co., 13 Ind., 58(1859) ; Hamilton v. Same, 13 Ind., 347 (1859); Bottomley's Case, L R, 16 Ch. D., 681 (1880). But may be confirmed by a quorum. Phosphate of Lime Co., 24 L. T., 932. 3 Ex parte Stanley, 33 L J. (Ch.), 535 (1864). To the same effect, see N. J. Mid- land R'y Co. v. Strait, 35 N. J. L, 322 (1872) ; Wells v. Rodgers, 50 Mich., 294 (1883); S. C, 44 Mich., 411; 27 N. W. Rep., 671 (1886), involving the consolida- tion of two railroads. See. also. Crooks v. State, 4 N. E. Rep., 589 (Ind., 1886) ; Wallingford Mfg. Co. v. Fox, 12 Vt, 304 (1840); Bank of South Australia v. Abrahams, L R, 6 P. C. App., 262 (1875): Hurlbert v. Root, 12 How. Pr.. 511 (1855): Hill v. Reid, 16 Barb, 280 (1853): Hurlbert v. Carter, 21 Barb.. 221 (1855).- Cf. Smith v. Hallett, 34 Ind., 519 (1870), where the subscription was not for stock, but as a bonus. The arti- cles of incorporation of a company may authorize a mortgage on unpaid and uncalled subscriptions. Re Pyle, etc.. Works, 62 L T. Rep., 226 (1890). Af- firmed, id., 887. The subscription may 163 §§ 112, 113.] CALLS. [CH. VII. tionary one, cannot be transferred to other parties. The transfer is void. The subscribers are bound to pay their subscriptions only when, in the opinion of the proper corporate authorities, or of a court of equity, the money is needed for corporate purposes. This power of ascertaining and determining the extent of the corporate needs, being a discretionary power, cannot be transferred or dele- gated to others. A different rule prevails, however, after a call has been made but not yet collected, and an assignment of the amount already called is legal and valid. 1 § 112 Interest runs from the time the call is due.— A subscriber who has failed to pay for his shares according to the terms of his contract is properly chargeable with interest from the time of the default. 2 The company cannot be compelled to issue the stock until principal" and interest are paid. § 113. Stockholders cannot question advisability of calls.— The necessity or advisability of making a call is a matter which rests exclusively within the discretion of the corporate authorities who have power to make the call. 3 A stockholder, when sued upon an J. & S., 407 ; Gardner v. Loudon, etc., R'y Co., L R, 2 Ch., 201, 215. An as- signee of unpaid subscriptions may as- sign to still another. Rand v. Wiley, 29 N. W. Rep., 814 (Iowa, 1886). Right of one road built on line of abandoned road, to recover on private donation to latter, see Sickels v. Anderson, 30 N. \V. Rep., be enforced by contractors to whom it has beeu assigned. Darnall v. Lyon, 19 S. W. Rep., 506 (Tex., 1892). 1 Humber Iron-works Co., 16 Weekly Rep., 474. 667 (1868) ; Hills v. Rodgers, 50 Mich., 294 (1883) ; Miller v. Maloney, 3 B. Monr. (Ky.), 105 (1842), where the call was assigned to the railroad contractor who owed the subscriber for work done : Downieu Hoover, 12 Wis., 174 (1860); Morris v. Cheney, 51 111., 451 (1869), where, however, it is not clear that a call had been made. A call which has been determined upon, but not defi- nitely made, may be transferred if it is afterwards duly made by the directors. Be Sankey Brook Coal Co., L. R, 9 Eq., 721 (1870). See L. R, 10 Eq.. 381. As to the enforcement of a subscription by a subsequently created corporation formed by consolidation, see ch. 53. A mortgage on all the land, property and effects of the corporation does riot in- clude uncalled subscriptions. Pickering v. Ilfracombe R'y Co., 37 L J. (C. P.). 118 (1868); Lishman's Claim, 23 L. T. Rep. (N. S.), 759 (1870); King v. Mar- shall, 33 Beav., 565 (1864;. Cf. Re Ma- rine M. Co., L. R, 4 Eq., 601 (1867); British Prov. L. Ins. Co., In re, 4 De G., 78 (Mich., 1886). 2 Gould v. Oneonta, 71 N. Y., 298 (1876) ; Rikhoff t>. Brown's Rotary, etc., Co., 68 Ind., 388 (1879); Casey v. Galli, 94 U. S., 673 (1876). See, also, Burr v. Wilcox, 22 N. Y., 551 (1860). Cf. Stock- en's Case, L R, 5 Eq, 6 (1867); Cleve- land v. Burnham, 55 Wis., 598 (1886). In the case Glenn v. Liggett, 51 Fed. Rep., 381 (1892X interest was allowed only from the date of suit and not from the date of the call. 20 Atl. Rep., 115. 3 The question of the necessity for the call " was a matter for the determina- tion of the board of directors." Chou- teau Ins. Co. v. Floyd, 74 Mo., 286(1881). " The question whether these necessities demanded the payment of the money was for the directors." Judah v. Ameri- can L. S. Ins. Co., 4 Ind., 333 (1853); Budd v. Multnomah St R'y Co., 15 Pac. Rep., 659 (Oreg., 1887). 164 OH. VII.] CALLS. [§ 114. unpaid call, cannot set up in defense that there was no occasion or use for the money. The call, however, must be for the bona fide purpose of raising money for corporate purposes. It must not be for the purpose of enabling the stockholders to use the money to the detriment of the creditors of the failing corporation. 1 More- over, a court of equity will set aside calls and payments made ami managed with a view to discharging the stockholders' liability, and preventing the proceeds from being applied to the general corporate debts. Equity, however, will not interfere with a call merely because the money received may be diverted by the di- rectors to an act or enterprise beyond the powers of the corpora- tion. 2 The corporation cannot contract to postpone indefinitely a call. 3 To allow such postponement would be unjust to corporate creditors and other stockholders. § 114. Culls must be impartial and uniform. — A call cannot be made so as to affect a part only of the subscribers. It must be made on all alike, or it will be void. 4 The courts will not allow the directors of a company so to proceed as to require some stockhold- ers to pay calls, and not to require others to do the same. Any such attempt will be promptly set aside and rectified. 5 > Habertson's Case, L. R., 5 Eq., 286 (1868). Thus, where the amount paid in is immediately paid out to the direct- ors for fees, the transaction is fraudu- lent, and is set aside. Syke's Case, L. R., 13 Eq. Cas., 255 (1871). On the other hand, the directors cannot delay calls in order to enable themselves to trans- fer their stock and avoid liabilities. Gil- bert's Case, L. R. 5 Ch., 559 (1870); Preston v. Grand Collier Dock Co., 1 1 Sim., 327 (1840). 2 In the case of Bailey v. Birkenhead, L. & C. J. R'y Co., 12 Beav., 433 (1850), the court said : It is not within the ju- risdiction of courts "to take the ac- counts and make the inquiries necessary for the purpose of ascertaining whether, under the circumstances to which the company is reduced, and in a continu- ing concern, it is proper, in the due man- agement of the affairs of the company, to raise money by way of calls from the shareholders." Corporate meetings are the places for such complaints. See, also, Yetts v. Norfolk R'y Co., 3 De G. & Sm., 293 (1859). 3 McComb v. Credit Mobilier of Amer- ica, etc., 13 Phil. Rep.. 468 (1878); Van Allen v. 111. Central R. R Co., 7 Bosw. (N. Y.), 515 (1861) -the last case hold- ing, however, that this principle does not prevent the issue of bonds convert- ible into stock whenever the stockholder desires. * Pike v. Bangor & Calais S. L. R R Co., 68 Me., 445 (1878). Cannot object to call on ground that motives of direct- ors were wrong. Oglesby v. Attrill, 105 U. S., 605 (1881). A suit to collect thirty- five per cent, of a subscription fails where other subscribers have paid but two per cent. Great Western Tel. Co. v. Burnham, 47 N. W. Rep., 373 (Wis.. 1890) ; Bowen v. Kuehn, id., 374. 6 Preston r. Grand Collier Dock Co., 11 Sim., 327 (1840). If directors use power to make calls oppressively they will be restrained. Cannon v. Trask, L. R, 20 Eq.. 669. As where the object is to disqualify from voting those who cannot pay. Anglo, etc., Bank v. Barag- non, 45 L. T., 362. 165 § 115.] CALLS. [CH. VII. § 115. Method of making call — No formality necessary.— There are no prescribed or established rules stating how a call shall be made by the corporate authorities empowered to make it. Any act or resolution which in a court of law would prove a clear official intent to render due and payable a part or all of the unpaid sub- scriptions seems to be sufficient. 1 The call need not indicate when, or to whom, or where, payment is required to be made. 2 These are to be stated in the notice of the call. Mere irregularities are disregarded, and will not invalidate the call. 3 The substantial fact must exist that the proper corporate officers voted or declared that payment be required. Hence the elements of a call seem to be that it shall be by the proper persons acting officially ; and that a resolution, susceptible of legal proof, 4 be passed that a certain amount, either the whole or part, 5 of the subscriptions for stock shall be paid in. i Budd v. Multnomah St R'y Co., 15 Pac. Rep., 659 (Oregon, 1887) ; Citizens' Ins. Co. v. Sortwell, 10 Allen, 110, 112 (1865). 2 Fox v. Allensville, C. S. & V. Turn- pike Co., 46 Ind., 31 (1874); Andrew r. Ohio & M. R, R Co., 14 Ind., 169 (1860). In the case of Great North of Eng. R'y Co. n Biddulph, 7 M. & W., 243 (1840), Baron Parke held that the resolution for a call need not state the place of payment nor the person to whom it was payable. See, also. Marsh v. Burroughs, 1 Woods, 463 (1871), holding that the call need not specify either time or place. See, also, Rutland & Burlington R R. Co. v. Thrall, 35 Vt., 356 (1863), that the place need not be stated. Call made in a new name, legally assumed by the cor- poration, is binding on subscribers who knew of the change of name. Shackle- ford v. Dangerfield, L. R, 3 C. P., 407 (1868). 8 Irregularities are no defense. The remedy is to revoke or set aside the call. " Call in fact made means that if made, and notice be given, ... a party shall not wait to take advantage of any irregularity at the trial." Re British Sugar Ref. Co., 3 K. & J., 408 (1857); Southampton Dock Co. v. Richards, 2 Railw. Cas., 215, 234 (1840) ; S. C. 1 Man. & Gr., 448. See. also, Shackleford r. Dangerfield, L, R, 3 C. P., 407 (1868). An error in the call may be corrected and cured by a subsequent call made after the first liability accrued but be- fore suit. Phil. & West Chester R R Co. v. Hickman, 28 Pa. St., 318 (1857). A director who participated in making the call cannot set up informalities for the purpose of defeating it Hays v. Pittsburgh, etc., R R, 38 Pa. St, 81 (1860). Payment and acquiescence in informality as to one call waives it as to another call. Macon & Augusta R R Co. v. Vason, 57 Ga., 314 (1876). 4 A call by the directors is valid al- though no entry of the resolution is made in the minutes of the directors' meeting. Hays v. Pittsburgh & S. R R Co. (1860), supra. An entry of the reso- lution, made by the secretary in the book containing the minutes, is suffi- cient. Fox v. Allensville C. S. & V. T. Co., 46 Ind., 31 (1874). An authorized subsequent call is competent proof of the validity of a previous call. Barring- ton v. Pittsburgh & S. R R Co., 34 Pa. St., 358 (1859). The corporate books are competent to prove both the call and the mode of payment. Barrington v. Pittsburgh, etc., R. R Co., supra; Com- fort v. Leland, 3 Whart (Penn.), 81 (1837). 5 The call may be for the whole sub- 160 CH. VII.] 0ALL3. [§ 119. § 116. Time, place, amount and person to whom payable. — The time and place and person to whom calls are to be paid need not necessarily be designated or fixed by the persons authorized to make the call. 1 These are duties which may be performed by other offi- cers of the corporation, and frequently either the president or treas- urer of the corporation performs this work. The time of payment should be reasonable, 2 as also should be the place. If no place or person to receive payment is designated, it is to be paid to the treasurer at his office. 3 The amount called need not be made pay- able in one sum at one time, but may be made due in instalments. 4 scription. Fox v. Allensville C. S. & V. T. Co., 46 Ind., 31 (1874). May be for the whole or for part. Harm v. Mulberry & Jefferson G. R. Co., 33 Ind., 103 (1870) ; Stone v. Great Western Oil Co., 41 111., 85 (1866) ; Spangler v. Ind. & 111. Central R R Co., 21 111., 276 (1859); Ross V. Lafayette & Indianapolis R. R Co., 6 Ind., 297 (1855). Even though it be ex- pressly provided that only a certain sum shall be assessed at one time, yet several assessments, each one not in excess of the stated sum, may be or- dered by a single vote. Penobscot R R. Co. v. Dummer, 40 Me., 172 (1856) ; Pe- nobscot R R Co. v. Dunn, 39 Me., 587 (1855). 1 See § 115, note 2. The directors themselves may fix the time, place and manner of payment, even at a meeting subsequent to the meeting ordering a call. The call may be prospective. The directors may order that on a certain date a call payable at a later date shall be made. Sheffield & Manchester R'y Co. v. Woodcock, 7 Mees. & W., 574 (1840). The subscription itself may reg- ulate the time of payment N. J. Mid- land R'y Co. v. Strait, 35 N. J. L, 322 (1872); Roberts v. Mobile & O. R R Co., 32 Miss., 373 (1856). Even though the statute provides otherwise. Iowa & Minn. R R Co. v. Perkins, 28 Iowa, 281 (1869). 2 Fairfield County Turnpike Co. v. Thorp, 13 Conn., 173 (1839). The time between paj'ments of instalments is en- tirely within the discretion of the di- rectors, there being no provision regu- lating the subject Hall v. United States Ins. Co., 4 Gill (Md.), 484 (1860X 3 A resolution of the directors that the instalments should be paid in at the times therein designated "imports that payments should be made to the treas- urer, who is the proper and only officer to receive and keep the moneys of the corporation." Danbury & Norfolk R. R Co. v. Wilson, 22 Conn., 435 (1853). As to a tender to the president, see Mitchell v. Vermont, etc., Co., 67 N. Y., 280 (1876). * London & North West R'y Co. v. McMichael, 6 Ex., 273 (1851); Birken- head L & C. R'y Co. v. Webster, id., 461 (1851); Ambergate R'y Co. v. Nor- cliff, id., 461 (1851) ; not following Strat- ford & M R'y Co. v. Stratton, 2 B. & Ad., 519 (1831). In Birkenhead L. & E. R'y Co. v. Webster, as reported in 6 Ex., 277, the court say: "We are unani- mously of opinion that a call payable by instalments is good, although debt will not lie for one instalment until all the instalments are due and payable." In Hays v. Pittsburgh & Steubenville R R Co., 38 Pa. St, 81 (1860), the court held that the directors by one resolu- tion could call in the balance of the sub- scriptions, making the call payable in instalments, due at different times. To the same effect see Rutland & Burling- ton R R Co. v. Thrall, 35 Vt, 536 (1863); Lewis' Case, 28 L T. (N. S.), 396, holding that several assessments, pay- able at different times, may be made by one vote, where the call was by the court 167 §§ 117, 118.] CALLS. [CH. VII. § 117. Notice of calls — Cases holding it not necessary. — There is a wide and irreconcilable difference of opinion among the authori- ties on the question whether notice of a call must be given to a stockholder before suit can be brought for the collection of a call. Frequently either the charter, or a statute, or the by-laws of the corporation, require notice to be given; and in such cases notice is, of course, necessary, in order to sustain suit. 1 But where there is no provision in the charter, or statute, or by-laws, or subscription itself, prescribing that notice of calls shall be given to the stock- holders, the weight of authority holds that no notice is necessary, and that an action to collect the call may be maintained without averring or proving such a notice. 2 §118. Notice of calls — Cases holding it necessary. — There is, however, strong authority for the rule that notice of calls must be given before suit is brought for their collection. 3 The reason for 1 In many of the states there exist statutes, very similar in their terms, that notice shall be given of calls, and that in case of non-payment the stock may be forfeited. These statutes have received different interpretations in dif- ferent states. The usual construction is that the notice required therein refers only to the forfeiture proceedings, and does not necessitate notice before bring- ing a suit at law for the collection of the call. Smith v. Indiana & 111. R'y Co., 12 Ind., 61 (1859); Lake Ontario, Auburn & N. Y. R R Co. v. Mason, 16 N. Y., 451, 464 (1857). In other states such a statute is construed to require notice before suit Hughes v. Antietam Mfg. Co., 34 Md.. 316 (1870); Granite Roofing Co. v. Michaels, 54 Md., 65 (1880); Dexter & Mason P. R Co. v. Millerd, 3 Mich., 91 (1854). Illinois River R. R Co. v. Zimmer, 20 111., 654 (1858), holds that a statute regulating notice of calls does not release the stockholder. 2 Wilson v. Wills Valley R. R. Co., 33 Ga., 466 (1863); Eppes v. Mississippi, Gainesville & Tuscaloosa R R Co., 35 Ala., 33 (1859) ; Grubb v. Mahoning Nav. Co., 14 Pa. St., 302 (1850); Gray v. Mo- nongahela Nav. Co., 2 W. & S. (Pa.), 156 (1841); Grubbe v. Vicksburg & Bruns- wick R R Co., 50 Ala., 398 (1873) ; Eak- right v. Logansport & Northern Ind. R R. Co., 13 Ind., 404 (1859); Johnson v. (rawfordsville R R. Co., 11 Ind., 280 (1858); New Albany & Salem R R. Co. v. McCormick, 10 Ind., 499 (1858) ; Fisher v. Evansville & C. R. R Co., 7 Ind., 407 (1856); Ross v. Lafayette & Indianapolis R. R Co., 6 Ind., 297 (1855); Hill v. Nis- bit, 100 Ind., 341 (1884); Smith v. Indiana & 111. R'y Co., 12 Ind., 61 (1859). In the last case the court says : " These decis- ions rest upon the ground that the con- tract to pa} r by instalments is in effect a promise to pay on demand, and the demand involved in the suit itself was alone sufficient" Notice of calls is re- quired by the Pennsylvania railroad act McCarty v. Selinsgrove, etc., R R, 35 Leg. Intel., 410 (1878). In New York, since no call is necessary, no notice is necessary. Cf. Macon & Augusta R R. Co. v. Vason, 57 Ga., 314 (1876). 3 Wear v. Jacksonville & Savannah R R Co., 24 111., 593 (1860); Spangler v. Ind. & 111. Central R. R Co., 21 111., 276 (1859). Cf. Peake v. Wabash R R Co., 18 111., 88 (1856), holding that notice is unnecessary. In the case of Carlisle v. Cahawba & Marion R R Co., 4 Ala. (N. S.), 70 (1842), the court say that notice must be given, since " the times, amount of instalments and manner of payment were all to be prescribed by the presi- dent and directors of the corporation, 168 CH. VII.] CALLS. [§119- this rule seems to accord with sound legal principles and with busi- ness expediency. It is a well-established principle of law that, when the facts or circumstances upon which the performance of a contract depends lie more particularly in the knowledge of the promisee than the promisor, the former must give the latter notice. Hence it would seem that since a subscription is not clue absolutely, but only on call, and the time, place and amount of the call is fixed by persons other than the subscribers, the better and more reason- able rule would be that notice of the call should be required and must be given. § 119. Methods of serving notice of calls. — The manner and mode of giving notice has given rise to some controversy. Unless pro- vision is expressly otherwise, the notice must be given by handing to the subscriber a written notice, or by informing him orally that the call has been made, giving the amount, time, place and person to whom payment is to be made. 1 Where the notice is served, not personally, but by mail, the notice is effective only in case it is actually received. 2 Whether it was so received is a question for the jury. 3 A publication of a notice in a newspaper is not binding and depended upon their volition and action, and consequently were more properly within their knowledge." See, also, Scarlet v. Academy of Music, 43 Md., 203 (1875) ; Essex Bridge Co. v. Tuttle, 2 Vt, 393 (1830); Rutland & Burlington R. R. Co. v. Thrall, 35 Vt, 536(1863); Miles v. Bough, 3 Q. B., 845 (1842) ; Edinburgh, etc., R'y v. Hibblewhite, 6 M. & W., 707(1840); Alabama & Florida R. R. Co. v. Rowley, 9 Fla., 508 (1861). In Hughes v. AntietamManuf. Co., 34 Md., 316(1870), the court say : " To say that it [notice] is unnecessary, because the subscribers, who may be living in different parts of the county, and perhaps the state, are presumed in law to know all that is done by the directors, seems to us to be rais- ing a presumption against the truth itself." 1 The notice need not be written. Ver- bal notification suffices. Smith v. Tal- lahassee Plank-road Co., 30 Ala., 650, 666 (1857). Notice to pay to the treasurer sufficiently indicates the place of pay- ment. It is understood to be at his office. Muskingum Valley T. Co. v. Ward, 13 Ohio, 120 (1844). Contra, Dex- ter & Mason P. R. Co. v. Millerd, 3 Mich., 91 (1854). It must be proved to have been sent by authorized persons. Miles v. Bough, 3 Q. B., 845 (1842). Notice to various parties in the neighborhood is not sufficient. New Jersey Midland R'y Co. v. Strait, 35 N. J. L., 322 (1872). No particular form of notice is necessary. The only question is " whether the no- tice gives the shareholder to understand that a call has been made, and that he is required to pay the amount on a given day." Shackleford v. Daugerrield, L. R, 3 C. P., 407 (1868). 2 "Constructive notice bj' mail is not a personal notice, although in some cases, by express statutory provision, it is sufficient to bind parties." Hughes v. Antietam Manuf. Co., 34 Md., 816 (1870). 3 A notice of a call may be by mail. If the subscriber denies that he received it, the question is for the jury. Brad- dock v. Phil., Marlton & Medford R. R Co., 45 N. J. Law Rep., 363 (1883). Ouly the person actually mailing the notice can testify to that fact Jones v. Sisson, 72 Mass., 288 (1856). 169 § 1190 CALLS. [CH. VII. effectual unless it be proved that the subscriber who is sued actu- ally read the notice as published. 1 A personal notice is sufficient, although the charter, statute or by-laws provide for notice by pub- lication. 2 An express promise of the subscriber to pay a call which has been already made is presumptive evidence that he had notice of that call. 3 Notice by publication, given under the authority of 1 In Alabama & Fla. R. R. Co. v. Row- ley, 9 Fla., 508 (1861), the court say such a mode of notice "might be attended with irreparable injury to innocent parties." See, also, dictum in Lake Ontario, Auburn & N. Y. R R. Co. v. Mason, 16 N. Y., 451 (1857). In the case of Schenectady & S. R R. R Co. v. Thatcher, 11 N. Y, 102 (1854), where the charter prescribed notice by publica- tion or by mail, a director who aided in giving the notices was held to have had personal notice and to be bound. " Personal service of due notice is clearly more advantageous to the defendant than either an advertisement in a news- paper or a notice sent by mail." See, also, Lexington & West Cambridge R. R. Co. v. Chandler, 13 Mete, 311 (1847). See, also, £ 130. Notice in a newspaper is not good notice unless the statute so prescribes. People's, etc., Assoc, v. Furey, 20 Atl. Rep., 890 (N. J., 1890). In the case of Lincoln v. Wright, 23 Pa. St., 76 (1854), not a corporation case, Judge Jeremiah Black said that a notice by publication in a newspaper was no notice unless actually read by the per- son charged with the notice. " It must be proved that he read it; otherwise it is no stronger than proof that the fact was orally and publicly uttered at a place where he was not present . . . Where the law requires notice to be given to a party before a liability can be fixed upon him, and the mode of giv- ing such notice is left undetermined, it should be given personally and in fact, and so proved." On the other hand, in Hall v. U. S. Ins. Co., 4 Gill (Md.^, 484 (1847), notice of a call by newspaper was held sufficient The court said : " There is no proportionate object attained by the great inconvenience, labor and ex- penses incident to personal notice. The substitution of such newspaper publica- tion in lieu of personal notice has so long been an universal usage, and of a notoriety equal to that of a publication of newspapers themselves, that the cus- tom of doing so has become a part of the law of the land." See. also, Louisville & E. T. R R Co. v. Meriwether, 5 B. Monr. (Ky.), 13 (1844), to the same effect and dictum in Danbury & Norfolk R R Co. v. Wilson, 22 Conn., 435 (1853), and £§ 130, 131, infra. 2 In the case of Miss., etc., R R Co. v. Gaster, 20 Ark., 455 (1859), the statute prescribed sixty days' notice by publica- tion. Actual personal notice was given, and no publication was had. The court sustained the notice and said: "One of the criterions by which to determine whether the requirements of a statute are imperative or merely directory is that those acts which are of the essence of the thing required to be done are im- perative, while those which are not of the essence are directory. . . . The giving of sixty days' notice is imperative and mu£t be strictly complied with, be- cause it is of the essence of the thing re- quired to be done ; the mode of doing so is directory, because not of the essence, and may be either by publication in the manner prescribed by the charter or by actual personal notice." Cf., semble, in Tomlin v. Tonica & Petersburg R R Co., 23 111., 429 (I860). 3 Miles v. Bough, 3 Q. B., 845 (1842) ; Fairfield County Turnpike Co. v. Thorp, 13 Conn., 173 (1839). 170 OH. vir.] CALLS. [§ 120. a. statute, charter or by-law, must strictly comply with the provis- ions prescribed as to the time and formalities. 1 § 120. Demand, waiver, -pleadings, etc. — After notice has been given, no demand is necessary before bringing a suit to collect the subscription. 2 The subscriber may, by his acts or express agree- ment, waive the call itself, or informalities in its making, or notice thereof. 3 It is immaterial that other shareholders have had no notice of the call. 4 The proof of calls and of notice, when required, must be clear and complete. 5 The pleadings in an action on calls must allege the various facts which complete the obligation of the subscriber to pay. 6 1 Where twenty days' notice was re- quired, proof of sending notice is insuffi- cient Must prove the time of sending. Cole v. Joliet Opera House Co., 79 111., 96 (1875). Notice by publication "at least sixty days " is satisfied by one pub- lication sixty days or more before the time of payment Muskingum Valley T. Co. v. Werd, 13 Ohio, 120 (1844) ; Marsh v. Burroughs, 1 Woods, 463 (1871) Fox v. Allensville Co., 46 Ind., 31 (1874). Fifty-nine days is insufficient where sixty days is prescribed. Macon & Au- gusta R. R Co. v. Vason, 57 Ga., 314 (1876). The printed notice must be put in evidence. Rutland & Burlington R R. Co. v. Thrall, 35 Vt. 536 (1863). Proof of several insertions is by copy of first insertion and the testimony of the pub- lisher that the others were made. Un- thank v. Henry County T. Co., 6 Ind., 125 (1855). The secretary of the corpo- ration cannot, by a certificate, prove publication of notice. Tomlin v. Tonica & P. R. R Co.. 23 111., 429 (1860). 2 Penobscot RR Co. v. Dummer, 40 Me., 172 (1856); Goodrich v. Reynolds, 31 111.. 491 (1863); Winters v. Muscogee R. R Co., 11 Ga., 438 (1852). Cf. Spang- ler v. Ind. & 111. Central R. R Co., 21 111., 276 (1859\ holding that one demand made for several assessments suffices. 3 Macon & A. R R Co. v. Vason, 57 Ga., 314 (1876). Payment of part of subscription is no waiver of right to have a call made for the balance before payment. Grosse Isle Hotel Co. v. Ex'rs of L'Anson, 43 N. J. L, 442 (1881). The vote of a city to pay a call is no waiver of its invalidity. Pike v. Bangor & Calais Shore Line R R Co., 68 Me., 445 (1878). The waiver must be clearly proved. Rutland & B. R R Co. v. Thrall, 35 Vt, 536 (1863). Director par- ticipating in call cannot object thereto. York Tramways v. Willows, L. R, 8 Q. B. D., 685. Where a subscriber, upon receiving notice of a call, denies that he is a stockholder, he thereby waives fur- ther notice. Cass v. Pittsburg, etc., R'y, 80 Pa. St., 31 (1875\ 4 Newry & Enniskillen R'y Co. v. Ed- munds, 2 Ex. Rep., 118 (1848); Shackle- ford v. Dangerfield. L. R., 3 C. P., 407 (1868). 5 Scarlett v. Academy of Music, 43 Md., 203 (1875). This case holds also that calls may be proved by reading ex- tracts from the minutes of the directors' meetings, without putting the books in evidence. 6 Must allege that the instalments are all due and payable, where several are sued on. Bethel & Hanover T. Co. v. Bean, 58 Me., 89 (1870). At common law the count set out in the declaration should be not on the contract of sub- scription, but in indebitatus assump- sit for calls or instalments due. Peake v. Wabash R R Co., 18 111., 88 (1856). For the customary averments, see Spangler v. Ind. & 111. Central R R Co.. 21 111., 276 (1859). For the defendants' pleading, see South Eastern R'y v. Hib- blewhite, 12 A. & E, 497 (1840)." 171 CHAPTER VIII. FORFEITURE OF SHARES FOR NON-PAYMENT. § 121. The various remedies. 122-123. The remedy by forfeiture and sale of stock is by statutory authority only. 124. The remedy by forfeiture is cu- mulative. 125-126. When one remedy is ex- hausted the corporation can- not resort to another. 127-128. Forfeiture relieves the share- holder whose shares are for- feited from liability to corpo- rate creditors. 129. Statutory formalities and gen- eral method of forfeiture. 130. Notice in cases of forfeiture. 131. Notice is not the same thing as forfeiture. 132. Tender, by stockholder, before forfeiture. 133. Surplus after valid forfeiture be- longs to the corporation. 134. Equity will relieve a shareholder from an unauthorized forfeit- ure — Action at law for dam- ages. § 121. The various remedies. — When a subscriber fails or refuses to pay for the shares of stock for which he has subscribed, the cor- poration generally has several methods of enforcing the contract. First, there is the common-law action to collect the subscription as a debt. This remedy always exists, except in a few states where it is available only when the subscription itself or the charter cre- ates a liability to pay. 1 Second, the corporation may sue on the subscription, obtain judgment, and then proceed to sell the stock under an execution levied to collect the judgment. 2 Third, the corporation may bring an action at law for breach of contract, the measure of damages being the difference between the value of the stock at the price which the subscriber was to pay and the mar- ket value «t the date of the refusal to pay. 3 A fourth and very important remedy is that of forfeiture. It is the subject of this chapter. It is effected in one of two ways : the forfeiture may be by a strict foreclosure of the stockholder's stock — that is, the taking of his stock by the corporation itself; or it may be by a public sale of the stock for non-payment of the subscription. §§ 122-123. The remedy by public sale of stock is by statutory authority only. — In addition to the remedy of an action at law to compel payment of a subscription for* stock, there frequently is given to the corporation the right to sell the subscriber's stock for non-payment of his subscription and apply the proceeds to the pay- ment of that subscription. This is what is generally known as a 1 See § 74, supra. 2 Chase v. East Tenn., etc., R R Co., 5 Lea, 415 (1880). 3 Rand v. White Mountains R R Co., 40 N. H., 79 (I860). 172 OH. VIII.] KOKFEITUKE OF STOCK. [S 124. forfeiture of the stock. It is not a common-law remedy, and, con- sequently, can be resorted to by the corporation only when power to make the sale is given to the corporation by statute or by the act of incorporation. 1 The right to forfeit may, however, be cre- ated by the consent of the stockholders, and be indorsed on the certificates of stock. 2 The authority to forfeit shares for non-payment of the subscrip- tion cannot be created by a by-law. 3 Such a forfeiture would be wholly void, and transfers based thereon would confer no rights upon the transferee. 4 § 12-L The remedy utj forfeiture is cumulative. — Frequently, when a corporation is authorized by statute to forfeit shares for non-payment of the subscription, the question arises whether the statutory remedy of forfeiture is exclusive, thereby preventing a resort to the common-law remedy of an action of assumpsit on the 1 Westcott v. Minnesota, etc., Co., 23 Mich.. 145 (1871) ; Minnehaha, etc., Ass'n of Minneapolis v. Legg, 52 N. W. Rep., 898 (Minn., 1892) ; Budd v. Multnomah St. R'y Co., 15 Pac. Rep., 659 (Oreg., 1887). In the last case the statute gave the corporation power to make by-laws for forfeiture of stock. There being no by-law, a forfeiture was attempted by a resolution of the board of directors. Held, this could not be done. Barton's Case, 4 De G. & J., 46 (1859), is similar and stronger, as public notices and ad- vertisements were made of the threat- ened forfeiture. Perrin v. Granger, 30 Vt, 595 (1858); Clarke v. Hart, 6 H. of L. Cases, 633 (1858) ; Stanhope's Case, L. R, 1 Chan.. 161 (1865). In Kelk's Case, L. R, 9 Eq., 107 (1869), the forfeit- ure was provided for in deed of settle- ment, and hence regular. If the cor- poration purchases at forfeiture sale, as it may by statute in California, execu- tion against the corporation cannot be levied ou such stock. Robinson ?•» Spaulding, etc., Co., 72 Cat, 32 (1887). A building association cannot provide that it will discount a subscriber's stock, loan him the amount thus discounted, and forfeit the whole if he does not pay. It is usury. Henderson, etc., Assoc, v. Johnson, 10 S. W. Rep., 787 (Ky, 1889). 2 Weeks v. Silver, etc., Co., 55 J. & S. (X. Y.), 1 (1887). 3 Matter of the Long Island R. R. Co., 19 Wend., 37 (1837); S. C, 32 Am. Dec. 429: Kirk v. Nowill, 1 Term Rep, 118 (1786). Cf. Kennebec, etc., R. R Co. v. Kendall, 31 Me., 470 (1850); Rosenback v. Salt Springs National Bank, 53 Barb., 495, 506 (1868). 4 Matter of the Long Island R R Co., s}ipra. Yet, where such a power was conferred by a by-law adopted at a meeting of the stockholders, a stock- holder whose stock had been declared forfeited under the by-law, and who is shown to have assented to the by-law, will not be heard to question the valid- ity of the forfeiture. He is estopped. Lesseps v. Architects' Co., 4 La. Ann., 316 (1849). The corporation cannot, by a by-law, forfeit shares temporarily until penalties or fines shall have been paid. Adley v. Reeves. 2 Maule & S.. 53 (1813), by Lord Ellenborough. Cf. Cartan v. Father Mathew, etc.. Society, 3 Daly, 20 (1869); Pentz v. Citizens" Fire, etc., Co., 35 Md., 73 (1871). But only the stockholder can object to a forfeit- ure on the ground that it is by by-law. Detweiler u Breckenkamp, 83 Mo., I". (1884). Cf m 131, 134. As to the effe.t of acquiescence or waiver by the stock- holder, see gg 129, 134, infra. 173 § 124.] FORFEITURE OF STOCK. [CH. VIII. contract. It is the well-established rule that it does not. A grant of the power to declare a forfeiture of the shares of a subscriber for non-payment of calls does not, by implication, deprive the cor- poration of its option of remedies; and the corporate agents may, in their discretion, upon the failure of the subscriber to pay for his stock, either proceed against him by suit to collect the unpaid calls, or may forfeit his shares of stock. The corporation, by such a statute, is given its choice of remedies, and may pursue either. The remedy by forfeiture is additional. 1 i Delaware, etc., Co. V. Sansom, 1 Binn.. 70 (1803); Instone v. Frankfort Bridge Co., 2 Bibb, 576 (1812); Rens- selaer, etc., T. Co. v. Barton, 16 N. Y., 457 (1854) ; Lake Ontario, etc., R. R. Co. v. Mason, 16 id., 451 (1857) ; Buffalo, etc., R. R, Co. i\ Dudley, 14 id., 336 (1856) ; Tutweiler v. Tuscaloosa, etc., Co., 7 S. Rep., 398 (Ala., 1890); Harlem, etc., Canal Co. v. Seixas, 2 Hall (N. Y. Super. Ct.), 504 (1829); Fort Edward, etc., Co. tt Payne. 17 Barb., 567 (1854); Rens- selaer, etc., R. R. Co. v. "Wetsel, 21 id., 56 (1855): Sagory v. Dubois, 3 Sandf. Chan., 466 (1846) ; Troy, etc., R. R. Co. v. McChesney, 21 Wend., 296 (1839); Herkimer, etc., Co. v. Small, 21 id., 273 (1839); Ogdensburgh. etc., R. R Co. v. Frost, 21 Barb.. 541 (1856); Northern R R Co. v. Miller, 10 id.. 260 (1851); Troy, etc., R. R. Co. v. Tibbits, 18 id., 297 (1854); Troy, etc., v. Kerr, 17 id., 581 (1854); Union Turnpike Co. v. Jenkins, 1 Caines' Cas., 86, 95 (1804); Goshen, etc., Co. v. Hurtin, 9 Johns., 217 (1812); McDonough v. Phelps, 15 How. Prac, 372 (1856) ; Freeman v. Win- chester, 18 Miss., 577 (1848); Hartford, etc., R R. Co. v. Kennedy, 12 Conn., 499 (1838); Mann v. Cooke, 20 id., 178 (1850); Connecticut, etc., R. R. Co. v. Bailey, 24 Vt., 465 (1852) ; Rutland, etc, R R. Co. v. Thrall, 35 id., 536 (1863); New Hampshire, etc., R. R. Co. v. John- son, 30 N. H., 390 (1855) ; White Mount- ains R R. Co. v. Eastman, 34 id., 124, 147 (1856); Piscataqua Ferry Co. v. Jones, 39 id., 491 (1859) ; Hightower v. Thornton, 8 Ga.. 486, 502 (1850); Hughes v, Antietam, etc., Co., 34 Md., 316 (1870); Beene v. Cahawba, etc, R. R. Co., 3 Ala,, 660(1842); Selma, etc., R. R. Co. v. Tipton, 5 id., 787 (1843); Gratz v. Redd, 4 B. Mon. (Ky.), 178 (1848) ; Bos- ton, etc., R R. Co. v. Wellington. 113 Mass., 79 (1873). [Compare with this case Worcester, etc, Co. v. Willard, 5 Mass. 80 (1809); Andover, etc., Co. v. Gould, 6 id., 40(1809); New Bedford, etc., Co. v. Adams, 8 id., 138 (1811); City Hotel r. Dickinson, 72 Mass., 586 (1856); M< - chanics', etc, Co. v. Hall, 121 Mass., 272 (1876).] Mexican Gulf, etc., R. R Co. t?. Viavant, 6 Rob. (La.), 305 (1843): New Orleans, etc., Co. v. Briggs, 27 La. Ann.. 318(1875); Greenville, e*c, R. R. Co. v. Cathcart, 4 Rich. Law, 89 (1850); Klein v. Alton, etc, R R Co., 13 111., 514 (1851); Peoria, etc., R. R, Co. v. Elting, 17 id., 429 (1856); Kirksey v. Florida, etc, Co., 7 Fla., 23 (1857); Tar River, etc., Co. v. Neal, 3 Hawks (N. C), 520 (1825); Stokes v. Lebanon, etc., Co., 6 Humph., 241 (1815); South Bay, etc., Co. v. Gray, 30 Me., 547(1849); Frank- lin Glass Co. v. Alexander, 2 N. H., 380 (1821); S. C, 9 Am. Dec, 92, and the note at pp. 96-104. A subscriber for stock cannot avoid liability to the corpo- ration by setting up that the corpora- tion has a lien on the stock therefor and may enforce it. Lankershine, etc. Co. «, Herberger, 23 Pac Rep., 134 (Cal.. 1890). The corporation may sue for the whole subscription and need not sue merely for the deficiency that would result from selling the stock. Interna- tional, etc., Ass'n v. Walker, 47 N. W. Rep., 338 (Mich., 1890). For a learned dis- cussion of the general question how far 174 OH. VIII.] FORFEITURE OF STOCK. [§§ 186, 120. It is to be borne in mind, however, that in the New England states the right to forfeit stock for non-payment of assessments does not imply a right in the corporation to sue for such assess- ments. The latter right does not exist at all unless it is given by statute or by the express promise of the subscriber. 1 But where both remedies exist, the corporation has its election which remedy to pursue. 2 §§ 125, 126. When one remedy is exhausted the corporation can- not resort to another. — Although a corporation having the right to declare a forfeiture of shares for non-payment of calls may gener- ally, at its option, either forfeit the stock or bring an action to col- lect the amount due, it does not follow that it can forfeit the stock and then bring an action for the unpaid calls, or any part thereof that may remain unsatisfied by the forfeiture. The corporation, when a shareholder is in default, may pursue either the one remedy or the other in its discretion; but it cannot forfeit the stock and afterwards sue at law. The first remedy excludes the second. 3 In order, however, to bar the remedy of an action on the contract, the forfeiture must be complete and actual. Consequently, a mere Such, also, seems to be the rule iu Eng- land. King's Case, L. R, 2 Chan., 714 (1867); Knight's Case, id., 321 (1S67); Snell's Case, u. R, 5 Chan., 22 (1869). By statute in England the right to for- feit and the right to sue may be exer- cised together; and shares may be for- feited for non-payment of calls, whether those calls have been sued for or not Great North., etc., Ry Co. v. Kennedy, 4 Ex., 417 (1849); Jnglis v. Great North. Ry Co., 1 Macq., 112 (1852). But there is a line of cases in England where, by the terms of the deeds of settlement only an option is given to sue or to for- feit, and it is then held that the cor- poration is concluded by its election. Inglis v. Great North. Ry Co., 1 Macq. (Scotch Ap.), 112 (1852), where, notwith- standing the forfeiture and cancellation of shares and the issue of new ones, the right to recover in an action for calls was held to remain unimpaired in the company. See, also, Birmingham, etc.. Ry Co. v. Locke. 1 Q. B., 256 (1841); Edinburgh, etc., Ry Co. v. Hebblewhite. 6 M. & W., 707 (1840); London, eta, Ry Co. v. Fairclough, 2 Man. & Gr., 674 (1841). the jurisdiction of a court of equity may be affected by statutes conferring simi- lar jurisdiction upon the courts of law — an inquiry germane to the matter of the present section — see the note to the case of Payne v. Bullard, 23 Miss., 88 (1851), in 55 Am. Dec, 74, 77. i See § 74. *See§§125, 126. 3 Small v. Herkimer, etc., Co., 2 N. Y., 330 (1849), reversing Herkimer, etc., Co. v. Small. 21 Wend., 273 (1839) ; S. C, 2 Hill, 127 (1841): Northern R R. Co. v. Miller, 10 Barb., 260, 271 (1851); Ogdens- burgh, etc., R R Co. v. Frost, 21 id., 541 (1856); Mills v. Stewart, 41 N. Y., 384 (1869); Macauly v. Robinson, 18 La. Ann., 619 (1866); Allen v. Montgom- ery, etc., Co., 11 Ala., 437 (1847); Athol, etc., R R Co. v. Inhabitants of Prescott, 110 Mass., 213 (1872); Mechanics', etc., Co. v. Hall, 121 id., 272 (1876). With these later Massachusetts cases compare Andover, etc., Co. v. Gould, 6 Mass., 40 (1809); Franklin, etc., Co. v. White, 14 id., 286 (1817) ; Rutland, etc., R. R Co. v. Thrall. 35 Vt, 536 (1863) ; Macon, etc., R. R. Co. v. Vason, 57 Ga., 314 (1876); Ashton v. Burbank, 2 Dill., 435 (1873). 175 §§ 127, 128.] FORFEITURE OF STOCK. [CH. VIII. threat that a forfeiture will be made if the call be not paid on or before a day named, or an unsuccessful attempt to sell the shares, will not be sufficient to bar the action. 1 So long as the stock- holder's right to the shares and to the immunities and emoluments attached thereto remain, his obligation to pay is not extinguished. 2 There is, however, a line of cases in which a contrary rule is sus- tained. In these cases it is held that the forfeiture of shares of stock is like the foreclosure of a mortgage; and that, just as a mortgagee may have judgment against the mortgagor for a de- ficiency, so may a corporation have its action of assumpsit against a subscriber whose stock, having been forfeited, has failed to sell for enough to pay his entire indebtedness to the corporation on the subscription. 3 This rule is held to apply equally to original sub- scribers or their transferees; and any stockholder is liable, under this rule, for the balance due upon assessments, after deducting the amount realized at the forfeiture sale. 4 §§ 127, 12S. Forfeiture relieves the shareholder ivhose shares are forfeited from liability to corporate creditors. — In the absence of fraud and collusion it is a settled rule that, where a corporation has authority to declare a forfeiture of shares for non-payment of calls, and a forfeiture is regularly declared, such formal declaration 1 Macon, etc., R R Co. v. Vason, 57 Ga., 314 (1876). See, also, cases cited supra and infra, § 131. 2 Instone v. Frankfort Bridge Co., 2 Bibb, 576, 581 (1812). Cf. Buffalo, etc., R R Co. v. Dudley, 14 N. Y., 336, 347 (1856). It has been held, also, that an action to collect a subscription, when prosecuted to judgment, is a bar to the remedy by forfeiture. Giles v. Hutt, 3 Ex., 18 (1848). 3 Carson v. Arctic Mining Co.. 5 Mich., 288 (1858); Danbury, etc., R R Co. v. Wilson, 22 Conn., 435 (1853); Great Northern Ry Co. v. Kennedy, 4 Exch., 417, 425 (1849). 4 Merrimac Mining Co. v. Bagley, 14 Mich., 501 (1866). Cf. Hartford, etc., R R Co. v. Kennedy, 12 Conn., 499 (1838); Brockenbrough v. James River, etc., Co., 1 Patton & H. (Va.), 94 (1855) ; Mann v. Currie, 2 Barb., 294 (1848). It is some- times so provided expressly by statute or by the charter of the company. Brockenbrough v. James River, etc., Co., 1 Patton & H., 94 (1855) ; Danbury, 1 etc., R R Co. v. Wilson, 22 Conn., 435, 456 (1853); Great Northern R'y Co. v. Kennedy, 4 Exch., 417 (1849); Mann v. Cooke, 20 Conn., 178 (1849). But see Athol. etc.. R R Co. v. Inhabitants of Prescott, 110 Mass., 213 (1872); Kenne- bec, etc., R R Co. v. Kendall, 31 Me., 470 (1850); Allen v. Montgomery R R. Co., 11 Ala.. 437 (1847) ; Stokes v. Leb- anon, etc., Co., 6 Humph. (Tenu.), 241 (1845); Mills v. Stewart, 41 N. Y., 384 (1S69). Or that any shareholder whose shares shall have been forfeited for non- payment of assessments shall neverthe- less be liable to pay to the company all calls owing on such shares at the time of the forfeiture. This seems to be a common provision in the articles of as- sociation of English companies. Creyke'.s Case, L. R, 5 Chan., 63 (1869); Stocken's Case, L. R, 5 Eq., 6 (1867). But in such a case interest is not collectible. Stock- en's Case, supra. It is otherwise in or- dinary defaults. Gould v. Oneonta. 71 N. Y., 298 (1877); Rikhoff V. Brown, etc., Co., 68 Iud., 388 (1879). 76 CH. VIII.] FORFEITURE OF STOCK. [§ 128. puts an end to the liability of the shareholder, and corporate cred- itors cannot subsequently hold such an expelled or released share- holder liable. 1 This is the rule even though the debt was contracted by the company before the stock was forfeited. 2 The same prin- ciple of law that prevents the corporation from suing on a sub- scription after the stock has been forfeited prevents the corporate creditors also from doing the same. Rut, on the other hand, inas- much as fraud vitiates all acts into which it enters, a forfeiture of shares by collusion between a shareholder and the board of direct- ors of the corporation will not release him from liability to con- tribute in the event of the insolvency of the company. 3 In such a case the creditors may invoke the interposition of a court of equity to prevent the consummation of an inchoate forfeiture, or to set aside one already accomplished. 4 Hence, it is well settled that the power of forfeiture cannot lawfully be exercised for the purpose of enabling members to escape from their liability on their stock, either to the corporation or its creditors. 5 A stockholder, 1 Allen v. Montgomery R R Co., 11 Ala., 437, 450 (1847) ; Macauly v. Robin- son, 18 La. Ann., 619 (1866); Mills v. Stewart, 41 N. Y., 384 (1869) : Woollas- ton's Case, 4 De G. & J., 437 (1859) ; & parte Beresford, 2 Macn. & G., 197 (1850); Kelk's Case, L. R, 9 Eq., 107 (1869); Dawes' Case, L. R, 6 Eq.. 232 (1868); Snell's Case, L. R, 5 Chan., 22 (1869). Nor, on the other hand, can the stockholder claim, after the forfeiture, any of the rights of stockholdership. St Louis, etc. Co. v. Sandoval, etc.. Co., 116 111., 170 (1886). 2 Mills v. Stewart, supi-a. 3Slee v. Bloom, 19 Johns., 456 (1822) : Burke v. Smith, 16 Wall., 390 (1872); Mills v. Stewart, 41 N. Y., 384 (1869) ; Walters' Second Case, 3 De G. & Sm., 244(1850); Richmond's Case, 4 Kay & J., 305 (1858); Spackman's Case, 11 Jur. (N. S.), 207 (1865) ; Stanhope's Case, L R, 1 Chan., 161 (1866); Stewart's Case, L R, 1 Chan., 511 (1866) ; Gower's Case, L R.. 6 Eq., 77 (1868). * Germantown, etc., R'y Co. v. Fitler, 60 Pa. St, 124 (1869). See, also, Grand Rapids Savings Bank v. Warren, 52 Mich., 557 (1884). The fact that the cor- poration might have forfeited the stock, but in fact did not is no defense as against the corporate creditors. If a transaction between a shareholder and the directors is irregular, but is alleged to have been acquiesced in, it is incum- bent upon the stockholder to support such allegation by showing that the transaction was fully made known to the general body of the shareholders. Spackman's Case, 11 Jur. (N. S.), 207 (1865). A stockholder whose stock is forfeited in a building association for non-payment of dues, as authorized by the charter, cannot recover back the money paid by him. Freeman v. Ot- tawa, etc., Assoc, 28 N. E. Rep., 611 (111., 1885). 5 Spackman v. Evans, L R,, 3 H. of L, 171 (1868); Stanhope's Case, L R, 1 Ch., 161 (1866) ; Richmond's Case, 4 Kay & J., 305 (1858) ; Manisty's Case, 17 Solicitor's Jour., 745; Gower's Case, L R, 6 Eq., 77 (1868) ; Ex parte Jones, 27 L J., Chan., 666 (1858) ; Hall's Case, L R, 5 Chan., 707 (1870) ; Mills n Stewart 41 N. Y, 384 (1869). Cf. Dixon v. Evans, L. R, 5 H. of L, 606 (1872); Lord Belhaven's Case, 11 Jur. (N. S.), 572 (1865) ; S. C, 12 L T. (N. S.), 595 (1867); Clarke r. Hart 6 House of Lords Cases, 633 (1858) ; Gar- (12) 177 § 129.] FORFEITURE OF STOCK. [_CH. vnr. by mere abandonment of his shares, cannot forfeit them himself, and thus, by his own act, discharge himself from his obligation on the subscription. 1 § 129. Statutory formalities and general method of forfeiture.— The general method of forfeiting shares for non-payment of calls is usually prescribed in detail by the statute authorizing the for- feiture. In the earlier cases there may be observed some tendency to hold that a substantial, in distinction from a strict, compliance with the requirements of the statute is all that is necessary to a valid forfeiture. 2 But in later cases, English s and American, 4 it is plainly declared, and it may be taken as a settled rule, that the validity of the forfeiture and sale of the shares of a subscriber in arrears depends upon a strict and formal compliance with the re- quirements of the enabling statute. 5 Thus a sale of the shares at private sale, when a sale by public auction was prescribed, has been held to invalidate the forfeiture.' 1 den Gully, etc., Co. v. McLister, L. R, 1 App. Cas., 39 (1875); Sweny v. Smith. L. R, 7 Eq., 324 (1869); Chouteau v. Dean, 7 Mo. App., 211 (1879). Cf. Bed- ford R R Co. v. Bowser, 48 Pa. St, 29 (1864). 1 Rockville, etc., Turnpike Co. v. Max- well, 2 Cranch, C. C, 451 (1824). For sundry illustrations of what will or will not justify a forfeiture, see, particularly, Sweny v. Smith, L. R, 7 Eq., 324 (1869) ; Stocken's Case, L. R, 3 Chan., 412 (1867) ; Count Palen's Case, L R, 9 Eq., 107 (1869); Thomas' Case, L. R, 13 Eq., 437. No defense that defendant supposed he could pay balance of subscription or have a forfeiture of stock. Ross v. Bank, etc., 19 Pac. Rep., 243 (Nev., 1888). 2 Catchpole v. Ambergate, etc., R'y Co., 1 Ellis & B., Ill (1852): Nolan v. Arabella, etc., Co., 6 W. W. & A. B. (Australian), 38. Cf. "Woollaston's Case, 4 De G. & J., 437 (1859) ; Knight's Case, L. R, 2 Ch., 321 (1867). 3 Clarke v. Hart, 6 House of Lords Cases, 633 (1858); Johnson v. Lyttle's Iron Agency, 46 L. J. (Chan.), 786 (1877). Cf. Knight's Case, L. R, 2 Chan., 321 (1867); Garden Gully, etc., Co. v. McLis- ter, L. R, 1 App. Cas., 39 (1875); Lon- don & B. R'y Co. v. Fairclough, 2 Mann. & G, 674 (1841). In England a forfeit- ure may be made after a call, and be- fore the call is due. The call is " owing " from the time when it is made. Faure, etc., Co. v. Phillapart, 58 L. T. Rep., 525 (1888), where the forfeiture was made on two calls, one past due and one not yet due. * Portland, etc., R R Co. v. Graham, 52 Mass., 1 (by Shaw, C. J., 1846) ; Ger- mantown, etc., R'y Co. v. Fitter, 60 Penn. St., 124 (1869); Eastern, etc., Plank-road Co. v. Vaughan, 20 Barb., 155 (1855) ; York, etc., R R Co. v. Ritchie, 40 Me., 425(1855); Lewey's Island RR Co. v. Bolton, 48 id., 451 (1860) ; Down- ing v. Potts, 23 N. J. Law, 66 (1851); Matter of the Long Island R R. Co., 19 Wend., 37 (1837); Mitchell v. Vermont Copper Mining Co., 40 N. Y. Super. Ct, 406 (1876); Occidental, etc., Assoc v. Sullivan, 62 Cal., 394 (1882). Cf. John- son v. Albany, etc., R R. Co., 40 How. Prac, 193 (1870); Rutland, etc., R R. Co. v. Thrall, 35 Vt, 536 (1863) ; Perrin v. Granger, 30 id., 595 (1858). 5 Garden Gully, etc., Co. v. McLister, L. R, 1 App. Cas., 39 (1875); German- town, etc., R'y Co. v. Fitler, 60 Penn. St, 124 (1869). 6 Lewey's Island R R Co. v. Bolton, 178 CH. VIII.] FORFEITURE OF STOCK. [§ 129. There must be a properly constituted board of directors to declare a forfeiture of shares. 1 It is held, in general, that, in the absence of statutory provisions as to order or details, the mode of forfeit- ure must be reasonable and just. 2 The forfeiture may be regu- larly effected by a resolution of the board of directors, ordering a sale of all stock on which assessments shall remain unpaid at a day named in the future. 3 It is a well-established rule, also, that a forfeiture of shares, where the forfeiture was irregular or defective in its form, is not void, but voidable, and that, by subsequent knowledge and acqui- escence, the shareholder and the company are alike estopped to 48 Me.. 451 (1860). As to what is, in general, sufficient to satisfy the require- ments of the rule that powers of for- feiture are to be construed strictly and exercised or pursued strictty, see Giles v. Hutt; 3 Exch., 18 (1848); Catchpole v. Ambergate, etc., R'y Co., 1 Ellis & B., 11 (1852); Birmingham, etc., R'y Co. v. Locke, 1 Q. B., 256 (1841); Graham v. Van Diemen's Land Co., 1 Hurl. & N., 541 (1856); Sweny V. Smith, L. R, 7 Eq., 324 (1869) ; .Stockton's Case, L. R, 3 Chan., 412 (1867); Count Phalen's Case, L. R, 9 Eq., 107(1869); Thomas' Case, L. R, 13 Eq., 437 ; Gower's Case, L R, 6 Eq., 77 (1868). It has, however, been held in an English case — In re North Hallenbeagle Mining Co., Knight's Case, L. R, 2 Chan., 321 (1867): S. C, 15 L. T. (N. S.), 546 (1869), — that, when it is a matter of mere form rather than of substance that has not been strictly followed, in proceedings to forfeit shares, the forfeiture will not necessarily be thereby invalidated. 1 Garden Gully, etc., Co. v. McLister, L. R, 1 App. Cases, 39, 55 (1875). A stockholder may enjoin a forfeiture on the ground that the directors were il- legally elected. Moses v. Tompkins, 4 S. Rep., 763 (Ala., 1888). 2 Rutland, etc., R R Co. v. Thrall, 35 Vt., 536 (1863); Mitchell v. Vermont Copper Mining Co., 67 N. Y., 280 (1876). 3 Rutland, etc., R R Co. v. Thrall, 35 Vt., 536 (1863). See, also, Woollaston's Case, 4 T>e G. & J., 437 (1859). Under such a resolution a sale of the stock is not necessary to complete the forfeiture where the effect of the forfeiture is to release the stockholder from any future liability, and where he is not entitled to the surplus, if any there be, after sale. Rutland, etc., R R Co. v. Thrall, supra. It is, however, said elsewhere that a general resolution, not specifying the stock which is forfeited, but merely as- suming to forfeit any and all stock whose owners are in arrears, does not effect a valid forfeiture. Johnson v. Albany, etc., R R. Co. 40 How. Prac, 193 (1870). When, after default made in the payment of assessments, notice is given by the corporation that the shares of owners in arrears will be for- feited unless full payment of what is due be made by a day named, there is a presumption that the subsequent pro- ceedings of the company looking to perfecting the forfeiture ai-e valid and regular. Knight's Case, 15 L T. (N. S.), 546 (1867), holding that where, by the articles of association, provision is made for forfeiture by resolution with notice upon default, the court will assume that the requisite steps have been taken to make a valid forfeiture, even though it does not appear that such resolution was passed or that notice was sent. The notice is a notice that the forfeiture has already been declared, not that it will be made on further default That notice is a condition precedent. 179 § 130.] FORFEITURE OF STOCK. [CH. VIII. deny its validity. 1 Under the California code a corporation may by suit foreclose a lien which it has on its stock. 2 § 130. Notice in cases of forfeiture.— A notice to the delinquent subscriber that his shares will be forfeited at a day named is gen- erally requisite to effect a forfeiture. The subscriber is entitled to full knowledge of the fact that, unless he pays up within a specified time, he will lose his stock. The requirements of the statute or charter, with respect to the contents of the notice, and the length of time which is to elapse between the notice and the forfeiture, 1 King's Case, L. R, 2 Ch., 714, 731 1 iable on the double ground of lapse of time and a clear presumption of knowl- edge and acquiescence. Houldsworth v. Evans, id., 263, where an irregularity in the condition of withdrawal was held substantial and the transaction ultra vires. (One lord dissented, that years of acquiescence retrospectively sanctioned it.) Brotherhood's Case, 31 Beav., 365 (1862). Dissentient members were al- lowed to withdraw, by resolution, upon terms which were certainly ultra vires. The master of the rolls said that the transaction might have been set aside at the time ; but all parties having had full knowledge, and having acquiesced for more than twelve years, the court would not, after such a lapse of time, touch the transaction. In Lesseps v. Architects' Co., 4 La. Ann., 316 (1849), the court regarded a general acquies- cence in a by-law for a forfeiture, itself ultra vires, as a matter of contract, and refused equitable relief. Cf. Lindley on Partnership, p. 750, saying : " If there is power to forfeit, and the shares intended to be forfeited are treated by the company and the shareholders as forfeited, the company will be pre- cluded from afterwards insisting that no forfeiture ever took place." Garden Gully, etc., Co. v. McLister. L. R., 1 App. Cas., 39, 55 (1875), holding that mere laches does not, of itself, disen- title the holder of shares to equitable relief against an invalid declaration of forfeiture. 2 Mechanics', etc., Assoc, v. King, 23 Pac. Rep., 376 (Cal., 1890). (1867) ; Woollaston's Case, 4 De G. & J., 437 (1859) ; Webster's Case, 32 L. J., Ch., 135 (1862) ; Knight's Case, L. R, 2 Ch., 321 (1867); Kelk's Case, L. R, 9 Eq., 107 (1869); Austiu's Case, 24 L. T. (N. S.), 932 (1871) ; Prendergast v. Tur- ton, 1 Y. & C. (Ch.), 98 (1841). Cf. Lyster's Case, L. R, 4 Eq., 233 (1867); Teasdale's Case, L. R, 9 Ch., 54 (1873) ; Phosphate, etc., Co. v. Green, L. R, 7 C. P., 43 (1871). Here the company had power to forfeit shares for non-pay- ment and to compromise debts, but were prohibited from purchasing their own shares. The transaction in issue was held to be such a purchase, and hence ultra vires, but the members were estopped by knowledge and acqui- escence. In this case it was also said that, to show assent and acquiescence in such a case, it is not necessary or pos- sible to prove the acquiescence of each individual shareholder. It is enough to show circumstances which are rea- sonably calculated to satisfy the court or a jury that the thing to be ratified came to the knowledge of all who chose to inquire, all having full opportunity and means of inquiry. Houldsworth v. Evans, L. R, 3 H. of L., 263 (1868); Spackman v. Evans, L. R, 3 H. of L., 171 (1868). Here the terms of the withdrawal were not in accordance with the deed of settlement, and it was held after years that the party was still liable as a con- tributor. Evans v. Smallcombe, id., 249, where a member withdrawing under a like arrangement was held not 180 CII. VIII.] FORFEITURE OF STOCK. [§ 130. must all be strictly complied with. 1 It is accordingly held that the notice must state correctly the amount due for non-payment of which the stock is to be forfeited. 2 The time, also, within which payment is to be made must be accurately stated, 3 and also the place where the sale is to be made. 4 The mode of giving notice of a contemplated forfeiture of stock is generally specified in the statute authorizing the forfeiture. 5 1 Heaston v. Cincinnati, etc., R. R. Co., 16 Ind., 275 (1861) ; Levvey's Island R R. Co. v. Bolton, 48 Me., 451 (1S60); Rutland, etc., R. R. Co. v. Thrall, 35 Vt, 536, 546 (1863); Lake Ontario, etc., R, R Co. v. Mason, 16 N. Y., 451 (1854) ; Sands v. Sanders, 26 id., 239 (1863); Mis- sissippi, etc., R. R. Co. v. Caster, 20 Ark., 455 (1859); Hughes v. Antietam, etc., Co., 34 Md., 317 (1870) ; Johnson v. Lyttle's Iron Agenc} r , 46 L. J. (Chan.), 786 (1877); Cockerell v. Van Diemen's Land Co., 26 L. J. (C. P.), 203 (1857) ; Watson v. Eales, 23 Beav., 294 (1856). Cf. Eppes v. Mississippi, etc., R R. Co., 35 Ala., 33 (1859); Schenectady, etc., R. R Co. v. Thatcher, 11 id., 102 (1854); Harlaem, etc., Co. v. Seixas, 2 Hall (N. Y. Super. Ct), 504 (1829); Mitchell v. Vermont Copper Mining Co., 40 N. Y. Super. Ct, 406 (1876); New Albany, etc., R. R. Co. v. McCormick, 10 Ind., 499 (1858). Cf. Lexington, etc., R. R Co. v. Chandler, 54 Mass., 311 (1847), where notice, provided for by a by- law, was held not a condition prece- dent, but only directory, and substan- tial compliance was sufficient. Knight's Case, supra, is sometimes wrongly cited, for the reason that there are two no- tices provided for: (1) notice that for- feiture will be made on default at future time, and (2) notice after forfeit- ure that it has been made. The former is essential, the latter not. 2 So where the notice stated that un- less the amount of a certain call, to- gether with lawful interest from the date of the call, was paid on or before a certain day, the shares would be liable to forfeiture, it was held that, as inter- est was only payable from the day fixed for payment, and not from the date of the call, the notice was irregular, and thit a forfeiture founded on a non- compliance with such a notice was bad. Johnson v. Lyttle's Iron Agency, 46 L. J. (Ch.). 786 (1877). 8 A notice that the stock will be for- feited " on Monday, the 9th," when in point of fact the 9th comes on Friday, is not a sufficient notice. Watson v. Eales, 23 Beav., 294 (1856). 4 Accordingly, a notice in all other respects regular, which does not state the place of sale, is insufficient, al- though it name the day of sale, and the auctioneer, who was and had long been an auctioneer in the place at which the notice was dated. Lexington, etc., R. R. Co. v. Staples, 71 Mass., 520 (1855). In the absence of a statutory provision as to time, it is said that three days' notice of the time and place of the sale of shares for non-payment of assess- ments is too short and unreasonable, where the owner of the shares lives at a distance in another state. Lexing- ton, etc., R. R Co. v. Staples, stqva. In Rutland, etc., R R Co. v. Thrall, 35 Vt, 536 (1863), a thirty days' notice is said to be sufficient and reasonable. And where the charter provided that notice of an assessment should be given to the subscriber thirty days before the order of the directors to sell the shares, a notice thirty days before the sale was held insufficient. Lewey's Island R. R Co. v. Bolton, 48 Me., 451 (1860); Louis- ville, etc., Turnpike Co. V. Meriwether, 5 B. Mod., 13 (1844). A printed notice in designated newspapers, published in cities where the subscribers reside, is good notice of a call. Louisville, etc., Turnpike Co. v. Meriwether, supra. 5 In Mississippi (Ouachita & Red 181 §§ 131, 132.] FORFEITURE OF STOCK. [CH. VIII. § 131. Notice is not the same thing as forfeiture.— A notice of a probable or certain forfeiture in the future, or a threat of forfeiture, is not forfeiture, and does not become forfeiture merely by non- payment of the call or assessment within the time specified in the notice. 1 A forfeiture is void if declared for the non-payment of assessments, when all or any one of the assessments were illegal or unauthorized. 2 §132. Tender, oy stockholder, hefore forfeiture.— Where the amount due on a subscription for non-payment of which a forfeit- ure is about to take place is tendered to the proper officer of the corporation at any time before the sale actually takes place, 3 the River E. R Co. v. Gaster, 20 Ark. 455 — date of the forfeiture, but not of the dec- 1859) it is said that the mode of giving laration itself. All essentials being reg- a notice in these cases is directory ular, and there being no strict require- rather that mandatory, and that, where ment of a written resolution, the court the charter provided that notice bo held the forfeiture valid because the given in certain newspapers, a personal entry of forfeiture could not have been notice would be sufficient. See, also, properly made without a resolution of Knight's Case, L. R, 2 Chan., 321 (1867). the directors, which would hence be as- So where a by-law provided for notice by letter, it was held that personal no- tice sufficed. Lexington, etc., R R Co. v. Chandler, 54 Mass., 311 (1847). But see Lewey's Island R R Co. v. Bolton, 48 Me., 451 (1860). In general, as to the effect of a notice left at one's residence or place of business, but which never reaches the person for whom it is intended, see Cockerell v. Van Diemen's Land Co., 26 L J. (C. P.), 203 (1857); 1 C. B. (N. S.), 732. Cf. Birmingham, etc., R'y Co. v. Locke, 1 Q. B., 256 (1841); Graham v. The Van Diemen's Land Co., 1 Hurl. & N., 541 (1856). See, also, South Staffordshire R'y Co. v. Burnside, 5 Exch., 129 (1850), aud § 119. 1 Macon, etc., R R Co. v. Vason, 57 Ga., 314 (1876); Bigg's Case, L R, 1 Eq., 309 (1865); Cockerell V. Van Die- men's Land Co., 26 L. R (C. R). 203 (1857) ; Water Valley Manuf. Co. v. Sea- man, 53 Miss., 655(1876), where only a t'ueat was made. Cf. § 125. But see Knight's Case, L. R, 2 Chan., 321 (1867). In Knight's Case it was further provided that the declaration of forfeit- ure should be at once entered in the register. Entry was duly made of the sumed. In Austin's Case, 24 L. T. (N. S.), 932 (1871), it is said that a corpora- tion, after forfeiting shares, cannot set the forfeiture aside, and hold the owner liable as a subscriber, on the ground that the notice given him was irregu- lar. It is for the subscriber alone to raise that objection to the validity of the forfeiture. Cf. § 123; Birming- ham, etc., R'y Co. v. Locke, 1 Q. B., 256 (1841). A mere declaration of forfeiture is not sufficient to effect it, and is no bar to an action on the subscription. Min- nehaha, etc., Ass'n of Minneapolis v. Legg, 52 N. W. Rep., 898. A resolution of forfeiture does not constitute forfeit-, ure, and is no bar to an action. Hayes v. Franklin, etc., Co., 53 N. W. Rep., 381 (Nob., 1892). 2 Stoneham, etc., R R Co. v. Gould, 68 Mass., 277 (1854); Lewey's Island' R R. Co. u Bolton, 48 Me., 451 (1860). 3 Mitchell v. Vermont Copper Min- ing Co., 67 N. Y., 280 (1876); Sweny v. Smith, L. R, 7 Eq., 324 (1869). In Sweny v. Smith a bill was filed to annul the forfeiture, which was made because the tender (although in time and place) was accompanied by a pro- test Held, the protest did not vitiate 182 CH. VIII.] FORFEITURE OF STOCK. [§§ 133, 134. forfeiture is not valid. This rule is based in justice, and, while pro- tecting the corporation and the public, it relieves the stockholder from the hardship of a harsh and summary remedy. § 133. Surplus, after valid forfeiture, belongs to the corporation. Upon a sale of the stock forfeited, if the amount realized is more than the debt due the corporation, the surplus belongs to the cor- poration. 1 The purchaser at the forfeiture sale, if the stock has been only partially paid for, must pay the instalments due and to come due, and if he fail to make these payments the stock must be sold again. 2 § 134. Equity will relieve a shareholder from an unauthorized forfeiture — Action at law for damages. — The share-owner him- self, as well as a corporate creditor, may, in a proper case, invoke the aid of a court of chancery when his shares have been forfeited in an unauthorized or unlawful manner. Usually, in such a case, the shareholder may, by bill in equity, obtain a decree annulling the forfeiture. 3 Where an illegal assessment has been made, and the tender. Walker v. Ogden, 1 Biss., 287 (111., 1859), where the articles of a private joint-stock company provided for a forfeiture, but in no express mode, and a forfeiture was declared of certain shares which thereafter remained un- distributed. No rights of third parties were vested in consequence ; and the court of equity, never favoring forfeit- ures, decreed that upon payment of the whole amount due, principal and in- terest, the complainant should be al- lowed to redeem his stock. The court did not rule, but was " inclined to the opinion," that "the mere declaration of the trustees " could not " have the effect to foreclose all Walker's inter- est," and " that a judicial decree of foreclosure upon a bill filed by the trustee was necessary in order to bar his right to redeem his stock." 1 Small v. Herkimer, etc.. Co.. 2 N. Y., 330 (1849) ; and see Sturges v. Stetson, 1 Biss.. 246 (1858); Gt. North. E'y Co. v. Kennedy, 4 Eq., 417, 426 (1849), by Rolfe, B. (ruling on the language of a special act) : " The company are not to sell more of the shares than will be sufficient, as nearly as can be ascer- tained, to pay arrears of calls, together with interest and expenses ; and, if there be any surplus, it is to be paid to the defaulter, who has a right to redeem at the last moment before sale. That shows that the forfeited shares are a security only until payment." " It is clear that the declaration of forfeiture is in the nature of a mortgage." Cf. Freeman v. Harwood, 49 Me., 195, 198 (1859), dictum. 2 Sturges v. Stetson, 1 Biss., 246,551 (1858). 3 Sweny v. Smith, L. R. 7 Eq., 324 (1869) ; Mitchell v. Vermont, etc., Co., 67 N. Y., 280 (1876); Adley v. Whitstable Co., 17 Ves., 315 (1810, by Lord Eldon) ; Sloman v. Bank of England, 14 Sim., 475 (1845); Norman v. Mitchell, 5 De G., M & G, 648 (1854\ Thus, a forfeiture of shares for non-payment of calls, de- clared at a meeting held out of the state in which the company was incorporated, the meeting being in consequence an unlawful meeting, may be set aside upon a proper application to a court of chancery at any- time within the period prescribed by the statute of limitations for bringing an action for conversion. Ormsby v. Vermont, etc., Co., 56 N. Y., 623 (1874). Injunction not granted to 183 § 134.] FORFEITURE OF STOCK. [ch. VIII. the stock is about to be sold, a stockholder may enjoin the sale and cause the assessment to be set aside. 1 So, also, equity will sometimes set aside a forfeiture upon purely equitable grounds; as, for example, where a forfeiture was declared for non-payment of calls, which, it was shown, were not paid be- cause the shareholder had died, and no administrator had been appointed before the time for payment had fully elapsed. 2 But it seems that the weight of authority is to the effect that a forfeiture of shares, lawful and regular, for non-payment of assessments, is one of those forfeitures from which equity will not afford relief except in very exceptional cases. 3 When the shareholder has lost his shares by an irregular or unlawful forfeiture, his suit should be for the recovery of his shares, and not for an undivided interest in the property of the company. 4 Acquiescence or delay, as we have seen, on the part of the shareholder, will usuall}' bar his right restrain sale of stock for non-payment of assessments, though notice thereof was illegal, where the plaintiff does not offer to pay the calls. Burnham v. San F. & Co., 17 Pac. Rep., 939 (Cal., 1888). See, also, Same v. Same, id., 940 (Cal., 1888). Forfeiture may be enjoined. Moore v. N. J., etc., Co., 5 N. Y. Supp., 192 (1889). The forfeiture will not be set aside if the organization meeting of the company was illegal, having been held out of the state. Smith v. Silver, etc., Co., 30 Atl. Rep., 1032 (Md., 1885). 1 Green v. Abietine, etc., Co., 31 Pac. Rep., 100 (Cal., 1892). 2 Glass v. Hope, 16 Grant (Up. Can. Chan.), 420 (1869). Cf. Walker v. Ogden, 1 Biss.. 287 (1859). 3 Sparks v. The Company of Proprie- tors of the Liverpool Water-works, 13 Ves., 428 (1807); Prendergast v. Turton. 1 Y. & C. (Ch.), 98 (1841) ; Germantown, etc., R'y Co. v. Fitler, 60 Penn. St, 124 (1869): Clark v. Barnard, 108 U. S, 436, 456 (1882). Equity will not relieve where, on the re-organization of a com- pany, old stockholders fail to use their options for securing new shares before the expiration of a fixed time limit. Vatable v. N. Y. L. E & W. R R. 96 N. Y, 49, 57 (1884). Equity will not relieve from such forfeiture, because to do so would, it is said, be in contraven- tion of the direct expression of the leg- islative will. Small v. Herkimer, etc., Co., 2 N. Y., 330, 340 (1849). Neither can a share-owner have a forfeiture set aside merely because the calls which he refused to pay were for the purpose of paying debts which the company would not have owed but for the pre- vious misappropriation of the corpo- rate funds of the trustees. Marshall v. Golden Fleece, etc., Co., 16 Nev., 156, 179 (1881): Weeks v. Silver, etc., Co., 55 J. & S. (N. Y), 1 (1887) ; Taylor v. North, etc., Co., 21 Pac. Rep., 753 (Cal.. 1889). 4 Smith v. Maine Boys Tunnel Co., 18 Cal., Ill (1861). The suit to set aside the forfeiture must be brought in the state where the corporation is incorporated. North State, etc., Co. v. Field, 64 Md., 151 (1885); Sudlow v. Dutch R R Co., 21 Beav., 43 (1855). See Wilkins v. Thome, 60 Md., 253 (1883). The courts of Mary- land will not issue a mandamus to com- pel a foreign corporation to annul a forfeiture of stock. This is a matter to be litigated in the courts of the state creating the corporation. North State, etc., Co. v. Field, 20 Atl. Rep., 1039 (Md.. 1885). 184 CH. VIII.] FORFEITURE OF STOCK. [§ 134. in a court of equity to have the forfeiture set aside. 1 If the for- feiture is irregular the party deprived of his stock may collect damages. 2 1 Vide § 129, supra. It will, more- over, sometimes be found that a general statute, or the charter of the corpora- tion, fixes or limits the time within which a shareholder will be allowed to make such an application to a court of chancery. Thus, in California, such an application must be made within six months. Civ. Code, § 347. 2 Re New Chile, etc., Co., Limited, 63 L. T. Rep. 344 (1890). A corporation is liable in damages for selling the stock of a stockholder for non-payment of dues where such sale was irregular and illegal, being contrary to the requirements of the by-laws, even though the corporation buys the stock itself at such sale. The fact that a surplus realized at the sale is sent to the stockholder by check and is received by him does not bar his remedy, being in ignorance of the illegal ity. A lien v. American Building, etc., Ass'n et ah, 52 N. W. Rep., 144 (Minn., 1892). 185 CHAPTER IX. DEFENSE OF PAROL AGREEMENTS AND FRAUDULENT REPRESEN- TATIONS INDUCING SUBSCRIPTIONS FOR STOCK § 135. The subject. 136. Definitions. 137-38. Oral agreements and execu- tor y contracts. 139-40. Corporations are chargeable with the fraudulent represen- tations of their agents. 141. The misrepresentations must be ■ by the authorized agents. 142. Misrepresentations at public meet- ings. 143. Misrepresentations by prospec- tuses. 144. Misrepresentations by reports. 145. What misrepresentations amount to a fraud. 146. Statements as to questions of law. 147. Misrepresentations by suppression of the truth. 148. Misrepresentations without knowledge of their falsity. § 149. 150. 151. 152. 153. 154. 155- 157- 159. 160. 161- 163- 165. Immaterial misrepresentations. Subscribers not bound to investi- gate. Subscription not void, but void- able. Remedies. Remedy by rescission without legal proceedings. Remedy by defense to action for calls. 56. Remedy by bill in equity. 58. Remedy by action at law for deceit Remedy by action for money had and received. Ratification as a bar, 62. Laches as a bar. 04. Corporate insolvency as a bar. Necessary allegations, etc. § 135. The subject — Parol agreements and fraudulent represen- tations inducing subscriptions to stock have been a prolific source of litigation both in this country and in England. As a defense to actions brought for the collection of subscriptions, and as the basis of suits in equity to set aside subscriptions and compel a repay- ment of money already paid on such subscriptions, the agreements and representations made to induce persons to subscribe for stock have given rise to intricate principles of law peculiar to this sub- ject. § 136. Definitions. — A parol agreement includes all representa- tions and stipulations made before or at the time of subscribing, but not included in the written subscription, whereby the corpora- tion is to do something or refrain from doing something in the future. A fraudulent representation, on the other hand, is a state- ment as to past acts or existing facts, or the omission of such a statement, which amount to a fraud on one who, relying thereon, subscribes to the stock of the company. Difficulty sometimes arises in determining whether a statement by a corporate agent inducing a subscription is merely a parol agreement or is a fraudulent repre- sentation. This question is one which must be decided first of all; 186 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§13' since the rules of law applicable to parol agreements, as a defense to an action on a subscription, differ greatly from those applicable to fraudulent representations. § 137. Oral agreements and executory contracts. — Where a sub- scription contract is absolute on its face, it is well settled, both in equity and at law, that parol evidence of previous or contempora- neous negotiations, stipulations, terms or agreements is not admis- sible to vary or add to the contract, except for the purpose of proving that the parties, at the time of consummating the agree- ment, intended and understood that such terras and stipulations would be incorporated in the contract, but omitted the same by accident, fraud or mistake. 1 This rule, forbidding the introduction ^iscataqua Ferry Co. v. Jones, 39 N. H., 491 (1859) ; Kennebec & Portland R R Co. v. Waters, 34 Me., 369 (1852); Cincinnati, Union & Ft. Wayne R. R. Co. v. Pearce, 28 Ind., 502 (1867) ; Scar- lected only after connection had been made with a certain place is no defense. Anderson v. Middle, etc., R R, 17 S. W. Rep., 803 (Tenn., 1891). In Georgia, under section 3803 of the lett v. Academy of Music, 46 Md., 132 code, where the subscription does not (1876) ; Dill v. Wabash Valley R R. Co., 21 111., 91 (1859) ; East Tenn. & Va. R R Co. v. Gammon, 5 Sneed (Tenn.), 567 (1858); Corwith v. Culver, 69 111., 502 (1873); Jack v. Naher, 15 Iowa, 450 (1863); Thornburgh v. Newcastle & D. R R Co., 14 Ind., 499 (1860) ; Gelpcke v. Blake, 15 Iowa, 387 (1863). holding that it is immaterial that the agent acted in good faith ; Johnson v. Pensa- cola & Ga. R R Co., 9 Fla., 299 (1860) ; Miss., O. & R R. R Co. v. Cross, 20 Ark., 443 (1859) ; Ridgefield & N. Y. R. R Co. v. Brush, 43 Conn., 86 (1875); Phoenix Warehousing Co. v. Badger, 6 Hun, 293 (1875); affirmed, 67 N. Y., 294; White- hall & P. R R Co. v. Myers, 16 Abb. Pr. (N. S.), 34 (1872). But see Brewers' Fire Ins. Co. v. Burger, 10 Hun, 56 (1877), holding that where the original sub- scription contract is verbal and com- plete, and a part only of it is afterwards purport to contain the whole contract, parol evidence is admissible. Hendrix v. Academy of Music, 73 Ga., 437 (1884). In Pennsylvania the case of McCIure v. People's Freight R'y Co., 90 Pa. St., 269 (1879), sustains the general rule, and excludes a parol agreement or con- dition allowing payment in property. But Rinesmith v. People's Freight R'y Co., 90 Pa. St., 262 (1879); Caley v. Phil. & Chester R R Co., 80 Pa. St, 363 (1876); Miller v. Hanover June. & Sus. R R Co., 87 Pa. St, 95 (1878) ; and McCarty v. Selinsgrove & N. B. R. R Co., 87 Pa. St., 332 (1878), allow parol evidence to contradict the subscription contract where it is shown that but for the parol agreement the subscription would not have been made ; the last two cases saying, however, that the evi- dence is inadmissible if other stock- holders are interested in opposition to reduced to writing, it is competent to such parol agreement This unusual rule prove the whole agreement. See, also, Hendrix v. Academy of Music (Ga., 1885). Cf. Eighmie v. Taylor, 98 N. Y, 288 (1885). An oral condition to a sub- scription cannot be set up. Masonic, etc., Assoc, v. Channell, 45 N. W. Rep., 716 (Minn., 1890). An oral statement that the subscriptions would be col- probably has its origin in an old Eng- lish case (Pulsford v. Richards, 17 Beav., 87, 1853), which holds that a represen- tation is to be considered fraudulent when, "if the real truth had been stated, it is reasonable to believe the plaintiff would not have entered into the contract" Thus a parol agreement 187 § 138.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. of parol evidence to explain, contradict or vary a written instru- ment, applies to a subscription contract for stock in a corporation. Neither party is permitted to prove a different contract from that expressed in the written instrument. Under the rule, not even a separate written contemporaneous contract is admissible to change the subscription contract. 1 § 138. Thus, an agreement that a certain location will be adopted,- or that payment may be made in a certain way or at a certain time, 3 or that the subscription shall be merely nominal, for the pur- pose of inducing others to subscribe, 4 or that the subscription shall that part payment in contract labor should be allowed was held to be void, inasmuch as it varied the terms of a written agreement. Ridgefleld & N. Y. R. R. Co. v. Brush, 43 Conn., 86 (1875). Contra, Louisville & Nash. R R Co. v. Thompson, 18 B. Monr., 735 (1857); McConahy v. Centre & Kish Turnpike R. Co.. 1 Penn. & W., 426 (1830), fol- lowed in Swatara R R v. Brune, 6 Gill, 41 (1847) ; overruled by Nippenose Mfg. Co. v. Stadon, 68 Pa St., 256 (1871). See, also, Weber v. Fickey, 52 Md., 501; Leibke v. Knapp, 79 Mo., 22 (1883). Parol condition that others were to sign is not admissible. Minn., eta, Co. v. Davis, 41 N. W. Rep., 1026 (Minn., 1889). But it has been held that a parol agreement herein, made after the subscription, and on a new considera- tion, is valid. Pittsburgh & Connells- ville R R Co. v. Stewart, 41 Pa. St., 54 (1861). See, also, Tonica, etc., R R Co. v. Stein, 21 111., 96 (1859). Cf. Bucher v. Dillsburg, etc., R R Co., 76 Penn. St. 306 (1874); Brewers', etc., Ins. Co. v. Bur- ger, 10 Hun, 56 (1877); Eighmie v. Tay- lor, 98 N. Y., 288 (1885). The subscriber's remedy is against the person who made the agreement which has not been kept Felgate's Case, 2 D3 G., J. & S., 456 (1865). An action for damages for breach of contract lies against the corporation if the agreement amounts to a condition subsequent See ch. V. i Brownlee v. O., Ind. & 111. R R. Co., 18 Ind., 68 (1862); White Mts. R R Co. v. Eastman, 34 N. H., 124 (1856). 2 North Car. R R. Co. v. Leach, 4 Jones' Law (N. C), 340 (1857); Wight V. Shelby R R Co., 16 B. Monr., 4 (1855) ; Ellison v. Mobile & O. R R Co.. 36 Miss., 572 (1858) ; Miss.. O. & R R R Co. V. Cross, 20 Ark., 443 (1859) ; Evansville, Indianapo- lis & C. S. R. R Co. v. Posey, 12 Ind., 363 (1859); Eakrightr. Logansport & N. Ind. R R Co., 13 Ind., 404 (1859); Carlisle v. Evansville, Ind. & C. S. R. R Co., 13 Ind., 477 (1859); Miller v. Wild Cat Gravel Road Co., 52 Ind., 51 (1875) ; S. C, 57 id., 241; Miller v. Hanover June. & Sus. R. R Co., 87 Pa. St, 95 (1878) ; Gelpcke v. Blake, 15 Iowa, 387 (1863); Braddock v. Phil., M. & M. R R Co., 45 N. J. Law Rep., 363 (1883); Killer v. Johnson. 11 Ind., 337 (1858), holding it immaterial that fraud was actually in- tended. Contra, Rives v. Montgomery S. P. R Co., 30 Ala., 92 (1857). Repre- sentations of an agent that the road will be built between the termini laid down in the charter are representations relative to the future and are not fraud- ulent though not carried out Arm- strong v. Karshner, 24 N. E. Rep., 897 (Ohio, 1890). » Noble v. Collender, 20 Ohio St, 199 (1870) ; Henry v. Vermilion & A. R R. Co., 17 Ohio, 187 (1848) ; Stewards of M. E. Church v. Town, 49 Vt, 29(1876); Ridgefleld & N. Y. R R. Co. v. Brush, 43 Conn., 86 (1875); Thigpen v. Miss. Central R. R Co., 32 Miss., 347 (1856). * Downie v. White, 12 Wis., 176 (1860) ; Wetherbee v. Baker, 35 N. J. Eq., 501 (1882); Kishacoquillas & Centre T. R. Co. v. McConahy, 16 S. & R (Pa.), 140 188 CH. IX.] - DEFENSE OF PAROL AGREEMENT AND FRAUD. [{ 13S. be in fact only a pledge of stock by the corporation to the sub- scriber, or that the stock may be surrendered, 1 or that certain prop- erty would be purchased by the corporation, 2 or that the subscriber might keep his stock, but should not be liable for the full par value thereof, 3 or that payment -would not be demanded until certain work had been completed, 4 or that the money would be applied to a particular part of the road, 5 or that a certain part of the road would be completed within a certain time, 6 or that the road will be extended to a certain point, 7 or other parol conditions, 8 or execu- (1827); Phoenix W. Co. v. Badger, 6 Hun, 293 (1875); aff'd, 67 N. Y., 294; Psychaud v. Hood, 23 La. Ann., 732 (1871) ; Cleveland Iron Co. v. Ennor, 12 Am. & Eng. Corp. Cases, 88 (III., 1886); Robinson v. Pittsburgh & C. R R Co., 32 Pa. St., 334 (1858) ; Graff v. Pittsburgh & S. R. R Co., 31 Pa. St, 489 (1858); Mann v. Cooke, 20 Conn., 178 (1849); Conn. & Pass. Rivers R R v. Bailey, 24 Vt, 465 ; Davidson's Case, 3 De G. & S., 21 (1849), holding it to be a fraud on other subscribers, without requiring proof that there were such: Bridger's Case, L R, 9 Eq. Cas., 74 (1869) ; New Albany & Salem R. R Co. V. Slaughter, 10 Ind., 218 (1858) ; Blodgett v. Morrill, 20 Vt., 509(1848); Minor v. Mechanics' Bank of Alexandria, 1 Peters, 46 (1828) ; Bates v. Lewis. 3 Ohio St, 459 (1854); Litchfield Bank v. Church, 29 Conn., 137 (1860); Mangles v. Grand Collier Dock Co., 10 Sim., 519 (1840) ; Preston v. Grand Collier Dock Co., 2 Rail. Cas., 335 (1840); Chouteau Co. v. Floyd, 74 Mo., 286 (1881). These cases hold that parol agreements are void as a fraud on corporate creditors and on other sub- scribers, and that the subscription is en- forceable absolutely. It is no defense that there was a prior or contempora- neous oral agreement that the stock was not to be issued and the subscriber not to be held liable. Wurtzbarger v. Anniston, etc., Mills, 10 S. Rep., 129 (Ala., 1891). It is no defense that an- other party had promised the stock- holder that the former would pay for the stock. Williams v. Benet, 13 S. E. Rep., 97 (S. C, 1891). A person sued as a subscriber cannot set up that he sub- scribed at the solicitation of another person who agreed to take the subscrip- tion off his hands at once. Stutz v. Handley, 41 Fed. Rep., 531 (1890). 1 Melvin v. Lamar Ins. Co., 80 111., 446 (1875) ; White Mts. R R Co. v. Eastman. 34 N. H, 124 (1856). Cf. §§ 247, 465, infra. Or that the subscriber be re- leased. Gill v. Balis, 72 Mo., 424 (1880). 2 Kelsey v. Northern Light Oil Co., 45 N. Y., 505 (1871). 3 Custar v. Titusville Gas & Water Co., 63 Pa. St., 381 (1869); Union Ins. Co. v. Frear S. Manuf. Co., 97 111., 537 (1881); Upton v. Tribilcock, 91 U. S., 45 (1875). 4 La Grange & M. P. R Co. v. Mays, 29 Mo., 64 (1859) ; Clem v. Newcastle & D. R R Co., 9 Ind., 488 (1857), holding that such a promise is contradictory of the legal effect of the subscription ; Cin- cinnati U. & Ft. Wayne R R Co. v. Pearce, 28 Ind., 502 (1867). 5 Smith v. Tallahassee Branch of C. P. R Co., 30 Ala., 650 (1857). An action to rescind the purchase of stock lies where the money paid therefor was to be ap- plied to a certain purpose but was not so applied, but the receiver will not be directed to give up the money. Moore v. Robertson, 25 Abb. N. C, 173 (1890). e Blair v. Buttolph, 33 N. W. Rep., 349 (Iowa, 1887). " Low v. Studebaker, 10 N. E. Rep., 301 (Ind.. 1887). 8 Topeka, etc., v. Hale, 17 Pac. Rep., 601 (Kan., 1888) ; Marshall, etc., Co. v. Kellian, 6 S. E. Rep., 680 (N. C, 1888). Parol can- not add to a condition of a conditional 189 § 139.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. tory contracts,— are held to be no defense to an action to collect the subscription. 1 Where, for the purpose of obtaining a subscrip- tion, a promise was made in behalf of the corporation that a branch road would be built, it was held that this promise was but an ex- pression of an existing intention which was liable to be changed, and was no defense. 2 It was also held that a promise which, if carried out, would necessitate an ultra vires act by the corporation, is not binding, and is no defense. 3 § 139. Corporations chargeable with the fraudulent representa- tions of their agents.— At an early day in England it was held in a number of cases that corporations were not bound by the frauds of their agents in obtaining subscriptions to stock. 4 This doctrine rested on the theory that the corporation gave the agent no power or authority to commit a fraud, and that, consequently, the fraud rendered the agent liable personally, but did not release or affect the subscription. subscription. Miller v. Preston, 17 Pac. Rep., 565 (N. M., 1888). An oral agreement to take stock in payment of a note is no defense to the note. The corporation must pay it. Tuscaloosa, etc., Co. v. Perry, 4 S. Rep., 635 (Ala., 1888). Where the agent of the railroad represented that a depot would be constructed at a certain place, a failure to so construct is good ground for enjoining the issue of municipal-aid bonds. Wullenwaher v. Dunnigan, 47 N. W. Rep., 420 (Neb., 1890). An oral contract that the sub- scriber was to be allowed to pay in property is good as against other stock- holders who assented thereto, but such contract must be clearly proven. Knoop V. Bohmrich, 23 All. Rep., 118 (N. J., 1891). 1 Piscataqua Ferry Co. v. Jones, 39 N. H., 491 (1859) ; Crossman v. Penrose Ferry Bridge Co., 26 Pa. St, 69 (1856) ; New Albany & Salem R. R. Co. v. Fields, 10 Ind., 187 (1858); East Tenn. & Va. R R Co. v. Gammon, 5 Sneed (Tenn.), 567 (1858); Saffold v. Barnes, 39 Miss., 399 (1860) ; • Payson v. Withers, 5 Biss., 269 (1873); Goff v. Hawkeye Pump & W. M. Co., 62 Jowa, 691 (1884); Corwith v. Culver, 69 111., 502 (1873). Contra, Mahan v. Wood, 44 Cal., 462 (1872). where the par value of the shares was not what was promised. - McAllister r. Indianapolis & Cin. R. R. Co., 15 Ind., 11 (18G0). No de- fense that the subscribers were told that branches would be established and that they had not been. Guarantee, etc., Co. v. Weil, 21 Atl. Rep., 665 (Penn., 1891). 3 Johnson v. Crawfordsville, F. K. & Ft W. R. R Co., 11 Ind., 280 (1858), where aid from another railroad was promised ; Peters r. Lincoln & N. W. R. Co., 14 Fed. Rep., 319 (1882), where an ultra vires lease was promised ; Baile v. Calvert C. E. Soc, 47 Md., 117 (1877). * Dodgson's Case, 3 De G. & Bin., 85 (1849); Bernard's Case, 5 De G. & Sm., 283 (1852) ; Gibson's Case, 2 De G. & J., 275 (1858); Holt's Case, 22 Beav., 48 (1856); Felgate's Case. 2 De G., J. & S., 456 (1865) ; Mixer's Case, 4 De G. & J., 575, where a prospectus was issued by the directors; Ayres' Case, 25 Beav., 513 (1858), the court holding that the corpo- ration is bound by the misrepresenta- tion* only where it expressly authorized the particular statement made. Cf. Barry v. Craskey, 2 Johns. & Hem., 1 (1861). 190 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§§ 140, 141. § 140. The modern doctrine, however, both in this country and in England, has completely exploded the theory that corporations are not chargeable with the frauds of their agents in taking sub- scriptions. The well-established rule now is that a corporation cannot claim or retain the benefit of a subscription which 'has been obtained through the fraud of its agents. The misrepresentations are not regarded as having actualty been made by the corporation, but the corporation is not allowed to retain the benefit of the con- tract growing out of them, being liable to the extent that it has profited by such misrepresentations. 1 ' The question of the author- ity of the agent taking the subscription is immaterial herein. It matters not whether he had any authority, or exceeded his author- ity, or concealed its limitations. 2 The corporation cannot claim the benefits of his fraud without assuming also the representations which procured those benefits. Parol evidence is admissible to show the fraud, since it does not vary or contradict the contract, but shows that no contract was properly formed. 3 § 141. The misrepresentations must be by authorized agents. — False representations by persons who do not act as intermediaries between the corporation and the subscriber in forming the con- tract cannot bind the corporation nor affect the subscription. They are statements of outside parties. 4 The subscriber may have his 1 Western Bank of Scotland v. Addie, by persons legally connected with the L. R, 1 Sc. App. Cas., 145 (1867) ; Nat'l taking of the subscription. An agent Exchange Co. v. Drew, 32 Eng. L. & Eq., to obtain subscriptions may use the or- 1 (1853); Henderson v. Lacon, L. R, 5 Eq. dinary means of accomplishing the Cas.. 249 (1867) ; Ex parte Linger, 5 Irish object of his appointment, such as repre- Ch. Rep. (N. S.), 174; Montgomery S. R'y senting the location and quality of the Co. v. Matthews, 77 Ala., 357(1884). lands, and the like. San dford v. Handy, The principles governing these contracts 23 Wend., 260 (1849). See, also, Nelson are the same as the principles governing v. Cowing. 6 Hill, 336 (1844). contracts between private individuals. 3 N. Y. Exchange Co. v. De Wolf, 31 Directors, etc., of Central R'y v. Kisch, N. Y., 271 (1865); Jewett v. Valley R'y L. R., 2 H. L. App. Cas., 99 (1870); An- Co., 34 Ohio St., 601 (1878). In Pennsyl- derson v. Newcastle & Richmond R R vania the peculiar rule prevails that the Co., 12 Ind., 376 (1859) ; Vreeland v. N. agent's misrepresentations affect the J.Stone Co., 29 N. J. Eq., 188 (1878); subscription, and are a defense only Ranger v. Great W. R'y, 5H. L G, 72 when the agent actually had or reason- (1859); Mackay v. Com. Bank, 5 P. G, ably appeared to have authority to make 394. As regards representations in ref- representations. This was the ancient erence to bonds secured by mortgage English doctrine, long since abandoned, and the right of a purchaser of bonds Custar v. Titusville Gas & Water Co., to complain, see Van Weel v. Winston, 63 Pa. St, 381 (1869). 115 U. S., 228 (1885). < Cunningham v. Edgefield & Ky. R. '•* Crumb v. U. S. Min. Co., 7 Graft R. Co., 2 Head, 23 (1858). The repre- (Va.), 353 (1851). Provided, of course, sentations made to him by other sub- that the misrepresentations were made scribers or outsiders are immaterial 191 § 142.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [cH. IX. action for damages against such persons for deceit, but he cannot charge the corporation with their misrepresentations. Sometimes, also,°the misrepresentations even of persons connected with the corporation do not bind the corporation, inasmuch as their powers are purely statutory, or have nothing to do with the taking of sub- scriptions. Thus, while there has been considerable controversy in this country over the question of fraudulent representations by commissioners having statutory powers to take subscriptions, it is quite well settled that the subscriber is bound to know that the commissioners have no power to make representations, and that the corporation is not bound thereby. 1 So, also, it has been held that the representations by the president of the corporation do not bind it where he had no authority to take subscriptions. 2 In Indi- ana it is held that an agent taking subscriptions before the incorpo- ration of the company cannot bind it by his misrepresentations. 3 If there is conflicting testimony as to the authority and status of the agent, the question is to be submitted to the jury. 4 § 142. Corporation not bound by misrepresentations of officers at a public meeting.— There is a difference of opinion among the au- thorities as to whether fraudulent representations made by one or more of the company's officers, at a public meeting called to pro- mote the procuring of subscriptions, are chargeable against the cor- poration where such representations were not expressly authorized by the corporation. In Xew Tork, Iowa, Alabama and Louisiana such misrepresentations do not bind the corporation. 5 In Georgia and Wisconsin, on the other hand, such fraudulent representations herein. His remedy is against them resentations. It must assume both or personally. Duranty's Case, 26 Beav., neither. 268 (1858): Ex parte Frowd, 30 L. J. * Miller v. Wild Cat Gravel Road Co., (Ch.). 322 (1860). 57 Ind., 241 (1875). i Nippenose Mfg. Co. v. Stadon, 68 Pa. +Kelsey v. Northern Light Oil Co., 45 St.. 256 (1871); Barington v. Pittsburgh N. Y„ 505 (1871); Crump v. U. S. Mining & Steubenville R R Co.. 34 Pa. St, 358 Co.. 7 Gratt (Va.), 353 (1851). (1859); Wight v. Shelby R R Co., 16 B. * Buffalo & N. Y. City R. R. Co. v. Monr., 4 (1855); Rutz v. Esler & R Mfg. Dudley, 14 N. Y., 336 (1856); First Nat Co., 3 Bradw., 81 (1878): Syracuse, P. & Bank v. Hurford, 29 Iowa, 579 (1870); O. R. R Co. v. Gere, 4 Hun, 392 (1875); Smith t\ Tallahassee Branch of C. P. R North Car. R. R Co. v. Leach, 4 Jones' R. Co., 30 Ala., 650(1857), on the ground L (N. C), 340 (1857). . of a want of authority, which the sub- 2 Crump v. U. S. Mining Co., 7 Gratt scriber is bound to know; Vicksburg, (Va), 353 (1851); Rives V. Montgomery S. & T. R R. v. McKean, 12 La, Ann., South Plank R. Co., 30 Ala., 92 (1857). 638 (1857), on the ground that, if the In all such cases, however, if the corpo- rule were otherwise, " there will be very ration accepts a subscription taken by little security to those who loan money an unauthorized agent, it cannot retain or render assistance to institutions of the subscription and repudiate the rep- this kind. 192 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ 143. are held to be admissible in evidence. 1 The former rule seems to accord most with the modern tendency of the decisions, which go very far towards the enforcement of subscriptions after corporate creditors and other subscribers have become interested in the en- prise. §143. The misrepresentations may arise by prospectuses. — A prospectus issued by the authority of the directors or the stock- holders of a corporation may be relied upon by a person in subscrib- ing for stock ; and if the prospectus contains a false representation, and the subscription is made by reason thereof, such representation is binding upon the corporation. 2 In this class of corporate instru- ments, however, it is held that some high coloring and even exag- geration is allowable. " In an advertisement of this description some allowance must always be made for the sanguine expectations of the promotors of the adventure; and no prudent man will accept the prospects which are always held out by the originators of every i Atlanta & West Point R R Co. v. Hodnett, 36 Ga., 669(1867); McClellan v. Scott, 24 Wis., 81 (1869). The question of representations at a public meeting was submitted to the jury in Weems v. Georgia, etc., R R, 14 S. E. Rep., 583 (Ga., 1892). 2 0akes v. Turquand, L. R, 2 H. L. App. Cas., 325 (1867) ; Ross v. Estates In- vestment Co., L. R, 3 Ch. App., 682 (1868); Reese River Silver Min. Co. v. Smith, L. R, 4 H. L.. 64 (1869) : Blake's Case, 34 Beav.. 639 (1865) : Henderson v. Lacon, L. R, 5 Eq. Cas.. 249 (1867). In England it is enacted, by section 38 of the Companies Act, 1867. " Every pros- pectus of a company, and every notice inviting persons to subscribe for sbares in any joint-stock company, shall specify the dates and names of the parties to any contract entered into by the com- pany, or the promoters, directors or trustees thereof, before the issue of such prospectus or notice, whether subject to adoption by the directors or the com- pany or otherwise; and any prospectus or notice not specifying the same shall be deemed fraudulent on the part of the promoters, directors and officers of the company knowingly issuing the same, as regards any person taking shares in the company on the faith of such prospectus, unless he shall have had notice of such contract." For the application of this very important and commendable statute, see Cornell ?v Hay, 8 C. R, 328 (1873) ; Gover's Case,. L. R, 20 Eq., 114 (1875): Davidson v.. Tulloch. 1 Macq., 783 (1860); Arkright r. Newbold, L. R, 17 Ch. D., 311 (1880): Tu ycross v. Grant, L. R, 2 C. P. D., 469 (1877); Emma Min. Co. v. Lewis, L. R, 4 C. P. D.. 396 (1879); Bagnall i\ Carlton. L. R. 6 Ch. D.. 371 (1877); Plynipton Min. Co. v. Wilkins, 1882, W. N. p. 69; Sullivan v. Metcalf, L. R, 5 C. P. Div.. 455 (1880). But a pros- pectus containing statements based upon a report of the vendor of property to the corporation, which report is ap- pended to the prospectus, is no ground for rescission, even though the report is totally false. All the stockholders and the company relied equally thereon. Ex parte Vickers, 56 L T. Rep.. 815 (1887). Several subscribers who have been induced by the same misrepresen- tations contained in a prospectus to sub- scribe for stock may join in a suit in equity for the benefit of themselves and others similarly deceived, to set asidf> their subscriptions. Bosherr. Richmond, etc., Co.. 16 S. K Rep., 360 (Va„ 1892 . See 66 L. T. Rep., 700, reversing id, 184. (13) 193 §§ 144, 145.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. new scheme without considerable abatement." l So, also, if the language used in the prospectus admits of two meanings, the sub- scriber relying on it must ascertain which meaning is intended. 2 Unless the representation distinctly refers to what is actually exist- ing at the time, it must be taken to represent what will result when the enterprise is carried out, and will then be merely an expression of opinion. Nevertheless a subscriber may have rescission where the prospectus is not an honest, candid, straightforward document, but suggests that which is untrue and is in a high degree mis- leading. 3 § 144. Or by reports. — So, also, a report made by the corporate officers to the stockholders may be relied on by one who contem- plates subscribing for stock. 4 The corporation cannot say that such reports were intended for the stockholders alone. The law holds that the report is known, and is intended to be known, to all per- sons who contemplate becoming stockholders, and is the same as though published to the world. 5 § 145. Misrepresentations amounting to fraudulent representa- tions. — Any false statement by the authorized agents of a corpo- ration in regard to the past or present status of the corporate enterprise or material matters connected therewith, whereby sub- scriptions are obtained, is a fraudulent representation. Thus, a false statement that a certain amount of stock had been subscribed for ; 6 or that certain property had been purchased ; 7 that 1 Directors, etc., of Central R'y Co. v. R, 3 Ch., 682 (1868); Henderson v. La- Kisch, L. R, 2 H. L. App. Cas., 99 (1870). con, L. R., 5 Eq., 249 (1867). A state- 2 Smith v. Chadwick, L. R., 9 H. L., ment that £200,000 had been subscribed. 187: Hallows v. Fermie, L. R, 3 Ch. when in fact owners of property had App., 467 (1868), where the court say : contracted to convey the same to the " If they may be construed in a differ- company for £200,000 of stock, is a ma- ent manner by different minds, it will terial misrepresentation. Arnison v. be impossible to test the truth of any Smith, 59 L. T. Rep., 627 (1888). It is one man's assertion that he understood fraud to state that a certain person had them in the sense in which they in- subscribed for stock when in fact his volved a misrepresentation." See, also, stock was given to him. It is not fraud- §§ 352, 353. ulent that the mine whose stock is 3 Scott v. The Snyder, etc., Co., 67 L. sold would not pay for mining. A bill T. Rep., 104 (1892). in equity lies to cancel a conveyance of 4 Western Bank of Scotland v. Addie, land to pay for the stock. Coles v. Ken- L. R, 1 Sc. App, Cas., 145; New Bruns- nedy, 46 N. W. Rep., 1088 (Iowa, 1890). wick & C. R'y Co. v. Conybeare, 9 H. L. 7 Also that the property contained val- Cas., 711 (1862). uable mines, in full operation, and with 5 National Exchange Co. v. Drew, 32 large daily returns. Reese River Silver Eng. L. & Eq., 1 (1855) ; Scott v. Dixon, Min. Co. v. Smith, L. R, 4 H L., 64 29 L. J. (Ex.), 62, n.; explained and (1869) ; Waldo v. Chicago, St. P. & F. D. adopted in L. R, 6 H. L., 377. L. R. R Co., 14 Wis., 575 (1861); Ross v. 6 Ross v. Estates Investment Co., L. Estates Investment Co., sujira. Repre- 194 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ H5. the corporate property is unincumbered ; x that the corporation is solvent' and prosperous; 2 that the directors have subscribed for stock ; 3 that certain individuals are directors ; 4 or as to the nature of the business to be undertaken; 5 or, in England, where the memo- randa or articles of the association are different from the prospec- tus; 8 or that work on the enterprise had reached a certain stage of completion ; 7 or that a certain price had been paid for property when in fact a large part of the price went to promoters ; 8 or that sentation that a certain patent-right owned by the company had been tested and found to be valuable, held not a misrepresentation, although it turns out to be worthless. Denton r. Macneil, L. R, 2 Eq., 352 (1866). Representation in cool faith that title to land was good when in fact it was bad is not a misrep- resentation. New Brunswick & C. R'y Co. v. Conybeare, 9 H. L. Cas., 711 (1862). But misrepresentation that a governmerit guaranty had been ob- tained is material. Kisch v. Central R'y of Venezuela, 34 L. J. (Ch.), 545. 1 McClellan v. Scott, 24 Wis., 81 (1869) ; Water Valley Mfg. Co. v. Seaman, 53 Miss., 655. -'Tyler v. Savage, 143 U. S., 79 (1892); Bell's Case, 22 Beav., 35 (1856); Melendy v. Keen, 89 111., 395 (1878); Western Bank of Scotland v. Addie, L. R, 1 Sc. App. Cas., 145 (1877). Not so, however, where the directors honestly figured in debts which afterwards turned out to be bad. Jackson v. Turquand, L. R., 4 H. L., 305 (1869). Directors held liable to depositors for fraudulent repre- sentations as to the bank's solvency. Scale t\' Baker, 7 S. W. Rep., 742 (Texas, 1888). 3 Henderson v. Lacon, L. R, 5 Eq. Cas., 249 (1867). 4 Blake's Case, 34 Beav., 639 (1865); Menster's Case, 14 W. R, 957 (1866). Persons who have accepted are direct- ors, although without the qualification shares. Hallows v. Fernie, L. R., 3 Ch. App., 467 (1868). A misrepresentation as to the directors is ground for repudi- ating the subscription. Re Metropolitan, etc., Aes'n, 64 L. T. Rep., 561 (1891); id., 429. A misrepresentation as to who are the members of the council of adminis- tration is material and a rescission may be had. Re Metropolitan, etc., Ass'n, 62 L. T. Rep., 30 (1889). 5 Blackburn's Case, 3 Drew., 409 (1856). A person who has agreed to turn in property for stock may have the con- tract annulled on the ground that fraud- ulent representations were made about the process of manufacture by the cor- poration. Kelley v. Owens et al., 30 Pac. Rep., 596 (Cal., 1892). eDownes v. Ship, L. R, 3 H. L., 343 (1868); Ex parte Briggs, L. R., 1 Eq. Cas., 483(1866). 7 Peel's Case, L. R., 2 Ch. App., 674 (1867); Ogilvie v. Currie, 37 L. J. (Ch.), 541 (1868) ; Lawrence's Case, L. R., 2 Ch. App., 412 (1867); Kincaid's Case, id. (1867); Wilkinson's Case, L. R., 2 Ch. App., 536 (1867); Ashley's Case, L. R., 9 Eq. Cas., 263 (1870): Stewart's Case, L. R, 1 Ch. App., 574 : Whitehouse's Case, L. R, 3 Eq., 790(1867); Taite's Case, L. R., 3 Eq., 795 (1867): Upton v. Hans- braugh, 3 Biss., 417 (1873); Re Cachar Co., 36 L. J. (Ch.), 490 (1867); Ship v. Cresskill, L. R, 10 Eq. Cas., 73 (1870). Cf. Ex parte Briggs, L. R., 1 Eq. Cas., 483 (1866); Stewart's Case, L. R., 1 Ch., 574 (1866). False representation that sufficient funds were at hand to build a specified part of the road, being a differ- ent part from that which the defendant required by his subscription to be com- pleted before payment, is immaterial. Blair v. Buttolph, 33 N. W, Rep., 349 (Iowa, 1887). 8 Capel v. Sims, etc., Co.. 58 L. T. Rep., (1888). See, also, ch. XXXIX 195 § 146.] DEFENSE OF PAKOL AGREEMENT AND FEACD. [CH. IX. steam could be used where only horse-power was allowed ; l or that the objects of the enterprise set forth in the subscription contract were of a certain nature, the subscriber not reading or hearing, and not being able to read, the contract, 2 or other material mis- statements of fact, 3 have been held to constitute a fraudulent rep- resentation, entitling the subscriber induced thereby to subscribe to the remedies provided for him by law in such cases. In all these cases, however, the distinction between statements relative to the prospects and capabilities of the enterprise, and statements spe- cifically specifying what does or does not exist, must be carefully borne in mind. The former are matters of opinion ; the latter are material representations, and are fraudulent if false. 4 § 146. Statements as to questions of law. — Where a subscription is obtained by a false representation as to the legal effect of the subscription contract, or of corporate rights or liabilities, the sub- scriber has no remedy. He is bound to take notice of the law. 5 Thus, a misrepresentation as to the extent to which the subscriber would be liable on his stock, 6 or that he may allow his stock to be iPeek v. Deny, 59 L. T. Rep., 78 (1888). 2 West v. Crawf ordsville & A. T. Co., 19 Ind., 242 (1862). 3 See ch. XX, § 350. A representation that only $3,000 of stock and $12,000 bonds per mile would be issued is fraud- ulent where $12,000 of stock and $15,000 of bonds per mile have already been issued. Weems v. Georgia, etc., R. R, 11 S. E. Rep., 503 (Ga., 1890). Where an apartment-house corporation induces by prospectus subscriptions on repre- sentations that certain subscriptions en- title tbe rjolder to a perpetual leasehold in the apartments selected by the sub- scriber, he cannot afterwards be evicted on the ground that the building cost more than was expected and further rent must be paid. Compton v. Chelsea, 8 N. Y. Supp., 622 (1890). A statement of assets that include not only separate items for moving, exhibiting, etc., the aggregate value of the buildings being given also, but also outstanding accounts with no deductions for bad debts; ac- crued interest with no allowance for interest on liabilities; expenses of per- fecting a machine, the latter not yet being a success ; and money paid for ex- penses, it being also included in the value of the property, — is a false state- ment and sustains an action. Hubbard v. Weare, 44 N. W. Rep., 914 (Iowa, 1890). 4 Whether the statement refers to a " possibility or a contingency, or an in- tention," or to an existing fact, is a question sometimes for the jury, some- times for the judge ; generally the latter. Edgington v. Fitzmaurice, L. R, 29 Ch. D., 459 (1885). All the statements, to- gether with the circumstances and his- tory of the matter, are to be considered in deciding whether a misrepresentation was made. It is sufficient if the sub- scriber relied partly on the misrepre- sentation. He need not have relied on it exclusively. Id. See, also, Nicol's Case, 3 De G. & J., 420 (1858). The sub- scriber may, by contract, waive his right to rely on a representation. Brown lee v. Campbell, L. R, 5 App. Cas., 925 (1880). 8 Parker v. Thomas. 19 Ind., 213 (1862). 6 Upton v. Tribilcock, 91 U. S., 45 (1875), where the representation was that only a certain percentage could be called for. In Upton v. Englehart, 3 Dill., 496 (1874), this representation was 196 CH. IX.] DEFENSE OF PAKOL AGREEMENT AND FRAUD. [§§ 147, 148. forfeited, 1 or that payment would not be demanded until the enter- prise was partly or wholly completed, 2 is a statement as to the law. It states that something can be done which the law prohibits from being done. § 147. Misrepresentation may be by suppression of the truth,— The misrepresentation entitling the subscriber to his remedies may consist in the suppression of what is true as well as in the asser- tion of what is false. 3 Where any statement is made at all, it must be a fair and full statement of all the material facts. The corpo- rate authorities, in issuing a prospectus, are " bound to state every- thing with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge, the existence of which might, in any de- gree, affect the nature or extent or quality of the privileges and advantages which the prospectus holds out as inducements to take shares." 4 Thus, an omission to state that a very large sum had been paid for property, the merits of which were fully set forth, has been held to be equivalent to a fraudulent representation. 5 On the other hand, a failure to state that large sums were paid to the directors to induce them to act as such was held not to be a fraudulent omission. 6 § 148. Misrepresentation may be by statements made without knowledge of their falsity.— Statements need not be intentionally false in order to amount to a fraudulent representation. 7 A false held to be a defense, where it was made court say the prospectus is objection- in one state with reference to the laws able, "not that it does not state the of another state. See, also, Accidental truth as far as it goes, but that it con- Insurance Co. v. Davis, 15 L. T., 182 ceals most material facts with which (1866), where it was represented that the public ought to have been made further calls were not contemplated. acquainted, the very concealment of i N. E. R. R. Co. v. Rodriques, 10 Rich, which gives to the truth which is told (S. C), 278 (1857"). the character of falsehood." 2 clem v. Newcastle & Danville R. R. 4 New Brunswick & Con. R'y Co. v. Co., 9 Ind., 488 (1857) ; New Albany, etc., Muggeridge, 1 Dr. & Sm., 363, 381 (1860). R. R. v. Fields, 10 id., 187 (1858). For 5 Directors, etc., of Central R'y Co. v. representation as to the route, see Elli- Kisch, supra. In Gover's Case, L. R., son v. Mobile, etc., R. R. Co., 36 Miss., 1 Ch. D„ 182 (1875), under different cir- 572 (1858) ; Wight v. Shelby R. R. Co., cumstances, the contrary was held. 16 B. Mon., 4 (1855). ' 6 Heymann v. European Central R'y s " No misstatement or concealment Co., L. R., 7 Eq. Cas., 154 (1868). State- of any material facts or circumstances ment need not be made that stock had ought to be permitted. . . . The sup- been given to the directors and promot- pression of a fact will often amount to ers in payment for services. Pulsford v. a misrepresentation." Directors, etc., Richards, 17 Beav., 87 (1853). Nor as to of Central R'y v. Kisch, L. R, 2 H. L. the amount of stock already subscribed. App. Cas., 99 (1867). In Oakes v. Tur- Vane v. Cobbald, 1 Ex., 798 (1848). quand, L. R, 2 H. L. Cas. 325 (1867), the ' Corporate agents, making represen- 197 149.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. statement, made in good faith but in ignorance, is, in a legal point of view, the same as an assertion which the party knew to be un- true. 1 Thus, a prospectus issued by the directors, representing the corporate property as containing valuable mines, all of which was in good faith, but false, is the same as though the statements were made with knowledge of their falsity. Where, however, the state- ment in good faith was that the corporation had a government contract, which, upon litigation, was found to be untrue, the rep- resentation was held not to be fraudulent. 2 §149. Misrepresentations that are insufficient. — It is not every misrepresentation that enables a subscriber to set up that he was induced to subscribe by fraud. 3 Thus, an honest mistake of judg- tations in order to obtain subscriptions, are bound to know the truth or falsity of such statements. Reese River Co. v. Smith, L.R., 4 H. L., 64 (1869); affirm- ing L. R, 2 Eq., 264; Glamorgansbire Iron, etc., Co. v. Irvine, 4 F. & F., 947 (1866), applying the same rule at law. The English case of Kennedy v. Panama, N. Z. & A. R. M. Co., L. R. 2 Q. B., 580 (1867), holds, however, that "where there has been an innocent misrepresentation or misapprehension, it does not author- ize a rescission, unless it is such as to show that there is a complete difference in substance between what was sup- posed to be and what was taken, so as to constitute a failure of consideration," and that to hold otherwise would be to make a warranty out of the representa- tion. In the recent case of Edgington v. Fitzmaurice, L. R., 29 Ch. D.,' 459 (1885), the court say that a statement of fact, which the person making does not know the truth of, is, " in the eye of the law, a fraudulent statement as much as if the parties making it had known it to be false." In this country the cases seem to favor a different rule. The party making the representations must be proven "to have had a fraudulent purpose in contemplation, or at least to have known that the statements were untrue." Nugent v. Cincinnati, Harri- son & Indianapolis S. L. R. R. Co., 2 Dis- ney, 302 (1858); Selma, M. & M. R. R. Co. v. Anderson, 51 Miss., 829 (1876); Cunningham v. Edgefield & Ky. R R. Co., 2 Head, 23 (1858). See, also, Chitty on Contracts, 682, and Montgomery, etc., R'y Co. v. Matthews, 77 Ala., 357 (1884). The vigorous case of Henderson v. Railroad Co., 17 Tex., 560 (1856), however, effectively presents the opposite view ; and see § 356, infra. See, also, 1 Story, Eq. Juris., § 193; Story on Agency, §§ 127, 135, 137, 452. 1 Reese River Co. v. Smith, L. R, 4 H. L., 64 (1869). 2 Kennedy v. Panama, N. Z. & O. R M. Co., L. R., 2 Q. B., 580 (1867). 3 Mere matters of opinion as to whether the enterprise can be com- pleted, or when it will be completed, or the prospects of profits, cannot be misrepresentations. The subscriber is bound to know that these are all mat- ters of mere conjecture. Brownlee v. O., Ind. & 111. R. R Co., 18 Ind., 68 (1862); Pickering v. Templeton, 2 Mo. App., 424 (1876); Hughes v. Antietam Mfg. Co., 34 Md., 316 (1870); Hardy v. Merriweather, 14 Ind., 203 (1860); An- drews v. O. & Miss. R R Co., 14 Ind, 169 (1860); Bish v. Bradford, 17 Ind., 490(1861); Walker v. Mobile R R Co., 34 Miss., 245 (1857) ; Coil v. Pittsburgh College, 40 Pa. St, 439 (1861). State- ments as to when the road would be completed are not such representations as will avoid a subscription for stock. Jefferson v. Hewitt, 30 Pac. Rep., 772 (Cal., 1892). The fact that statements as to the affairs of the company are not filed as required by statute does not 198 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ 150. raent, on the part of the directors, as to the collectibility of certain debts, whereby a company represented to be solvent turns out to be insolvent, is not a fraudulent representation. So, also, of a representation as to the value of a patent-right, which, it was stated, would be tested further. On the other hand, a statement made with the intent to defraud the subscriber, but without that effect is immaterial ; mere intent without damage is insufficient. 1 A misstatement as to the contents of the subscription contract which the subscriber signs is immaterial, where he can read but does not. 2 And where false representations are made, but before the subscription is completed the representations are made good by intervening events, the subscribers cannot complain. 3 Frauds of the directors which are not the subject of a representation are not to be remedied by the principle of law governing the subject of false representation. 4 §150. Subscriber is not bound to investigate the truth of repre- sentations. — If a subscriber has used reasonable caution and judg- ment in accepting the statements of corporate agents, it is no answer to his claim that he was induced to subscribe by fraudulent representations, to say that by proper inquiry he might have learned the truth, or bv more vigilance he might have discovered the de- amount to fraud in the sale of stock ; nor do representations that the stock will pay twenty per cent, dividends amount to fraud. The question as to validity of stock, having once been liti- gated, cannot be again raised in an ac- tion for deceit in the sale of the stock. The mere act of conspiracy is not suffi- cient to sustain the action unless dam- age is shown. Robinson v. Parks et al., 24 Atl. Rep., 411 (Md., 1892). Represen- tations that the stock would be a good investment and pay dividends, etc., con- stitute no defense. Weston v. Colum- bus Southern R'y Co., 15 S. E. Rep., 773 (Ga., 1892). In the cases, however, of Gerhard v. Bates, 17 Jur.. 1097 (1853), and Taylor v. Ashton, 11 M. & W., 401 (1843), it was held that a false guaranty of the promoters that a certain divi- dend would result from the enterprise constituted a false representation. In re Nat'l, etc., Fuel Co., Ex parte North, 4 Drew., 529 (1859), held that one sued as contributory cannot plead fraudulent misrepresentation on part of company because it was arranged between di- rectors and shareholders that certain shares (of which these were a part) should have a preference. A statement as to the purpose for which the proceeds of bonds will be used by the company is immaterial. The bondholder cannot re- scind. Banque, etc., v. Brown, 34 Fed. Rep., 145, 198 (1888). Stock may be is- sued before payment by machinery is made. An action by another .stock- holder for cancellation of the stock on the ground of fraud fails unless there is clear proof that the person agreed that the machinery would succeed. Pendle- ton Mfg. Co. v. Mahanna, 18 Pac. Rep., 563 (Oreg., 1888). See 21 N. R Rep., 12 (111., 1889). i Kiiler v. Johnson, 11 Ind., 337 (1858) ; Cunningham v. Edgefield & Ky. R. R. Co., 2 Head, 23 (1858). 2 Thornburgh v. Newcastle & Danville R R. Co., 14 Ind.. 499 (I860). 3 Ship v. Cresskill, L. R, 10 Eq. Cas., 73 (1870). 4 Hornaday v. Ind. & 111. Central R. R.. 199 § 151.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [cil. IX. ception. 1 Where the representations are by a prospectus, he is not obliged to examine documents referred to, even though such exam- ination would have shown the falsity of the representations. 2 It is not incumbent upon him to institute inquiries, and to suspect fraud when all seems fair. But where the means of information are open equally to both parties, the subscriber has no right to rely upon the representations of the corporate agent, unless the latter dis- suades the subscriber from investigation. 3 So, also, where the sub- scriber reads several documents, he cannot rely on representations in one which are corrected and limited by statements in the others, even though he claims to have overlooked such corrections.* § 151. Subscriptions induced by fraudulent representations are not void, but only voidable. — The principle of law that fraud viti- ates all contracts applies to a contract of subscription ; but this principle means, not that the contract is void per se from the for- mation of the contract, but that the contract is voidable at the option or election of the person defrauded. 5 Until such election is exercised, the contract is enforceable by both or either of the par- ties. Hence a subscription to stock, obtained by fraudulent repre- sentations, is not void from the time when it was made, nor is it void until it is ratified and confirmed by the defrauded subscriber, but it is valid until it is expressly rescinded and repudiated by the subscriber. 6 This principle is important in determining the method 9 Ind., 263 (1857): Heymann v. Euro stated to be that "every contracting per- pean Central R'y Co., L. R., 7 Eq. Cas., son has an absolute right to rely on the 154 (1868). express statement of an existing fact, 1 New Brunswick & Can. R'y Co. v. the truth of which is known to the op- Muggeridge, 1 Dr. & Sm,, 363 (1860); posite party, and unknown to him, as a Upton v. Englehart, 3 Dill., 496(1874); basis of a mutual engagement; and he Directors, etc., of Central R'y ti Kisch, is under no obligation to investigate and L. R, 2 H. L. App. Cas., 99 (1870) ; Ex verify statements, to the truth of which parte West, 56 L. T. Rep., 622 (1887). the other party to the contract, with Cf. Hallows v. Firmie, L. R, 3 Ch. App., full means of knowledge, has deliber- 467 (1868). The subscriber is not bound ately pledged his faith." Mead v. Bunn, to investigate the truth of statements 32 N. Y., 274 (1865). which the other party with full knowl- 3 Jennings v. Braughtou, 22 L. J. (Ch.), edge of the facts makes. McClellan v. 583 (1853) ; Walker v. Mobile & O. R. R. Scott, 24 Wis., 81 (1869). False state- Co., 34 Miss., 245 (1857). ments as to who are the other subscrib- 4 Scholey v. Central R'y Co., L. R, 9 ers are no defense where the subscriber Eq. Cas., 766, n. (1870). has opportunity to ascertain. Haskell ^Oakes v. Turquand, L. R, 2 H. L. v. Worthington, 7 S. W. Rep., 481 (Mo., App. Cas., 325 (1867) ; Upton v. Engle- 1888). hart, 3 Dill., 496 (1874); Reese River 2 Kisch v. Central R'y, 34 L. J. (Ch.), Min. Co. v. Smith, L. R, 4 H. L., 6-4 545 (1865) ; S. C, supra. In New York (1869). the general principle of law governing « Tennant v. City of Glasgow Bank, L. cases of misrepresentation is clearly R, 4 App. Cas., 615 (1879). 200 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§§ 152-154. of rescission, and particularly the time within which a rescission must be made. § 152. Remedies of a subscriber induced to subscribe by fraudu- lent representations.— There are, in general, live different remedies which are open to a subscriber induced to subscribe by fraud. He may, upon discovering the fraud, rescind the subscription by noti- fication to the corporate authorities, without taking legal proceed- ings; or he may wait until sued upon the subscription, and. then set up the fraud as a defense to the action at law; or he may file a bill in equity to restrain such suits at law, and to set aside the subscription contract, and also, if he wishes, to recover back pay- ments already made on the subscription; or he may bring an ac- tion at law against the parties fraudulently inducing the subscrip- tion, and recover damages for the deceit; or he may sue for money had and received. § 153. Rescission without legal proceedings — It is the duty and the right of directors, without waiting for a bill in equity or other legal proceedings, to revoke a subscription contract, and remove from the stockholders' list the name of a subscriber who reasonably proves that he was induced to subscribe by fraudulent representa- tions chargeable to the corporation, and who requests a rescission of the subscription. 1 The directors are not bound to make a hope- less defense. It is an ordinary business act within the powers of the directors, and their discretion is not to be controlled unless un- reasonably exercised. Where, however, upon such a demand being made bv the subscriber, the directors refuse to dissolve the sub- scription contract, the subscriber must resort to a bill in equity to have the contract set aside for fraud. 2 A mere notification to the corporation is insufficient. § 154. False representation as a defense to an action at law for calls.— The most common remedy of a subscriber induced by fraud to subscribe is to wait until the corporation brings suit to collect the subscriptions, and then to set up the fraud as a defense. Nearly all of the cases in this country are cases where this remedy has been adopted. 3 It is subject, however, to the danger that the cor- i Wright's Case, L. R, 2 Eq., 331 ; S. anything more, is insufficient Re Scot- er, L. R, 7 Ch., 55 (1871); Blake's Case, tish Petroleum Co., L. R, 23 Ch. Div.. 34Beav., 639 (18C5); Reese River Co. v. 413 (1882), where the directors refused Smith, L. R, 4 H. L., 64 (1869), affirming to allow the rescission. See, also, Hare's L. R, 2 Eq., 264 ; JEtna Ins. Co. v. Shields, Case, L. R, 4 Ch., 503 (1869). Ir. R, 7 Eq., 264; Bath's Case, 8 Ch. 3 " It is a good answer at common law Div., 334 (1878). See, also, Fox's Case, ' to an action for calls that the defendant L. R, 5 Eq., 118(1868). Contra, Steel's was induced to become the holder of Case. 49 L. J. (Ch.), 176 (1879). the shares by the fraud of the plaint- -Mere repudiation, not followed by iffs." Bwlch-y-plwm Lead M. Co. v 201 §§ 155, 156.] DEFENSE OF PAROL AGREEMENT AND FEATTD. [CH. IX. poration may become insolvent, and thereby bar the defense. The decided tendency of the law to preserve the rights of third persons will probably and properly tend to defeat this defense in all cases where the subscriber has not filed a bill in equity promptly upon discovering the fraud, but has waited to be sued by the corporation. The intervening rights of stockholders and corporate creditors call for prompt action on the part of a subscriber who seeks to avoid his liabilitv on the ground of fraud. § 155. Remedy ly hill in equity.— This is the fairest, safest and most complete remedy that the subscriber has. It is a decisive no- tice to the corporation and all third parties not to rely upon the sub- scription in question. It avoids the risk of future corporate insolv- ency. It enables the subscriber to set aside the contract, to enjoin actions at law for calls, and to recover back payments made before- discovery of the fraud. 1 It is the customary, and it seems favor ite, remedy in England, and has been clearly upheld in this coun- trv. 2 '§ 156. The complainant in a bill in equity to set aside a subscrip- tion obtained by fraud cannot sue in behalf of himself and others Baynes, 36 L. J. (Ex.), 183 (1867): De- posit Life A. Co. v. Ayscough, 6 E. & B., 761 (1856); Sandford v. Handy, 23 Wend., 260 (1840). Cf. 21 N. W. Rep., 304 (Cal., 1889). i But the injunction to restrain the action at law will not be granted if the subscriber delays until the case is about to be tried. Thorpe v. Hughes, 3 Myl. & Ci\, 742 (18381 And where the stock has been fully paid, and no injury can come from the delay, equity will not sustain the subscriber's bill to compel repayment, but will send him to a court of law, where a jury may pass upon the question of fraud. Askew's Case, L. R, 9 Ch., 664 (1874). Equity, however, un- questionably has concurrent jurisdic- tion if it cares to exercise it. Hill v. Lane, L. R, 11 Eq., 215 (1870), criticis- ing Ogilvie v. Currie, 37 L. J., 541 (1867). See, also, § 356, infra. And will en- join the collection of the subscription pending the suit. Walsh v. Seager, 1886 (N. Y. Sup. Ct). And the equitable action will not be enjoined merely be- cause the corporation subsequently be- comes insolvent, and a receiver is ap- pointed. Id. 2 Where a person is induced to sub- scribe for stock on the fraudulent representations of the president that the company is in a prosperous condition, the person may file a bill in equity to recover back the money ; and equity lias jurisdiction on the grounds of discov- ery, account, fraud, misrepresentation and concealment Both the company and the president individually were made defendants and held liable. Tyler v. Savage, 143 U. S., 79 (1892). A per- son induced by fraud to subscribe for stock ma}' bring an equitable action to procure a rescission of the contract, a cancellation of her subscription, and the removal of the name from the stock books. The statute of limitations does not begin to run until the fraud is dis- covered. Bosley v. National, etc., Co., 123 N. Y., 550 (1890) ; S. C, 6 N. Y. Supp., 4; Banque, etc., v. Brown, 34 Fed. Rep., 145,198 (1888); Waldo v. Chicago, St Paul, etc., R R Co., 14 Wis., 575 (1861) ; Henderson v. Railroad Co., 17 Tex., 560 (1856); Rawlins V. Wickham, 3 De G. & J., 304 (1858). And see the various English cases in this chapter. 232 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ 157. who may wish to come in. But several subscribers, defrauded in the same way, may join in the bill as co-complainants. 1 The cor- poration is to be a defendant, and if merely a cancellation of the subscription and an injunction against suits at law are sought, the corporation, it seems, may be the sole defendant. 2 A court of equity in these actions will give complete relief by decreeing that the di- rectors guilty of the fraud shall refund to the subscriber payments made by him before discovering the fraud. 3 This relief dispenses with an action at law for damages for deceit, and when sought for in the bill in equity the guilty directors must be made parties. The bill is not multifarious by reason of its blending prayers for these various kinds of relief. 4 § 157. Remedy by an action at law for deceit. — An action at law for damages for deceit lies at the instance of a subscriber for stock, fraudulently induced to subscribe, against the persons guilty of the fraud. 5 The fraudulent representation, however, which must be 1 Several subscribers who have been induced by the same misrepresentations contained in a prospectus to subscribe for stock may join in a suit inequity for the benefit of themselves and others similarly deceived to set aside their subscriptions. Bosher v. Richmond, etc., Co., 16 S. E. Rep., 360 (Va., 1892). Several stockholders may join in filing a bill to rescind a subscription for stock on the ground that they were induced to sub- scribe by false representations that the corporation had a certain amount of paid-up capital, was out of debt and do- ing a profitable business, and that the subscribers would be employed. The corporation may be enjoined from transferring its assets in the meantime and may be compelled to pay back the money paid by complainants. Sher- man v. American Stove Co., 48 N. W. Rep., 537 (Mich., 1891). A plaintiff may upon the trial be compelled to elect whether he sues to hold the promoters liable for fraud or whether he sues in behalf of all stockholders and for the benefit of the corporation. Brewster v. Hatch, 122 N. Y., 349 (1890). 2 Smith v. Reese River, etc., Co., L. R, 4 H. L., 64 (1869); Hallows v. Fermie, L. R, 3 Ch. App., 467 (1868). A trans- feree of the shares cannot bring the suit The fraud is personal to the orig- inal subscriber. Duranty's Case, 26 Beav., 268 (1858). 5 Vreland v. N. J. Stone Co., 29 N. J. Eq. R, 188 (1878) ; Reese River Silver Min. Co. v. Smith, L. R, 4 H. L.. 64 (1869). Where subscribers bring suit to set aside subscriptions and for repay- ment thereof, for fraud, and join the directors as co-defendants, the directors are not nominal parties. Seddon v. Vir- ginia, etc., Co., 36 Fed. Rep., 6 (1888). If the suit is in equity for damages, in- tent must be shown. Hubbard v. Weare, 44 N. W. Rep., 914 (Iowa, 1890). 4 Nor is it multifarious because it joins such a suit with one by the cor- poration to compel the directors to ac- count to the corporation for the same fraud. Ashmead v. Colby, 26 Conn.. 287 (1857). 5 Clarke v. Dickson, 6 C. B. (N. S.), 453 (1859); Miller v. Barber, 66 N. Y., 558 (1876); Paddock v. Fletcher, 42 Vt, 389 (1869). In England the liability of the directors herein is enforced gener- ally in connection with a suit in equity, and as a part of the equitable decree. This is under a statute. Western Bank of Scotland v. Addie, L. R, 1 Sc. App. Cas., 145. A false affirmation, made by the defendant with intent to defraud 203 § 157.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. proved to sustain this action must be a more intentional fraud than the one which suffices to rescind the contract. The subscriber must prove that a material false representation was made by the defend- ant; that the defendant recklessly made it or knew the representa- tion to be false; that the plaintiff subscribed by reason, partially at least, of that representation, and that he was thereby injured. 1 the plaintiff, whereby the plaintiff re- ceives damage, is the ground of an action upon the case in the nature of deceit In such an action it is not nec- essary that the defendant should be benefited by the deceit, or that he should collude with the person thus benefited. 1 Smith's Leading Cases (8th Eng. ed.), 66-94, as applicable to misrepresenta- tions inducing subscriptions. Brewster v. Hatch, 10 Abb, N. C, 400 (1881), aff'd 122 N. Y., 349 (1890), sustains an action by subscribers for stock, for damages, for false representations by promoters as to the real cost of property purchased by the latter for the corporation. See, a'so, ch. XXXIX. There is no remedy at law or in equity against the estate of a deceased director herein except for property received by him. Peek v. Gurney, 6 H. of L,, 377 (1873). Sub- scribers to debentures may recover back the difference between the actual value of the debentures and the price paid. Arnison v. Smith, 59 L. T. Rep., 627 (1888). 1 In the important case Derry v. Peek, 61 L. T. Rep., 265 (1889), the house of lords decided that in order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Fraud is proved when it is siown that a false statement has been made (1) knowingly ; (2) without belief in its truth ; (3) recklessly. But if a man make a false statement honestly believing it to be true, it is not sufficient to support an action of deceit to show that he had no reasonable grounds for his belief. Tbe directors of a tramway company issued a prospectus in which they stated that they were authorized to use steam power, and that bv this means a great saving in working would be effected. At the time of making this statement they had not in fact ob- tained authority to use steam power, but they honestly believed that they would obtain it as a matter of course. Held (reversing the judgment of the court below), that they were not liable in an action of deceit brought by a shareholder who had been induced to apply for shares by the statement in the- prospectus. In an action for deceit by a misrepresentation in a prospectus as to the net profit on the capital employed, the action being against one who was a promoter, and also one of the vendors, and whose name appeared in the pros- pectus, and who became a director, the plaintiff must prove (1) that the defend- ant's statement was untrue ; (2) that it was dishonest; (3) that he believed it to be untrue. Glasier v. Rolls, 62 L. T. Rep., 133 (1889), reversing 60 id., 591, and fol- lowing the house of lords in Derry tt Peek, 61 id., 265. See, also, Ship v. Cresskill, L. R., 10 Eq. Cas., 73 (1870). To sustain the action for deceit the plaintiff must show " that the defend- ants intended that people should act on the statements, that the statements are untrue in fact, and that the defendants knew them to be untrue, or made them under such circumstances that the court must conclude that they were careless whether they were true or not ; " also that the statement were relied upon, acted on, and damage sustained. Ed- gington v. Fitzniaurice, L. R, 29 Ch. D., 459 (1885). When the prospectus stated that the company were authorized to use steam for propelling street cars, when in fact it could only use horses, a subscriber relying thereon may hold the 204 CM. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ 158. The gist of the action is fraudulent intent. 1 It cannot be main- tained against the corporation, because the corporation, though liable to refund fraudulent^ acquired property, is not capable of a fraudulent intent. 2 § 158. The directors are not liable to an action for deceit by rea- son of the frauds of their agents, 3 nor is an innocent director liable directors who issued the prospectus lia- ble for deceit, upon proof that they knew the statement was false or were reckless in making it Peek v. Derry, 59 L. T. Rep., 78 (1888). Must show re- liance on the misrepresentations. Priest v. White, 1 S. W. Rep., 361 (Mo., 1886). 1 Scienter is fixed on the directors, making them liable in damages upon proof of incorrect representations, known to them to be incorrect, know- ingly stated by them, and acted on by the plaintiff subscriber. Henderson v. Lacon, L. R., 5 Eq. Cas., 249 (1867); Cargill v. Bower, L. R, 10 Ch. D., 502 (1878). See, also. Bale v. Cleland, 4 F. & E, 113 (1864): and see p. 79, n. 3, supra. Must allege knowledge and in- tent to deceive on their part. " Falsely and fraudulently represented " does not properly plead the scienter. Mahey v. Adams, 3 Bosw., 346 (18o8). In case the representations are not fraudulent as against the corporation, they are not sufficient to entitle the subscriber to re- cover from the directors. Heymann v. European Central R'y Co., L. R., 7 Eq. Cas., 154 (1868). A subscriber for stock may hold the president liable for false representations made by the latter to other persons with an intent that the plaintiff be induced to act upon them. The representations of the president that a dividend had been earned bind him, and are false where he paid close attention to its affairs, and where such dividend was made on an improper and untrue statement of assets and liabili- ties. It must be proven that the defend- ant president knew that the representa- tions were false, but this may be proven by inference. A stockholder who is in- duced to make still further subscriptions by reason of misrepresentations of an officer may hold him liable. Hubbard v. Weare. 44 N. W. Rep., 914 (Iowa, 1890). The directors are personally liable in an action for deceit where a prospectus falsely states that guarantied dividends were secured by a deposit of certain securities, and a person subscribes for stock relying upon such statements. Knox v. Hayman, 67 L. T. Rep., 137 (1892). 2 Mixer's Case, 4 De G. & J., 575 ; Du- ranty's Case, 26 Beav., 268 (1858); West- ern Bank of Scotland v. Addie, L R., 1 Sc. App. Cas., 145 ; Abrath v. North- eastern R'y Co., 55 L. T. R (N. S.), 63 (1886); Houldsworth v. City of Glasgow Bank, L. R, 5 App. Cas., 317; Benja- min on Sales (4th Am. ed.), § 467a. Contra, Peebles v. Patapsco Guano Co., 77 N. C, 233 (1877) ; Barwick v. English Joint-stock Bank. L. R, 2 Ex., 259 (1867) ; Mackay v. Com. Bank of New Bruns- wick, L. R, 5 P. C, 394, not stock cases, but distinctly holding that a corporation is liable to an action for damages for deceit. Where, however, the old corpo- ration organizes a new corporation, and has the latter build a competing road on a new line, a stockholder of the old, who contributed lands, etc., may have an action for damages against it Chap- man v. Railroad Co., 6 Ohio St. 119 (1856). See, also, article in 1 R'y & Corp. L. J., 122; Lubricating Oil Co. v. Stand- ard Oil Co., 42 Hun, 153 (1886); also, §45. 3 Weir v. Burnett, 26 Week. Rep., 147 (1877); Weir v. Bell, L. R, 3 Ex. Div., 238 (1878); Eaglesfield v. Marquis of Londonderry (H. L), 26 W. R, 540 (1878). See, also, Cargill v. Bower, L R, 10 Ch. D., 502 (1878); Watson v. Earl Charle- 205 §§ 159, 160.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [cH. IX. for the fraudulent representations of his co-directors — not even though the evidences of their fraud were entered on the corporate books, there being no ground for suspicion on his part. 1 A director cannot be held liable for false representations con- tained in the articles of association, which were made before he became a director. 2 But a director who stands by and allows a co-director to make the false representations is equally chargeable with the injury done thereby. 3 The false representations support- ing an action for deceit may have been by corporate reports or prospectuses, or by personal statements. § 159. Remedy hy action for money had and received. — Where a subscriber pays his subscription in part or wholly, and afterwards discovers that the representations whereby he was induced to sub- scribe were fraudulent, he may bring an action at law for money had and received, and recover back from the corporation the money so received. 4 If the money has not yet passed into the hands of the corporation he may recover it from the person who has it. If, however, he would be barred from suing in a court of equity by reason of his laches or corporate insolvency, he would fail equally in this remedy at law. 5 § 160. Ratification as a Mr to the subscriber's remedies. — A sub- scription contract obtained by fraudulent representations may cease to be voidable and may become absolutely binding by acts of rat- ification. Any act of the subscriber, inconsistent with an inten- tion to disaffirm the contract, will constitute a ratification of the subscription and a waiver of the right to avoid it by reason of fraud, provided the subscriber knew of the fraud at the time of such ratifying act. Thus, where the subscriber, after knowledge of the fraud, receives dividends, sells part of the stock, 6 instructs mont,. 12 Q. B., 856 (1848); Arthur v. a subscription obtained by fraud, was Griswold, 55 N. Y., 400 (1874). sustained, without involving the ques- 1 Re Denham & Co., L. R, 25 Ch. Div., tion of a fraudulent intent See Bruce 752 (1883). v. Nickerson, 5 N. E. Rep., 647 (Mass., 2 Mahey v. Adams, 3 Bosw., 346 (1858). 1886). The action for money had and 3 Vreeland v. N. J. Stone Co., 29 N. J. received cannot be brought against Eq., 188 (1878). other stockholders for the fraud of a 4 Grangers' Ins. Co. v. Turner, 61 Ga., promoter. Perry v. Hale, 143 Mass., 540 561 (1878); Hamilton v. Grangers' L. & (1887). H. Ins. Co., 67 Ga., 145 (1881). But the « Scholey v. Central R'y Co., L. R, 9 subscriber cannot retain the stock and Eq., 266, n. (1870) ; Ayres' Case, 25 Beav., also sue. Houldsworth v. City of Glas- 513 (1858); Mixer's Case, 4 De G. & J., gow Bank, L. R, 5 App. Cas., 317 (1880). 575. See Jarrett v. Kennedy, 6 C. B„ 319 « Ayres' Case, 25 Beav., 513 (1858). (1848). Assumpsit for money had and But a sale of a part of the stock before received, brought against the directors the subscriber discovers the fraud is no to compel them to repay money paid on bar to a rescission as to the rest Ex 206 CH. IX.] DEFENSE OF PAKOL AGREEMENT AND FEACD. [§ 161. his broker to sell, 1 participates in the meetings, 2 pays calls, 3 or, in general, accepts any corporate benefit or continues to act as a stock- holder, 4 he will be held to have waived all objections to the fraud, and to have ratified the subscription contract. But mere attend- ance at a stockholders' meeting, 5 or demanding a dividend, 6 or vot- ing his shares by proxy, 7 is insufficient. § 161. Ladies as a bar to the subscriber's remedies. — Where a subscriber for stock, who was induced to subscribe bv fraud, neg- lects for an unreasonable time after the discovery of the fraud to have his subscription canceled, and, in the meantime, the interests of third persons become involved, and would be injured by the can- cellation of such subscription, the subscriber's laches is a bar to re- lief, and a court of equity will refuse to set aside the subscription. 8 Equity does not allow the subscriber to say. " I will abide by the company if succcessful, and I will leave the company if it fails." 9 Immediately upon receiving information of the fraud, it is his duty to decide whether he will rescind the contract or waive the fraud. 10 Nevertheless delay is not fatal, unless circumstances and third parties' rights have so changed or been acquired that the re- parte West, 56 L. T. Rep., 622 (1887). A subscriber to stock cannot rescind for fraud, when he has had the stock trans- ferred to his infant children, unless their right thereto is also tendered back. Francis v. New York, etc., R R, 108 N. Y., 93 (1888). 1 Ex parte Briggs, L. R, 1 Eq., 483 (1866). 2 Harrison v. Heathorn, 6 Man. & G., 84 (1843); Chaffin v. Cummings, 36 Me., 76 (1853). A subscriber who acts as di- rector and manager, and purchases lots from the company, cannot rescind his subscription on the ground that certain newspaper articles prepared by himself and others contain misrepresentations. Raymond v. San Gabriel, 53 Fed. Rep., 883 (1893). a Scholey v. Central R'y Co., L. R, 9 Eq., 266, n. (1870). 4 Ogilvie v. Knox Ins. Co., 22 How., 380 (1859) ; Chubb v. Upton, 95 U. S., 665 ■ (1877); Litchfield Bank v. Church, 29 Conn., 137 (1860): Kishacoquillas Centre Co. v. McCanahy. 16 S. & R, 140 (1827). Waiver of one misrepresentation is not a waiver of others. Ex parte Hale, 55 L. T. Rep., 670 (1886). 5 Stewart's Case, L. R., 1 Ch. App., 574 (1866) ; Wontner v. Shairp, 4 C. B., 404 (1847); Re Metropolitan, etc., Ass'n, 64 L. T. Rep., 561 (1891). 6 Philadelphia R. R. Co. v. Cowell, 28 Pa. St., 329 (1857). 7 McCully v. Pittsburgh, etc., R R. Co., 32 Pa. St., 25 (1858); Greenville, etc., R. R Co. v. Coleman, 5 Rich. L., 118 (1851). 8 City Bank of Macon v. Bartlett, 71 Ga., 797 (1883). As a bar in an action at law. Schwanck v. Morris, 7 Rob. (N. Y), 658 (1868). But it is no bar that other subscribers ma3 r have been in- duced to subscribe by reason of this subscription. Western Bank of Scot- land v. Addie, L. R., 1 Scotch App. Cas.. 145. Cf. Parbury's Case, 3 De G. & Sm., 43 (1849). 9 Re London & Staffordshire Fire Ins. Co., L. R., 24 Ch. Div., 149 (1883); Ash- ley's Case, L. R, 9 Eq. Cas., 263 (1870). 10 Heymann v. European Central R'y Co., L. R., 7 Eq. Cas., 154 (1868) ; Peek v. Gurney, L. R., 6 H. L, 377 (1873). The last case overrules Bagshaw v. Sey- mour, 18 C. B., 903 (1856), and Bedford v. Bagshaw, 4 H. & N., 538 (1859). 207 §§ 162, 163.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. scission would be inequitable. Consequently, the decision of each case depends largely on the facts of the case. Thus it has been held that a delay of one, 1 two, 2 three, 3 four 4 or six months, 5 or of two or six : years, was fatal under the circumstances of the case, while, under different facts, a delay of two months, 8 or even seven years, 9 was held not to be a bar. In the remedies by actions at law the statute of limitations governs, and, by analogy, courts of equity are inclined to follow the same period, unless there be an equita- ble reason to the contrary. § 162. The date from which laches begins to run is the time when the subscriber is first chargeable with notice that a fraud has been perpetrated upon him. Mere suspicions or random statements heard in public or in stockholders' meetings do not necessarily con- stitute notice. 10 But after a subscriber's suspicions are reasonably aroused, it is his duty to investigate at once. 11 The corporation has the burden of proof in asserting that the subscriber had notice and was guilty of laches. 12 § 163. Corporate insolvency as a bar to the subscriber' s remedies. In England the principle has become well established that, after the statutory proceedings for winding up a corporation by reason of corporate insolvency have been commenced, a subscriber cannot rescind his subscription on account of fraud. 13 He is too late. It 1 Taite's Case, L. R., 3 Eq. Cas., 795 holder who has been fraudulently in- (1867), the delay evidently being to see duced to subscribe for stock awaits the re- which course would be most profitable ; suit of an action by another stockholder Peel's Case, L R, 2 Ch. App., 674 brought to rescind his subscription on (1867): Kincaid's Case, L. R, 2 Ch., 412 the same ground, the delay being nearly (1867). three years, and then commences suit 2 Wilkinson's Case, L. R, 2 Ch. App., for the same purpose only after a meet- 536 (1867). ing has been called for a winding up, he 3 Heymann v. European Central R'y is guilty of laches, and his remedy is Co.. L. R, 7 Eq. Cas., 154 (1868). barred. Re Snyder, etc., Co., 63 L. T. * Ex parte Lawrence, 36 L. J. (Ch.), Rep., 210 (1893\ 490(1867). 8 Directors, etc., of Central R'y v. 5 Whitehouse's Case, L R, 3 Eq. Cas., Kiscb, L. R, 2 H. L. App. Cas., 99 790 (1867). (1870). 6 Farrar v. Walker, 3 Dill., 506, n. 9 McClellan v. Scott, 24 Wis., 81 (1869). (1874); Ashley's Case, L. R. 9 Eq. Cas., w Directors, etc., of Central R'y Co. v. 263 (1870). Three years. State v. Jef- Kisch, L. R, 2 H. L. App. Cas., 99 ferson Turnpike Co., 3 Humph. (Tenn.), (1870). 305 (1842). ii Ogilvie r. Currie, 37 L. J. (Ch.), 541 •Denton v. Macneil, L. R, 2 Eq.. 352 (1867); Ashley's Case, L. R, 9 Eq. Cas., (1866). Four years' delay in complaining 263 (1870); Bosley v. National, etc., Co., of the fraud inducing the" purchase, 123 N. Y., 550 (1890). after knowledge thereof, is fatal. Cedar, li Re London & S. F. Ins. Co., L. R, etc., Ins. Co. V. Butler, 48 N. W. Rep, 24 Ch. Div., 149 (1883). 1026 (Iowa, 1891). Where one stock- "Wright's Case, L R, 12 Eq. Cas., 208 CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§164. matters not that he did not discover the fraud until after the wind- ing up has commenced. The rights of corporate creditors prevail, then, over the equities of the subscriber. 1 If, however, he insti- tuted proceedings to rescind the contract before the winding up was commenced, he may be released, although the proceedings are not completed until after such winding up. 2 So, also, where there are several similar cases, and by agreement with the corporate solicitors all the cases are to follow a test case, this agreement pre- vails, although a winding up is commenced before the test case is fully decided. 3 The highest court in England in one case goes fur- ther, and intimates that corporate insolvency is a bar to rescission of a subscription for fraud, even though a winding up has not been commenced. 4 § 164. In this country the effect of corporate insolvency upon the right of a subscriber to rescind his contract for fraud has not been passed upon so often as in England. The decisions, however, clearly hold that corporate insolvency is a bar to such rescission. 5 331 ; Kent v. Freehold, L. & B. M Co., L. R., 3 Ch. App., 493 (1868) ; Hender- son v. Royal British Bank, 7 El. & Bl., 356 (1857); Powis v. Harding, 1 C. B. (N. S.), 533 (1857); Daniell v. Off. Man- agers of Bank, 1 H. & N., 681 (1857); Oakes v. Turquand, L. R, 2 H. L. App. Cas., 325 (1867); Mixer's Case, 4 De G. & J., 575; Clarke v. Dickson. 27 L. J. (Q. B.), 223 (1858). So, also, where there is a voluntary winding up by rea- son of corporate insolvency. Stone v. City & County Bank, L. R, 3 C. P. Div., 282 (1877); Collins v. Same, id. But not if the proceedings for rescission were commenced in good faith and in igno- rance of the winding-up proceedings. Hall v. Old. T. L. Min. Co., L. R, 3 Ch. D., 749 (1876). 1 Turner v. Grangers' L. & H. Ins. Co., 65 Ga., 649 (18S0). 2 Reese River Co. v. Smith, L. R, 4 H. L., 64 (1869): affirming S. C, L. R, 2 .Ch., 604; L. R, 2 Eq., 264; reversing S. G, H. L., 36 L. J. (Ch.). 385. A sub- scriber is liable on a winding up al- though he had repudiated the subscrip- tion long before on the ground of fraud and understood that his name had been dropped. Be Lennox, etc., Co., 62 L. T. Rep., 791 (1890). If the party institutes legal proceedings to cancel his subscrip- tion on the ground of fraud, prior to the commencement of the winding-up pro- ceedings, the insolvency of the company is no bar. Cocksedge v. Metropolitan, etc.. Ass'n. 64 L. T. Rep., 826 (1891). 3Pawles Case, L. R. 4 Ch., 497; McMuTs Case, L. R, 10 Eq., 503 (1870). But mere attendance at the meeting where such stipulation is made is insuf- ficient. The subscriber must plainly in- dicate an intention to abide by the test case. Ashley's Case, L. R., 9 Eq. Cas., 263 (1870). * Tennent r. City of Glasgow Bank, L. R, 4 App. Cas., 615. See, also, Burgess* Case. L. R, 15 Ch. D., 507. But the fact that the company is unable to meet its engagements at the time of rescission is no bar if the subscriber is ignorant thereof. Ex parte Carliug, 56 L. T. Rep, 115 (1887). SRuggles v. Brock. 6 Hun, 164 (1875); Saffold v. Barnes, 39 Miss., 399 (1860). After the corporation becomes insolv- ent a subscriber cannot repudiate for fraud. Duffield v. Barnum, etc., Works, 31 N. W. Rep., 310 (Mich., 1887). In Chubb v. Upton, 95 U. S., 665, 667 (1677), the court say it has often been held that the defense of false and (14) 209 § 165.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [CH. IX. In the bankruptcy courts also, under the late bankruptcy law, such a rule was upheld. 1 § 165. Essential allegations inJegal proceedings to remedy a fraud inducing subscription,— The essential allegations, especially in a suit in equity, necessarily vary according to the peculiar facts of each case. Yet there are certain elements common to all the cases. It is necessary to allege that a material misrepresentation of a question of fact was made, setting out fully the fact misrepre- sented; that the person making the misrepresentation thereby bound the corporation; and that, upon discovery of the fraud, he immediately disaffirmed the contract, 2 That the representation was false cannot be proved by statements made by the directors in stockholders' meetings. 3 The burden of proving that the repre- sentation was false, and that the subscriber relied thereon, is upon the subscriber. 4 fraudulent representations will not pre- vail against a receiver, especially where there has not been a prompt discovery of the fraud, followed by a repudiation ; citing Upton v. Tribilcock, 91 U. S., 45 (1875) ; Webster v. Upton, id., 65 (1875) ; Sanger v. Upton, id., 56 (1875); Ogilvie v. Knox Ins. Co., 22 Hun, 380 (1859). Of. Litchfield Bank v. Peck, 29 Conn., 384 (1860). Fraud is no defense as against creditors. Mathis v. Pridham, 20 S. \V. Rep.. 1015 (Tex., 1892). Fraud is no defense as against creditors. Mc- Dowall v. Sheehan, 13 N. Y. Supp., 386 (1891). Fraud no defense after insolv- ency, etc. Howard v. Glenn, 11 S. E. Rep., 610 (Ga.. 1890). An action to re- scind the purchase of stock lies where the money paid therefor was to be ap- plied to a certain purpose but was not so applied, but the receiver will not be directed to give up the money. Moore v. Robertson, 25 Abb. N. C, 173 (1890). !Farrar v. Walker, 13 Nat Bankr. Reg., 82 (1876) ; Michener v. Payson, id., 49 (1876). 2 Quoted aDd approved in Armstrong v. Karshner, 24 N. E. Rep., 897 (Ohio, 1890) ; Bwlch-y-plwm L. M. Co. v. Baynes, 36 L. J. (Ex.), 183 (1867; ; Deposit Life A. Co. v. Ayscough, 6 E. & B., 761 (1856) ; Upton v. Englehart, 3 Dill, 496 (1874) ; Hallows v. Fermie, L. R, 3 Ch. App., 467 (1868) ; Selma, M. & M. R. R. Co. v. Anderon. 51 Miss., 829 (1876) — the last case holding it necessary to al- lege also that the f ct misrepresented was not a charter matter. Carey v. Cin. & Chicago R. R Co., 5 Iowa. 357 (1857), indicates that an allegation that the certificates are brought into court for disposal is proper. See, also, Ore- gon Central R. R. Co. v. Scoggin. 3 Oreg.. 161 (1869); Gilfillan v. Mawhin- ney, 21 N. E. Rep., 299 (Mass., 1889). 3 In re Devala Prov. G. M. Co., L R, 22 Ch. Div., 593 (1883). Cf. Phil.. W. & B. R. R. Co. v. Quigley, 21 How., 202 (1858). Contra, Jarrett v. Kennedy, 6 C. B., 319 (1848). 4 Jennings v. Broughton, 22 L J. (Ch.), 585 (1853). A subscription will not be decreed to be canceled unless the proof of fraudulent representations is very clear, especially where the sub- scription contained special terms in writ- ing. Western, etc., Co. v. Purnell, 23 Atl. Rep., 134 (Md., 1891). In New York, proof of other similar contemporaneous frauds is admissible. Miller v. Barber, 66 N. Y., 558 (1876). In Alabama it is not admissible. Montgomery S. R'y Co. v. Matthews, 77 Ala., 357 (1884). 210 CHAPTER X. MISCELLANEOUS DEFENSES TO SUBSCRIPTIONS FOR CAPITAL STOCK. § 166. Defenses to subscriptions not fa- vored by the courts. 167-70. Release, withdrawal, cancella- tion or rescission. 171. Compromise. 172-75. Non-payment of percentage required by statute. 176-81. Full capital stock not sub- scribed. 182. Capital stock not definitely re- solved upon. 183-86. Irregular incorporation. 187. Ultra vires acts. 188. 189. 190. 191. l'.i'J. 193- 195. 196. 197. 198. Fraud and mismanagement of directors. Delay and abandonment of en- terprise. Failure of corporate enterprise. Other subscribers released. No certificates of stock issued. 94. Set-off and counter-claim. Statute of limitations. Ignorance or mistake. Miscellaneous defenses. Waiver of defenses. § 166. Defenses to subscriptions not favored by the courts. — It is a common saying and a well-recognized fact that the subscribers to certain corporate enterprises, especially railroads, rarely realize a profit from their investment, but, on the contrary, lose the whole amount of the subscription which they have made. These subscrip- tions are generally not called in until after corporate insolvency has occurred. Then the reluctance of the subscriber to pay a sub- scription from which there is no hope of a return leads him to search out and build up all possible defenses to defeat any action for the collection of the amount due from him. Some of these de- fenses are just, and have been sustained; but most of them have not been allowed. On the theorv that, having taken the chances of large gains, the subscriber takes also the risk of total loss, and that the hardship of the subscriber is not equal to the superior equities and rights of corporate creditors, the courts have uniformly discountenanced such defenses, and have rigidly enforced the sub- scriber's liability. § 167. Release, withdrawal, surrender, cancellation or rescission. These terms are frequently used as synonymous, although tech- nically they have different meanings. The term release, especially, has led to considerable confusion. It has been applied to cases where the subscriber withdraws his offer to subscribe, the contract not yet having been closed ; l second, to cases where the subscriber retains his stock, but is not required to pay the full par value thereof; third, to cases where the subscription contract is dissolved 1 For this class of cases see ch. IIL 211 168.] MISCELLANEOUS DEFENSES. [CH. X. by mutual agreement. The last class of cases forms the subject of this section. ° The term rescission is more properly applied to the defense of fraudulent representations. 1 Probably the term cancel- lation describes most accurately the dissolution of a subscription contract by the mutual consent of all parties concerned. 2 § 168. A subscription contract, like any other contract, may be waived, canceled or dissolved by the mutual consent of all the parties interested. The interested parties are the subscriber him- self, the other stockholders, and the corporate creditors existing at the time of the cancellation. Frequently the directors of the cor- poration attempt to usurp this right and power of the general stock- holders. The well-established rule, however, is that corporate directors have no power to agree with a subscriber that his sub- scription shall be canceled, unless such power is given to them by charter or statute or the by-laws of the corporation. 3 The cancel- i See ch. IX. 2 For a definition of the words "sur- render " and " cancellation," see Green's Brice's Ultra Vires (2d ed.), 181. 189. Re Dronfield Silkstone Coal Co., L. R.. 17 Ch. D.. 76 (1880) ; Colville's Case, 48 L, J. (Ch.), 633 (1879). Cancellation cannot be objected to on the ground that it re- duces the capital stock. It no more re- duces the capital stock than a forfeiture does. Re Dronfield Silkstone Coal Co., supra. 3 In the case of Bedford R. R. Co. v. Bowser, 48 Pa. St, 29, where, just before the expiration of their office, the direct- ors fraudulently released part of the subscribers, the court said : " It is an abuse of their trust, wholly unauthor- ized, and at war with the designs of the charter, to single out some of the stock subscribers and release them from their liability. No such authority in them has ever been recognized." The direct- ors have no power to release a sub- scriber nor to allow him to make addi- tional conditions to his subscription. La Fayette, etc., Corp. v. Ryland, 49 N. W. Rep., 157 (Wis., 1891). To the sa'ie effect, Rider v. Morrison, 54 Md., 429 (1880): Hughes v. Antietam Mfg. Co., 34 Md., 316 (1870): Ryder v. Alton, etc., R. R. Co., 13 111., 516 (1851); Tuckerman v. Brown, 33 N. Y., 297 (1865) ; Esparto Trading Co.. L R, 12 Ch. D., 191 (1879 ; Hall"s Case, L, R., 5 Ch.. 707 ; Re Lon- don & Prov. Consol. Coal Co., L. R, 5 Ch. D., 525 (1877): Re Argyle C. & C. Co.. Ex parte Watson, Law Times, April 17, 1886 ; Ex parte Fletcher, 37 L. J. (Ch.), 49 (1867) ; Addison's Case, L R.. 5 Ch., 294 ; Spackman v. Evans. L. R., 3 H. L, 171 (1868); Thomas' Case, L R.. 13 Eq., 437 (1872), where the di- rectors had power to " enter into, alter, rescind or abandon contracts ; " Rich- mond's Case, 4 K. & J.. 305 (1858), hold- ing that power to forfeit does not give power to cancel : Adam's Case, L. R., 13 Eq. ; 474 (1S72\ holding that power to compromise gives no power to cancel. " It would be putting into the hands of directors an almost unlimited power. . . . It might happen in cases where it would be impossible to fix fraud on them." A cancellation of shares is void, and the subscriber is liable, though ten years have elapsed. Ex parte Watson. 54 L T, 233 (1885). Cf. Plate Glass Ins. Co. v. Sunley, 8 El. & Bl., 47 (1857) ; Koll- man's Carriage Co. v. Beresford, 2 M. & G., 197 (1850); Lord Belhavens Case, 34 L. J. (Ch.), 503: Ex parte Blake, 32 L. J. (Ch.), 278 ; Fox's Case, L R., 5 Eq., 118 (1868); Dixon's Case, L R, 5 Ch., 79, rev'd on another point, L R., 5 H. L„ 606 ; Burt v. Farrar, 24 Barb., 518 212 CH. X.] MISCELLANEOUS DEFENSES. [§ 168. lation of a subscription differs little from a purchase by the corpo- ration of shares of its own stock. The rules of law governing: such a transaction are laid down elsewhere. 1 (1857); Gregory v. Lamb, 16 Neb., 305 (1884); Erskine v. Peck, 83 Mo., 465 (1884). See. also, § 158. The directors may release a subscription payable in property, part of whicb has been deliv- ered. Nettles v. Marco, 11 S. E. Rep., 595 (S. C. 1890). Before organization a subscriber probably can be released by the promoters and his subscription can- celed, but after organization the officers have no power to release him and take other subscriptions in his stead. Noth- ing but a transfer is then available. The officers cannot repay to him the amount paid in by him. He is and remains lia- ble. Cartwright v. Dickinson, 12 S. W. Rep, 1030 (Tenn., 1890). A subscription may be canceled by and with the con- sent of the directors when fraud is in- volved. Four years afterwards corpo- rate creditors cannot attack it. McDer- mott v. Harrison, 9 N. Y. Supp., 184 (1890). The express power of the direct- ors to do all things " conducive to the attainment of the objects for which it was established " does not enable them to agree to a cancellation. Be Dronfield Silkstone Coal Co., L. R., 17 Ch. D., 76 (1880). Cannot be canceled by a corpo- rate solicitor, although the work in which the subscription is due can no longer be done. Wheatcroft's Case, 29 L. T., 324 (1873). Sometimes the directors agree in advance to release or cancel a part or all of the subscriber's contract. Such agreements are void, not only as ultra vires, but as frauds on other sub- scribers. Melvin v. Lamar Ins. Co., 80 III., 446 (1875); Robinson v. Pittsburgh & Connellsville R. R. Co., 32 Pa. St., 334 (1858); Minor?;. Bank of Alexandria. 1 Pet. 65 (1828) ; Jewett v. Valley R'y Co., 34 0hioSt, 601 (1878); White Mountains R. R Co. v. Eastman, 34 N. H., 124 (1856). See, also, Pickering v. Templeton, 2 Mo. App.,425; Downier. White. 12 Wis., 176 (1860); Blodgett v. Morrill, 20 Yt. 509 (1848); Davidson's Case, 3 De G. & S., 21 : Bridger's Case, L. R, 9 Eq.. 74 : Litchfield Bank v. Church, 29 Conn., 137 (1860). Where, however, the issue itself is ultra vires, being fictitious paid- up stock, the directors may agree to a cancellation. Barnett's Case, L. R.. 18 Eq., 507(1874). Or an ultra vires stock dividend. Hollingshead v. Woodward, 35 Hun, 410 (1885). They may cancel it for mistake in registering the wrong man. Ex parte Knightley, W. M. (1874 \ 18, 47. See Hartley's Case, L. R, 10 < h.. 157. The agreement of a stockholder to surrender his stock in liquidation of an unpaid assessment is without con- sideration and does not bind a purchaser of the certificate. Hill v. Atoka, etc., Co., 21 S. W. Rep., 508 (Mo.. 1893). The secretary cannot accept a surrender and cancellation of the subscription. Min- nehaha, etc., Ass'n v. Legg. 52 N. W. Rep., 898 (Minn., 1892). In England an express power given by the articles of association of the corporation may au- thorize cancellation by the directors. Colville's Case. 48 L. J. (Ch.). 633; Snell's Case, Wright's Case. L. R., 12 Eq.. 334, reversed in L. R, 7 Ch., 55 (1871) ; Teas- dale's Case, L. R, 9 Ch., 54 ; Whiteley's Case, 60 L T. Rep., 807 (1889). Healey on Companies Law & Practice (Eng.) says : '• There is no inherent power in directors to accept a surrender of shares, nor is the acceptance of a surrender a matter lying between the majority and minority. Every, shareholder must ex- pressly ... or impliedly join iu the release; though a company may be pre- cluded by knowledge and acquiescence from disputing the validity of the sur- render." Citing many cases, and dis- cussing what constitutes notice and acquiescence. 'See §§251, 309, 310. etc., infra. A scheme whereby the corporation takes back the stock and issues certificates of 213 169.] MISCELLANEOUS DEFENSES. [CH. § 169. A subscriber for stock in a corporation cannot obtain a cancellation of his subscription except by the unanimous consent of the other subscribers. 1 Even a majority of the stockholders can- not withdraw and refuse to proceed. 2 These rules are just, and based upon a sound public policy. A subscriber may, however, withdraw at any time prior to the filing of the articles of incorpo- ration. 3 indebtedness for it is invalid as against are incurred. Hill v. Silvey, 8 S. E. Rep., creditors. The latter are entitled to the assets in preference to the former. Heggie V. Building, etc., Ass'n, 12 S. E. Rep.. 275 (N. C. 1890). • K'd welly Canal Co. v. Raby, 2 Price, 93 (1816); Lake Ontario, etc., R, R. Co. v. Mason, 16 N. Y., 451, 463 (1857); Hughes v. Antietam Mfg. Co., 34 Md., 316 (1870): Johnson v. Wabash & Mt. Vernon P. R. Co.. 16 Ind., 389 (1861); United Soc. r. Eagle Bank, 7 Conn., 457 (1829); Bishop's Fund v. Eagle Bank, id., 476: Selraa & Tenn. R. R. Co. v. Tip- ton, 5 Ala. (N. S.), 787 (1843). The plea in defense need not allege that the other stockholders assented to the cancellation. Gelpcke v. Blake, 19 Iowa, 263 (1863). Where, however, by the articles of as- sociation, acts of the directors ratified at stockholders' meetings were to be valid, a cancellation so ratified is legal, and the unanimous consent is not nec- essary. Marshall v. Glamorgan Iron & Coal Co., L. R., 7 Eq.. 129 (1868). Cor- poration is bound by agreement of agent that a person taking stock in the corporation and giving note in payment may return the stock at any time and be released from payment Bank of Lyons v. Demmon, Hill & Denio Supp. (N. Y.), 398 (1844). In Pennsylvania a subscriber for stock may withdraw at any time before the charter is applied for. Muncy, etc.. Co. v. De La Green, 13 Atl. Rep., 747 (Pa., 1888). It is legal for a corporation, by common consent, to issue to its stockholders full-paid stock to the amount of cash actually paid iu on a larger subscription, the first subscription being canceled; such arrangement being made before debts 808 (Ga., 1889). Where property is sold to a corporation for stock, and other stockholders are dissatisfied, the bargain may be rescinded. The stockholder will then no longer be liable. Morgan v. Lewis, 17 N. E. Rep., 558 (Ohio, 1888). Cancellation is a question of fact If there is no record of it, and the stock- holder continues to act, he is bound. Topeka, etc., Co. v. Hale, 17 Pac. Rep, 601 (Kan., 1888). An offer or agreement to subscribe is revoked by death where it has not yet been accepted by the cor- poration. Wallace v. Townsend, 43 Ohio St, 537 (1885); Sedalia, W. & S. R'y Co. v. Wilkinson, 83 Mo., 235 (1884). The company may be compelled to issue a certificate to one who acquires his in- terest by the death of the original sub- scriber. State v. Crescent City, etc., Co., 24 La. Ann., 318 (1872). Although the directors cannot, yet the stockholders by unanimous consent may allow subscrip- tions to be reduced one-half by cancella- tion of one-half, creditors' rights not intervening. Glenn v. Hatchett, 8 S. Rep., 656 (Ala., 1890). 2Busey v. Hooper, 35 Md., 15 (1871). 3 Auburn, etc.. Works v. Schult^ 22 Atl. Rep., 904 (Pa., 1891). Up to the time of incorporation a subscriber for stock may withdraw. Hudson, etc., Co. r. Tower, 30 N. E. Rep., 465 (Mass., 1892). Prior to incorporation a subscriber may withdraw, especially if his subscription was informal and was merely to see what could be done. Planks, etc., Co. v. Burkhard, 49 N. W. Rep., 562 (Mich., 1891); Garrett v. Dillsburg, etc., R. R. Co., 78 Penn. St., 465 (1875), holding that at any time before the filing of the arti- 214 CH. X.] MISCELLANEOUS DEFENCES. [§ 169. The consent of all the other stockholders, however, need not be express. If the means of notice are sufficient, so as to raise a clear presumption of knowledge and acquiescence, and the arrangement is left un impeached by any one for many years, no objection can be made. The stockholders are bound by the cancellation. 1 But where a subscription has been canceled, and calls already paid are refunded without the consent of the other stockholders, any stock- holder may, by a bill in equity, have the money refunded to the corporation, and the subscriber made liable upon his canceled sub- scription. 2 Moreover, the directors are personally liable to the cor- poration for loss occasioned by their improper cancellation of subscriptions. 3 When, however, a subscriber fails to pay his sub- scription or exercise his rights, it has been held that the corpora- tion may take his subscription as abandoned and allow others to fill it. 4 An alteration, however, of the subscription list by substi- tution of different stockholders may release dissenting stockholders. 5 Where a subscription is not paid, and the stock is transferred to the corporation as " treasury stock"" and then sold below par, the purchaser is liable for the unpaid par value. 6 Where a subscrip- tion for stock is paid, the stockholder is entitled to his stock and past dividends although for thirty years he sleeps on his rights. 7 cles a subscriber may withdraw. Cook v. Chittenden, 25 Fed. Rep., 544 (1885), allowing a withdrawal where no others have subscribed in reliance thereon, nor creditors' debts incurred. Gulf, C, etc., R'y Co. v. Neely, 64 Texas, 344 (1885), holding that there can be no withdrawal after an acceptance by the corporation. Cf. Tilsonburg, etc., Co. v. Goodrich, 8 Ontario (Q. B. Div.), 565 (1885); Ross v. San Antonio, etc., R. R. Co., 31 Tex., 49 (1868). See, also, Goff v. Flesher, 33 Ohio SL, 107 (1877). 1 Evans v. Sraallcombe, L. R., 3 H. L., 249 (1868). So, also, where the corpora- tion retains the benefits of a cancella- tion, no objection can be made. Miller v. Second J. B. Ass'n, 50 Pa. St., 32 (1865). Proof of cancellation need not necessarily be by the corporate records. May be proved by evidence that the subscriber was not regarded "by him- self or by the company as a stock- holder." Stuart v. Valley R. R Co., 32 Gratt., 146 (1879). 2 Melvin v. Lamar Ins. Co., 80 111., 446 (1875). 3 Hodgkinson v. Nat'l Co., 26 Beav., 473 (1859); Bank of St. Mary's v. St John, 25 Ala., 566 (1882). The subscriber, also, may set up this defense. Southern Hotel Co. v. Newman, 30 Mo.. 118 (1860). * Perkins v. Union B. H. & E. M. Co.. 12 Allen, 273 (1866). Cancellation may be by the substitution of another person for the subscriber at the latter's request. This occurs where regular transfer is not yet possible. The signature of the first subscriber must be erased and that of his substitute inserted. Otherwise the substitution fails. Ryder v. Alton & S. R. R Co., 13 III., 516 (1851). And see § 62. 5 See §§ 53, 62, supra. 6 Ailing v. Ward, 24 N. E. Rep., 551 (111., 1890). 7 Where, in 1845, an Indian chief dis- closed an iron mine under promise of being compensated, and the officers of the unincorporated company gave him 215 170.] MISCELLANEOUS DEFENSES. [CH\ § 170. A cancellation of a subscription, to the detriment of cor- porate creditors, may be impeached by the latter and set aside. 1 Especially is this the rule when the cancellation is made after the a paper recognizing his right to twelve thirty-one one-hundredths interest, and after incorporation in 1848 eighteen full-paid shares of stock were set aside for the Indians, and twelve of such shares corresponded to the twelve thirty-one one-huudredths interest, the descendants of the chief are entitled to the stock although neither he nor they made any claim thereto until 1877. Back profits may also be recovered. The stat- ute of limitations is no bar. A new corporation assuming the property and liabilities of the old one is liable. Ko- bogum v. Jackson Iron Co., 43 N. VV. Rep., 602 (Mich., 1889). To same effect, Bedford County v. Nashville, etc., R R, 14 Lea (Tenn.), 525 (1884). 1 One who is a corporate creditor be- fore the cancellation is made may object to it. Vick v. La Rochelle, 57 Miss., 602 (1880); Appeal of Miller, 1 Pa. Sup. Ct, 120, in which stock in an insurance company was subscribed for in order to enable the company to undergo an ex- amination by the commissioner, a divi- dend being paid on it during their hold- ing, and the notes given in payment being published as assets. It was held that, although after the emergency had passed the stock was taken back by the company and the notes canceled, the subscribers were liable to its creditors, the transaction being looked upon as a fraud upon them. Cancellation by with- drawal is not legal as against corporate creditors existing at the time of the withdrawal, even though all the stock- holders assent thereto. Farusworth v. Robbins, 31 N. W. Rep., 349 (Minn., 1887). Where a corporation takes land in payment for stock, then rescinds, and eighteen months afterwards becomes insolvent, rescission is binding. San- derson v. JEtna, etc., Co., 8 Cent. L. J., 266 (Ohio, 1879). So, also, if the debt was incurred after the cancellation. John- son v. Sullivan, 15 Mo. App., 55; Ers- kine v. Peck. 13 Mo. App., 280; 21 N. E. Rep., 514 (111., 1889). The plea in de- fense, it has been held, need not allege that there were no corporate creditors at the time of the cancellation. Gelpcke v. Blake, 19 Iowa. 263 (1803). In England a different rule prevails. " If the com- pany could not question it, neither can a creditor : for he can obtain nothing but what the company can get from the shareholders." Re Dronfield Silkstone Coal Co.. L. R.. 17 Ch. D., 76 (1880). A bona fide cancellation of a subscription is valid and corporate creditors cannot have it set aside. WaUgericu v. Aspell, 24 X. E. Rep.. 405 (Ohio, 1890). Where the directors rescind a subscription at the request of the subscriber he cannot be made liable five years later. Re West London, etc., Bank, 60 L. T. Rep., 807 (1889). Subscribers whose stock is taken back by the corporation are not liable thereon either at common law or by statute relative to transfers. Ailing v. Ward. 24 N. E. Rep, 551 (111., 1890). A fraudulent release by a corporation of an unpaid subscription to an increase in the capital stock of a corporation is void even against a debt arising before the increase. Carter ?•. Union Printing Co. et al, 15 S. W. Rep. 579 (Ark., 1891). This case holds also that a corporate creditor may object to the corporation n - leasing a stockholder from his stock and repaying to him the subscription which he has paid in. The transaction may be set aside. It is legal for the corporation to make an agreement with stockholders whereby the latter surrender their stock upon which they have paid twenty per cent, and receive full-paid stock to the amount of twenty per cent, of the stock surrendered. A receiver cannot attack this agreement even in behalf of credit- 216 CH. X.] MISCELLANEOUS DEFENSES. [§ 171. corporation has become insolvent. 1 In the United States courts it is established that the governing officers of a corporation cannot, by agreement or other transaction with the stockholder, release the latter from his obligation to pay, to the prejudice of its creditors, except by fair and honest dealing, and for a valuable considera- tion. 2 §171. Compromise. — A compromise differs from a cancellation in that the subscriber pays to the corporation a part of the subscrip- tion price in order to be released from the balance. The stock is delivered back to the corporation. The corporate authorities — gen- erally the directors — have power to compromise any corporate debt ; and if, in the collection of subscriptions, there is reasonable doubt as to the liability of the subscriber, 3 or if the subscriber is insolv- ent, the corporation may compromise the liability, and release a part for the purpose of securing the residue. All that is required is good faith. 4 A receiver, however, cannot compromise a subscrip- tion; nor can a court of equity give him power so to do, unless all the stockholders are parties to the equitable suit in connection with which the receiver is appoiuted. 5 A compromise is not binding if there is no controversv. 6 ors. Republic Life Ins. Co. v. Swigert, 25 X. E. Rep., 680 (111., 1890). The " trust fund" theory is denied in Hospes v. Northwestern, etc., Co., 50 N. W. Rep., 1117 (Minn., 1892). 1 Chouteau Ins. Co. v. Floyd, 74 Mo., 286 : Gill v. Balis, 72 Mo., 424, holding, also, that it is immaterial that enough subscriptions x - emain to pay the corpo- rate debts. 2 " The governing officers of a corpo- ration cannot, by agreement or other transaction with the stockholder, re- lease the latter from his obligation to • pay, to the prejudice of its creditors, except by fair and honest dealing and for a valuable consideration." Potts v. Wallace, 146 U. S., 689 (1892) : Burke v. Smith, 16 Wall., 390 (1872) ; New Albany v. Burke, 11 Wall., 96 (1870). So. also, in Illinois. See Zirkel v. Joliet Opera House Co., 79 111., 334 (1875). 3 Bath's Case, L. R.. 8 Ch. D„ 334 (1878) ; Lord Belhaven's Case, 3 De G., J. & S., 41 (1865). An unaccepted offer of compromise is no defense, and com- promises with other stockholders are no defense. Howard v. Glenn, 11 S. E. Rep., 610 (Ga., 1890). < Phil. & W. C. R. R. Co. v. Hickman, 28 Pa. St., 318(18571 Power may be given by statute. Pearson's Case, L R., 7 Ch., 309, holding that, under the English statute, the court may allow, but cannot compel, a receiver to com- promise. Where a stockholder denies his liability, and the directors compro- mise with him by reducing the amount of his subscription, the compromise is binding on all parties. Whitaker v. Grummond, 36 N. W. Rep., 62 (Mich., 1888). 5 Chandler v. Brown, 77 111., 333 (1875\ The fact that the court authorized the receiver to compromise with some of the stockholders is no defense to others. Hambleton v. Glenn, 20 Atl. Rep., 115 (Md., 1890). • 6 Phosphate, etc., Co. v. Green, L. R., 7 C. P., 43 (1871); Sp:tckman v. Evans, L R, 3 H. L, 171, 188, 231 (1868). In Dixon v. Evans, L. R., 5 H. L, 606 (1872), the sub- scription was made upon a condition, which unfulfilled a corn- 217 §§ 172, 173.] MISCELLANEOUS DEFENSES. [CH. X. § 172. Non-payment of a percentage required by statute. — The charter or statute governing a corporation often prescribes that each subscriber to the capital stock shall, at the time of subscrib- ing, pay to the corporation a fixer! sum or a specified proportion of the subscription. These statutes vary somewhat in their provisions, some declaring the subscription to be void unless the percentage is paid, others merely prescribing that it shall be paid. In the actual taking of the subscriptions, it frequently happens that the subscriber has not the ready money requisite, and is al- lowed to subscribe without paying the same. "When an attempt is made to collect such a subscription, the subscriber, if the enter- prise has resulted disastrously, sets up the defense that he did not pay the statutory percentage, and that the subscription is void and not enforceable. A long list of cases, dating from the early litiga- tion over railroads, has turned upon this defense. In some of the states the defense has been held insufficient; in others a contrary rule prevails ; and in still others, first one rule and then the other has been adopted. § 173. The decided weight of authority and the most carefully considered cases hold that a subscriber for stock cannot escape the responsibilities of a stockholder by showing that he never paid the percentage or fixed amount required by the charter or statute to be paid at the time of subscribing. 1 He will not thus be permitted to promise was made permitting the with- so vitally affect the public," but not to drawal of the subscriber. Held, after change the liability of stockholders to two appeals, that directors had power corporations. Minnesota & St L. R'y to enter into such a compromise, and Co. v. Bassett, ?0 Minn., 535(1874), where the subscriber was not held in the wind- the court said of the statute : " While it ing up. confers upon plaintiff the right to insist 1 Webb v. Baltimore, etc., Co., 26 Atl. upon the payment, it does not make the Rep., 113 (Md., 1893); Illinois River R R. successful exercise of this right indis- Co. v. Zimmer, 20 111., 654 (1858), hold- pensable to the validity of the subscrip- ing that the commissioners may waive tion." Water Valley Manuf. Co. v. payment. The court say: "Thisindul- Seaman, 53 Miss., 655 (1876), where t u e gence is a most ungracious defense, requirement was provided for in the , which should not be allowed unless it is subscription itself. Barrington v. Miss. 6trictly required by some inflexible rule C. R R Co., 32 Miss., 370 (1856), where of law." Haywood & P." P. R Co. v. payment was made before the subscrip- Bryan, 6 Jones' L. (N. C), 82 (1858), the tion. See, also, Vicksburg, S. & T. R. R court saying: "It would be a strange Co. v. McKean, 12 La. Ann., 638 (1857); rule which would allow him to take ad- Wright v. Shelby R R. Co., 16 B. Monr. vantage of the other stockholders' for- (Ky.), 4 (1855); Smith v. Plank-road Co., bearance and his own neglect." Pitts- 30 Ala., 650 (1857) ; Mitchell v. Rome R burgh, W. & K. R R. Co. v. Applegate, R. Co., 17 Ga., 574 (1855); Henry v. Ver- 21 W. Va., 172 (1882). On the theory million & A. R. R Co., 17 Ohio, 191 that the statute is "to insure good faith, (1848); Chamberlain v. Painesville & H. and to avoid shams in enterprises that R. R Co., 15 Ohio St., 225 (1864) ; Napier 218 CH. X.] MISCELLANEOUS DEFENSES. [§ ira- take advantage of bis own wrong and default to the prejudice of others. In some instances the percentage was paid in notes l or checks 2 instead of cash; in others, payment in cash was made at some period subsequent to the act of subscribing; 3 in still others, no payment at all was made on the subscription, and suit was v. Poe, 12 Ga„ 170 (1852); Fiser v. Miss. & Tenn. R. R. Co., 32 Miss., 359 (1856) ; Ryder v. Alton & S. R. R. Co., 13 111., 516 (1851). where the subscriber was one of the commissioners; Klein v. Alton & S. R R Co., 13 111., 514 (1851), where payment was made before the subscrip- tion books were closed : Stuart v. Valley R R Co., 32 Graft, (Va.), 146 (1879); Southern L. Ins. Co. v. Lanier, 5 Fla., 110(1853); Selma & Tenn. R. R Co. v. Rouudtree, 7 Ala. (N. S.), 670 (1845); Spartanburg & A. R R Co. v. Ezell, 14 S. C, 281 (1880', where a few subscribers paid in more than their percentage, and enough to make up for those not pay- ing; Oler v. Baltimore R R Co., 41 Md, 583 (1874), where the percentage was "payable," the court saying that this merely made it "due and collectible," like a call. To the same effect, Ashta- bula & N. L. R R Co. v. Smith, 15 Ohio St., 328 (1864). Payment by the sub- scriber's agent is sufficient. Litchfield Bank v. Church, 29 Conn., 137 (1860). The following cases hold that non-pay- ment of the required percentage is a good defense : Charlotte & S. C. R R. Co. v. Blakeley, 3 Strobh. Eq. (S. C), 245 (1848) : State Ins. Co. v. Redmond, 1 Mc- Crary, 308 (1880). The requirement herein was by by-law. People v. Cham- bers. 42 Cat, 201 (1871), holding a check to be insufficient; Farmers' & M. Bank v. Nelson, 12 Md., 35 (1857); Taggart v. Western Md. R R Co., 24 Md., 588 (1866); Wood v. Coosa & C. R. R Co., 32 Ga., 273 (1861), the statute prescrib- ing that the subscription should be "void." A provision that only ten per cent, of the stock shall be paid up until certain contingencies arise is strictly construed by the courts. City of Bur- lington v. Burlington Water Co., 53 N. W. Rep., 246 (la., 1892). Although the statute requires that a certain percent- age of subscriptions shall be paid upon incorporation, yet one subscriber may pay the proportion of others. Beattys v. Town of Solon, 64 Hun, 120 (1892). It is no defense that the corporation commenced business before twenty-five per cent, of its capital stock had been paid in as required by the charter. Nau- gatuck, etc., Co. v. Nichols, 20 Atl. Rep., 315 (Conn., 1890). i Yt. Central R. R Co. v. Clayes, 21 Vt, 30 (1848). A bond so given is col- lectible, as it would be if given to carry out a parol contract for the sale of land void by statute of frauds. McRea v. Russell, 12 Ired. (N. C), 224 (1851), the court saying that the statute " was meant to protect stockholders from men of straw. It was, moreover, meant to pro- tect men from the consequences of making such subscriptions under the in- fluence of momentary excitement, which they could not fulfill." The stat- ute made the subscription void. In the case of Home Stock Ins. Co. v. Sher- wood, 72 Mo., 461 (1880), payment by note and mortgage was sustained. Hayne v. Beauchamp, 13 Miss., 515 (1846), holds that the payment by note amounted to an informal subscription, the statutory subscription being void. Pine River Bank v. Hadsdon, 46 N. H., 114 (1865). -' People v. Stockton & V. R R. Co., 45 Cal., 306 (1873). there being funds in the bank to meet it. 3 Payment of a judgment, in an ac- tion for one call, estops the subscriber from setting up this defense. Hall v. Selma & Tenn. R R. Co., 6 Ala. (N. S.\ 741 (1844). 219 174.] MISCELLANEOUS DEFENSES. [CH. X. brought for the whole amount. 1 Where the directors commence business before ten per cent, of the capital is paid in as required by statute, the directors are personally liable as agents transacting business without authority from the principal. 2 In England a fail- ure to pay such a percentage is held not to affect the liability of the subscriber, but to restrict his right of transferring his stock. 3 § 174. In New York there has been doubt and a strong tendency to change the rule laid down at an early day by the court. The case of Jenkins v. The Union Turnpike Company, in 1S04, 4 decided that a failure by the subscriber to pay a required percentage at the time of subscribing was a good defense to an action on the sub- scription. This decision has been distinguished, questioned and doubted by the courts. 5 The latest authority, however, in New 1 In the case of Piseataqua Ferry Co. v. Jones, 39 N. H., 491 (1859), the require- ment was by by-law, not by charter. The subscription was to be void for non- payment. The court thought otherwise. The effect of non-payment is that " it is due and liable to be called for at any time — payable on demand, whenever needed by the corporation." Greenville & C. R R Co. v. Woodsides, 5 Rich. L. (S. C), 145 (1851), where the subscriber also voted the stock. 2 Farmers', etc., Co. v. Floyd, 26 N. E. Rep., 110 (Ohio, 1890). • 3 East Gloucestershire R'y Co. v. Bar- tholomew, L. R, 3 Ex., 15 (1867) ; Pur- dy's Case, 16 W. R, 660 (1868); McEwen v. West, L. W. & W. Co., L. R, 6 Ch. 655 (1871) — the statute stating that the stock should not "issue" or "vest" until one-fifth should be paid. See, also, Morton's Case, L. R, 16 Eq., 104 (1873). 4 1 Caines' Cases in Error, 86, reversing Union Turnpike Co. v. Jenkins, 1 Caines' Rep., 381. 5 Highland Turnpike Co. v. McKean, 11 Johns., 98 (1814), the court saying: '•It is a little difficult to ascertain the point upon which the court of errors grounded their decision." A subscriber, who is also the commissioner, need not pay the required percentage to himself. In Crocker v. Crane, 21 Wend., 211 (1839), payment in checks was held not to be good, they evidently not having been given in good faith. The court say : " Receiving an occasional check might have been a fair substitute." Thorp v. Woodhull, 1 Sandf. Ch., 411 (1844\ sustains the validity of a bond and mortgage in payment of a subscrip- tion in which the percentage had been paid by a worthless check. Eastern Plank-road Co. v. Vaughan, 14 N. Y., 546 (1856), holds it not to be necessary " that each subscriber should pay five per cent, upon his subscription, but only that five per cent on the amount of the stock subscribed should be actu- ally paid by some one." To the same effect, Lake Ontario, A. & N. Y. R R Co. v. Mason, 16 N. Y., 451 (1857), the court saying that the object was " to insure the organization of real substan- tial companies in good faith, animated by an honest purpose, and having some degree of abilitj^ at least to undertake the proposed improvement." In the case of Rensselaer & W. P. R. Co. v. Barton, 16 N. Y.. 457, n. (1857), the court, in speaking of the decision in Jenkins v. Union T. Co., say : " It may well be doubted whether the reasoning upon which it was based is sound, and whether, were the question to be again directly presented, this court would feel bound to follow it." Black River & Union R R Co. v. Clarke, 25 N. Y.. 208 (1862), holds that "the subscription 220 CII. X.] MIS< ' E I- 1. A N EOUS DEFEN8 ES. [§ W5. York, undoubtedly holds that if the subscriber merely signs the subscription contract and does not pay the percentage, he may thereby defeat his liability on such subscription. 1 § 175. In Pennsylvania a similar state of doubt has existed. The case of Hibernia Turnpike Co. v. Henderson, 2 in 1822, decided that a failure by the commissioners taking subscriptions to stock to require payment of the statutory percentage made the subscription void and not enforceable. Later decisions do not overthrow the rigid rule, but distinguish and practically destroy it by holding that this defense is barred by a subsequent statute curing the de- fect; 3 or by a waiver in attending corporate meetings and voting; ; or by transferring the shares; 5 or that the provision applies only to subscriptions taken by the commissioners; 6 or, under the act of 1868, that the percentage must be paid on subscriptions after, but not on those before, incorporation; 7 or that the requirement does not apply to a conditional subscription; 3 or that it is waived by any acts indicating an intent to be bound as a stockholder. 9 one day, with payment the next, would satisfy the statute, and so would act- ual payment at any period after sub- scription with intent to effectuate and complete the subscription." See, also, Beach v. Hazard, as stated in 30 N. Y., lis. Ogdensburgh. C. & R. R. R. Co. v. Wooley, 3 Abb. Ct. of App., 398 (1864), holds that the requisite percent- age for all may be paid by a few sub- scribers, and that a promissory note is good payment. Beach v. Smith, 30 N. Y., 116 (1864), affirming S. C, 28 Barb., 254, holds that payment in serv- ices performed under a contract with the company suffices. Excelsior G. B. Co. v. Stayner, 25 Hun, 91 (1881), holds that payment by check, on which pay- ment is stopped, is insufficient. Syra- cuse, P. & O. R. R. Co. v. Gere, 4 Hun, 392 (1875), sustains a suit by the cor- poration to collect such a check. See, also, Ogdensburgh R. & C. R. R. Co. v. Frost, 21 Barb., 541 (1856). Certified check is good payment Re Staten I. R. T. R. R. Co., 37 Hun, 422 (1885) ; 38 Hun, 381. i New York & O. M. R R. Co. v. Van Horn, 57 N. Y., 473 (1874), holding also that a subsequent statute cannot cure such omission to pay, and thereby ren- der the subscriber liable. See, also, Perry v. Hoadley, N. Y. Daily Reg.. May 6, 1887. 2 8 S. & R., 219. See, also. Leighty v. Pres. of S. & W. T. Co., 14 S. & R, 434. 3 Clark v. Monongahela Nav. Co., 10 Watts, 364 (1840). 4 Erie & W. P. R. Co. v. Brown, 25 Pa. St, 156 (1855), the court saying: "There is no merit in such a defense. . . . The subscriber himself is under the highest moral obligations faithfully to perform the promise he has distinctly made." In the case of Cam v. West- chester R. R. Co., 3 Grants Cas., 200 (1855), the court held that failure to pay the percentage did not render the char- ter forfeitable. 5 Everhart v. Westchester & Phil. R. R. Co., 28 Pa. St., 339 (1857). 6 Phil. & W. C. R. R. Co. v. Hickman, 28 Pa. St 318 (1857). Contra, under the act of 1868. See Butcher v. Dillsburg & M. R. R. Co., 76 Pa. St. 306 (1874). • Garrett v. Dillburg & M. R. R Co., 78 Pa. St, 465 (18751 8 Hanover J. & S. R. R Co. v. Halde- man, 82 Pa. St., 36 (1876). s Boyd v. Peach. B. R'y Co., 90 Pa. St, 169 (1879), holding, however, that 221 176.] MISCELLANEOUS DEFENSES. [CH. X. § 176. Failure of the corporation to obtain subscriptions to the extent of the full capital stock — It is an implied part of a contract of subscription that the contract is to be binding and enforce- able against the subscriber only after the full capital stock of the corporation has been subscribed. This condition precedent to the liability of the subscriber need not be expressed in the corporate charter nor the subscription itself. It arises by implication from the just and reasonable understanding of a subscriber that he is to be aided by other subscriptions. This rule is supported also by public policy, in that corporate creditors have a right to rely upon a belief that the full capital stock of the corporation has been sub- scribed. 1 If the corporation commences business before the full payment cannot be by promissory note, although a demand note. 1 The leading case on this defense is Salem Mill-dam Corporation v. Ropes, 23 Mass., 23 (1827), and 26 Mass., 187 (1829). In the case of Livesey v. Omaha Hotel, 5 Neb., 50 (1876), Judge Redfield in the brief says : " This rule has been held inflexible in all cases, both for the security of the public and also of the subscribers;" Shurtz v. Schoolcraft & T. R R Co., 9 Mich.. 269 (1861); New York, H. & N. R. R. Co. v. Hunt, 39 Conn., 75 (1872) ; Hale v. Sanborn, 16 Neb., 1 (1884) ; Haskell v. Worthington. 7 S. W. Rep., 481 (Mo., 1888); Halsey, etc., Co. v. Donovan, 57 Mich., 318 (1885) ; Peoria & R I. R. R Co. v. Pres- ton, 35 Iowa, 118 (1872), the court say- ing that this is the rule, " unless a con- trary intention appears, expressly or by implication, either in the charter or the contract of subscriptions;" Stone- ham Branch R. R Co. v. Gould, 68 Mass., 277 (1854), the court saying: " This is no arbitrary rule ; it is founded on a plain dictate of justice, and the strict principles regulating the obliga- tion of contracts ; " Bray V. Farwell, 81 N. Y., 600, 608 (1880), where the court say the directors " had no authority to go on with insufficient means, and thus wreck the company;" Selma, M. & M. R R Co. v. Anderson, 51 Miss., 829 (1876); Hughes v. Antietam Manuf. Co., 34 Md., 318, 332 (1870); Topeka Bridge Co. v. Cummings, 3 Kan., 55 (1864); Allman v. Havana R. & E. R R Co., 88 111., 521 (1878); Temple v. Lemon, 112 111., 51 (1884); Littleton Manuf. Co. V. Parker, 14 N. H., 543 (1844); Hendnx v. Academy of Music, 73 Ga., 437 (1884); Contoocook Valley R. R. Co. v. Barker, 32 N. H., 363 (1855); Prop, of N. Bridge v. Story, 6 Pick., 45 (1827); Belfast & M. L R R. Co. v. Cottrell, 66 Me.. 185 (1875); Rockland, etc., Co. v. Sewall, 14 Atl. Rep., 939 (Me., 1888); Memphis Branch R R Co. v. Sullivan. 57 Ga., 240; Fox v. Allensville, C. S. & V. % Co., 46 Ind., 31 (1874); Hain v. North W. G. R Co., 41 Ind., 196 (1872', hold- ing also that the corporation in suing must aver that the full capital stock has been subscribed : Central Turnpike Co. v. Valentine, 10 Pick., 142 (1830), hold- ing also that the corporation has the burden of proving subscriptions for the full capital stock ; Warwick R. R. Co. v. Cady, 11 R I., 131 (1877), where the charter said that the capital stock should not exceed a specified sum ; Fry's Ex'rs v. Lexington & B. S. R R Co., 2 Met (Ky.), 314 (1859), holding also that the corporation must aver full subscription ; Lewey's Island R. R Co. v. Bolton, 48 Me., 451 (1860); Lail v. Mt Sterling C. R Co., 13 Bush (Ky.), 34 (1877). holding that the corporation need not aver full subscriptions. Cf. Monroe v. Fort W., J. & S. R R Co., 28 Mich.. 272 (1873). Where, also, the cor- poration is incorporated with a less capital stock than was proposed when 222 CH. X.] MISCELLANEOUS DEFENSES. [§ 1 77. capital stock is subscribed, the state may bring an action for the forfeiture of its charter. 1 The subscriber, however, is liable for his proportion of the necessary expenses, preliminary to the incor- poration and organization of the company. 2 § 177. The act of incorporation may, of course, vary this rule. Thus, it is well established that, where the charter authorizes the organization of the company, and the commencement of corporate the defendant subscribed, he is not bound by the subscription. Santa Cruz R. R Co. v. Schurtz, 53 Cal., 106 (1878). A few cases seem to hold a contrary doctrine. New Castle & A. T. Co. v. Bell, 8 Blackf. (Ind.), 584 (1847); Ore- gon Central R. R Co. v. Scoggin, 3 Oreg., 161 (1869); York & C. R R Co. v. Pratt. 40 Me., 447(1855); Cheraw & C. R R Co. v. White, 10 S. C, 155 (1878). See, also, Chubb v. Upton, 95 U. S., 665. 668 (1877), probably a dictum. In the case of Skowhegan & A. R R. Co. v. Kinsman, 77 Me., 370 (1885), the court seem to hold that, where there is in the subscription an express promise to pay, it is enforceable even though the whole capital stock is not subscribed. If such a condition is expected, the court says it must be inserted in the subscrip- tion. It has been held that, where a subscription is made before incorpora- tion, on a paper not fixing the capital stock, a failure to secure full subscrip- tion to the capital stock as fixed in the charter is no defense. Belton, etc., Co. v. Sanders. 6 S. W. Rep.. 134 (Tex., 1887). Subscribers are not liable until the whole amount is subscribed. They may recover back what they have paid. Winters v. Armstrong, 37 Fed. Rep , 508 (1889). See, also, 42 N. W. Rep., 226 (Wis., 1889). A full subscription is not necessary if the subscriptions are paj r - able to an agent and nothing is said about full subscription. West v. Craw- ford, 21 Pac. Rep., 1123 (Colo., 1889). A stockholder may defend on the ground that the amount required by the sub- scription list to be subscribed shall be subscribed before he is held liable, es- pecially where misrepresentations are made as to the amount which had been subscribed when the defendant sub- scribed. The question is one for the jury. Spellier, etc., Co. v. Leedom, 24 Atl. Rep., 197 (Pa., 1892). When the capital is increased after the defendant subscribed he cannot insist on the sub- scription of the capital stock as in- creased. Port Edwards, etc., R'y v. Arpin, 49 N. W. Rep.. 828 (Wis., 1891). Cf. S 288. Full capital necessary. Ex- position, etc., R'y v. Canal, etc., R'y. 7 S. Rep., 627 (La., 1890). The ques- tion must be clearly raised by the find- ings, otherwise it will not be considered on appeal. Arthur v. Clarke, 49 N. W. Rep., 252 (Minn., 1891). Where stock- holders proceed to business before the minimum capital prescribed by statute is subscribed and before the requisite amount is subscribed, they are liable to corporate creditors for such minimum capital. The creditors may sue them and the corporation in the same action. Burns v. Beck, 10 S. E. Rep., 121 (Oa.. 1889). The defense of non-full subscrip- tions is available agaiust creditors of the corporation. Exposition, etc., R'y v. Canal, etc., R'y. 7 S. Rep.. 627 (La.. 1890). The text above was approved in Portland, etc., Co. v. Spillman, 32 Pac. Rep., 688 (Ore., 1893), and Denuy, etc., Co. v. Schram, 32 Pac. Rep.. 1002 (Wash., 1893). No defense that the full capital stock was not subscribed where creditor sues. Hamilton v. Clarion, etc.. R. R., 23 Atl. Rep., 53 (Pa., 1891). i People v. Nat. Saw Bank, 11 N. E. Rep., 170 (III., 1887); affirmed, 22 id., 288. 2 Salem Mill-dam Corp. v. Ropes, 23 Mass., 23 (1827). 23 § its.] MISCELLANEOUS DEFENSES. [CH. work after a certain amount of the capital stock has been sub- scribed, such a charter provision is equivalent to an express author- ity to the corporation to call in the subscriptions as soon as this organization is effected. 1 Subscriptions to the full amount of the capital stock are held not to be necessary. The defense is not good. § 178. Where the subscription itself specifies how much of the capital stock must be subscribed before payment may be enforced, such specifications are legal and effective, and until they are fully complied with the subscriber is not liable. 2 A subscription of this i Schenectady & S. P. R. R. Co. v. Thatcher, 11 N. Y., 102 (18r,4); Rensse- laer & W. P. R. Co. v. Wetsel, 21 Barb., 56 (1855); Hamilton & D. P. R. Co. v. Rice, 7 Barb., 166 (1849); Sedalia, War- saw, etc.. R'y Co. v. Abell. 17 Mo. App.. 645 (1885); Perkins v. Saunders. 56 Miss., 733 (1879); Hunt v. Kansas & M. B. Co., 11 Kan., 412 (1873), the court saying that otherwise there would be no propriety in allowing the organization before the full capital was subscribed : Hoagland v. Cin. & F. W. R. R Co., 18 Ind., 452 (1862): Hanover J. & S. R. R Co. 0. Haldeman, 82 Pa. St., 36 (1876); Penob- scot & K. R. R Co. v. Bartlett, 12 Gray, 244 (1858), holding so, even though no contracts for building the road were to be made until a larger subscription was obtained ; Boston, B. & G. R. R. Co. v. Wellington, 113 Mass., 79 (1873); Minor v. Mechanics' Bank, 1 Peters, 46; New Haven & D. R. R. Co. v. Chapman. 38 Conn., 65 (1871) ; Illinois River R R. Co. v. Zimmer, 20 111., 654 (1858); Lexington & W. C. R R. Co. v. Chandler, 54 Mass., 311; Willamette F. Co. v. Stannus, 4 Oreg., 261 (1872); Jewett v. Valley R'y Co.. 34 Ohio St., 601 (1878). A vigorous case to the contrary is Galveston Hotel Co. v. Balton, 46 Tex., 633 (1877). The court says : " There were good reasons for organizing the company to be found in the increased facility of thereby rais- ing the subscriptions to the amount fixed for the capital stock and of other preliminary preparations for the execu- tion of the work, when the subscription should reach that amount" A contrary rule " would render nugatory the most important provision of the charter, which is the amount of its capital stock."' When the capital stock is to be fixed by the corporation between two limits, the subscription of the full amount as fixed is a subscription of the full capital stock. Kennebec & P. R. R. Co. v. Jarvis, 34 Me., 360 (1852). There need not be a full subscription where the statutes authorize an organization as soon as one-half is subscribed. As- toria, etc., R R. v. Neill, 25 Pac. Rep., 379 (Oreg., 1890). The statutes may allow the corporation to proceed with business and collect subscriptions be- fore the full capital stock is subscribed. Schloss v. Montgomery, etc., Co., 6 S. Rep.. 360 (Ala., 1889). 2 Where, by its terms, it is not to be binding until a certain amount is sub- scribed, it is enforceable when that amount is secured, although less than the full capital stock. Bucksport & B. R. R Co. v. Buck, 65 Me., 536 (1876). See, also, Iowa & Minn. R. R. Co. v. Perkins, 28 Iowa, 281 (1869). Organiza- tion authorized where "250 to any one mile "' has been subscribed is satisfied by a $250 subscription in general. Fitch v. Poplar, etc., Co., 13.S. W. Rep., 791 (Ky., 1890). Where the subscription list or articles of association signed by defend- ant expressly provide for the commence- ment of bussiness before the full capital is subscribed, the defense is waived. Arkadelphia, etc., Mills v. Trimble, 15 S. W. Rep., 776 (Ark., 1891). 224 CH. X.] MISCELLANEOUS DEFENSES. [§ m kind is a conditional subscription. 1 A condition that the subscrip- tion shall be payable only when sufficient subscriptions for the corporate purpose have been secured has been held to require funds sufficient to put the enterprise in full operation. 2 On the other hand, a subscription to pay "when required" renders the sub- scribers liable before the full capital stock is subscribed. 3 § 179. In England statutory provisions have almost entirely dis- placed the common-law rule. The principle that a subscriber is not liable until the full capital stock has been subscribed is recog- nized as having been the original rule at law. A few cases, how- ever, seem to favor an opposite rule. Yet an eminent English authoritv says that, in all the cases in which the subscribers were held bound, they " had entered into a contract which precluded them from maintaining that the subscription of the whole of the originally proposed capital was an express or implied condition to their becoming shareholders." The English courts seem to have no clearlv defined rule in this matter, but allow each case to turn largely on its own facts; releasing the subscriber if the discrepancy in the subscriptions is very large, and holding him liable if it is small, or if he in any way has aided the company in beginning business. 4 i See ch. V. 2 People's Ferry Co. v. Balch, 74 Mass., 203 (1857), the court holding that funds for the land, structures and boats must be in hand before the defendant becomes liable. 3 Cheraw & C. R R Co. v. Garland, 14 S. C, 63 (1880). 4 Norwich & L. Navigation v. Theo- bold, 1 Moody & M., 151 (1828), required full subscription in accordance with a statute. Fox v. Clifton, 6 Bing., 776 (1830), the earliest common-law English case on this subject, holds that the sub- scriber is not liable to corporate cred- itors unless the full capital stock has been subscribed. Pitcbford v. Davis. 5 Mees. & W., 2 (1839), also fully agrees with the rule that prevails in this country. Wontner v. Shairp, 4 C. B., 404 (1847), sustained a recovery back of amounts paid on a subscription, under misrepresentations that the whole stock had been subscribed. Waterford, W. W. & B. R'y Co. v. Dalbiac, 4 Eng. L. ■& Eq., 452 (1S50), refused to allow the defense, since the charter allowed the corporation to purchase lard before the full capital stock was subscribed. Watts v. Salter, 10 G B., 447 (1856), holds the same, the subscriber having aided in the incorporation, and given the direct- ors power to proceed. Galvanized Iron Co. v. Westoby, 21 L. J. (Ex.), 302 (1852), per B. Parke, says that at common law the subscriber is not liable unless the full capital stock is subscribed. Contra, Lyons' Case, 35 Beav., 646 (1866). John- ston v. Goslett, 3 C. B. (N. S.), 569 (1851 1, makes the directors liable to the sub- scriber for his deposit when they so pro- ceed. London & C. Ins. Co. V. Redgrave. 4 C. B. (N. S.), 524 (1858), holds the sub- scriber liable, he having aided in the incorporation. Ornamental P. W. Co. v. Browne, 2 Hurl. & C, 63 (1863), holds the subscriber liable, under the statute of 19 and 20 Vic, ch. 47. similar to the American statutes. See, also, McDou- gall v. Jersey I. H. Co.. 10 Jur. (X. S.\ 1043 (1864). Peirce r. Jersey W. Co., L R, 5 Ex., 2C9 (1870). re quired a cer- (15) 225 § ISO.] MISCELLANEOUS DEFENSES. [CH. X. § ISO. Some difficulty has been experienced in determining what subscriptions shall be counted in ascertaining whether the full cap- ital stock has been subscribed. Conditional subscriptions, the con- dition to which has not yet been performed by the corporation, are clearly not to be counted among the rest, since such subscriptions- may never become enforceable. 1 This rule, if strictly insisted upon, would probably occasion great inconvenience to the corporation in enforcing the subscriptions for stock. The subscriptions of married women, infants or persons of un- sound mind are to be excluded from the count. 2 So, also, the sub- scriptions of insolvents are exeluded, unless at the time of subscribing they were apparently able to pay the subscription. 3 Considerable subsequently ratified by tbe principal. Conditional subscriptions, tbe condition of which cannot be fulfilled until after incorporation, are not to be counted in ascertaining whether tbe requisite cap- ital stock has been subscribed. Port- tain amount to be subscribed, tbe char- ter itself so prescribing. Elder v. New Zealand L. I. Co., 30 L. T. (N. S.), 285 (1875), the most important case on this subject, holds that, where the directors are about to proceed with only one- fourteenth of the capital stock sub- land, etc., Co. v. Spillman, 32 Pac. Rep, scribed, 'a subscriber may apply to the 688 (Ore.. 1893). Subscription on con- court and have his name removed from the subscribers' list. The court say that the case of McDougall v. Jersey I. H. Co., supra, would have been decided otherwise had not two-thirds of the stock in that case been subscribed. See, also, Howbeach Coal Co. v. Teague, 5 H. & N., 151 (1860) ; dictum in Re Jen- nings, 1 Irish (Ch.), 654 (1851). i Troy & G. R. R Co. v. Newton, 74 Mass., 596 (1857), the condition being that the subscriber be allowed to pay in construction work ; Oskaloosa Agricult- ural Works v. Parkhust, 54 Iowa, 357 (1880) ; Brand v. Lawrenceville, etc., R R Co., 1 S. E. Rep., 255 (Ga., 1887); New York, etc., R R Co. v. Hunt, 39 Conn., 75 (1872) ; Cabot & W. S. B. v. Chapin, 60 Mass., 50 (1850), where a subscription payable in other stock at par, when the market value was less, was not counted ; Ticonic Co. v. Lang, 63 Me., 480 (1874). Subscriptions payable in property are not to be counted in ascertaining whether the full capital stock is sub- scribed. California, etc., Co. v. Russell, 26 Pac. Rep., 105 (1891), holding, also, that an agent's unauthorized subscrip- tion is not to be counted even though dition that interest shall be paid is counted. Rutland & B. R R Co. r. Thrall. 35 Tt, 536 (1863). Cf. Greenville & C. R R Co. v. Coleman, 5 Rich. (S. C). 118(1851). Invalid subscriptions are not counted. Belfast & M. L. R R Co. v. Cottrell, 66 Me., 185 (1875). Cf. Swart- wout v. Michigan Air Line R R Co., 24 Mich., 389 (1872) ; § 79, supra. 2 Phillips v. Covington & Cin. Bridge Co., 2 Mete. (Ky.), 219 (1859), holding that subscriptions of infants, married women or insolvents are not to be counted unless already paid in. Ficti- tious paid-up stock, and stock converti- ble into corporate bonds, counted. See, also, Appeal of Hahm, 7 Atl. Rep., 482 (Pa., 1886), excluding subscriptions of married women. Cf. Litchfield Bank v. Church, supra. Payment of part with knowledge that married woman's subscription was counted is a waiver. Appeal of Cornell, 6 Atl. Rep., 258 (Pa, 1886). Ultra vires subscriptions of other corporations are not counted. Berry v. Yates, 24 Barb., 199 (1857). 3 Lewey's Island R. R. Co. v. Bolton. 48 Me., 451 (1860); Belfast, etc., R'y Co. v. Inhabitants of Brooks, 60 Me., 568 226 CII. X.] MISCELLANEOUS DEFENSES. [§ 181. difference of opinion exists as to whether subscriptions payable by their terras in labor or materials or contract work are to be in- cluded in the count. 1 The better rule seems to be that the necessity of employing this method of carrying out many modern corporate enterprises requires that such subscriptions should be counted if the contract is made in good faith and the contractors are reason- ably responsible men. 2 The weight of authority, however, holds otherwise. The records of the corporation are sufficient and com- petent evidence that the full capital stock has been subscribed. 3 The directors and stockholders are not liable for corporate debts merely because they commence business before the capital stock was subscribed. The incorporation was legal without it. 4 § 181. A subscriber may waive the defense that the full capital stock of the corporation has not been subscribed. This waiver may be either express or implied from the acts or declarations of (1872), 32 Pac. Rep., 1002. The subse- quent failure of some of the subscribers is immaterial. Salem M. D. Corporation v. Ropes, 26 Mass., 187 (1829). 1 Not counted where the contractor failed to complete the work. New York, H. & N. R R Co. v. Hunt, 39 Conn., 75 (1872); Troy & G. R. R Co. v. Newton, 74 Mass., 596 (1857), the court saying: " The receipt of the stock by them de- pended entirely upon a contingency, as the contractors might fail to do the work, and so no stock be earned ; " Old- town & Lincoln R. R. Co. v. Veazie, 39 Me., 571 (1855), where the contract work was not completed. In the case of Ridgefield & N. Y. R. R. Co. v. Brush, 43 Conn., 86 (1875), such subscriptions were counted, the contract for payment in work being parol, and not allowed to vary the apparently absolute subscrip- tion. 2 Phillips v. Covington & Cin. Bridge Co., 2 Mete. (Ky.), 219 (1859). 3 Penobscot R R Co. v. Dummer, 40 Me., 172 (1855) ; Same v. White, 41 Me., 512 (1856). Unless proof be introduced to destroy their effect. A call is notice that the full amount has been sub- scribed. Harlem Canal Co. v. Seixas, 2 Hall (N. Y), 504 (1829) ; Same v. Spear, 2 Hall, 510; Litchfield Bank v. Church, 29 Conn., 137 (1860), holding that the cer- tificate of the commissioners that the full stock had been subscribed would not be questioned, even though they had counted married women's subscrip- tions. To same effect, see Lane v. Brainerd, 30 Conn., 565 (1862); Marl- borough Branch R. R Co. v. Arnold, 9 Gray, 159 (1857). If the corporate ords are destroyed or lost there should be other clear evidence. Central Turn- pike Co. v. Valentine, 10 Pick., 142 (1830). 4 National Bank v. Texas, etc., Co., 12 S. W. Rep., 101 (Tex., 1889). It is not actionable negligence in directors to proceed to business because only a small part of the capital is subscribed. Re Liverpool, etc., Ass'n, 62 L. T. Rep., 873 (1890). Paying in half of the subscrip- tion with a view to incorporation, and then abandonment of incorporation, do « not render a subscriber liable as a part- ner. Hendson v. Spaulding, 6 N. Y. Supp., 877 (1889). Where stockholders proceed to business before the minimum capital prescribed by statute is sub- scribed and before the requisite amount is subscribed, they are liable to corporate creditors for such minimum capital. The creditors may sue them and the corporation in the same action. Bums v. Beck, 10 S. E. Rep., 121 (Ga.. 1889 , Cf. § 243. 227 § 1SL] MISCELLANEOUS DEFENSES. [CH. X. the subscriber. 1 Many different facts have been passed upon by the courts, and held either to constitute or not to constitute a waiver of this defense. Thus, it has been held to amount to a waiver for the subscriber to act as a director, attend meetings and contract corporate debts; 2 or to pay assessments for several years, with full knowledge of all the facts; 3 or to write to the directors, requiring them to call a meeting ; 4 or to participate as a stock- holder and committee-man for several months; 5 or to act as presi- dent of the corporation. 6 But a subscriber does not waive this defense by paying a deposit; 7 or by attending a meeting; 8 or by participating in preliminary work and paying a statutory percent- lEmmitt v. Springfield. J. & P. R R Co., 31 Ohio St. 23 (1876); Hager v. Cleveland, 36 Md., 476 (1872); Masonic, etc., Assoc, v. Channell, 45 N. W. Rep., 716 (Minn., 1890). In Anderson v. Mid- dle, etc., R R, 17 S. W. Rep., 803 (Tenn., 1891), a special agreement was held to be a waiver of the full capital being subscribed, but not as to those who had not signed the agreement. A subscriber by paying calls may waive objections to the full capital stock being sub- scribed. California, etc., Hotel Co. v. Callender, 29 Pac. Rep., 859 (Cal., 1892). The wbole capital stock must be sub- scribed before subscriptions are en- forced, unless the subscription contract provides otherwise. A subscriber may waive this, and the question of waiver is for the jury. Hards v. Platte, etc., Co., 53 N. W. Rep., 73 (Neb., 1892). Where the subscribers have induced a con- tractor to proceed on the theory that the full capital has been subscribed, it is no defense that one subscription was in- valid. Gibbons v. Ellis, 53 N. W. Rep., 701 (Wis., 1892). 2 Hager v. Cleveland, supra. A de- fendant waives the defense that the full capital stock was not subscribed where he serves as a director, is present when calls are made, votes in favor of buying a building lot, serves on committees, prepares plans, etc. Auburn, etc., Ass'n v. Hill, 32 Pac. Rep., 587 (Cal., 1893). 3 Morrison v. Dorsey, 48 Md., 461 (1377> 4 Tredwen v. Bourne, 6 Mees. & W., 461 (1840), holding it to be evidence of waiver. s Sharpley v. Louth & E C. R'y Co., L. R. 2 Ch. Div., 663 (1876). A stock- holder who receives and retains a cer- tificate for increased stock cannot, after corporate insolvency, set up that the full increased capital was not subscribed. Butler v. Aspinwall, 33 Fed. Rep., 217 (1887). By organizing and proceeding, stockholders waive the defense that the full capital stock was not subscribed. Dallemand v. Odd Fellows', etc., Bank, 16 Pac. Rep., 497 (Cal., 1888). GCorwith v. Culver, 69 111., 502 (1873). "< Pitchf ord v. Davis, 5 Mees. & W., 2 (1839). 3 Wontner v. Shairp, 4 C. B., 404 (1847) ; New H. Central R R Co. v. Johnson, 30 N. H., 390 (1855) ; Orynski v. Lous- tannan, 15 S. W. Rep., 674 (Tex., 1890), holding that this defense is not waived by attending a corporate meeting, the subscriber not knowing all the facts ; nor is it waived by paying part of the subscription. Power in the directors to make calls when they see fit does not destroy this defense. A subscriber who attends meetings and participates in the organization waives the defense that the full capital stock has not been subscribed ; but if he does so without knowledge of the fact that the full cap- ital stock has not been subscribed he does not waive such defense. Portland, etc., Co. v. Spillman, 32 Pac. Rep., 688 (Ore., 1893); International, etc., Assoc v. Walker, 49 N. W. Rep., 1086 (Mich., 228 en. x.] MISCELLANEOUS DEFENSES. [§ 182. age required to be paid at the time of subscribing; 1 or by paying assessments for surveys. 2 § 182. Failure to fix definitely the capital stock, where the amount is left in the discretion of the corporation. — Sometimes corporate charters, especially in the New England states, are granted with- out specifying the exact amount of the capital stock, but either fixing the outside limit or allowing the corporate authorities to fix it between certain specified limits. "Where the charter leaves the amount of the capital stock indefinite, it is the duty of the proper corporate authorities to determine what it shall be; and no sub- scriber can be held liable on his subscription until such determina- tion is made. 3 After the capital stock is once fixed, there seems to be no rule preventing its being varied subsequently, provided the specified charter limits are observed. 4 It has been held that even subscriptions to the amount of the lowest limit allowed by the charter are insufficient, unless that limit has been designated by the corporate authorities as the amount of the capital stock.' After the capital stock is so determined, the full amount thereof must be subscribed before any subscriber is liable. 6 It is not nec- essary that the amount of the capital stock be fixed by formal 1891), holding that attendance at a meet- ing and voting are not necessarily a waiver. 1 Livesey v. Omaha Hotel, 5 Neb., 50 (1876); Oldtown & L. R. R Co. v. Vea- zie, 39 Me., 571 (1855), where as an officer the subscriber aided in preliminary work. This case goes further, and holds that there can be no waiver under any state of facte. Full capital stock neces- sary. Acts and facts prior to the sign- ing of the subscription do not constitute a waiver. Curry Hotel Co. v. Mullins, 53 N. W. Rep., 360 (Mich., 1892). 2 Memphis Branch R R Co. v. Sulli- van, 57 Ga., 240 (1876). Atlantic Cotton Mills v. Abbott, 63 Mass., 423 (1852), holds that paying assessments and at- tempting to transfer is not a waiver. May v. Memphis B. R R Co., 48 Ga., 109 (1873), holds that paying an assess- ment with notice of this defense is no waiver of it. 3 Worcester-* N.E.R Co. v. Hinds, 62 Mass., 110 (1851); Troy & G. R. R Co. v. Newton, 74 Mass., 596 (1857); Pike v. Shore Line, 68 Me., 445 (1878); Somerset R R Co. v. Clarke, 61 Me., 384 (1871 \ 320 Contra, Warwick R R. Co. v. Cady. 11 R. I, 131 (1875); City Hotel v. Dickin- son, 72 Mass., 5R6 (1862). In the case of Kirksey v. Florida & G. P. R. Co.. 7 Fla., 23 (1857), it was held that the cor- porate charter need not mention any capital stock or shares of stock, and yet subscriptions may be taken and en- forced. In the case of Ward v. Gris- woldville Mfg. Co., 16 Conn., 593 (1844), where the charter allowed the capital stock to vary from $5,000 to $50,000. it was assumed that the subscriptions were enforceable, although no fixed capital stock had been settled upon. In the case of White Mts. R R Co. v. East- man, 34 N. H., 124 (1856), the charter allowed assessments when the lower limit of the capital stock was reached. * Somerset & K. R R Co. r. Cashing, ■15 Me., 524 (1858); Troy & G. R. R Co. v. Newton, 74 Mass., 596 (1857) —dicta, however, in both of these cases. 5 Pike v. Shore Line, 68 Me.. 445 (1878). e Somerset & K. R R. Co. r. Cashing, 45 Me.. 524 (1858); Kennebec, etc., R R Co. a Jarvis, 34 Me., 360 (1852). §§ 183, 184.] MISCELLANEOUS DEFENSES. [CH. X. declaration of the corporate authorities. It may be done by acts equivalent thereto. Thus, a resolution to close the books on a given day, 1 or limiting the time of subscription and then closing the subscription books, 2 or voting that a certain amount of stock in addition to existing subscriptions shall be issued, 3 are the same as, and are equivalent to, an express resolution that the capital stock shall be the amount of subscriptions thus taken. § 183. Irregular incorporation of the company. — Under the laws of most of the states, charters of incorporation are obtained by com- plying with the provisions of what are called general incorporating acts. Usually these acts provide that a specified number of persons, by filing at a public registry a certificate setting out certain facts, may thereb} 7 form a corporation for the purposes named in such cer- tificate. The various steps to be taken, and the contents of each certif- icate, are prescribed by the statute. It frequently happens, however, that in the formation of a corporation under the statute some part of the proceeding, through inadvertence or mistake, is not strictly complied with. The same thing happens, also, under a special act incorporating a certain company, and requiring it to perform speci- fied things in order to render the incorporation complete. These defects may render the corporate charter forfeitable at the instance of the state. Accordingly the question has arisen whether such defects in the process of becoming incorporated are a good and suffi- cient defense to an action by the corporation to collect subscrip- tions to its stock. § 184. When an action is brought to collect a subscription, either directly or indirectly for the benefit of corporate creditors, it is well established that the subscribers cannot defeat such action by the defense that the corporation was not an incorporation, by rea- son of its not having fully complied with the terms of the statute providing for such an incorporation. 4 Not only is the subscriber 1 Lexington & W. C. R. R, Co. v. in fact so defective as to be incapable of Chandler, 54 Mass., 311 (1847). supporting the corporation as against 2 Bucksport & B. R. R Co. v. Buck, 65 the state, they are, as against a sub- Me., 536 (1876). scriber to its capital, held sufficient to 3 Penobscot & K. R. R Co. v. Bartlett, constitute a corporation de facto, if sup- 7S Mass., 244 (1858). ported by proof of user ; " Clark v. 4 Hickling v. Wilson, 104 111., 54 (1882) ; Thomas, Rec. etc., 34 Ohio St., 46 tVheelock v. Kost, 77 111., 296 (1875); (1874); Voorhees n Receiver of Bank, Casey i\ Galli, 94 U. S., 673; Upton v. etc., 18 Ohio, 464 (1850); Ossippee Co. v. Hansbrough, 3 Biss., 317 (1873), the court Canney, 64 N. H., 295 (1874) ; McCune saying: "I understand the rule to be Min. Co. v. Adams, 10 Pac. Rep., 468 well settled that, where papers having (Kan., 1886) ; Hamilton v. Clarion, eta, color of compliance with the statutes R. R, 23 Atl. Rep, 53 (Pa., 1891). have been filed with the proper state Thompson v. Reno Sav. Bank, 7 Pac. officers and meet their approval, but are Rep., 68 (Nev., 1885), says : " The certifi- 230 en. x.] MISCELLANEOUS DEFENSES. [§ 135. estopped, by the act of subscribing, from setting up this defense, but he is bound also by the rule that the existence of a corporation cannot be inquired into except by a direct proceeding in behalf of the state. It is sufficient that the corporation exists de facto. If there is no authority of law for such a corporation, the members are liable as partners. 1 § 185. As between the corporation itself and the subscribers there is more difficulty and doubt in determining the rule. The great weight of authority lays down the broad rule that " where there is a corporation de facto, with no want of legislative power to its due and legal existence; where it is proceeding in the per- formance of corporate functions, and the public are dealing with it on'the supposition that it is what it professes to be; and the ques- tions suggested are only whether there has been exact regularity and strict compliance with the provisions of the law relating to in- corporations, — it is plainly a dictate alike of justice and of public policy, that, in controversy between the de facto corporation and those who have entered into contract relations with it, as cor- porators or otherwise, such questions should not be suffered to be raised." 2 This, doubtless, is the law of the land, although a cate is made for the benefit of the tion shall be taken as performed." In public, not for the corporation or its stockholders. Those who participated in the incorporation of this bank, and, by a certificate made in pursuance of the statute, announced the amount of its capital stock, cannot, as against the creditors of the corporation, contradict their own certificate." The creditors of the consolidated company may enforce subscriptions to the stock of the constit- uent companies, and the irregularity of the incorporation of the consolidated company is no defense. Hamilton v. Clarion, etc., R R, 23 Atl. Rep., 53 (Pa., 1891). See, also, ch. XIII. i See ch. XIII. 2 Cooley, J., |in Swartwout v. Mich. Air Line R. R. Co., 24 Mich., 389 (1872). An important case on this subject is Tar River Nav. Co. v. Neal, 3 Hawks (N. C), 520 (1825;, where the court say that "even where it is shown that such charter has been granted upon a condi- tion precedent, and persons are found in the quiet possession and exercise of those corporate rights as against all but the sovereign, the precedent condi- this case the subscriber had participated in corporate meetings. Wilmington C. & R R R Co. v. Thompson. 7 Jones' L. (N. C), 387 (1860) ; Brookville & G. T. Co. v. McCarthy, 8 Ind., 392 (1856), holding also that the subscriber cannot set up that the corporation had for- feited its charter for misuser and non- user. Central A. & M. Ass'n v. Alabama G. L. Ins. Co., 70 Ala., 120 (1881), where the court say : " Whoever contracts with a corporation having a de facto existence, the reputation of a legal corporation, in the actual exercise of corporate powers and franchises, is estopped from denying the legality of the existence of the corporation, or in- quiring into irregularities attending its formation, to defeat the contract, or to avoid the liability he has voluntarily and deliberately incurred." It also holds that a subsequent statute curing the defect is constitutional and effect- ive. Appleton Mut Fire Ins. Co. v. Jesser, 87 Mass., 446 (1862), the court saying that where "persons were found with the consent and under the author- 231 § 185.] MISCELLANEOUS DEFENSES. [CH. carefully-considered case in Missouri held to the contrar}^, and al- lowed a subscriber who had not done more than merely subscribe to set up this defense against the corporation, no creditor's rights being involved; and the court declared that all the cases denying ity of the designated corporators, and without objection on the part of the sovereign power, actually exercising the corporate powers and claiming and using the franchise, they constituted a corporation de facto; and the lawful- ness of their organization cannot be impeached collaterally in an action to recover an assessment." McCarthy v. Lavasche, 89 111., 270 (1878), holding that the defense is not allowable, even though the statute creating the corpo- ration be unconstitutional. See St. Louis Ass'n v. Hennessey, 11 Mo. App., 555 ; Slocum v. Prov. S. & G. P. Co., 10 R. I., 112 (1871); McHose v. Wheeler, 45 Pa St., 32 (1863); Tarbell v. Page, 24 111., 48 (1860), where no certificate was filed ; Wallworth v. Brackett, 98 Mass., 98 (1867) ; Hanover J. & S. R R Co. v. Haldeman. 82 Pa. St., 36 (1876), hold- ing that non-user rendering the charter forfeitable is no defense; Rowland v. Meader Furniture Co., 38 Ohio St., 269 (1882), holding that actual judgment of forfeiture is no defense ; Meadow v. Gray, 30 Me., 547 (1849) ; Danbury & N. R R. Co. v. Wilson, 22 Conn., 435 (1853), where the subscriber acted as a director ; Central Pr. Co. v. Clements, 16 Mo., 359 (1852) ; Maltby v. Northwestern Va. R R Co., 16 Md., 422 (1860), where the subscriber had already paid calls ; Craw- ford R R Co. v. Lacey, 3 Y. & J., 80 (1829), where incorporation was ob- tained by a false representation to par- liament ; Rockville & W. T. Co. v. Van Ness, 2 Cranch, C. C, 449 (1824), where the subscriber had taken part in an election ; Monroe v. Fort W., J. & S. R R Co., 28 Mich., 272 (1873), where only three instead of five signed the certifi- cate : Rice v. Rock L & A. R R. Co., 21 111., 93 (1859); Hunt v. Kansas & M. Bridge Co., 11 Kan., 412 (1873), where the subscriber acted as director ; Home Stock Ins. Co. v. Sherwood, 72 Mo.. 460 (1880); Evansville. etc., Co. v. Evans- ville, 15 Ind., 395 (1860); Stoops v. Greensburgh, etc., Co., 10 Ind., 47 (1857); Kishacoquillas, etc., Co. v. McConahy, 16 S. & R., 140 (1827), and cases in ch. XXXVIII on this subject. Gill v. Ky. & C. G. & S. Min. Co., 7 Bush, 635 (1870); Wood v. Coosa & C. R R. Co., 32 Ga., 273 (1861); Hager v. Bassett, 36 Md., 476 (1872) ; East P. Hotel Co. v. West, 13 La. Ann., 545 (1858). See, also, Oregon, etc., v. Scoggin. 3 Oreg., 161, holding, under a statute, that the subscription may be sued on before the organization is completed. It is no defense that the corporation was organ- ized on a fourteen-day notice instead of fifteen days. Ofsipee, etc., Co. v. Canney, 54 N. R, 295 (1874). Stockholders, when sued on their statutory liability, cannot impeach the organization of the com- pany. Aultman v. Waddle, 19 Pac. Rep., 730 (Kan., 1888). The subscriber cannot set up that the charter was unconstitu- tional. Dows v. Napier, 91 111., 44 (1878). In New York the first case is Dutchess Cotton Manufactory v. Davis, 14 Johns., 238 (1817); then came Schenectady & S. P. R. Co. v. Thatcher, 11 N. Y, 102 (1854); Eaton v. Aspinwall, 19 N. Y, 119 (1859); Methodist E. U. Ch. v. Pick- ett, 19 N. Y, 482 (1859), the court say- ing it is sufficient for the corporation to be de facto. " Two things are necessary in order to establish the existence of a corporation de facto, viz. : (1) The exist- ence of a charter, or some law under which a corporation with the powers assumed might lawfully be created ; and (2) a user, by the party to the suit, of the rights claimed to be conferred by such charter or law. The rule estab- lished by law as well as by reason is, that parties recognizing the existence of corporations by dealing with them have 232 CH. X.] MISCELLANEOUS DEFENSES. [§ 186. the defense were cases where the subscriber had acquiesced, " either by the payment of part of the subscription or by becoming a di- rector, or by attending meetings of stockholders, or by any other act indicating an acquiescence in the validity of his subscription." l § 186. There is a different class of cases in which a subscriber for stock is allowed to make the defense that the corporation has not been regularly and legally incorporated. Where the subscriber made his contract of subscription previous to and in anticipation of the incorporation, and does not, by his subsequent acts, acquiesce in the mode of incorporation, he may set up that the corporation has not been incorporated, and that he is not liable. The rule that no right to object to any irregularity in their organization." Black R. & U. R R. Co. v. Clarke, 25 N. Y., 208 (1862); Leonardsville Bank v. Willard, 25 N. Y., 574 (1862); Buffalo & Allegany R. R Co. v. Cary, 26 N. Y. 75 (1852); Aspin- wall v. Sacchi, 57 N. Y, 331 (1874); Dor- ris v. French, 4 Hun. 292 (1875). Not, however, where, at the time of signing the articles, the names of the directors, required to be inserted, were not in- serted. Dutchess & C. C. R. R. Co. v. Mabbett. 58 N. Y., 397 (1874); Cayuga Lake R. R. Co. v. Kyle, 64 N. Y„ 185 (1876); Phoenix Warehousing Co. v. Badger, 67 N. Y, 294 (1876) ; De Witt v. Hastings. 69 N. Y, 518 (1877), admitting the defense on the ground that there was no user of a corporate franchise; Ruggles v. Brock, 6 Hun, 164 (1875); Mead v. Keeler, 24 Barb., 20 (1857); Ab- bott v. Aspinwall. 26 Barb., 202 (1857); Childs v. Smith, 55 Barb., 45 (1869); and see Childs v. Smith, 46 N. Y, 34 (1871) ; McFareon v. Triton, 4 Denio, 392 (1847). This is also the rule in the federal courts. Webster v. Upton, 91 U. S., 65 (1875); Chubb v. Upton, 95 U. S., 665 (1877). Contra, Thompson v. Guion. 5 Jones' Eq. (N. C), 113 (1859). Cf. Katama Land Co. v. Holly, 129 Mass., 540 (1880). The lapse of the charter, by limitation of time within which work must be commenced, is good defense. McCully v. Pittsburgh & C. R R Co., 32 Pa St, 25 (1858). Subscribers to increased cap- ital stock cannot escape liability there- for by setting up that the notice of in- crease was not published as required by statute. Handley v. Stutz, 139 U. S., 417(1891). A subscriber to stock in a West Virginia corporation doing all its business in Minnesota cannot set up that the company was not legally incorpo- rated, and cannot set up that the plaint- iff is not a corporation, he having par- ticipated in its incorporation. Minn., etc., Co. v. Denslow, 48 N. W. Rep., 771 (Minn., 1891). It is no defense that the charter was not registered in all the counties through which the road run?. Anderson v. Middle, etc., R R, 17 S. W. Rep., 803 (Tenn., 1891). Concerning the question of who can complain of mis- takes, irregularities and illegalities in the corporation, see § 5. Where the general railroad act provides that unless work is commenced within two years the charter shall be void, a subscriber for stock prior to incorporation may set up the defense that two years have elapsed and the charter is void. By- waters v. Paris, etc., R'y, 11 S. W. Rep., 856 (Tex., 1889). Cannot deny incorpo- ration when sued on a note given to it. Columbia Electric Co. v. Dixon, 49 N. W. Rep., 244 (Minn., 1891). A note given to be applied in payment of a subscrip- tion in a company to be formed has been held to be good even though the corporation was not legally formed, an attempt at incorporation having been made. Smith v. Gillen, 12 S. W. Rep., 1073 (Ark., 1890). 1 Kansas City Hotel Co. v. Hunt, 57 Mo., 126 (1874)." 233 § 1ST.] MISCELLANEOUS DEFENSES. [CH. a person contracting with a corporation recognizes thereby its capacity to contract, and cannot afterwards deny it in that^ trans- action, does not apply to one who subscribes before incorporation. He may insist upon the organization of a regular and legal corpo- ration. 1 §187. Ultra vires acts of the directors of the corporation.— A. subscriber for stock in a corporation cannot defeat an action to col- lect such subscription by the defense that the directors or the cor- poration itself have done corporate acts which are beyond the corporate powers. 2 There are other remedies open to the sub- scriber. He may either enjoin such ultra vires acts, or may have them set aside if already accomplished. 3 This defense is clearly iDorris v. Sweeney, 60 N. Y., 463 (1875); Rikhoff v. Browne R. S. S. M. Co., 68 Ind., 388 (1879) ; Indianapolis F. & Min. Co. v. Herkimer, 46 Ind., 142 (1874); Nelson v. Blakey, 47 Ind., 38 <1874); Mclntyre v. McLane D. Ass'n, 40 Ind., 104 (1872); Richmond Factory Ass'n v. Clarke, 61 Me., 351 (1873) ; Reed v. Richmond Street R R. Co., 50 Ind., 342 (1875); Taggart v. Western Md. R. R. Co., 24 Md., 563 (1866). the court saying: "The preponderance of au- thority in favor of a strict compliance with the provisions of the charter, in cases of subscriptions prior to the or- ganization of the company, is such as is not to be disregarded." Cf. Buffalo, etc., v. Hatch, 20 N. Y., 157 (1859). The " records, books and minutes " of a cor- poration are sufficient evidence of its incorporation. Glenn v. Orr, 2 S. E. Rep, 538 (N. Q, 1887). A subscriber may deny that a consolidated company which succeeds his own was legally incorporated. Mansfield, etc., R. R v. Stout, 26 Ohio St., 241 (1875): Brown r. Dibble, 32 N. W. Rep., 565 (Mich., 1887). In suing on an original subscription the corporation must allege that it has been duly incorporated. The payment of part of the subscription is no waiver of the defense. Schloss v. Montgomery, etc., Co., 6 S. Rep., 360 (Ala., 1889). Indefmite- ness in the statement of the objects of incorporation is no defense. Owenton, etc., Co. v. Smith, 13 S. W. Rep., 426 (Ky., 1890). a Cravens v. Eagle, etc., Co., 21 N. E Rep., 981 (Ind., 1889); First Municipality of N. O. v. Orleans Theater Co., 2 Rob. (La.), 209 (1842); Hannibal R C. & P. P. R. Co. v. Menifee, 25 Mo., 547 (1857); Vicksburg, S. & T. R. R Co. v. McKean, 12 La. Ann., 638 (1857) ; Smith v. Talla- hassee, etc., Plank-road Co., 30 Ala., 650 (1857) ; Prop, of City Hotel v. Dick- inson, 72 Mass., 586 (1856); Courtright v. Deeds, 37 Iowa, 503 (1873); 111. Grand T. R R Co. v. Cook, 29 111., 237 (1862); Hammett n Little Rock & N. R R. Co., 20 Ark., 204 (1859). In the case, how- ever, of Macedon & B. P. R Co. v. Lap- ham, 18 Barb., 315 (1854), an ultra vires extension of the line was held to be a good defense. Subscriber cannot set up that corporation has not complied with charter. Toledo, etc., R R. Co. v. Johnson, 49 Mich., 148 (1882). Ultra vires acts and no notice of meetings are not good defenses. Cartwright v. Dick- inson, 12 S. W. Rep., 1030 (Tenn., 1890). If a manufacturing corporation does not locate its works in the place prescribed by its articles of incorporation, a sub- scriber to stock may withdraw his sub- scription. Auburn, etc., "Works v. Schultz, 22 Atl. Rep., 904 (Pa., 1891). 3 " The stockholder has his remedy by injunction not to enjoin the collection of calls due upon his stock, but to re- strain the corporation from the partic- ular violation or abuse of its charter complained of." Miss., O. & Red R R R Co. v. Cross, 20 Ark., 443 (1859). 234 CH. X.] MISCELLANEOUS DEFENSES. [§ 1S3. distinguishable from the common defense of amendments to the charter, by the fact that the acts here complained of have no sanc- tion from the legislative authorities. 1 Thus, it has been held that a subscriber cannot defeat an action to collect his subscription by showing that the corporation has, without authority of law, and in excess of its powers, executed a lease or sale of the road ; 2 or illegally issued its bonds; 3 or purchased shares of its own stock, 4 or the stock of another corporation; 3 or changed the location or route of the road. 6 The last instance, especially, has been a fre- quent defense; but it has been uniformly discountenanced by the courts where the change in the route was made, not by an amend- ment to the charter, but by the arbitrary, unauthorized act of the corporate authorities. § 18S. Frauds and mismanagement of directors.— This defense is very similar to the preceding one, and is governed by the same rules of law. A stockholder cannot defeat an action to collect his subscription by the defense that the corporate affairs have been managed fraudulently or recklessly or negligently. 7 The stock- In Ex parte Booker, 18 Ark., 338 (1857), an application for an injunction to re- strain the corporation from enforcing the payment of a subscription, on the ground that the corporation had com- mitted ultra vires acts, was refused. And see, also, ch. 52, infra. i Caley v. Phil. & C. C. R. R. Co., 80 Pa. St., 363 (1876). A change in the law between the time of making a subscrip- tion and the obtaining of the charter may release or render illegal the sub- scriptions. Knox v. Childerburg Land Co., 5 S. Rep.. 578 (Ala., 1889). Where the statutes under which the company is organized allow the objects of the company to be changed on a vote of the stockholders, a dissenting stockholder is not released from his subscription by such change. Mercantile Statement Co. v. Kneal, 53 N. W. Rep., 632 (Minn., 1892). For the principles of law herein relative to amendments to the charter, see § 502, etc. 2 Hays v. Ottawa, O. & F. R V. R, R. Co., 61 111., 422 (1871) ; Ottawa, O. & F. R. V. R R. Co. v. Black. 79 111., 262 (1875); Chicago, B. & Q. R R. Co. v. McGinnis, 79 111., 269 (1875); 111. Mid R'y Co. v. Supervisors, etc., 85 111., 313 (1877); South Ga. & Fla. R. R Co. v. Ayres. 56 Ga., 230 (1876). See, also, Tuttle v. Mich. Air Line R R Co., 35 Mich., 247 ; Troy & Rutland R. R Co. V. Kerr, 17 Barb., 581 (1854). Or the whole of a business. Plate Glass Ins. Co. v. Sunley, 8 El. & BL, 47 (1857). 3 Merrill v. Reaver, 50 Iowa, 404 (1879). 4 i?e Republic Ins. Co., 3 Biss., 452 (1873). 5Cheltain v. Republic Life Ins. Co., 86 111., 220 (1877). 6 Central P. R, Co. v. Clemens, 16 Mo., 359 (1852) ; Miss., O. & Red R. R. R. Co. v. Cross, 20 Ark., 443 (lSr.9): Rives v. Montgomery, South P. R Co., 30 Ala., 92 (1857). Where, however, the terminus was made two thousand feet away from the location designated by charter, this fact was held to constitute 2»'i"M facie a good defense. Chartiers R. R Co. v. Hodgens, 77 Pa. St. 187. See, also. § 82, siijira. A change in the route under statutes existing before the incorporation does not release subscribers. Armstrong v. Karslmer, 24 N. E. Rep, 897 (Ohio, 1890). ■ People v. Barnett, 91 III.. 422 (1879); Cheltain v. Republic Life Ins. Co., 86 Til.. 220 (1877); Merrill v. Reaver, 50 235 § 1S9.] MISCELLANEOUS DEFENSES. [CH. X. holder's remedies for such evils are of a different nature. For fraud, he may bring the guilty parties to an accounting; 1 for mis- management, his only remedy is the corporate elections. In no case has he been allowed to escape liability on his subscription by reason thereof. Thus, it is no defense that the corporate authori- ties fraudulently placed an overvaluation on property purchased by them for the corporation ; 2 nor that they have made a fraudulent contract with a construction company. 3 § 139. Delay and abandonment of the enterprise. — As a general rule, it is no defense to an action on a subscription to allege that the enterprise has been unduly delayed. 4 The defense frequently is that there has been a non-user of the corporate franchises. 5 It is, however, a well-established principle that non-user of corporate franchises can be complained of only by the state or in the name of the state. A subscriber has been held not to be discharged by the fact that the corporation was engaged thirteen years in com- pleting the enterprise — a turnpike." Nor does a temporary aban- donment of the work release the subscriber. 7 But when the cor- porate work was not commenced for nine years, and in the meantime the subscriber had acted on the supposition of an abandonment and had sold property which the road was expected to benefit, he Iowa, 404 (1879). Depreciation of the stock, by reason of mismanagement, no defense. People v. Barnett, 91 111., 422 (1879). JSee ch. XXXIX. In the case of Hodgkinson v. Nat. Live Stock Ins. Co., 26 Beav., 473 (1859), equity restrained the enforcement of calls already made, by reason of the fraud of the directors ; but it was conceded in this case that the subscriber was still liable on his sub- scription. 2 Hornaday v. Ind. & 111. Central R. R. Co., 9 Ind., 263 (1857); Dorris v. French, 4 Hun, 292 (1875), where a pat- ent-right was purchased by the direct- ors from themselves, for the corpora- tion, at an exorbitant price. 3 People v. Logan County, 63 111., 374, 387 (1872). 4 Pickering v. Templeton, 2 Mo. App., 424 (1876); Miller v. Pittsburgh & C. R. R Co., 40 Pa. St., 237 (1861), where there was a delay of two and one-half years, the court saying: "Until it can be shown how railroads can be built with- out money, no such defense as is here set up can prevail." First Nat'l Bank v. Hurford, 29 Iowa. 579 (1870), where there was a delay in the performance of a condition subsequent to the subscription. See, also, Union Hotel Co. v. Hursee, 79 N. Y., 454 (1880) ; reversing 15 Hun, 371. Boyle's Case, 54 L. J. (Ch.), 550 (1885), holds that after a winding-up has com- menced there can be no withdrawal ; but the court in a dictum clearly says that an unreasonable delay in organiz- ing will authorize a withdrawal by the subscriber. But where the charter has lapsed by reason of not complying with its terms, the stockholder is not liable. Sod us Bay, etc., R R Co. v. Lapham, 43 Hun, 314 (1887). s Ouachita & Red R R R Co. v. Cross, 20 Ark, 443 (1855); Hammett v. Little Rock & N. R R Co., 20 Ark., 204 (1859). « Gibson v. Columbia & N. R, T. & B. Co., 18 Ohio St., 396 (1868). " McMullen v. Maysville & Lex. R R Co., 15 B. Monr. (Ky.), 218 (1854). 236 CH. X.] MISCELLANEOUS DEFENSES. [§ 190. was held not liable on the subscription. 1 An abandonment of part of the enterprise, however, is no defense. 2 A subscriber cannot defeat the subscription by the fact that the corporation has not completed, and has no intention of completing, the road in its entirety; 3 nor bv the fact that the road has been sold under foreclosure. 4 In Pennsylvania a failure on the part of the corporation to make a call for the subscription within six years, the statutory time of limitations on the collection of parol debts, is held to constitute an abandonment of the subscription, and to be a ^ood defense. 5 If the corporation is insolvent, and the subscrip- tion is needed to pay corporate creditors, abandonment cannot In- set up. 6 § 190. Failure of the corporate enterprise. — The entire failure of the enterprise and the insolvency of the corporation constitute no defense to an action on calls. 7 This defense would seem on the face of it to be frivolous, and yet is occasionally set up. Under the American doctrine a subscription is enforceable most of all when it is needed to pay corporate creditors. This defense is closely allied to those that precede, and differs in little from the defense of abandonment of the enterprise. 1 Fountain Ferry T. R. Co. v. Jewell, 8 (1858), where the court say, "if the de- B. Mour. (Ky.), 147 (184S). A note in payment of a subscription, payable by its terms after the road had been partially completed, is not enforceable where the enterprise was abandoned and fourteen years afterwards was revived and the road built. Blake v. Brown, 44 N. W. Rep., 751 (Iowa, 1890). 2 Dorman v. Jacksonville & A. P. R Co., 7 Fla., 265 (1857). No defense that the company had abandoned a part of its business nor that the company was organized for the sole benefit of the charter members. Dallas, etc., Mills v. Clancy, 15 S. W. Rep., 194 (Tex., 1891). 3 Buffalo & J. R R. Co. v. Gifford, 87 N. Y.,294 (1882) affirming 22 Hun, 359. No defense that road not fully completed. Armstrong v. Karshner, 24 N. E. Rep., 897 (Ohio, 1890) ; Lesher v. Karshner, id., 882. * Id. 5 Pittsburgh & C. R. M. Co. v. Byers, 32 Pa. St, 22 (1858). The same rule is stated less broadly in McCully v. Pitts- burgh, etc., J. R R Co., 32 Pa. St., 25 lay was not satisfactorily accounted for, subscribers would be at liberty after that lapse of time to consider the enter- prise abandoned." In this case an act- ual abandonment and return of sub- scription money to other subscribers was held to release all the subscribers. In Delaware, etc., R. R Co. v. Row- land, 9 Atl. Rep., 929 (Penn., 1S87), it was submitted to the jury whether the subscriber had been released by an abandonment of the enterprise. See, also, § 195. infra. 6 Phoenix Warehousing Co. v. Badger, 67 N. Y., 294 (1876): Smith v. Gower, 2 Duv. (Ky.), 17 (1865); Hardy v. Merri- wether, 14 Ind., 203; and see the de- fense in § 190. 7Bish v. Bradford, 17 Ind., 490 (1861): Morgan County v. Thomas, 76 III.. 120, 141 (1875); Four-mile V. R R Co. v. Bailey, 18 Ohio St.. 208 (1868). Assess- ments are collectible though the work is not completed. Red W. Hotel Co. v. Friedrich. 26 Minn., 112 (1879). See Buffalo, etc., R. R. Co. v. Gifford, supra. 237 §§ 191, 192.] MISCELLANEOUS DEFENSES. [CH. X. § 191. Subsections of other subscribers released or canceled, or Whi bill must.be so framed as to permit other creditor-, they elect, to come in and be made parties to the - - in no way necessary to join them as parties. The other creditors are proper but not necessary parties. 3 Several creditors, however, Knox Insurance C ,22 How.. I - :•: 591 In practice a receiver is usually appoir: amount of t be corporate debts and tbe amount necessary to be contributed by the holders of shares I paid up i- : lined by proof, or through a referee and master's report, and then there is a final decree afford- ing, so far as the ase - .mit. adequate relief, and, in any e jportional relief to a. -. Dalton, etc.. R R Co. n McDanieL 56 Ga.. 191 (1876 : Wil- I - :kholders, IS Bank Reg . ITS: Ogilvie v. Knox Insurax. i? How., 380 (1359). I Handle; a Statz I ] U. S, (1890); Crease ■:. Babcock. 51 Mass., 525 (1846); Holme- - r :y. (1881); Sawyer a Hoag, 17 Wall, 610 (1ST? : Kffls n Scott 99 U. BL, BS (1878); Patterson n Lynde, 106 id., 519 (1882). A creditor's suit to collect un- paid subscriptions must n I only be in equity but must be for the benefit of all creditors. Bickley r. Schlag. SO Al Rep. 25 K J- 1880). >therbee V. Baker. 35 K J. E- : .. 501 (1882 : Coleman r. White, 14 W - 968); Carpenter v. Marine Bank. 14 :.."•" : 1862); Morgan n New York. etc.. R R Co.. 10 Paige. 290 184 : Masters v. Rossie Lead Mining . 8 Sandf. Chan.. 301 (1845): Mann . Pentz. 3 N. Y„ 415 1850); Hmsted Buskirk. IT Ohio St.. 11 ase . Babcock. 51 Ma ^- 52S 1846); Pollard • Bailey. 30 Wall.. 580 (1974 : TVrry r. -.7 e, 101 C . S . 1879) Any cred- itor has a right to come in, establish his claim and share pro rata in the dis- tribution of the assets, even though the bill was not filed for the benefit of such as should choose to come in and share the expense. Turnbull r. Prentiss Lum- ber C 37(1884). See, also. Tallmadge r. Fishkill Iron Co.. 4 Barb., 393 (184S); Wal- rain. IT id.. 1 In consequence thereof no one creditor can, by superior diligence in filing a bill, obtain a preference other creditors in respect of the unpaid balances of iptions. Vide the - in preceding note. There is. how- ever, an earlier case in the Ohio re- - which e bo recognize such a preference. Miers r. Zanesville & Mays- ville .Turnpike Co., 13 Ohio. 197 U See Adler a. Milwaukee, etc., Co. 13 Wis.. 57 1868 : Wright :: McCormack, - ^(1866). There mustbe an account taken of the amount of debts, assets and unpaid capital and a decree for an assessment of the amount due by each stockholder. Bell's Appeal S Ati ".77 Penc. 1887 . Ofcha he jury to say whether the whole b unpaid subscriptions are needed to pay corporate debts. Citizens', etc., •. Gillespie. 9 Atl Rep.. T3 (Pa., 1SST The pleadings may be of such a nature that the trial must be at law. Glenn a Lancas: s Marsh v. Burroughs. 1 Woods. 463 1871); Crease r. Babcock, 51 Mas § 206.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [CH. XI. cannot bring separate suits of this nature. They must all join in one proceeding. 1 The stockholders need pot wait to be made parties defendant to a creditors' bill before moving for contribu- tion, but may, in a proper case, before a suit in the nature of a creditors' bill is filed against them by creditors of the corporation, file a bill in equity upon their own account, making the corpora- tion a party, to enforce the payment of unpaid balances of sub- scription, for the payment of corporate indebtedness, and for contribution. 2 § 206. Parties defendant. — The defendants to such a suit should be the corporation itself, 3 and all from whom an unpaid subscrip- (1846); Hatch v. Dana, 101 U. S., 205 (1879). Cf Adler v. Milwaukee, etc., Co., 13 Wis., 57 (1860). Corporate cred- itor suing need not join all the corpo- rate creditors as co-cornplainantsnor all the stockholders liable as defendants. Appeal of Cornell, 6 Atl. Rep., 258 (Pa., 1886). Other creditors may come in on a bill by a creditor to collect unpaid subscriptions. Bailey v. Pittsburg, etc., Co., 21 Atl. Rep, 72 (1891). 1 Crease v. Babcock, 51 Mass., 525 (1846). But see Perry v. Turner, 55 Mo., 418 (1874). And an action to compel the pa3 r ment of an unpaid subscription may be joined by a creditor with an action to enforce a statutory liability. Warner v. Callender, 20 Ohio St., 190 (1870). Accordingly, where a bill is filed, on behalf of all the creditors who chose to come in, against all the stock- holders in default, the courts will en- join a separate creditor's suit Pierce v. Milwaukee Construction Co., 38 Wis., 253 (1875). Cf. Coleman v. White, 14 id.. 700 (1862); Carpenter v. Marine Bank, id., 705, n. (1862); Ballston Spa Bank v. Marine Bank, 18 id., 490 (1864). A stockholder who is also a creditor may file a bill as a creditor to reach un- paid subscriptions. He must, however, pay his own subscription in full. Bick- ley v. Schlag, 20 Atl. Rep., 250 (N. J., 1890) ; Bissit v. Kentucky River Naviga- tion Co., 15 Fed. Rep., 353 (1882), and the valuable note ; Thompson v. Reno Sav- ings Bank (Nev., 1885). Cf. Hogg's Ap- peal. 88 Penn. St, 195 (1878) ; Calhoun v. The Steam Ferry Boat, etc., 27 Int Rev. Rec, 273 (1881), in which case it is held he cannot sue the corporation. But see Milvain v. Mather, 5 Exch., 55 (1850). in which it is held that a corpo- ration sued by a stockholder may set off any amount due by him on calls. Cf. Ex parte Windsor, 3 Story's CO, 411 (1S44); Weber v. Fickey, 47 Md., 196 (1877), holding that a stockholder who is also a creditor and who has not fully paid his subscription cannot re- cover from another stockholder the full amount of his claim. Emmert v. Smith, 40 id., 123, to same effect. In distrib- uting the proceeds of sale of the prop- erty of a corporation the claims of such creditors as are stockholders should bo reduced by the amount unpaid upon their stock. 2 Fiery v. Emmert, 36 Md., 464 (1872). 3 The corporation is ordinarily a nec- essary party. Mann v. Pentz, 3 N. Y., 415 (1850); Walsh v. Memphis, etc., R. R Co., 2 McCrary, 156(1881); S. C, 19 Fed. Rep., 152; Wilbur v. The Stock- holders, 18 Bank. Reg., 178 (1846) ; Wetherbee v. Baker. 35 N. J. Eq., 501 (1882) ; First Nat Bank v. Smith, 6 Fed. Rep., 215 (1879); Brinkerhoff v. Brown, 7 Johns. Chan., 217 (1823). But see, contra, Walser v. Seligman, 21 Blatch, 130 (1882), a well-considered case, and Wellman v. Howland Coal & Iron Works, 19 Fed. Rep.. 51 (1884). In the former of these cases the court say : "Suf- ficient reason for not making it (the corporation) a party is found in the 258 CH. XI.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [§ 200. tion is due, except such as are unknown or insolvent, or be\ 7 ond the jurisdiction. 1 The stockholders against whom the bill is filed may, however, it seems, when all are not made parties, file a cross-bill, obtain a dis- fact that it is beyond the jurisdiction of this court, and also in the fact that it is practically defunct" In the case last cited it was Held that, where a cor- poration is without property or officers or place of business, it need not be made a party of record. i Vick v. Lane. 56 Miss.. 681 (1879) ; "Walsh v. Memphis, etc.. R R Co., 2 McCrary, 156 (1881); Hadley tt Russell, 40 N. H., 109 (18601; Erickson v. Ne- smith, 46 id., 371 (1860); Pierce tt Mil- waukee, etc., Co., 38 Wis., 253 (1875); Coleman v. White, 14 id., 700 (1862); Carpenter v. Marine Bank, 14 id., 705, n. (1862); Umsted tt Buskirk, 17 Ohio St, 113(1866); Mann tt Pentz. 3 N. Y., 415 (1850). Cf. Young tt New York & Liverpool Steamship Co., 10 Abb. Prac, 229 (1860), holding that judgment cred- itors are not proper parties defend- ant without showing why they were not made parties plaintiff. The bill should contain an appropriate allega- tion as to the shareholders unknown, insolvent, or out of the jurisdiction, and a prayer that, upon discovery, they be made parties when possible. Bogardus v. Rosendale Manufacturing Co., 7 N. Y., 147(1852\ "Where the attempt is to reach the liability of the shareholders on their subscription to capital stock, all the solvent stockholders within the ju- risdiction must be joined, except where this will be excused upon an allegation that the number is too great" Chal- mers, J., in Vick v. Lane, 56 Miss., 681, 684 (1879). Cf. Bonewitz tt Van Wert Co. Bank, 41 Ohio St, 78 (1884). But on the other hand, with respect to the matter of joining all the solvent share- holders who are in arrears as parties de- fendant to the bill, provided they are within the jurisdiction, we find a line of authorities in support of the proposi- tion that all such stockholders are not always necessary parties to the bill, that such a suit may properly be brought against one, or any, of the delinquent stockholders as well as against all, and that a bill will not be hold defective merely because it fails to include all the delinquent stockholders as parties de- fendant. Ogilvie v. Knox Insurance Co., 22 How., 380 (1859); Hatch v. Dana, 101 U. S., 205 (1879); Marsh tt Bur- roughs, 1 Woods, 463 (1871); Holmes tt Sherwood, 3 McCrary, 405 (1881); Glenn v. Williams, 60 Md., 93 (1882) ; BartL tt tt Drew, 57 N. Y., 587 (1874) ; Griffith tt Mangam, 73 id.. 611 (1878); Brundage v. Monumental, etc., Mining Co.. 12 Ore- gon, 322 (1885). Cf. Von Schmidt tt Huntington, 1 Cal., 55 (1855); Lamar Insurance Co. tt Gulick, 102 111., 41 (1882). Any other rule would place upon the creditor a burden which would be unjust and perhaps destructive of the remedy itself. In Hatch v. Dana, supra, there was a bill to compel pay- ment of a debt out of the unpaid sub- scription of a single stockholder. It was not sought to wind up the com- pany. It being urged that a creditor of an insolvent corporation is not at lib- erty to proceed against one or more delinquent subscribers to recover the amount of his debt, without an account being taken of c.ther indebtedness, and without bringing in all the stockholders for contribution, the court, by Mr. Jus- tice Strong, said: "The liability of a subscriber for the capital stock of a company is several and not joint. By his subscription each becomes a several debtor to the company, as much so as if he had given his promissory note for the amount of his subscription. At law, certainly, his subscription may be en- forced against him without joinder of other subscribers, and in equity his lia- bility does not cease to be several A 259 § 206.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [ch. XL covery of the remaining delinquent stockholders, bring them in as parties, and thus enforce contribution. 1 If all the parties who are liable have not been brought before the court, it has been held that those who are defendants of record cannot be charged with liabil- ity which should fall upon those who are absent, unless it be shown that the absentees are insolvent or beyond the jurisdiction of the court. 2 There is doubt, however, as to the soundness of this rule. creditor's bill merely subrogates the creditor to the place of the debtor, and garnishes the debt due to the indebted corporation. It does not change the character of the debt attached or gar- nished. It may be that, if the object of the bill is to wind up the affairs of this company, all the shareholders, at least so far as they can be ascertained, should be made parties, that complete justice may be done by equalizing the burdens, and in order to prevent a mul- tiplicity of suits. But this is no such case. The most that can be said is that the presence of all the stockholders might be convenient, not that it is nec- essary. When the only object of a bill is to obtain payment of a judgment against a corporation out of its credits or intangible property, that is, out of its unpaid stock, there is not the same rea- son for requiring all the stockholders to be made defendants." See, also, Bone- witz v. Van Wert Co. Bank, 41 Ohio St., 78 (1884), where it was held error to give judgment against the defendants prop- erly before the court, when the return of the summons was entirely silent as to two of the defendants. As to when bills brought by creditors in these cases are and are not multifarious, see Allen v. Montgomery R R Co., 11 Ala., 437 (1847): Cambridge, etc., Co. v. Somer- ville, etc., Co., 14 Gray, 193 (1860), where the liability of some of the defendants was as directors and of others as stock- holders, and the bill was held to be multifarious. Barre National Bank r. Hingham Manuf. Co., 127 Mass., 563 (1879); Popo v. Leonard, 115 id., 286 (1874); Deaderick v. Wilson, 8 Baxter, 108 (1874) ; Holmes v. Sherwood, infra. 260 Executors of a deceased stockholder may be joined with other stockholders as defendants where the suit is in equity. Hamilton v. Clarion, etc., R R, 23 Atl. Rep., 53 (Pa., 1891). A creditor's bill filed to collect the unpaid subscriptions of stockholders will be dismissed where only a few of the stockholders are made party defendants and no allegation is made showing clearly and in detail that the other stockholders cannot be reached and brought in. Dunstonr. HoptonieCo., 47 N. W. Rep.. 322 (Mich., 1890). An in- solvent stockholder is not necessarily a party to a suit by corporate creditors to collect subscriptions. Wilson v. Cali- fornia, etc., Co., 54 N. W. Rep., 643 (Mich., 1893). All the stockholders need not be joined as defendants. Baines v. Bab- cock, 30 Pac. Rep, 776 (Cal., 1892); Gib- bons v. Trinsel, 48 N. W. Rep., 255 (Wis., 1891). A stockholder may be held liable on a subscription, although the corpora- tion is not made a party defendant and other stockholders are not joined. A court of equity has jurisdiction. Potter v. Dear, 30 Pac. Rep., 777 (Cal., 1892). 1 Hatch v. Dana, 101 U. S., 205 (1879). In the original bill itself there may properly be a prayer, when some of the delinquent shareholders are unknown, for a discovery, in order that such un- known stockholders may be made par- ties by amendment. Hippie v. Five, etc., Imp. Co., 3 Atl. Rep, 682 (N. J., 1886); Bogardus v. Rosendale Manuf. Co., 7 N. Y., 147 (1852) ; Morgan v. New York, etc., R R. Co., 10 Paige, 290. 2 Wood v. Du miner, 3 Mason, 308 (1824), But see Marsh v. Burroughs, 1 Woods, 463 (1871). Cf. Erickson v. Nesmith, 46 N. H, 371 (1866). Contra, CH. XI. j SUBSCRIPTIONS AND CORPORATE CREDITORS. [§§ 207, 208. §207. A court of equity may make a call. — It is well settled that, when stock is subscribed to be paid in upon call by the cor- porate authorities, and the company neglects or refuses to make such calls as are necessary to raise funds to meet the just cor- porate obligations, a court of equity will itself make the necessary calls if the interests of the creditors require it. 1 The court will, in behalf of the creditors, do what it is the duty of the corporation to do in respect of calls. 2 And the court may make the call al- though the statute says calls shall be made by the trustees, direct- ors or managers. 3 The question of whether interest on the call may be collected is considered elsewhere. 4 § 208. Receivers and assignees in bankruptcy for the benefit of creditors — Their duties, powers and liabilities as to unpaid sub- scriptions. — When a corporation becomes insolvent, with corporate Appeal of Cornell, 6 Atl. Rep.. 258 (Pa., 1886), citing Strong's Appeal, 10 W. N. Cases, 409. "When there are delinquent stockholders beyond the jurisdiction, the stockholders who have been sued and compelled to pay more than their due proportion must look to them for contribution. Holmes v. Sherwood, 3 McCrary, 405 (1881). ! See § 108, supra. 2 Scovill v. Thayer, 105 U. S., 143, 155 (1881); Hatch v. Dana, 101 id., 205, 214 (1879); Curry v. Woodward, 53 Ala., 371 (1875); Wilbur v. Stockholders, 18 Bank. Reg., 178 (1878); Marsh v. Bur- roughs, 1 Woods, 463 (1871): Myers v. Seeley, 10 Bank. Reg, 411 (1874) ; Henry v. Vermillion, etc., R R. Co., 17 Ohio, 187 (1848); Robinson v. Bank of Darien, 18 Ga., 65 (1855); Ward v. Griswolds- ville Mfg. Co., 16 Conn., 593 (1844); Sanger v. Upton, 91 U. S., 56 (1875); Chubb v. Upton, 95 id., 665 (1877); Glenn v. Williams, 60 Md., 93 (1882). Cf. Germantown, etc., R'y Co. v. Fitler, 60 Pa. St., 124 (1869); Chandler v. Keith, 42 Iowa, 99 (1875); Mann v. Pentz, 3 N. Y., 415 (1850); Ogilvie v. Knox In- surance Co., 22 How., 380 (1859) ; Adler v. Milwaukee Mfg. Co., 13 Wis., 57 (1860). And see Seymour v. Sturgess, 26 N. Y., 134 (1862); Wheeler v. Millar, 90 id., 353 (1882). The court itself may make a call. Marson v. Deither, 52 N. W. Rep., 38 (Minn., 1892). A call is necessary, or the equivalent, where the receiver sues. Chandler v. Siddle, 3 Dill., 477 (1874). No call is necessary where creditors file a bill to reach un- paid subscriptions. Hamilton v. Clarion, etc., R R, 23 Atl. Rep., 53 (Pa., 1891). Non-resident stockholders are bound by the decree of the court levying the as- sessment Howard v. Glenn, 11 S. E. Rep., 610 (Ga., 1890). Where the stat- ute requires twenty days' notice to stockholders before calls are made, cred- itors must give this notice before claim- ing and collecting the unpaid subscrip- tion. Universal, etc., Co. v. Tabor, 27 Pac. Rep., 890 (Colo., 1891). 3 Crawford v. Rohrer, 59 Md., 599 (1882). Cf. Glenn v. Saxton, 68 Cal., 353 (1886). A call may be made in be- half of corporate creditors although the company had contracted with the stock- holders not to call in the subscriptions until a later date. Re Cordova, etc., Co., 64 L. T. Rep., 772 (1891). Where, how- ever, it was provided by the charter of the corporation that all calls are to be made only upon a three-fourths vote of the stockholders, it was held that a call by the court was irregular. Trustees of the Louisiana Paper Co. v. Waples, 3 Woods, 34 (1877). * See S 112. 261 § 20S.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [CH. XT. creditors on the one hand pressing their claims, and subscriptions to the capital stock wholly or partially uncollected on the other hand, it is usual to place the assets of the company, including the claims against delinquent share-owners, in the hands of a third per- son for the benefit of all concerned. Such a person may be an assignee under state insolvent laws, a receiver, or an assignee for the benefit of creditors. A receiver in such a case may be defined to be a third person appointed by a court of equity to act as the representative alike of creditors and stockholders for the purpose of collecting the corporate assets and paying the corporate debts. 1 It is the right and duty of such a receiver to collect the unpaid subscriptions, so far as may be necessary, for the purpose of pay- ing the corporate debts in full. 2 1 Johnson v. Laflin, 5 Dill., 65 (1878) ; High on Receivers (2d ed.), 1. 2 Dayton v. Borst, 31 N. Y., 435 (1865); Nathan v. Whitlock, 9 Paige, 152 (1841); Mean's Appeal, 85 Pa. St., 75 (1877); Dorris v. French, 4 Hun, 292 (1875) ; Van Wagenen v. Clark, 22 id., 497 (1880); Frank v. Morrison, 58 Md., 423(1882); Chandler v. Brown, 77 111., 333(1875); Cnlkins v. Atkinson, 2 Lans., 12 (1870). Of. Tucker v. Gilman, 45 Hun, 193 (1887). Assignee for benefit of cred- itors of an insolvent corporation may enforce unpaid subscriptions. Cham- berlain v. Bromberg, 3 S. Rep., 434 (Ala., 1888); Tobey v. Russell, 9 R I., 58(1868); Stewart v. Lay, 45 Iowa, 604 (1877): Clark v. Thomas, 34 Ohio St., 46 (1877) ; Phoenix, etc., Co. v. Badger, 67 N. Y., 294 (1876). As incidental to the receiver's power to collect unpaid bal- ances of subscription, it is held that he may, as an officer of the court, make calls for the amount due. Hall v. United States Ins. Co., 5 Gill (Md.), 484 (1847); Rankine v. Elliott, 16 N. Y., 377 (1857). Lionberger v. Broadway, etc., 10 Mo. App., 499 (1881), holds that an as- signee for benefit of creditors may, by a bill in equity, compel the directors of the insolvent corporation to make an assess- ment upon the capital stock, payable to him ; such a suit is not affected by the fact that certain creditors are proceed- ing against the stockholders by motion under the statute, since the proceeding by motion is cumulative merely and not exclusive. Chandler v. Keith, 42 Iowa, 99 (1875), holds that a stock- holder who had paid all regular assess- ments could not be called upon by the receiver, in an action at law, to pay the remainder of his subscription until a general call is made upon the stock- holders for the amount assessed upon their shares, and this call should be preceded by the fact that losses have been sustained by the corporation, showing a necessity for an assessment and call upon the stockholders. Under the English Railway Companies Act of 1867, a receiver has no such power. In re Birmingham, etc., R'y Co., L. R., 18 Chao. Div., 155 (1881). In New York, by statute, the receiver may sue. See Dayton v. Borst, 31 N. Y, 434 (1865); and see, previous to the statute, Mann v. Pentz, 3 N. Y, 415' (1850), reversing 2 Sandf. Ch., 257. The receiver cannot enforce the subscription where the de- fendant had transferred his stock and been discharged by the corporation. Cutting v. Damerel, 88 N. Y, 410 (1882). It may be remarked here that the re- ceiver has no power to enforce statutory liability, this liability not being an asset of the corporation. See Farnsworth v. Wood, 91 N. Y, 308 (1883), and the chapter on Statutory Liability, infra. The receiver of a foreign corporation, 262 CH. XI.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [§ 20S. As long as the authority of the receiver exists, a creditor can- not directly bring suit against delinquent shareholders, but the re- ceiver may be compelled to act in the matter at the instance of creditors. 1 An assignee for the benefit of the creditors of a corporation, like a receiver, represents both the corporation and the creditors, and should collect unpaid subscriptions ; 2 and, in like manner, an as- duly empowered to sue at home, may- sue resident stockholders for the bal- ances due the company, provided the corporation itself could have done so if it had remained solvent. Dayton v. Borst, 31 N. Y., 435 (1865), a case where a receiver appointed by the court of chancery in New Jersey was held com- petent to maintain a suit of this nature in New York against a citizen thereof. Mann v. Cook, 20 Conn., 178 (1850) ; Mc- Donough v. Phelps, 15 How. Prac, 372 (1856): Seymour v. Sturges, 26 N. Y., 134 (1862). It has been held that a re- ceiver may collect unpaid balances due on subscriptions, although the other corporate assets have not been collected and the amount of the liabilities is un- determined. Starke v. Burke, 9 La. Ann., 341 (1854). And that if, on the final settlement, there is a surplus, it is to be returned pro rata to the share- holders. Pentz v. Hawley, 1 Barb. Chan. (N. Y), 122 (1845). But the more modern and better rule is that a receiver has no authority to call upon a sub- scriber for his unpaid balance until the court have determined the amount of the corporate indebtedness and fixed definitely the liability of each share of the stock. Chandler v. Keith, 42 Iowa, 99 (1875). See, also, Mills v. Scott, 99 U. S., 25 (1878> After a transfer, the transferrer is not liable to the receiver any more than he would have been to the corporation. Billings v. Robinson, 94 N. Y, 415 (1884) ; affirming 28 Hun, 122. The court cannot give a receiver power to compromise claims upon un- paid subscriptions. Chandler v. Brown, 77 111., 333 (1875). See §§ 167-171, 210. It has been held that the assignee can- not sue to set aside a fraudulent device by which a stockholder has escaped payment of his subscription. Boutou v. Dement, 14 N. E. Rep, 62 (111., 1887). Receiver cannot enforce subscriptions which the corporation could not enforce. Winters v. Armstrong, 37 Fed. Rep., 508 (1889). The receiver may sell the sub- scription at auction and the subscriber may buy it. Dean v. Biggs, 25 Hun, 122 (1881). 1 It is the receiver's duty to act promptly and vigilantly in the collec- tion of the assets, and to compel pay- ment of balances due by subscribers on unpaid stock, if such a course is neces- sary to meet the demands of creditors. If the receiver fails to do his duty in this respect the creditors may compel him to act, inasmuch as they cannot act directly themselves. Gas Light Co. v. Haynes, 7 La. Ann., 114 (1852); New Orleans Gas Light Co. v. Bennett, 6 id., 457 (1851); Starke v. Burke, 9 id, 341 (1854); Atwood v. Rhode Island Agric. Bank, 1 R. I, 376 (1850); Rankine v. El- liott, 16 N. Y, 377, holding that when a receiver of an insolvent railroad is ap- pointed in an action in behalf of all its creditors, the right to proceed for the collection of unpaid subscriptions vests in him, and a judgment creditor will be enjoined from proceeding against a stockholder in an action begun after the order was made but before the appoint- ment is perfected. "While the receiver is in charge, a corporate creditor cannot sue to enforce a stockholder's liability on an unpaid subscription. Merchants', etc., Bank v. Northwestern, etc., Co., 51 N. W. Rep, 119 (Minn., 1892). 2 Shockley v. Fisher, 75 Mo., 498 (1882) ; 263 § 208.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [CH. XI. signee in bankruptcy could recover the amounts due by' stockhold- ers on account of their subscriptions, and his proper remedy was 'Vanderwerker v. Glenn, 6 S. E. Rep., 806 (Va., 1888>. Of. Germantown, etc., R'y Co. v. Fitler, 60 Pa. St., 124 (1869): Eppright v. Nickerson, 78 Mo., 482 (1883), holding that an insolvent corporation may include in an assignment for the heneflt of its creditors the liability of its stockholders for unpaid stock for which no call has been made. An action at common law on subscriptions must be in the company's name and not in the name of the assignee of the com- pany. Glenn v. Marbury, 145 U. S., 499 (1892). An assignee of the corporation for the benefit of creditors may sue. Cartright v. Dickinson, 12 S. W. Rep., 1080 (Tenn., 1890). An assignment for the benefit of creditors made by order of a directors' meeting at which three directors were present and the other two were not notified is invalid and no bar to a creditor's action to collect unpaid sub- scriptions. Docrubecher v. Columbia, etc., Co., 28 Pac. Rep., 899 (Oreg., 1892). In Indiana a creditor of a manufactur- ing corporation can collect his debt from unpaid subscriptions through a receiver, and in that way only. Wheeler v. Thayer, 22 N. E. Rep, 972 (Ind., 1889). The United States district court has jurisdiction of an action by the receiver of an insolvent national bank to collect assessments on stock. Stephens v. Bernays, 44 Fed. Rep., 642 (1890). A re- ceiver may cause to be assessed and may collect assessments on parties liable therefor to pay insurance losses. Mc- Donald v. Ross-Lewin, 29 Hun, 87 (1883). Where a receiver is appointed to take charge of the " whole property " he may sue to collect unpaid subscriptions. Showalter v. Laredo, etc., Co., 18 S. W. Rep., 491 (Tex., 1892). In a judgment creditor s suit for sequestration and a receiver, both the corporation and a stockholder liable on his subscription being made parties, the receiver may have judgment against the stockholder. Spooner v. Bay, etc., 50 N. W. Rep, 601 (Minn., 1891). Although some fraudu- lent claims have been allowed in the court which appointed the receiver and made the calls, yet a stockholder who is sued in another state cannot enjoin the collection of the judgment on that ground. Foote v. Glenn, 52 Fed. Rep., 529 (1892). Although the statute of limitations is a bar, unless the court al- lows creditors to be substituted in place of a receiver, who has brought suits to enforce the liability of stockholders and is held not to have had authority to do so, yet such substitution will not be granted. Fairbanks v. Farwell, 30 N. E. Rep., 1056 (111., 1892). The position of the receiver as regards the collection of subscriptions is thus stated in Republic Life Ins. Co. v. Swigert, 25 N. E. Rep., 680 (111., 1890). "We understand the rule to be that, where a receiver is ap- pointed for the purpose of taking charge of the property and assets of a corporation, he is, for the purpose of de- termining the nature and extent of His title, regarded as representing only the corporate body itself, and not its cred- itors or shareholders, being vested by law with the estate of the corporation and deriving his own title under and through it; and that, for purposes of litigation, he takes only the rights of the corporation, such as could be as- serted in his own name ; and that upon that basis only can he litigate for the benefit of either stockholders or credit- ors. . . . Almost all of the causes cited by defendants in error fall in one or another of the four classes following : Where the receiver by force of some statute can act for the creditors; where the act complained of was ultra vires and not binding upon the corporation ; where the receiver was appointed in a proceeding prosecuted by creditors, which was supplemental to execution, and the receiver had the rights of the 264 CIL XI.] SUBSCRIPTIONS AlfD CORPORATE CREDITORS. [§ 209. by bill in equity, making all the delinquent shareholders parties to the bill. 1 § 209. The judgment against the corporation impeachable only for fraud or want of jurisdiction. — That a judgment conclusively settles all matters of controversy involved in the suit, so far as par- ties or their privies are concerned, excepting where it may be im- peached for fraud or want of jurisdiction, is well-established law. When, therefore, a corporate creditor has obtained judgment against the corporation, and execution is returned unsatisfied, and he then proceeds to enforce his remedy against the holders of stock not paid up, the question arises whether the stockholders ma}^ set up in defense matters which the corporation might have set up or did set up to defeat the creditor's claim against the corporation. It has been strenuously insisted that he might. This was Chan- cellor Kent's famous contention in the case of Slee v. Bloom ; 2 but the authorities have firmlv established the rule that, in the absence of fraud and collusion, judgments against the corporation, if the court had jurisdiction, are conclusive against the stockholders as to the validity and amount of the creditor's claim. 3 Thus, it is held creditors at whose instance, and to se- cure whose claims, he was appointed ; and where the receiver was suing for property or assets that belonged to the debtor. . . . We think the decided weight of authority sustains the rule in respect to the powers of receivers, where there has been no enlargement of their powers by legislative enactment, that they have such rights of action only as were possessed by the persons or corporations upon whose estates they administer." The court referred to and considered many authorities. "The re- ceiver represents the creditors as well as all other parties interested in the corporation." A subscriber sued by him on the subscription cannot set up fraudulent representations inducing him to subscribe. Ruggles v. Brock, 6 Hun, 164 (1875). Where the bonds are invalid a receiver appointed in the foreclosure suit has no power to collect subscrip- tions. Farmers' L. & T. Co. v. San Diego, etc., St Car Co., 49 Fed. Rep., 188 (1892). A receiver may collect the un- paid par value of stock issued for cash at less than par, even though the cor- poration agreed with the stockholders that no more than the amount already paid should ever be required. Such an agreement does not bind the receiver in so far as it is necessary for him to col- lect the money to pay creditors. Mathis v. Pridham, 20 S. W. Rep., 1015 (Tex., 1892). i Sawyer v. Hoag, 17 Wall., 610, 621 (1873) ; Upton v. Tribilcock, 91 U. S., 4!> (1S75); Sanger v. Upton, id., 56: Web- ster v. Upton, id., 65 ; Chubb v. Upton, 95 id., 665 (1877) ; Payson v. Stoever, 2 Dill., 427 (1873) ; Upton v. Hansbrough, 3 E-iss., 417 (1873). Cf. County of Mor- gan v. Allen, 103 U. S, 498 (1880). The principles of equity applicable to actions by a receiver in cases of this nature will, in general, unless some statute has changed the law, be found applicable to these actions when brought by assignees at common law or in bankruptcy. '•i5 Johns. Chan., 366 (1820); reversed by 19 Johns., 456, 473 (1822), by Spencer, C. J. 3 Sleet'. Bloom, 20 Johns., 669(1822); Hawkins r. Glenn, 131 U. S., 319 (ISM); Henry r. Vermillion, etc., R R. Co., 17 Ohio, 187 (1S48); Hampson v. Weare, 4 Iowa, 13 (1856); Millikin v. White- 265 § 209.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [cn. XI. that the stockholder cannot take advantage, in the suit against him, of a defect in the service of process upon the corporation in the original suit. His remedy in such a case is by a direct pro- ceeding. 1 In New York the conclusiveness of the judgment in these cases has been much questioned. 2 house, 49 Me., 527 (1860); Wilson v. Pittsburgh, etc., Coal Co., 43 Pa. St., 424 (1862) ; Bank of Wooster v. Stevens, 1 Ohio St., 233 (1853); Stevens v. Fox, 83 N. Y., 313 (1881); Marsh v. Bur- roughs, 1 Woods, 463 (1871); Grund v. Tucker, 5 Kan., 70 (1869) ; Bissitu. Ken- tucky River Navigation Co., 15 Fed. Rep., 353, and the note, p. 360 (1882); Havves v. Petroleum Co., 101 Mass., 385 (1869). So, also, in actions to enforce statutory liability of stockholders, a judgment against the corporation is equally conclusive. Donworth v. Cool- baugh, 5 Iowa, 300 (1857); Came v. Brigham, 39 Me., 35 (1854); Havves v. Anglo-Saxon Petroleum Co., 101 Mass., 385 (1869), holding that a judgment by default is prima facie conclusive; Stephens v. Fox, 83 N. Y., 313 (1881); Holyoke Bank v. Goodman Paper Mfg. Co.. 63 Mass., 576 (1852), holding that a judgment by default is conclusive; Bigelow on Estoppel, 129, 4th ed. ; Free- man on Judgments, § 177, 3d ed. The stockholder may, of course, set up that he is not a stockholder, and other sim- ilar defenses, such as ai - e specified in chapter X. See infra, $% 210, 224. See, also, Merrill v. Suffolk Bank, 31 Me., 57 (1849); Johnson v. Somerville, etc., Co., 81 Mass., 216 (1860); Glenn v. Springs, 26 Fed. Rep., 494; Powell v. Oregonian R'y, 38 Fed. Rep., 187 (1889); Barron v. Paine, 22 Atl. Rep., 218 (Me., 1891). The decree of the court where the corporation is located is conclusive as to whether service was properly made on the corporation, such service being on two directors and the cashier. The decree is also conclusive that no laches existed in bringing suit; that the statute of limitations was no bar to the decree; that the court had au- thority to make an assessment; that the change in the coi-porate name did not discharge the stockholders' liability ; and that the trustee, Glenn, might sue the stockholders. Lehman v. Glenn, 6 S. Rep., 44 (Ala., 1889). Nor can he set up that the creditors' rights are based on purchases made ultra vires by the corporate officers. Sumner v. Marcy, 3 Woodb. & M., 105 (1847). The judgment against the corporation is conclusive, and it cannot be shown that it arose on a contract which was ultra vires. Baines v. Babcock, 30 Pac. Rep., 776 (Cal., 1892). Cannot attack the debts upon which the judgment was obtained. Hambleton v. Glenn, 20 Atl.. Rep., 121 (Md., 1890). No defense that the judg- ment against the corporation was ob- tained by collusion with one of the directors. Id. i Came v. Brigham, 39 Me., 35 (1854). The stockholder sued on his subscription may set up that the judgment against the corporation was obtained by service on one who had ceased to be an officer. Beardsley v. Johnson, 121 N. Y., 224 (1890). Cf. Wheeler v. Millar, 24 Hun, 541 (1881). In Chesnut v. Pennell, 92 111., 55 (1879), it was held that a decree against the corporation is not admissi- ble in evidence against a stockholder who was not a party to the bill or de- cree, actually or constructively, and that in such a case proof of the liability of the corporation to the creditor should be given. 2 New York is practically the only % state where this question presents any difficulty, and the confusion which there reigns is largely due to the failure to distinguish between cases of liability for unpaid subscriptions and liabilities created by statute. In some of the cases the meaning of the court is not clear, and often the question did not 266 CTT. XI.] SUBSCRIPTIONS AND CORPORATE CREDITORS. 210. Where the stockholders are liable only on a particular class of corporate debts, or to certain classes of creditors only, the court will not, of course, reject evidence tending to show either that the debt recovered belongs or does not belong to the class on which the shareholder is liable. 1 § 210. Defenses available against corporate creditors in actions to compel payment of balances of subscriptions. — There are, of course, certain defenses which subscribers may set up when actions are brought against them on behalf of corporate creditors. These defenses are the same as those which may be set up to defeat an action by the corporation to enforce the subscription. 2 But both in England and in this country the courts do not favor such de- come up directly for decision. The gen- paratively little from the general law. eral rule was originally stated essen- tially as in the text, hy Spencer, C J., in Slee v. Bloom, 20 Johns., 669 (1822), reversing S. C, 5 Johns. Ch., 366 (1821). This was followed by Moss v. Oakley, 2 Hill, 265 (1842). Moss v. McCullough, 5 Hill, 131 (1843), started a new theory, that the case was the ordinary one of principal and surety, and hence a judg- ment against the corporation was not even prima facie evidence against the stockholder. Although this ruling was overturned on the final determination, S. C, 7 Barb., 279 (1849), it was followed in Strong v. Wheaton, 38 Barb., 616 (1861). In T3elmont v. Coleman, 21 N. Y, 96 (1860), on appeal from 1 Bosw., 188, three justices affirmed the ruling below that the judgment was prima facie evi- dence, while the other four refused to commit themselves to that doctrine. Conklin v. Furman, 8 Abb. Pr. (N. S.), 161 (1865), accepts the original rule as stated by Spencer, C. J. Then follow two later cases. Miller v. White, 50 N. Y., 137 (1872), aud McMahou v. Macy, 51 id., 155, which reject that rule in strong terms. But both these cases are easily distinguishable on the principle stated supra. They were suits to enforce a statutory penalty against trustees for failure to file a certain report. It may be said, then, that after all, the New York rule, in the cases really covered by the language of the text, differs com- The courts, under the influence of some of the earlier decisions, hesitate to ac- cept the rule of conclusiveness ; but the latest case in the court of appeals, Rapallo, J, uses this language: "The creditor thus claims through the corpo- ration, and to entitle him to this statu- tory subrogation or transfer he need only show that he is a creditor. If he shows this fact by evidence which is binding and conclusive against the cor-' poration, such evidence should be com- petent against the stockholder to estab- lish the title of the creditor to succeed to the rights of the corporation. A judgment against the corporation, being the highest evidence against it, should be as effectual to pass its title to the fund in question as a deed or any other form of transfer." Stephens v. Fox, 83 N. Y, 313, 317 (1881). Cf. Wheeler v. Millar, supra. See, also, Grund v. Tucker, 5 Kan., 70 (1869); Merchants' Bank v. Chandler, 19 Wis., 434 (1865). 1 Wilson v. The Stockholders, 43 Pa. St., 424 (1862) ; Conant v. Van Schaick, 24 Barb., 87 (1857) ; Larrabee v. Baldwin, 35 Cal., 155 (1868). Cf. Hudson v. Carman, 41 Me., 84 (1856), holding that the judg- ment obtained may not be conclusive evidence of the organization and exist- ence of the corporation, and if denied they must be proved. 2 See ch. X 267 211.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [ch. xi. fenses, especially after the corporation has become insolvent. More- over, there are many defenses which might defeat an action by the corporation, but which do not prevent the corporate creditor from enforcing the subscription. 1 § 211. Contribution. — Corporate creditors compelling stockhold- ers to pay their subscriptions are under no obligation to see that the payments made by the subscribers are proportionally equal. 2 A court of chancery will compel subscribers to pay in full the amount of their unpaid subscriptions if the corporate indebtedness make it necessary, leaving them to seek contribution from the other shareholders. 3 The rule, moreover, is well settled that a 1 Such as fraud on the part of the corporation, inducing a subscription. See §§ 163, 164, supra. So, also, fraud and mismanagement on the part of the directors and corporate officers is not a valid defense herein. In re Republic Insurance Co., 3 Biss., 452 (1873). The stockholder may set up that the corpo- ration had no stock to offer him. Lath- rop v. Kneeland, 46 Barb., 432 (1866). Of. Mackley's Case, L. R., 1 Chan. Div., 247 (1875). Acts that estop the subscriber as against the corporation estop him as to corporate creditors. Griswold v. Selig- man, 72 Mo., 110 (1880). But mere en- tries in corporate books are not admis- sible in evidence to prove the creditor's claim. Neilson v. Crawford, 52 Cal., 248 (1877). Where a firm or partnership becomes a subscriber in the copartnership name, corporate creditors may have execution against any one of the partners. The partnership subscription is not a de- fense of which any single partner can avail himself to escape liability. Bray's Adm'r v. Seligman's Adm'r, 75 Mo., 31 (1881). It is no defense that judgment against the defendant stockholder for the full amount of his liability has been recovered by other creditors, and that he settled the same at a discount. Kuo- kelman v. Rentchler, 15 Brad. (111.), 271 (1884). Prominent among these de- fenses is the defense that the corpora- tion contracted with the defendant that his stock should be deemed fully paid-up stock, although in fact the full par value had never been paid. See ch. III. The unpaid subscription may be col- lected in payment of damages for a tort the same as for a contract debt. Powell v. Oregonian R'y, 36 Fed. Rep., 726 (188G); 38 id., 187. In Maine this rule is declared by statute. Grindle v. Stone. 4 East Rep, 623 (1886). For many other defenses, see ch. XII, where defenses were set up to defeat the statutory liability. 2 Pentz v. Hawley, 1 Barb. Chan., 122 (1845). 3 Pentz v. Hawley, supra (1845) ; Evaus v. Coventry, 25 L. J., Chan., 489 (1856); Marsh v. Burroughs, 1 Woods, 463(1871). As to whether solvent stockholders are required to make up. for the* benefit of creditors, the deficiency of defaulting or insolvent subscribers to the full amount of the former's own unpaid subscriptions, see South C. Mfg. Co. v. Bank of S. C, 6 Rich. (Eq.), 227 (1854). But actual subscribers are not liable for that part of the capital stock which was never subscribed. Evans v. Coventry, 25 L. J., Chan., 489 (1856). It is no de- fense to show that notes were given in payment of subscriptions, or that notes by insolvent persons were pro- cured to be given, when it appears that nothing was ever realized from the notes. Nathan v. Whitlock, 9 Paige. Chan., 152 (1841). When it is made to appear by proof that some of the stock- holders are insolvent, the solvent must pay the proportion of the insolvent, 268 •CH. XI.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [§211. shareholder who has been compelled to pay more than his propor- tion of the debts of the company may maintain an action against his co-stockholders for contribution. 1 Contribution may properly be enforced in the corporate cred- itor's suit. It is largely for this purpose that all the delinquent shareholders may be and should be made parties defendant. 2 to be apportioned among them ac- Pennsylvania the right to contribution cording to and up to the amount of their is said to be purely statutory. Brinham stock subscribed and unpaid. Such is v. Wellersburg Coal Co., supra; Allen v. the rule in Oregon. Hodges v. Silver, Fairbanks, 45 Fed. Rep., 4 1 5| 1891 i. Alia- etc, Co., 9 Oregon, 200 (1881). Cf. g 243. bility for contribution on subscriptions All of the stockholders who are defend- does not cease upon the death of the ants will have judgment entered against stockholders. Allen v. Fairbanks, 40 them for their full liability, and they Fed. Rep., 188 (1889). The remedy of must seek contribution themselves, one stockholder against another for con- Hamilton ?'. Clarion, etc., R. R., 23 Atl. Rep., 53 (Pa., 1891). i Wincock v. Turpin, 96 111., 135 (1880) ; Millaudon v. New Orleans, etc., R. R. Co., 3 Rob. (La.), 488 (1843); Marsh v. tribution is in equity and not at law. Koons v. Martin, 66 Hun, 554 (1893). 2N. Y. Code of Civil Procedure. §§ 1791-1794; Masters v. Rossie Lead Mining Co., 2 Sandf. Chan., 301 (1845); Burroughs, 1 "Woods, 463(1871); Holmes Holmes v. Sherwood, 3 McCrary, 405 v. Sherwood, 3 McCrary, 405 (1881); (1881); Hadley tt Russell. 40 N. H, 109 Umsted v. Buskirk, 17 Ohio St 113 (1860); Umsted v. Buskirk, 17 Ohio St., <1866); Matthews v. Albert, 24 Md., 527 113 (1866); Hodges v. Silver Hill Min- <1866); Stewart v. Lay, 45 Iowa. 604 ing Co., 9 Oregon, 200(1881). Where the (1877); Handley v. Russell, 40 N. H., articles of incorporation provide that 109 (1860) ; Erickson v. Nesmith, 46 id., the indebtedness shall not exceed a cer- 371 (1866); Masters v. Rossie Lead Min- tain sum, but debts are contracted in ing Co., 2 Sandf. Chan., 301 (1845); excess of the limit, and, the corporation Aspinwall u. Torrence, 1 Lans., 381 (1870); being insolvent, the officer who con- Stover v. Flack, 30 N. Y., 64 (1864); Far- tracted the debt pays it off out of his row v. Bivings, 13 Rich. (Eq.), 25 (1866); own individual funds, he cannot claim Brinham v. "Wellersburg Coal Co., 47 contribution unless the debt in excess Pa. St, 43 (1864). Cf. Andrews v. of the limit was contracted by the unan- Collender, 30 Mass., 484 (1833); Gray v. imous assent of the stockholders. Hal- Coffin, 63 Mass., 192 (1852); Sutton's deman v. Ainslie, 82 Ky., 395 (1884). Case, 3 De G. & Sm., 262 (1850). In 259 CHAPTER XII. STATUTORY LIABILITY OF STOCKHOLDERS TO CORPORATE CRED- ITORS. A. EXTENT OP THE LIABILITY. 212, 213. Statutory liability in general. 214. The liability is strictly construed and limited. 215. Particular statutes construed as to the extent of the liability. 216. Waiver by corporate creditors of their statutory rights against stockholders. 217. Statutory liability not enforce- able to pay damages recovered against the corporation in tort. ENFORCEMENT OP THE LIABILITY. STATUTORY 218. The statutory liability can be en- forced by corporate creditors only — Stockholders and direct- ors as creditors. 219. Judgment, execution, etc., against the corporation, a condition precedent to the right to en- force the statutory liabdity. § 220. Difficulty in determining whether the creditor's remedy is at law or in equity. 221. The remedy at law. 222. The remedy in equity. 223. Enforcement of the statutory lia- bility by means of courts in other states — Penal liabilities. 224. How far the .judgment agaiust the corporation is conclusive of the creditor's claim. 225. Stockholder's miscellaneous de- fenses against his statutory liability — Defense of release — Defense of liability already paid — Defense of set-off — De- fense as to iuterest — Defense of costs — Defense of statute of limitations — Other de- fenses. 226. Priority among creditors. 227-229. Contribution among stock- holder* A. EXTENT OF THE LIABILITY. §212, 213. Statutory liability in general. — Probably the most characteristic feature of a corporate existence is the fact that, by being a corporation, its stockholders are liable only for the par value of the stock held by them, and when that is once paid in money or property there is no further liability. This exemption from liability need not be declared in the charter, but arises from the ver} 7 fact of incorporation. For this reason legislatures are very careful, in giving joint-stock companies special powers, to distinctly declare that the company shall not thereby become a corporation. The very fact of incorporation by itself releases subscribers for stock from all liability for corporate debts, except to the extent of their unpaid subscriptions. It has been deemed wise, however, by the state legislatures, in many instances, to increase the liability of stockholders to corporate creditors. Accordingly, statutes are passed expressly declaring that the stockholders shall be liable for a specified sum, in addition to their unpaid subscrip- tions. This is called the statutory liability of stockholders. It 270 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDER. .'.' 214, 215. rarely exists as regards stockholders in railroad corporations, but frequently exists in the case of manufacturing and various other corporations, 1 and nearly always exists as against the stockholders in banks. This additional liability may be imposed by the state constitu- tion, or by the charter, or by a general statute. Where this liabil- ity is imposed by a provision existing at the time of the creation of the corporation, there is no doubt of its constitutionality. But where the liability is created by a statute or constitutional provis- ion enacted after the corporation was incorporated, then there arise difficult questions of constitutional validity. A full discus- sion, however, of the constitutionality of such a statute is consid- ered elsewhere. 2 § 214. This Viability is strictly construed and limited. — Inasmuch as all statutes creating an additional liability on the part of stock- holders are in derogation of the common law, they are to be strictly construed. They are a wide departure from established rules, and, though founded on considerations of public policy and general con- venience, are not to be extended beyond the plain intent of the words of the statute. 3 § 215. Particular statutes construed. — The character, nature and extent of the liability imposed by constitutional provisions or by statute upon stockholders, in addition to their common-law liabil- ity, vary, of course, widely, and the extent of the liability created by each statute will depend, entirely upon the particular words of 1 A complete statement of the liabil- 293 (1872); Youghiogheny Shaft Co. v. ity of stockholders in various corpora- Evans, 72 id., 331 (1872) ; Diven v. Lee, tions in all the states and territories is 36 N. Y., 302 (1867); Lowry v. Ionian, 46 given in Part VII, infra. id., 119 (1871); Salt Lake City National 2 See § 497, infra. It is constitutional Bank v. Hendrickson, 40 N. J. Law, 52. for the legislature at the time of enact- Cf. Priest v. Essex Hat Mfg. Co., 115 ing a general incorporating act to pro- Mass., 380 (1874); Ripley v. Sampson, 10 vide for an extra liability of directors Pick, 371 (1830); Knowlton r. Ackley, who make false reports. Huntington 8 Cush., 93 (1851) ; Bassett v. St. Albans v. Attrill, 118 N. Y, 365 (1890). Hotel Co., 47 Vt, 313 (1875); David- 3 Gray v. Coffin, 9 Cush., 192 (1852); son v. Rankin, 34 Cal., 503 (1868); Moke- O'Reilly v. Bard, 105 Pa. St., 569 lumne Hill, etc., Co. v. Woodbury, 14 (1884); Chaser. Lord, 77 N.Y, 1(1879); id., 265 (1859); Dewey v. St. Albans Mean's Appeal, 85 Pa. St., 75 (1877); Trust Co., 57 Vt, 332 (1885). A con- Dane v. Dane Mfg. Co., 14 Gray, 489 trary rule seems to have been adopted (1859); Chamberlin v. Huguenot Mfg. in Carver v. Braintree Mfg. Co., 2 Story, Co., 118 Mass., 532 (1875); Grose v. Hilt, 432 (1843). where liability for debts con- 36 Me., 22 (1853); Coffin v. Rich., 45 id., tracted during membership was held 511; Windham Provident Institution, to include "dues owing." Also in Rider etc., v. Sprague, 43 Vt., 502 (1871); r. Tritchey, 30 N. E. Rep., 692 (Ohio, Dauchy v. Brown, 24 id., 197; Moyer v. 1892); Freeland v. McCullough, 1 Denio, Pennsylvania Slate Co., 71 Pa. St, 414(1845). 271 § 215.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. the enactment. 1 Occasionally, however, a provision imposing addi- tional liability is found to be substantially repeated in the statutes of many states. Such is the case with the provision that stock- holders shall be liable " to an amount equal to their stock." This is construed to impose a double liability. 2 "When it has been en- forced, each subscriber will have paid double for his stock — once on the subscription and once on the statutory liability. Stockholders in national banks are subject to this double liabil- ity. ]S T ot only that, but if at any time the capital stock of the bank i Root v. Sinnock, 11 N. E. Rep., 339 (III., 1887), citing many cases; Wheeler V. -Millar, 90 N. Y., 353, 359 (1882) ; Mat- ter of the Empire City Bank, 18 N. Y., 199, 218 (1858); Ohio Life Ins. Co. v. Merchants' Ins. Co., 11 Humph. (Tenn.), 1. 23 (1850); Lewis v. St. Charles Co., 5 Mo. App., 225 (1878). Cf. Briggs V. Penniman, 8 Cow., 387 (1826) ; Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473 (1840). 2 A liability "to an amount equal to the amount of stock held by them re- spectively " has been construed to create the double liability. Booth v. Camp- bell, 37 Md., 522 (1872); Matthews v. Albert, 24 id., 527 (1866) ; Morris v. John- son, 34 id., 485 (1871); Hager v. Cleve- land, 36 id., 476, 491 (1872). The former constitutional provision in Alabama that stockholders were " liable to the extent of their stock " meant a double liabil- ity. McDonnell r. Alabama, etc., Ins. Co., 5 S. Rep., 120 (Ala., 1888). A lia- bility of stockholders for "double" the amount of their stock means a liability once for the unpaid subscriptions and then an additional liability of twice the par value of the stock, making a triple liability altogether. Parrish's Appeal, 19 Atl. Rep., 569 (Pa., 1890). A liability "equally and ratably to the extent of their respective shares of stock" does not authorize a judgment against one for any more than his proportion. Buenz v. Cook, 24 Pac. Rep., 679 (Col., 1890). The constitution of Missouri formerly contained a provision, now re- pealed, imposing a double liability. See Perry v. Turner, 55 Mo., 418 (1877). By the constitution of 1875, a provision taken from amendment of 1S70 provides, '' in no case shall any stockholder be in- dividually liable in any amount over and above the amount of stock owned by him or her." Construed in Schricker v. Ridings, 65 Mo., 208, to limit liability to unpaid subscriptions. Prov. Sav. Inst. v. Jackson, etc., 52 Mo., 552 (1873); Miller v. Marion, 50 id., 55 (1872); Perry v. Turner, 55 id., 418 (1874). See, also, Ochiltree v. Railroad Co., 21 Wall., 249 (1874). A statute imposing a liability to the amount of the stock has been held in Texas to be merely declaratory of the subscription liability. Walker v. Lewis, 49 Tex., 123. A liability " to the amount of what remains unpaid upon his sub- scription to the capital stock" is declar- atory and creates no liability beyond the subscription price. Burch v. Taylor, 24 Pac. Rep, 438 (Wash., 1890). In Massa- chusetts, by statute, stockholders in manufacturing corporations are liable as tenants in common to creditors to the extent of the capital stock, until it has been divided into shares. Hawes v. Anglo-Saxon Petroleum Co., 101 Mass., 385 (1869); Same v. Same, 111 id., 200 (1872). Cf. Burnape v. Haskins Steam- engine Co., 127 Mass., 586 (1879). Cf. Hager v. Cleveland, srqyra; Morris r. Johnson, sujira. But where some of the stock is held by the corporation it- self, this will not compel the other share- holders to bear the statutory liability as to the stock so held by the corporation. Crease v. Babcock, 10 Mete, 525, 568 (1846). 272 en. xii.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 215. becomes diminished by losses, the comptroller of the currency may compel the stockholders to discontinue business or to assess them- selves to replace the loss. 1 A very common statutory liability is that which makes stock- holders liable for debts due from the corporation to its servants or laborers. There has been difficulty in determining what persons are to be classed as servants, but the courts are not inclined to give a broad application to the word.- i See R S. of U. S., § 5205. 2 It may be stated as the rule, that only those who perform menial or man- ual services are within the class contem- plated in the statute ; " that he who per- forms them must be of a class whose members usually look to the reward of a day's labor or service for immediate or present support, from whom the company does not expect credit, and to whom its future ability to pay is of no consequence." Wakefield v. Fargo, 90 N. Y., 213, 217 (1882). Cf. Adams v. Goodrich, 55 Ga., 233 (1875). This over- rules some of the earlier New York cases, e. g., Vincent v. Bramford, 1 Jones & Sp., 506; S. C, 12 Abb. Prac. (N. S.), 252. which held an engineer and fore- man, who sometimes also acted as su- perintendent, to be a servant within the meaning of the rule ; Harris v. Norvell, 1 Abb. N. C, 127 (1876), which held a re- porter employed by a newspaper com- pany, and a city or assistant editor, if not an officer of the company, to be a servant ; Hovey V. Ten Broeck, 3 Rob- ertson, 316 (1865), holding an overseer and book-keeper within the protection of the act A master mechanic and su- perintendent of works is a servant or laborer. Sleeper v. Goodwin, 31 N. W. Rep., 335 (Wis., 1887). A superintendent of laborers is a " laborer" himself. Pen- dergast v. Yandes, 24 N. E. Rep., 724 (Ind., 1890). An expert employed to ad- just and start the machinery is entitled to the statutory lien for "labor." In re Black, 47 N. W. Rep., 342 (Mich., 1890). A traveling salesman is a " clerk " within the meaning of the statute ren- dering stockholders liable for debts to (18) % " clerks," etc. Hand v. Cole, 12 S. W. Rep., 922 (Tenn., 1890). The following employees have been held not servants or laborers within the protection of the rule : The secretary of a manufacturing company. Coffin v. Reynolds, 37 N. Y, 640 (1868), overruling Richardson v. Abendroth, 43 Barb., 163, and perhaps Williamson v. Wadsworth, 49 id., 294 (1867), which is the case of a civil engineer and traveling agent at a fixed salary. A civil engineer. Penn- sylvania, etc., R R Co. v. Leuffer, 84 Pa. St., 168 (1877). Contra, Conant v. Van Scbaick, 24 Barb., 87. Cf. William- son v. Wadsworth, 49 Barb., 294 (1861). A consulting engineer. Ericsson v. Brown, 38 Barb., 390 (1862). An assist- ant chief engineer. Brockway v. Innes, 39 Mich., 47 (187S). Cf. Peck v. Miller, 39 Mich., 594 (1878). An overseer on a plantation. Whitaker v. Smith, 84 N. G, 340 (1879). Contra, Hovey v. Ten Broeck,' 3 Robertson (N. Y. Super. Ct.). 316 (1875). A contractor. Boutwell v. Townsend, 37 Barb., 205 (1860) ; Aikin v. Wasson, 24 N. Y, 482 (1862) ; Balch r. New York, etc., R R Co., 46 id., 521 (1871); Atcherson v. Troy, etc., R. R Co., 6 Abb. Prac. (N. S.), 329. Cf. Kent v. New York, etc., R R Co., 12 N. Y. 628 (1855); McCluskey v. Cromwell, 11 id., 593. An agent of a mining corpora- tion employed to take charge of its mines in a foreign country. Hill v. Spencer, 61 N. Y., 274 (1874); Dean v. De Wolf, 16 Hun, 186 (1878); Krauser v. Ruckel, 17 id., 463 (1879). A book- keeper and general manager. Wake- field v. Fargo, 90 N. Y, 213 (1882). A superintendent Kincaid v. Dwindle, 73 §215.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. Many of the states have statutes rendering stockholders or di- rectors liable to creditors unless certain reports or certificates are filed. 1 Directors are sometimes made personally liable for making 59 N. Y., 548 (1875). Cf. Gordon v. Jen- nings, L, R, 9 Q. B. Div., 45 (1882). And compare, also, Gurney v. Atlantic, etc., Ry Co., 58 N. Y., 358 (1874). Counsel is not an "employee." Louisville, etc., R R v. Wilson, 138 U. S., 501 (1891). A contractor is not an employee under the Indiana statute. Vane v. Newcombe, 132 U. S., 220 (1889). A statutory pref- erence to servants and employees gives no preference to the secretary. Wells v. Southern, etc., Ry, 1 Fed. Rep., 270 (1880). In general only manual or men- ial laborers are protected by the statute. Adams v. Goodrich, 55 Ga., 335 ; People v. Remington, 45 Hun, 329 (1887). Cf. Heebner v. Chave, 5 Pa. St, 115 (1847) ; Harrod v. Hamer, 32 Wis., 162 (1873). Under the mechanics' lien laws of the several states, a wider meaning has been given to the word "laborers." These cases are frequently confused with the statutes considered herein. Stryker v. Cassidy, 76 N. Y, 50 (1879); Mutual Benefit Ins. Co. v. Rowood, 26 N. J. Eq., 389 (1875); Bank of Pennsylvania v. Gries, 35 Pa. St., 423 (1860); Arnoldi v. Gonin, 22 Grant's Chan. (Up. Can.), 314 (1875); Mulligan v. Mulligan, 18 La. Ann., 21 (1866); Knight v. Norris, 13 Minn., 475 (1868): Raeder v. Bensberg, 6 Mo. App., 445 (1878); Foushee | v. Grigsby, 12 Bush, 75 (1876); Smallhouse v. Kentucky, etc., Co., 2 Mont, 443 (1876); Capron v. Stout, 11 Nev., 304 (1881). The mere fact that one does some manual labor incidental to his position as manager or foreman or su- perintendent will not constitute him a laborer within the intent of these stat- utes. Krauser v. Ruckel, 17 Hun, 463 (1879): Ericsson v. Brown, 38 Barb., 390 (1862). Cf Wakefield v. Fargo, 90 N. Y, 213 (1882). But where a foreman did so much manual labor that it was not a mere incident of his foremanship, it was held that he might recover as a laborer. Short v. Medberry, 29 Hun, 39 (1883). See, also, Poor on N. Y Mfg. Act, p. 70. In construction of the Pennsylvania lia- bility for labor and supplies, see Weiss v. Mauch Chunk Iron Co., 58 Pa. St, 295 (1868) ; Reading Industrial Manuf'g Co. v. Graeff, 64 id., 395 (1870) ; Moyer v Pennsylvania, etc., 71 Pa. St, 293 (1872), where a statute imposing liability for debts due workmen, etc., and materials furnished was construed not to include debts for hauling, repairing wagons, lumber for erecting machinery, powder for blasting, eta ; Weigley v. Coal Oil Co., 5 Phila., 67 (1862). A claim against stockholders on their statutory liability to laborers is assignable. Day v. Vin- son, 47 N. W. Rep., 269 (Wis., 1890). 1 As to whether this liability is a penal liability, see § 223, infra. Cases on stat- utes of this character are given through- out this chapter. The following recent cases may also aid in giving an idea of this kind of liability : Under a statute rendering the stockholders liable to cor- porate creditors to the extent of the unpaid portion of the par value of their stock unless a true statement of the affairs of the company is made annu- ally, the stockholders are so liable if the statement which is filed is a false state- ment. Condon v. Winsor, 21 Atl. Rep., 540 (R I, 1891), refusing to follow Sted- man v. Eveleth, 6 Mete, 1 14. Directors are not liable by statute requiring an annual report, where such report is filed, even though it be false. If the statute makes them liable for know- ingly making a false report, knowledge must be averred. Matthews v. Patter- son, 26 Pac. Rep., 812 (Colo., 1891). This statutory liability of directors for fail- ure to file reports is not avoided by the fact that the company is insolvent and has gone out of business. Gans v. Switzer, 24 Pac. Rep, 18 (Mont, 1890 . A statutory liability of officers for a 274 CU. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§21* loans in excess of the capital stock. 1 A liability imposed Iry a con- stitution may or may not be self-executing without any statutory provision, according to the wording of the provision itself. 2 An increase or reduction of the capital stock leads often to complica- tions in addition to the usual ones incident to the statutory lia- bility. 3 Various decisions on the liability of stockholders and directors under particular statutes are given in the notes below. 4 It remains to add that this class of statutes, except in the case of banks, have on the whole proved lamentable failures. They drive corporations from a state; are rarely relied upon by creditors, and are productive of incessant litigation. false report applies only to debts cre- ated after the false report is made. Tor- bett v. Godwin, 62 Hun, 407 (1891). 1 Where directors are liable for corpo- rate debts in excess of the subscribed capital stock, the capital stock includes that paid for by property as well as in cash. Moore v. Lent, 22 Pac. Rep., S75 (Cal., 1889). In enforcing a liability of directors for debts in excess of the capi- tal a creditor must sue for the benefit of all, and can recover only a propor- tion of the excess over such capital stock. Anderson v. Speei-s, 21 Hun, 568 (1880). A director cannot enforce a stat- utory liability of tbe directors for debts contracted by the corporation in excess of the capital stock, the directors being liable " jointly and severally " by stat- ute, but such debt due to the director is counted. Thacher ?•. King, 31 N. K Rep., 648 (Mass., 1892). The statutory liability of stockholders for a failure to file a certificate that the capital stock has been fully paid, and the statutory liability of directors for debts in excess of the capital stock, do not apply to a judgment in an action of tort. Leighton v. Campbell, 20 Atl. Rep., 14 (R I, 1890). Liability of director in national bank for loans in excess of amount allowed by law. Witters v. Sowles, 43 Fed. Rep. 405 (1890) : Stephens v. Overstolz, 43 Fed. Rep., 771 (1890). 2 A constitutional liability may not be enforceable where no statute has been passed to enforce it; as, for example, the provision that " dues from corpora- tions shall be secured by individual liability of the stockholders to an addi- tional amount equal to the stock owned by each stockholder, and such other means as shall be provided by law.'' Morley v. Thayer, 3 Fed. Rep., 737 (1880). Under the Ohio constitutional provision imposing a liability on stockholders, a general act authorizing incorporations must contain a provision to that effect or the act will be void. State v. Sher- man, 22 Ohio St., 411 (1872). A con- stitutional provision that stockholders shall be liable to the extent of their stock is self-executing and applies to all corporations. It renders them liable to the extent of the par value of their stock in addition to the liability on sub- scriptions. A release to the corporation does not release this statutory liability. Willis v. St. Paul, etc., Co., 50 N. W. Rep.. 1110 (Minn., 1892). 3 See g§ 288, 289, concerning this sub- ject 4 Under the Iowa statutes the stock- holders are liable as partners where the certificate of incorporation failed to state the highest amount of indebted- ness which the company might incur. Heuer v. Carmichael, 47 N. W. Rep., 1034 (Iowa, 1891). "Dues" include in- surance policies. McDonnell v. Ala., etc., Co., 5 S. Rep.. 120 (Ala, 1888). The constitutional liability of stockholders applies if a part of the business as set forth in the charter consists of mercan- tile business. The objection that all stockholders and creditors are not joined 275 §216.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. § 216. Waiver ~by corporate creditors of their statutory rights against shareholders. — A corporate creditor may, by express con- tract, when the debt is incurred, waive his right to collect from the stockholder debts which the corporation fails to pay. 1 And the corporation in its contracts with third persons may,"it is held in England, lawfully stipulate for the exemption of its members from the liability imposed upon them by statute in the event of the in- solvency of the corporation. 2 It has been held to be competent for any one dealing with the company to contract to hold the shareholders responsible to only a limited extent, to no extent at all, or to any specified extent mutu- ally agreed upon. 3 must be raised by answer. Densmore v. Red Wing, etc., Co., 48 N. W. Rep., 528 (Minn., 1891). The case of Austin v. Ber- lin, 22 Pac. Rep., 433 (Colo., 1889), holds that new directors are not liable for the statutory delinquencies of the old. Policy-holders' claims come within the meaning of the words " debts due," for which stockholders are held liable. Mc- Donnell v. Ala., etc., Ins. Co., 5 S. Rep, 120 (Ala., 1S88). A debt contracted in the midst of acts for which directors are liable by statute is contracted " after such violation." Patterson v. Minn., etc., Co., 42 N. W. Rep., 926 (Minn., 1889). In Maine by statute stockholders are liable as subscribers if their stock is paid for by property taken at an overvalua- tion. Libby v. Tobey, 19 Atl. Rep., 904 (Me., 1890). Under the Iowa statute rendering officers, etc., liable for diver- sion of funds, a policy-holder may re- cover, where a consolidation with an- other company has been made and plaintiff was excluded from the new company. Grayson v. Willoughby, 42 N. W. Rep, 591 (Iowa, 1889). A com- plaint to enforce a stockholder's liabil- ity for labor done in the construction of the road is not good if it omits the alle- gation as to the construction of the road. Toner v. Fulkerson, 25 N. E. Rep, 218 (Incl, 1890). Where stockholders are liable for debts other than mortgage debts, an agreement of the company to pay another company's mortgage debt is not a mortgage debt. Barron v. Paine, 22 Atl. Rep., 218 (Me., 1891). Where stockholders in manufacturing corpora- tions are not liable, but in other compa- nies are liable, under a statute, yet, if the charter authorizes other business than manufacturing, they are liable al- though only the manufacturing busi- ness is pursued. Arthur v. Willius, 46 N. W. Rep., 851 (Minn., 1890). 1 Robinson v. Bidwell, 22 Cal, 379 (1863); French v. Teschemaker, 24 id., 518 (1864); Basshor v. Forbes, 36 Md., 154(1872); Brown v. Eastern Slate Co., 134 Mass., 590 (1883), where the waiver was oral. 2 Re Athenaeum, etc., Society, 3 De G. & J., 660 (1859); Halket v. Merchant Traders', etc., Association, 13 Q. B., 960 (1849); Durham's Case, 4 Kay & J., 517 (1858). Cf. Shelford on Joint-stock Companies (2d London edition), 4. Al- though the subscribers themselves may stipulate with each other for such a re- stricted liability, nothing is more clear than that, as to the rest of the world, each shareholder is liable for the whole amount of the debts of the company. Nor will notice that astipulation of this kind has been entered into between the shareholders prevent a creditor from holding each of them liable to the full extent of his demand. See Greenwood's Case, 3 De G., M. & G, 459 ; The State Fire Ins. Co., Meredith's Case, and Con- vert Case, 1 K R, 510, V. C. W. 3 In re State Fire Insurance Co., 1 Hem. & M., 457 (1863) ; S. C, 1 De G., 276 CH. XII.] STATUTORY LIAT.IMTY OF 6TOCKIIOLDKK-. [§21 (. § 217. Statutory liability not enforceable to j)aj/ damages recov- ered against the corporation in tort. — The statutory liability im- posed upon the shareholders in corporations is a liability exclusively for debts and demands accruing against the corporation by reason of its contracts. It cannot, therefore, be enforced to pa} 7 damages recovered against the corporation in an action in tort. 1 J. & J., 634: 35 L. J.. Chan., 834; 34 id., 436 ; Hassell v. Merchant Traders' Asso- ciation, 4 Exch., 525: Lord Talbot's Case, 5 De G. & 9m., 386 (1852); S. C, 21 L. J., Chan., 846. See, also, Reid v. Allan, 4 Exch., 326 (1849); S. C, 19 L, J., Exch., 39. And compare hi re In- dependent Assurance Co., Ex parte Cope, 1 Sim. (N. S.), 54; Sunderland Marine Insurance Co. v. Kearney. 16 Q. B., 925 (1851); S. C, 20 L. J. (Q*! B.), 417; Pedell v. Gwynn, 1 Hurl. & N., 590 (1857); S. C, 26 L. J., Exch., 199; Gordon v. Sea, Fire and Life Assurance Society, 1 Hurl. & N., 599 (1857) : S. C, 29 L. J., Exch., 202. And see Hess v. Werts, 4 Serg. & R, 361 (1818) : King v. Accumulation, etc.. Assurance Co., 3 C. B. (N. S.), 151 (1857). Of. Hallett v. Dowdall, 18 Q. B. D. (1852). The mere fact that the articles of association of an unincorporated company provide against personal liability is no defense, even though the contracts say that they are subject to the provisions in such arti- cles. Sullivan v. Campbell. 2 Hall (N. Y.), 271 (1829) ; Hess v. Wirts, 4 Serg. &R. (Pa. \ 356(1818); Greenwood's Case. 3 De G, M. & G, 459 (1854). The same rule prevails in an ordinary copartner- ship. Bromley v. Elliot, 38 N. H., 287 (1859). Directors ai'e bound to know of the restriction and have no recourse to the stockholders ; nor does a firm in which a director is a member. In re Worcester, etc., Co., 3 De G, M. & G, 180 (1853). Contract that promot- ers shall not be liable binds an en- gineer. Lard man v. Entwistle. 7 Ex., 632 (1852). Where promoters stipu- late that they shall not be liable the party who tacitly assents to that condi- tion is bound. Giles v. Smith, 11 Jar., 334 (1847). See, also, ch. XLTIT, infra; Kent's Com., vol. Ill, p. 27: Story on Partn., § 164. A contrary doctrine seems to have prevailed in Davis v. Beverly, 2 Cranch, C. C. (U. S.), 35 (1811); Riggs v. Swann, 3 id., 183 (1827); reversed on another point by Mandeville v. Riggs, 2 Pet., 482. The exemption from liability must be clearly proved. Skinner v. Dayton, 19 John.. 513, 537 (1822). A stipulation against holding stockholders liable has been held to refer to statu- tory liability and not the subscription liability. Preston v. Cincinnati, etc., R. E.. 36 Fed. Rep., 54 (1888). A pro- vision in an insurance policy that the directors shall not be liable, although the statute makes them liable, is not good. Greene v. Walton, 13 N. Y. Supp.. 147 (1891). See 28 N. E. Rep., 874. 1 Heacock v. Sherman. 14 Wend., 59 (1835). In this case the stockholders in a company which owned a bridge, and against which a judgment had been re- covered for damages because the bridge was out of repair, were held not to be liable upon such a demand, since the act imposing a personal liability upon them contemplated a liability only for demands arising ex contractu. In gen- eral, the word " debt," as used in stat- utes imposing a personal liability upon stockholders is construed to include only liabilities arising ex contractu, and not to include liability for damages re- covered against the corporation in ac- tions sounding in tort. Child v. Boston, etc.. Iron Works. 187 Mass., 516 (1884): S. G, 50 Am. Rep.. 828, where a Judg- ment for infringement of patent was not enforced. Leighton v. Campbell. 20 Atl. Rep., 14 (R. I, 1890); Mill Dam Foundry Co. v. Hovey, 21 Pick., 417,455 § 218.] STATUTORY LIABILITY OF STOCKHOLDERS. [CE XII. B. THE ENFORCEMENT OF THE LIABILITY. § 218. The statutory liability can he enforced by corporate cred- itors only — Stockholders and directors as creditors. — The statu- tory liability of the stockholder is created exclusively for the benefit of corporate creditors. It is not to be numbered among- the assets of the corporation, and the corporation has no right or interest in it. It cannot enforce it by an assessment upon the shareholders. 1 Nor can the corporation upon the insolvency assign it to a trustee for the benefit of creditors. 2 It is a liability running- directly and immediately from the shareholders to the corporate creditors. 3 Accordingly, a receiver of an insolvent corporation, invested with "all the estate, property and equitable interests" of the concern, has no power to enforce such a liability as this. 4 The action to (1839), sustaining an unliquidated claim for damages ; Dry den v. Kellogg, 2 Mo. App., 87 (1876), enforcing a judgment for breach of warranty of title ; Doolit- tle v. Marsh, 11 Neb., 243; Esmond v. Bullard, 16 Hun, 65 (1878) ; S. C. affirmed, sub nom. Losse v. Bullard, 79 N. Y., 404 (1880); Archer v. Rose, 3 Brewster (Pa.), 264 (1871); Cable v. McCune, 26 Mo., 371 (1858), defeating a judgment for damages for loss of a steamboat ; Bohn v. Brown, 33 Mich., 257, 263 (1876). Cf. Stanton v. Wilkeson, 8 Ben., 357, refus- ing to enforce herein a judgment against a common carrier for negligence; Chase v. Curtis, 113 U. S., 452 (1884). Cf. Car- ver v. Braintree Mfg. Co., 2 Story, 432, 448 ; Wyman v. American Powder Co., 8 Cush., 168, 182: Zimmer v. Schleehauf, 115 Mass., 52. But the stockholders' subscription liability may be enforced to pay damages arising from torts. Powell v. Oregonian R'y, 36 Fed. Rep., 726 (1888) ; 38 id., 187. The word " dues," as contained in the Ohio constitution, rendering stockholders individually lia- ble, renders them liable not only in con- tracts of the corporation but on torts committed by the corporation. Rider v. Fritchey, 30 N. E. Rep., 692 (Ohio, 1892). 1 Umsted v. Buskirk, 17 Ohio St, 113 (1866) ; Liberty Female College Associa- tion v. Watkins, 70 Mo., 13 (1879). 'Wright v. McCormick, 17 Ohio St, 86, 95 (1866) ; Dutcher v. Marine National Bank, 12 Blatch.. 435 (1S75). See, also, Cuykendall v. Corning, 88 N. Y., 129 (1882). 3 Bristol v. Sanford, 12 Blatch.. 341 (1874); Lane v. Morris, 8 Ga., 468 (1850); Arenz v. Weir, 89 111., 25. This was an action by a judgment creditor against a stockholder after a distribution of cor- porate assets by a receiver. The cred- itor was held to stand " on an independ- ent platform, above that cf a receiver, having no concern with the corporation, and the stockholder is bound under the law to answer to him." Breese, J. 4 Billings v. Robinson, 94 N. Y., 415 (1884); Farnsworth v. Wood, 91 N. Y, 308(1883); Jacobson v. Allen, 12 Fed. Rep., 454 (1882) ; Cuykendall v. Corning, 88 N. Y, 129 (1882); Arenz v. Weir. 89 III., 25; Jacobson v. Allen, 29 Blatch.. 525 (1882); Cutting v. Damerel, 88 N. Y, 410 (1882). Cf. Davis v. Gray, 16 Wall., 203 (1872); Attorney-General v. Guard- ian Mutual, etc., Ins. Co., 77 N. Y, 272 (1879). Receivership of corporation does not prevent creditors enforcing di- rectors' liability. Patterson v. Minn., etc.. Co., 42 N. W. Rep., 926 (Minn., 18S9). Doubtful whether corporate creditors may sue to enforce directors' statutory liability after a receiver has gone in. Minn., etc., Mfg. Co. v. Langdon, 46 N. W. Rep., 310 (Minn., 1890). The receiver of a national bank may sue a stock- 278 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 219. enforce can be maintained only by the creditors themselves, in their own right and for their own benefit. 1 It has been held that statutory liability of stockholders cannot be enforced by the directors as " creditors." 2 It is uncertain whether a stockholder, who is also a creditor of the corporation, can bring an action at law against his co-stock- holders to enforce a statutory liability. In Massachusetts, 3 Illinois 4 and New York s the rule is settled that such an action cannot be maintained. In those jurisdictions the only reined}'- for such a creditor in such a case is by a bill in equity for contribution. 6 But in Pennsylvania 7 and in Maine 8 the rule is otherwise, and it is no objection to the creditor's action that he is himself also a share- holder. 9 § 219. Judgment and execution must he obtained against the cor- poration hefore the stockholders statutory liability can he enforced. Even when not expressly provided by statute, it is the rule, accord- holder in the state courts to recover an assessment Peters v. Foster, 56 Hun, 607 (1890). The creditor may proceed to judgment though a receiver has been appointed. Mason v. N. Y., etc., Mfg. Co., 27 Hun, 307 (1882). i Farnsworth v. Wood, 91 N. Y., 308 (1883). See, also, Mason v. New York Silk, etc., Co., 27 Hun, 307 (1882) ; Bill- ings v. Trask, 30 id., 314 (1883). See, also, Walker v. Crain, 17 Barb., 128 (1853); Story v. Furman, 25 N. Y, 215 (1862): Cuykendall v. Corning, 88 N. Y, 129 (1882) ; Herkimer Co. Bank v. Furman, 17 Barb., 116 (1853); Hurd v. Tallman, 60 id., 272 (1871). 2McDowall v. Sheehan, 129 N. Y, 200 (1891). A director who is a creditor cannot in certain cases share with the other creditors and prove a claim due to him from the corporation. Neither can such claim be proved where it belongs to a firm or company of which the di- rector was a member, or to the assignee of such firm or company. Thacher v. King, 31 N. E. Rep., 648 (Mass., 1892). a Thayer v. Union Tool Co., 4 Gray, 75 (1855). 4 Meisser v. Thompson, 9 Brad. (111.), 368 ; 108 111., 359. s Mathez v. Neidig, 72 N. Y, 100 (1878) ; Clark v. Myers, 11 Hun, 608 (1877): Bailey r. Bancker, 3 Hill, 188 (1842) (overruling upon this point Simonson v. Spencer, 15 Wend., 548 — 1836) ; Beers v. Waterbury, 8 Bosw., 396 (1861) ; Richard- son v. Abendroth, 43 Barb., 162 (1864); Deming v. Puleston, 33 Super. Ct., 231. Cf. Sanborn v. Lefferts, 58 N. Y, 179 (1874); .Garrison v. Howe, 17 N. Y, 458 (1858). To same effect, Perkins v. San- ders, 56 Miss., 733 (1879). Cf. Slee v. Bloom, 5 Johns. Ch., 366, 382 (1821). 6 But see Potter v. Stevens Machine Co., 127 Mass., 592 (1879), and Sav. Ass'n v. O'Brien, 51 Hun. 46 (1889). 7 Brinbam v. Wellersburg Coal Co., 47 Pa. St, 43( 1 °'U). 3 Fowler v. Robinson, 31 Me., 1S9(1850). 9 In a suit in equity to enforce stock- holders' statutory liability, a plea that the decedent of one of the complain- ants was also a stockholder and no offer to pay his liability had been made is not a good plea. Newbury v. Robinson, 41 Fed. Rep., 458 (1890). In New York it seems that the assignee of a judgment may bring the suit to enforce statutory liability, though the assignee be a stock- holder. Woodruff & Beach Iron Works v. Chittenden, 4 Bosw., 406 (1859). See, also, Garrett v. Sayles, 1 Fed. Rep, 371 (1880), aff'd 110 U. S., 288; Potter v. Ste- vens Machine Co., 127 Mass., 592 (1879). 279 § 219.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XIT. ing to the weight of authority, that corporate creditors, before they can proceed against the shareholders upon their statutory liability, must first exhaust their remedy against the corporation and its as- sets. 1 This rule arises from the fact that the liability of the stock- holders is not the usual fund for the payment of corporate debts, but that the corporate treasury is the primary resource. Accord- ingly, the statutory liability of the stockholders is not to be resorted to, if the assets of the corporation, including the unpaid subscrip- tions for stock, "will suffice to pay the debts. 2 i Means' Appeal, 85 Pa. St., 75 (1877); Fourth Nat. Bank v. Francklyn, 120 U. S., 747 (1887); Bayliss v. Swift, 40 Iowa, 648 (1875) ; McCIaren v. Francis- cus, 43 Mo., 452 (1869); Wright v. Mc- Cormack, 17 Ohio St., 86 (1866); Wehr- man v. Reakirt, 1 Cinn. Super. Ct., 230 (1871) ; Lane v. Harris, 16 Ga., 217 (1854) ; Drinkwater v. Portland, etc., R'y, 18 Me., 35 (1841); Dauchy v. Brown, 24 Vt, 197 (1852); Cambridge Water-works v. Somerville Dyeing Co., 4 Allen, 239 (1862); Toucey v. Bowen, 1 Biss., 81 (1855). Cf. Patterson v. Wyomissing Manuf. Co., 40 Pa. St., 117 (1861); Har- per v. Union Manuf. Co., 100 111., 225 (18S1); Hatch v. Burroughs, 1 Woods, 439 (1870). In Colorado stockholders liable by statute may be joined as party defendants in the original suit against the corporation. Tabor v. Goss, etc., Co., 18 Pac. Rep., 537 (Colo., 1888). Judgment against the corporation is first necessary. Where some of the credit- ors are ' proceeding against the stock- holders without first obtaining judg- ment against the corporation, but one creditor has procured a judgment and exhausted his remedy against the cor- poration, the latter may enjoiu the other creditors from pursuing their remedy. Hoyt v. Bunker, 32 Pac. Rep, 126 (Kan., 1893). If no judgment has been ob- tained, the stockholders can set up such defenses as would have been avail- able to the company. Railroad Co. v. Smith, 31 N. E. Rep, 743 (Ohio, 1891). In an action by a judgment creditor to enforce a statutory liability, claims by himself and others not yet reduced to judgment may be proved. Thacher v. King, 31 N. E. Rep, 648 (Mass., 1892). 2 Stewart v. Lay, 45 Iowa, 604 (1877); Wright v. McCormack, 17 Ohio St., 86 (1866). There is, however, a line of au- thorities in support of the proposition that a judgment against the corpora- tion is not a prerequisite to the enforce- ment of the shareholders' statutory liability. Perkins v. Church, 31 Barb., 84 (1859) ; Southinayd v. Russ, 3 Conn., 52 (1819) : Culver v. Third National Bank. 64 111., 528 (1871) ; Davidson v. Raukin, 34 Cal., 503 (1868); Young v. Rosen- baum, 39 id., 646 (1870) ; Morrow v. Su- perior Court, 64 Cal., 383 (1883); Bird v. Calvert, 22 S. C, 292 (1884). No pre- vious judgment against the corporation is necessary in enforcing directors' stat- utory liability. Patterson v. Minn., etc., Co., 42 N. W. Rep, 926 (Minn., 1889). In Alabama the remedy against the cor- poration need not be first exhausted unless the statutes expressly require it. McDonnell v. Alabama, etc., Ins. Co., 5 S. Rep, 120 (Ala., 1888). Cf. § 200, supra. In these cases it is held in gen- eral that the shareholder's liability under the statute is unconditional, orig- inal and immediate, not dependent on the insufficiency of the corporate assets, and not collateral to that of the corpo- ration upon the event of its insolvency. Thus, in the case of Manufacturing Company v. Bradley, 105 U. S., 17S (1881), it was held that, upon a bill being filed against the corporation for the col- lection of a debt, the shareholders might 280 CH. XII. J STATUTORY LIABILITY OF STOCKHOLDERS. [§ 219. Frequently the statutes which impose this extraordinary or extra common-law liability upon shareholders provide that a creditor shall obtain judgment against the corporation, and that an execu- tion duly levied thereunder shall have been returned wholly or partially unsatisfied, before the creditor has a right to proceed against the stockholders individually. 1 But, in general, proceed- ings against the corporation are not to be required when they would be nugatory or impossible. 2 properly be made parties in order to avoid a multiplicity of suits. ancTupon the ground that the shareholders were immediately liable under that provision of their charter which made "members of the coinpan}- . . . jointly and severally liable for all debts and con- tracts made by the company until the whole amount of the capital stock fixed and limited by the corporation " is paid in. Under the New York act of 1875 a stockholder may be sued before judg- ment against the corporation, but can- not be held liable until after such judgment. Walton v. Coe, 110 N. Y., 109 (1888). i See Laws of 1848, New York. ch. 40, § 24, commonly known as "The Gen- eral Manufacturing Act." Handy v. Draper, 89 N. Y, 334 (1882). But a con- trary rule prevailed under the Business Corporation Act of 1875. See Walton v. Coe, 110 N. Y, 109 (1888). See, also, Rocky Mountains National Bank v. Bliss, 89 N. Y, 338 (1882); Dean v. Mace, 19 Hun, 391 (1879). Sometimes the stat- ute provides that a specific demand shall have been made. Haynes r. Brown, 36 N. H, 545 (1858). In Wiscon- sin, by statute, there need be no prece- dent judgment against the corporation. Sleeper v. Goodwin, 31 N. W. Rep., 335 (Wis., 1887). The case of Patterson r. Lynde, 112 111., 196 (1884), holds that the judgment must be obtained in the state where enforcement is sought, and that not even a judgment in the federal cir- cuit court for that district will suffice. Cf. § 200, supra. 2 Cf. Shellington v. Howlaud, 53 N. Y. 371 (1873), where proceedings required as conditions precedent to liability were rendered impossible by the operation of United States bankruptcy law. See, also. State Sav. Ass'n v. Kellogg, 52 Mo., 583 (1873); Dryden v. Kellogg, 2 Mo. A pp.. 87. Cf. Ansonia Brass & Copper Co. v. New Lamp Chimney Co.. 5:3 N. Y.. 123 I B73) : S. C. affirmed, 91 U. S., 650 (187.-)) ; Fourth Nat'l Bank v. Fraucklyn. 120 U. S.. 747 (1887 1 : Paine v. Stewart," 33 Conn., 516 (1866), where, under a statute pro- viding that the property of stockholders could not be levied upon while corpo- rate property could be found to satisfy the debt, it was held that evidence that the corporate property was in the hands of a receiver was sufficient to prove the condition. Chamberlain v. Huguenot, etc., 118 Mass., 532 (1875), holding that proceedings in bankruptcy do not. in Massachusetts, prevent recovering judg- ment against the bankrupt corporation for the purpose of perfecting the liabil- ity of stockholders. It has been held in New Hampshire, that, before suit is brought against the stockholder, he should be given noticp of the default of the corporation, and a demand should be made. Hecks v. Burns. ;?s N. H, 141 (1839). Even where the statute requires it, a suit to enforce a statutory liability need not be delayed until the corporate property has all been applied to the pay- ment of debts, if it be clear that such property will be insufficient to pay every- thing. Munger r. Jacobson, 99 111., 349 (1881). Or where the corporation is clearly insolvent, and it would be idle to wait the return of the execution. Flash v. Connectk-ut. 109 U. S., 371 (1883) ; Km- caid v. Dwinelle, 59 N. Y, 548 (1875> 281 § 220.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. A judgment must be obtained and execution issued and returned in the state where suit is brought, or good reason must be shown why they are not. 1 Where the statutes provide for an enforcement of the share- holder's statutory liability only upon the dissolution of the corpo- ration, it is held that a dissolution, in the sense in which that term is here used, takes place when the corporation comes into the con- dition of having debts and no assets, or has ceased to act and exer- cise its corporate functions, or has suffered acts to be done which end the object for which it was created. 2 § 220. Difficulties in determining whether the creditor s remedy is at law or in equity. — Perhaps the most difficult, unsettled and un- satisfactory question concerning the statutory liability of stock- holders is the question whether that liability must be enforced at law or must be in equity, or may be in either a court of law or of equity. After determining this point there arises the further diffi- culty of ascertaining who shall be parties plaintiff and parties de- fendant — whether one corporate creditor may sue, or all must join ; whether one stockholder may be pursued as a single de- fendant, or all the stockholders must be brought in. The law on Cf. Toucey v. Bowen, 1 Biss., 81 (1855): Munger v. Jacobson, supra. Or the cor- poration is dissolved. Patterson v. Lynde, 112 111., 196 (1884). A judgment against the corporation is not necessary to en- force the stockholder's liability when the corporation is insolvent, has ceased to do business, and has made an assign- ment for the benefit of creditors. Mor- gan v. Lewis, 17 N. E. Rep., 558 (Ohio, 1888). Judgment against the corpora- tion need not first be obtained if the corporation has been dissolved. Hard- man v. Sage, 124 N. Y., 25 (1890). The issue and return of an execution unsat- fied against the corporation is necessary where the corporation is a going con- cern, but not where it is insolvent and has assigned for the benefit of its cred- itors. Barrick v. Gifford, 24 N. E. Rep., 259 (Ohio, 1890). 1 See § 223. 2 Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473 (1840) ; Slee v. Bloom. 19 Johns., 456 (1822); Penniman v. Briggs. Hopkins' Chan., 300 (1825); S. G, sub nom. Briggs v. Penniman, 8 Cowen, 387 (1826) ; State Savings Association v. Kel- logg, 52 Mo., 583 (1873); Dryden v. Kel- logg, 2 Mo. App., 87 (1876); Perry v. Turner, 55 Mo., 418 (1874); Central Agric, etc., Association v. Alabama, etc., Ins. Co., 70 Ala., 120 (1881); Mc- Donnell v. Ala., etc., Ins. Co., 5 S. Rep., 120 (Ala., 1888). Cf. Morley v. Thayer, 3 Fed. Rep., 737 (1880). holding that bankruptcy of the corporation is not a dissolution of a corporation within the meaning of the statute of Massachusetts imposing liability upon stockholders. In Florida upon dissolution the stock- holders are liable " to an extent equal in amount to the amount of stock by him owned, together with any amount un- paid thereon." The dissolution need not be a judicial decree to that effect. It is sufficient if there are debts and no assets, and the corporation has ceased to act and exercise its corporate functions, or has suffered acts to be done which end the object for which it was created. Suit against the corporation first is not necessary in such a case. Gibbs v. Davis, 8 S. Rep., 633 (Fla., 1891). 282 CH. XII. J STATUTORY LIABILITY OF STOCKHOLDERS. [§221. these points is in a transition stage. The question is largely one of practice, and from experience the courts will doubtless evolve that rule which is most just and convenient. At present, however, not only must the decisions of the state in which the action is brought be examined, but it is necessary also to note carefully the wording of the statute creating the liability. Where the statute prescribes expressly the form of the remedy, it is the well-established rule that that remedy was intended by the legislature to exclude every other, and it must be strictly pursued. 1 § 221. The remedy at law. — In New York the shareholder's lia- bility, imposed by the statute relative to miscellaneous corpora- tions, is held to be such that any creditor who has recovered a judgment against the compan}', and sued out an execution thereon, which has been returned unsatisfied, may sue any stockholder and recover to the extent provided by the statute in an action at law. 2 1 Lowry v. Inmau, 46 N. Y., 119, 127 (1871); Movley v. Thayer, 3 Fed. Rep., 737, 741 (1880); Haskins v. Harding, 2 Dillon, 99 (1873); Allen v. Walsh, 25 Minn., 543 (1879): Windham Provi- dent Savings Institution v. Sprague, 43 Vt., 502 (1871); Dauchy v. Brown, 24 Vt, 197; Bassett v. St. Albans Hotel Co., 47 id., 313 (1875); Pollard v. Bailey, 20 Wall.. 520 (1874) ; Knowlton v. Ack- ley, 8 Cush., 93, 98 (1851) ; Erickson v. Nesmith, 15 Gray, 221 (1860); Brinham v. Wellersburg Coal Co., 47 Pa. St, 43 (1864); Hoard v. Wilcox, 47 id., 51 ; Youghiogheny Shaft Co. v. Evans, 72 id., 331 (1872). Cf. Andrews v. Cal- ender, 13 Pick., 484 (1833); Potter v. Stevens Machine Co., 127 Mass., 592 (1879); Grose v. Hilt. 36 Me., 22 (1853); Diven v. Lee, 36 N. Y, 302 (1867) ; Wehr- man v. Reakirt, 1 Cinn. Super. Ct., 230. 2 Abbott v. Aspinwall, 26 Barb., 202 (1857); Wiles v. Suydam, 64 N. Y, 173 (1876): Shellington v. Howland, 53 id., 371 (1873) : Handy v. Draper, 89 id., 334 (1882); Rocky Mountain National Bank v. Bliss, id., 338 (1882) ; Mathez v. Neidig, 72 id., 100 (1878); Flash v. Conn, 109 U. S, 371, 380 (1883); Weeks v. Love, 50 N. Y, 568 (1872). And this was the rule, also, under the earlier statute of March 22, 1811, R. S., 7th ed., p. 1726. Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473 (1840). Cf. Van Hook v. Whitlock, 3 Paige, 409 (1832) ; Simonson v. Spencer, 15 Wend., 548 (1836); Rich- ards v. Coe, N. Y Daily Reg., Aug. 2, 1 887. But when the action is to enforce the statutory liability to employees, "laborers, servants and apprentices," in New York, it has been held that all the shareholders should be made par- ties. Strong v. Wheaton, 38 Barb., 616 (1861). The creditor must sue one or all. Dean v. Whiton, 16 Hun. 203 (1878). In Illinois, under the charter provision that "each stockholder shall be liable to double the amount of stock " owned, it was held that the stockholders were severally and individually liable; that is, that an action at law against one or all of them would lie. McCarthy v. Lavasche, 89 111., 270 (1878); Hull v. Burtis, 90 id., 213 (1878); Fuller v. Led- den, 87 id., 310 (1877). In Pennsylvania, under the statute relating to the incor- poration of manufacturing companies, the corporate creditor proceeds against the shareholders in an action at law upon the original contract, making the corporation and all the shareholders parties defendant Brinham v. Wellers- burg Coal Co., 47 Pa St, 43 (1864); Mansfield Iron Works v. Willcox, 52 id., 377 (1866); Hoard v. Wilcox, 47 id., 51 (1S64): McHose v. Wheeler, 45 id., 33 2S3 §221.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. So, also, when it is provided by statute that the shareholders " shall, to the amount of the stock by them held, be jointly and severally liable for all the debts and responsibilities of such compan}'," it is held that an action at law may be maintained on the individual liability by any corporate creditor against an}' individual share- holder. 1 Where an action at law can be maintained, and the shareholder's liability is limited and several, each shareholder being: made liable for a sum certain, a separate action will lie against each one. 2 And unless the remedy at law has been enlarged by statute, so as to allow judgment separately against each one of several defendants before the court in the same proceeding, each creditor must sue each shareholder, or each creditor must sue some one or more shareholders separately. 3 (1863). See Patterson v. Wyomissing (1S66); Cuhcr v. Third National Bank, Manuf'g Co., 40 Pa. St.. 117 (1861). And to same effect, Thompson v. Jewell, 43 Midi., 240 (1880); Pope v. Leonard, 1 15 Mass.. 286 (1874). Under a Georgia statute, by the provisions of which each shareholder in banking corporations in that state is made liable to redeem his proportionate share of the outstanding circulation, a single creditor may have his action at law against any individual shareholder. Lane v. Han is, 16 Ga., 217 (1854): Lane v. Morris, 8 Ga., 468 (1850): Branch v. Baker, 53 id., 502 (1874); Hatch v. Burroughs, 1 Woods, 439 (1870). Cf. Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473 (1840). !Grud v. Tucker, 5 Kan., 70 (1869): Norris v. Johnson, 34 Md., 485 (1871). See Bullard v. Bell, 1 Mason, 243 (1817, by Story, J.). Cf. Matthews v. Albert, 24 Md.. 527(1866): Culver v. Third Na- tional Bank, 64 111., 52S (1871); Bond v. Appleton, 8 Mass.. 472. The Missouri statute may be enforced at law. Sav- ings Assoc, v. O'Brien, 51 Hun, 45 (1889). By statute in California the remedy may be at law. Borland v. Haven, 37 Fed. Rep., 394(1888). 2 Bank of Poughkeespie v. Ibbotson, 24 Wend., 473 (1840); Perry v. Turner, 55 Mo., 418 (1874) ; Boyd v. Hall, 56 Ga., 563 (1876), where the liability was pro rata; Paine v. Stewart, 33 Conn., 516 64 111., 528 (1S71); Abbott r. AspinwaU, 26 Barb, 202 (1857); Garrison v. Howe, 17 N. Y.. 458 (1858) ; Terry v. Little, 101 U. S., 216 (1879). 3 Abbott i'. AspinwaU, 26 Barb., 202 (1857); Paine v. -Stewart, 33 Conn., 516 (1866) ; Matter of the Hollister Bank, 27 N. Y., 393 (1863); Perry v. Turner, 55 Mo., 418 (1874); Bank of Poughkeepsie v. Ibbotson, 24 Wend., 473. Cf. Milroy v. Spurr Mountain Iron Mining Co., 43 Mich., 231 (1880). Where the share- holder's liability is held to be like that of a partner, then all must be joined as defendants, and the omission of any one is ground for a plea in abatement Allen v. Sewall, 2 Wend., 327 (1829), but holding that it cannot be taken advantage of on the trial ; Strong v. Wheaton, 38 Barb., 616 (1861), holding that, under the New York code, defect of parties herein must be objected to by demurrer or answer; Reynolds v. Fe- liciana Steamboat Co., 17 La. Rep., 397 (1841); Dean v. Whitory, 16 Hun, 205 (1878) ; Bonewitz v. Bank, 41 Ohio St, 78, holding that the sheriff's return show- ing clearly that other stockholders are out of the jurisdiction must be in proof. Cf. Dodge v. Minnesota, etc., Slate Roofing Co., 16 Minn., 368(1871); Cul- ver r. Third National Bank, 64 111.. 528 (1871); Branson v. Oregonian R'y Co., 284 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. § 221, Under a statute providing that u each shareholder shall be indi- vidually and personally liable for his proportion of all the debts and liabilities of the company contracted or incurred, . . . for the recovery of which joint or several actions may be prosecuted," it has been held that the liability of the shareholders is substantially that of partners. 1 So, also, a general joint and several liability for all the corporate debts makes the stockholders liable as partners as though there had been no incorporation. 2 Under the provisions 10 Oregon, 278 (1882;; Hoag v. La- 6 id., 80(1856); Adkins v. Thornton. 19 mont, 60 N. Y., 96 (1875); Abbott v. Aspinwall, 26 Barb., 202, 207. As to the joinder of parties in Pennsylvania, see Mansfield Iron Works v. Willcox, 52 Pa. St., 377 (1866) ; McHose v. Wheeler, 45 id., 32 (1863) ; Hoard v. Wilcox, 47 id., 51 (1864). Creditor suing directors on a statutory liability need not join all cred- itors nor all directors. Patterson v. Minn., etc., Co., 42 N. W. Rep., 926 (Minn., 1889). The corporation need not be joined as a party defendant. The suit may be against the estate of a deceased stockholder. It may be a separate suit from that against the corporation. Nolan v. Hazen, 47 N. W. Rep, 155 (Minn., 1890). In Pennsylvania the cor- poration also should be made a party defendant. Hoard v. Wilcox, 47 Pa. St., 51 ; Mansfield Iron Works v. Willcox, 52 Pa. St., 377 (1866). Cf. Deming v. Bull. 10 Conn., 409 (1835); Middletown Bank v. Magill, 5 id., 28 (1823). In Vermont a provision that shareholders "shall be personally holden " is held to create only a joint liability. Windham Provident Savings Institution v. Sprague, 43 Yt., 502 (1871). The suit may be at law and by one creditor against one stockholder. The corporation need not be joined. Gibbs v. Davis, 8 S. Rep, 633 (Fla., 1891). The liability of stockholders under the Kansas statute is several and not joint. The creditors cannot join several stock- holders in one suit Each must be sued separately. Abbey v. W. B., etc., Co., 24 Pac. Rep, 426 (Kan., 1890). 1 Davidson v. Rankin, 34 Cal., 503 (1868). Cf. Young v. Rosenbaum, 39 id., 646 (1870); Larrabee v. Baldwin, 35 id.. 155 (1868) ; McAuley v. York Mining Co.. Ga., 326 (1856) [this case is frequently miscited, owing to a misprint in the original report, as Dozier v. Thornton] ; Branch v. Baker, 53 Ga.. 502 (1874); Dane v. Young, 61 Me., 160 (1872); Cas- tleman v. Holmes, 4 J. J. Marsh., 1 (1830). Cf. Fuller v. Ledden, 87 111.. 312; Brown v. Hitchcock, 36 Ohio St., 678. The constitutional and statutory liability of stockholders in California is a contract obligation, and may be enforced by at- tachment. Kennedy v. California, etc., Bank, 31 Pac. Rep, 846 | Cat, 1892). The liability of a stockholder in a California bank for his proportion of a corporate debt was enforced at law in Barling r. Bank of B. N. A., 50 Fed. Rep. 260 (1892). 2 Planters' Bank, etc., v. Bivingsville, etc., Manuf. Co., 10 Rich. Law, 95 (1856); Southmayd v. Russ, 3 Conn., 52 (1819); Middletown Bank v. Magill, 5 id., 28, 45 (1823); Deming v. Bull, 10 id., 409 (1835); Conant v. Van Schaick. 24 Barb!, 87 (1857); Allen v. Sewall, 2 Wend., 327 (1829); Moss v. Oakley, 2 Hill, 265 (1842); Harger v. McCullough, 2 Denio, 119(1846); McCullough v. Moss, 5 id, 567 (1846); Corning v. McCullough, IN. Y, 47(1847); Moss v. Averell, 10 id., 449 (1853); Wyles v. Suydam, 64 id.. 173, 176 (1876); Conklin v. Furman, 8 Abb. Pr. (N. S.), 164; S. C, 57 Bail... 487 ; Abbott v. Aspinwall, 23 Barb., t 207 : Erickson v. Nesmitb, 46 X. EL, 371 (1866); White v. Blum. 4 Neb. 555 (1876): New England Commercial Bank v. Newport Steam Factory, 6 R I., 154 (1859) ; Moies v. Sprague, 9 id., 541 (1870) ; Witherhead v. Allen, 28 Barb., 6C7 ; Chase v. Lord, 77 N. Y, 3a S85 § 221.] STATUTORY LIABILITY OF STOCKHOLDERS. [cu XII. of the constitution and statutes of Ohio, and of other states, it is held that while the undertaking of the shareholder is not primary, and is to be resorted to only in case of the insolvency of the corpo- ration, still the liability, when it does properly arise, is essentially that of partners. 1 This class of cases holds that, unless the statute prescribes otherwise, the common-law rules as to the liability of partners, and the remedies for enforcing that liability, apply to the statutory liability of shareholders in incorporated companies. 2 1 And that although the stated extent of the shareholder's liability, as pro- vided by the statute, cannot be ex- ceeded, still, up to the full measure of his liability, he may be charged, al- though it be shown that, if other solv- ent shareholders had contributed their full proportion, it would not be neces- sary for him to pay. Wehrman v. Reakirt, 1 Cinn. Super. Ct, 230(1871): Brown v. Hitchcock, 36 Ohio St, 678. Cf. Stewart v. Lay, 45 Iowa, 604 (1877) ; Crease v. Babcock, 10 Mete, 525 (Mass., 1846). Iu AViscousin stockholders in banking corporations are liable by stat- ute as original and principal debtors, substantially as though they were part- ners, except, as in Ohio, that the re- sponsibility of each is limited to a sum equal to his shares of stock. Coleman v. White, 14 Wis., 700 (1862). Under the Wisconsin statute making stockholders liable for the debts where business is commenced before one-half the capital stock is subscribed and twenty per cent, paid in, the statute allows suit without joining the corporation as a defendant. Flour City Nat Bank v. Wechselberg, 45 Fed. Rep., 547 (1891). 2 Story v. Furman, 25 N. Y M 214, 221, 222 (1862); New England Commercial Bank v. Newport Steam Factory, 6 R I., 154, 189 (1859); Moies v. Sprague, 9 id., 541 (1870). It is sometimes held that a general statutory liability means a lia- bility on the part of the stockholder only in the proportion which his inter- est bears to the total indebtedness of the corporation. Boyd v. Hall, 56 Ga., 563 (1876); Reynolds v. Feliciana Steamboat Co., 17 La. Rep, 397 (1841). In such a case, where the shareholders are jointly and severally personally liable for debts contracted by the corporation, which it cannot or does not pay, in proportion to the number of shares they own, it seems to be settled that they are to be held principal debtors, and not mere sureties for the corporation. Harger v. McCul- lough, 2 Denio, 119 (1846); Corning v. McCullough, 1 N. Y., 47 (1847), the court saying that the stockholders stand towards the creditors "on the same ground and under the same responsibil- ity ... as they would, if unincor- porated, have stood ; " Moss v. Averell. 10 id., 450 (185:5); Simonson v. Spencer, 15 Wend., 548(1836), sustaining the ac- tion for debt; Bailey t>. Bancker, 3 Hill. 188 (1842), holding, also, that a creditor must sue a stockholder upon the orig- inal demand and not upon the judg- ment against the company; Southmayd v. Russ, 3 Conn., 52 (1819), holding that since the liability is original, scire facias will not lie against a stockholder, but he must be sued as if there were no incor- poration; Marcy v. Clark, 17 Mass., 330 (1821). In Michigan it is held that they are sureties. Hanson v. Donkersley, 37 Mich., 184 (1877). Cf. Grand Rapids Savings Bank v. Warren, 52 id., 557 (1884). It has been held, also, that they are not sureties for each other. Lane v. Harris, 16 Ga., 217, 234 (1854); Crease v. Babcock. 10 Mete. 525 (18461 Cf. Lar- rabee v. Baldwin, 35 Cal., 155 (1868). This seems to be the rule, in general, as to all statutory liability. Young v. Ro- senbaum, 39 Cal., 646 (1870) ; Taylor on Corporations, £§ 714, 715; Erickson v. Nesmith, 46 N. BL, 371 (1866); Thomp- 286 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [$ 222. The liability of stockholders in national banks is fixed by an order of the comptroller of the currency. 1 § 222. The remedy in a court of equity. — The remedy in equity is the favorite remedy of the courts. It is just, certain, impartial and clear. It enforces once for all the liability of the stockholders, and at the same time provides for contribution. It distributes the assets equally and equitably among all the corporate creditors. It prevents a multiplicity of suits, and avoids the difficult question as to whether a suit at law will lie. The only and great objection to the remedy in equity is that it is protracted, vexatious and ex- pensive. 2 Frequently the courts have held that an action at law to enforce a statutory liability is not a proper proceeding, but that the rights of all parties can be properly adjusted only in a court of equity, and that the latter remedy is exclusive of all others. 3 son v. Meisser, 108 111., 359 (1884). It is obvious that the question whether the creditor, in pursuing his remedy against the shareholder, may sue one or any of the shareholders at his option, Or must sue all, in a joint action, is of the high- est importance. It goes to the very form and essence and content of his action ; but it is a point upon which, as has been already intimated, a text-writer cannot deduce from the reported cases any clearly-settled rule of general applica- tion. It is, in every case where the stat- ute does not contain an explicit pro- vision, a question of construction to be determined by the courts in expounding the words of the statute. 1 It is for him to determine whether and to what extent the statutory liabil- ity of the stockholders sTiall be enforced. Casey v. Galli, 94 U. S.. 673 (1876) ; Ken- nedy v. Gibson. 8 Wall., 498 (1869); Strong v. Southworth, 8 Ben., 331 ; Na- tional Bank v. Case, 99 U. S., 628 (1878). A voluntary assessment of the stock- holders by themselves does not affect or decrease this statutory liability. 118 U. S., 634 (1886). The United States dis- trict court has jurisdiction of an action by the receiver of an insolvent national bank to collect assessments on stock. Stephens v. Bernays, 44 Fed. Rep., 642 (1890). The statutory liability of stock- holders in a national bank may be en- forced by an action at law, and the as- sessment as made by the comptroller is conclusive. Young v. Wempe, 46 Fed. Rep., 354 (1891). The liability of direct- ors under the National Banking Act for loans to separate persons of amounts in excess of one-tenth of the capital stock can be enforced only in a court of equity. Welles v. Graves, 41 Fed. Rep.. 459 (1890); Peters v. Foster, 56 Hun, 607 (1890). As regards the remedy under the National Bank Act, see Kennedy v. Gibson, 8 Wall., 498 (1869); Casey v. Galli, 94 U. S., 673 (1876), and act of June 30, 1876, ch. 44; Witters v. Sowles, 32 Fed. Rep., 767 (1887) ; Richmond v. Irons, 121 U. S., 27 (1887), as to joinder of causes of action. 2 Thus, with reason, the court said, in Mason v. Alexander, 44 Ohio St., 318: " By reason of the great number of stockholders, the frequent transfers of stock, the decease of parties, and of other causes, delays, vexatious, expen- sive and almost interminable, seem to be inevitable in all such proceedings; so much so. indeed, that such liability has grown to be looked upon as furnishing next to no security at all for the debts of corporations." 3 Thus, under a charter provision that stockholders shall " be bound respect- 287 222.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. In many jurisdictions the rule prevails that creditors in these oases have a concurrent remedy, either at law or in equity. The action at law will lie upon the debt, while, on the other hand, the equitable jurisdiction arises from the power of a court of chancery to compel contribution among the shareholders and to effect an equitable distribution among the creditors. 1 In the courts of the United States it is the rule that, where a stockholder's statutory liability is by the terms of the statute a joint and several or several liability, the creditor may, after the remedy against the corporation has been exhausted, enforce his rights in an action at law; but, in all other cases of statutory lia- bility, the remedy must be in equity, as in cases of unpaid subscrip- tions. 2 In several of the state courts it is held that a creditor's ively for all debts of the bank in pro- portion to their stock holden therein," it was held that an action at law by a single creditor against a single stock- holder would not lie. Pollard v. Bailey, 20 Wall., 520 (1874); Hatch v. Dana, 101 U. S , 205 (1879) ; Terry v. Little, id., 216 ; Smith v. Huckabee, 53 Ala., 191 (1875); Jones v. Jarman, 34 Ark., 323 (1 879). Cf. Wright v. McCormack, 17 Ohio St., 86 (1866); Sands v. Kimbark, 37 Barb., 108, 120 (1863) ; Cushman v. Shepard, 4 id., 113 (1848). Nor under a statute making the stockholders of a banking company " individually responsible to the amount of their respective share or shares of stock for all its indebtedness and liabil- ities of every kind." Coleman v. White, 14 Wis.. 700 (1862); Carpenter v. Marine Bank, id., 705, n. (1862). Also upon the ground that at law the indebtedness of the corporation and the several liabilities of the members could not be equitably adjusted. Low v. Bu- chanan, 94 111., 76 (1879), where the di- rectors were held liable for an excess of indebtedness; Queenan v. Palmer, 34 Alb. L. J., 117 (111., 1886); Stewart v. Lay, 45 Iowa, 604 (1877) ; Norrisr. John- son, 34 Md.,485 (1871) ; Garrison v. Howe, 17 N. Y., 458 (1858); Story v. Furman, 25 id., 214 (1862). Cf. Flash v. Conn, 109 U. S., 371 (1883). Where, in South Carolina, the charter of a bank provided that upon the failure of the bank " each stockholder shall be liable and held bound . . . for any sum not exceeding twice the amount of . . . his . . . shares," it was held by the supreme court of the United States that a suit in equity by or on be- half of all the creditors is the only ap- propriate mode of enforcing the liability incurred by such a failure. Terry v. Little, 101 U. S., 216 (1879). 1 Bank of the United States v. Dallam. 4 Dana, 574 (1836); Van Hook v. Whit- lock, 3 Paige, 409 (1832) ; Bank of Pough- keepsie v. Ibbotson, 24 Wend., 473 (1840) ; Masters v. Rossie Lead Mining Co., 2 Sandf. Chan., 301 (1845); Pfohl v. Simp- son, 74 N. Y., 137(1878); Eamesv. Doris, 102 111., 350 (1882); Culver v. Third Na- tional Bank, 64 id., 528 (1871); Perry v. Turner, 55 Mo., ^18 (1874); Norris v. Johnson, 34 Md., 485, 489 (1871); Mat- thews v. Albert? 24 id., 527 (1866). Cf. Weeks v. Love, 50 N. Y, 568 (1872) ; Gar- rison v. Howe, 17 id., 458 (1858). And see the following New York cases, wherein it is held that a remedy in equity is preferable : Morgan v. New York, etc., R R, Co., 10 Paige, 290(1843) ; Sherwood v. Buffalo, etc., R R Co., 12 How. Prac, 136 (1855); Hinds v. Canan- daigua, etc., R R Co., 10 id., 487 (1855); Courtois v. Harrison, 12 id., 359 (1856) — the last three cases relating to supple- mentary proceedings. 2 Pollard v. Bailey, 20 Wall., 520 (1874) ; 288 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 222. remedy against a shareholder upon the statutory liability is in equity alone. 1 In New York and Illinois a stockholder sued at law for the enforcement of this liability may institute an equitable proceeding to bring in all the parties. 2 Terry v. Little. 101 IT. S., 216 (1879). Cf. Terry v. Tubman, 92 U. S., 156 (1875) ; Andrews v. Bacon, 38 Fed. Rep., 777 (1889) ; Cuykendall v. Miles, 10 Fed. Rep., 342 (1882), where the court said: "The supreme court hold that the mode in which a liability of this kind is to be enforced depends entirely upon the par- ticular law governing the corporation. If that law merely provides for a pro- portionate liability of all stockholders for all debts there should be a bill in equity for the benefit of all the cred- itors and against all the stockholders. (Citing cases.) But if the law of the state authorizes an action by one cred- itor against one stockholder, that rem- edy may be pursued." Patterson v. Lynde, 106 U. S., 519 (1882). As to joinder of parties, see R. S. of U. S., § 737. An action at law lies in the fed- eral courts, herein, when that remedy is appropriate. Bullard v. Bell, 1 Mason, 243 (1817). Or where the courts of the state creating the liability hold that an action at law will lie. Mills v. Scott, 99 U. S., 25 (1878). In the federal courts a suit to enforce a director's statutory lia- bility is in equity. Stone v. Chisolm, 113 U. S., 302 (1884). 1 Harris v. First Parish, 40 Mass., 112 (1839); Coleman v. White, 14 Wis., 700 (1862) ; Ladd v. Cartwright, 7 Oreg., 329 ; Smith v. Huckabee, 55 Ala., 191 (1875). See Patterson v. Lynde, 106 U. S., 519 (1882). In Illinois there was some doubt as to whether the bill in equity would lie; but the late case of Tunesma v. Schuttler, 114 111., 156 (1885), holds that, in case the corporation is insolvent and the corporate creditors numerous, a bill in equity is the proper remedy. Under the Manufacturing Company's Act of Illinois, the creditor's remedy is held to be clearly in equity. Rounds v. McCormick, 114 III, 252 (1885); Harper v. Union Mfg. Co., 100 111., 225 (1881) ; Low v. Buchanan, 94 III, 76 (1879). See Pierce v. Milwaukee, etc., Co., 38 Wis., 253 (1875), for the rule in that state. Where under a creditor's bill a receiver is appointed and the assets administered, and then by a supplemental bill the stockholder's liability enforced, a cred- itor who received a dividend under the original bill cannot sue a stockholder at law. Tunesma v. Schuttler, 28 N. E. Rep., 605 (111., 1885). The remedy is in equity alone, and non-joinder of any stockholders as defendants will render the bill demurrable. Friend v. Powers, 9 S. Rep., 392 (Ala., 1891). 2 Pfohl v. Simpson, 74 N. Y., 137 (1878) ; Cochran v. American Opera Co., N. Y. Daily Reg., Jan. 5, 1888. In Wiscon- sin a long line of decisions hold that the , creditor's remedy against stockholders can be in equity only. Sleeper v. Good- win, 31 N. W. Rep., 335 (Wis., 1887), cit- >ing many cases; Garrison v. Howe, 17 N. Y, 458 (1858). Semble, Thebus v. Smiley, 110 III., 316 (1884); Eames v. Doris, 102 111., 350 (1882). All the stock- holders should be made parties, but the defect may be waived. Arthur v. Will- ius, 46 N. W. Rep., 851 (Minn., 1890\ The liability of stockholders under the Ohio laws is several and to all creditors. New- bury v. Robinson, 41 Fed. Rep., 458 (1890). When the equitable remedy is pursued, the corporation and all the solvent shareholders within the jurisdiction who are known must be made defend- ants. Contribution among the share- holders is of the essence of the proceed- ing, and that is best effected when all are made parties. Walsh v. Memphis, etc., R R Co., 2 McCrary, 156 (1881); S. O, 6 Fed. Rep., 797 : Umsted v. Bus- kirk, 17 Ohio St., 113 (1866), holding, also, that defendant stockholders may insist on joinder of co-stock holders. Erickson (19) 289 223.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. A still different remedy from all these exists where the judgment creditor of the corporation, after execution returned unsatisfied, may issue execution against any stockholder without being obliged to institute a new action. 1 Another remedy still is to allow the plaintiff creditor to join stockholders as defendants in his original suit against the corpo- ration. 2 § 223. Enforcement of the statutory liability in the courts of an- other state — Penal liabilities. — The stockholders of a corporation are generally widely scattered, and reside in many states. Accord- ingly, when some or all of them are non-residents of the state in which the corporation exists, the important question arises whether v. Nesmith, 46 N. H., 371 (1866) ; Hadley amount of recovery may thereby exceed v. Russell, 40 N. H., 109 (1860). The joinder of all the shareholders may be dispensed with in a case where it is shown to be impracticable. Umsted v. Buskirk, 17 Ohio St, 113 (1866); Petti- bone v. McGraw, 6 Mich., 441 (1859); Piei'ce i\ Milwaukee Construction Co., 38 Wis., 253 (1875); Coleman v. White, 14 Wis., 700 (1862); Crease v. Babcock, 10 Mete, 525 (1846); Brundage v. Monu- mental, etc., Mining Co., 12 Oregon, 322 (1885), holding, also, that a defendant stockholder desiring to bring in other stockholders must do that by an appro- priate cross-proceeding. And an action to enforce statutory liability may be joined with an action to collect unpaid subscriptions. Warner v. Callender, 20 Ohio St., 190 (1870). But a claim against stockholders upon a liability imposed by statute cannot be joined in one bill in equity with a penal claim against the directors of the company. Cambridge Water-works v. Somerville Dyeing, etc., Co., 14 Gray, 193(1859); Poper. Leonard, 115 Mass., 286 (1874); Nappier v. Morti- mer. 11 Abb. Pr. (N. S.), 455. Cf. Wiles v. Suydam, 64 N. Y., 173 (1876). The late case of Mason v. Alexander, 13 Am. & Eng. Corp. Cas., 54 (Ohio, 1886), holds that the corporation is a necessary party to the creditor's suit in equity; that judgment against the stockholders is to be against them severally ; and that interest is to be allowed from the com- mencement of the suit, "although the 290 the stockholder's original liability." See, also, § 226, infra, to the effect that any creditor may enjoin the pro- ceeding at law and bring all parties into a suit in equity. In a corporate cred- itor's action against a few stockholders, to enforce their liability and to obtain discovery of other stockholders, the discovery may be compelled. Hippie v. Fire, etc., Co., 3 Central Rep., 462 (N. J., 1886). See, also, §§ 519, 520, infra. A married woman in Arkansas may own stock and be liable thereon. Her liability may be enforced in equity. Bundy v. Cocke, 128 U. S., 185 (1888). Proceedings to enforce the statutory liability are made elastic, and applica- tions of creditors who come in may cure defects in the original papers. Arthur v. Willius, 46 N. W. Rep., 851 (Minn., 1890). 1 See § 201, supra. 2 Milroy v. The Spurr, etc., 43 Mich., 231, holding that, if the statute author- izes a suit against the corporation alone or jointly with one or more stockhold- ers, a creditor who elects to sue it alone cannot afterwards proceed upon the same debt against the corporation and stockholders jointly. One of the cred- itors who is a party to the sequestra- tion proceedings may in those proceed- ings enforce the stockholder's statutory liability. McKeesick i\ Seymour, etc., Co., 50 N. W. Rep., 1110 (Minn., 1892). CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 223. the courts of one state will enforce a stockholder's statutory liabil- ity created by the statutes of another state. If not, then non- resident stockholders practically escape the liability which they assumed when they became members of the corporation. The cases are uniform in holding that the extent of the stock- holder's statutory liability and the character of that liability de- pend upon and are determined by the charter of the corporation or the statute of the state which created it. 1 In general, when the courts of one state are asked to enforce the statutory liability of stockholders in a corporation created by an- other state, two things are to be considered : First, is the statutory liability itself a contract liability or a mere penalty? Second, are the remedies provided by the laws of the state where suit is sought to be brought adequate to the just enforcement of the liability? The law is clear that the courts of one state will not enforce penalties imposed by another state. 2 But the usual statutory liabil- ity of stockholders is not a penalty. The courts are unanimous in holding that where by statute the stockholders in a corporation, instead of being relieved entirely from liability to corporate credit- i Payson v. Withers, 5 Biss., 269 (1873) ; Seymour v. Sturgess, 26 N. Y., 134 (1862); McDonough v. Phelps, 15 How. Prac, 372 (1856) ; Ex parte Van Piper, 20 Wend.. 614 (1839); Aultman's Ap- peal, 98 Pa. St, 505. Cf. Hill v. Beach, 12 N. J. Eq., 31 (1858); Nabob of Car- riage v. East India Co., 1 Vesey, Jr., 371 (1791); Dutch West India Co. v. Hen- riquez, 1 Strange, 612. See, also, ch. I, supra. This principle applies, of course, only to corporations which were legally incorporated. For the liability where the incorporation was not legal, see chapter XIII. An administrator may enforce the statutory liability even in a foreign jurisdiction. The United States courts take judicial notice of the stat- utes of the various states. Newberry v. Robinson, 36 Fed. Rep., 841 (1888). In Bateman v. Service, L. R., 6 App. Cas., 386 (1881), the ground is taken that a liability created by statute remains the same wherever the corporation may transact its business, or wherever the shareholders may happen to live, and that the fact of doing business in a for- eign state does not subject the share- holders of the corporation to the opera- tion of laws which create statutory liability in such foreign state. In ac- cordance with this view it was held in Ohio, where a foreign corporation, with- out statutory liability of its stockhold- ers, did business in Ohio, where the statutes prescribe a personal liability for stockholders in domestic corporations of similar character, that the shareholders of the foreign corporation ai - e protected by the exemption they enjoy at home. Second National Bank v. Hall, 35 Ohio St., 158 (1878). See, also, Jessup v. Car- negie, 80 N. Y., 441 (1880); and see § 243, infra. 2 Story on the Conflict of Laws, £§ 620, 621 ; Wharton on the Conflict of Laws, § 853 et seq.; Rorer on Interstate Laws, 148, 149. See, also, Lowry v. Inman, 46 N. Y, 119 (1871); Patterson r. Baker. :'! How. Prac, 180 (1867) ; Howell v. Man- glesdorf, 33 Kan., 194 (1885). "Penal laws are strictly local, and cannot -have any operation beyond the jurisdiction of the country where they were en- acted." Scoville v. Canfield, 14 Johns., 338 (1817). 291 223.] STATUTOKY LIABILITY OF STOCKHOLDEKS. [CH. XII. ors, are only partially relieved therefrom, the additional liability is a contract liability, and will be enforced by the courts of any state. In other words, the ordinary statutor}>- liability of stock- holders is a contract liability, and will be enforced as such by the courts of all the states. 1 i Corning v. McCullough, 1 N. Y., 47 (1847); S. G, 49 Am. Dec, 287; Free- land v. McCullough, 1 Denio, 414 (1845) ; S. C, 43 Am. Dec, 685; Hodgson v. Cheever, 8 Mo. App., 321 (1880) ; Man- ville v. Edgar, 8 id., 324 (1880) ; Queenan V. Palmer, 117 111., 619 (1886) ; Aultman's Appeal, 98 Pa. St., 505 (1881) ; Sacketts Harbor Bank v. Blake, 3 Rich. Eq., 225 ; Woods v. Wicks, 7 Lea (Tenn.), 40 (1881) ; Ex parte Van Riper, 20 Wend., 614 (1839) ; McDonough v. Phelps, 15 How. Prac, 372 (1856); Lowry v. Inman, 46 N. Y., 119 (1871). See, also, Paine v. Stewart, 33 Conn., 516 (1866) ; Bond v. Appleton, 8 Mass., 472 (1812); Hutchins v. New England Coal Mining Co., 4 Allen, 580 (1862) ; Grand Rapids Bank v. Waren, 52 Mich., 537. Cf. Bateman v. Service, L. R., 6 App. Cas., 386 (1881); Norris v. Wrenschall, 34 Md., 492 (1871); Terry v. Calnan, 13 S. C, 220 (1879); Tinker v. Van Dyke, 1 Flippin, 532 (1876). Cf. Lowry v. Inman, 46 N. Y., 119, 127 (1871); Strong v. Wheaton, 38 Barb., 625(1861); Brown v. Hitchcock, 36 Ohio St., 678 (1879) ; Hatch v. Bur- roughs, 1 Woods, 443 (1870); Flash v. Conn, 109 U. S., 371 (1883) ; Fourth Nat'l Bank v. Francklyn, 120 U. S., 747 (1887); Cuykendall v. Miles, 10 Fed. Rep., 342 ; Nimick v. Mingo Iron Works, 25 West Va., 184 (1884). Cf. Woods v. Wicks, 7 Lea (Tenn.), 40 (1881) ; Lawler v. Burt, 7 Ohio St., 340 (1857). A Maryland case holds that the statutory liability of a stockholder in a New York manufactur- ing corporation is a penalty, and cannot be enforced in that state. Attrill v. Huntington, 70 Md., 191 (1889). But in the case of Huntington v. Attrill, 146 U. S., 657 (1892), the court reversed the court of appeals of Maryland (70 Md., 191), which refused to enforce in Maryland a judgment obtained in New York by a corporate creditor against an officer of the corporation, who, under the statutes of New York, was rendered liable to cor- porate creditors by reason of signing a false certificate as to the amount of the capital stock of the company. The su- preme court of the United States held that such a liability was not penal in the international sense. And when the suit is maintainable, the construction placed upon the statute of the state in which the corporation exists, by the courts of that state, is, as a general rule, controlling, and will be followed by the courts of the state where the suit to en- force is brought. Jessup v. Carnegie, 80 N. Y, 441 (1880); Chase v. Curtis, 113 U. S., 452 (1884); Sav. Assoc, v. O'Brien, 51 Hun, 45 (1889). In the case of New Haven, etc., Co. v. Linden Spring Co., 6 East Rep., 663 (Mass., 1886), the court, in refusing to enforce a subscription made to a foreign corporation, without an express promise to pay, said : " That the statutes of a state do not operate ex- traterritorial ly, 2)roprio vigore, will be conceded. How far they should be en- forced beyond the limits of the state which has enacted them must depend on several considerations — as, whether any wrong or injury will be done to the citizens of the state in which they are sought to be enforced ; whether the pol- icy of its own laws will be contravened or impaired ; and whether its courts are capable of doing complete justice to those liable to be affected by their de- crees." To same effect, Halsey v. Mc- Lean, 94 Mass., 438 (1866). The statutory liability of stockholders in California is a contract liability. Dennis v. Superior Court, 27 Pac Rep., 1031 (Cal., 1891). The statutory liability of stockholders in New York business corporations to the extent of their stock until a certifi- 292 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 223. A different rule prevails as to the statutory liability of corpo- rate officers for failure to file reports, or give certain notices, or make certain contracts. Such liability is generally construed to be penal, and will not be enforced by the courts of other States. 1 This question of whether the liability is a penalty arises often in ascertaining what particular statute of limitations applies. 2 There cate is filed that the whole capital stock is paid in is not a penal liability and it survives the death of a stockholder. Cochran v. Wieehers, 119 N. Y., 399 (1890). 1 Derrickson v. Smith, 27 N. J. Law, 166 (1858) ; First National Bank v. Price, 33 Md., 487 (1870), where a statute of Pennsylvania imposing liability upon directors and officers contracting or as- senting to an indebtedness in excess of the amount of capital was held to be penal. (But see, contra, Field v. Haines, 28 Fed. Rep., 919 — 1886.) Halsey v. McLean, 12 Allen, 438 (1866); Bird v. Hayden, 1 Robertson (N. Y. Super. Ct), 383 (1863) ; Union Iron Co. v. Pierce, 4 Biss., 327 (1869). The twelfth section of the New York Manufacturing Compa- nies Act), to the effect that the corporate officers shall be liable for the debts of the corporation in case they fail to make an annual public report of the business of the corporation (Laws of 1848, ch. 40), is universally held to be penal in its character. Chase v. Curtis, 113 U. S., 452 (1885) ; Stokes v. Stickney, 96 N. Y. t 323 (1884) ; Pier v. Hanmore, 86 id., 95 (1881); Pier v. George, 86 id., 613 (1881); Veeder v. Baker, 83 id., 156 (1880) ; Knox v. Baldwin, 80 id., 610 (1880) ; Easterly v. Barber, 65 id., 252 (1875); Wiles v. Suydam, 64 id., 173 (1876) ; Jones v. Bar- low, 62 N. Y. 202 (1875); Merchant's Bank of New Haven v. Bliss, 35 id., 412 (1866) ; Gadsden v. Woodward, 103 N. Y, 244. In New York if the suit is com- menced by summons only to recover a penalty, a reference must be made on the summons to the statute. Nordell v Wahlstedt, N. Y. L. J., Jan. 16, 1890. A stockholder's liability for failure to file a certificate each year is a penal liability and cannot be enforced in a foreign ju- risdiction. Sayles v. Brown, 40 Fed. Rep., 8 (1889). Foreign stockholders can- not be sued in their state for contribu- tions towards a penal liability paid by domestic stockholders. Id. The liabil- ity of stockholders, for a failure to file a certificate to the effect that the capital stock is fully paid up, is a penal liability. Sayles v. Brown, 4 Fed. Rep., 8 ; Howell v. Roberts, 45 N. W. Rep., 923; Halsey n McLean, 12 Allen, 438 ; Erickson v. Ne- smith, 4 Allen, 233 ; Mitchell v. Hotch- kiss, 48 Conn., 9 ; Steam Engine Co. v. Hubbard, 101 U. S., 188; Savings Ins. Co. of St. Louis v. O'Brien, 5 R'y See, also, Jones v. Barlow, 62 X. Y„ 202 (1875); Bolen r. Crosby, 49 N. Y, 183 (1872;. In Aultman's Appeal, 98 Pa. St, 505 (1881), it was held that, where the extension was granted at the request of the directors, the stockholders had assented, and there was no release. A release of the corporation under an in- solvency statute is a release of the stock- holder's statutory liability. Mohr v. Minn., etc., Co., 41 N. W. Rep., 1074 (Minn., 18S9). See, also, Hanson v. Donk- ersley. 37 Mich., 184 (1877), ruling that the Michigan statute does not make stockholders primarily liable, and hold- ing that the individual liability for cor- porate debts is discharged by an exten- sion of time and the acceptance of a corporate note. A laborer's statutory right to collect from the stockholders is not waived by taking the corporate note. Jackson v. Meek, 9 S. W. Rep., 225 (Tenn., 1888> See § 225 (/) sub. 298 GH. XII. J STATUTORY LIABILITY OF STOCKHOLDERS. [§ 225. (Z>) LioMlity already paid. — It is a defense to the stockholder to prove that his full statutory liability has already been paid by him. A stockholder who has voluntarily paid corporate debts to the full extent of his corporate liability is entitled to set up that fact. And when such a payment was bona fide it is a bar to an action to collect any further amount. 1 (c) Set-off. — Closely related to the defense of payment already made, there is the defense that the defendant stockholder has claims against the corporation, and that he is to be credited to that amount as a set-off. 2 It has been held that, where the statute creates a fund out of which the creditors are to be paid ratably, then the stockholder 1 Garrison v. Howe, 17 N. Y., 458 (1858) ; Mathez v. Neidig, 72 N. Y., 100 (1878) ; Lane v. Harris, 16 Ga., 217 (1851) ; Belcher v. Willcox, 40 id., 391 (1869); Robinson v. Bank of Darien, 18 id., 65, 109 (1855); Woodruff & Beach Iron Works v. Chittenden, 4 Bosw., 406 (1859); Boyd v. Hall, 56 Ga., 563 (1S76); San Jose Savings Bank v. Pharis, 58 Cat, 380. Cf. Thebus v. Smiley, 110 111., 316 (1884), where fraud was in- volved; Delano v. Butler, 118 U. S., 634 (1886). Contra, Fowler v. Robinson, 31 Me., 189 (1850); Grose v. Hilt, 36 Me., 22. But when a creditor has actually commenced a suit to enforce the statu- tory liability of any individual share- holder, it is then too late for that share- holder to defeat the action by paying some other corporate creditor's claim. Jones v. Wiltberger, 42 Ga., 575 (1871). See, also, Lane v. Harris, 16 Ga., 217 ; Thebus v. Smiley, 110 111., 316 (1884). A contrary conclusion was reached m Richards v. Brice, 3 N. Y. Supp., 941 (Com. PI., 1889; ; but the plain injustice of allowing the stockholder to defeat an action by such a device will not com- mend this decision. Nor will a share- holder who has employed an agent to buy up claims at a discount, and then confessed judgment in favor of that agent, be permitted to plead such a judgment in bar of an action by other creditors. Manville v. Karst, 16 Fed. Rep, 173 (1883). A mortgage by an in- solvent stockholder in an insolvent cor- poration to one of the corporate cred- itors is a preference to the extent of the stockholder's liability for corporate debts. Gatch v. Fitch, 34 Fed. Rep, 566 (1888) ; Ingalls v. Cole. 47 Me., 530, 541, holding that the mere pendency of suits is not a defense for a stockholder in a later action, unless the prior claims have been legally established and his liability exhausted. Payment of the judgments at a discount is no exhaustion of the lia- bility, though the judgments at full value would have exhausted it. Kunkelman v. Rentchler, 15 Bradw. (111.), 271 (1884). 2 A shareholder cannot himself buy in claims at a discount, and then set them off at their face value in an action to en- force his statutory liability to creditors. Gauch v. Harrison, 12 Bradw. (111.), 457 (1883). See, also, Thompson v. Meisser, 108 111., 359 (1884); Diven v. Phelps, 34 Barb., 224 (1861). A stockholder can de- feat his statutory liability by offsetting judgments against the corporation pur- chased by himself, but only to the ex- tent that he paid for the judgments. Bulktey v. Whitcomb,49 Hun, 290 (1888) ; Lingle v. National Ins. Co., 45 Mo., 109 (1869); Holland v. Heyman, 60 Ga., 174 (1878). Where a stockholder is liable by statute and is also a creditor of the in- solvent corporation, the court will order a set-off. Sowles v. Witters, 40 Fed. Rep., 413(1889). Cf. Id., 403. Cf. Boulton Car- bon Co. v. Mills, 43 N. W. Rep, 290 (Iowa, 1889). See a criticism on this case in § 193, n., supra. 299 225.] STATDTOKT LIABILITY OF STOCKHOLDERS. [CH. XIL cannot set off an indebtedness of the corporation to him. He must pay in what the statute requires, and then prove his claim against the corporation like any other creditor. 1 But where the share- holder's liability by statute is immediate and personal and several, and any creditor may sue any shareholder, then the shareholder may set off a debt, owing to him from the corporation, when he is sued by a corporate creditor. 2 (d) Interest. — In South Carolina, 3 Maine and Illinois, 4 the share- 1 Matter of the Empire City Bank. 18 N. Y., 199, 227 (1858): Matthews v. Al- bert, 24 Md., 527 (1866); Briggs v. Corn- well, 9 Daly, 436; Hobart v. Gould, 8 Fed. Rep., 57 (1881); Hillierr. Allegheny Mutual Ins. Co., 3 Pa, St., 470; Law- rence v. Nelson, 21 N. Y., 158 (1860); Thebus v. Smiley, 110 111., 316 (1884); Witters v. Sowles, 32 Fed. Rep, 130 (1887). See, also, Clapp v. Wright, 21 Hun, 240 (1880;; Buchanan v. Meisser, 105 111., 638 (1883). A stockholder sued on his statutory liability cannot offset judgments which he has purchased against the corporation, except to the extent that he paid for them. Bulkley v. Whitcomb, 1 N. Y. Supp., 748 (1888) ; aff'd, 121 N. Y, 107. The stockholder cannot purchase claims against the cor- poration at a discount and set them off, but can set them off for the amount paid by him for them, even though they are purchased in an agent's name. Abbey v. Long, 24 Pac. Rep., 1111 (Kan., 1890). A stockholder who is also a di- rector and is sued on his statutory lia- bility as a stockholder cannot set off a judgment against the insolvent com- pany, which judgment he purchased for a nominal sum. Bulkley v. Whit- comb, 121 N. Y, 107 (1890). For cases where the stockholder brings action as a corporate creditor, see Terry v. Bank of Cape Fear, 20 Fed. Rep., 777 ; Weber v. Fickey, 47 Md., 196. See, also, Emmert v. Smith, 40 id., 123; and §§ 193, 194, supra; Hollister v. Hollister Bank, 2 Abb. App. Dec, 367 (1865). In this case stockholders of an insolvent bank, after paying the judgments had against them to enforce their individual liabilities, turned around and asked to be made, to the extent of those judgments, creditors of the bank, and thus entitled to partici- pate pro rata with other creditors. Held, nothing is to be repaid to the stockholders until all the debts of the bank are paid. 2 Mathez v. Neidig, 72 N. Y, 100 (1878) ; Agate v. Sands, 73 id., 620 (1878); Wheeler v. Millar, 90 id., 353, 362 (1882) ; Richards v. Crocker, N. Y Daily Reg., April 22, 1887 ; Christensen v. Colby, 43 Hun, 362 (1887); Tallmadge v. Fishkill, 4 Barb., 382 (1848); Boyd v. Hall, 56 Ga, 563 (1876); Remington v. King, 11 Abb. Prac, 278 (1858). This defense is allowed by the courts of New York in actions to enforce the liability imposed by the statute of that state known as the Man- ufacturing Companies Act of 1848. N. Y. Laws of 1848, ch. 40, §§ 10, 24. See Wheeler v. Millar, 90 N. Y, 353 (1882), a case in which the right to set- off under this statute is fully considered. The shareholder's right to set off his claim against the corporation in defense to an action against him to enforce his statutory liability may sometimes be a matter of bona fides. Boyd v. Hall, 56 Ga., 563 (1876); Belcher v. Willcox, 40 id., 391 (1869) ; Thompson v. Meisser, 108 111., 359; Buchanan v. Same, 105 id., 638 (1883) ; Welles v. Stout, 38 Fed. Rep., 807 (1889). 3 Sacketts Harbor Bank v. Blake, 8 Rich. Eq., 225 (1849) ; Cole v Butler, 43 Me., 401 (1857). See Grand Rapids Sav- ings Bank v. Warren, 52 Mich., 557 (1884); Cleveland v. Burnham, 64 Wis., 347 (1885) ; 20 & W. Rep., 1015. < Munger v. Jacobson, 99 111., 849 (1881). 300 «CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 225. holder is not liable for interest on the amount for which the statute makes him answerable, and when he pays the principal sum the whole liability is discharged. In New York interest is collectible from the time the suit to enforce is commenced, instead of bef>in- ning from the time when judgment is entered. 1 (e) Costs. — Although it is a condition precedent to the action against the shareholder that a judgment be recovered against the corporation, it has been held no part of the shareholder's statutory liability to pay the costs of obtaining that judgment. Accordingly a judgment against the shareholder was held not to include any part of the costs of the proceeding against the corporation ; but there has been strong dissent from this doctrine. 2 (/) Statute of limitations. — Where the liability of the share- holder is immediate and primary, and not contingent on the ob- taining of a judgment against the corporation, it is clear that the statute of limitations begins to run in favor of the shareholder when the debt matures against the corporation. 3 i Handy v. Draper, 89 N. Y., 334 (1882) ; Burr v. Wilcox. 22 id., 551 (1860). Cf. €asey v. Galli, 94 U. S., 673 (1876) ; Rich- mond v. Irons, 121 U. S., 27 (1887). Where a referee computed the interest on the plaintiff's claim from the date on which it became due from the company instead of from the day the suit against the shareholder was com- menced, it appearing that the indebted- ness was less than the amount of the shareholder's liability, and that the al- lowance of interest did not swell it be- yond that limit, the court of appeals held such a computation no error. Wheeler v. Millar, 90 N. Y., 353, 362 (1882). Interest on the judgment is al- lowed in suit to enforce a stockholder's liability. Shickle v. Watts, 7 S. W. Rep., 274 (Mo., 1888> Interest is allowed from the day when the referee ascertains and reports the debts of the corporation. Nat'l Com. Bank v. McDonnell, 9 S. Rep., 149 (Ala., 1891). 2 Bailey v. Baneker, 3 Hill, 188 (1842) ; Richmond v. Irons, 121 U. S., 27 (1887) ; Rorke v. Thomas, 56 N. Y, 559, 565 (1874); Miller v. White, 50 N. Y, 137 (1872). Cf. Veeder v. Mudgett, 27 Hun, 519 (1882). It is possible that the rule might be otherwise in a case where the judgment is held to be conclusive as against the shareholder. So in Michigan. Grand Rapids Savings Bank v. Warren, 52 Mich., 557 (1884). A judgment for costs against a corporation may be en- forced against the director's statutory liability. Allen v. Clark, 108 N. Y, 269 (1888). Costs may be collected against stockholders in suits to enforce this lia- bility. Irons v. Manufacturers' Bank, 36 Fed. Rep., 843 (1888), holding that a creditor enforcing the stockholder's lia- bility in behalf of himself and other creditors may have his costs. 3 Davidson v. Rankin, 34 Cat, 503 (1868) ; Lindsay v. Hyatt, 4 Edw. Chan. (N. Y), 97 (1842); Godfrey v. Terry, 97 U. S., 171 (1877) ; Conklin v. Furman, 8 Abb. Pr. (N. S.), 164 (1865) ; Schalucky v. Field, 16 N. E. Rep., 904 (111., 1888). Compare Carrol v. Green, 92 U. S., 509 (1875); Terry v. Tubman, 92 id, 156 (1875); Terry v. McLure, 103 id., 442 (1880) ; Corning v. MeCullough, 1 N. Y, 47 (1847) ; Jagger Iron Co. v. Walker, 70 N. Y, 522 (1879). See, also, Terry v. Calnan, 13 S. C, 220 ; Lawler v. Burt. 7 Ohio St., 340; King v. Duncan, 38 Hur, 461 (1886); Stilphen v. Ware, 45 Cal., 110 (1872), holding that, under California statute of limitations, the three j-ears 301 225.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. But when the creditor must first obtain a judgment against the corporation and sue out an execution, which must be duly returned wholly or partially unsatisfied before the cause of action arises against the shareholder of his statutory liability, then the statute of limitations commences to run upon the return of the execution. 1 begin to run from the time the debt was clue, and is not extended by a judg- ment obtained against the corporation. The stockholder's liability under the California statute being a liability as a priucipal debtor, the statute of limita- tions begins to run as soon as the cred- itor's right of action against the corpo- ration commences. An extension of the time as to the corporation by renewal notes does not stop the statute of limita- tions as regards the stockholder's liabil- ity. Hyman v. Coleman. 23 Pac. Rep., 62 (Cal., 1890). The statute of limita- tions begins to run against a bank stock- holder's statutory liability from the closing of the doors of the bank. It be- gins to run against the corporation and stockholders at the same time. Mitchell v. Eeckman, 28 Pac. Rep., 110 (Cal.. 1883). The liability in California of stockholders by statute for corporate debts begins when the debt is contracted and cannot be extended by the corpora- tion so as to extend this stockholder's liability. Redington v. Cornwall, 27 Pac. Rep.. 40 (Cal., 1891). The extension of a debt by taking a note does not delay the application of the statute of limitations so fai as a stockholder's lia- bility is concerned. Hardman v. Sage, 121 X. Y., 2.1 (1890). The state statute of limitations as to executors and estates will be applied by the federal courts to suits by a receiver for the enforcement of a stockholder's liability in a national bank. Butler v. Poole, 44 Fed. Rep., 586 (1890). The stockholder's statutory liability dates from and is based upon the original debt created by the corpo- ration and not from or upon the judg- ment against the corporation. New- berry v. Robinson, 41 Fed. Rep., 458 (1890). An action based on the notes is not on the debt for which the notes were given. Griffith v. Green, 13 N. Y. Supp., 470 (1891). The statute of lim- itations under the Ohio law begins to run against the stockholder's liability from the time when the corporation makes an assignment for the benefit of creditors, even though no judgment has been obtained by the creditor. Bar- rick v. Gifford, 24 N. E. Rep., 259 (Ohio, 1890). In a suit by one creditor for the benefit of all, other creditors may come in although the statute of limitations would be a bar against a separate suit by them. Id. See, also, § 225 (a), supra. i Handy v. Draper, 89 N. Y., 334 (1882); Merritt v. Reid, 13 Week. Dig. (N. Y), 453 (1882) : Longley r. Little, 26 Me., 162 (1846). In Terry v. Tubman, 92 U. S., 156 (1ST-")), where the charter of a bank contained a provision making the shareholders individually liable for the ultimate redemption of its bills, the liability of the shareholders was held to arise, and hence the statute of limita- tions to commence to run in their favor, upon the open and notorious insolvency of the bank. So. likewise, where share- holders were made individually liable " upon the failure of the bank," it was held that, the liability arising upon the failure, the statute of limitations began to run at that time. Carrol v. Green, 92 U. S., 509, 511 (1875). To the same effect is Baker v. Atlas Bank, 9 Mete, 182(1845); Terry v. McLure, 103 U. S.. 412 (1880); Godfrey r. Terry, 97 id., 171 (1S77). The case of Terry v. Anderson, 95 U. S., 628 (1877), sustains the consti- tutionality of a statute shortening the statute of limitations herein. The case In re Bank of Sing Sing, 32 Hun, 462 (1884) ; affirmed, 96 N. Y. 672, held that twenty years' delay by receiver in making report bars any assessment on stockholders. A statute of limitations 302 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDKU-. .' 22 ). It is a general rule of law that the statute of limitations appli- cable to any ordinary action to enforce a contract is the one appli- cable to the action to enforce the statutory liability of sharehold- ers in incorporated companies. 1 Accordingly, the suit must usually be commenced within six years after the cause of action has accrued. 2 running from the time of dissolution of the company is not set running by corporate insolvency and cessation of business. Sleeper v. Goodwin, 31 N. W. Rep., 335 (Wis., 1887). Cf. § 195. The statute of limitations begins to run only from the time when the creditors right to sue the stockholders begins. McDon- ald v. Alabama, etc., Ins. Co., 5 S. Rep., 120 (Ala., 1888); Powell v. Oregonian R'y, 38 Fed. Rep., 187 (1889); 33 N. E. Rep. 233. 1 Green v. Beckman, 59 Cal., 545 (1881); Corning v. McCullough, 1 N. Y., 47 (1847) ; Wiles v. Suydam, 64 id., 173, 176(1876); Mappier v. Mortimer, 11 Abb. Prac. (N. S.), 455 (1871); Baker v. The Atlas Bank, 9 Mete, 182 (1845); The Commonwealth v. The Cochituate Bank, 3 Allen, 42 (1861) ; N. Y. Code of Civil Proa, § 382. 2 The citations in the preceding note. See, also, Phillips v. Therasson, 11 Hun, 141 (1877), holding that where by stat- ute the capital must be paid in within two years upon pain of dissolution, and imposes liability upon stockholders for debts of the corporation until the cap- ital is fully paid, the statute of limita- tions begins to run at the expiration of the two years allowed for paying the capital. Under the New York Manu- facturing Act relative to the two-year statute of limitations to a stockholder's statutory liability, it begins to run upon the dissolution of the corporation. The creditor must sue within that time. Hollingshead v. Woodward, 107 N. Y, 96 (1887); King v. Duncan, 38 Hun, 461 (1886), holding that under that statute the creditor is not recmired to delay his suit until the two years has expired ; Knox v. Baldwin, 80 N. Y, 610 (1880); Hawkins v. Furnace Co., 40 Ohio St., 507 (1884). In South Carolina, under the statute of limitations of 1712 in that state, this action must be begun within four years. Carrol v. Green, 92 U. S., 509 (1875)- Terry v. McLure, 103 id , 442 (1880). And, on the other extreme, in some of the older cases, it is held that an obligation, such as this, to pay money, arising under a statute, is a debt by specialty, and accordingly that it is barred only b} r a lapse of twenty years. Bullard v. Bell, 1 Mason. 243, 289 (1817, by Judge Story); Thornton v. Lane, 11 Ga.. 459 (1852); Lane v. Morris, 10 id., 162 (1851). But see this view con- demned in Carrol v. Green, 92 U. S.. 509, 515 (1875), in an opinion by Justice Swayne, construing the South Carolina statute of 1712. Cf. Green v. Beckman, 59 Cat, 545 (1881), construing ^ 359, Cal- ifornia Code of Civil Procedure. 38 Fed. Rep., 777. Sometimes there is a provis- ion that the action must have been com- menced by the creditor against the cor- poration within a given limited time after the maturity of the debt, in order to hold the share-owner on his statutory liability. N. Y. Laws of 1848. ch. 40, § 24 ; Shellington v. Howlan-1, 53 N. Y, 371 (1873); Birmingham National Bank v. Mosser, 14 Hun, 605 (1878); Lindsley v. Simonds, 2 Abb. Prac. (N. S), 69 (1S66). Cf. State Sav. Ass'n v. Kellogg. 52 Mo., 583 (1873). See, also, Freeland v. McCul- lough, 1 Denio, 414, 422 (184.")); Mer- chants', etc., Co. v. Bliss, 21 How. Pr., 366; affd, 35 N. Y. 414 (I860); Lewis v. Ryder, 13 Abb. Pr., 1 ; Kuykendall v. Draper, 19 Hun. 577 : Moore v. Boyd, 15 Pac. Rep., 670 (Cat, 1887). Frequently, also, there is a limitation applicable particularly to transfers of stock. Paine v. Stewart. 33 Conn., 516 (18S2). In this case a statute of Minnesota imposing 303 § 225.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. If a statutory liability be held to be a penalty, then of course it will be held to come within that provision of the statute of limita- tions which provides for actions to enforce penalties. 1 In general, whatever the statute be, it is the rule that a lapse of time sufficient to constitute a bar at law will in equity be given the same effect ; in other words, in these cases there is the same statute of limitations both at law and in equity. 2 Other defenses. — The cause of action against a stockholder, aris- ing from his statutory liability, is not defeated by his death. The action may proceed against his estate. 3 The liability of solvent stockholders is not extended beyond the limit fixed by statute, even though other stockholders are insolvent. 4 A petition in bankruptcy by a stockholder is no bar to the enforcement of his liability, unless the corporate creditor was a party to the bankruptcy proceeding. 5 The admissions of one stockholder cannot bind another stockholder herein. 6 Various other defenses are considered in the notes below. 7 liability upon stockholders while they were such, and for one year thereafter, 'was held, in an action in Connecticut, not to be operative against one who had not been a stockholder for more than a year before the action was brought. In New York this limitation is two years. See Handy v. Draper, 89 N. Y., 334, and ch. XV, infra. 1 See § 223, supra, 2 Bank of Poughkeepsie v. Ibbotson, 24 Wend.. 473 (1840); Carrol v. Green, 92 U. S., 509 (1875); Baker v. The Atlas Bank, 9 Mete, 182 (1845); Lindsay v. Hyatt, 4 Edw. Chan. (N. Y.\ 104 (1842); Van Hook v. Whitlock, 3 Paige, 409 (1832); Commonwealth v. Cochituate, 3 Allen, 42(1861); Terry v. McLure, 103 U. S., 442 (1880). When the statute prescribes the limitation, there is of course no controversy. Baker v. Bachus' Adm'r, 32 111., 99. 3 Richmond v. Irons, 121 U. S., 27 (1887) ; Chase v. Lord, 77 N. Y, 1. But see Dane v. Dane Mfg. Co., 80 Mass., 489 (1860). 4 Crease v. Babcock, 51 Mass., 525. See, also, under the National Bank Act, United States v. Knox, 102 U. S., 422 (1880). 5 Birmingham Bank v. Mosser, 14 Hun, 605. 6 Simmons v. Sisson, 26 N. Y., 264 (1863). 7 The court will not authorize the re- ceiver of a national bank to compromise with the stockholders on their liability, even though more can be realized thereby, the stockholders having fraudu- lently conveyed away their property in order to avoid liability. In re Certain Stockholders of Cal. Nat'l Bank, 53 Fed. Rep., 38 (1892). Stockholders cannot set up that their corporation was not au- thorized by Jaw. McDonnell v. Ala., etc., Ins. Co., 5 S. Rep., 120 (Ala., 1888); Nat'l Com. Bank v. McDonnell, 9 S. Rep., 149 (Ala., 1891). The defendant cannot set up that he intended his subscription as a gift, where he received and retained the certificate. McDowall v. Sheehan, 13 N. Y Supp., 386 (1891). It is no de- fense that the corporation had com- mitted an ultra vires act in buying out another corporation ; nor that other stockholders had not paid for their stock in full, such unpaid portion being in- sufficient to pay the debts ; nor that no certificates of stock had been issued. Mitchell v. Beckman, 28 Pac. Rep., 110 (1883). A corporation is not liable on a contract of its promoters to pay for drawings, plans, etc. Hence, although by statute stockholders are personally 304 CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§§ 226-229. § 226. Priority among creditors. — When the creditor is entitled to an action at law against an individual shareholder for an en- forcement of a statutory liability, in order to collect a claim against the corporation it has been held that the creditor first suing any shareholder is entitled to priority in enforcing his claim as against that particular shareholder. The diligent creditor is en- titled to the payment of his claim, although other creditors are thereby deprived of payment. 1 The right to a priority, however, in these cases, is in general one of questionable propriety, and the courts are not inclined to favor it. 2 And one creditor may, at the instance of the rest, be restrained from the prosecution of his individual suit where it is in prejudice of the equal rights of all the others. 3 §§ 227-229. Contribution among shareholders. — Upon general principles of equity, where a shareholder has been held liable, under the provisions of a statute, for a debt of the corporation of which he is a member, he may maintain an action against his co-share- holders for contribution. 4 "Where the stockholders' statutory lia- liable on corporate contracts, if the cor- poration commences business before one-half of its capital is subscribed and twenty per cent, is paid in, they are not liable on such a contract. Buffing- ton v. Bardon, 50 N. W. Ren., 776 (Wis., 1891). Under the California statute it seems that a mere subscriber for stock is not liable where he did not fulfill the subscription. Bank of Yolo i: Weaver, 31 Pac. Rep., 160 (Gal., 1892). iCole v. Butler, 43 Me., 401 (1857), holding, also, that the rights of a cred- itor who moves first cannot be affected by the fact that another creditor, pursu- ing a shorter remedy, obtains judgment before him ; Ingalls v. Cole, 47 id., 530, 541 (1860); Jones v. Wiltberger, 42 Ga., 575 (1871); Robinson v. Bank of Darien, 18 id., 65, 108 (1855); Thebus v. Smiley, 110 III., 316 (1884). Cf. Weeks v. Love, 50 N. Y., 568 (1872); Miers v. Zanesville, etc.. Turnpike Co., 13 Ohio, 197 (1842). See, also, £ 225 (b). 2 Wright v. McCormack, 17 Ohio St., 86, holding that, if part of the creditors institute an action to enforce the lia- bility of all, no creditor can acquire priority or institute a separate suit on his own behalf; Smith v. Huckabee, 53 Ala., 191 (1875); Chicago v. Hall, 103 111.. 342 (1882), holding that, if a suit at law by a creditor against a stockholder be enjoined by other creditors who seek to enforce the liability for the benefit of all the creditors, and the stockholders dischai'ge their liability, the creditor so enjoined has no prior lien upon the fund. 3 Eames v. Doris. 102 111.. 350 (1882); Pfohl v. Simpson. 74 N. Y, 137 (1878). Cf. Garrison v. Howe, 17 N. Y., 458 (185*). * Aspinwall v. Sacchi, 57 N. Y. 331 (1874); Stewart v. Lay, 45 Iowa, 604 (1877); Umsted v. Buskirk. 17 Ohio St., 113(1866); Matthews v. Albert, 24 Md., 527(1866); Hadley v. Russell, 40 N. H., 109. 112 (1860); Erickson v. Nesmith, 46 id., 371 (1866): Gray v. Coffin, 9 Gush., 192 (1852); Middletowu Bank v. Magill, 5 Conn., 61 (1823); Brinham v. Wellers- burg Coal Co., 47 Pa. St, 43 (1864); Masters t\ Rossie Lead Mining Co., 2 Sandf,Chan., 301 (1845): Farrow v. Biv- ings, 13 Rich. Eq., 25 ; Clark v. Myers, 11 Hun, 608 (1877), holding that the ac- tion cannot be against one only ; O'Reilly v. Bard, 105 Pa. St, 569 (1884), holding that a stockholder who pays a judgment (20) 305 § 229.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII. bility is enforced by a suit in equity, contribution is of course enforced, in that suit, so far as the parties can be found within the jurisdiction. 1 against the corporation is confined to the remedy provided in the act. and in this case could not maintain assumpsit for contribution against other stock- holders who were not parties to the judgment. As to the Pennsylvania stat- utory method of obtaining contribution, see. also, Brinham v. Wellersburg, etc., Co., 47 Pa. St., 43 (1864). Stockholders seeking to enforce contribution from co-stockholder in foreign corporation must show that he, the plaintiff, is legally liable. Eastman v. Crosby, 8 Allen, 206. See, also, Ladd v. Cart- wright. 7 Oreg., 329 ; Patterson v. Lynde, 106 U. S., 519 (1882). A shareholder, it is said, being also a creditor of the cor- poration, may make use of whatever advantage his position as shareholder gives him to secure the payment of his claim, even to the exclusion of other creditors who are not shareholders. Whitwell v.Warner, 20 Vt, 425,444; Reichwald v. Commercial Hotel Co., 106 111.. 439, holding that the securing of a large debt to a stockholder for money advanced, by means of a deed of real property, with agreement that it should be considered security, was not fraudu- lent See, also, Bristol Milling, etc., Co. v. Probasco, 64 Ind., 406 ; Terry v. Bank of Cape Fear, 20 Fed. Rep.. 777. See, stockholder sued at law may enjoin the suit and bring all parties into a suit in equity. Officer paying statutory lia- bility may have contribution. Nicker- son v. Wheeler, 118 Mass., 295. Of. Ray v. Powers, 134 Mass., 22: Hartman v. Ins. Co. of Valley of Va., 32 Gratt., 242 (1879) ; Chandler v. Brown, 77 111.. 334 (1875); Bronson v. Wilmington, etc.. Ins. Co., 85 N. C, 411 (1881); Perry v. Turner. 55 Mo., 418 (1874); Lindley on Partnership, pp. 1223-1474 A stock- holder and director who pays his lia- bility under the California statute may have contribution from other stockhold- ers. Redington v. Corn well, 27 Pac. Rep., 40 (Cal., 1891). i Harpold v. Stobart, 21 N. E. Rep., i;:;7 (Ohio, 1889). This case holds also that a stockholder in Ohio "is liable to creditors of the corporation for such portion only of the debts existing while he held the stock and remaining due (not in excess of the amount of stock assigned) as will be equal to the propor- tion which the capital stock assigned by him bears to the entire capital stock held by solvent stockholders, liable in respect to the same debts, who are within the jurisdiction, to be ascer- tained at the time judgment is ren- dered." also, § 226, supra, to the effect that a 306 CHAPTER XIII. LIABILITY OF STOCKHOLDERS WHERE THE SUPPOSED INCORPORA- TION DOES NOT PROTECT THEM, AND FOR ASSESSMENTS BEYOND THE PAR VALUE OF THE STOCK § 230. Different liabilities of a stock- holder. 231-34. Liability as partners by rea- son of deficient incorporation. 235. Extent of the liability. 236. Liability as partners by reason of unauthorized incorporation. § 237-40. Liability as partners by reason of the fact that the corporation is incorporated in one state but does all its business in another state. 241-42. Assessments in excess of par value of stock. 243. Miscellaneous cases of liability. § 230. Differen t liabilities of a stockholder on his stock. — A stock- holder may be said to be liable on his stock in three different ways. First, he is liable to the corporation and corporate creditors until the full par value of his stock has been pai'd. 1 Second, he may have an additional liability imposed upon him by statute. 2 Third, it may happen that by some accident, mistake or neglect, the sup- posed corporation was never duly incorporated, or for some other reason the members become liable as partners in a copartnership; or it may be within the power of the corporation to assess the stockholder for sums over and above and in addition to the par value of the stock. This third kind of liability is unusual in its character, and is the subject of this chapter. § 231. Liability as partners by reason of material defects in be- coming incorporated. — The statutes under which incorporations are generally made provide that a corporation may be formed by taking certain steps, usually the making and filing with the state, and also with the local authorities, a certificate signed by the cor- porators, and containing a statement of the business, of the capital stock, and other facts materia! to he organization of the corporation. Occasionally, however, it happens that this certificate is not fully made out, as required by the statute, or is not filed, or some other step prescribed by law is not complied with. The corporation is then not duly incorporated; and the state, by quo warranto, may oust it from its user of corporate franchises. But it is a very dif- ferent and difficult question to determine whether a private indi- vidual may take advantage of such facts, and claim that the sup- posed corporation is not a corporation, but only a partnership. i See chs. XI and III. 2 See ch. NIL 307 §§ 232, 233.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [dr. XIII. § 232. When the regularity of acts in becoming incorporated can- not be questioned by a private individual — As already explained, 1 a subscriber for stock in a corporation cannot, when sued for calls on bis stock, set up that the corporation was not duly incorporated. He is estopped from so doing. Xor can a stockholder, who has funds of the corporation in his hands, defeat an action bv the cor- poration therefor by setting up that the corporation was not duly incorporated. 2 And, in general, a party contracting to pay money to a corporation, or to transfer property to it as a corporation, can- not avoid the obligation of that contract by alleging the fact that the corporation was not duly incorporated, provided that such cor- porations were allowed by law. 3 Xor, on the other hand, can the corporation itself avoid its contracts on such grounds. 4 § 233. Corporate creditors cannot hold stockholders liable as part- ners by reason of irregularities, mistakes or omissions in the incorpo- ration of a de facto corporation. — There are many cases to the effect that a corporate creditor seeking to enforce the payment of his debt may ignore the existence of the corporation, and may proceed against the supposed stockholders as partners, by prov- ing that the prescribed method of becoming incorporated was not complied with by the company in question. For instance, it has been held that where the articles of association were signed, but not filed until some time subsequently, debts contracted in the interim might be collected from the stockholders as partners. 5 So, also, a total failure to file or record the certificate or articles of incorporation has been held to render the members liable as part- ners; 6 as also an omission of the members to sign and publish the !See§§ 183-186; Buffalo & A. R R facto corporation cannot be questioned in Co. v. Cary, 26 N. Y.. 75. an action by it for damages for an injury 2 Krutz v. Paola Town Co., 20 Kan., to property. Golden, etc., Co. v. Joshua, 397 (187S). etc., Works, 23 Pac. Rep., 45 (Cat, 1890). 3 See 19 Am. Dec, 67, notes; Lesseeof Concerning the question of who can Frost v. Frostburg Coal Co., 24 How., complain of mistakes, irregularities and 278 (1860), where the grantor of land to illegalities in the corporation, see, also. a corporation claimed that no title ch. I, sujwa. passed ; Pope v. Capital Bank, 20 Kan., 4 Hoi brook v. St. Paul Fire & M. Ins. 440 (1878), where the plaintiff corpora- Co., 25 Minn., 229 (1878). tion sued the defendant on a promissory 5 Bigelow v. Gregory, 73 111., 197 (1874) ; note ; Fay v. Noble, 7 Cush., 188, where a MoVicker v. Coue, 28 Pac. Rep., 76 third person was not allowed to impeach (Oreg., 1891). See, also, Bergen v. Por- a transfer of property by a corporation poise F. Co., 13 Am. & Eng. Corp. Cas., to another person setting up that the 1 (N. J., 1886). Contra, Whitney tt transfer was invalid owing to informal- Hyman, 101 U. S., 392 (1879). Cf. 17 ities in the corporation. See ch. Atl. Rep.. 840 (Vt. 1889). XXXVIII. Under the California Code, fi Field v. Cooks, 16 La. Ann., 153 § 358, the regular incorporation of a de (1861); Abbott v. Omaha Smelting Co., 308 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 233. articles of association ; ' or an indefinite statement of where the principal place of business of the corporation is to be. 2 In Iowa and Nebraska the statutory law makes the stockholders liable if the incorporation was irregular. 3 4 Neb., 416 (1876); Garnett v. Richard- son, 35 Ark., 144 (1879) ; Ferris v. Thaw, 72 Mo., 449 (1880) ; Coleman v. Coleman, 78 Ind., 344 (1881); Martin v. Fewell, 79 Mo., 401, 410 (1883). In the case of Hurt v. Salisbury, 55 Mo., 310 (1874), corporate officers were held personally liable on a promissory note signed by them as officers, where the certificate of incorporation was not filed as required. In Richardson v. Pitts, 71 Mo.. 128 (1879), the same officers were held to be entitled to contribution from other members of the supposed corporation. Cf Blanchard v. Kaull, 44 CaL, 440 (1872); Western, etc.,T. Co. v. U. P. R'y, 3 Fed. Rep., 721, 729 (1880). In Garnett r. Richardson, 35 Ark., 144, the court held stockholders liable as partners until the certificate was filed with the secre- tary of state. Cf. Harrod v. Hamer, 32 Wis., 162 (1873), where the statute ef- fected an incorporation without fil- ing, but prohibited organization until after the articles were filed. The fil- ing of the certificate in the county clerk's office, as required by statute, is essen- tial to incorporation. Childs v. Hurd, 9 S. E. Rep., 362 (W. Va., 1889). In Bigelow v. Gregory, 73 I1L, 197 (1874). the court held that there was no corpo- ration until the certificate was filed, and that a creditor might recover from a stockholder as a partner. In Indian- apolis Min. Co. v. Herkimer, 46 Ind., 142 (1874), the court held that there was no corporation until the certificate was filed, and that a subscriber to the arti- cles who had agreed to pay the corpo- ration his dues when it was organized could successfully resist its suit until the certificate was filed. In State v. Cent. O. Mut. R. Ass'n, 29 Ohio St, 399, the court ousted an association whose notice of acceptance to the state was in- definite and ambiguous. 1 Unity Ins. Co. v. Cram, 43 N. H, 636 (1862) ; Kaiser v. Lawrence S. Bank. 50 Iowa, 104 (1881), where the, articles were not properly signed and acknowl- edged. This case also disapproves the decision in Humphrey V. Mooney, 1 Col., 282 (1880). In enforcing this partner- ship liability, the assumed corporation is not to be made a party defendant with the members thereof. Smith v. Colorado Fire Ins. Co., 14 Fed. Rep., 399 (1882). 2 Harris v. McGregor, 29 Cal.. 124 (1865). The fact that the party con- tracted with them under a corporate name is immaterial, since, at common law, parties may carry on business under any name they may choose. Lauferty v. Wheeler, 11 Abb. N. C. 223 ; Lindley on Partn., 182 (Callaghan & Co., 1881). The case of Chaffe v. Ludeling, 27 La. Ann., 607 (1875), well says: "Obligors are bound, not by the style which they give to themselves, but by the consequences which they incur by reason oi their acts. It matters not what they choose to call themselves." See, also, Nat*l Bank, etc., v. LanJon, 45 N. Y., 410, 414 (1871); Ridenour v. Mayo, 40 Ohio St, 9 (1883). Cf. Wentz i\ Lowe, 3 Atl. Rep., 878 (Pa, 1886). An individual may enforce a contract which he makes for himself but in the name " The National Associated Press, James H.'Goodsell, President." Goodsell v. Western, etc., Tel. Co., 130 N. Y.. 430 (1892). Corporate creditors may attack the validity of the corporate organization. Empire Mills V. Alston, etc., Co., 15 S. W. Rep., 505 (Tex., 1891). Insufficient statement in the papers to be filed as to the property which is turned in for stock renders the stockholders liable as partuers. Van Horn v. Corcoran, 18 Atl. Rep.. 16 (Pa.. 1889). 3 In C!egg v. Hamilton Co., 61 Iowa, 309 § 231.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. § 234. During the past few years, however, the great weight of authority has clearly established the rule that where a supposed corporation is doing business as a de facto corporation, the stock- holders cannot be held liable as partners, although there have been irregularities, omissions or mistakes in incorporating or organizing the company. The corporation is a de facto corporation where there is a law authorizing such a corporation and where the com- pany has made an effort to organize under that law and is trans- acting business in a corporate name. 1 This rule applies to claims based on tort the same as to those based on contract. 2 It must be admitted that this conclusion of the law is reasonable 121, the court held that publishing the articles, which did not contain all the requirements of the statutory notice, was insufficient, and stockholders were liable as partners. In Iowa stockhold- ers are liable as partners, by statute, if the incorporation is not regular. Eisfield V. Kenworth. 50 Iowa, 389 (1879). In First Nat. Bauk v. Davies, 43 Iowa. 424 (1876). the court held that, where the state waived notice by permitting the filing to be made with its secretary within ninety, days, vested rights ac- crued which would not be affected by failure to file within that time. See, also. Jcssup v. Carnegie, 80 N. Y., 441 (1880). Under the Iowa statutes the st> >ckholders are liable as partners where the certificate of incorporation failed to state the highest amount of indebted- ness which the company might incur. Heuer v. Carmichael, 47 N. W. Rep., 1034 (Iowa, 1891). Although the articles are not recorded as required by statute, yet as between themselves the parties are stockholders and not partners. Heald r. Owen, 44 N. W. Rep, 210 (Iowa, 1890). Under the Iowa statutes an in- sufficient incorporation of the plaintiff foreign corporation is not put in issue by a denial of ii corporation. The de- ficiency must be specifically alleged. Warder, etc., Co. v. Jack, 48 N. W. Rep, 729 (Iowa, 1891). In an action against individual stockholders to charge their property with a judgment rendered against the corporation, the plaintiff is not estopped to allege defects in its or- ganization by reason of having recog- nized the corporation in dealing with it and in bringing suit against it as such. Heuer v. Carmichael (Iowa), 47 N. W. Rep., 1034, followed. Stivers v. Car- michael, 49 N. W. Rep. 984 (Iowa, 1891). Failure to complete the publication as required by statute does not render the stockholders liable under the Iowa stat- ute to a creditor who entered into his contract before the time allowed for publication had expired. Thornton v. Balcom et al, 52 N. W. Rep., 190 (Iowa, 1892). Although the statute requires the articles to state the amount of in- debtedness which may be incurred, the articles may fix the amount with the rig) it to the stockholders to increase it up to the statutory limit. Thornton v. Balcom et at.. 52 N. W. Rep., 190 (Iowa, 1892). The fact that the whole capital stock is not subscribed is not a failure to comply with the law relative to or- ganizations so as to render the stock- holders liable as partners under the Iowa statute. Sweney et al. v. Talcott et a/.. 52 N. W. Rep., 106 (Iowa, 1892). Al- though the statute renders stockholders liable as partners unless there has been a substantial compliance with the statute relative to organization, yet the courts are not inclined to enforce sucn liabil- ity. Porter v. Sherman, eta, Co., 54 N. W. Rep., 424 (Neb., 1893). 1 See cases in notes below ; also § 185, note. 2 Demarest v. Flack, 32 N. Y. St Rep., 675 ; affirmed, 128 N. Y, 205. 310 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. L§ 234. and just. There is no reason why parties who have dealt with a corporation as a corporation should afterwards be allowed to claim more than fchev originally bargained for and to hold the stockholders personally liable. Such a rule would be disastrous in the extreme. The dangers to business, the hardship to inno- cent parties and the disinclination to invest in corporate enter- prises would be such, if stockholders were subject to this un- known peril, that the courts have gradually departed from the old decisions on this subject and have wisely refused to hold the stock- holders liable. Recent cases have so settled the law beyond rea- sonable controversy. 1 i Whitney v. Wyraan, 101 U. S., 392. The members of a supposed corporation are not liable individually on a loan of money made to it, even though it was irregularly incorporated. Larned v. Beal, 23 Atl. Rep., 149 (N. H., 1889). " Where there is a statute authorizing the creation of a corporation, an attempt to comply with the statute, and an act- ual exercise of corporate functions, the existence of the corporation can only be destroyed b}' a direct proceeding." Crowder v. Town of Sullivan, 28 N. E. Rep., 94 (Ind., 1891). Where the articles were riled with the county clerk on November 9, 1886, and goods were pur- chased of plaintiff soon after, and the articles were not filed with the secretary of state until August 17, 1887. the plaint- iff cannot ignore the corporation and hold the parties liable as partners. The plaintiff made the contract supposing he was dealing with a corporation. Van- nemare v. Young, 20 Atl. Rep., 53 (N. J., 1890). Under the Colorado statute re- quiring the certificate to set forth by whom the corporate affairs shall be con- ducted, a provision that they shall be conducted by the president, vice-presi- dent and attorney, instead of providing for directors, is insufficient. The corpo- ration is only de facto, but an incorpo- rator aud a vendor of property to it cannot question the incorporation. Bates v. Wilson, 24 Pac. Rep., 99 (Colo., 1890). Though the provision in the Kentucky statutes requiring publication of the charter is not complied with, yet 31 the corporation is valid and complete, except that the state may proceed to annul the charter. No other party can raise the objection. Stutz v. Handley, 41 Fed. Rep.. 531 (1890) ; Walton v. Riley, 85 Ky., 413, 421, overruling Heinig v. Manufacturing Co., 81 Ky, 300. Fail- ure to file the articles with the secretary of state is not fatal. Portland, etc., Co. v. Bobb, 10 S. W. Rep., 794 (Ky., 1889). In proving incorporation it is not nec- essary to prove publication as required by statute. Brown v. Corbin, 42 N. W. Rep., 481 (Minn., 1889). Although there are less stockholders and less directors than the statute or charter require, yet the acts of these are sufficient to sustain obligations incurred by the corporation with third persons. Welch v. Importers', etc., Bank, 122 N. Y., 177 (1890)'. The grantor of land cannot claim that the grantee was unincorporated aud not qualified to hold land, the incorporation being only partially completed. Rein- hard v. Virginia, etc., Co., 18 S. W. Rep., 17 (Mo., 1891). The failure to specify the term of existence is not fatal where the general act limits the time. Albright v. Lafayette, etc., Ass'n, 102 Pa. St., 411, 423 (1883) ; Becket u Uuiontovvn, etc., Assn, 88 id., 211 (1878). In the case Seacord v. Pendleton, 55 Hun, 579 (1890), there was no pretense of any attempt to incorporate the bank and yet the stockholders were held not liable. See S. C, sub nam. Merchants' Nat'l Bank v. Pendleton, 9 N. Y. Supp., 46. In Christian v. Bowman, 51 N. W. Rep.' 1 234.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. The mere assumption of corporate powers, without any attempt at incorporation, cannot, of course, exempt the members from full liability as partners. 1 The corporation itself cannot set up the defense that it was irregularly incorporated, 2 nor can a foreign corporation. 3 663 (Minn., 1892), where there was a failure to file the proper affidavit of prblication, the directors were held per- sonally liable for debts, but the court stated that if the case had been properly- tried a different conclusion might have been reached. One who takes part in organizing the company cannot hold its members liable as partners on the ground that it was irregularly organized # Allegheny Nat'] Bank v. Bailey, 23 Atl. Rep., 439 (Pa, 1892). Nor can one to whom he assigns a leasehold. Egbert v. Kimberly, id., 436. Where a creditor of a bank sues the stockholders as partners the burden of proof is on him to prove that no corporation existed, it being shown that the bank always acted as a corporation and held itself out as such ami was supposed so to be by the stock- holders. Hallstead v. Curtis, 22 Atl. Rep., 977 (Pa., 1891). Although a major- ity of the incorporators assume to be residents, but are not and the charter is forfeited, yet stockholders who become such after incorporation and without knowledge of the fraud cannot be held liable as partners. American Salt Co. v. Heidenheimer, 15 S. W. Rep., 1038 (Tex., 1891). A stockholder cannot sus- tain a bill in equity to have the de facto going corporation wound up as a part- nership by proving that the articles were not filed in the office of the re- corder of deeds for the county, nor by proof that his subscription was not in good faith. "The general rule is that one who deals with a corporation as ex- isting de facto is estopped to deny that as against it it has been legally or- ganized." Bushnell v. Consolidated, etc., Co., 27 N. E. Rep., 596 (111., 1891). A failure to organize does not render the stockholders liable as partners, business having been carried on without organi- zation after the filing of the papers. Cory v. Lee, 8 S. Rep., 694 (Ala., 1891). The failure to insert in the certificate a provision as to the residences of the persons does not render the stockholders liable as partners. The defendant in this case alleged that it was a corpora- tion de facto and that plaintiff sold goods to and contracted with defendant as a corporation, knowing that it was doing business as such. The contract was made with it in its corporate name and capacity. Sniders, etc., Co. v. Troy, 8 S. Rep., 658 (Ala., 1890). In Alabama the stockholders are not liable for the debts, merely because the articles of incorporation do not specify the instalments by which the unpaid capital stock shall be paid in. Boiling v. Le Grand, 6 S. Rep.. 332 (Ala., 18S9). Where a corporation has been author- ized by a judge as provided by statute, but no certificate has been issued, the corporation is sufficiently formed to de- feat the plea of nul tiel corporation. Sparks t'. Woodstock, etc., Co., 6 S. Rep., 195 (Ala., 1889). If proof is given by plaintiff that a copartnership existed and the defense is that it was a corpo- i-ation, the defendant must prove that fact. Although the company had a president and secretary, this in itself does not raise a presumption of a corpo- ration. Clark v. Jones, 6 S. Rep., 362 (Ala., 1889). Failure to file the articles of association with the county clerk, as required by statute, does not render the 'Pettis v. Atkins, 60 III, 454 (1871); Fuller v. Rowe, 57 N. Y., 23 (1874). 2 See § 637, infra. 3 Liter v. Ozokerite Min. Co., 27 Pac. Rep., 690 (Utah, 1891J. 312 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 235. § 235. Extent of the liability l>y reason of deficient incorpora- tion. — The mere fact that an attempted incorporation has failed does not necessarily render all the participants therein liable ab- solutely for the debts of the concern. At the most, each is liable stockholders liable as partners. Granby, eta, Co. v. Richards, 8 S. W. Rep., 246 (Mo., 1888). Where the certificate or articles arc to be filed both with the state and the local authorities, a failure as to the former does not render the stockholders liable as partners, provided the articles or certificate are filed with the local authorities. Mokelumne Hill Min. Co. v. Woodbury, 14 Cal., 424 (1859) ; Raisbeck v. Oesterricher, 4 Abb. N. C, 444 (1878) ; Cross v. Pinckney ville Mill Co., 17 II]., 54. The creditor cannot sue the directors for damages for a fraudulent conspiracy herein, especially when he was informed that the corpo- ration had been irregularly incorpo- rated. Nelson v. Luling, 62 N. Y., 645 (1875). Stating place of business suffices for principal place of business. In re Spring, etc., Works, 17 Cat, 132 (1860). That a failure to file the certificate with the secretary of state does not invalidate the corporation, see Tarbell v. Page, 24 111., 46 (1860). See, also, to same effect, Planters', etc.. Bank v. Padgett, 69 Ga., 159 (1882); Humphreys v. Mooney, 5 Col., 282 (1880); Gartside Coal Co. v. Maxwell, 22 Fed. Rep., 197 (1884);'Mer- riman v. Magivennis, 12 Heisk. (Tenn.), 494 (1873); Merchants', etc., Bank v. Stone, 38 Mich., 779 (1878): Jessup v. Carnegie, 80 N. Y., 441 (1880), applying an Iowa decision to an Iowa case, First Nat. Bank-* Davies, 43 Iowa, 424 (1876). In Holmes v. Gilliland, 41 Barb., 568, the court held that failure to give notice to the community by publication does not make the stockholders partners. In the case of De Witt v. Hastings, 69 N. Y, 518 (1877), where no certificate was filed owing to an abandonment of the enter- prise, it was held that a subsequent fil- ing of it could not render liable one of the original promoters who took no part in the filing of the articles of associa- tion, although his name was attached thereto. In People v. Sel fridge, 52 Cal, 331, an action was brought on the ground that the certificate filed did not show, as required, that a majority of the stockholders were present at the meet- ing to organize. The defendant offered to prove that a majority were in fact present, but the court refused to receive the evidence and rendered judgment of ouster. Such facts, however, are no de- fense to subscriptions. See §§ 183-186, supra, and § 637, infra. See, also, ch. XLI, relative to foreign corpora- tions. And see ch. XXXVIII, as to who can attack the legality of a de facto cor- poration. A failure to notify each member of the meeting to organize is immaterial. McClinch v. Sturgis, 72 Me., 288 (1881). See, also, Judah v. America, etc., Co., 4 Ind., 333 (1853) ; Russell v. McLellan, 31 Mass., 63 (1833); Newcomb v. Reed, 12 Allen, 362. A failure to give the stat- utory notice of the first meeting is im- material where all but one stockholder was present and he afterwards ratified all that was done. Babbitt v. East, etc., Co. (N. J., 1876), Stew. Dig., p. 208, § 13. The omission of an immaterial part of the acknowledgment by an in- corporator, and the omission of a certifi- cate of notaryship, do not render the incorporators liable as partners. Stout v. Zulick, 7 Atl. Rep., 362 (N. J., 1886). A failure to commence the principal business does not invalidate the incor- poration. Trowbridge v. Scudder, 66 Mass., 83 (1853). Nor does an ultra vires act or fraud of the corporation have that effect. Langan v. Iowa & Minn. Con. Co., 49 Iowa, 317 (1878); Second Nat'l Bank of Cin. v. Hall, 35 Ohio St, 158 (1878). Where, however, an incor- porated society used all its funds to con- test a debt, the court compelled the 313 236.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CJ. XIII. only in case he would be liable if the original plan had been to form a partnership. If he was not a member when the debt was contracted he cannot be held liable on that particular debt. 1 One case goes still further, and holds that one who becomes a member subsequently to the attempted incorporation, but takes no part in the organization or management of the company, cannot be held liable for its debts. 2 § 236. Liability as 'partners by reason of fact that corporations cannot he organized for the business involved. — The general incor- porating acts common to most of the states usually specify the particular kinds of business for the prosecution of which corpora- tions may be formed thereunder. It follows that no business can be carried on by persons, as a corporation, under the incorporating act, unless that particular business is specified therein. Many decisions on what kinds of business are included in the words used in various statutes of the different states are given in the notes below. 3 members to replace the money so used. Adm'r of Bigelow v. Cong. Society of M., 11 Vfe, 283 (1839). In the case of Meuill v. Collier, 16 Ohio St 599, 613 (1866), the court said : " When the entire business carried on by persons in the name of a corporation is such as tbe corporation is prohibited by law from doing, tlie) r caunot interpose the corpo- rate privileges between them and the liabilities which the law imposes upon individuals in the transaction of similar business without the use of the corpo- rate name." Where the articles of in- corporation are signed and filed, but no organization ever had, a part of the subscribers are not liable for debts con- tracted by another part in the corporate name. Rutherford v. Hill, 29 Pac Rep., 546 (Oreg., 1892). Although the corpo- ration is apparently abandoned and an agreement as to contributions is signed, yet the courts are inclined to hold that the business is still that of the corpora- tion. Rio Grande, etc., Co. v. Burns, 17 S. W. Rep., 1043 (Tex., 1891). Stock- holders cannot be held liable as part- ners on the ground of illegal incorpora- tion where there is a law authorizing incorporation for that purpose, and an attempt was made to organize there- under, and there was user. Finnegan v. Knights, etc., Ass'n, 53 N. W. Rep.. 1150 (Minn., 1893). Although the stat- utes require the directors to be residents of the state, nevertheless, even though the directors are non-residents, the in- corporation is valid and the corporation is not dissolved, nor are the stockholders liable as partners. Demarest v. Flack, 128 N. Y., 205 (1891). Statutory provis- ions as to notice of the first meeting are directory. They need not be observed if the stockholders acquiesce. Brain- tree, etc., v. Braintree, 16 N. E. Rep., 420 (Mass., 1881). 1 Fuller v. Rowe, 57 N. Y., 23 (1874> See, also, § 508, infra. In a suit against stockholders as partners, the defendants may require the joinder of their asso- ciates. De "Witt v. Hastings, 69 N. Y., 518 (1877). 2 Stafford Bank r. Palmer, 47 Conn., 443 (1880). Cf. Richardson v. Pitts, 71 Mo., 128 (1879). 3 Thus, where a rifle club attempted incorporation under the statute allow- ing incorporation for " literary, scien- tific and charitable purposes," the mem- bers were held individually liable for damages to the widow of a man who was killed by a bear which the club was keeping. Vredenburg v. Behan, 33 La. Ann., 627 (1881). See, also, Glen u 314 CH, XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 236. If a general incorporating act is unconstitutional, all supposed corporations formed thereunder are merely partnerships and the members are liable as partners. 1 If the business itself, for which Breard, 35 La. Ann., 875 (1883). Many 10 S. E. Rep., 327 (Va., 1889). A corpo- business purposes may be specified in one charter. Bird v. Daggett, 97 Mass., 494 (1867). A bank cannot incorporate under act for " any species of trade or commerce." Bank of California v. Col- lins, 7 Hun, 336 (1876). A purchaser of stock from one of the supposed stock- holders cannot recover back the pur- chase price from all of such stockhold- ers. His remedy is other than this. Perry v. Hale, 10 N. E. Rep., 174 (Mass., 1887). Several objects may be included in the same articles of incorporation. West v. Crawford, 21 Pac. Rep., 1123 (Colo., 1889). An application for a char- ter for " the mining for and manufact- uring of oil and gas " is too general and indefinite to be granted. An applica- tion should express singleness of pur- pose, but two pursuits may be combined when kindred and cognate. Op. Atty.- Gen., Re Newton Hamilton Oil and Gas Co., 10 Pa. Co. Ct Rep., 452. Under the words "or other lawful business," in the general incorporating statute, a com- pany may be organized to buy and sell real estate. Brown v. Corbin, 42 N. W. Rep., 481 (Minn., 1889). Indefiniteness in the statement of the objects of incor- poration is no defense. Owentou, etc., Co. v. Smith, 13 S. W. Rep., 426 (Ky., 1890). A company may incorporate to buy, use and deal •' in real estate, live- stock, bonds, securities, and other prop- erties of all kinds, on its own account and for commission, in the United States and elsewhere," under the Texas statute authorizing incorporation for pur- poses of " mutual profit or benefit." Na- tional Bank v. Texas, etc., Co., 12 S. W. Rep., 101 (Tex., 1889). A constitutional prohibition against the incorporation of any church does not prevent the incorpo- ration of the " General Assembly of the Presbyterian Church in the United States." Guthrie v. Guthrie's Executor. ration for mining and trading cannot come under an act for mining. Isle, etc., Co. v. Sec'y of State. 43 N. W. Rep., 14 (Mich., 1889). A medical college can- not be incorporated under an act to in- corporate benevolent, charitable, scien- tific and missionary societies. People v. Gunn, 98 N. Y., 317 (1884). A mutual reliance society cannot be incorporated under an act for incorporating benevo- lent, charitable, scientific and mission- ary societies. People v. Nelson, 46 N. Y., 477 (1871). Where the general act au- thorizes incorporation for manufactur- ing gas " or " manufacturing electric- ity, a company may be organized for both of these purposes. People v. Rice, 33 N. E. Rep., 846 (N. Y., 1893). Ex- press business is an " industrial pursuit," as used in the federal statute allowing incorporation in territories. Wells, etc., Co. v. Northern Pac. R'y Co., 23 Fed. Rep., 469 (1881). A mercantile enter- prise may be incorporated under an act authorizing incorporation for any " in- dustrial or productive industry." Car- ver, etc., Co. v. Hulme, 19 Pac. Rep., 213 (Mont., 1888). An elevator com- pany cannot incorporate under a manu- facturing company act Mohr v. Minn., etc., Co., 41 N. W. Rep., 1074 (Minn., 1889). Printing and publishing a news- paper is not a manufacturing business. Press, etc., Co. v. State Board, 16 Atl. Rep.. 173 (N. J., 1888). Under an act authorizing incorporations for ''trade," an incorporation for buying and selling land is sustained. Finnegan v. Knights, etc., Ass'n, 53 N. W. Rep., 1150 (Minn., 1893). i Kennedy v. McLellan, 43 N. W. Rep., 638 (Mich., 1889). There may be a ques- tion as to the validity of the law itself allowing the incorporation. Williams v. Bank of Michigan, 7 Wend., 540 (1831); State of Michigan v. Howard, 1 315 § 237.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. a corporation is attempted, is illegal the charter is no protection. 1 Frequently certain kinds of business are not mentioned in the act for the reason that it is not deemed wise public policy to allow a limited liability in that class of business, such as construction com- panies for the building of railroads. 2 Accordingly, where the busi- ness for which incorporation is sought is not within the classes of business mentioned in the act itself, the attempted incorporation is void and the participants are liable as copartners. § 237. Liability as partners by reason of the fact that the corpo- ration is incorporated in one state, but docs all its business in another state. — By the comity of states the rule has become well established Mich., 512 (1846) ; Chenango Bridge Co. v. Paige, 83 N. Y., 178, 190 (1880). As to a corporation incorporated by a state, as a state, before it was admitted to the Union, see Mayers v. Manhattan Bank, 20 Ohio, 283 (1851). Contra, Scott v. Detroit, etc., Society, 1 Doug. Rep. (Mich.), 119 (1843). 1 Notes given in the purchase of stock in a corporation whose sole business is to carry on an infringing telephone business are without consideration and void. Clemshire v. Boone, etc., Bank, 14 S. W. Rep., 901 (Ark., 1890). Where a lottery scheme is organized under the act authorizing the organization of benevolent and charitable institutions, a court of equity will enjoin the con- tinuance of business and will wind it up, the officers being guilty of illegal conduct Peltz v. Supreme, etc., Union, 19 Atl. Rep., 668 (N. J., 1890). The or- ganization of a company to carry on the lottery business in foreign countries was held legal in Macuee v. Persian, etc., Corp., 62 L. T. Rep., 894 (1S90). Cf. Le Warne v. Meyer, 38 Fed. Rep., 191 (18S9). The secretary of state will not be compelled to accept articles of incorporation for bookmaking, i. e., gambling on races, even though the statute legalizes and regulates race tracks. In re New York Booking Co., N. Y. L. J., April 29, 1892. The courts will refuse a charter to a company whose business is to be " to promote the business of such retail dealers as be- come members thereof and to protect them," etc, the interest being to com- bine the retail coal dealers. Matter of Richmond Retail Coal Co., 9 R'y & Corp. L. J., 31 (Phila., 1890). Persons incorporated for the purpose of doing a grain gambling business have been held jointly and severally liable for money obtained from a customer. The corporate character does not protect them. McGrew v. City Produce Ex- change, 4 S. W. Rep., 38 (Tenn., 1887). 2 See Part VII, infra, concerning the statutes. It has been held, however, that, under the general act for the in- corporation of companies for construct- ing and operating a railroad, a com- pany for the construction alone of the road may be incorporated. " That there can be a railroad company which does nothing but construct the road, and a railroad company which does nothing but operate the constructed road, can- not be doubted. It is not essential to the idea of a railroad company that it should both construct and operate a rail- way." First National Bank of Davenport v. Davies, 43 Iowa 424 (1876), followed in Jessup v. Carnegie, 80 N. Y., 441 (1880): Langan r. Iowa & Minn. Construction Co., 49 Iowa, 317 (1878). Where the general incorporating act does not pro- vide for the incorporation of railroad of banking corporations under it, a corporation organized under it to buy and sell railroad stock and bonds and to lease railroads and operate and aid them is void. Clarke v. Central R R, eta, 50 Fed. Rep., 338 (1892). 310 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 237. that a corporation organized under the laws of a state may trans- act business beyond the borders of that state. 1 A broad and liberal view of the comity of states and the inter- ests of business was taken by the New York court of appeals in the cases of Demarest v. Flack, 2 and Merrick v. Van Santvoord, 3 where the court refused to hold the stockholders liable as partners, although the companies were clearly organized for the purpose of doing all of their business outside of the state wherein they took out their charters. This rule of law has been laid down by the courts of Ohio also, and is established by the great weight of authority. 4 1 •' It is very true that a corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. . . . But although it must live and have its being in that state only, yet it does not by any means follow that its existence there will not be recognized in other places ; and its residence in one state creates no insu- perable objection to its power of con- tracting in another." C'h. J. Marshall, in Bank of Augusta v. Earle, 13 Pet., 521 (1839). 2 It is legal for citizens of New York to take out a charter in West Virginia, even though all the corporate business is to be transacted in New York. The stockholders are not liable as partners. Demarest v. Flack, 128 N. Y, 205 (1891). The court said (p. 217) : " If in an} r par- ticular case it is thought by those in- terested in the matter that the business can be done in our own state and by our own citizens with greater facility under the form of a foreign corporation than under that of a domestic one, there is no public policy which forbids its trans- action under such form." Affirming 11 N. Y. Supp., 83. 3 Merrick v. Van Santvoord, 34 N. Y, 207 (1866), reversing Merrick v. Brainerd, 38 Barb., 574, where, although a Con- necticut corporation did all its corpo- rate business and performed all its corporate acts in New York excepting the holding of elections, j r et the court, in a well-considered and ably-written opinion, held that the corporation did not thereby lose its corporate char- acter, and that its members were not liable as partners, saying: "We think the recognition, in our state, of the rights hitherto conceded in our courts to foreign corporations is neither in- jurious to our interests, repugnant to oux policy, nor opposed to the spirit of our legislation. ... It would be neither provident nor just to inaugurate a rule which would unsettle the secu- rity of .corporate property and rights, and exclude others from the enjoyment here of privileges which have always been accorded to us abroad. ... A corporation is an artificial being, and has no dwelling, either in its office, its warehouses, its depots or its ships. . . . The grant of franchises without restriction is equivalent to a specific au- thority to exercise them wherever the company might find it convenient or profitable, whether within or without the limits of the state of Connecticut." 4 Although parties incorporated in Kentucky, by reason of the greater lib- erality of the Kentucky corporation statutes, and although the corporation does all its business in Ohio, nevertheless its corporate charter is recognized, and the stockholders are not liable as part- ners on a corporate note. Second Nat'l Bank v. Lovell, 2 Cin. Rep., 397 (1873) ; Second Nat'l Bank of Cin. v. Hall. 35 Ohio St., 158 (1878;, the court holding it to be no fraud on the Ohio laws for a corporation organized under the laws of Kentucky to do all its business in Ohio, even though thereby the stockholders escape a personal liability. See, also, 317 238.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. § 23S. There are, however, decisions to the contrary. In Massa- chusetts it has been held that where a citizen of Massachusetts in- corporates a company in New Hampshire, and states in the certificate of incorporation that the chief place of business is in a city in New Hampshire, and that he and his associates are jointly interested, the corporation is fraudulent and void — it being proved, in fact, that all the business was carried on in Massachusetts, and that the associates were "dummies," having one share of stock each. 1 Danforth v. Penny, 3 Mete, 564 (1842). A subscriber to stock in a West Virginia corporation doing all its business in Minnesota cannot set up that the com- pany was not legally incorporated, and caDnot set up that the plaintiff is not a corporation, he having participated in its incorporation. Minn., etc., Co. v. Denslow, 48 N. W. Rep.. 771 (Minn., 1891). In Wright V. Lee. 51 N. W. Rep., 706 (S. D., 1892), it appears that a Minnesota corporation did all its business in South Dakota. The court held this to bs legal. See, also, 35 Kan., 242-244. Concerning the legality, purpose and effect of per- sons incorporating in one state with the intention of doing all of the corporate business in another state, see Cook on The Corporation Problem, pp. 107-110. See, also, article in 25 Am. Law Rev., 352, criticising the law as laid down above, and another article in 35 Am. Law Rev., commending the law as laid down above. Bateman v. Service. L R, 6App., 386 (1881); Stevens v. Phoenix Ins. Co., 41 N. Y., 149 (1869). A party contracting with a foreign corporation to pay it in oil from land assigned by it to him cannot defeat the suit of the cor- poration by alleging that it was incor- porated in another state to do all its business in the state, and thereby was guilty of a fraud. Newburg Petroleum (Jo. v. Weare, 27 Ohio St, 343 (1875). A corporation of one state " lawfully may, as they often actually do, remove their officers, agents, offices and effects into another sovereignty, and there exercise their functions and franchises." Pa. Co. v. Sloan, 1 Bradw. (111.), 364 (1878). A Connecticut corporation may hold land in New Hampshire, although it does little or no business in Connecticut New Hampshire Land Co. v. Tilton, 19 Fed. Rep., 73 (1884). A corporation may sell its products in any state and collect notes given in payment. Hall v. Tanner, etc., Co., 8 S. Rep., 348 (Ala., 1890). " Com- ity between the states authorizes a corpo- ration to exercise its charter powers within another state, but it does not per- mit the exercise of a power where the policy of that state, distinctly marked by 1' igislative enactments or constitutional provision, forbids it"' In this case the consolidation of competing hues of rail- way was involved. Clarke v. Central R. R, etc., 50 Fed. Rep., 338 (189&/. A lim- ited partnership formed under the laws of Spain will be recognized and upheld by our courts. King v. Sarria, 69 N. Y., 24 (1877), where the court discusses the comity of states. 21 S. W. Rep., 488. 1 Montgomery v. Forbes, 19 N. E. Rep., 342 (Mass., 1889). In this case the holder of a note signed in the corporate name, and given for goods sold, sued a stock- holder for the price of the goods. The court sustained the suit and said : " Tbe apparent corporation was not a corpo- ration. . . . The defendant's pre- tended associates were associates only in name ; he alone was interested in the enterprise. The articles of agreement were recorded in Nashua, N. H., and stated that the business was to be car- ried on there; but it was not in fact carried on there, and was not intended to be. This is not a case where a cor- porate charter has been granted, but the organization of the corporation under the charter has been defect- ive. . . . The business was his per- sonal business, which he transacted 318 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. . 238. In New Jersey, at an early da} T , it was held that a corporation could not become incorporated under the laws of New York for the purpose of carrying on all its corporate transactions in the state of New Jersey. 1 The stockholders were decided to be merely partners. Likewise it was held that where a corporation was in- corporated to do business in a certain city in the state, but actually does all its business in another city of that state, the incorporation is a fraud upon the law, and the company is the same as though unincorporated. 2 In these days, however, when New Jersey is the favorite resort for the class of corporations now under consideration, the laws of that state having been framed especially for the purpose of attract- ing them, it is not at all probable that the old decisions in that state on this subject would be adhered to. In Texas it has been held that its citizens are liable as partners where they incorporate in another state to carry on a mercantile business in Texas, the legislature having substantially forbidden incorporation for that purpose. 3 nuder that name." Cf. Saltmarsh v. Spaulding, 17 N. E. Rep., 316 (Mass., 1888). 1 The corporation " cannot be recog- nized by any court in New Jersey as a legally constituted corporation, nor be dealt with as such. If it can be, what need is there of any general or special law in our state? Individuals desirous of carrying on any manufacturing busi- ness may go into the city of New York, organize under the general laws of that state, erect all their manufacturing es- tablishments here, and under their as- sumed name transact their business, not only free from all personal responsibil- ity, but under cover of a corporation not amenable to our laws." Hill r. Beach, 12 N. J. Eq. Rep., 31 (1858). 2 The corporation was incorporated to do business in Trenton, but actually transacted all its business in Jersey City. The court said: "The doctrine that the organization cannot be inquired into collaterally has no application as the case stands, because the charter does not fit this company, and was not intended for it." Booth V. Wonderly, 36 N. J. L., 250 (1873). This doctrine was followed in a New York case in an in- ferior court, the facts being that a New Jersey corporation had no office or place of business in New Jersey, and did no business there, but transacted its busi- ness in New York. " It was not an ex- isting corporation within the meaning of the statute of New Jersey, under which it purports to have been incor- porated. ... It was a fraud upon the laws of New Jersey, and cannot screen defendants and its organizers from personal responsibility as partners for contracts made in New York under the assumed name." Kruse v. Dusen- bury, 19 Weekly Dig. (N. Y. Com. PI.), 201 (1884). This last case seems to have been decided without noticing Merrick v. Van Santvoord, supra, and the case certainly is not the law of New York. Chief Justice Beasley, in Erie Railway Co. v. State, 31 N. J. L„ 544, says : " A statute (and by parity of reason we might add a decision by the court), that should abolish the rule of comity and should refuse a recognition of foreign corporations, would, it is conceived, have this effect, aud no more, i. e., to convert corporations, as to that state, into a partnership of individuals." 3 Stockholders are liable as partners in 319 §£ 239-241.] PARTNEKSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. In Canada, also, at an early day, the same rule seems to have been laid down. 1 §§ 239-240. There certainly is a limit beyond which the courts will not go. In order that such contracts may be upheld and the corporate character be sustained, it is necessary that both the state creating the corporation and the corporation so created shall have acted in good faith in conferring and taking the corporate privi- leges. Thus, where a corporation was incorporated by the leg- islature of Pennsylvania, and authorized to do business anywhere but in that state, the court of Kansas refused to recognize its cor- porate character. 2 The comity of states does not prevail to that extent. § 241. Assessments by the corporation in excess of the par value of the stock - Stockholders are not liable then for. — It is a principle of law, coeval with the existence of corporations having a capital Texas on business done in Texas where they organized a corporation in Iowa to do a mercantile business, the laws of Texas not authorizing incorporation for that purpose. Empire Mills v. Alston, etc.. Co., 15 S. W. Rep., 200 (Tex., 1891). It appeared in this case, however, that the legislature had expressly declared the policy of the state by repealing a statute that authorized incorporation for mercantile purposes. See S. C, 15 S. W. Rep., 505, on rehearing. T!ie fact that the company is doing all its busi- ness in another state does not release the company from its obligation to issue certificates of stock to its stockholders. Rio Grande, etc., Co. v. Burns, 17 S. W. Rep., 1043 (Tex., 1391). 1 In Canada it is held that no state can validly authorize a body corporate to transact business out of its own terri- tory. Bank of Montreal v. Bathune, 4 Up. Can., Q. B., 341 ; Genesee Mutual Ins. Co. v. Westman. 8 id., 487; Union Rub- ber Co. v. Hibbard, 6 Up. Can.. C. P., 77. If carefullj- examined, these cases decide that a corporation formed to carry on a particular busiuess in one country ex- ceeds its powers if it carries on a similar business out of that country. At the same time the judges who decided those cases based their judgments on supposed grounds of international law. The first case mentioned above held that a bank chartered in Lower Canada has no power to discount a note in Upper Can- ada and sue upon the same, but may re- cover for money had and received. In the case of Genesee, etc., Mut. Ins. Co. v. Westman, 8 Up. Can., Q. B., 487(1852), the court held that a New York corpo- ration had no right or power to enter into any contract at all or transact any business in a corporate capacity in that province. In the case of ReynoMs r. Galliher, etc., Co., 7 R & G, 466 (Can., 1886), it appears that a Massachusetts corporation o%vned a mine in Nova Scotia. The decision was concerning an attachment, and the legality of the company's acts was not questioned. 2 Land Grant R'y & Trust Co. v. Coffey County, 6 Kan., 245 (1870), the court saying : " No rule of comity will allow one state to spawn corporations, and send them forth into other states to be nurtured and do business there, when said first-mentioned state will not allow them to do busiuess within its own boundaries." And see opinion of At- torney-General of Texas (1887), 2 R'y & Corp. L J., 433, to the effect that a Scotch corporation, authorized to pur- chase 1 nd anywhere excepting at home, cannot hold lands in Texas. 320 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 241. stock, that, unless the corporate charter or a constitutional statute provides otherwise, a stockholder, the full par value of whose stock has been paid in, is not liable and cannot be made to pay any suras in addition thereto. 1 The mere legislative act of creating a corpo- » Great Falls & C. R R Co. v. Copp, 38 N. H., 124 (1859) ; State v. Morristown Fire Ass'n, 3 Zab., 195 (1851): Morley v. Thayer, 3 Fed. Rep., 737 (1880) ; Chase v. Lord, 77 N. Y., 1 (1879) ; Slee v. Bloom, 19 Johns., 453, 473 (1822): Shaw v. Boy- Ian, 16 Ind., 384 : Coffin v. Rich, 45 Me., 511 (1858); Gray v. Coffin,. 63 Mass., 192, 199 (1852); French v. Teschi maker, 24 Cal., 518, 540 ; Inhabitants of Norton v. Hodges, 100 Mass., 241 (1868). "The creation of the corporation necessarily destroys the common-law liability of the individual members for its debts." People v. Coleman, 133 N. Y., 279 (1892). " After the full par value of the stock subscribed for has been paid, the com- mon-law liability of the stockholders, both as respects the corporation and its creditors, is at an end."' Toner v. Ful- kerson, 25 N. E. Rep., 218 (Ind.. 1890). " Liability of stockholders in a corpora- tion is undoubtedly a creature of stat- ute. It does not exist at common law." Buenz v. Cook, 24 Pac. Rep., 679 (Col., 1890). The chief stockholders cannot be held liable for the corporate debts on the theory of a "general understand- ing " that they would be responsible. The corporation alone is liable. Circu- lars, bill-heads, letters, etc., used in the business and containing the corpora- tion's name are admissible to show that the business was conducted in corporate name and on the corporate responsibil- ity. Butte Hardware Co. v. Wallace, 22 Atl. Rep., 330 (Conn., 1890). Stockhold- ers are not liable for services rendered to the company, even though they in- duce the party to render such services. Davidson v. Westchester, etc., Co., 99 N. Y., 558 (1885) ; Oliver v. Liverpool & LL & F. Ins. Co.. 100 Mass., 531, 539 (1868), holding that, in order to prevent this limited liability, the English parlia- ment expressly declared joint-stock com- panies not to be incorporations; Myers v. Irwin, 2 Serg. & R, 371 (1816), the court saying : " The personal responsi- bility of the stockholder is inconsistent with the nature of a body corporate ; " Liverpool Ins. Co. v. Massachusetts, 10 Wall., 566, 576 (1879) ; New Eng. Bank v. Stockholders of N. S. Factory, 6 R. I, 188(1859); W T aiker v. Lewis. 49 Texas, 123(1878): Green v. Beckman, 59 Cal., 545 (1881); Jones v. Jarman, 34 Ark., 323 (1879): Windham Prov. Inst. v. Sprague, 43 Vt.. 502 (1871); Woods v. Hicks, 7 Lea (Tenn.), 40, on the ground that the corporate creditor contracts not with the stockholders but with the corporation ; Terry v. Little, 101 TJ. S.,_ 216 (1879), the court saying: "The in- dividual liability of stockholders in a corporation is always a creature of stat- ute. It does not exist at common law ; ' Smith v. Huckabee, 53 Ala., 191 (1875). where the court said : " Immunity from such liability is one of the inducements which has led to multiplication of private corporations, and caused them to supersede, to a great extent, in haz- ardous enterprises, or enterprises re- quiring large capital, partnerships;" Spense v. Iowa Valley Construction Co.. 36 Iowa, 407 (1873), the court saying: " It is one of the distinguishing features of incorporation that the individual property of its members may be ex- empt from liability for corporate debts. Therein consists the great superiority of a corporation over a partnership or an unincorporated joint-stock company ; " Salt Lake City Nat. Bank v. Hendrick- son, 40 N. J. L. Rep, 52 (1878); Van Sandan v. Moore, 1 Russ. Ch., 392, 408 (1826); Atwood v. Rhode I. Agri. Bank, 1 R I., 376 (1850). the court saying: "At common law the stockholders in a cor- poration are not liable individually for the corporate debts. The capital stock (21) 321 § 242.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. ration produces by implication this limited liability of its mem- bers. For this reason the statutes regulating joint-stock companies are frequently careful to state that nothing therein contained shall give such companies the character of corporations. 1 The older text-books and the earlier reports did not emphasize or probably appreciate the vitality of this principle of law. Of such importance is it that it would seem to be the great and distinguishing charac- teristic of corporations, and not a subsidiary or unimportant one. It seems to have been assumed rather than established by direct adjudication. 2 In the early turnpike company cases of New Eng- gland a contrary rule appears to have been assumed, and the sub- scriber appear to have been open to assessments indefinitely, ex- cept that he might forfeit his stock. 3 Such companies, however, had no fixed par value of their stock. At present the rule of non- liability at common law, be} 7 ond the par value of the stock, is es- tablished beyond question, and forms the chief inducement in the formation of the many corporations of the day. § 242. Attempts have been made in various ways to authorize the assessment of stockholders for amounts after the par value of their stock has been paid in. Such efforts have generally failed. It cannot be done by a majority vote of the stockholders, nor of the directors, nor by a by-law. 4 The liability is sometimes created is the fund to which alone the creditors holder will be liable to contribute, re- must resort, unless in cases of fraud." spectively, the unpaid amount on his 5 N. Y. Supp., 192 (1889). The case shares, or to the extent of the com- of Atlantic De Laine Co. v. Mason, pany's guaranty, or indefinitely." Cav- 5 R. T., 463 (1858), holds that the pay- anagh's Law of Money Securities (2d ment of one invalid assessment is no ed.), 494, citing Lion, etc., Ins. Co. v. waiver of the right to object to another. Tucker, L R., 12 Q. B. D., 176; In re Cf. Field v. Pierce, 102 Mass., 253 (1869). Norwich Ius. Society, K R., 13 Ch. D., If the stockholders voluntarily contrib- 693; In re City, etc., Bank, L R, 4 ute to the corporate treasury in order to App. Cas., 337. 550, 567, 581, 583, 598, make it a success, such gifts are not 607, 615, 624, 632; City, etc., Bank v. corporate debts and cannot be recov- Houldsworth, L R., 5 App. Cas., 317. •;red back. Bid well v. Pittsburgh, etc., l Oliver v. Liverpool, etc., Ins. Co., R'y Co., 6 Atl. Rep., 729 (Pa., 1887); supra; Laws of N. Y., 1854, ch. 245, Leavitt v. Oxford, etc Co., 3 Utah, 265 § 3. And see ch. XXIX. (1883). In England " the liability of a 2 T n t b e case of Carr v. Iglehart, 3 Ohio shareholder in a corporate body is de- St., 457 (1854), the court took counsel to termined by the conditions of incor- task for questioning this principle of poration. Without express provision, law. For an opinion that at common no member of a corporate body is indi- law the stockholders were liable for all vidually liable for the corporate debt corporate debts, see Harvard Law Re- A company may be registered under the view, Nov., 1888, p. 160. Companies Act, 1862, with limited or 3 Middlesex Turnpike Co. v. Swan, 10 unlimited liability. According to the Mass., 384. nature of such registration a share- * Flint v. Pierce, 54 Mass., 539 (1868) ; 322 CH. XIII.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [§ 242. by statute. 1 Where the state has reserved the power to alter, re- peal or amend the charter, it may authorize the corporation to levy assessments on its stockholders, in addition to the subscrip- tion of their stock. The reasoning of this rule is clear. The lim- ited liability is a part of the corporate privileges conferred. A right to repeal the franchises includes the right to repeal in part or altogether the franchise or privilege of limited liability. On such grounds, laws of this character, however harsh in their opera- tion, are upheld as constitutional. 2 Kennebec & Portland R. R. Co. v. Ken- dall, 31 Me., 470 (1850) ; Trustees of Free School v. Flint, 54 Mass., 539 (1847); Roid v. Eatonton Mfg. Co., 40 Ala., 98 (1869). In the first-nientioned case the defendant subscribed to such a by-law, among other by-laws, when he sub- scribed for stock. Placing the words "individual property of stockholders liable" on the face of corporate liabil- ities has no effect in itself. Stockhold- ers are liable only as prescribed by law. Lowry v. Inman, 46 N. Y., 119 (1871). An agreement of a vendee of stock with the vendor to pay the corporate debts is not enforceable by corporate creditors. Free Schools v. Flint, 54 Mass., 543 (1847). But the agreement is enforce- able if made directly with creditors. Maxwell's Case, L. R, 20 Eq., 585 (1874). By consent of the stockholders each share may be subject to further assess- ment; and, when this agreement is printed on the certificates, the purchaser is bound by it Weeks v. Silver, etc., Co.. 55 J. & S. (N. Y.), 1 (1887). The case, however, of Hume v. Winyah & W. Canal Co., Carolina Law Journal, 217, held, at an early day, that where a cor- poration, not professing to have any fixed capital, made a by-law by which each of the corporators was bound to contribute equally or ratably to all ex- penses incurred, the corporators were liable personally. See 21 S. W. Rep., 556. 1 In California, under sections 331, 333, of the Civil Code, a corporation may assess its members to any extent "for the purpose of paying expenses, conducting business or paying debts." Santa Cruz R. R Co. v. Spreckies, 65 Cal., 193 (1884). In California all shares of stock are assessable even though they have once been fully paid. Green v. Abietine, etc., Co., 31 Pac. Rep., 100 (Cal., 1892). A better construction of such a statute prevails in Vermont. Under a charter provision that " if at any time the stock paid into said corpo- ration shall be impaired by loss or other- wise, the directors shall forthwith re- pair the same by assessment," a receiver was not allowed to assess, since the pro- vision is only to pi - event a continuance of business with an impaired capital. Dewey v. St Albans Trust Co., 59 Vt, 332 (1886). In Pennsylvania it is held that, though the corporation has power to assess beyond the par value of the stock, yet such power may be restricted by by-law. Price's Appeal, 106 Pa. St., 421 (1884). In Texas it is possible to form a corporation wherein assessments may be made on members ratably to any amount for corporate purposes. Guadalupe, etc., Ass'n v. West, 7 S. W. Rep., 817 (1888) — a stock-protecting cor- poration. In Idaho it is held that the statutory provisions rendering stock- holders jointly and severally liable for debts authorizes the directors to levy assessments to pay for improvements already made. Sparks v. Lower, etc., Ditch Co., 29 Pac. Rep, 134 (Idaho, 1892). 2 Gardner v. Hope Ins. Co., 9 R I., 194 (1869) ; Meadow Dam Co. v. Gray, 30 Me., 547 (1849). See, also, §§ 280, 497, infra. 323 § 243.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIII. § 243. Miscellaneous cases of liability or non-liability. — It has been held, on grounds of public policy, that although a corporation is advertised as having a capital stock of a fixed amount, the share- holders and directors are not liable personally, even though sub- scriptions have not been taken to that amount. They are not liable either for the untaken stock, or on the ground of false representa- tions, since the capital stock is understood to represent what the corporation hopes to obtain in subscriptions. 1 An oral promise to i First Nat'l Bank v. Almy, 117 Mass., 476 (1875) ; Wakeman v. Dalley, 51 N. Y., 27, 30 ; Evans v. Coventry, 25 L. J. (Ch.), 489 (1856); Crease v. Babcock, 51 Mass., 525, 557 (1846). Contra, Haslett v. Wotherspoon, Strob. Eq. (S. C), 209, 229 (1847). In Illinois there is a statu- tory liability in a case like this. Stat of 111., ch. 32, § 18. Where, upon incor- poration, the capital stock is fixed at $25,000, and is subscribed, but no part thereof is paid in, and business is com- menced, the participators are liable as partners under the Pennsylvania stat- ute. It is a fraud on the law. Hill, etc., Co. v. Stetler, 13 Atl. Rep., 306 (Pa., 1888). A corporation may commence business before any stock is subscribed unless the charter forbids. Johnson v. Kessler, 41 N. W. Rep., 57 (Iowa, 1888). Where, by the charter, a certain amount of the capital stock must be paid in be- fore business is commenced, it is suffi- cient that that amount was paid in by a few stockholders paying their subscrip- tions in full. Lander v. Logan, 16 Atl. Rep., 44 (Pa., 1889). See, also, § 180. Subscribers for stock are not liable for such part of the capital stock as has not been subscribed for by any one, no fraud being involved. Sweeney et al. v. Tal- cott et al... 52 N. W. Rep., 106 (Iowa, 1892). Stockholders are not liable as partners merely because the whole capi- tal stock has not been subscribed. Thorn- ton v. Balcom et al, 52 N. W. Rep., 190 (Iowa, 1892). The directors are not lia- ble for corporate debts merely because they commence business before the capi- tal stock was subscribed. The incorpo- ration was legal without it National Bank v. Texas, etc., Co., 12 S. W. Rep., 101 (Tex., 1889). Where the directors commence business before ten per cent of the capital is paid in as required by statute, the directors are personally lia- ble as agents transacting business with- out authority from the principal. Farm- ers', etc., Co. v. Floyd, 26 N. E. Rep., 110 (Ohio, 1890). Paying in half of sub- scriptions with a view to incorporation, and then abandonment of incorporation, does not render a subscriber liable as a partner. Hudson v. Spaulding, 6 N. Y. Supp., 877 (1889). Where stockholders proceed to business before the minimum capital prescribed by statute is sub- scribed and before the requisite amount is subscribed, they are liable to corpo- rate creditors for such minimum capi- tal. The creditors may sue them and the corporation in the same action. Burns v. Beck, 10 S. E. Rep., 121 (Ga.. 1889). Where the alleged directors of an athletic association enter into con- tracts in its name after the charter is acknowledged and tiled with the secre- tary of state, but no capital stock is sub- scribed and no steps taken to complete the organization or comply with the law, the directors are personally liable on such contracts. Walton v. Oliver, 30 Pac. Rep., 172 (Kan., 1892). In the case Consolidated, etc., Co. v. Kansas, etc., Co., 45 Fed. Rep., 7 (1891), the court said: " It is true, as contended by counsel, that the statute did not require that this increment of stock should be actu- ally paid up. Yet the public deals with such concerns on the faith of such capi- 324 CH. XIII.] PARTNERSHIP LIABILITY OF ST (CKIIOLDERS. [§ 24:3. pay corporate debts is void by the statute of frauds. 1 Partners, by becoming incorporated, do not thereby cease to be partners as to all the debts of the former partnership. 2 A stockholder is not lia- ble as a partner by reason of misrepresentations that the corpora- tion is solvent, though probably he would be liable in damages for false representations. 3 Upon the dissolution of the corporation the liability of the stockholder ceases. If the business is carried on thereafter by the agents, no liability therefor attaches to the former stockholders, 4 unless they expressly authorize it. 5 Persons who purchase a railroad at an execution sale thereof cannot continue to run it in the name of the old railroad corporation, and thereby be protected from liability as partners. 6 They do not succeed to its corporate character, although they purchase its property. In all cases, however, in which the members of an association might have been held liable as partners, the right of the creditor to enforce that liability is barred by his bringing suit and obtaining judgment against the supposed corporation. 7 Although there are less stockholders and less directors than the statute or charter requires, yet the acts of these are sufficient to sustain obligations incurred by the corporation with third persons. 8 Questions relative to the mode of organizing under a special charter are considered elsewhere. 9 Stockholders sometimes guar- anty the liabilities of the company. This class of contracts is con- sidered elsewhere. 10 Where a corporation is a mere " dummy," the courts will sometimes ignore its existence and reach the stock- holders and officers. This class of cases also is considered else- tal in esse, and it is that which chiefly tract made by the officers after the char- gives it ci'edit. It is to be imputed to ter has been forfeited does not bind the these directors and stockholders that stockholders. Wilson v. Terson, 12 Ind., they pretended and claimed all along 285 (1859). that the stock subscribed by them was 5 Nat'l Union Bank of Watertown v. paid up." London, 45 N. Y., 410 (1871). 1 Trustees of Free School v. Flint, 54 « Chaffe v. Ludeling, 27 La. Ann., 607 Mass., 539 (1868). (1875). 2 Broyles v. McCoy, 5 Sneed (Tenn.), 1 Cresswell v. Oberly, 17 Brad. (111.), 602(1858). The case of Martin v. Few- 281 (1885); Pochelu v. Kemper, 14 La. ell, 79 Mo., 401, 412 (1883), holds also Ann., 308 (1859). The partners herein that, " for the debts incurred after they cannot bring an action at law against become a corporation, their liability each other. Their remedy is in equity, will depend upon the fact of actual no- Crow v. Green, 17 W. N. C, 409 (Pa., tice of their incorporation to the plaint- 1886). See, also, ch. XXIX, on Joint- iffs at the time such debts were in- stock Companies. curred." 8 Welch v. Importers', etc., Bank, 122 3 Searight v. Payne, 2 Tenn. Ch., 175. N. Y., 177 (1890). * Central City Sav. Bank v. Walker, 66 9 See ch. XXXVI. N. Y, 424 (1876), aff'g 5 Hun, 34. A con- 1» See ch. IV. 325 § 243.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [CH. XIIT. where. 1 Where stockholders are sued on a corporate liability they need not plead the incorporation. They may merely deny liability. 2 i See § 6. 2 Where suit is brought against stock- holders to hold them liable as partners they may deny liability and need not set up the affirmative defense that the cor- poration alone is liable. Demarest v. Flack, 128 N. Y., 205 (,1891). In an action for damages the defense that the de- fendant is merely a stockholder in the party who really is liable should be set up by the general issue and not by a plea. Dade Coal Co. v. Haslett, 10 S. E. Rep., 435 (Ga., 1889) 326 CHAPTER XIV. LIABILITY OF PLEDGEES, TRUSTEES, EXECUTORS, AGENTS, ETC. § 244. The subject. 245-246. The liability of trustees and cestui que trust. 247. The liability of a pledgee of shares. 248. The liability of an executor or administrator. 249. The liability of principal and agent on stock standing in the agent's name 250. Liability where stock is sub- scribed for or held by or in the names of infants and married women. 251. The liability of the corporation itself as a stockholder. 252. The liability of legatees, assignees in insolvency, and joint own- ers of shares. 253. The use of " dummies," and transfers to nominal and ficti- tious persons. § 24i. The subject. — AVhere the apparent owner of shares is not the real owner, the registered title to the stock being in one per- son and the equitable or real ownership being in another, various intricate questions have arisen involving the matter of liability for unpaid subscriptions and liability under the statute. The cases present every variety of ownership and every phase of liability, including many instances of transfer for the purpose of avoiding liability. The principles and rules of law governing this branch of the subject are somewhat numerous and complicated, nevertheless they are comparatively well settled. §§ 245-24:6. The liability of trustees and cestui que trust. — A trustee of stock who is recorded on the corporate books as a stock- holder is, at common law, liable on such stock as though he were the absolute owner of the same. This is the rule even though he is recorded on the corporate books not as an absolute owner, but as a trustee of the stock. 1 And the liability of the trustee is not limited by the amount of the trust property. 2 Each trustee is liable not merely for his proportion, but for the whole amount due upon the stock. 3 1 Chapman & Barker's Case, L R, 3 Eq., 361 (1866); Davis v. Essex, etc., Soc, 44 Conn., 582 ; Bugg's Case, 2 Dr. & Sm., 952; Muir v. City of Glasgow Bank, L. R, 4 App. Cas., 337 (1879). See, also, Sales v. Bates, 6 E. Rep., 703 (R. I., 1886) ; Holt's Case, 1 Sim. (N. S), 389 (1851); Mitchell's Case, L. R, 9 Eq., 363 (1870); King's Case, L R, 6 Ch., 196 (1871); Grew v. Breed, 10 Mete, 569 (1846): Leifchild's Case, L R, 1 Eq.. 231 (1865); Hemming v. Maddick, L. R, 9 Eq., 175 (1870); Ex parte Oriental, etc., L. R, 3 Ch., 791 (1868); Ind's Case, L R., 7 Ch., 485 (1872). Cf. Saunders' Case, 2 De G, J. & S, 101. 2Hoare's Case, 2 John. & H, 229 (1862). 3 Cunningham v. City of Glasgow, L R, 4 App. Cas., 607 (1879). 327 § 246.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH. XIV. The cestui que trust is not liable on the stock held by the trustees. The corporation cannot hold him liable; neither can the corporate creditors. The cestui que trust cannot be held either on the unpaid subscription or on the statutory liability of the stock. He is a stranger to the corporation and its creditors. 1 But here the exemption of the cestui que trust ceases. He does not entirely escape liability. His exemption from liability to the creditors of the trust does not protect him from liability to the trustee. He is bound to indemnify the trustee and to repay to him any debts which the latter may have paid in the administration of the trust. 2 The indemnity which the trustee may claim from him i Mitchell's Case, L. R, 9 Eq., 363; Ex parte Bugg, 2 Drew. & Srn., 452 (1865); Williams' Case, L. R, 1 Ch. Div., 576 ; King's Case, L. R, 6 Ch. App., 196 (1871); Fenwick's Case, 1 De G. & Sm., 557 (1849); Newry, etc., Co. v. Moss, 14 Beav., 64. Frequently, however, the stat* utes of the state cieating the corpora- tion change these rules. In New York, by statute, trustees holding stock in railroad or manufacturing corporations are released from liability. Laws of 1892, ch. 688, sec. 54. By the statutes of the United States a similar provision applies to national banks. R S., § 5152. But this exemption does not protect the trustee unless the stock registered in his name is registered to him as " trustee." Davis v. Essex, etc., Soc, 44 Conn., 582 (1877). A trustee is not lia- ble on national bank stock, his trustee- ship appearing on the books. Welles r. Larrabee, 36 Fed. Rep., 866 (1888). These statutes, however, apply, of course, only to stock issued by corporations which have been incorporated by the government which enacted the stat- ute. 2 Butler v. Cumpston, L. R, 7 Eq., 16 (1868); James v. May, L. R, 6 H. of L., 328 (1873); Re National Financial Co., L, R, 3 Ch., 791 (1868): Perry on Trusts, §§ 485, 486. In the case of Jervis v. Wolferston, L. R, 18 Eq., 16 (1874), the court said, in enforcing indemnity to the trustees of stock : " I take it to be a general rule that where persons accept a trust at the request of another, and that other is a cestui que trust, he is personally liable to indemnify the trustees for any loss accruing in the due execution of the trust ; and under that doctrine I shall hold that the estate of the testator becomes liable to in- demnify the trustees against the pay- ment of this large sum of money." Hemming v. Maddick, L. R, 7 Ch. App., 395 (1872). where the court held also that the trustee might authorize the corpora- tion to use the trustee's name and collect from the cestui que trust. In Hughes v. India, etc., Co., L. R, 22 Ch. D., 561 (1882), it is held that the trustees cannot sue for indemnity before the corpora- tion has demanded payment See, also, Phene v. Gildan, 5 Hare, 11 (1845), where a mortgagor of stock was held liable to indemnify the mortgagee, who had been held liable on the stock. The court said the mortgagor was liable the same as a '•trustee of leasehold property under covenants for the benefit of a cestui que trust" In Balsh v. Hyham, 2 P. Will- iams, 453 (1728), the lord chancellor said that " it is a rule that the cestui que trust ought to save the trustee harmless as to all damages relating to the trust," and consequently that the cestui que t7-ust must repay to the trustee money bor- rowed by the latter and given to the cestui que trust, the trust consisting of stock which was pledged to secure the loan. Approved in Ex parte Chippen- dale, 4 De G., M. & G., 19, 54 (1854). Liudley on Partnership, pp. 758, 759, says : •'The right of a trustee to indemnity 328 CH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 247. cannot be denied on the ground that the trustee is irresponsible, and consequently that the corporation cannot get anything from him. 1 But until the trustee is actually called on by the corporation to pay, he cannot compel the cestui que trust to give indemnity. 2 This liability, however, of the cestui que trust may be avoided. If the trustees are willing to provide in the trust instrument that the cestui que trust shall not be liable, such a provision is legal and effectual. The cestui que trust then escapes liability absolutely and completely. 3 § 247. The liability of a pledgee of shares. — A pledgee of stock, that is, one to whom the stock has been transferred in pledge or as collateral security, and who has had the stock transferred into his own name on the corporate books, is liable to the creditors of the corporation as though he were the absolute owner of the stock. 4 from his cestui que trust very closely re- sembles the right of an agent to indem- nity from his principal. ... A trustee is clearly entitled to be indemni- fied out of the trust property against all costs, charges and expenses properly in- curred, and against all losses sustained by him in the execution of his trust; and if the trust property is not sufficient for the purpose of indemnifying him in respect of such matters, his cestui que trust, if under no disability, is personally liable to indemnify him. unless such liability is excluded by some special cir- cumstance. ... If there is an ex- press covenant to indemnify, the obliga- tion will be limited by the covenant." 1 In re National Financial Co., L. R., 3 Ch., 791 (1868) ; Cruse v. Paine, L. R, 6 Eq., 641 (1868). 2 Hughes-Hallett v. Indian, etc., Co., L. R. 22 Ch. D., 561 (1882). 3 Thus, Ex parte Chippendale, 4 De G., M. & G., 19, 52 (1854). The court says, in a dictum: " No doubt a company's deed, or any other deed, may be so formed as to deprive directors or trustees of the right to indemnity ; and, if parties think proper to accept directorships or trusts under deeds so framed, they must abide by the consequences. See, also, Gillan v. Morrison, 1 De G. & Sm., 421 (1847), holding that an express agree- ment that the cestui que trust shall be liable to the trustee to a certain extent and no more is binding on the trustee. 4 Nat'l Com. Bank v. McDonnell, 9 S. Rep., 149 (Ala., 1891): Moore v. Jones. 3 Woods, 53 (1877) ; Pullman v. Upton, 96 U. S., 328 (1877); Aultman's Appeal, 98 Pa. St., 505 (1881); Crease v. Babcock,51 Mass., 525 (1846) ; Holyoke Bank v. Bum- ham, 65 Mass., 183 (1853); Sleeper v. Goodwin, 31 N. W. Rep., 335 (Wis.. 1887); Rosevelt v. Brown, 11 N. Y., 148 (1854) ; Matter of The Empire Bank. 18 id., 199 (1858) ; Grew v. Breed, 10 Mete, 569 (1846) ; Royal Bank of India's Case, L. R., 7 Eq., 91 (1868) ;*S. C, L. R, 4 Chan., 252 (1869); Weikersheim's Case, L. R, 8 Chan., 831 (1873); Price & Brown's Case, 3 De G. & Sm., 146 (1850), in which the holders of shares taken as security, who had new shares issued in their own names in exchange for the old shares which had been called in. were declared to be contributories, though the directors knew the nature of their holding ; Richardson V. Abend- roth. 43 Barb., 162 (1864). And the pledgee is liable upon the stock even after his debt has been paid and the certificate handed back to the pledgor, if the retransfer is not properly entered on the corporate books. Bowdell v. The Farmers' & Merchants' National Bank of Baltimore, 25 Nat. Bank. Reg., 405 (1877) ; Johnson v. Somerville Dyeing, 329 § 247.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH". XXV. This rule has frequently been enforced in the case of a pledge of shares of stock in a national bank. 1 If, however, the stock has been recorded on the corporate books, not in the name of the pledgee, but in the name of a " dummy," the pledgee is not liable thereon. 2 A statute frequently relieves the pledgee. 3 etc., Co., 15 Gray, 216 (1860) ; Adderly v. Storm, 6 Hill, 624 (1844). •Magruder v. Colston, 44 Md., 349 (1875); Wheelock v. Kost, 77 111., 296 (1875); Hale v. Walker, 31 Iowa. 344 (1871); Barre National Barik v. Hing- ham Manuf'g Co., 127 Mass., 563 (1S79); National Bank v. Case, 99 U. S., 628 (1878). 2 Henkle v. Salem Mfg. Co., 39 Ohio St., 547 (1883) ; Welles v. Larrabee, 36 Fed. Rep., 866 (1888). In the case of Anderson, Receiver, v. Philadelphia Warehouse Co., Ill U. S, 479 (1883), it is held that a pledgee of shares of stock in a national bank, who takes the se- curity for his benefit in the name of an irresponsible person, as trustee, for the avowed purpose of avoiding individual liability as a share-owner, incurs no lia- bility which can be enforced by cred- itors of the bank in case of its failure. To same effect, Newry, etc., R'y Co. v. Moss, 14 Beav.. 64 (1851) ; § 470, infra. A transfer of shares by one who holds them as collateral security, for the pur- pose of avoiding liability thereon, is not a conversion. Hiatt v. Griswold, 5 Fed. Rep., 573 (1881). Cf. % 253. 3 New York Laws of 1892, ch. 688, § 54; also Part VII, infra, See McMa- hon v. Macy, 51 N. Y., 155 (1872). A sim- ilar provision is found in the old New York Manufacturing Companies Act of 1848 (New York Laws of 1848, ch. 40, § 16). See Stover v. Flack. 30 N. Y. 64 (1864); S. C, 41 Barb., 162. Cf. Case of the Reciprocity Bank, 22 N. Y, 9, 17 (1860). And a similar provision has been enacted in Maryland. Matthews v. Albert, 24 Md., 527 (1866); Addison's Case, L. R, 5 Chan.. 294 (1870). In Bur- gess v. Seligman, 107 U. S., 20 (1882), the supreme court of the United States con- strued the Missouri statute, and held. that the pledgees were not liable to cor- porate creditors upon the shares so held by them ; and such also is the rule now in Missouri. Union Sav. Ass'n v. Selig- man, 92 Mo., 635 (18S4), overruling Gris- wold v. Seligman, smb. So, also, a pledgee of the corporation itself has been held not liable, especially where the statutes declared pledgees not liable and the creditor suing became such before the pledgee voted the stock held by him. Union Sav. Assoc, v. Seligman, 15 S. W. Rep., 630 (Mo., 1884), reversing 11 Mo. App., 142, overruling Griswold v. Selig- man, 72 Mo., 116, and following Burgess v. Seligman, 107 U. S., 20. See, also. Melvin v. Lamar Ins. Co., 80 HI.. 446 (1875), §§ 138, 465. In England, Chap- man's, etc., Case, L' R, 3 Eq., 365 ; Re Anglesea Colliery Co., L R, 2 Eq., 379: Inds' Case, L R, 7 Ch., 485, were under the Companies Act. In the case .Re City Terminus Hotel Co., L R, 14 Eq., 10 (1872), a hotel company borrowed £40,000 of a railroad company and gave its un- issued shares as security, they being placed in the hands of a trustee, with power to sell, and thus reduce the debt. Afterwards the railway company bought the hotel, and the latter was wound up. Held, that the railway company were not stockholders, but creditors, and were entitled to deduct the amount of the loan from the purchase-money. See, also, Manchester, etc., Case, 22 Week. Rep., 41 (1875); Nellis v. Coleman, 98 Pa. St, 465 (1881), where the corporation received subscriptions as a loan, to be repaid. It was held to be valid. In a late Massachusetts case it is said that the pledgee is liable on the stock as owner only when the certificate fails to show that the shares are held merely as col- lateral. Bane National Bank v. Hing- hara Manuf'g Co., 127 Mass.. 563 (1879) ; 330 OH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 248. A pledgee of stock who holds the certificates, but who docs not appear on the corporate books as a stockholder, is not liable as a stockholder. 1 § 248. The liability of an executor or administrator. — The estate of a deceased person is liable upon the stock held and owned by the decedent in the same way and to the same extent that the share- holder was liable in his life-time. Accordingly, an executor or ad- ministrator of the estate of a deceased shareholder is chargeable upon the shares of the decedent to the extent of the property that comes into his hands as the personal representative of the deceased. 2 The executor or administrator becomes personally liable, however, upon the stock, if he pay away the assets of the estate in legacies without making provision to meet the liability on the stock. 3 When S. P., Davis v. Essex Baptist Society, 44 Conn., 582 (1877). 1 Prouty v. Prouty, etc., Co., 25 Atl. Rep., 1001 (Pa., 1893). An unrecorded pledgee is, of course, not liable on stat- utory liability. Henkle v. Salem, etc., Co., 39 Ohio St., 547 (1883). See, also, § 258, infra. 2 Thomas' Case, 1 De G. & Sm., 579 (1849); Baird's Case. L. R, 5 Chan., 725 (1870), holding that the presumption is that executors of a deceased shareholder succeed to his full liability ; Stewart's Trustee v. Evans, 9 Scotch Ct. of Ses. Cas. (3d series), 810 (1871) ; Evans v. Cov- entry, 25 L. J., Chan., 489 (1856), holding the executor liable only to the extent of the estate funds. To same effect, Blake- ley's Case, 13 Beav., 133 (1850) ; Ex parte Gouthvvaite, 3 Mac. & G., 187 (1851); Ex parte Doyle, 2 Hall & Twell's (Eng. Chan.), 221 (1850); Ex parte Hall, 1 Mac. & G., 307 (1849) ; Hamer's Devisee's Case, 2 De G., M. & G., 366 (1852) ; Robinson's Executor's Case, 6 id., 572 (1856) ; Ness v. Armstrong, 3 De G. & Sm., 38, note (1849) ; Straffars' Case, 1 De G., M. & G, 576; Bulmer's Case, 33 Beav., 435; Gouthwaite's Case, 3 De G. & Sm., 258 (1850) ; Taylor v. Taylor, L. R, 10 Eq., 477 (1870); Alexander's Case, 15 Sol. Jour., 788 (1871); Hamer's Case, 3 De G. & Sm., 279 (1850); Grew v. Breed, 10 Mete, 569 (1846); New England Com- mercial Bank v. Stockholders of the Newport Steam Factory, 6 R. I., 154 (1859) ; Crandall v. Lincoln, 52 Conn., 73 (1884); Bailey v. Hollister, 26 N. Y., 112 (1862); Chase v. Lord, 77 id., 1 (1879); Witters v. Sowles, 25 Fed. Rep., 168 (1885); S. C, 32 id., 130 (1887), relative to the liability of an executor under the federal statute governing national banks ; also Davis v. Weed (U. S. D. G), 44 Conn., 569 ; Schouler on Executors, § 380 ; New York Laws of 1850, ch. 140, § 11 ; 1848, ch. 40, § 13. An administra- tor is not liable on national bank stock even though he is the residuary distribu- tee of the estate. Matter of Bingham, 127 N. Y, 296 (1891). Some of the ear- lier Massachusetts cases are in apparent conflict with the rule declared in the text. Child v. Coffin, 17 Mass., 64 (1820); Gray v. Coffin, 9 Cush., 200 ; Ripley v. Sampson, 10 Pick. 371 (1830) ; Andrews v. Callender, 13 id., 484 (1833) ; Dane v. Dane Manuf'g Co., 14 Gray, 489 (1860) ; Grew v. Breed, 10 Mete, 569 (1846). See, also, Re Cheshire Banking Co., 54 L T. Rep., 558 (1886). 3 Taylor v. Taylor, L. R, 10 Eq., 477 (1870); Jefferys v. Jefferys, 24 L. T. Rep. (N. S.). 177 (1871); Thomas' Case, siqjra. In Stewart's Trustees v. Evans, 9 Scotch Ct. Ses. Cas. (3d series), 810 (1871), it is held that, where executors pay away the estate bona fide, they are not, after a lapse of sixteen years, liable person- ally for a deficit on shares. Cf. Witters v. Sowles, 25 Fed. Rep., 168 (1885). 331 § 2i9.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH. XIV. the executors accept a transfer in their own names they make themselves personally liable on the stock. 1 An executor who takes new shares for the estate is personally liable thereon. 2 § 249. The liability of principal and agent on stock standing in the agent's name. — Sometimes a subscription for stock is made by one person as the agent of another, and the stock is entered on the corporate books in the name of the agent. In such a case it is the rule that corporate creditors may hold either the principal or the agent responsible on the stock.* But an agent who is com- pelled to assume and pay charges on the stock may recover from 1 Alexander's Case, 15 Sol. Jour., 788 (1871). In New York it is held that an action to charge an executor on the stock of the estate need not be joined with an action to enforce an individual subscription by the executor. Erie, etc., Ry Co. v. Patrick, 2 Keyes, 256 (1865). A special statute of limitations appli- cable to executors will apply to an exec- utor's liability on stock. Sales v. Bates, 6 East Rep., 703 (R I., 1886). In Eng- land an executor is liable personally on stock, if he transfers it to himself ; other- wise not, the title to the stock being left in the name of the testator. Healey's Company Law and Practice, p. 90; Buchan's Case, L. R, 4 App. Cas., 549 (1879). 2 Fearnside & Dean's Case, L. R, 1 Chan., 231 (1866); Spence's Case, 17 Beav., 203(1853); Jackson v. Turquand, L R, 4 H. L,, 305 (1866); Mallorie's Case, L R, 2 Chan., 181 (1867). Cf. Russell's Executor's Case, 15 Sol. Jour., 790 (1871). 3 Burr «. Wilcox, 22 N. Y., 551 (I860). See, also, §§ 68, 69 ; and § 253, infra. Cf. Grangers' Market Co. v. Vinson, 6 Ore- gon, 172(1876); Barrett's Case, 4 DeG., J. & S., 416 (1864), where one who al- lowed another to use his name in reg- istering stock as a favor, and under agreement that he should incur no lia- bility, was held to be a contributory. A broker who has the stock transferred into his own name is liable as though he were the full owner. M'Kim v. Glenn, 8 Atl. Rep., 130 (Md., 1887). An unregistered transfer to one as agent to sell does not render him liable for the unpaid subscription. Powell v. Willa- mette, etc., R R Co., 15 Pac. Rep, 663 (Oreg., 1887): Mann v. Currie, 2 Barb., 294 (1848), where one who held stock in his own name, but really as an agent or broker for its sale, was held to be a stockholder at the suit of creditors. One to whom stock is issued, and in whose name it appears on the books of the corporation, is liable to the creditors of the corporation for the unpaid sub- scription, although he is not the owner of such stock. Baines v. Babcock et al., 27 Pac. Rep., 674 (Cal., 1891). One who subscribes to corporate stock for his wife, in the wife's name, is not liable on the subscription, because a married woman cannot make such a subscrip- tion ; but if the subscription is for him- self, although in the wife's name, it is otherwise. The fact that the husband took part of the stock in his own name and participated in the business of the company tends to show that the sub- scription was for his benefit Shields v. Casey, 25 Atl. Rep., 619 (Pa, 1893). Where a party subscribes for stock in the name of his son, even without the consent or knowledge of the son, the party so subscribing is not liable him- self thereon. Re Britannia, etc., Ass'n, Limited, 64 L. T. Rep., 184 (1890), revers- ing 63 L. T. Rep, 480. Where the hus- band subscribes for stock in his wife's name and she is incompetent to respond, he is liable on the stock. Nat'l Com'l Bank v. McDonnell, 9 S. Rep., 149 (Ala., 1891). 332 CH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 250. his principal the amount so paid. 1 Where a transfer is made, not to the principal himself, but to an agent, the latter is but a nom- inal holder, and is subject to the rules applicable to such. The transferee of an agent, when suit is brought by corporate creditors to enforce a demand against the stock, cannot set up that the agent had no power to transfer the stock to him. If he has received the certificates and appears as a stockholder on the books of the corporation, he is, as between himself and creditors of the corporation, a shareholder. 2 It is a serious question whether so-called " dummies " — that is, per- sons holding in their own names stock which belongs to others, in order to enable the latter to avoid liability thereon — are not to be regarded as agents rather than trustees. This question, however, is considered elsewhere. 3 § 250. Liability where stock is subscribed for or held by or in the names of infants and married women. — It has already been shown that an infant cannot be held liable upon a subscription to stock, 4 and any person subscribing for shares in the name of an infant renders himself personally liable thereon. So, likewise, when shares are assigned or transferred to infants as a contrivance to escape liability, the transferrer remains liable. 5 And this is the rule as to an infant transferee, although the transfer was bona fide, and even in ignorance *of the infancy of the transferee." The infant may, however, upon attaining his majority, ratify or acquiesce in a trans- i Orr v. Bigelow, 14 N. Y., 556 (1856) ; (186S) : Reid's Case, 24 Beav., 318 (1857) : affirming S. C, 20 Barb., 21 (1854); and see cases in the succeeding notes Stover v. Flack, 30 id., 64 (1864). herein. 2 Wakefield v. Fargo, 90 N. Y., 213 * Weston's Case, L. R, 5 Chan., 614 (1882). Upon the liability of agents or (1870). Thus, a broker purchasing shares trustees in these cases, see Crandall v. for the account of an infant was held Lincoln, 52 Conn., 73 (1884). liable as holder of the stock, not even 8 See § 253, infra. his broker's agency availing to protect 4 See §§ 67, 318. him. Ruchisky v. De Haven, 97 Pa. St.. s Capper's Case, L. R., 3 Chan., 458 202 (1881); Mann's Case, supra. In (1868); Mann's Case, id., 459, note (1867); Nickalls v. Merry, L. R, 7 H. L., 530 Weston's Case, L. R, 5 Chan., 614(1870); (1875), a stock jobber was held liable Richardson's Case, L. R, 19 Eq., 588 where, in a suit to recover calls on stock (1875); Roman v. Fry, 5 J. J. Marsh., 634 sold by him for the Stock Exchange, it (1831); Castleman v. Holmes, 4 id., 1 turned out that the ultimate transferee (1830). But see Parson's Case, L. R, 8 of the shares was a minor, and his trans- Eq., 656, where the action of the com- ferrer had, in consequence, been com- pany in continuing an infant's name, pelled to pay the calls. If three persons and not notifying his vendor of his in- buy fifteen shares and take title in an fancy, was held to be such laches as to infant's name, each is liable on five estop the official liquidator from sub- shares and no more. Brown v. Black, stituting the vendor's name for that of 29 L. T. Rep., 363 (1873). the infant. Curtis' Case, L. R, 6 Eq., 455 333 § 250.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH. XIV. fer of shares to him during his infancy, and thereby render him- self liable on the stock. 1 The plea of infancy in these cases must, however, allege repudiation within a reasonable time after attain- ing majority. 2 What is a reasonable time within which the infant must repudi- ate the contract in order to escape chargeability is, in general, a question of law, and it will vary with the particular circumstances of each individual case. In general it is the rule that the trans- feree, on coming of age, must disaffirm promptly. Laches will bar his right to repudiate. 3 1 Lumsden's Case, L. R., 4 Chan., 31 (1868), where an infant held stock for six months. Accordingly, where an in- fant, after becoming of age, permits his name to remain on the registry as a shareholder, he is held to have ratified the antecedent transfer to him during his minority. Cork, etc., R'y Co. v. Cazenove, 10 Q. B., 935 (1847). An infant may be an incorporator at least until he repudi- ates the transaction. All rights ac- quired prior to such repudiation are protected. Re W. Laxon & Co., 67 L. T. Rep., 85 (1892). •^Dublin, etc., R'y Co. v. Black, 8 Exch., 181 (1852). Cf. Birkenhead, etc., R'y Co. v. Pilcher, 5 Exch., 24 (1850). Where an infant transferee became of age ten months before the winding up, he was held liable as a contributory by acquiescence. Ebbett's Case, L. R, 5 Chan., 302 (1870); S. C, 18 W. R, 202 (1869). But in a case where the winding up came just before an infant transferee became of age, it was held that no af- firmative repudiation was necessary, but that some distinct act of affirmation alone would avail to render him liable after majority. Wilson's Case, L. R, 8 Eq., 240 (1869). Where the winding up occurs just before or just after the in- fant transferee becomes of age, it is said that he need not expressly repudiate in order to escape liability, "because he cannot tell whether the compauy in- tends to enforce their claim against him, and, therefore, he is not bound till some steps are taken to resist his bfing a shareholder in the company." Mitchell's Case, L. R, 9 Eq., 363 (1870). It seems, ■ also, that a repudiation during infancy may, under certain circumstances, avail to discharge an infant shareholder from liability to pay calls which are made after he attained the age of twenty-one years. Newrj & Enniskillen R'y Co. v. Coombe, 3 Exch., 565, 578 (1849). The court, in speaking to this point, said,: " He became a shareholder by contract during infancy, and during infancy he disaffirmed the contract; therefore, in my opinion, he ceased to be a share- holder liable to be sued for calls. Where the infant transferee, coming of age after the winding up had been com- menced, offered to affirm the contract, it was held that the liquidators might, in the interest of the creditors, refuse to accept the offer, and might instead hold the transferrer liable. Symon's Case, L. R, 5 Chan., 298 (1870); Cos- tello's Case, L, R, 8 Eq., 504. 3 In one English case we find it held that two years' dela}' after coming of age is a ratification of the contract Mitchell's Case, L. R., 9 Eq., 363 (1870). And in another case ten months is held sufficient. Ebbett's Case. L. R, 5 Chan., 302 (1870). While in a third case a lapse of three years was held not to amount to an affirmance of the contract. Hart's Case, L. R. 6 Eq.. 512 (1868). In this case the infant shareholder came of age six months after the proceedings to wind up the company had been com- menced. He was served with notice of these proceedings shortly before his ma- jority. Two years after, a list of share- 334 CH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 250. ~No general rule can be laid "down as regards the effect of a trans- fer of stock to a married woman. Bv the law of most of the states she may contract as a feme sole in respect to her separate estate, and doubtless may become a transferee of stock. 1 In such cases holders liable as contributors, which included his name, was filed, and a year later a notice of a call was served on him. He resisted the collection of the amount of that call ; and, although his resistance was made three years after he came of age, the court held that he was liable. But after a repudiation of the contract on attaining majority, it is held that rendering aid in holding the transferrer liable is not a waiver by the infant of his formal repudiation of the transfer to him of which the cor- porate creditors can take advantage, when for any reason they fail to make their claim against the vendor of the infant Baker's Case, L. R, 7 Chan., 115 (1871). If a father transfers shares of stock to his minor son, though in good faith, he is, upon the winding up, liable upon the stock as though no transfer had been attempted, if the son repudiates the transaction. Litch- field's Case, 3 De G. & 8m., 141 (1850); Weston's Case, L. R, 5 Chan.. 614 (1870). Of. Roman v. Fry. 5 J. J. Marsh., 634 (1831). And a director in an incorpo- rated company, who induces his minor children to take stock in the company in their own names, is liable upon the winding up for a breach of trust, in case the children are still minors. Ex parte Wilson, L. R, 8 Chan., 45 (1872). But if a father buy shares in the name and for the benefit of his son, who is a minor, and when the transfer is made informs the broker of the vendor of the minority of the transferee, the father, upon the winding up, is not liable on the stock, but, the transferee continuing a minor when the right of action accrues, the corporate creditors may look to the transferrer. Maitland's Case, 38 L. J., Chan., 554 (1869). So, also, where the vendor of shares allows the certifi- cate to be made to the minor son of his vendee, and the son upon attaining his majority repudiates the transaction, the vendor and not the vendee is liable upon the winding up. Hennessey's Case, 3 De G. & Sm„ 191 (1850). But where a shareholder transferred to an infant, and this infant to another infant, who in his turn transferred to an adult capa- ble of responding upon the stock, all the transfers having been duly reg- istered, it was held that the last vendee was a contributory, and that the im- mediate transfers could not be avoided. Gooch's Case, L. R, 8 Chan., 266 (1872). After a winding up is commenced, a person in whose name, while an infant, stock had been placed, but who had, with knowledge, allowed the subscrip- tion to continue after he came of age, cannot repudiate. Re Yoeland, etc., 58 L. T. Rep., 922 (1888). It seems, there- fore, that the act of the infant in trans- ferring shares is valid and effectual to pass the title and to discharge himself from liability on the stock. 1 See £§ 66, 319. A woman to whom stock is transferred in the corporate books is liable on the statutory liability if she approves or acquiesces in it in any way, as by signing an application to change the charter of the bank or by indorsing checks which are made out to her for dividends. She is es- topped from denying that she knew what she was signing. It is immaterial whether new certificates were issued to her, and also whether the transfer to her was by the husband in order to con- ceal his property. A married woman may be a stockholder in a bank in the District of Columbia, and be liable on the statutory liability. The court re- fused to pass on the question as to what property might be reached as against her. Keyser v. Hitz, 133 TJ. S., 138 (1890). See, also, Johnson v. Gal- 335 § 251.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH. XIV. she would also have power to transfer her stock without the con- sent of her husband. § 251. The liability of the corporation itself as a stockholder. — When the corporation becomes the purchaser of its own stock, and the shares, as is generally the case, are transferred into the name of a trustee for the corporation, it is the rule, both here and in Eng- land, that the trustee is personally liable in respect of all the shares so standing in his name. 2 lagher, 3 De G., F. & J., 491 (1861); Mrs, Matthewmann's Case, L R, 3 Eq., 781 ; Luard's Case, 1 De G., F. & J., 533; Queen v. Carnatic R. Co., L. R, 8 Q. B., 290 (1873). In Angus' Case, 1 De G. & Sm., 560, the constitution of the corpo- ration prevented such a transfer. See, also, Matter of Reciprocity Bank, 22 N. Y., 9. In England the husband is liable on stock owned by his wife when he married her. Burlinson's Case, 3 De G. & Sm., 18 (1849) ; Sadler's Case, id., 36 ; White's Case, id., 157. But he is liable only for subsequent liabilities of the company. Kluht's Case, id., 210. See, also, Butler v. Cumpston, L. R, 7 Eq., 16, where the wife was a cestui que trust. A husband has been held liable on stock which was given to his wife after their marriage by way of legacy, and was accepted by her. Thomas v. City of Glasgow Bank, 6 Scotch Ct of Sess. (4th series), 607 (1879). A married woman is herself liable for the statutory liability on stock, where she lias power to be a stockholder. Sales v. Bates, 6 East. Rep., 703 (R I, 1886); Bundy v. Cocke, 128 U. S., 185 (1888). So, also, as to national banks. Witters v. Sowles, 32 Fed. Rep., 767 (1887); Ibid., 35 id., 640 (1888); 38 id, 700; Keyser v. Hitz, 2 Mackey, 473 (U. S. D. C, 1883) ; Hobart v. Johnson, 19 Blatch., 359 (1881) ; Ander- son v. Line, 14 Fed. Rep., 405 (1880). The case of Simmons v. Dent, 16 Mo. App., 288 (1884), holds that, under a statute whereby a married woman may become a stockholder, a transfer of stock from the husband to the wife is valid, and re- lieves him from liability on the stock the same as though he had transferred to any other person. A married woman may give away or pledge her stock. Walker v. Joseph, etc., Co., 20 Atl. Rep., 885 (N. J., 1890). Married women are liable on the statutory liability. Par- rish's Appeal. 19 Atl. Rep., 5(59 (Pa.. 1890). A married woman is not at common law qualified to act as an in- corporator nor as treasurer. 9 R'y & Corp. L J., 197. 2 Matter of the Empire City Bank, 18 N. Y., 199. 226 (1858) ; Allibone v. Hager. 46 Pa. St, 48 (1862); Crandall v. Lincoln. 52 Conn., 73 (1884). Cf. Sanger v. Up- ton. 91 U. S, 56, 60 (1875). To the same effect are the English cases. In re St. Marylebone Banking Co., 3 De G. & Sm., 21 (1849); In re National Financial Co., L R, 3 Chan., 791 (1868), in which one who held shares in one company as trustee for another company was de- clared to be a creditor of the company for which he held the shares to the amount of the calls made upon and paid by him on account of the other company. Chapman & Barker's Case, L R, 8 Eq., 361 (1866), holding, also, that the trustee might have a right to be indemnified by the company of which he was merely a trustee. The trustee for the corporation has recourse against it for calls paid by him. Good- son's Claim, 28 W. R, 766 (1880); Ind's Case, L. R, 7 Chan., 485 (1872) ; Eyre's Case. 31 Beav., 177; Munt'sCase, 22 id., 55: Richmond's Case, 3 De G. & Sm.. 96: Walter's Case, id., 244. The last four cases are instances of attempted transfers to trustees for the benefit of the corporation being declared void as illegal and the original holders being 336 OH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 252. The transferrer, also, if he knew that the transferee took as trustee for the corporation, is liable upon the stock. 1 But when this knowledge is not imputable to the transferrer, he is not liable. 2 Xor, of course, is he liable when the corporation has power, by charter or otherwise, to deal in its own shares. 3 Where the owner of stock transfers it directly to the corporation itself, without the interven- tion of a trustee, the transferrer is not released from his liability on the stock, but remains as fully chargeable as though no transfer had been attempted. 4 § 252. The liability of legatees, assignees in insolvency and joint owners. — A legatee of shares of stock may, of course, if he thinks proper, decline to receive his testator's, gift. But if he accepts the legacy, it is well settled that, as specific legatee, he is bound to pay all calls made upon the stock after the death of the testator. 5 He declared liable. See, also, §§ 282, 314. Where the company issues its stock as collateral security to notes given to it by its subscribers in payment for such stock, and then sells the notes, the stock follows the notes and may be subjected to the payment of judgment on the notes. If the corporation has issued the stock to others it must pay the judg- ments. Houston, etc., R'y v. Bremond, 18 S. W. Rep., 448 (Tex., 1886). Concern- ing a pledge of its own stock bj r a corporation, see § 465. 1 Lawe's Case, 1 De G., M. & G., 421 (1852) ; Walter's Second Case, 3 De G. & Sm., 244 (1850) ; Daniell's Case, 22 Beav., 43 (1856). Cf. Johnson v Laflin, 5 Dill., 65 (1878) ; S. C, Thompson Nat. Bank Cases, 331 ; S. C, 103 U. S., 800 (1880) ; and particularly Crandall v. Lincoln, 52 Conn.. 73 (1884). See, also, § 309. 2Hollwey's Case, 1 De G. & Sm., 777 (1849) ; Nicol's Case, 3 De G. & J., 387 (1859) ; Johnson v. Laflin, 103 U. S., 800 (1880\ s Grady's Case, 1 De G, J. & S., 488 (1863); Lane's Case, id., 504 '(1863). Sometimes, by agreement between dis- contented stockholders and the direct- ors of the corporation, transfers are made by such shareholders as desire to be released from their obligation as shareholders to nominees of the direct- ors, with the intent thereby to relieve themselves from liability upon the stock. In such cases it is held that the action of the directors in permitting or sanctioning such a transfer was ultra vires, and that in consequence the trans- ferrer is still liable. Morgan's Case, 1 De G. & Sm., 750 (1849) ; Bennett's Case, 5 De G, M. & G, 284 (1854); In re Patent Paper Manuf'g Co., L. R., 5 Chan., 294 (1870) ; Nathan v. Whitlock, 9 Paige, 152 (1841). See, also, §§253, 309, 310, infra. 4 Case of the Recipi-ocity Bank, 22 N. Y., 9 (1860) ; Currier v. Lebanon Slate Co., 56 N. H., 262 (1875); Johnson v. Laflin, 5 Dill., 65 (1878); S. C, 6 Cen- tral Law Jour., 124; 103 U. S., 800 (1880) ; Walter's Second Case, 3 De G. & Sm., 244 (1850) ; Glenn v. Scott, 28 Fed. Rep., 804 (1886). Compare Zulueta's Claim, L. R, 5 Chan., 441 (1870); In re Patent Paper Manuf'g Co., L. R., 5 Chan., 294 (1870). Subscribers whose stock is taken back by the corporation are not liable thereon either at common law or by statute relative to transfers. Ailing v. Ward, 24 N. E. Rep., 551 (111., 1890). See §§ 167-171. & Day v. Day, 6 Jur. (N. S.), 365 (1860). Cf. Witters v. Sowles, 25 Fed. Rep., 168 (1885). (22) 337 § 253.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [CH. XIV. must also p?v all calls voted before, but not due and payable in tue regular course of business until after, the testator's death. 1 It has been held that an assignee of the estate of a bankrupt is not liable, personally or as assignee, upon the bankrupt's share of stock. He is not bound, as assignee, to accept as part of the es- tate property of this nature, when it is of an onerous or unprofit- able character. 2 Upon the death of one who is joint owner with another or others of shares of stock, the liability thereon attaches only to the surviving owners, and the estate of the deceased owner cannot be charged. 3 § 253. The use of " dummies " and transfers to nominal and fic- titious persons. — Frequently it happens that persons purchasing or subscribing for stock do not wish to take the stock in their own names, inasmuch as they thereby incur liability, or make known to the public the fact that they are stockholders. Accordingly, it is the custom in such cases to have the stock taken or purchased in the names of other persons. These latter are called "dummies." 4 The law is well settled that such a " dummy " is liable on the stock to the corporation and corporate creditors to the same extent that he would be if he were the real owner of the stock. 5 And it is 1 Addams v. Ferick, 26 Beav., 384 (1859). For a more complete statement of the law relative to legacies of stock, see ch. XVIII. 2 American File Co. v. Garrett, 110 U. S., 288 (1883) ; Amory v. Lawrence, 3 Cliff., 523 (1872); and see Rugely & Harrison v. Robinson, 19 Ala., 404 (1851) ; Streeter v. Sumner, 31 N. H., 542 (1855) ; Ex parte Davis, L. R, 3 Chan. Div., 463 ; Furdonjee's Case, id., 268, holding that the liability upon shares not being a debt provable in insolvency proceedings is not barred by the order of discharge. And where a corporation itself assigned shares of its own stock to an assignee for the benefit of corporate creditors, it was held that the assignee was not lia- ble, personally or as assignee, thereon. In re City Terminus Hotel Co., L. R, 4 Eq, 10 (1872). It has been held other- wise, however, in a case where the as- signment was absolute and the assignee was also a creditor. Protection Life Insurance Co. v. Osgood, 93 111., 69. It has been held that one who makes an assignment for the benefit of creditors is thereby released from liability on stock, even though the transfer has not been recorded in the corporate books. Sales v. Bates, 6 East Rep., 703 (R I., 1886). 3 Re Maria Anna, etc., Coal & Coke Co., 44 L. J., Chan., 423 (1875); Hill's Case, L. R, 20 Eq., 585 (1874).. 4 The cases in this section refer to t u e use of " dummies " without the real owner appearing at all on the corporate books as a stockholder. These cases differ from those where stock is trans- ferred by a stockholder from himself to a "dummy" or irresponsible person. See §§ 263-266. s Wakefield v. Fargo, 90 N. Y., 213 (1882) ; Case of Reciprocity Bank, 22 id., 9 (1860) ; Barrett's Case, 4 De G., J. & S., 416 (1864) ; Bugg's Case, 2 Dr. & Sm., 952. Cf. Fox v. Clifton, 6 Bing. (Eng.), 776 (1830). A transfer of stock on the books to a director renders him liable on the 338 CH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 253. established that the real owner of the stock is liable to repay to his "dummy " any sum of money which the latter has paid to the cor- poration or the corporate creditors. 1 An attachment against the " dummy " may take the stock. 2 But a more difficult question arises when an attempt is made to hold the real owner of the stock liable to the corporation or corpo- rate creditors. Where the real owner was formerly the registered stockholder, but has transferred his stock to an irresponsible per- son, a class of cases is found which is considered elsewhere. 3 A different class of cases, however, is now under consideration, and in America it has been held, where a person purchased stock in a national bank, but had it transferred, not to himself, but to another person, a "dummy," that the real owner of the stock is liable thereon, although he never appeared on the corporate books as a stockholder. 4 statutory liability, even though the transfer was to render him eligible for office, and lie was unaware of the trans- fer, and had paid the dividends to the transferrer. As director he was bound to know. Brown v. Finn, 34 Fed. Rep., 124 (1888 1. When a director enters stock in his wife's name, but she knows noth- ing of it and he receives all dividends and votes it, she cannot be charged as a stockholder. Longdale Iron Co. v. Pom- eroy Iron Co., 34 Fed. Rep., 448 (1888). 1 This is the rule whether the relation of the real owner be considered that of a principal towards an agent (see § 249, supra), or that of cestui que trust towards a trustee (see § 245). 2 White v. Rankin, 8 S. Rep., 118 (Ala., 1890). 3 See §§ 263-266, infra. * Davis v. Stevens, 17 Blatch., 259 (1879), where the question was, " Whether, in an action at law by a re- ceiver of the bank, the real owner of stock in a national bank, standing by his procurement in the name of another, and never having been in his own name on the books, can be charged as a share- holder with the statutory liability for debts?" Held, that the real owner is liable. "Every principal is responsible for the obligations of his agency. The debt of the agent is the debt of the principal, and always recoverable from the principal." See, also, to same effect, Case v. Small, 10 Fed. Rep., 722 (1881) ; Castleman v. Holmes, 4 J. J. Marsh., 1 (1830). In England, under its statutes, a different rule prevails. See King's Case, L. R, 6 Ch. App., 196 (1871) ; William's Case, L. R, 1 Ch. D., 576; Fenwick's Case, 1 De G. & Sm., 557 (1849) ; Cox's Case, 4 De G., J. & S., 53 (1863). The real owner of stock is likewise liable where he transfers it from his own name to that of an irresponsible person. §§ 263- 266, infra. Cf. cases in note 3, p. 332, supra. An undisclosed owner of stock, standing in the name of another as trustee, is liable on the statutory liability. Borland v. Haven, 37 Fed. Rep., 394 (1888); Castleman v. Holmes, 4 J. J. Marsh., 1 (1830), holding that one who subscribed for stock in the name of an infant for the purpose of avoiding re- sponsibility, and who enjoyed the ben- efits of the stock, was individually re- sponsible as a stockholder for debts of the corporation. Where the " dummy " dies, and his representatives claim the stock, and they pay the real owner a small sum in settlement, the compro- mise will be upheld. Antoine r. Smith. 4 S. Rep., 321 (La., 1888). Where the " dummy " dies and is insolvent. the stock cannot be reclaimed by the :;:!9 § 253.] LIABILITY OF PLEDGEES, AGENTS, EXECCTOKS, ETC. [CH. XIV. In England a directly contrary rule prevails. 1 In America the relation of the real owner to the " dummy " is held to be that of principal and agent, and the principal is held liable, on the ground that an undisclosed principal is liable on the con- tracts of his agent. In England the real owner of the stock is looked upon as a cestui que trust, and hence is not liable. 2 Under the Ohio statute the word "stockholders" applies to persons owning stock in the name of another, as well as to persons appear- ing on the corporate books as stockholders. 3 A transfer to a fictitious person is void, and leaves all parties as they were. 4 real owner. Hirsch v. Norton, 17 N. E. Rep., 612 (Ind., 1888). Stock held in the name of a "dummy" is subject to his debts, even though he notified the sec- retary of the company that be held it in trust. Ex parte Old, 2 Mont. & A., 734 (1835) ; Ex parte Watkins, id., 348 (1835) ; reversing 1 id., 693. king's Case, L. R, 6 Ch. App, 196 (1871), where the court says it does not know upon what ground a court, set- ting aside a transaction as fraudulent, is able to make a new contract for per- sons which they had never made them- selves. Cox's Case, 4 De G., J. & S., 53 (1863), is distinguished on the ground that Cox had agreed to take certain shares, and the decision was in the nature of specific performance. In Cox's Case, also, he had, by the use of "dum- mies," entrapped the public into believ- ing that many persons were investing. In Williams' Case, L. R, 1 Ch. D., 571 1 1875), where a purchaser of shares had them transferred to one of his em- ployees, the real owner was held not liable thereon. In the case Ex parte Bugg, 2 Drew. & Sm., 452, a similar conclusion was arrived at, the court saying that the relation between the real owner and the " dummy " was that of cestui que trust and trustee. Such, also, is the rule laid down in Fenwick's Case, 1 De G. & Sm., 557 (1849), where the purchaser had the stock transferred into the name of the " dummy " as " trustee." A person who subscribes for stock in a Canadian corporation in the name of another, a " dummy," is not liable for the unpaid subscription. Molson's Bank v. Boardman, 47 Hun. (N. Y.), 135 (1888). That a cestui que trust is not liable on stock held by his trustee, see §§ 215, 246. See, also, cases in note 2, p. 330, sxipra. 2 See supra. 3 Lloyd v. Preston, 146 U. S., 630(1892). 4 Arthur v. Midland R'y Co., 3 Kay & J., 204 (1857). See Pugh & Sharmans Case, L. R, 13 Eq., 566 (1872), where the transfer was to a married woman, but the court treated it as a transfer to a fictitious person. In Muskingum, etc., Co. v. Ward, 13 Ohio, 120 (1844), where the transfer was made to a fictitious person, the court held that the transac- tion was a mere nullity, and that it could not' be regarded as an abandon- ment of the stock. So where one pur- chased, or assumed to purchase, shares for an infant, and took the certificate in the name of an imaginary person, it was held that by such a transaction the purchaser did not become liable upon the shares, nor was the vendor released. Maitland's Case, 38 L. J., Chan., 554 (1869). See, also, Richardson's Case, L. R, 19 Eq., 588. 340 CHAPTER XV. LIABILITY AS AFFECTED BY TRANSFERS. § 254. The subject herein. 255. Liability of the transferrer on unpaid subscriptions after reg- istry. 256. Liability of the transferee on unpaid subscriptions after reg- istry. 257. Knowledge that the shares are not fully paid up, how far im- putable to a transferee. 258. Liability on subscription after transfer but before registry — Irregular and attempted trans- fers. § 259. Does the statutory liability at- tach when the corporate debt is contracted or is due or is sued upon? 260. Transferrer's statutory liability after transfer but before reg- istry. 261. The transferee's statutory lia- bility. 262. Liability of transferee to trans- ferrer. 263-266. A transfer to a "dummy" or to an insolvent person in order to escape liability. § 254. The subject herein. — "When shares of stock are transferred from one owner to another it at once becomes an important matter to determine who is liable upon unpaid subscriptions, and who must assume the liability imposed by statute. The difficulty is in- creased by the rule of law that no transfer is complete until it is duly entered or recorded in the transfer book of the corporation. The complication is usually greatest in cases involving the question of statutory liability, since generally each case turns more or less upon the particular words of the statute by which the liability is imposed. There are, however, many rules which are general in their character and application, governing the liability of share- holders as affected by transfer, and these are the subject of this chapter. § 255. Liability of the transferrer on unpaid subscriptions after registry. — Transfers of shares may be made at any time after the contract of subscription is made, and before any part or after a part of the subscription price has been paid. The well-established and general rule of law is, that where a stockholder makes an ab- solute transfer of his stock in good faith, and the transfer is duly recorded in the corporate stock book, the transferrer is thereby wholly discharged from all further liability upon the uncalled sub- scription price of the stock. 1 1 Huddersfield Canal Co. v. Buckley, transferrer is not liable on an unpaid 7 Term Rep., 36 (1796, by Lord Ken- subscription. " A transfer of stock made yon); Executors of Gilmore v. Bank of in good faith and at a time when the Cincinnati, 8 Ohio, 62, 71 (1837). A corporation is a going and solvent con- 341 § 255.] transferrer's and transferee's liability - . [ch. XV. This important rule is peculiar to corporation law. It is based on public policy and an appreciation of the demands of trade. The transferrer is released, although the corporate officers enter the cera, and which is entered upon the books, would certainly relieve the trans- ferrer from all of the responsibilities which attached to him as a stockholder." Tucker v. Gilman, 121 N. Y., 189 (1890) ; Billings v. Robinson, 94 N. Y., 415 (1884) ; affirming S. C, 28 Hun, 122 (1882); "Wakefield v. Fargo, 90 N. Y, 213 (1882) ; Cowles v. Cromwell. 25 Barb., 413 (1857); Cole v. Ryan, 52 id., 168 (1868); Isham v. Buckingham, 49 N. Y, 216 (1872); Stewart v. Walla, etc.. Co., 20 Pac. Rep., 605 (Wash. Ter., 1889) ; Miller v. Great Republic Ins. Co., 50 Mo., 55 (1872): Allen v. Montgomery R. R. Co., 11 Ala., 437, 451 (1847); Haynes v. Palmer, 13 La. Ann., 240 (1858); Wes- ton's Case, L, R„ 4 Chan., 20 (1868) ; Mc- Kenzie v. Kittridge, 24 Upp. Can., C. P., 1 (1874). The mere fact that the trans- ferrer, after the registry, paid a call does not estop him from denying his liability for subsequent calls. Provin- cial Ins. Co. v. Shaw, 19 U. C. (Q. B.), 533 (1860). It is not necessary to the validity of the transfer that there should be a consideration moving from trans- feree to transferrer ; and so, where one gives his share away absolutely and in good faith, the same rule as to liability prevails. In re European Bank, Mas- ter's Case, 41 L. J., Chan., 501 (1872). Neither does it alter the rule that no certificates of stock have been issued. In such a case the transferee becomes liable on the stock, and the transferrer's liability is at an end. Burke v. Smith, 16 Wall., 390 (1872); Brigham v. Mead, 10 Allen, 245 (1865). See, also, First Nat'l Bank v. Gifford, 47 Iowa, 575, 583 ; Isham v. Buckingham, 49 N. Y, 216 (1872). As regards the rule where the transfer is made before the corporation is organized, see § 61. The statutes of the state may, of course, change this rule. Thus, in Pennsylvania, see Bright- ley's Purdon's Digest, pp. 1420-1427; and in Virginia, see Glenn v. Scott, 28 Fed. Rep., 804 (1886) ; McKim v. Glenn, 8 Atl. Rep., 130 (Md., 1887). In Pennsyl- vania and Virginia both the transferrer and transferee are liable. Glenn v. Foote, 36 Fed. Rep., 824 (1888) ; Priest v. Glenn, 51 Fed. Rep., 400 (1892) ; Hambleton v. Glenn, 9 S. E. Rep., 124 (Va., 1889). Sub- scribers to stock are liable according to the law of the state incorporating the company, and not according to the law of the state where the subscribers re- side. A subscriber to stock in a Vir- ginia corporation is liable by statute al- though he has transferred his stock. Morris v. Glenn, 7 S. Rep, 90 (Ala., 1888). In Pennsylvania, after consid- erable doubt and conflict, it has been clearly stated by the supreme court that the transferee of stock is liable on the unpaid subscription. Bell's Appeal, 8 Atl. Rep, 177 (Pa., 1887); Citizens', etc., Co. v. Gillespie, 9 Atl. Rep., 73 (1887), where, however, the transferee directly contracted to pay. But compare West Philadelphia Canal Co. v. Innes, 3 Whar- ton, 198 (1838); Aultman's Appeal, 98 Pa. St, 505 (1881); Bunn's Appeal, 105 id., 49 (1884); Palmer v. Ridge Mining Co., 34 id., 288 ; Pittsburgh Iron Co. v. Otterson, 4 Week. Notes Cas., 545 (1878) ; Delaware Canal Co. v. Sanson), 1 Biun., 70 (1803) : Merrimac Mining Co. v. Levy, 54 Pa. St, 227 (1867). And, in general, as regards the Pennsylvania General Railroad Act of February 19, 1849, see Pittsburgh, etc., R R Co. v. Clarke, 29 Pa. St, 146 (1857); Graff v. Pittsburgh, etc., R R. Co., 31 id., 489 (1858). Cf. Frank's Oil Co. v. McCleary, 63 id., 317 (1869), holding that the transferee in a mining company is not liable. Messer- sniith v. Sharon Savings Bank, 96 id., 440 (1880), to same effect ; and see Ault- man's Appeal, 98 id., 505 (1881), involv- ing an Ohio corporation ; Pittsburgh, etc., Iron Co. v. Otterson, 4 Week. Notes 342 CH. XV.] transferrer's and transferee's liability. [§ 256. transfer against the protest of the transferrer. 1 The transferrer, however, is liable for calls payable before the transfer is made, 2 and in some cases for calls made before but payable after the transfer. 3 § 256. Liability of the transferee or unpaid subscriptions after registry. — When a transfer of stock is made, and the transfer is duly recorded in the corporate stock book, the transferee thereupon becomes liable for any balance of the subscription price remaining unpaid at the time of the transfer. The transfer releases the trans- ferrer, and charges the transferee. 4 Cas., 545 (1878) ; Miller v. Peabody Bank, 15 Week. Notes Cas., 76 ; Reimer Co. v. Rosenberger, 40 Leg. Jnt, 383; Pitts- burgh R. R Co. v. Clarke. 29 Pa., 153. In Maryland, also, the ordinary stat- utor}' provision holding stockholders liable until the capital stock is fully paid in is held to render the shareholder liable, even though he has transferred his shares. Hager v. Cleveland, 36 Md., 476 (1872). After a transfer and regis- try the stockholder is not liable on the subscription even under a statute. Libby v. Tobey, 19 Atl. Rep., 904 (Me., 1890). In New York no stock in either railroad or manufacturing corporations, created by the laws of that state, can be law- fully transferx-ed while there are calls unpaid upon the shares. N. Y. Session Laws, 1850, ch. 140, § 8 ; N. Y. Session Laws, 1848, ch. 40, § 8. In California railroad stock cannot be issued until it is fully paid up. Brewster v. Hartley, 37 Cal., 15 (1869). In Tennessee it is held that, upon a valid transfer, the transferrer is released, not only upon his liability for unpaid subscriptions, but also as to all the existing debts of the corporation ; and this is the general rule. Jackson v. Sligo Mfg. Co., 1 Lea, 210 (1878). So in Alabama. Allen v. Montgomery R. R.. 11 Ala., 437 (1847> 1 London, etc., R'y Co. v. Fairclough, H Man. & G., 674, 706 (1841) ; Upton v. Burnham, 3 Biss., 520 (1873); Webster v. Upton, 91 U. S., 65 (1875). 'In a pro- ceeding in equity a transferee will be compelled to pay calls made after trans- fer of the certificate and before registry of the same. Webster v. Upton, supra. 2 Yicksburg, etc., R R Co. v. McKean, 14 La. Ann., 724 (1859) ; and cases in this section generally, and g 258, infra. 3 North American Colonial Association v. Bentley, 19 L. J. (Q. B.), 427 (1850); Schenectady, etc., Plank-road Co. v. Thatcher, 11 N. Y, 102, 113 (1854). Contra, West Philadelphia Canal Co. v. Innes, 3 Wharton, 198 (1838). But this case was decided on the ground that the transferee had not accepted the stock, and could not be held liable by the cor- poration. Cf. Aylesbury Railway Co. v. Mount, 4 Man. & G., 651, reversing 5 Scott's New Rep, 127 (1842); In re Hoy- lake R'y Co., L. R., 9 Chan., 257 (18741 4 Webster v. Upton, 91 U. S., 65 (1875) ; Pullman v. Upton, 96 id., 328 (1877); Upton v. Hansbrough, 3 Biss., 417 (1873) ; Hall v. United States Ins. Co.. 5 Gill (Md.), 484 (1847) ; Bend v. Susquehanna Bridge Co., 6 Har. & J., 128 ^1825) ; Mer- rimac Mining Co. v. Bagley, 14 Mich., 501 (1866) ; Brigham v. Mead, 10 Allen, 245 (1865); Hartford, etc., R R Co. v. Boorman, 12 Conn., 530 (1838) ; Moore v. Jones, 3 Woods, 53 (1877); Merrimac Mining Co. v. Levy, 54 Pa. St., 227 (1867) ; Huddersfield Canal Co. v. Buckley, 7 Term Rep., 36 (1796). In Gray's Case, L. R, 1 Ch. Div., 664, where an owner of iron-works sold them to an incorpora- tion for its stock, and having guarantied that the net dividends should be not less than ten per cent, on the paid-up capital, for which purpose the shares given as consideration were vested in trustees, but were not to be registered in their names except by their own direction, it was held that they were not liable as 343 § 257.] transferrer's and transferee's liability. [cil XV. In Pennsylvania 1 and some other states, the liability of the trans- feree is regulated by statute. Where, by statute or a by-law of the corporation, no valid transfer can be made while there are calls due and unpaid, it is held that a transfer without such payment will not render the transferee liable thereon. 2 § 257. Knowledge that the shares are not fully paid up, how far imputable to a transferee. — The question whether the purchaser of shares is bound to take notice that the stock he purchases is not fully paid for is a serious and complicated one. The better opin- ion, and the one most in accord with the usages, analogies and demands of trade, is that, where one buys stock in open market, in good faith, and without notice that the subscription price thereof has not been paid up, such a purchaser cannot be held liable to pay the unpaid balance of subscript ion. a stockholders because they had not elected to be registered as stockholders. When a person takes shares of a com- pany, he, as between himself and other shareholders, takes those shares with all the rights and liabilities attaching to them, so that his co-shareholders have a perfect right to insist upon his contribut- ing with them towards the liquidation of debts contracted before he joined the company. Taylor v. Ifill, 1 N. R„ 566, V. C. W. ; Cape's Executor's Case, 2 De G., M. & G., 562 ; Mayhew's Case. 5 id., 837. See, too. Horsley v. Bell, 1 Bro. C. G, 101, note. Sanderson's Case, 3 De G. & S., 60, cannot be regarded as correct on this point See Henderson v. Sanderson, 3 H. L. G, 698. !See notes to the preceding section. z Watson v. Eales, 23 Beav., 294 (1856); McCready v. Rumsey, 6 Duer, 574 (New York Super. Ct., 1857), was a case under a prohibition to transfer in articles of association of a bank, organized under the General Banking Act of 1838 of the state of New York ; In re Bachman, 12 Nat. Bank. Reg., 223 (1875), where the corporation had a lien on the stock. 3 Certificates of stock have become such important factors in trade and credit, and general investment by all classes, that the law is steadily tending towards the complete protection of a bona fide purchaser of them in open market, and without notice of facts which will decrease the apparent value of the stock. The constant tendency of the courts to increase the negotiability of certificates of stock will probably, at some time hereafter, not allow any lia- bility on unpaid subscriptions to be en- forced against a transferrer unless such liability is stated on the face of the cer- tificate itself. At present it is still a question whether a purchaser of the cer- tificate is bound to inquire and know whether the stock is issued as paid-up stock or not See ch. III. Where a member has not paid for his stock in full and sells it as though it was full paid he must refund to the transferee the balance which the transferee is obliged to pay. Jamison r. Harbert, 54 N. W. Rep., 75 (Iowa, 1893). But where a subscription is not paid, and the stock is transferred to the corporation as " treasury stock " and then sold below par, the purchaser is liable for the un- paid par value. Ailing v. Ward, 24 N. E. Rep., 551 (111., 1890). A contract by a corporation that it will issue its stock for one-fifth of its par value is void under the Alabama constitutional pro- hibition. The subscriber having sold his contract to another person cannot collect on such sale. Williams v. Evans, 6 S. Rep., 702 (Ala., 1889> 344 CH. XV. 1 TRANSFERRER S AND TRANSFEREE S LIABILITV. [§ 258. § 25S. Liability on subscription after transfer hut before regis- try — Irregular and attempted transfers. — Until a transfer is re- corded in the transfer book of the corporation, the transferee, not being duly organized as a stockholder, is not chargeable either with corporate debts or unpaid balances of the subscription. He is bound to protect and indemnify his transferrer, but he is not liable to the corporation or corporate creditors or other stockhold- ers. 1 The transferrer, however, is not released from liability until the transfer is dulv registered in the corporate books. 2 This rule, however, has not been rigidly adhered to; and it is the law that, where the corporation accepts the transferee as a stockholder and pays dividends to him, or where, through the negligence or fault of the corporation, no transfer on the books is made, in such cases the transferrer is released, and the transferee only is liable on the stock. 3 1 Marlborough Manuf'g Co. v. Smith, 2 Conn.. 579 (1818); Topeka. etc., Co. r. Hale, 17 Pac. Rep., 601 (Kan., 1888) ; Mid- land, etc., R'y Co. v. Gordon, 16 Mees. & W., 804 (1847). In Indiana it has been held that a statute will not be construed so as to make both transferrer and transferee liable directly for the same indebtedness. Williams v. Hanna, 40 Ind., 535 (1872). 2Shelliugton v. Howland, 53 N. Y., 371 (1873); Worrall v. Judson, 5 Barb., 210 (1849) ; Louisiana Insurance Co. v. Gordon, 8 La. Rep, 174 (1835); Dane v. Young, 61 Me., 160 (1872) ; Fowler v. Ludwig, 34 Me., 455 (1852); Davis v. Essex, etc., Society, 44 Conn., 582 (1877); Kellogg v. Stockwell, 75 111., 68 ; Bow- dell v. Farmers', etc., Nat. Bank, U. S. C. C. (D. Md., 1877); Brown's N. B. Cas., 147 ; London, etc.. R'y Co. v. Fair- clough, 2 Man. & G, 674 (1841) ; to the same effect, McEuen r. West London Wharves, etc., Co., L. R, 6 Chan., 655, in which it was held that the sale and transfer by delivery of scrip certificates, allotted and issued to a subscriber enti- tling the bearer to exchange them for share certificates, would not exonerate the vendor from liability for calls, even though the vendee had paid some calls ; Midland, etc.. v. Gordon, 6 Mees. & W.. 604(1847); Sayles v. Blane, 19 L. J. (Q. B.), 19 ; S. C, 6 Eng. R'y Cases, 79. See, also, Hawkins v. Glenn, 131 U. S., 319 (1889). The registered stockholder is liable on the subscription. Baines v. Bab- cock, 30 Pac. Rep, 776 (Cal., 1892). An original subscriber for stock is not re- leased from his obligation although he sells and transfers the certificate of stock, such transfer not having been re- corded on the corporate books. Hood v. McNaughton, 24 Atl. Rep., 497 (N. J., 1892). A person sued as a subscriber cannot set up that he subscribed at the solicitation of another person who agreed to take the subscription off his hands at once. Stutz v. Handley, 41 Fed. Rep., 531 (1890). 3 Isham v. Buckingham, 49 N. Y., 216 (1872); Cutting v. Damerel, 88 id., 410 (1882); Chambersburg Ins. Co. r. Smith, 11 Pa. St., 120 (1849); Murry v. Bush. L. R, 6 House of Lords, 37 (1873); Upham v. Burnham. 3 Biss., 431 (1873); S. C, id., 520. Where the transferrer signs the transfer on the back and de- livers the same to his broker, who sells the stock and then presents the certifi- cate to the corporation for transfer, and the corporation agrees so to do, but neg- lects to for a year, the transferrer is not liable on the stock. Young v. M'Kay, 50 Fed. Rep., 394 (1892). The transferrer of stock in a national bank is released 345 S 258.] transferrer's and transferee's liability. [ch. XV. It is immaterial that no certificate of stock is issued to the trans- feree. The registry is complete without it. 1 When the transferrer from liability when he goes with the transferrer to the bank, delivers the old certificate duly transferred and leaves the same for registry, even though no registry is made. Hayes v. Shoemaker, 39 Fed. Rep., 319 (1889). A substitution of stockholders after organization by canceling some subscriptions and filling in others is illegal. There should be a transfer. Cartwright v. Dickinson, 12 S. W. Rep., 1030 (Tenn., 1890). Where a party buys stock through a broker and the broker without authority causes the stock to be transferred on the books to the purchaser, but the latter upon receiving the certificates returns them and repudiates the transfer and orders a sale and transfer, and the company fails before such resale is made, the purchaser is not liable to corporate creditors on the subscription price of the stock. Glenn v. Garth, 133 N. Y., 18 (1892). Where a person subscribes to the proposed increased capital stock, but the increase is not made, and the officers surreptitiously transfer some of their old stock to him, he is not liable on the statutory liability thereon, even though he accepted the stock, if he ac- cepted in ignorance of the fraud prac- ticed upon his. Stephens v. Follett, 43 Fed. Rep., 842 (1890). A stockholder is liable by statute on stock where he has merely transferred the certificate, and no effort has been made to complete the transfer on the corporate books. Where there is no transfer book, but cer- tificates are merely canceled and new ones issued, this is sufficient to effect a transfer on the corporate books. Plumb v. Bank of Enterprise, 29 Pac. Rep., 699 (Kan., 1892). Where a person agrees to accept a transfer of stock, and acts as director, he is liable on the unpaid subscription though no formal transfer is made. Weinman v. Wilkinsburg, etc., R'y Co., 12 Atl. Rep., 288 (Pa., 1888) ; Bernard's Case, 5 De G. & Sm., 283 (1852). See, also. § 260, infra. Cf. Ex parte Hall, 1 McC. & G., 307 (1849), holding that an unregistered transferee is not liable merely because he accepts dividends; Shipman's Case, L. R, 5 Eq., 219, in which a purchaser offered a name to which he wished the shares transferred on the register, but which was rejected by the directors. The vendor, in whose name they stood, was held liable for calls, and the court refused to remove his name; Sheffield, etc., v. Woodcock, 7 Mees. & W., 574, holding that where, by law, transfers of stock were to be made by deed, a transfer in blank, and stating the consideration untruly, made to a purchaser who afterwards signed and sent to the company a proxy, in which he described himself as the proprietor of the shares, constituted him a stock- holder for the purpose of requiring him to respond to calls for assessments ; 1 First Nat'l Bank, etc., v. Gifford, 47 Iowa, 575, 583; Brigham v. Mead, 10 Allen, 245 (1865) ; Straffon's Executor's Case, 1 De G., M. & G, 576 (1852). Chouteau Spring Co. v. Harris, 20 Mo., 382 (1855), holding that an assignment upon the books of the company, with- out having a new certificate issued, is a sufficient transfer to exonerate the as- signor from liability for assessments ; and that any transfer in writing is valid against a company which, having notice, refuses to allow it to be made. The shareholder cannot set up for defense, to an action by a corporate creditor, that some third person had contracted to purchase his shares, or a portion of them, but that with the consent of the corporate authorities it had been agreed that, until that third person had paid the notes given for the purchase price of the stock, the transfer should not be made on the corporate stock-book. Phoenix Warehousing Co. v. Badger, 67 N. Y., 294 (1876); affirming S. C, 6 Hun, 293 (1875). 346 ch. xv.] transferer's and transferee's liability. [§ 258. has clone all in his power to complete the transfer and is guilty of no laches, his liability to corporate creditors is thereby deter- mined; and accordingly, he is discharged, as though the registry Taylor v. Hughes, 2 Jones & Lat. (Ir. Ch.), 24. in which the court refused to hold liable as a stockholder of a bank one who has transferred his stock seven years before, though not by a proper method, and whose name had not ap- peared on the books during that time, but had been re-entered by a committee after the failure of the bank. Burnes v. Pennell, 2 H. of L. Cas., 497, held that where certain forms were to be observed by a transferee of shares in a Scotch joiut-stock compan} r , the required acts were for the benefit of the company, and therefore the leaving of one of such acts unexecuted by a purchaser was not allowed to enable him to retire from his contract. Maguire's Case, 3 De G. & Sm., 31. In this case a share- holder in a steam packet company transferred two shares to his son without his knowledge. The son did not receive dividends nor do any act as proprietor ; but, for the purpose of obaining free passages upon the boats of the com- pany, he obtained from the company certificates that he was a proprietor. It was held that the son was a contribu- tory in respect of the two shares. A receiver cannot apply to have a trans- feree's name put on the list of contribu- tories on ground of undue delay of the company in registering the transfer. Only the transferrer can complain. Sichell's Case, L. R, 3 Ch., 119 (1867). See Marlborough Mfg. Co. v. Smith, 2 Conn., 579 (1818), holding that a mere entry on the corporate books that a transfer has been made is insufficient ; and see, also, Lane v. Young, 61 Me., 160, holding that the failure to have the registry properly witnessed invalidates it. A person who buys stock at an exe- cution sale, after it has already been pledged for its full value to others and a transfer to them made, is not liable for calls on the stock, even though such pledgees transferred it to him without his knowledge. Simmons v. Hill, 10 S. W. Rep., 61 (Mo., 1888). A vendee of stock who is to be entitled to it only upon payment is not liable for the sub- scription price if he never pays for the stock and his name never appears on the books. Cormac v. Western, etc., Co., 41 N. W. Rep., 480 (Iowa, 1889). For other cases holding the transferee lia- ble, although all the formalities of reg- istry were not complied with, see Ex parte Dixon, 1 Dr. & Sm., 225 (1860); Gordon's Case, 3 De G. & Sm., 249 (1850) ; Staffron's Case, 1 De G., M & G., 576 (1852); Walter's Case, 3 De G. & Sm., 149 (1850); London, etc., Ry v. Fair- clough, 2 Man. & G, 674 (1841); Lon- don, etc., R'y v. Freeman, 2 Man. & G., 606 (1841); Birmingham, etc., R'y v. Locke, 1 Q. B., 256 (1841). For a case holding that the transferrer is liable, see Keene's Case, 3 De G, M. & G, 272 (1853). For cases to the effect that the transferrer is, in general, discharged only when the transfer is actually re- corded, and duly recorded in the stock- book, and when all the prescribed con- ditions of a valid transfer have been duly complied with, Cartmell's Case, L. R, 9 Chan.. 691 (1874); Heritage's Case, L. R, 9 Eq., 5 (1869) ; Hennessy's Executor's Case, 3 De G. & Sm., 191 (1850) ; Ex parte Henderson, 19 Beav., 107 (1854). Where the consent of the board of directors is necessary to a trans- fer, no transfer is complete without it, and the transferrer remains liable. Bosanquet V. Shortridge, 4 Ex., 699 (1850). But this case at law was en- joined by Bargate v. Shortridge, 5 H. L C, 297 (1855), in equity, and it was held that the transferrer was not liable. To same effect, see Taylor v. Hughes, 2 Jo. & La. (Irish), 24 (1844), where the regis- try was not regularly made, but the transferee was treated as a stockholder, 347 § 253.] transferrer's and transferee's liability. [ch. XT. had been made. 1 The corporation cannot hold an unrecorded transferrer liable on the unpaid subscription for stock. 2 Cf. Murray v. Bush, L. R., 6 H. of L„ 37 (1872); affirming L. R, 6 Ch., 246. In this case the deed of settlement, among other things, required a trans- feree to covenant by deed to abide by the rules of the company. A director who failed to comply with that require- ment was held to be a shareholder as to the shares, because he had been recog- nized as a shareholder by the directors at a meeting of shareholders and had been at that meeting elected a director. The transferrer was held not liable. Contra, Keene's Ex'rs Case, 3 De G., M. & G., 272 (1853) ; Mayhew's Case, 5 De G.. M. & G, 837 (1854), where the parties went together to the proper of- ficer of the company and deposited a transfer, but no notice in writing was given to the officer as required by the company's rules. The transferee was held to be properly placed on the list of con tributaries. See, also, next note. • Whitney V. Butler, 118 U. S., 655 (1886). See, also, £ 383. Ex parte Hen- derson, 19 Beav., 107 (1854); Shortridge v. Bosanquet, 16 Beav., 84 (1852), over- . ruling S. C, sub nom. Bosanquet v. Shortridge, 4 Exch., 699 (1850). In White's Case, L. R, 3 Eq., 86 (1866), a transferrer was held not discharged be- cause of laches; Fyfe's Case, L. R, 4 Ch., 768 (1869), where there was an im- proper delay on the part of the com- pany in registering a transfer ; Lowe's Case, L. R., 9 Eq., 589 (1870), on similar facts and to same effect; Nation's Case, L. R, 3 Eq., 77 (1866), in which the di- rectors did not confirm a transfer at their next meeting after it was left for that purpose, thereby causing an unnec- essary delay ; Hill's Case, L. R, 4 Ch., 769 (1869), note, to same effect as Fyfe's Case, supra; Ward v. Garlit's Case, L. R, 4 Eq., ltsn, in which the court rectified the register by completing a transfer which was duly executed and left for registry the day before the corporation stopped business, but was not registered on that account ; Ward's Case, L. R, 2 Eq., 226 (1867), in which the names of purchasers of shares had not been placed on the register in place of that of the vendor in consequence of disputes among themselves; Ex parte Hall, 5 R'y & Canal Cas., 624 (1849), holding that where a transferee whose name has not been actually entered on the registry has so acted — as being a trustee for his wife — and his acts have been so far adopted that a waiver of the necessary forms may be inferred, he will be held a contributory in wind- ing-up proceedings. De Pass' Case, 4 De G & J., 544(1859). In this case the certificates were transferable by de- livery ; and in winding-up proceedings the holders were adjudged to be con- tributories, though it appeared that as to some shares they were not delivered until after the winding-up order was made, and, as to others, that they were delivered to a clerk for a nominal con- sideration in order to escape liability. Marino's Case, L. R, 2 Ch., 596 (1867), in which the transferee, who lived in Smyrna, and had not sufficient time to execute and forward the deed required of him by the rules and usage of the company to effect a valid transfer, was held not to be a contributory ; Skowhe- gan Bank v. Cutler, 49 Me.. 315 (1872), holding that, in order to hold a trans- feree liable, it must be shown that stat- utory provisions relating to transfer have been observed ; Laing v. Burley, 101 111., 591 (1882). holding that, where there was no transfer on the books of a national bank as required by law, but new certficates had been issued to the transferee, who was also recognized as a shareholder on the bank's ledger, the transferee was liable; Midland, etc., v. Gordon, 16 Mees. & W., 804 (1847), -'Vale Mills v. Spalding, 62 N. H., 605 (1883). 348 ch. xv.] transferrer's and transferee's liability. [§ 259. §259. Does the statutory liability attach to him who is the reg- istered stockholder when the corporate debt is contracted-, or is due, or is stud upon?- -When the question of statutory liability is con- sidered there is more difficulty, as between transferrer and trans- feree,' in determining who is to be charged. Frequently the statute itself prescribes when the liability is to attach. The important question which arises herein is whether the corporate debt raises a liability against him who was the registered stockholder when the corporation entered into the contract leading to the debt, or against him who was the registered stockholder when the debt it- self became due and payable to the corporate creditor, or against him who was the registered stockholder when suit is brought bv the corporate creditor against the corporation to collect the debt, or against him who was the registered stockholder when suit is brought against the stockholder. Under certain statutes to that effect, those stockholders are liable who are such at the time when the execution against the corpora- tion is returned nulla hona} holding that a holder of scrip certifi- cates for shares to be allotted at a future time, having sold them in the market, was liable for calls until the name of the vendee was registered as the holder of them. See, also, Harpold v. Stobart, 21 N. E. Rep., 637 (Ohio, 1889). That the failure to record the transfer is the fault of the corporation itself, or of the officer thereof whose duty it is to make the entries in the stock-book, is not sufficient to relieve the shareholder who, having transferred his shares, fails to see to it that the proper entry is actually and duly made. In re Bachman, 12 Nat Bank. Reg., 223 (1875). 1 Nixon v. Green, 11 Exch., 550; af- firmed, 25 L. J., Exch., 209 (1856) ; Dodg- son v. Scott, 2 Exch., 457 (1848) ; Long- ley v. Little, 26 Me., 162 (1846) ; Bond v. Appleton. 8 Mass., 472 (1812). In this case, under a statute making the orig- inal stockholders, their successors, as- signs and the members of the corpora- tion liable for the debts of the corpora- tion, it was held that only such persons as were members at the time paj^ment was refused were intended ; McClaren v. Franciscus, 43 Mo. 452 (1869) ; Douchy v. Brown, 24 Vt, 197. Cf. Deming v. Bull, 10 Conn., 409 (1835). Under the provision of a charter that stockholders should "at all times be liable for all debts due by said corporation," it was held that those who were members when the debt was contracted, but had transferred their stock absolutely and in good faith before the commencement of the suit against the corporation, are not to be held liable under the statute. Middletown Bank v. Magill, 5 Conn.. 28 (1823), following Bond v. Appleton, supra; Child v. Coffin. 17 Mass., 64 (1820), holding that, where there is a statutory provision "'that a creditor, in a certain case, may levy his execution upon the body or estate of any member of the corporation, this must be under- stood of such as were members at the time of the commencement of the ac- tion, and of those only.'' It does not authorize an execution upon the estate of a corporator who died before the commencement of the action. Under the statute making all the members of a company liable in certain cases for its debts, the liability extends to all who wej - e members when it was sought to be enforced, and is not con- fined to such persons as were members 349 § 250.] transferrer's and transferee's liability. [en. xv. As to whether under the usual statute making the stockholders liable, to a greater or less extent, for the debts of the corporation, a registered stockholder is liable for debts contracted before he became such as well as for those contracted while he was such, al- though he subsequently transfers his stock, the words of the stat- ute control, and decisions on various statutes are given in the notes below. 1 when the debt was contracted. Curtis v. Harlow, 12 Mete, 3 (1846). i Chesley v. Pierce, 32 N. H., 388 (1855), holding that, under a statute making stockholders liable for the debts of a corporation, the individual stockholders are not liable for debts contracted be- fore they became such ; Castleman w Holmes, 4 J. J. Marsh., 1 (1839), but here a statute made them liable for debts, etc.. contracted "during the time he or the}' held stock;" Mill-dam, etc.. v. Hovey, 21 Pick., 417, 453 (1834), where the question arose on an objection to a witness in a suit against a corporation on the ground that it was liable for its debts; Bank v. Burnham, 11 Cush., 183 (1853), a case where, under a statute making liable "all members" of a cor- poration, a shareholder was held for all debts contracted while he was a mem- ber, although he ceased to be a member before they were payable, and not liable for debts contracted before he became a member if his membership expired be- fore they became payable and action brought; Southmayd v. Russ. 3 Conn., 52 (1819), holding that the judgment creditor cannot proceed against stock- holders by scire facias, but must sue them upon their liability ; Williams v. Hanna, 40 Ind., 535 (1872), holding that owners of stock at the time corporate debts are contracted are intended in a statute making stockholders liable for all debts of the company, etc. ; Larrabee v. Baldwin, 35 Cal., 155 (1868); Moss v. Oakley, 2 Hill, 265 (1842); holding that a charter declaring stockholders jointly and severally liable for the debts of the company makes liable only such as were members when the debt was con- tracted, and not those persons who be- came members afterwards : Judson v. Rossie, etc., 9 Paige, 598 (1842), to the same effect; McCullough v. Moss, 5 Denio, 567, 572, 585 (1846) to same effect ; Adderly v. Storm, 6 Hill, 624, holding that they are considered liable whose names appear on* the books of the com- pany as stockholders when the debt was contracted. But see McMaster v. David- son, 29 Hun, 542 (18S3), varying this rule as applicable to New York manu- facturing corporations; and cf. Tracy v.Yates, 18 Barb., 152 (1854); Phillips v. Therasson. 11 Hun, 141 (1877); King v. Duncan, 38 Hun, 461 (1886); David- son v. Rankin, 34 Cal., 503 H868), hold- ing that the cause of action against a stockholder of a mining corporation, under the laws of California, accrues at the same time as against the corpora- tion. In Ohio those who own the stock at the time the corporate creditor com- mences his suit against stockholders to enforce their statutory liability are liable under the Ohio statute. It is im- material that some of the stock was is- sued after the debt itself was incurred by the corporation. See, also, Barrick v. Gifford, 24 N. E. Rep., 259 (Ohio, 1890). Stockholders are liable under the Ohio statute for debts incurred be- fore they became stockholders, but the equities between them and the trans- ferrers of the stock may be adjusted in the same suit. Railroad Co. v. Smith, 31 N. E. Rep., 743 (Ohio, 1891). Under the Ohio statute the transferees are lia- ble for precedent debts. See Brown v. Hitchcock, 36 Ohio St.. 667 (1881). See, also, Mason v. Alexander, 44 Ohio St.. 318 (1886); Wheeler v. Faurot, 37 id, 86 350 en. xv.] transferrer's and transferee's liability. [§ 260. § 260. Transferrer 's statutory liability after transfer but before registry. — The previous section treated of the statutory liability of a transferrer in cases where the transfer is recorded on the corporate books at the same time that the sale and transfer of the certificates (1881) ; Brown v. Hitchcock, supra, hold- ing, also, that the liability is not dis- charged by a subsequent transfer of the stock ; that in such cases there is an implied undertaking by the assignee to indemnify the assignor from the liabil- ity for debts contracted while he was a stockholder: Hager v. Cleveland, etc., 36 Md., 476, holding that, by virtue of the statute of Maryland, the transfer of stock does not exonerate the trans- ferrer from liability for a corporate debt contracted while he was a stock- holder and before the capital stock was paid in. His liability is in the nature of a contract with the compam\ and is not affected by a transfer of his stock. In Illinois suit may be brought against him who is a stockholder at the time suit is brought "The liability being because of the ownership of stock, it follows the stock, into whosesoever hands it may go, and whoever pur- chases it does so at the risk of this lia- bility." Root v. Sinnock, 11 N. E. Rep., 339 (111., 1887). Individual liability con- tinues, even after the death of the stockholder, until a transfer is made. Davis v. Weed (U. S. D. C), 44 Conn., 569. See, also, Witters v. Sowles, 32 Fed. Rep., 130 (1887); Phillips v. Theras- son, 11 Hun, 141 (1877); Tracy v. Yates, 18 Barb., 152 (1854), holding that, un- der the New York statute of 1848, a stockholder is not liable for debts con- tracted before he was such. But see McMaster v. Davidson, 20 Hun, 542 (1883). Cf. Rosevelt v. Bro%vn, 11 N. Y, 148 (1854) ; Cutting v. Damerel, 88 id., 410 (1882). See, also, § 261, infra. A stockholder does not, by transfer, avoid a statutory liability to creditors who were such at the time of the transfer. Jack- son v. Meek, 9 S. W. Rep., 225 (Tenn., 1888). It is not always clear precisely when a given indebtedness may be held to have been "contracted." When a corporate note has been renewed, it is doubtful whether the renewal operates to create a new indebtedness or to con- tinue and perpetuate that indebtedness for which the original note was given. In Ohio it is held that a renewal which is a payment or extinguishment of the debt discharges the shareholders who were bound under the old note. Wheeler v. Faurot, 37 Ohio St., 26 (1881). And in Maine the date of the second or re- newal note is taken as the time when the indebtedness accrued. Milliken v. Whitehouse. 49 Me., 527 (1860). While in Massachusetts the debt is said to be contracted when the corporation accepts a bill of exchange. Byers v. Franklin Coal Co., 106 Mass., 131 (1870). Cf. Free- land v. McCullough, 1 Denio, 414, 426 (1845), holding that, in a suit upon a note given by the corporation for a debt on a simple contract, the stockholders at the time the debt was contracted are the ones to be held liable. See, also, in New York, Parrott v. Colby. 6 Hun, 55 ; affirmed, 71 N. Y, 507 (1877); Jagger Iron Co. v. Walker, 76 N. Y, 521 (1879\ overruling Fisher v. Marvin, 47 Barb., 159 ; Moss v. Oakley, 2 Hill, 265 (1842), holding that, where stockholders at the time the debt was contracted are liable, a note given for a debt will be presumed to have been made when the debt was contracted. It has been held that the debt does not accrue, as against the shareholder, at the time judgment thereon is recovered against the corpo- ration. Larrabee v. Baldwin, 35 Cat, 155, 168 (1868). In this case Sawyer, C. J., said : " The claim of the respond- ent, that the judgment is itself a con- tract creating a new debt, within the meaning of the statute, for which all who were stockholders at the date of the rendition of the judgment are per- 351 § 260.] transferrer's and transferee's liability. [CH. XV. are made. But frequently there is some delay in registering the transfer in the corporate books, and in such cases the further com- plication arises as to who is liable for corporate debts and liabili- ties incurred during that interim. The rule in such cases, however, is clear. The law is well settled that the transferrer of stock is liable to corporate creditors on his statutory liability, up to the time of a registrv of the transfer, to the same extent that he would be if no sale and transfer of the certificate had been made until the date of the registry. Until registry is made, corporate creditors may hold the unregistered transferrer liable, as though he had not sold his stock. As to them the transfer will be deemed to have been made only at the date of the record thereof in the corporate stock-book. 1 Such, also, is the rule of the English courts. 2 The cor- sonally liable, is too absurd to require argument to refute it." Registered transferees are liable the same as their transferrers, even though before the transfer the statutory liability was de- creased by statute. The liability to old creditors follows the stock. Nat'l Com. Bank v. McDonnell, 9 S. Rep., 149 (Ala., 1891); Tracy r. Yates, 18 Barb., 152(1854), holding that the transferee is not liable on prior debts ; Cape's Executor's Case, 2 De G., M. & G, 562, holding that the transferee is liable for debts in- curred before as well as after the trans- fer; McMaster v. Davidson, 29 Hun, 542 <1883), holding that the transferee is liable on debts contracted before he "became such, but falling due after he "became a stockholder. Under the Mas- sachusetts Manufacturing Act, as re- enacted in Rhode Island, "the liability extends to all persons who were stock- holders when the debt sought to be en- forced was contracted, and also to all persons who are stockholders when the liability is sought to be enforced, al- though they may have become such since the debt was contracted ; but it does not extend to persons who had be- come stockholders after the debt was contracted, and had ceased to be such before the debt became payable and ac- tion was brought." Sales v. Bates, 2 N. E. Rep., 633 (R I, 1886). By the law of copartnership a new partner is not lia- ble for old debts. See Lindley on Part- nership, 205, 435, 208 (Callaghan & Co., 1888). 1 Brown v. Hitchcock, 36 Ohio St, 667 (1881). holding, also, that after the lia- bility attaches to a stockholder it is not discharged by an assignment or transfer of the stock, but the subsequent hold- ers of it impliedly undertake to indem- nify the assignor from his liability; Wehrman u Reakirt, 1 Cinn. Super. Ct, 230 (1871). Cf. Jackson v. Sligo Manuf'g, etc., Co., 1 Lea (Tenn.), 210 (1878). In an action to charge a trans- ferrer for corporate debts incurred be- tween transfer and registry, the trans- feree is, in Ohio, a necessary party. Wheeler v. Faurot, 37 Ohio St, 26 (1881) ; Richmond r. Irons, 121 U. S., 27 (1887); - Musgrave & Hart's Case, L. R., 5 Eq., 193 (1867); Walker's Case, L. R, 6 Eq., 30 (1868); McEuen v. West London Wharves, etc., Co., L. R., 6 Chan., 655 <1871); Gower's Case, L. R, 6 Eq., 77 <1868), holding that where shares had been forfeited by a resolution of the directors, but the names of their owners had not been removed from the reg- ister, they were contributories in wind- ing-up proceedings instituted a year later. Humby's Case, 5 Jur. (N. S.), 215 (1859); Head's Case, L. R., 3 Eq., 84 (1866); White's Case, L. R, 3 Eq., 86 (1866): Shepherd's Case, L R, 2 Chan., 16 (18GG). 352 ch. xv.] transferrer's and transferee's liability. [§ 261. porate creditor, in determining who are stockholders, need only show that the persons whom he sues appear as stockholders on the corporate stock-books. 1 A different question arises when an irregular registry of the transfer has been made, or the transferrer has done all in his power to effect a registry, or the corporation has accepted the unregis- tered transferee as a stockholder. These questions, however, are considered elsewhere. 2 § 261. The transferee's statutory Uauilitij.— The transferee of stock whose name has been duly entered on the stock-book as a shareholder becomes thereupon liable on the stock to corporate creditors. The registry which operates to change the stockholder at the same time operates to charge the transferee. 3 It is imma- terial that no certificate has been issued to the transferee, or that the corporation has not issued certificates to any of the sharehold- ers. 4 Nor will the transferee be heard to allege, as defense against an action to enforce the statutory liability, that he was induced by- fraudulent representations to purchase the shares. 5 Whether the Shellington v. Howland, 53 N. Y., 371 (1873) ; Johnson v. Underhill, 52 id.. 203 (1873); Veiller v. Brown, 18 Hun, 571 (1879); Richardson v. Abenroth. 43 Barb., 162 (1864); Worrall v. Judson, 5 id., 210 (1849); Borland v. Haven, 37 Fed. Rep., 394 (18S8); Dane v. Young. 61 Maine, 100 (1872); Skowhegan Bank v. Cutler, 49 id, 315 (1860); Fowler v. Ludwig, 34 id., 455 (1853); Stanley v. Stanley, 26 id., 191 (1846), holding that parol evidence is not admissible as against the books of a corporation to prove who were its stockholders in suits by creditors. In support of the general rule see, also, Irons v. Manu- facturers' Nat. Bank. 27 Fed. Rep, 591 (1886) ; Price v. Whitney, 28 Fed. Rep., 297 (1886), holding that the executors of one whose name appears on the books as a stockholder are liable for assess- ment, though deceased, in his life-time, had sold the stock. Transferrer is liable on debts existing at time of registry of transfer. Harford v. Stobart, 21 N. E. Rep., 637 (Ohio, 1889). iMagruder v. Colston, 44 Md., 349, 356 (1875). Cf. Fisher v. Seiigman. 75 Mo., 13 (1881); Adderly v. Storm, 6 Hill. 624 (1844); Crease v. Babcock, 10 (23) 3 Mete, 525 (1846); Matter of the Em- pire City Bank, 18 N. Y, 200, 224 (1858);. Holyoke Bank v. Burnham. 11 Cush., 183, 187 (1853). A stockholder is pre- sumed to be a stockholder until the con- trary is shown. Barron v. Paine, 22 Atl. Rep.. 218 (Me., 1891). 2 See £ 258, supra. a Webster v. Upton, 91 U. S., 65 (1875) ; De Pass' Case, 4 De G. & J., 544 (1859) : Cape's Executor's Case, 2 De G., M. & G, 562 (1852); Briggs v. Waldron, 83' N. Y, 582 (1881). Cf. Chesley v. Pierce, 32 X. H., 388 (1855) ; Thebus v. Smiley. 110 111., 316 (1884), to the effect that there can be but one amount for which there is liability on account of the same stock, and the statutory double liability hav- ing been once met by an owner of the stock, his transferee takes it free from liability. 4 See § 258, supra. 5 Oakes v. Turquand, LR,2 House of Lords, 325 (1867) ; Houldsworth v. City of Glasgow Bank, L. R, 5 App. Cas., 317 (1880) : Tennent v. City of Glasgow Bank, L. R, 4 App. Cas., 615 (1872); and see ch. IX. Cf. Slater's Case, 35 Bcav., 391 (1866). 53 § 262.] transferrer's and transferee's liability. [en. xr. statutory liability attaches to a shareholder, in respect of debts contracted before he became a member of the corporation, is a question turning upon the words of the statute. 1 Nevertheless, although the transferee may not be liable to others, he clearly is liable herein to his transferee for liabilities herein which fall upon the latter. 2 A purchaser of stock may be held liable to creditors upon the liability imposed by statute, although the transfer is not recorded. § 262. Liability of transferee to transferrer herein. — A transfer of stock may be said to involve three distinct acts, all of which may take place at one and the same time, or each at a different time. There is, first, the agreement of sale, b}*- which the right to the stock passes from the transferrer to the transferee ; second, the formal transfer of the certificate of stock; third, a registry of the transfer, by an entry on the corporate transfer-book. It frequently happens that the registry is not made until some time after the agreement of sale, and that during the interim calls on the sub- scription are made or corporate creditors' rights attach. The law then holds liable the transferrer whose transfer has not been res:- istered. But in reality his transferee ought to meet that liability. Hence the rule that for liabilities arising after a sale of stock, but before a registry of the same on the corporate books, the vendee is liable to the vendor when such liabilities are paid by the latter. 3 1 See § 259. (1886); Johnson v. Underhill, 52 N. Y., * See § 262. An unrecorded trans- 203 (1873) ; Kellogg v. Stockwell, 75 HI., feree is liable on the statutory liability of 68(1874); Hutzler v. Lord, 64 Md., 534 stockholders. McDowall v. Sheehan, (1885) : Brigham v. Mead, 10 Allen, 245 129 N. Y., 200 (1891). A stockholder of (1865); Walker v. Bartlett, 18 C. B., 845, record in a national bank cannot set up overruling Humble v. Langston, 7 Mees. that the transfer was made without his & W„ 517; Grissell v. Bristowe, L. R, knowledge or consent, where he was 3 C. P., 112 (1868); Davis v. Haycock, cashier of the bank and was bound by L. R, 4 Exch., 373 (1871); Bowring r. law to know about the stock book. Shepherd, L R, 6 Q. B., 309 (1869); Kel- Finn v. Brown, 142 IT. S., 56 (1891). A lock v. Enthoven, L. R, 9 Q. B., 241 person to whom stock is transferred on (1874); S. C, L. R, 8 Q. B., 458. The the corporate books is liable on the stat- statute of limitations does not begin to utory liability, if he approves or acqui- run against the transferrer until the esces in it in any way. as by signing an assessment is paid by him. Hutzler v. application to change the charter of the Lord, supra. So, also, when shares are bank, or by indorsing checks which sold for future delivery, but before the are made out to him for dividends. He time for delivery the seller, in order to is estopped from denying that he knew save the stock from forfeiture, is cora- what he was signing. It is immaterial pelled to pay assessments duly levied whether a new certificate was issued to upon it, the seller may refuse to deliver him or not. Keyser v. Heitz, 133 TJ. S., until he is repaid the amount of such 138 (1890). assessments. Whitney v. Page (N. Y. 3 Lord v. Hutzler, 3 Atl. Rep., 891 Super. Ct.), Daily Register, March 31, 354 CH. XV transferrer's and transferee's liability. [§ 262. The transferrer in these cases may have recourse to the real and not the nominal transferee. 1 In case of several successive transfers, the transferrer who has paid an assessment or corporate debt may look to his immediate transferee, although there be another one in the series who will ultimately be charged. 2 Generally the trans- ferrer who has paid seeks his remedy by a suit in equity for in- demnity, and also to compel a registry of the transfer. 3 1885. A transferrer who seeks recourse to his transferee for calls paid by the former after the transfer does not prove the transfer by showing a registry of the same. He must prove some act of purchase or acceptance by the trans- feree. Tripp v. Appleman, 35 Fed. Rep., 19 (1888). 1 Castellan v. Hobson, L. R, 10 Eq. Cas., 47 (1870). But not to an interven- ing unregistered transferee. Shaw v. Fisher. 2 De G. & Sm., 11 (1848); S. C, 5 De G , M. & G., 596 (1855). See, also, §253, supra. An unrecorded transferee who has transferred the certificate to still another party is not liable to his transferrer for calls made after the transferee had transferred to the sec- ond transferee. Brinkly v. Hambleton, 8 Atl. Rep., 904 (Md., 1887). In Lessas- sier v. Kennedy, 36 La. Ann., 539 (1884), an unregistered vendee escaped liability of indemnity to his vendor, because the vendee sold to a person to whom the transfer direct from the first vendor was made on the corporate books, but with- out the knowledge of the vendor. The dissenting opinions in this case are to be commended. 2 Nickalls v. Eaton, 23 L. T. (N. S.), 689 (1871); Kellock v. Enthoven, supra. Or he may look to the final transferee, even though the call was made be- fore the latter purchased. Hawkins v. Maltby, L. R., 3 Ch., 188 (1867). See S. C, L. R., 6 Eq., 505 (1868). a Wynne v. Price, 3 De G. & Sm., 310 (1849); Cheale v. Kenward, 3 De G. & J., 27 (1858); Morris v. Cannan, 4 De G., F. & J., 581 (1862) ; Hawkins v. Maltby, L. R, 4 Chan., 200 (1868), holding, however, that the vendor cannot re- cover from the vendee interest which he has had to pay to a liquidator by way of penalty for not having paid calls promptly ; Butler v. Cumpston, L R, 7 Eq.. 16; Evans v. Wood, L. R., 5 Eq., 9 (1867); Paine v. Hutchinson, L. R, 23 Eq., 257 ; Cruse v. Paine, L. R, 6 id.. 641 ; S. C, 4 id., 441 (1868); Shaw r. Fisher, 2 De G. & Sm., 11 (1848); James v. May, L. R, 6 House of Lords, 328 ; Allen v. Graves, L. R., 5 Q. B., 479 (1870), holding that, where the pur- chaser did not offer as transferee the name of a person to whom no reason- able objection could be made, he had not fulfilled the contract of sale and was liable for the amount of a call sub- sequently made, and interest, as dam- ages ; Shaw v. Rowley, 16 Mees. & W., 810 (1847), sustaining an action for price of shares sold on which a previous call had not been paid, it being held that plaintiffs could recover because they could have paid the call and transferred the stock if defendants had furnished the name of the transferee when re- quested. In Ohio, under the act creat- ing statutory liability on the part of shareholders, transferees are liable, as between themselves and their vendors, for all indebtedness of the corporation, whether incurred before or after the transfer, "as if they had owned the stock from the organization of the com- pany." Wheeler v. Faurot, 37 Ohio St., 26 (1881); Brown v. Hitchcock, 36 id., 667 (1881), a case wherein the question of statutory liability is very fully and satisfactorily discussed. To same effect Cape's Case, 2 De G., M. & G, 562 (1852). That a transferrer may compel the transferee to register the transfer, 355 §§ 203-265.] transferrer's and transferee's liability, [ch. xv. §§ 263-2G5. A transfer to a "dummy" or to an insolvent to es- cape liability. 1 — In the United States a transfer of shares in a fail- ing concern, made by the transferrer with the intention and for the purpose of escaping liability as a shareholder to a person who for any cause is incapable of responding in respect of such liability, is void both as to creditors of the company and as to other share- holders ; and that, too, although as between the transferrer and transferee the transaction may have been absolute and no secret trust involved. 2 But, on the other hand, it has been held that if see § 384. The court will determine the liability as between the transferrer and transferee, in connection with the corporate creditors' suit, brought to en- force the stockholder's liability. Mason v. Alexander, 44 Ohio St, 318 (1886); Sayles v. Blane, 19 L J. (Q. B.), 19 (1849), holding that a transferrer who continues to be the owner on the reg- istry, and who has been compelled to pay calls made after the transfer, can- not recover the money so paid from the transferee upon the common count for money paid for his use. 1 The cases in this section refer to instances where a person transfers stock from his own name to that of a " dummy." An entirely different class of cases exists where the person really interested buys stock or subscribes for stock in the name of a "dummy," and the name of the real owner never ap- pears on the corporate books. The latter class of cases are treated of in § 253, supra. * Nathan v. Whitlock, 3 Edw. Chan. (N. Y.), 215 (1838); S. C, 9 Paige, 152 (1841) ; Rider v. Tritchey, 30 N. E. Rep., 692 (Ohio, 1892). Transferee held liable herein though transfer of certificate was made long previous, but registered only shortly before insolvency, and though all parties acted in good faith. Rich- mond v. Irons, 121 U. S., 27 (1887) ; Veil- ler v. Brown, 18 Hun, 571 (1879); Mc- Laren v. Franciscus, 43 Mo., 452 (1869); Miller v. Great Republic Ins. Co., 50 id., 55 (1872), holding, however, that if a sale and transfer be made honestly and with- out intent to defraud the creditors of the corporation, the fact that the pur- chaser is insolvent will not render the vendor liable. Provident Savings In- stitution v. Jackson Place Skating and Bathing Rink, 52 id., 557 (1873); Chou- teau Spring Co. v. Harris, 20 id., 382 ; Mandion v. Fireman's Ins. Co., 11 Rob. (La.), 177 (1845), where the transfer was a gift; In re Bachman, 12 Nat Bank. Reg., 223 (1875); Marcy v. Clark, 17 Mass., 330 (1821); Central Agricultural, etc.. Association v. Alabama Gold Life, etc., Co., 70 Ala., 120 (1881); Gaff v. Flesher, 33 Ohio St. 107 (1877); Douchy v. Brown, 24 Vt, 197 (1852); Aultman's Appeal, 98 Pa. St, 505 (1881). In the last case one who held stock as collateral security and surrendered it after the company's insolvency to the company, which issued a new certificate to the former owners, was held responsible to the creditors of the company. Everhart V. West Chester, etc., R R. Co., 28 id., 339 (1857); Rider v. Morrison, 54 Md., 429 (1880) ; Paine v. Stewart 33 Conn., 516 (1866) ; Bowden v. Santos, 1 Hughes (U. S.), 158 (1877) ; Wehrman v. Reakirt, 1 Cin. Super. Ct, 230 (1871); Bowden r. Johnson, 107 U. S., 251 (1882); Davis v. Stevens, 17 Blatch., 259 (1879). Cf. Allen v. Montgomery R R. Co., 11 Ala., 457 (1847) ; Billings v. Robinson, 28 Hun, 122 (1882); affd. 94 N. Y., 415 (1884). It is also held that the owner of stock cannot escape liability by transferring it to his infant children, or by taking it origi- nally in their name. Roman v. Fry, 5 J. J. Marsh., 634 (1831). It has been held, also, that no transfer made in anticipa- tion of a judgment against the corpora- 35S ch. xv.] transferer's and transferee's liability. [§ 2M. the transfer is bona Jide, and the transferrer is ignorant of the in- solvency of the transferee, and the company is not insolvent, the transfer is effectual, and the transferrer is released from liability. 1 The creditor's remedy to enforce the liability of a shareholder who has in this way fraudulently assigned or transferred his stock is in a court of chancery.- § 266. The rule in England. — The rule in England is that a shareholder may transfer his shares, when the company is in a fail- ing condition, to a man of straw for a nominal consideration, even although the sole purpose of such a transfer be to escape liability. If the transfer be out and out, and not merely colorable, and col- lusive with a secret trust attached, it is valid, and the transferrer is thereby released from liability, both as to corporate creditors and the other sharehold rs. 3 But if the transfer is merely color- tion, and for the purpose of escaping liability, is valid, and shareholders who make such a transfer will be held liable. McLaren v. Franciscus, 43 Mo., 452 (1869): Marcy v. Clark, 17 Mass., 330 (1821). 1 Miller v. Great Republic Ins. Co., 50 Mo., 55 (1872). See, also, Cole v. Ryan, 52 Barb., 168 (1868). Cf. Billings v. Rob- inson, 94 N. Y., 415 (1884) ; S. C, 28 Hun, 122 (1882). A stockholder who promises a corporate creditor, at a time when the company's affairs are involved, that he will not transfer, thereby inducing him not to sue to collect his debt, is liable to such creditor in case he does transfer. Paine V. Stewart, 33 Conn., 516 (1866). But a ti'ansfer will be held valid, it seems, when it is made pursuant to an antecedent option agreement, although the final transfer is really made in order to avoid liability. Holyoke Bank v. Burnham, 65 Mass., 183 (1853); Magru- der v. Colston, 44 Md., 349 (1875). Cf. Chapman v. Shepherd, L. R, 2 C. P., 228 (1867), under the English statute. -Johnson v. Southwestern Railroad Bank, 3 Strobh. Eq. (S. C), 263, 295 (1848). 3De Pass' Case, 4 De G. & J., 544 (1859) ; Weston's Case, L. R, 4 Chan., 20 (1868) ; Harrison's Case. L R, 6 Chan., 286 (1871); Master's Case, L. R, 7 Chan., 292(1872); Hakim's Case, L. R., 7 Chan.. 296, n. (1872); Bishop's Case, id. (1S72); William's Case, L. R, 1 Chan. Div., 576 (1875) ; King's Case, L. R, 6 Chan., 196 (1871); Chynoweth's Case, L. R, 15 Chan. Div.. 13(1880); Jessopp's Case, 2 De G. & J., 638(1858); In re Taurine Co., L, R., 25 Chan. Div., 118 (1883); Moore v. McLaren, 11 Up. Can., C. P., 534 (1862); Batties' Case, 39 L J., Chan., 391 (1870). Cf. Bunn's Case, 2 De G. F. & J., 275 (1860). Thus, in De Pass' Case, 4 De G. & J., 544 (1S59), the facts were that DePass, owning two hundred and fifty shares of stock in the Mexican & South American Company, for which he had paid £1,750, upon learning that the concern was involved, handed the certificate to his clerk, without having previously spoken to him of the matter, saying that he might have the stock for a sovereign, which the clerk instantly paid, and at the same time accepted the shares. In about three weeks this clerk sold the shares to another person in the employ of De Pass. Upon the winding up of the company, which was ordered within a few days after the sale by De Pass to his clerk, although it was shown that the shares at the time of that sale were worth considerably more than a sovereign, still, inasmuch as the trans- action appeared to have been absolute, although confessedly made to escape possible liability, it was held that the 357 § 266.] TRANSFERRERS AND TRANSFEREE'S LIABILITY. [CH. XV. able, and there exists a secret trust in favor of the transferrer, so that as between the parties there has been no hona fide transfer, but the object is to secure the shares to the transferrer in the event that the concern becomes prosperous, and to leave tliem to the transferee if there is a winding up, the transferrer's name will be put in the list of contributories, and the pretended transfer be wholly ignored. 1 The right to transfer shares in England seems to exist up to the time the company is ordered to be wound up and business is sus- pended. 2 But after that time the right is gone, and it is the duty of the management to refuse to allow a transfer. 3 Any collusion between the stockholders and the directors to evade the rules erov- erning transfers, for the purpose of evading liability, will invali- date the transfer. 4 Persons to whom shares have been transferred transfer might stand, and that De Pass was not liable in respect to the shares after the date of the sale to the clerk. But in Master's Case, L. R, 7 Chan., 202 (1872), a transfer of two hundred and eighty shares of stock, on which £15 per share had been paid, for a nomi- nal consideration to an irresponsible son-in-law of the transferrer, the trans- fer being made only for the purpose of escaping liability upon the shares, was held to discharge the transferrer. A transfer by a director in a failing corpo- ration to avoid liability is void. Re South London, etc., Co., 59 L. T. Rep., 210 (1888). i Budd's Case, 3 De G., F. & J., 297 (1861); Payne's Case, L, R. 9 Eq., 223 (1869); Kintrea's Case, 39 L. J., Chan., 193 (1869); S. C, L, R, 5 Cban., 95; Chinnock's Case, Johns. (Eng. Chan.), 714(1860); Costello's Case, 2 De G., F. & J., 302 (1860); Hyam's Case, 1 id., 75 (1859) ; Lund's Case, 27 Beav., 465 (1859) ; Ex parte Bennett, 18 id., 339 (1853); Daniell's Case, 22 id., 43(1856); Eyre's Case, 31 id., 177 (1862); Hunt's Case, 22 id., 55 (1856) ; Slater's Case, 35 id., 391 (1866); Bank of Michigan v. Gray, 1 Up. Can., Q. B., 422 (1834) ; Cox's Case. 33 L. J., Chan., 145 (1864); William's Case, L, R, 9 Eq., 225, n. (1869); Capper's Case, L. R, 3 Chan., 458 (1868) ; Mann's Case, id., 459, n. (1868) ; Mitchell's Case, L. R, 9 Eq.. 363 (1870) ; Ex parte Hat- ton, 31 L. J., Chan., 340 (1862) : Pugh & SI n-man's Case, L, R, 13 Eq., 566 (1872) ; Lankester's Case, L R, 6 Chan., 905, n. (1871); Gilbert's Case, L. R, 5 Chan., 559 (1879). Cf. Castellan v. Hobson, L, R, 10 Eq., 47 (1870) ; Maynard v. Eaton, L, R, 9 Chan., 414 (1874) ; Colquhoun v. Courtenay, 43 L. J., Chan., 338 (1874) ; Richardson's Case, L. R, 19 Eq„ 588 (1875). 2 De Pass' Case, supra, and the cases generally in the preceding notes. 3 Mitchell's Case, L. R, 4 App. Cas., 548 (1879) ; Weston's Case, L. R, 4 Chan.. 20, 30 (1868); Ex parte Parker, L R, 2 Chan., 685 (1867) ; Chappell's Case, L. R, 6 Chan., 902 (1871). In this country di- rectors have in general no power to re- fuse or prevent transfers, such as inheres in the boards of management in English companies. 4 Eyre's Case, 31 Beav., 177 (1862): Bennett's Case, 5 De G., M. & G, 284 (1854). Nor may a director make use of his position as director to transfer his stock, and thus escape chargeability upon it. Munt's Case, 22 Beav., 55 (1856). Nor will a stockholder be al- lowed to relieve himself when he learns of the probable insolvency of the con- cern by inducing the directors to post- pone their application for an order to wind up until he have time to transfer 358 CH. XV.] transferrer's and transferee's liability. [§ ^06. without their knowledge or assent are not estopped, when the knowledge is brought to them, from repudiating and denying the stockholdership. 1 The present tendency in England is to give greater security to corporate creditors; and it is probable that the English rule in regard to transfers to insolvent persons will gradu- ally be changed. his shares to a pauper or other irrespon- sible person. Ex parte Parker, L. R, 2 Chan., 685 (1867); Gilbert's Case, L. R, 5 Chan.. 559(1870); Allin's Case, 16 Eq., 449 (1873). And a director who transfers shares standing in his name to a person already holding all the shares any one person is allowed to hold will not thereby escape liability. Ex parte Brown, 19 Beav., 97 (1854). In general, moreover, a transferrer is not exempt from liability by reason of a transfer, unless the transferee has the present capacity to assume the liability. Nickalls v. Merry, L. R, 7 H. L., 530 (1875); Browne r. Black. L. R, 8 Chan., 939 (1873) ; Mann's Case. L. R, 3 Chan., 459, n. (1868). Cf. Johnson v. Lafiin, 5 Dill., 65, 81 (1878); Case of the Reci- procity Bank, 22 N. Y., 9 (1860). Ac- cordingly, a transfer to an infant for the purpose of escaping liability is fu- tile. Symon's Case, L. R, 5 Chan., 298 (1870); Weston's Case, id., 614 (1870) Curtis' Case, L. R, 6 Eq., 455 (1868) Castello's Case, L. R, 8 Eq., 504 (1869) "Walsh v. The Union Bank, 5 Quebec, L. R, 289(1879). i Birch's Case, 2 De G. & J., 10 (1857); Fox's Case, 3 De G, J. & S., 465 (1863); Higg's Case, 2 Hem. & M., 657 (1865) : Somerville's Case, L. R, Chan.. 266 (1870). Cf. Bullock v. Chapman, 2 De G. & Sra., 211 (1848). And see, also, case of the Reciprocity Bank, 22 N. Y., 9 (1860). A colorable transfer, as has ap- peared, will not operate to discharge the transferrer where shares were col- lusively assigned to a servant for the purpose of evading liability. Hence when the servant, upon the concern becoming solvent, attempted to claim the shares as though the transfer had been out and out, the court, having pre- viously decided against the bona fides of the transaction, held the owner en- titled to a declaration that the servant held the shares in trust for him. Col- quhoun v. Courtney, 43 L. J., Chan., 338 (1874). As to a transfer made in igno- rance of the fact that a winding up has been commenced, see Emmerson's Case, L. R, 1 Ch., 433 (1866). 359 CHAPTER XVI. ISSUE OF PREFERRED STOCK AND STOCK UPON WHICH INTEREST IS GUARANTIED. 267. What is preferred stock. 268. When may a corporation issue preferred stock? 269. 270. Rights of preferred stock- holders — Amount of prefer- ence — Voting — Subsequent leases, consolidations, etc. 271. Preferred stockholders are not creditors — Dividends can be only from profits — Mortgages securing preferred stock. 272. What are net profits applicable to preferred dividends — The pre- ferred stockholder's remedy to enforce a dividend. §273, •4 1 .). 276. 277. 278. 274. Arrears of preferred stock, to what extent payable subse- quently — Remedies to enforce payment of arrears. Rights of the assignee or trans- feree of preferred stock in ar- rears of dividends. " Special stock " in Massachusetts. Interest-bearing stocks. Rights of preferred shareholders on dissolution and on a reduc- tion of the capital stock. § 267. What is preferred stock. — By preferred stock is to be understood stock which entitles the holder to receive dividends from the earnings of the company before the common stock can receive a dividend from such earnings. 1 In other words, it is stock entitled to dividends from the income or earnings of the corpora- tion before any other dividend can be paid. 2 The relation of debtor and creditor does not exist between the preferred stockholders and the corporation, and the right to a preferred or guarantied dividend is not a debt until the dividend is declared. A dividend is money paid out of profits by a corporation to its shareholders. A pre- ferred dividend is nothing more than that which is paid to one class of shareholders in priority to that to be paid to another class. 11 1 Totten v. Tison, 54 Ga., 139 (1875). 2 Chaffee v. Rutland R R. Co., 55 Vt, 110 (1S82). 3 Belfast, etc.. R R Co. v. Belfast, 77 Me., 445 (1885); Taft v. Hartford, etc., R. R Co., 8 R L, 310, 333 (1866) ; Chaffee v. Rutland, etc., R. R. Co., 55 Vt., 110 (1882). A preferred dividend has also been defined as "substantially interest chargeable exclusively on profits.*' Henry v. Great Northern R'y Co., 1 De G. & J., 606, 637; Crawford v. North Eastern, etc., R. R Co., 3 Jur. (N. S.), 1093(1856). The preferred stockholder is one who may say, " Nobody shall have any portion of the profits of the com- pany until I have been paid my divi- dend." Henry v. Great Northern R'y Co., 4 Kay & J., 1, 32 (1857); aff'd, 1 De G. & J., 606. A preferred dividend is said to be " a pledge of the funds legally applicable to the purposes of a dividend." Taft v. Hartford, etc., R R Co., 8 R. L, 310, 335 (1866). "Payment of dividends to preferred stockhold- ers differs from such payment to the holders of common stock oul} r in that they are entitled to dividends in priority 360 CH. XVI.] PREFERRED STOCK. [§ 268. Guarantied stock is the same thing as preferred stock, 1 except of course where one corporation guaranties dividends on the stock of another corporation. 2 § 268. When may a corporation issue preferred stock? — Upon the incorporation of a company the incorporators and stockhold- ers may agree that a part of the stock shall be preferred stock. This is generally done by a by-law. It is undoubtedly legal, since there is no rule of public policy that forbids it, and moreover it amounts only to a contract of the stockholders as to how they shall divide the profits among themselves. 3 to any dividends upon the common stock." Miller v. Katterman, 24 N. E. Rep., 496 (Ohio, 1890). i Taf t v. Hartford, etc., R R Co., 8 R. I., 310, 333, 334, 335 (1866); Henry v. Great Northern R'y Co., 4 Kay & J., 1, 12, 21 (1857) ; affirmed, 1 De G. & J., 606 ; Lockhart v. Van Alstine, 31 Mich., 76 (1875). A guarantied dividend differs in nothing from a preferred dividend. Miller v. Ratterman, 24 N. E. Rep., 496 (Ohio, 1890). Cf. Boardmau v. Lake Shore, etc., R'y, 84 N. Y., 157, 174 (1881). holding that the word " guarantied " made the dividends cumulative. See §§ 273, 274. 2 See ch. XLVI, infra. 3 The case Re South, etc., Brewery Co., L. R., 31 Ch. D., 261 (1885). clearly holds that, although the charter and statutes are silent on the subject, yet that the by-laws may provide for the issue of preferred stock, and this provis- ion being in the original by-laws, a stockholder cannot enjoin a subsequent issue of the stock; approving Harrison v. Mexican R'y, L. R., 19 Eq. Cas., 358 (1875). Judge Cooley, in the case Lock- hart v. Van Alstine, 31 Mich., 76, 81, 85 (1875), said, in reference to the issues of preferred stock, even though the issues are not provided for by charter or stat- ute, '' there can be no reasonable objec- tion to them if they are entered into with full knowledge on the part of all concerned. . . . The guaranty prop- erly construed is not void, but unobjec- tionable." In the case Kent v. Quick- silver, etc., Co., 78 N. Y., 159, affirming 17 Hun, 169, the court said : " We know nothing in the constitution or the law that inhibits a corporation from begin- ning its corporate action by classifying the shares in its capital stock, with pe- culiar privileges to one share over an- other, and thus offering its stock to the public subscriptions thereto. No rights are got until a subscription is made. Each subscriber would know for what class of stock he put down his name, and what right he got when he thus be- came a stockholder, There need be no deception or mistake ; there would be no trenching upon rights previously ac- quired; no contract, express or implied, would be broken or impaired.*' The same question has recently arisen in the iTnited States courts, and the court there held that a stockholder, who is an officer of the company, who is active in having preferred stock issued, sub- scribes for it, takes his certificate there- for, votes upon it and induces others to take it, cannot after two years, when the corporation is insolvent, say that the statutes of the state authorize the issue of common stock only. Banigan v. Bard, 134 TJ. S., 291 (1890); S. G, 39 Fed. Rep., 13. The highest authority in Eng- land, Lindley on Companies, p. 396, says : " Shares conferring on their hold- ers preferential or additional rights not enjoyed by the holders of other shares are called preference shares. They can only be created when the authority to create them is given by statute or char- ter, or by agreement between all parties interested. If, however, authority to 361 § 268.] PEEFEEEED STOCK. [CH. XVI. But after the corporation has been organized, with common stock onty, and the stock issued in whole or in part, and business commenced and money invested in stock, it is then too late to make the unissued stock preferred stock, or to increase the capital stock and issue preferred stock, unless all the stockholders assent thereto. It would be a breach of contract to issue preferred stock then, in- asmuch as the existing stockholders invested their money on the basis of common stock only. Hence a dissenting stockholder may enjoin the corporation, the directors and the majority of stock- holders from issuing preferred stock in such a case. 1 issue them is given by, a company's pany had secretly agreed with certain memorandum of association, or by its articles of association as originally framed, preference shares may be is- sued." If all assent, the issue is legal. Re Bridgewater, etc., Co., 58 L. T. Rep., 476 (1888); affirmed, id.. 866. In the case Bates v. Androsco.uuin. etc., R R., 49 Me., 491 (1860), preferred stock was issued by unanimous consent, but with- out express statutory authority. Pre- ferred stock was issued without statu- tory authority in Gordon's Ex'rs v. Richmond, etc., R R., 78 Va., 501 (1884). In Sturge v. Eastern Union R'y, 7 De G., M. & G., 158 (1855), the court declined to pass upon the question whether, at common law, it was legal for a corpo- ration to issue preferred stock. In Eng- land a stock dividend of preferred stock may be enjoined by any stockholder, inasmuch as any stock dividend may be objected. In America the rule is differ- ent. See ch. XXXII, infra. A person who participates in an issue of preferred stock, and also subscribes for part of it. cannot repudiate it upon the insolvency of the company. Bard r. Banigan, 39 Fed. Rep., 13 (1889). "Where a person bought new preference stock of a rail- way company which both he and the directors bona fide believed they had power to issue, but which, in truth, they had not, it was held that he had no remedy against them, for there was nothing more than a common mistake of law. Eaglesfield t\ Marquis of Lon- donderry, 4 Ch. D., 693. It is no defense to a subscription for stock that the corn- subscribers to give them a preferred dividend. Such an agreement is void as regards another subscriber who did not assent thereto. Ryder v. Alton, etc., R. R, 13 111.. 501 (1851). 1 After a part of the stock has been issued, the majority stockholders and the directors cannot give a preference to the remaining stock where the mi- nority object. Hutton v. Scarborough, etc., Co., 4 De G., J. & S., 672 (1865); S. C, 2 Dr. & Sm., 521 ; Kent v. Quick- silver, etc., Co., 78 N. Y., 159 (1879). In the case of Moss v. Syers, 32 L. J., Ch., 711 (1863), the court at the instance of dissenting stockholders enjoined the is- sue of preferred stock which was not provided for by the charter or by the original agreement of the stockholders. A pledgee of a certificate of stock is not bound by a subsequent agreement of all the stockholders to surrender to the cor- poration a part of their stock, which part is then to be considered preferred stock and is to be sold by the corpora- tion for the purpose of paying corpo- rate debts. Although all the other stock has had this agreement stamped on the certificates, yet the corporation cannot insist that the purchaser of the stock so pledged shall allow the same agreement to be stamped on the new certificate issued to such purchaser. The court will order a transfer free from the agreement. Campbell v. American, etc., Co., 122 N. Y. 455 (1890). A preliminary injunction against the issue of preferred stock in order to raise capital for an old 362 CH. XVI.] PREFERRED STOCK. [§ 268. So also a common stockholder may object where preferred and common stock are already issued and an attempt is made to issue second preferred. 1 But the dissenting stockholder must move quickly in the mat- ter. If he delays in bringing his suit, so that the interested par- ties are justified in believing that he acquiesces in the issue, and the issue itself is made, his remedy is barred. His injunction suit will fail. 2 If, however, the statutes of the state authorize the issue, or if the by-laws contemplate a future issue of preferred stock, its issue will be legal, even though some of the stockholders object. 3 "Where the articles of incorporation specify the amount of pre- ferred and common stock, and also state that further stock may be issued, this increased stock must be common stock, and cannot be second preferred stock, even though the by-laws provide that it may be issued on such conditions as the corporation may deter- mine. 4 Preferred stock may be issued subsequently to the issue of the corporation was refused in Fielden v. Lancashire, etc., Ry., 2 De G. & Sm., 536 (1848), because only five stockholders dissented, but the court expressly re- fused to declare the issue a legal one. i Melhado v. Hamilton, 28 L. T. (N. S.), 578 (1873) ; S. C, 29 id.. 364. 2 A stockholder who is an officer of the company, who is active in having preferred stock issued, subscribes for it, pays for it, takes his certificate therefor, votes upon it and induces others to take it, cannot after two years, when the cor- poration is insolvent, say that the stat- utes of the state authorize the issue of common stock only. Banigan v. Bard, 134 U. S., 291 (1890), affirming 39 Fed. Rep., 13. The court has refused relief where there was a delay of four years, Kent v. Quicksilver Mining Co., 78 N. Y., 159 (1879); or ten years. Taylor v. South, etc., R. R Co., 4 Woods, 575 (1882); S. C, 13 Fed. Rep, 152. Delays in raising the question of the validity of an issue of preferred stock, advantages having accrued in the meantime to the corporation and the shareholders, have been held such acquiescence as will bar the right of a stockholder to object. Acceptance of the preferred stock and dividends thereon also bars the right to challenge the legality of the issue. Branch v. Jesup, 106 U. S., 468 (1882). Preferred stock may b} r unanimous con- sent be issued although the statutes are silent concerning it When issued after the first issue of stock has been made it may be prevented by a dissenting stock- holder ; yet delay on the part of the latter will bar his objection. Hazle- hurst v. Savannah, etc., R R, 43 Ga., 13 (1871). But see Moss v. Syres, 32 L. J., Ch., 711 (1863). 3 If the by-laws provide that any in- creased capital may be made in such manner and with rules, regulations, privileges and conditions as a meeting of the stockholders might determine, preferred stock may be issued on an in- crease of the capital stock. Harrison v. Mexican, etc., Ry, L. R, 19 Eq. Cas., 358 (1875). * Melhado v. Hamilton, 28 L. T. Rep.. 578; affirmed, 29 id, 364 (1873), the court saying : " If they could issue one share they could issue a thousand, and if at seven per cent they might issue them at seventy per cent, and thus, at a general meeting, the} - might pass resolu- tions which would have the effect of utterly annihilating the interests of the ordinary shareholders." 363 § 269.] PREFERRED STOCK. [CH. XVI. common and against the dissent of the minority stockholders, where the legislature amends the charter and provides for the issue of preferred stock. Such an amendment is considered inci- dental and is constitutional. 1 A subscriber to preferred stock may be liable on the subscrip- tion, although no preferred stock can be issued ; 2 and a person who loans money to be repaid in such stock may recover it back if the stock cannot be issued. 5 § 269. Bights of preferred stockholders — Amount of preference — Toting — Subsequent leases, consolidations, etc. — The rights, pow- ers and privileges of preferred stockholders depend largely on the terms upon which it is issued. Preferred stock takes a multi- plicity of forms according to the desire and ingenuity of the stock- holders and the necessities of the corporation itself. The percent- age of preferred dividend is always fixed at the time of the issue. It is a matter of contract. 4 The preferred dividends may be made 1 Everhart v. West Chester, etc., R. R. Co., 28 Pa. St, 339 (1857), holding that a charter amendment authorizing the is- sue was legal ; Rutland, etc., R, R. Co. v. Thrall, 35 Vt, 536, 545 (1863), to same effect, and holding that a common stockholder could not defeat his sub- scription on this ground; Williston v. Michigan, etc., R. R. Co.. 95 id., 400 (1866) ; Curry v. Scott, 54 Pa. St., 270 (1867) ; Cov- ington v. Bridge Co., 10 Bush (Ky.), 69 (1873), where the dissenting stockholder did not object until after the preferred stock had been issued and dividends laid upon it. In Covington, eta, Bridge Co. v. Sargent, 1 Cin. Super. Ct. 354 (1871), there is an intimation that such a statute is unconstitutional, and the court held that statutory power to issue a certain amount of preferred stock did not authorize an issue of partly pre- ferred and partly common. This de- cision may well be questioned. In Eng- land an act of parliament may authorize such an issue. Stevens v. South Devon R'y, 9 Hare, 313 (1851). And in one case the legality of the issue of pre- ferred stock under a statute was put upon the ground not of the right to borrow money, but upon the ground of a right to raise funds by sale of stock. Chaffee v. Rutland, etc., R. R. Co.. 55 Vt, 110 (1882). In the case of Eichbaum v. City of Chicago Grain Elevators. 65 L. T. Rep., 704 (1891), the court held that the company upon increasing its capi- tal stock might, by a majority vote of its stockholders, make such increased capital preferred stock, calling for a cer- tain dividend with no rights in surplus profits beyond that dividend, and might give to common stockholders the right to exchange their common stock for such preferred. 2 Where a person subscribes for pre- ferred stock, but no preferred stock is provided for, and he becomes a director and acts as such for several years, he is liable on such stock to corporate credit- ors, as though it were a subscription for common stock. Tama, etc., Co. v. Hop- kins, 44 N. W. Rep., 797 (Iowa, 1890). 3 Where a corporation borrows money and agrees to repay it in preferred stock, but has no power to issue the pre- ferred stock, the party paying the money may recover it back. Anthony v. Household, etc., Co., 18 Atl. Rep., 176 (R. I.. 1889). 4 The amount of preference, and whether cumulative or not, is all a mat- ter of contract Smith v. Cork, etc.. R'y, Ir. Rep., 3 Eq., 356 (1869). The amount of preference may be detei- 364 CH. XVI.] PREFERRED STOCK. [§ 269. cumulative or not cumulative. If nothing is specified in respect to this, then the law makes the preferred dividends cumulative. 1 It seems that unless the contract expressly provides otherwise, pre- ferred stockholders participate in the surplus profits remaining after the proper dividend has been declared on the preferred and an equal dividend on the common stock. 2 Where the preferred stockholders are entitled to participate in all dividends paid after their preferred dividend is paid, they are en- titled to participate in a dividend of scrip, similar to a stock dividend and representing accumulated profits which have been used for bet- terments. 3 The disposition of the surplus profits after the regular dividends have been paid is a matter of contract. 4 After the preference has been fixed the company cannot alter it by altering the amount of preference and providing for the re- demption of shares out of the surplus profits. 5 Preferred stockholders are entitled to vote at elections and to ex- ercise the various rights of stockholders the same as common stock- holders, unless this right is expressly withheld from them by the terms under which the stock is issued. 8 As already stated there are an infinite variety of provisions under which preferred stock may legally be issued. These provisions are to be found in the charter, the by-laws, the certificates of stock, the mined by the by-laws, and the provis- corporation a part of their stock, which ions of such a by-law constitute a con- part is to be then considered preferred tract. Belfast, etc., R. R. v. Belfast, 77 stock and is to be sold by the corpora- Me., 445 (1885). tion for the purpose of paying corporate 1 See §§ 273, 274, infra. debts. Although all the other stock 2 Id. has had this agreement stamped on the 3 Gordon's Ex'rs v. Richmond, etc., R certificates, yet the corporation cannot R, 78 Va,, 501 (1S84). insist that the purchaser of the stock so 4 Where the articles of incorporation pledged shall allow the same agreement specify that after certain dividends to be stamped on the new certificate have been paid on both the preferred issued to such purchaser. The court and common stock, one-fifth of the sur- will order a transfer free from the plus shall go to the preferred stock, the agreement. Campbell v. American, etc., company cannot devote such surplus to Co., 122 N. Y., 455 (1890). redeeming of shares. Ashbury v. Wat- 6 Miller v. Ratterdam, 24 N. E. Rep., son, L. R, 30 Ch. D., 376 (1885). 496 (Ohio, 1890), where the right to vote 5 Ashbury v. Watson, L. R, 30 Ch. D., was expressly withheld. In the caseMc- 376 (1885). If a stockholder, by accept- Intosh v. Flint, etc., R R, 34 Fed. Rep, ing the benefits, assents to a change in 350 (1S87), it appeared that the common the privileges which pertain to his stock, stockholders were by contract deprived he cannot afterwards object thereto, of their right to vote for a specified Compton v. Chelsea, 13 N. Y. Supp., 722 time. In the case lie Barrow, etc., Co., (1891). A pledgee of a certificate of 59 L. T. Rep., 50 (1888), the right to vote stock is not bound by an agreement of was withheld from preferred stock- all the stockholders to surrender to the holders. 365 § 270.] PREFERKKD STOCK. [ch. XVL resolutions of the stockholders and directors, the minutes of corpo- rate meetings, the reports of or to the company, and any contracts under which the stock was issued. The rights pertaining to the stock are matters of contract, and this contract is ascertained from the sources specified above. 1 Some of the various devices for rais- ing money by issuing various kinds of preferred stock are referred to in the notes below. 2 § 270. Where the corporation has power to lease its road, it may make a lease, although the rental is sufficient to pay a dividend on the preferred stock alone, leaving nothing for the common stock- holders. 3 1 Boardman v. Lake Shore, etc., R. R. Co., 84 N. Y., 157 (1881); Gordon n Richmond, etc.. R. R, Co., 78 Va.. 501, 510 (1884) ; Baily v. Hannibal, etc., R. R Co., 1 Dill., 174 (1871); S. C.,17 Wall., 96; St. John v. Erie R'y Co., 22 id., 136 (1874) ; Webb v. Earle, L. R, 20 Eq., 556 (1875) ; Matthews v. Great Northern, etc., R'y Co., 28 L. J., Chan., 375 (1859), constru- ing a statute affecting the rights of holders of "guarantied" and "deferred" stock ; Belfast, etc., R R. Co. V. Belfast, 77 Me.. 445 (1885); Stevens v. South, etc., R'y Co., 9 Hare, 313 (1851); Sturge v. Eastern, etc., R'y Co., 7 De G., M. & G., 158 (1855): Harrison v. Mexican, etc., R'y Co., L. R, 19 Eq. Cas., 358 (1875); Crawford v. Northeastern, etc., R'y Co., 3 Jur. (N. S.), 1093(1856); Henry v. Great Northern, etc., R'y Co., 1 De G. & J., 606, 642, 646 (1857) ; Matthews r. Same, 28 L J., Ch., 375 (1859). See, also, Coates v. Nottingham, etc., 30 Beav., 86. The agreement is ascertained from the con- tract, reports, resolutions, conveyances, etc. Rogers v. New York, etc, Land Co., 134 N. Y., 197 (1892). 2 Under the powers conferred by the statute, 30 and 31 Vict, ch. 127, various plans have been devised by English companies on the verge of insolvency to raise funds ; and a favorite device is the issue of preferred shares of stock. Thus, in one case, there were five kinds of preference shares. Corry v. London- derry, etc, R'y Co., 29 Beav., 263 (1860). See, also, by way of illustration as to these various methods in England of raising funds by the issue of preferred shares, Matthews v. Great Northern, etc., R'y Co., 28 L J., Chan., 375 (1859) ; Re Cambrion R'y Co., L. R, 3 Chan., 278 (1868); Re Potteries, etc., R'y Co., id., 67 (1867) ; Webb v. Earl, L R, 20 Eq.. 556 (1875) ; Stevens v. Midland, etc., R'y Co., L. R, 8 Chan.. 1064 (1873); Re Bristol, etc., R'y Co., L R, 6 Eq., 448 (1868); Re Devon, etc., R'y Co., id., 610 (1868) ; Munas r. Isle of Wight R'y Co., L R. 8 Eq., 665 (1869;; Re East & West, etc., R'y Co., id., 87 (1869); Lon- don, etc., Association v. Wrexham, etc, R'y Co., L R, 18 Eq, 566 (1874); Re Anglo-Danubian, etc., Co., L R, 20 Eq., 339 (1875) ; Midland R'y Co. v. Gor- don, 16 Mees. & W., 804 (1847). For a scheme where the stock was divided into half shares, one-half of which were deferred to the other half, see Re Brigh- ton, etc., R'y, 62 L. T. Rep., 353(1890). In Phillips v. Eastern R R, 138 Mass., 122 (1884), a scheme appears by which under a statute the creditors elected two-thirds and the stockholders one-third of the directors. 3 Middletown v. Boston, etc., R R, 53 Conn., 351 (1885). In the case Re Bue- nos Ayres. etc., Co., 66 L. T. Rep., 408 (1892), a sale of the company's enter- prise to the government upon terms which paid something to the preferred stockholders but left nothing for the common stockholders was sustained. 366 CH. XVI.] PREFERRED STOCK, [§ 270. But in a contract of lease the rent must be applied to income bonds before it is applied to dividends and preferred stock. 1 Where a corporation, having issued preferred stock, is merged into a new corporation by consolidation, the preferred shareholders of the old corporation may prosecute a suit for dividends against the new corporation if the consolidated company has assumed all the obligations of the old company. 2 A preferred stockholder is entitled to a certificate of stock which sets forth the fact of the preference. 3 Sometimes the right is given to exchange common for preferred stock or preferred for common, or bonds for stock. Concerning any such options, it is the settled rule that any time limited for the exercise thereof is of the essence of the offer. 4 Dividends on the preferred stock must be on all of that class, even though some of it has been exchanged for preferred stock bearing 1 a lower dividend. 5 iln Phillips v. Eastern R. R, 138 Mass., 122, 135 (1884), preferred stock had been offered, under a statute, in ex- change for indebtedness to be paid from income only. The company leased its property, and the lessee agreed to use the net profits to pay dividends on the preferred stock the same as the interest on such debts as had not been converted into preferred stock, and if the net profits were not sufficient, each was to get the same proportionately. The court held this to be illegal, inasmuch as it placed the preferred stockholders on the same basis as the income creditors. 2 Boardman v. Lake Shore, etc., R. R. Co., 84 N. Y., 157 (1881) ; Chase v. Van- derbilt, 62 '"d., 307 (1875). Cf. Prouty v. Lake Shore, etc., R R Co., 52 N. Y., 563 (1873). 3 Where by statute municipal aid bonds are to be paid for by preferred stock, the municipality may by man- damus compel the company to issue a certificate of stock setting forth the preference. State v. Cheraw, etc., R R„ 16 S. C, 524 (f881). 4 Where the corporation offers to ex- change preferred for common stock, upon the payment of an additional sum of money, a stockholder who de- lays for thirty years to avail himself of 36 the privilege cannot claim the right thereto. The fact that the corporation had taken in some of the common stock on a new basis of exchange is immate- rial. Holland v. Cheshire R'y, 24 N. E. Rep., 206 (Mass., 1890). An extension of the time when a bond is to be paid does not extend the time within which it may be exchanged for stock of the company. Muhlenberg v. Philadelphia, etc., R. R, 47 Pa. St., 16 (1864). Where an option was given to holders of the common stock to take a certain number of new preferred shares within a given time, it was held that a shareholder who lived abroad and had no notice of the option until the expiration of the specified time could not, upon learning of it afterwards, come in and demand the right to purchase the preferred shares. Pearson v. London, etc., R*y Co., 14 Sim., 541 (1845). Such, also, is the rule where there is an option within a fixed time to convert loan notes into common shares. Campbell v. London, etc., R'y Co., 5 Hare, 519 (1846). See, also, § 283. 5 Although the preferred stock is partly taken back by the company and new preferred stock of the same amount, bearing a less dividend, is issued in ex- change, yet this does not enab'e the § 271.] PREFERRED STOCK. [ch. xvr. Preferred stockholders are subject to a statutory liability the same as common stockholders. 1 § 271. Preferred stockholders are not creditors — Dividends can- oe only from profits — Mortgages securing preferred stoclc. — For- merly it was a matter of doubt and discussion whether or not a preferred stockholder had any rights as a creditor of the company or was confined to his rights as a stockholder. The law is now clearly settled that a preferred stockholder is not a corporate cred- itor. 2 " The preferred shareholder is but a shareholder with a right to have his dividend paid before dividends on the common stock are paid, and he is not entitled to any dividend until the corporation has funds which are properly applicable to the payment of divi- dends. A contract that dividends shall be paid on the preferred company to declare a dividend on the part not exchanged, and on that alone. It must declare on all. Coey v. Belfast, etc., R'y, Ir. Rep., 2 C. L., 112 (1866). If part of the preferred stockholders sur- render their stock for new common stock on a reorganization without fore- closure, such stock is canceled, and holders not so surrendering their stock are entitled to arrears of dividends out of the first net profits, without allowing such surrendered stock to participate therein. West Chester, etc., R R v. Jackson. 77 Pa. St., 321 (1875). In this case there was a special act providing for the issue of preferred stock, and after- wards another for the issue of consoli- dated stock. A dividend having been declared, a holder of the preferred stock, who had declined to accept the consoli- dated, was held "entitled to receive just what the company agreed to pay when the money was received." In the case Griffith v. Paget, L. R„ 6 Ch. D., 511 (1877); S. C, 25 W. R, 523, it was held that where the company is dissolved by a consolidation with another company, under a statute, the stockholders of the old being entitled to exchange their stock for stock in the new, the preferred stock is not entitled to preferred stock in the new. » Railroad Co. v. Smith. 31 N. E. Rep., 743 (Ohio, 1891}. 2 The House of Lords in England have clearly laid down the rule that preferred stockholders are not creditors. Birch v. Cropper, 61 L. T. Rep., 621 (1889) ; Bel- fast, etc., R R v. Belfast, 77 Me., 445 (1885). A very full, clear and learned discussion of the essential differences between a preferred stockholder and a creditor of a corporation is to be found in Miller v. Ratterman, 24 N. R Rep, 496 (Ohio, 1890), a case wherein the pre- ferred stockholder was secured by a mortgage and was deprived of the right to vote at corporate elections. Taft v. Hartford, etc., R R Co., 8 R I, 310 (1866) ; Chaffee v. Rutland, etc., R R Co., 55 Vt., 110 (1882), the court saying: " The claim is that he is also a creditor with all the rights pertaining to that re- lation. Against this claim are the terras of the charter, the presumption of law and the usual course of business." In this case certificates issued for "scrip dividends" or "guarantied preferred stock" were convertible into mortgage bonds. The company having refused to convert them it was held that general assumj)sit for the amount of the cer- tificates would lie, and that the suit could be brought in the name of the holder for value. St John v. Erie R'y Co., 10 Blatch., 271 (1874); S. C, 22 Wall., 137. 36S CH. XVI.] PREFERRED STOCK. [§ 271. stock whether any profits are made or not would be contrary to public policy and void. An agreement to pay dividends abso- lutely and at all events — from the profits when there are any, and from the capital when there are not — is an undertaking which is contrary to law, and is void. Public policy condemns with em- phasis any such undertaking on the part of a corporation as to its preferred or guarantied shares. Dividends on preferred stock are payable only out of the net earnings of the company. 1 The ques- 1 Taft v. Hartford, etc.. E. R Co., 8 R L, 310 (1866); Lockhart v. Van Al- styne, 31 Mich., 76 (1875); Chaffee v. Rutland, etc.. R. R. Co., 55 Vt. 110 (1882) ; Warren v. King, 108 U. S., 389 (1882> Under the statute in Connecticut it was held that dividends may be de- clared on preferred stock where the net earnings since the issue of the stock are sufficient, even though prior to such issue the capital stock had been im- paired. Cotting v. N. Y., etc., R. R, 54 Conn., 156 (1886). As supporting the rule in the text, see, also, Lockhart v. Van Alstyne, 31 Mich., 76 (1875); Craw- ford v. Northeastern, etc., R'y Co., 3 Jur. (N. S), 1093 (1856). In Mills v. Northern R'y Co., etc.. L. R., 5 Ch. App, 621 (1870), where a corporation, being in arrears in the payment of preferred stock dividends, and being at the same time largely indebted, proposed to ap- propriate a portion of its capital and to borrow further sums upon debentures for the purpose of paying such preferred dividends, it was held, in a suit by the creditors to prevent such action, that inasmuch as the appropriation of the 'capital was justified on the ground that an equivalent portion of the revenue had been used for capital purposes, and the proposed loan was within the com- pany's borrowing power, an injunction could not be granted. See, also, Elkins v. Camden, etc., R. R Co., 36 N. J. Eq., 233 (1882); Belfast, etc., R R Co. v. Belfast, 77 Me., 445 (1885X and the cases supra. In the case Guinness v. Land Corpo- ration, L. R, 22 Ch. D., 349 (1882), the court declared illegal a provision for the payment of preferred dividends out of the capital stock. Interest on debts, even those incurred after the preferred stock was issued, and rent on leases in- cluding those taken after such issue, must be paid before dividends are de- clared on the preferred stock. St. John v. Erie R'y, 22 Wall., 137, affirming 10 Blatch., 271 (1872), defining also the meaning of net profits. In the case Williston v. Michigan Southern, etc.. R R, 9? Mass., 400 (1866), the court held that preferred and guarantied stock in a Michigan and Indiana corporation was not entitled to dividends unless there were net profits. Preferred dividends may be paid out of the gross earnings where the statute evidently so intended. Gordon's Ex'rs v. Richmond, etc., R R., 78 Va., 501 (1884). See, also, Ragland v. Broadnax. 29 Gratt, 401 (1877), where the court upheld the charge of guaran- tied dividends on the gross receipts. That was the case of a debt converted into guarantied stock. The debt would have borne, if it had not been converted into stock, interest at the rate of six per cent per annum, whether there were net earnings or not. The court held that the guaranty of three per cent, dividend on the whole stock, which formerly belonged to the state, was simply the six per cent, interest upon the debt which was converted into stock ; and it also held that it was chargeable, in accordance with the plain provisions of the statute, upon the gross receipts. Guarantied dividends can be paid only from net profits. Miller v. Ratterman, 24 N. E. Rep., 496 (Ohio, 1890). (24) 369 § 271.] PKEFEEEED STOCK. [CH. XVI. tion of what constitutes net earnings has been treated else- where. 1 Occasionally, however, a mortgage is given by the corporation to secure the payment of dividends on preferred stock and to give it a preference in payment over subsequent debts of the corpora- tion upon insolvency or dissolution. It is difficult to see how such a mortgage would be legal except where it is issued under express statutorv authority. It is difficult to see how stockholders can contrive legally to obtain a preference over corporate creditors se- cured or unsecured, as they would do by such a mortgage. Certain it is that the courts will not readily give the stockholders a prefer- ence over creditors, even though the preferred stock is by its terms to be a first claim on the property.' 2 A mortgage to secure preferred stock and dividends thereon has been upheld in a few cases. 3 In other cases that which was called ■ See ch. XXXII. 2 Preferred stock which is " to be and remain a first claim upon the property of the corporation after its indebted- ness" has no lien ahead of present or future debts of the company. King v. Ohio & M. R'y, 2 Fed. Rep., 36 (1880). See, also, Warren v. King, 108 U. S., 389 (1882), the court holding that although the certificates of preferred stock pro- vided that it should "be and remain a first claim upon the property of the company after its indebtedness," etc., and although in foreclosure proceedings the preferred stockholders asked to have their stock declared a lien prior to a subsequent mortgage, yet the court re- fused the application, declaring that they had priority over the common stock only. It has been held, however, that where preferred stock is issued, re- citing that it is a lien on all the prop- erty of the corporation after the first mortgage, the lien will be upheld by the court as against subsequent mortgages and general creditors, although such lien was not secured by any mortgage. The trustees in the subsequent deed of trust knew of and acquiesced in the pri- ority of the preferred-stock lien, and the deed itself recognized it. This bound the bondholders. Skiddy v. Atlantic, etc., R. R, 3 Hughes, 320, 355 (1878). Cf. Westchester, etc., v. Jackson, 77 Pa. St., 321 (1875). In this case the preferred stock to be redeemed by payment of the par value and a sum which, with divi- dends and interest already paid, should amount to eight per cent, per annum from the time of its purchase from the company, was declared to be a contract which entitled its holder to his divi- dends before dividends were paid ou the common stock. 3 Although the power of a railroad to borrow be limited, yet preferred stock may be issued secured by a mortgage, where the power to mortgage has been given, and such preferred stock may be deprived of the power to vote. Miller v. Katterdam. 24 N. E. Rep.. 496 (Ohio, 1 S90). A deed of trust given by a cor- poration upon its lands to secure the performance of an undertaking of the • company to pay dividends on preferred stock which was about to be issued, and also ultimately to pay for the stock itself, is a mortgage. Where the corporation's equity of redemption has been sold the receiver of the corporation takes noth- ing. Fitch v. Wetherbee, 110 111.. 475 (1884). In the case Davis v. Proprietors, etc., 49 Mass.. 321 (1844), the stock was by law entitled to redemption when the holder moved from the town. The court upheld and enforced the contract 70 CH. XVI.] PREFERRED STOCK. [§ 272. preferred stock was nothing more than income bonds with a voting power. 1 A preferred stockholder is in no better position to enjoin the corporation from giving a mortgage than a common stockholder. 2 Where bonds are deposited as collateral security for preferred stock, it has been held that the corporation may call in, redeem and cancel the stock in exchange for the bonds; 3 but this would seem to be an illegal reduction of the capital stock. § 272. What are net profits applicable to preferred dividends - The preferred stockholder 's remedy to enforce a dividend. — It is largely a matter of discretion with a board of directors as to whether they will use the net profits for a dividend or will use them in the business of the company. There is a limit to this dis- cretion, and the courts will not allow the directors to use their power oppressively by refusing to declare a dividend where the net profits and the character and condition of the business clearly war- rant it. This is the rule where all of the stock is common stock. 4 Such also is the rule is regard to dividends on preferred stock. The preferred stockholder is not entitled as a matter of right to In the case Gordon's Ex'rs v. Richmond, denominated a 'preferred stockholder,' etc., R. R., 78 Va., 501 (1884), a mortgage is a mortgage creditor nevertheless ; and had been given to secure the payment interest is not changed into a ' dividend ' of the par value and dividends of pre- by calling it a dividend." It was a self- ferred stock. The case involved a dis- evident misnomer in the act. So also tribution of profits and not a foreclos- under a statute. See Pittsburgh, etc., v. ure of the mortgage, but the court said County of Allegheny, 63 Pa. St., 126 that the mortgage was legal. (1875 1 . Compare S. C, 79 id., 210. In > Burt v. Rattle, 31 Ohio St., 116 (1876), the case Miller v. Ratterdam, 24 N. E. turned upon a general " Act to author- Rep., 496 (Ohio, 1890), the court held ize manufacturing corporations to issue that the fact that a mortgage had been preferred stock." Where such stock given to secure the payment of pre- was issued certifying that the corpora- ferred dividends does not prevent such tion guarantied the holders certain div- stock from being considered stock in- idends not exceeding legal rates, and stead of a debt. the final payment of the certificates at a 2 Preferred stockholders cannot pre- specified lime, it being provided that vent the corporation giving a consoli- such preferred stock might be converted dated mortgage to secure past and into common stock, and the corpora- future debts. " Holders of preferred tion issued its bond and mortgage to a stock have no special control over the trustee to secure such certificates, it was corporation or its management. . . . held that holders of the so-called pre- The corporation is in no sense the ferred slock did not become stockhold- trustee for the holders of preferred stock. ers and members, but creditors of the Its duty is to each other alike according corporation, so that, on the winding up to the conditions attached to the stock of the company's affairs, they had a of each." Thompson v. Erie R'y, 1 1 lien upon the mortgage property supe- Abb. Pr., TJ. S., 188 (Supr. Ct., 1871). rior to that of general creditors and as- 3 Totten v. Tison, 54 Ga., 139 (1875). signees. "A mortgage creditor, although i See ch. XXXII, infra. 371 § 272.] PREFERRED STOCK. [CH\ XVI. his dividend, even though there are net profits which might be used for that purpose. If the directors are reasonable in the exer- cise of their discretion, and use the profits to improve the road, it is held by the supreme court of the United States that the discre- tion of the directors will not be interfered with. 1 This rule will work no injustice where the corporation is liable for arrears of preferred dividends. But if such arrears are not collectible under the terms upon which the stock is issued, then the rule laid down by the supreme court will result in numerous frauds by the corpo- ration on the preferred stockholder, since no dividend would be given to the preferred stockholder unless the net profits were sufficient for a dividend on the common stock also. For instance, where there are enough profits for two annual dividends on the preferred stock and no more, it will be a temptation to the common stock- holders to declare no dividend at all the first year, and to declare a dividend on both the common and preferred stock the second year. 2 The question of what constitutes "net profits" is discussed else- where. 3 This question has arisen a few times in connection with preferred stock, and the courts are inclined to scan closely a refusal to declare dividends where there are net profits and where the pre- ferred stock is non-cumulative. 4 In an action to compel the decla- i New York, etc.. R. R. Co. v. Nickalls, 119 U. S., 296 (1886), reversing 15 Fed. Rep., 575. 2 For an instance, see Mcintosh v. Flint, etc., R. R, 34 Fed. Rep., 350 (1887) ; S. C, 32 id., 350. For a valuable note by Judge Seymour on Dividends, see 22 Cent. L. J., 452. 3 Seech. XXXII. 4 Non-cumulative preferred stock is entitled to a dividend where all the prop- erty is leased for $36,000 a year ; tbere is no floating debt : the property cost over $1,000,000; the bonded debt of $150,000. coming due in three j r ears, may be ex- tended and all annual outlays are but $9,000. Tbe court will order the pay- ment of a dividend. Hazeltine v. Bel- fast, etc., R. R., 79 Me., 411 (1887). Di- rectors are not allowed to use their power illegally, wantonly or oppressively in refusing to declare dividends; but wbere the company owes $88,000 float- ing debt ; $150,000 debt due in five years, and $1,000,000 due in thirty-five years, 37 at which time its profits would probably be nothing, the court will not order a dividend even on the preferred stock, although the company has $37,000 on band and an annual income of $36,000 from the lessee of its road. Belfast, etc., R. R. v. Belfast, 77 Me., 445 (1885). Profits available for a dividend are such as are left after all debts for rolling stock, rails, station-houses, etc., are paid, but not tbe money raised under the borrowing pow- ers. Corry v. Londonderry, etc., R'y, 29 Beav., 263 (1860). In the case Stevens v. South Devon R'y, 9 Hare, 313 (1851), the court refused to enjoin the payment of dividends on preferred stock, even though the floating and unsecured debt had not been paid or provided for. Where, by a re-organization plan, com- mon stockholders are allowed to vote, etc., only after certain dividends are de- clared on preferred stock, the court will determine whether such dividends should have been declared. Mcintosh v. Flint, etc., R. R., 34 Fed. Rep., 350 en. xvi.] PREFERRED STOCK. [§ 273. ration of a preferred dividend the common stockholders are proper but not necessary parties. 1 A stock dividend is legal in America but cannot be forced upon stockholders in England. 2 A bond dividend is legal, and even if it results in impairing the capital stock the court will not interfere if no harm can come from it. 3 § 273. Arrears of preferred stock, to what extent payable subse- quently — Remedies to enforce payment of arrears. — When pre- ferred stock is issued it is generally specified whether it is "cumu- lative" or "non-cumulative." In the former case all arrears of dividends must be paid on the preferred stock before any dividend is paid on the common. In the latter case the contrary is the rule. Suoh are the rules where the question is expressly settled by the terms under which the stock was issued. (1887). See, also, Smith v. Cork, etc., R'y Co., Ir. Rep., 3 Eq., 356 (1869). Hence, in Dent V. London Tramways Company, L. R, 16 Chan. Div., 344 (1880), it was held that the owners of preference shares, the dividend on which was "de- pendent upon the profits of the particu- lar year only," were,entitled to a divi- dend out of the profits of any year after setting aside a proportionate amount sufficient for the maintenance and repair of the tramway for that year only ; and that they were not to be deprived of that dividend in order to make good the sums which in previous years should have been set aside by the company for main- tenance, but which had been improperly applied by them in paying dividends. But preferred shareholders are not en- titled to a redemption of their stock in accordance with a statute if it would work an injustice to creditors and the other stockholders by taking all the money from the treasury and thereby crippling or wrecking the enterprise. Culver v. Reno, etc., Co., 91 Pa. St., 367 (1879). i Thompson v. Erie R. Co., 45 N. Y., 468 (1871). See, also, Chase v. Vander- bilt, 62 id., 307 (1875), holding that the corporate officers are not necessary par- ties. 2 See ch. XXXII, infra. In Hamell v. Chicago, etc., R. R., 51 Barb., 378 (1868), where the rights of the preferred and common stockholders were clearly de- fined by the contract, a stock dividend of preferred stock was made to the pre- ferred stockholders and of common stock to the common stockholders. In figuring the amount of dividend thus declared the court estimated the stock dividends at their market values. In the case Wood v. Lary, 124 N. Y„ 83 (1890), the court sustained the court below in refusing to caucel a mortgage and bonds, the bonds having been issued as a bond dividend to preferred stock- holders. S. C, 47 Hun, 550. 3 Where the company pays dividends on preferred stock by issuing certificates entitling the holder to bonds in ex- change therefor, the company cannot afterwards refuse to deliver the bonds on the ground that the dividend was illegal or that such an issue of bonds was ultra vires, many bonds having al- ready been so issued. Chaffee v. Rut- land R R, 55 Vt, 110 (1882). Although a dividend may be illegal, yet " equity even would not interfere with a divi- dend unless it appeared that somebody in particular was hurt or liable to be injured. It would not interfere after all dauger had passed, and for the sake of vindicating general principles." Id. 373 § 273.] PREFERRED STOCK. [ch. XVI. If preferred stock is issued without any mention of whether or not the dividends are cumulative, then the law makes them cumu- lative. As soon as there are net profits available for dividends, the corporation must pay the preferred dividends and all arrears thereon before a dividend is declared on the common stock. This is the well-settled rule at common law in this country 1 and in Eng- land. 2 'Boardman v. Lake Shore, etc., R R. Co., 84 N. Y., 157.(1881); Prouty v. Michigan, etc., R R. Co., 1 Hun, 655 (1873); Elkins v. Camden, etc., R R. Co., 36 N. J. Eq.. 233 (1882): Taft v. Hartford, etc.. R. R., 8 R I, 310 (1866); West Chester, etc., R R v. Jackson, 77 Pa. St, 321 (1875): Lockhart v. Van Alstine, 31 Mich., 76 (1875), per Cooley, J. ; Bates v. Androscoggin, etc.. R R, 49 Me., 491 (1860). There are cases, however, to the contrary, under peculiar provisions gov- erning the dividends. When the pre- ferred dividends are "dependent upon the profits of the particular year only," they are not cumulative. Dent v. Lon- don, etc., Co., L R., 16 Ch. D., 344 (1880). Preferred stock under a provision that "should a surplus then remain of net earnings, after both of said dividends, in any one year, the same shall be di- vided pro rata on all the stock," is non- cumulative. Hazeltine v. Belfast, etc., R R, 79 Me., 411 (1887). See, also, dic- tum in Cotting v. N. Y., etc., R R, 54 Conn., 156 (1886). Speaking of preferred stock the court slid in Belfast, etc., R R v. Belfast. 77 Me.. 445 (1885). in a dictum and under a by-law in that case : '• It was not in- tended in the present instance to guar- antee a dividend. If a dividend is pre- vented in any one year by a deficit of earnings, it cannot be made up from the earnings of succeeding years." The preferred stock may be made non-cu- mulative. Bailey v. Hannibal, etc.. R. R., 1 Dill., 174 (1871); S. C, 17 Wall., 96. Where there is a statutory provision that dividends on the preferred stock shall not exceed a certain rate per cent- then there is no carrying over of ar- rears. Elkins v. Camden, etc., R R Co., 36 N. J. Eq., 233 (1882). -Henry v. Great Northern, etc., R'y Co., 1 De G. & J., 606 (1857), afTg 4 K. & J., 1 ; Crawford v. Northeastern R'y Co., 3 Jur. (N. S.), 1093 ; Sturge v. East- ern, etc., R'y Co., 7 De G., M. & G., 158 (1855); Stevens y. South, etc., R'y Co., 9 Hare, 313 (1851); Matthews v. Great Northern, etc., R'y Co.. 28 L J., Chan., 375(1859); Corry *. Londonderry, etc., R'y Co., 29 Beav., 263 (1860); Webb v. Earle, L R, 20 Eq., 556 (1875) ; Coates v. Nottingham, etc., R'y Co., 30 Beav., 86(1861); Smith v. Cork, etc., R'y Co., Ir. L. R, 3 Eq., 356 (1869) ; S. C, 5 id., 65. The Companies Clauses Act of 1863, 26 and 27 Vict. ch. 16, § 14, pro- vides that preference shares or stock shall be entitled to the preference divi- dend or interest assigned thereto out of the profits of each year in priority to the ordinary shares and stock of the company, but that if in any year there are -cot profits available for the pay- ments of the full amount or the prefer- ential dividend or interest for that year, no part of the deficiency shall be made good out of the profits of any subse- quent year, or out of any other funds of the company. In Henry v. Great Northern R'y Co., siqjra, in which the matter of arrears in preferred divi- dends was elaborately considered, it was stated that the reason why such arrears ought to be held payable out of subsequent profits is that other- wise there would be a temptation to the corporation to set aside profits for improvements when the profits were too small for a dividend on both the common and the preferred shares, and 374 CH. XVI.] PREFERRED STOCK. [§ 274. The right of the preferred stockholder to arrears of dividends is not deemed waived by delay, nor in any way except upon clear proof of intent to waive. 1 The dividends on the common stock may be made cumulative also before the preferred stock shares in the surplus profits remaining after preferred dividends are paid. 2 § 274. The remedy of a preferred stockholder when the com- pany proposes to pay dividends on the common stock before pay- ing the arrears of dividends on preferred stock is in a court of equity. 3 But an action at law will lie if dividends have already been not to set aside enough for improve- ments when the company made a divi- dend for both. Where each share in a company was converted into two half shares, one preferred, the other com- mon or deferred, and the holders of the preferred half shares had, in a former year, acquiesced in the declaration of a dividend on the deferred half shares, while there was an arrearage of divi- dends on the preferred half shares, it was held that, although they had pre- cluded themselves from making any claim to those specific arrears, they had not waived their light to claim subse- quent arrears. Matthews v. Great Northern, etc., R'y Co., 28 L. J., Chan., 375 (1859). 1 Boardman v. Lake Shore, etc. R. R., supra. In Smith v. Cork, etc., R'y. Ir. Rep., 3 Eq., 35G (1869), the court held under the facts of that case that the preferred stockholders had not waived their right to arrears, although they had forborne and had taken part in inducing new capital to come in. 2 When the preferred stock is entitled to participate in the surplus after the dividends are paid on the preferred, and "a dividend of the same amount upon the whole amount of paid-up capital" has been paid, arrears of dividends on the common stock as well as on the pre- ferred must be paid before there is any surplus. Allen v. Londonderry, etc., R'y Co.. 25 Week. Rep.. 524 (1877). 3 A suit in equity to restrain the cor- poration from declaring dividends on the common stock and to compel an ac- counting and the payment of dividends on the preferred stock is the proper remedy. Boardman v. Lake Shore, etc.. R. R, 84 N. Y.. 157 (1881); Williston v. Michigan, etc., R. R. Co., 95 Mass., 400 (1866). In this case the decision was that, when a preferred stockholder is entitled to share pro rata with holders of common stock in dividends over and above the preference, his remedy is not by an action at law against the corpora- tion, but by suit in equity ; and that there is no remedy against a foreign corporation in such case. In an action by a preferred stockholder in behalf of himself and others to enjoin the pay- ment of dividends to common stock- holders before the arrears of preferred dividends are paid, he need not join all the common stockholders as par- ties defendant. Smith v. Cork, etc., R'y, Ir. Rep., 3 Eq., 356 (1869); Prouty u. Michigan, etc., R. R. Co., 1 Hun, 655 (1874), where an injunction was granted to restrain the declaring of dividends or making other disposition of the funds of the corporation until arrears on pre- ferred stock should be paid ; Thompson v. Erie, etc., R. R. Co., 45 N. Y., 468, in- volving an action to "enforce the dec- laration and payment of a dividend;" Barnard V. Vermont, etc., 89 Mass., 572 (1863). holding that where certificates for an intended dividend had been is- sued payable at a future time when the company should be able to pay them, the final decision as to when the corn- pan}' is able to pay does not rest with the directors but with the court Where the common stockholders in a re-organ- ized company claim that the preferred 75 §§ 275, 276.1 PREFERRED STOCK. [CH. XVT. declared and paid to the common stockholders in violation of the rights of the preferred stockholders. 1 When the arrears and dividends of preferred stock are recover- able, the interest on such arrears mav be recovered from the time when moneys sufficient to pay the arrears were unlawfully used to pay dividends on the common stock instead of being used to pay the arrears on the preferred stock. 2 § 275. Bights of the assignee or transferee of preferred stock in arrears of dividends. — The transferee or assignee of preferred stock stands, in respect to arrears of dividends, in the shoes of his assignor or transferrer. The undeclared arrears of dividends pass to him in the transfer of the stock, unless by the terms of the trans- fer the arrears are expressly separated from the stock itself and reserved to the transferrer. 3 An assignment of preferred stock carries with it all arrears of dividends, and a subsequent assign- ment of arrears by the transferrer conveys nothing. 4 §276. u Special stock" in Massachusetts. — In Massachusetts in- corporated companies are permitted by statute 5 to issue a pecul- iar kind of stock, known as "special stock." It is something essentially different from preferred stock." Its essential character- istics are that it is limited in amount to two-fifths of the actual capital ; it is subject to redemption by the corporation at par after a fixed time, to be expressed in the certificate; the corporation is stockholders are defrauding them, a C. L., 112 (1866). holding that an action preliminary injunction will not be at law will lie against a railway corn- ordered unless imminent danger is pany for not giving to the plaintiff pre- ahown. Mcintosh v. Fliut, etc., R R ferred stockholder the same dividend Co., 32 Fed. Rep., 350 (1887). The plaint- that it has given to others, iff by offering in evidence his certificate 2 Boardman v. Lake Shore, etc., R R. of stock and showing that no dividends Co., 84 N. Y, 157 (1881) ; Prouty v. Mich, have been paid, makes out a prima S., etc., R. R., 1 Hun, 655 (1874). See facie case entitling him to dividends Adams v. Fort, etc., Bank, 36 N. Y., 255 and arrears. Boardman v. Lake Shore, (1867). Contra, Corry v. Londonderry, etc., E. R, 84 N. Y, 157 (1881). etc., R'y Co., 29 Beav., 263 (1860). Of. 1 If dividends are declared and paid ch. XXXII, infra. on the common stock, before paying the 3 Jermain v. Lake Shore, etc., R R arrears of dividends on the preferred Co., 91 N. Y., 483 (1883) ; Boardman v. stock, the holders of the latter may col- Same, 84 id., 157 (1881); Hyatt v. Allen, lect such arrears by au action at law in 56 id., 553 (1874); Manning v. Quicksil- assumpsit. West Chester, etc., R R v. ver, etc.. Co., 24 Hun, 361 (1881). Jackson, 77 Pa. St., 321 (1875). In the 4 Manning v. Quicksilver Mining Co.. case Bates v. Androscoggin, etc., R. R., 24 Hun, 361 (1881). 49 Me.. 491 (1860). an action of debt for •"' Stats. 1855, ch. 290 ; 1870, ch. 224. past due dividends was sustained, al- §§ 25. 39, cl. 4; Pub. Stats., ch. 106, though such dividends had not been §§ 42, 61. cl. 3. declared, they having been earned. 6 American Tube Works v. Boston, Coey v. Belfast, etc., R'y Co., Ir. Rep., 2 etc., Co., 139 Mass., R (1885). R78 CH. XVI. J PREFKRRED STOCK. [§ 277. bound to pay a fixed half-yearly sum, or dividend, upon it as a debt; the holders of it are in no event liable for the debts of the corporation beyond their stock, and the issue of this special stock makes all the general stockholders liable for all debts and contracts of the corporation until the special stock is fully redeemed 1 Spe- cial stock can be issued only by a vote of three-fourths of the gen- eral stockholders of the compan} 7 at a meeting duly called for that purpose. 2 The guaranty of dividends of special stock in Massa- chusetts is an absolute one, and not in any degree conditional upon the earning of sufficient profits by the corporation. 3 §277. Interest-bearing stoclcs. — Occasionally, instead of issuing preferred stock, a corporation issues ordinary common stock, to- gether with a promise that the corporation will pay interest thereon. Such a promise is generally lawful, and may be enforced as a con- tract in the nature of an agreement to pay a dividend. 4 It is a lawful contract, however, only when it is to be interpreted as re- quiring payment from profits alone. 5 An} 7 contract on the part of a corporation to pay interest or dividends to its shareholders, with- 1 The statutes cited supra; American Tube Works v. Boston, etc., Co., 139 Mass.. 5 (1885). 2 Stats. 1870, ch. 224, § 25. And the corporation must have a clerk, who is sworn, and who acts as recorder at such meeting. Stats. 1870, ch. 224, §§ 15, 18; Pub. Stats., ch. 106, §§ 23, 26. See. also, Reed v. Boston Machine Co., 141 Mass., 454 (1886). This special stock is declared to be " a peculiar kind of stock, distinctly provided for by statute ; " and it is im- portant that the marked distinction be- tween preferred stock, as usually under- stood, and special stock, as authorized by the statutes cited in the notes, be kept plainly in view. American Tube Works v. Boston, etc., Co., 139 Mass., 5 (18S5). It was held, in accordance with this view, in the case last cited, that a vote of a corporation to issue special stock, at a meeting called to consider whether the corporation will issue preferred stock, is invalid ; that a vote to issue special stock is invalid if the record of the meeting fails to show that three-fourths of the general shareholders voted for such issue ; that the court will not pre- sume, because the record showed that more than three-fourths of the share- holders were present at the meeting, that therefore three-fourths or more voted for the issue of special stock ; and that a holder of special stock which is illegally issued cannot, by estoppel or otherwise, become a member of the corporation in respect of such shares. s Williams v. Parker, 136 Mass., 204 (1884). See, also, Allen v. Herrick, 81 id., 274 (1860). 4 Barnard v. Vermont, etc., R R Co., 89 Mass., 512 (1863). 5 Richardson v. Vermont, etc., R R Co., 44 Vt, 613 (1872); Miller v. Pitts- burgh, etc., R R Co., 40 Pa. St., 237 (1861); Cunningham v. Same, 78 Mass., 411 (1859); City of Ohio v. Cleveland, etc., R R Co.. 6 Ohio St., 489 (1856) ; Wright v. Vermont, etc., R R. Co., 66 Mass., 68 (1853) ; Waterman v. Troy, etc., R R Co., 74 id., 433 (1837); Barnard v. Vermont, etc., R R Co., 89 id., 512 (1863). In the case of Ohio College, etc., v. Rosenthal, 12 N. E. Rep., 665 (Ohio, 1887), where certificates of stock bearing interest were issued by a corpo- ration which merely owned real estate, which was not organized for profit, never made any profit, never expected 377 § 278.] PREFERRED STOCK. [~CH. XVI. out reference to the ability of the company to pay them out of its earnings, is wholly illegal and void.' Moreover, the directors or corporate officers paying interest on stock out of the capital stock are jointly and severally liable to refund the amounts so paid out. 2 A railway company may lawfully receive subscriptions to its cap- ital stock upon the condition to pay interest thereon as soon as the amount of the subscription shall have been paid in, and until the completion of the road, or of some part thereof, or until the road shall have been put in operation. 3 It has been held that stipulated interest on stock cannot become a debt payable absolutely. 4 The right of a subscriber drawing interest on his stock to participate in elections and general corporate meetings, and to exercise gener- ally the rights of a shareholder, is the same as that of other stock- holders. 5 § 278. Sights of preferred 'shareholders on dissolution and on a reduction of the capital stoclc. — Upon the dissolution of a corpora- tion, and the distribution of its assets among the shareholders after the pa} T ment of the corporate indebtedness, it is the settled rule of law that, in the absence of any provision in the statutes, by-laws to, and had existed forty years, a suit by a stockholder to collect interest failed. 1 Painesville, etc., R. R Co. v. King, 17 Ohio St., 534 (1867); Pittsburgh, etc., R R. Co. v. County of Allegheny, 79 Pa. St., 210 (1875); id., 63 Pa. St., 126 (1869); Lockhart v. Van Alstyne, 31 Mich., 76 (1875); Troy, etc., R. R. Co. v. Tibbits, 18 Barb., 297 (1854); Salisbury v. Metro- politan, etc., R'y Co., 38 L. J. (N. S.), Ch., 249 (1869); In re National, etc., Co., L. R., 10 Ch. Div., 118 (1878). Cf. Bard- well v. Sheffield, etc., Co., L. R, 14 Eq. Cas., 517 (1872). In the case City of Ohio v. Cleveland, etc., R R., 6 Ohio St., 489 (1856), interest payable by stock dividends was allowed by statute. A subscriber to stock which by its terms is to draw interest cannot defeat the subscription on the ground that the pro- vision as to interest is illegal. Evans- ville, etc., R R. v. Evansville, 15 Ind., 395 (1860). In the case McLaughlin v. Detroit, etc., R R, 8 Mich., 100 (1860), a railroad company issued stock bearing interest. Tiie court sustained it. The stock called for interest instead of divi- dends. Bonds were tendered to the 3" stockholder in payment of such " in- terest." He declined the tender and sued for the interest money. The court sustained his suit. No question was raised as to paying such "interest" irrespective of profits. 2 Re National, etc., Co., 10 L. R., Chan. Div., 118(1878). 8 Milwaukee, etc., R R Co. v. Field, 12 Wis , 340 (1860) ; Racine County Bank v. Ayers, 12 id., 512 (1860); Miller v. Pittsburgh, etc., R R Co., 40 Pa. St., 237 (1861) ; Waterman v. Troy, etc., R R Co., 74 Mass., 433 (1857). The only effect of an agreement by the corporation to pay such interest is to enable those stockholders with whom the agreement is made to claim a dividend and arrears of dividends before other stockholders receive anything. This is nothing more nor less than a preferred dividend. 4 Barnard v. Vermont, etc., R R Co., 89 Mo., 512 (1863). Nevertheless, the relation of debtor and creditor is cre- ated to the extent of the interest stipu- lated for. McLaughlin v. Detroit, etc., R. R. Co., 8 Mich., 100 (1864). 5 McLaughlin v. Detroit, etc., R R Co., supra. CH. XVI.] PKEFERRED STOCK. [§ 278. or certificate to the contrary, preferred shareholders have no pri- oritv over common stockholders. Their stock was preferred in respect of dividends, and not in reference to the capital stock. The assets of the corporation are to be distributed as though no pre- ferred shares had been issued. The preferred shareholder in the distribution becomes a common shareholder. 1 Where, however, a preference as to capital has been expressly contracted for, 2 or is given by a statute, 3 the rule is, of course, otherwise. If the capital stock is reduced the preferred stock is reduced proportionately with the common unless the preferred stock is pre- ferred as to assets as well as dividends. 4 1 The House of Lords has held that upon the dissolution of a corporation having preferred stock and common stock the surplus assets, after repayment of the paid-up capital, the common stock not having been paid up, is divisible among all the stockholders, common and preferred, in proportion to their holdings. Birch v. Cropper, 61 L. T. Rep., 621 (1889), reversing the court be- low. See, also, In re London India Rubber Co., L. R., 5 Eq., 519 (1864) ; Re Bridgewater Nav. Co., 58 L. T. Rep., 476 (1888); id., 866, a case where there was a large surplus ; McGregor v. Home Ins. Co., 33 N. J. Eq., 181 (1880), a dictum, the court holding, however, that under the statutes of the state the preferred stockholders had a preference as to as- sets also, the statute providing for a division of the surplus after payment to preferred stockholders. Stock with guarantied dividends is stated, in Gor- don's Ex'rs v. Richmond, etc., R. R, 78 Va., 501 (1884), to give a preference as to dividends, but not of the stock on a winding up. In the case of Griffith v. Paget. L. R., 6 Ch. D., 511 (1877); S. C, 25 W. R, 523, it was held that where the company is dissolved by a consol- idation with another company under a statute, the stockholders of the old being entitled to exchange their stock for stock in the new, the preferred stock is not entitled to preferred stock in the new. On a winding up, if it turns out that the profits had been systematically overestimated for a number of years, thereby depriving common stockholders of the dividends, an account would be taken and such dividends would be then paid. Be Bridgewater, etc., Co., 64 L. T. Rep., 576 (1891). 2 Re Bangor, etc., Slate Co., L. R., 20 Eq., 59 (1875). 3 McGregor v. Home Ins. Co., 33 N. J. Eq., 181 (1880). 4 When the capital stock is reduced by decreasing tlie par value of the stock, the preferred stock may be reduced equally with the rest. Re Barrow, etc., Co., 59 L. T. Rep., 500 (1888). Where in consequence of losses the capital stock is reduced, as allowed by the charter, by reducing the par value of the stock one- half, the preferred stock as well as the common is reduced one-half. Bauna- tyne v. Direct, etc., Co., 55 L. T. Rep., 716 (1886). But not where the preferred stock is preferred as to assets as well as dividends, unless all the preferred stock- holders assent thereto. Re Quebrada R'y. 60 id., 482 (1889). Where a company has not issued or has acquired some of its stock it may reduce its capital stock by canceling the part owned by it, although it is all preferred or all com- mon or part of both. Re Gatliug Gun, Lim., 62 L. T. Rep., 312 (1890). Where there is both common and preferred stock it is legal for the company to re- duce the common stock without reduc- ing the preferred. Re Agricultural, etc, Co., 63 L T. Rep., 748 (1890). 379 CHAPTER XVII. INCREASE AND REDUCTION OF THE CAPITAL STOCK AND OVER- ISSUED STOCK § 279. Introductory. A. LEGAL INCREASE OR REDUCTION OF CAPITAL STOCK. § 280. Power of the legislature to au- thorize an increase or reduc- tion. 281. Power of the corporation to in- crease or reduce the capital stock. 282. Effect of purchase by a corpora- tion of shares of its own stock. 283. The issue of bonds convertible into stock. 284. Power of a court to direct an in- crease or reduction. 285. Shareholders, not directors, should authorize the increase. 286. Prior right of the old stockhold- ers to buy the new stock. 287. Issue of an increase of stock by a stock dividend. 288. Liability of the shareholder upon an increase of the capital stock — Irregularities in in- creasing the stock. 289. Rights and liabilities of the share- holder upon a reduction of the capital stock. § 290. Changes in the number or par value of the shares. B. ILLEGAL INCREASE OF STOCK. BEING OVERISSUED STOCK. § 291. Unauthorized increase of stock may amount to overissued stock. 292. Overissued stock is absolutely void. 293. Liability of the corporation on overissued stock. 294. Defenses of the corporation to such actions. 295. Personal liability of the officers of the corporation on overissued stock. 296. Liability* of the vendor of over- issued stock. 297. Equity will enjoin voting, trans- ferring and dividends on such stock, and will adjust the rights of all parties. 298. Subscriber's right to defeat a subscription to overissued stock and to recover back money paid thereon, § 279. Introductory. — The capital stock of all incorporated com- panies is generally fixed by the charters which give them an exist- ence. Frequently, however, in the progress of the corporate enter- prise, it happens that the capital stock is found to be too small or too large for the demands of the business, and there is a desire to change it. This change can be made lawfully only under certain conditions and limitations. These are the subject of this chapter. A. LEGAL INCREASE OR REDUCTION OF CAPITAL STOCK. § 280. Power of the legislature to authorize an increase or reduc- tion. — It is clearly constitutional for the legislature, upon granting a charter, to fix the capital stock and to authorize the corporation to increase or decrease that capital stock. But where the legisla- ture did not authorize the corporation to vary its capital stock, it 3S0 CH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 28L is a serious question whether, as against a dissenting stockholder, the capital stock may be subsequently changed, even under the au- thority of a legislative enactment. The better and prevailing opin- ion is that it may be; that the statute authorizing the change is constitutional, and that the increase or reduction is valid. 1 A different conclusion may be reached, however, as regards the rights of creditors of the corporation. It is clear that the legisla- ture cannot constitutionally authorize a reduction of the capital stock in prejudice of their rights as to an existing corporate in- debtedness. 2 § 281. Poiver of the corporation to increase or reduce the capital stoclc— In the absence of express authority from the state, a cor- poration has no power whatsoever to increase or reduce the amount of its stock, and any attempt upon the part of the corporation, either by the corporate officers or by the stockholders, to do so is wholly illegal and void. 3 Accordingly it is not competent for a corporation, having a fixed capital stock and being without legisla- tive authority to change it, to reduce that capital to the amount actually paid in. 4 "Where the attempted increase or reduction of the stock is not authorized by the charter, not even the unanimous assent and agreement of all the parties concerned will legalize it. It is void. 5 A different rule prevails, however, where the increase of capital stock is authorized by charter or statute, but is informally made. In such a case the increase is valid as against all parties excepting the state which created the corporation. 6 An authority to reduce the number of shares cannot be inferred from the authority to increase, and a reduction with no other war- rant of authority than a right to increase will be held void. 7 If the charter of the corporation provides that the capital stock shall not be less than a specified sum, nor greater than another specified sum, the corporation may commence business with less 1 See ch. XXVIII on this subject. poration r. Ropes, 6 Pick., 23 (1827). 2 Id. "If," says Parker, C. J., in the case last 3 Scovill v. Thayer, 105 U. S., 143, 148 cited, "a corporation is created with a (1881): Sutherland v. Olcott, 95 N. Y., 93, fund limited by the act, it cannot en- 100 (1884); New York, etc., R. R. Co. v. large or diminish that fund but by a Schuyler, 34 id., 30 (18G5) ; Mechanics' license from the legislature." Bank v. New York, etc., R R Co., 13 4 Droitwich Patent Salt Co. v. Curzon, id., 599 (1856); Grangers' Life, etc., In- L. R, 3 Ex., 35, 42 (1867). surance Co. v. Kamper, 73 Ala,, 325 * See § 292, infra. (1882); Moses v. Ocoee Bank, 1 Lea « See § 288, infra. (Tenn.), 398 (1878); Ferris v. Ludlow, 7 * Sutherland v. Olcott, 95 N. Y, 93 Ind. 517 (1856); Lathrop v. Kneeland, 46 (1884); Seignouret v. Home Ins. Co., 24 Barb., 432 (1866); Salem Mill-Dam Cor- Feci Rep., 332 (1885). 381 § 282.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII. than the latter sura, and afterwards increase the capital until the limit is reached. 1 An injunction is the proper remedy to prevent an illegal increase or reduction of the capital stock of a corporation. But an injunc- tion against the issue of new stock by a foreign corporation will be dissolved where the courts of the state where the corporation was created decide such issue of stock to be legal. 2 § 2S2. Effect of purchase oy a corporation of shares of its own stock. — If a corporation has power to -reduce its capital stock it has been held that it may do so by purchasing and retiring a portion of its shares. 3 Whether such a purchase by a corporation will op- erate to diminish the capital stock is a question of intention. If a reduction is authorized by charter or by statute, and the formali- ties of making the reduction have been complied with, and the proper corporate authorities purchase for the corporation shares of its own stock and consider the capital stock thereby reduced, the law holds that a reduction of the capital stock is thereby made. But if any of these elements are wanting, then no reduction is ef- fected, and the corporation may at any time sell and re-issue the stock. Hence a mere transfer of shares to the corporation, whether the corporation assumes to buy tin 1 stock or the stockholders simply to surrender it, will in no case constitute a reduction when the corporation lacks authority from the legislature to reduce its capital. Even if the shareholder is held to be released by such a transfer, still the stock survives and subsists. The corporation is merely the holder of it, and may sell and re-issue it at any time. 4 i Gray v. Portland Bank, 3 Mass., 364 3 State v. Smith. 48 Vt, 266 (1876). (1807); Somerset, etc., R R. Co. v. dictum. So, also, City Bank of Colum- Cushing, 45 Me., 524 (1858). In the bus v. Bruce. 17 N. Y., 507 (1858). Con- case last cited it is held that where the tret, Currier v. Lebanon Slate Co., 56 N. number of shares is not fixed by charter H., 262 (1875). Where a company has the directors or shareholders must fix it not issued or has acquired some of its before an assessment can be levied, and stock it may reduce its capital stock by that then, if the number fixed is greater canceling the part owned by it, although than the number taken, it may be re- it is all preferred or all common or part duced subsequently. of both. Re Catling Gun, Lim., 62 L. T. so^Brien v. Chicago, Rock Island & Rep., 312 (1890). Pacific K. R. Co., 53 Barb, 568 (1868). * The purchase by a corporation of An increase of the capital stock without its own stock does not necessarily de- warrant of authority is denominated an crease the capital stock. " It might or overissue of stock — a subject fully con- might not have that effect at the option sidered in the succeeding sections of this of the company, and would require, I chapter, q. v. The issue of new stock by think, some manifestation of such an the corporation cannot be enjoined intent to produce that result." Such where neither the corporation nor any stock may be re-issued at any time, of its directors are parties to the action. City Bank of Columbus v. Bruce, 17 White v. Wood, 129 N. Y., 527 (1892). N. Y., 507 (1858). See, also, § 814, infra, 382 0B\ XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 283. § 283. The issue of bonds convertible into stock. — Where the char- ter of a raihva}' corporation authorizes the issue of bonds, convert- ible at the option of the holder into stock, such an issue may be made, even though, if the bonds were converted into stock, the capital stock would thereby be increased beyond the amount fixed by the charter. The statute or charter authorizing such an issue of bonds is held to thereby authorize, by necessary implication, the right to increase the capital stock to the extent required in the ful- fillment of the contract to allow the bonds to be converted into stock. 1 The issue of a bond convertible into stock has the same effect as issuing stock, and the sale of such a bond at a discount would prob- ably be governed by the same rules that pertain to stock. 2 The holder of the bonds may demand stock therefor at any time; and even though the demand is made just before a dividend is declared he is entitled to the stock and dividend. 3 and Hartridge v. Rockwell, R. M. Charl- ton (Ga.), SCO (1828). In an early case a transfer to the corporation seems to have been regarded as a reduction of the capital stock pro tanto. Percy v. Millaudon. 3 La.. 568, 587 (1832). It is important to note in this connection that the purchase of its own stock by a corporation is an act not permitted at all in England, and not permitted in this country when corporate creditors' rights would be prejudiced thereb3 r . See §S 309-312. infra. It has been held in a recent case (New Eng., etc.. Life Ins. Co. v. Phillips, 6 N. E. Rep., 534, Mass., 1886) that a purchase by a corporation of cer- tificates of indebtedness effects a cancel- lation, even though the certificates have a voting power. i Belmont v. Erie R'y Co., 52 Barb., 637, 669 (1869) ; Ramsey v. Erie R'y Co., 38 How. Pr., 193, 216 (1869). When bonds are convertible by their terms into stock, but the company has no stock, specific performance will not be decreed, but damages given. Chaffee v. Middlesex R. R., 16 N. E. Rep., 34 (Mass., 1888). Where the stock of a land corporation is convertible into land, a stockholder may enforce the change by bill in equity. Franco, etc., Co. v. Bous- selet, 7 S. W. Rep., 761 (Texas, 1888). The bonds may provide that the holder may take certain lots of land in satisfac- tion thereof. Chicago, etc., Land Co. r. Peck, 112 111.. 408 (1885). 2 See ch. Ill concerning the issue of stock. Where, however, a corporation has power to increase its capital stock, it may issue bonds at fifty per cent, of their par value, convertible into stock upon payment of the other fifty per cent. Van Allen v. 111. Central R. R. Co., 7 Bosw. (N. Y.), 515 (1861). 3 Jones v. Terre Haute, etc., R. R. Co., 57 N. Y., 196 (1874). Where bonds are convertible into stock, a bondholder is entitled to stock equal in par value to- the par value of his bonds, but is not en- titled in addition thereto to past stock dividends declaimed on such stock. Sut- liff v. Cleveland, etc., R. R, 24 Ohio St., 147 (1873). In a suit by holders of bonds convertible into stock against the cor- poration for refusal to allow such con- version, the plaintiffs must allege that they still hold the bonds. Denney v. Cleveland, etc., R. R., 28 Ohio St., 108 (1875). A corporation with authority to increase its capital stock may lawfully issue new shares and receive in payment therefor the bonds of the corporation. Lohman v. New York, etc., R. R. Co., 2 Sandf. Super. Ct, 39 (1848); Reed v. 383 § 234.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XTII. An option to convert stock into bonds must be exercised within a reasonable time if the option itself contains no limit. 1 Where bonds are convertible into stock the holder may demand conversion into the stock of a new consolidated corporation that has assumed all the claims and liabilities of the old. 2 § 2S4. The power of a court to direct an increase or reduction.— The courts have no power, by mandate or decree or in any other manner, to effect an increase or reduction of the capital stock of a corporation. Hence, where the whole capital stock has been issued, and the corporation, by reason of its misconduct or mis- takes, is bound to issue new certificates to the owner of the stock or pay him damages, the court can give judgment for damages only. It cannot order the corporation to issue stock, since to do so would be to direct an overissue/ 1 In Massachusetts a later and better rule prevails, to the effect that the corporation in such a case may be compelled to issue the stock, but in order to prevent an illegal overissue it must purchase an equal amount of shares in the market. 4 Hayt, 51 N. Y. Super. Ct, 121 (1884). tificates of stock (which are valid and See, in general. g 27:5. not void) to the full extent of all the iCatlin v. Green, 120 N. Y, 441 shares which by law and the eonstitu- (1890). Where the subscribers for stock tion of the company it may issue, no have an option to exchange their stock court can order the issuance of other for bonds of the company and fail to shares, because in that respect the exercise that option for nine years, powers of the corporation have been when the company has passed into the exhausted." Smith v. North American hands of a receiver and the stock be- Mining Co., 1 Nev., 423 (1865); Will- come worthless, the right is gone. The iams v. Savage Manuf. Co., 3 Md. Chan., option, not being limited in time, must 418 (1851); Mechanics' Bank v. New be exercised within a reasonable time. York, etc., R. R. Co., 13 N. Y, 599 (1856). Id - In an action for the conversion of shares, 2 Day v. Worcester, etc., R. R., 23 N. E. the question of an increase cr reduction Rep., 824 (Mass., 1890). When by statute not being involved, it was said that "To the consolidated company is liable for require a new issue of stock might in the contracts of the old companies, it cases like this, where shares have gone must issue stock in exchange for bonds into the hands of innocent purchasers, of the old company which were con- involve an overissue of stock, which vertible into stock. India Mut. Ins. Co. would be illegal." Baker v. Wasson, v. Worcester, etc., R. R.. 25 N. E. Rep., 59 Texas, 140 (1883); S. C, 53 id., 150 975 (Mass., 1890). Where a bondholder (1880). has a right to convert his bonds into * This rule, with an equitable adjust- stock, a consolidation cannot deprive ment of the conflicting interests of all him of that right until after he has the parties, where an owner of stock been notified of the intended consolida- was deprived of it by forgery, was tion and given an opportunity to exer- established by the supreme judicial cise his rights. Rosenkrans v. Lafay- court of Massachusetts in the case of ette, etc., R. R., 18 Fed. Rep., 513 (1883). Machinists' National Bank v. Field, 126 3 " When a corporation has issued cer- Mass., 345 (1879). See, also, Pratt n 384 CH. XVII.] INCREASE, KEDUCTION AND OVERISSUE OF STOCK. [§ 285. Where corporate officers enter into a contract to pay for services or property wholly or partially in stock of the corporation, a court will not, after the whole amount of the stock has been issued, decree a specific performance of the contract, but the aggrieved, party is remitted to his action for damages. 1 § 285. Shareholders, not directors, should authorize the increase. An increase or reduction of the capital stock of a corporation is such a fundamental change in its affairs that, although it has been duly authorized by act of the legislature or by the charter of incor- poration, it cannot lawfully be effected merely by the act or assent of the board of directors, 2 but must be authorized by the sharehold- ers at a corporate meeting. Where, however, the directors have made the change, and the stockholders have acquiesced therein, they are as fully bound as though the increase or reduction had been expressly authorized at a corporate meeting. The share- holders' assent to the change may be shown as conclusively by their conduct and acquiescence as by a formal vote. 3 The power to increase the capital stock may be vested in the directors. 4 Although the shareholders have regularly voted to increase the capital stock, Machinists' National Bank, 123 id., 110, and Boston, etc., R. R. Co.. v. Richard- son, 135 id., 473, each of the three cases growing out of the same transaction. 1 Finley Shoe, etc., Co. v. Kurtz, 34 Mich., 89 (1876). In this case the court say that where the capital stock may be increased by vote of the stockholders, *' it certainly could not be within the implied powers of any corporate officer to obligate the corporation to any such increase, and thus indirectly do what the law permits to be done only by the body of corporators, specially convened for the purpose." In actions against corporations for conversion of stock, the relief demanded is usually in the alter- native, being either for an issue of a certificate of stock, or damages in lieu thereof. 2 Percy v. Millaudon, 3 La., 568, 585 (1832); Eidman v. Bowman, 58 111., 444 (1871); Finley Shoe, etc., Co. v. Kurtz, 34 Mich., 89 (1876); Crandall v. Lincoln, 52 Conn., 73, 99 (1884) ; People v. Parker Vein Coal Co., 10 How. Pr., 543 (1854). See, also, Railway Company v. Allerton, 18 Wall, 233 (1873). Cf. City of Chicago v. Jones, 60 111.. 383 (1871) ; Matter of Wheeler, 2 Abb. Prac. (N. S.), 361 (1866) ; People v. Twaddell, 18 Hun, 427, 432 (1879); State v. Merchant, 37 Ohio St, 251 (1881). See, also, § 708, etc. sSewell's Case, L. R., 3 Chan., 131 (1868); Lane's Case, 1 De G., J. & S., 504 (1863); Payson v. Stoever, 2 Dill., 428 (1873). See, also, ch. XLVIL infra, relative to mortgages ; but see § 288, infra. An allegation of ratification must not be in general terms, but must set out specifically the facts constituting the ratification. Eidman v. Bowman, 58 111., 444 (1871). An amendment of the charter which allows the directors in- stead of the shareholders to authorize an increase of the capital is not such a fundamental change in the constitution of the corporation as will operate to re- lease non-assenting shareholders from the obligation on their stock. Payson v. Withers, 5 Biss., 269 (1873) ; Payson v. Stoever, supra. * Sutherland v. Olcott, 95 N. Y., 93 (1884). Their resolution that "the capi- tal stock of this company be and the same is hereby increased to " is sufficient to effect the increase. (25) 385 § 286.] INCREASE, SEDUCTION AND OVERISSUE OF STOCK. [CH. XVII. in pursuance of adequate legislative authority, still, inasmuch as the increase is not accomplished until the shares are actually is- sued, the vote may be reconsidered in a lawful manner at anytime before the stock is finally issued. 1 § 286. Prior right of the old stockholder to ouy the new stock. — "When the capital stock of a corporation is increased by the issue of new shares, each holder of the original stock has a right to offer to subscribe for and to demand from the corporation such a proportion of the new stock as the number of shares already owned by him bears to the whole number of shares before the in- crease. This pre-emptive right of the shareholder in respect of new stock is well recognized. 2 But this applies only when the cap- ital is actually increased, and not to a re-issue of any portion of the 1 Terry v. Eagle Lock Co., 47 Conn., 141 (1879). In this case the court say : "It cannot be said that the capital is actually increased until the new stock is subscribed for at least. Until then there is an element of uncertainty about it. It may never be taken. It is very clear that the vote to increase is not per se an increase." 2 Gray v. Portland Bank, 3 Mass., 364 (1807); Eidman v. Bowman, 58 111., 444 (1871); Reese v. Bank of Montgomery, 31 Pa. St., 78 (1855); Jones v. Morri- son, 31 Minn., 140 (1883) ; Bank of Mont- gomery v. Reese, 26 Pa. St., 143 (1856). Cf. Curry v. Scott, 54 Pa. St, 270 (1867); Miller v. Illinois, etc., R. R. Co., 24 Barb., 312 (1857); Wilson v. Bank of Montgomery County, 29 Pa. St, 537 (1857); Mason v. Davol Mills, 132 Mass., 76 (1882). A sale of shares of the orig- inal capital stock carries with it as an incident the right which the vendor had previously acquired by subscription to shares of increased capital stock. Balti- more, etc., Co. t\ Hambleton, 26 Atl. Rep., 279 (Md., 1893); Biddle's Appeal, 99 Pa. St., 278, in which the option to subscribe for new stock was sold by an executor; Pratt v. American Bell Tel. Co., 141 Mass.. 225 (1886), where one who held notes convertible into stock at a future time sought to establish his right as a stockholder to an equitable share of an increase of capital stock to which shareholders had a first right to sub- scribe upon favorable terms. The court held that the suit could not be main- tained, on the ground that until he had converted the notes into stock he had no rights as a stockholder; Ohio Ins. Co. v. Nunnemacher, 15 Ind., 294 (1860), where the charter varied the rule; Re Wheeler. 2 Abb. Pr. (N. S.), 361, 363, in which it was said that if new stock is not apportioned among old stockholders it should be sold at public sale to the highest bidder, so that all may share in the gains arising from its sale; Miller v. Illinois, etc., 24 Barb., 312 (1857), that a stockholder who holds a receipt from a corporation for money payable on de- mand in cash, or, at his option, in new stock when issued, has no interest in such stock as a shareholder until he has elected to take it instead of the cash. In Massachusetts this right is preserved in the statutes. Ch. 106, § 37; ch. 112, § 58. In Massachusetts increased capi- tal, if worth more than par, must in cer- tain cases, by statute, be sold at public auction. See Att'y-Gen'l v. Boston, etc.. R. R. Co., 109 Mass., 99 (1871). In New York, in banking corporations, it is se- cured to the shareholder by statute. Session Laws 1878, ch. 274, § 5. But the pledgee of stock who holds it merely as collateral security is not entitled to this right to take up new shares. The right belongs to the pledgor. Miller v. Illinois Central R. R. Co., 24 Barb., 312 (1857). 386 CII. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 286. original stock. 1 It applies, however, to such part of the original capital stock as is issued long after business has been commenced by the company. Especially is this the rule where the directors issue such new stock to themselves or their friends in order to con- trol an election or make a profit. 2 The right must be exercised within a fixed or a reasonable time; and if the shareholder fails to avail himself of it, he is barred, by laches or acquiescence, of his right to contest a disposition of the stock to some one else. 3 The corporation cannot compel the old stockholders, upon their sub- scription for new stock, to pay more than par value therefor. They are entitled to it without extra burden or expense beyond the reg- ular subscription price. 4 An attempt to deprive the stockholder of 1 State v. Smith, 48 Vt., 266 (1876); which the untaken portion of the stock Hartridge v. Rockwell, R M. Charlton (Ga.), 260 (1828) ; Curry v. Scott, 54 Pa. St., 270 (1869), in which Reese v. Bank was said to decide "nothing more than that untaken stock is held by the corpo- ration in trust for the corporators, and must be disposed of for the benefit of all ; " and it was held that a stockholder has no greater right than a stranger to subscribe to original stock untaken. Cf. Eidmau v. Bowman. 58 111., 444 (1871); Gray v. Portland R R. Co., 3 Mass., 364 (1807). 2 Where, long after the company has commenced business, it has disposed of its property and is ready to declare a five per cent dividend, the directors issue to themselves at par that part of the original capital stock which never had been issued, it is a fraud on the re- maining stockholders. Arkansas, etc., Soc. v. Eichholtz, 25 Pac. Rep., 613 (Kan., 1891). Where a director issues to him- self, at par, stock belonging to the cor- poration and which is worth more than par, the transaction is voidable ; but if all t'..e stockholders acquiesce therein for a long time, the acquiescence of the ex- ecutors of a deceased stockholder binds the estate. St. Croix L. Co. v. Mittle- stadt, 44 N. W. Rep.. 1079 (Minn., 1890). In the case of Reese v. Bank, etc., 31 Pa. St, 78 (1855), the court held that where a part of the authorized capital stock remained untaken, and a resolution of the directors was carried into effect by was issued to those shareholders not in arrears upon shares previously taken, to the exclusion, as to the new shares, of those in arrears upon the original issue, it was held an invalid discrimination and an unlawful imposition of a pen- alty upon those in arrears. In regard to the right to subscribe for the unissued portion of the original capital stock, see, also, §§ 70, 653. Where a corporation has an authorized capital of $5,000, but only $2,500 are directed by the stock- holders to be issued, it is illegal and fraudulent to issue the remaining au- thorized capital without giving the ex- isting stockholders a prior right to sub- scribe to such increased capital pro rata. Directors elected by reason of such ille- gal issue will be enjoined from acting where they are about to change the whole policy of the company. Hum- boldt, etc., Ass'n v. Stevens et aJ., 52 N. W. Rep., 568 (Neb., 1892). 3 Terry v. Eagle Lock Co., 47 Conn., 141 (1879) ; Hart v. St. Charles St. R R Co., 30 La. Ann., 758 (1878); Brown v. Florida Southern R'y Co., 19 Fla., 472 (1882). 4 Cunningham's Appeal, 108 Pa. St., 546 (1885). Where the corporation in is- suing new stock requires the old stock- holders to pay a bonus in order to sub- scribe, a former stockholder may pay the bonus in order to get the stock, and may then recover back tlie bonus by a suit Dawson v. Insurance Co., 5 R'y & Corp. L J., 154 (1888, Com. PI. Phil.). 387 § 286.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII. this right will be enjoined in the absence of laches or acquiescence. 1 The courts go very far in protecting the right of stockholders to subscribe for new stock. It is often a very important right. When the newly-issued shares have all been distributed or sold to others, in violation of a shareholder's pre-emptive right, his only remedy is an action at law against the corporation for damages. And the measure of damages has been declared to be the excess of the market value above the par value at the time of the issue of the shares, with legal interest on such excess. 2 A mere verbal notice by the stockholder to the corporation that he will take his proportion of the new issue under an increase is held in Louisiana not to be sufficient to render the company liable in damages for selling the shares to some one else. 3 The corpora- tion mav, however, and usually does, limit the time within which the shareholders may signify their intention to take up the new shares, and may require a part payment upon the shares within that time. 4 The stockholder, therefore, who brings his action against the corporation for damages for refusal to allow him to If on offering increased capital stock to the old stockholders the company re- quires more than par, a stockholder who pays it, even under protest, canuot re- cover it back. He should have tendered par and then sued for refusal of the corporation to accept it De La Cuesta v. Insurance Co., 20 Atl. Rep, 505 (Pa., 1890). Where by its charter a terminal and union depot company is obliged to allow new roads to demand and pay for a proportional part of the former com- pany's capital stock, the price is par even though it is worth more. St Paul, etc.. Co. v. Minn., etc., R R, 49 N. W. Rep., 646 (Minn., 1891). 1 A stockholder's remedy, it is said, in such a case is clearly agaiust the cor- poration, and he is not obliged to sue at law for damages. " The effect of such an action [i. e., the action for damages] would be to convert part of his interest as a shareholder into a judgment for damages ; in other words, to sell a por- tion of his stock to the corporation. . . . The judgment to be effectual must be against the corporation itself, not against the directors personally, who may be changed from time to time." Dousman v. Wisconsin & Lake Superior, etc., Co., 40 Wis., 418 (1876). In this case it is also held that the share- holder, where the stock is not yet fully issued, may have a decree in a court of equity restraining the whole issue, or else that there be an equitable distri- bution ; and, if the shares are already partially distributed, that the proper amount be issued to the party com- plainant. Cf. Eidman v. Bowman, 58 111., 444. In Massachusetts, however, this is not the rule, and in that state it is held that the courts have no power to compel the corporation or the directors to issue the shares to the party ag- grieved. Sewall v. Eastern R. R Co., 9 Cush., 5 (1851). But an action will lie against the corporation for damages. Gray v. Portland Bank, 3 Mass., 364 (1807). 2 Eidman v. Bowman, 58 111., 444 (1871); Reese v. Bank of Montgomery, 31 Pa. St, 78 (1855); Gray v. Portland Bank, 3 Mass., 364 (1807). 3 Hart v. St Charles St. R'y Co., 30 La. Ann-, 758 (1878), holding, also, that a tender must be made. 4 Sewall v. Eastern R R Co., 63 Mass., 5 (1851) ; Hart v. St. Charles St R'y Co., 30 La. Ann., 758 (1878). 388 CH. XVII.] INCREASE, REDUCTION AND OVEEI8SUE OF STOCK. [§§ 2S7, 288. subscribe for the new shares, or for selling the shares to some one else, or for depriving him in any other way of them, must allege and prove that he demanded the shares and offered to subscribe and pay for them in the regular way, within the time fixed for such subscriptions. 1 Other shareholders similarly aggrieved are not to be joined as parties complainant. Each stockholder sues alone, inasmuch as the liability of the corporation in these cases is several and not joint. 2 § 2S7. Issue of new stock by a stock di vidend. — A frequent method of issuing an increase of the capital stock is by a stock dividend. In England there is some doubt as to whether such dividends may be imposed upon stockholders who ojbject thereto, and demand the money dividend in lieu of which the stock is issued. 3 In this coun- try such dividends are legal unless prohibited by constitutional or statutor} 7 - provisions. 4 But in all cases of a stook dividend, as a method of issuing an increase of the capital stock, there must be in the possession of the corporation an amount of property over and above its corporate debts equal to the whole capital stock, in- cluding the increase; and this amount cannot afterwards be used for anv kind of a dividend. § 288. Liability of the shareholder upon an increase of the capital stock — Irregularities in increasing the stocli. — A person subscrib- ing for shares of stock upon an increase of the capital stock is liable thereon the same as a subscriber to the original capital stock. In some respects he cannot set up defenses that an original subscriber 1 Wilson v. Bank of Montgomery increase of the capital. Miller v. Illi- _ County, 29 Pa. St.. 537 (1857). nois Central R R Co., 24 Barb., 312 2 Dousman v. Wisconsin & Lake Su- (1857). An incorporator is not entitled perior Mining & Smelting Co., 40 to the increased stock as a gratuity; Wis., 418 (1876). In an early Indiana he must pay for it Brown v. Florida decision it is said to be the law that Southern R'y Co., 19 Fla., 472 (1882). where, in the charter, directors are 3 See ch. XXXII, infra. given full power to effect an increase 4 Id. ; also p 51, svpra: Howell n of the capital stock, " on such terms Chicago, etc., R. R. Co., 51 Barb., 378 and conditions and in such manner as (1868). An increase of the capital stock, to them shall seem best," they may au- by the issue of new shares and the sale thorize the increase without the consent of them for less than their par value, is of the shareholders; that as to each not such an "issue of fictitious stock" increase there is no pre-emptive right, as the California state constitution for- and that, accordingly, the newly-issued bids (art. XII, g 11). Stein v. Howard, shares may be disposed of as the direct- 65 Cat, 616 (1884). Where the company ors determine. Ohio Insurance Co. v. is under obligations to issue stock to Nunnemacher, 15 Ind., 294 (1860). So, represent interest on subscriptions until also, in New York it is said that the ex- dividends are declared, a stock dividend ecutory purchaser of shares of the oris- does not stop the interest. Hardin inal stock is not entitled to the propor- County ?•. Louisville, etc., R R, 17 S. W. tionate amount of new stock on an Rep., 860 (Ky., 1891). 389 § 288.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVIT. might have set up. Thus, a subscriber for increased stock cannot defeat an action to enforce his subscription by setting up the failure of the corporation to obtain subscriptions for the whole of the au- thorized increase. 1 In general, a subscriber to an increase of stock cannot interpose defenses to his subscription which subscribers to the original stock could not have raised — such, for example, as technical objections to the validity of his contract of subscription. 2 Nor can the subscriber set up that the increase was irregularly effected. It is for the state alone to raise the question whether corporate capital stock has been lawfully and regularly increased. 3 Especiall} r it is the rule that, as against corporate creditors, stock- holders who have subscribed for the increased stock, accepted the certificate, and received dividends thereon, are estopped from de- feating an action on their subscription by setting up that the stock was increased in an irregular or unlawful manner. 4 Subscribers to i Clarke v. Thomas, 34 Ohio St, 46 (1877) ; Nutter v. Lexington, etc., R. R Co., 6 Gray, 85 (1856) ; Delano v. Butler, 118 U. S., 634 (1886); Aspinwall v. But- ler, 133 U. S., 595 (1890). A subscriber for increased stock is liable although the full amount is not subscribed. Avegne v. Citizens' Bank, etc., 5 S. Rep., 537 (La., 1889). But see Eaton v. Pa- cific, etc., Bank, 10 N. E. Rep., 844 (Mass., 1887). 2 Kansas City Hotel Co. v. Hunt, 57 Mo., 126 (1S74). » Pullman v. Upton, 96 U. S., 328 (1877). A party purchasing a certificate of stock not under seal nor signed by the president must take notice, and can- not afterwards complain that it was an irregular increase of stock. Byers v. Rollins, 21 Pac. Rep., 894 (Colo., 1889). Stockholder participating in irregular increase of stock cannot afterwards ob- ject to it. Poole v. West, etc., Ass'n, 30 Fed. Rep., 513 (1887). Irregularities in the increase of the capital stock will be disregarded as between the stock- holders who participate. Bailey v. Champlain, etc., Co., 46 N. W. Rep., 539 (Wis., 1890); Bard v. Banigan, 39 Fed. Rep., 13 (1889). 4 Chubb v. Upton, 95 U. S, 665 (1877) ; In re Miller's Dale, etc., Co., L. R, 31 Ch. D„ 211 (1886), in which a subscriber to new shares was not permitted to plead, as against creditors, that the issue was irregular because only thirteen days had elapsed between the passing of the resolution to increase the capital and the confirming of it, when the law re- quired fourteen days; Kansas City Hotel Co. v. Harris, 51 Mo., 464 (1S73); and see McCarthy v. Lavasche, 89 111., 270 (1878) ; Veeder v. Mudgett, 95 N. Y., 295 (1884) — the last case holding that a statute allowing increase to be made by stockholders in meeting assembled on a specified notice is invalid if the notice did not conform to the statute, but that the stockholders are liable nevertheless to corporate creditors on such stock. Sewell's Case, L R, 3 Chan., 131 (1868); Upton v. Jackson, 1 Flippin, 413 (1874); Kansas City Hotel Co. v. Hunt, 57 Mo., 126 (1874). In such a case the state alone can properly raise the question whether the corporate stock had been regularly and lawfully increased. Pullman u Upton, 96 U. S., 329 (1877). See Clarke r. Thomas, 34 Ohio St., 46 (1874) ; Matter of the Reciprocity Bank, 22 N. Y., 9 (1860); Byers v. Rollins, 21 Pac. Rep., 894 (Colo., 1889). See, also, Peckham v. Smith, 9 How. Prac, 436 (1854). See, also, the principles and cases in § 298, infra. Irregularity of notice of a meet- ing to increase the capital stock has 390 OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 289. increased capital stock cannot escape liability therefor by setting up that the notice of increase was not published as required by statute. 1 But a contrary rule prevails as regards essential steps in the in- crease. If there is no vote of the stockholders as required b} T stat- ute, they are not liable on the stock. 2 Stockholders of the original capital stock are of course not liable for the defaults of subscribers to the increased capital stock. 3 § 289. Rights and liabilities of the shareholders upon a reduction of the capital stoch. — Upon an authorized reduction of the capital stock of an incorporated company, regularly effected, the amount of corporate assets over and above the amount of the capital stock as reduced is equivalent to surplus profits, and may be treated as been held to be fatal. Matter of Wheeler, 2 Abb. Pr. (N. S.), 361 (1866). If the statute requires a publication of notice of the intended increase, such publica- tion must be made. It cannot be waived, even by unanimous consent of the stock- holders. The public are entitled to knowledge of the increase. State v. McGrath, 86 Mo., 239 (1886), the court refusing to grant a mandamus to com- pel the secretary of state to file the cer- tificate. The invalidity or irregularity of an increase of stock may be set up by the subscribers therefor as against cred- itors who were stockholders and man- agers of the company. Sayles v. Brown, 40 Fed. Rep., 8 (1889). lHandley v. Stutz, 139 U. S., 417 (1891). Holders of increased capital stock cannot defeat their liability for the subscription price by alleging that the increase was made by a stock- holders' meeting held out of the state, or that proper notice of the meeting was not given, or that the required statutory publication of the increase was not made. Stutz v. Handley, 41 Fed. Rep., 531 (1890). If the stockholders have knowledge of the intention to in- crease the stock, the failure to give stat- utory notice cannot be taken advantage of by one not injured by such want of notice. Columbia Bank's Appeal, 16 Weekly Notes Cas., 357 ; 42 Leg. Int., 226. Concerning the failure to give the requisite notice, see, also, chs. XXXVI and XLVI. Where a person subscribes to the proposed increased capital stock, and the officers surreptitiously transfer some of their own old stock to him, he is not liable on the statutory liability thereon, even though he accepted the stock, being ignorant of the fraud prac- ticed upon him. Stephens v. Follett, 43 Fed. Rep., 842 (1890). 2 The receiver of a national bank can- not hold stockholders liable on increased stock where such increase was not au- thorized by a two-thirds vote of the stockholders. Winters v. Armstrong, 37 Fed. Rep., 508 (1889). In American Tube Works v. Boston, etc., Co., 139 Mass., 5 (1885), it was held that a cred- itor who had taken irregularly issued stock in payment of his debt might over two years thereafter, and after the corporation became insolvent, repudiate the stock and again become a creditor. 3Veeder v. Mudgett, 95 N. Y„ 295 (1884). See, also, § 215, sujjra. Stock- holder not participating is not liable for fraud in increase of stock where the directors received pay therefor in notes which are worthless. So held under Iowa statute. Miller v. Bradish, 28 N. W. Rep.. 594 (Iowa, 18S6). See, also, Delano v. Butler, 118 U. S., 634 (1886). A statutory requirement that a certifi- cate shall be filed when stock is fully paid does not render old stockholders 391 § 280.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII. such by the corporation. It may be set aside as surplus, or it may be divided among the shareholders proportionally by a dividend, unless the rights of previous corporate creditors would thereby be injured. 1 But it is not the rule that the reduction of the capital liable for failure to file as to increased stock. Sayles v. Brown, 40 Fed. Rep., 8 (1889). A liability imposed until a specified certificate is filed is not revived by an increase of the capital stock. Veeder v. Mudgett, 95 N. Y., 295 (1884). See, also. Ochiltree v. Railroad Co., 21 Wall., 249 (1874), as to liability on in- crease of capital stock. As to the lia- bility on a reduction of the capital stock and the constitutionality thereof, see Dane v. Young, 61 Me., 160 (1872): also § 497, infra. Where a person subscribes to the proposed increased capital stock, but the increase is not made, and the officers surreptitiously transfer some of their own old stock to him, he is not liable on the statutory liability thereon, even though he accepted the stock being ignorant of the fraud practiced on him. Stephens v. Follett, 43 Fed. Rep., 842 (1890). In suing a stockholder on a statutory liability for failure to file a certificate upon an increase in the cap- ital stock, only those who hold the in- creased capital stock are liable. Griffith v. Green, 129 N. Y, 517(1892). 1 Strong v. Brooklyn Crosstown R R. Co., 93 N. Y, 426(1883), where a corpo- ration whose capital had been reduced one-half issued certificates of indebt- edness bearing interest to shareholders for the excess. The application of a dissenting holder to have them declared illegal, and to restrain the corporation from paying them, was refused ; Seeley v. New York National Exchange Bank of New York, 8 Daly, 400 (1878); S. C, aff'd, 78 N. Y, 608 (1879) ; McCann v. First Nat. Bank, 14 N. E. Rep., 251 (Ind., 1887), approving of the text herein, and holding that where by reason of bad debts the capital stock is reduced, a subsequent collection of such debts does not sustain an action by a stockholder for his proportion thereof. If increase is afterwards cancelled, a corporate cred- itor who was such previous to the in- crease cannot complain. Colt v. Gold Amal. Co., 119 U. S., 343 (1886). A sub- scriber to the increased stock may re- cover back the money paid thereon if the corporation afterwards reduces the proposed increase, so that it shall cor- respond to the amount actually sub- scribed for. The principle laid down in §§ 176-181, supra, applies. Eaton v. Pa- cific Nat Bank, 10 N. E. Rep., 844 {Mass., 1887). Cf. § 288. For the rules herein relative to life estates and remainder in stock, see § 559. A stockholder may enjoin the corporation from reducing its capital stock, as allowed by statute ; calling in all certificates of stock; issu- ing new certificates proportionately; de- claring a dividend of the surplus over the reduced capital stock, and, on ac- count of the corporate property being invested, borrow money to pay that dividend. Coquard v. St. Louis, etc., Co., 7 S. W. Rep., 176 (Mo., 1888). Under the English statute a reduction of the capi- tal stock reduces the preferred as well as the common stock. Bannatyne v. Direct, etc., Co., 55 L. T. Rep., 716 (1886). And in general see, also, In re State Ins. Co., 14 Fed. Rep., 28 (1882) ; Excel- sior Co. v. Lacey, 63 N. Y, 422 (1875). By-law cannot compel a stockholder to sell his stock to the corporation for the purpose of i-etiring it. Bergman v. St. Paul, etc., Assoc, 29 Minn., 275 (1882). In England it is the rule that when the assets are already reduced by losses the corporation cannot effect a reduction of the capital stock so as to cover up the losses. In re Ebbw Vale Steel, I,ron & Coal Co., L. R., 4 Chan. Div., 827 (1876). And yet it should seem that a greater injury would be worked upon the pub- lic by continuing business with an im- paired capital than to reduce it openly 392 CH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 290. stock of a corporation always authorizes the distribution among the stockholders of a sura equal to the difference between the original and the reduced amount of capital. Such a distribution is lawful only when it appears that the original capital stock is unimpaired. The corporation can divide among its stockholders only such a sum as will leave with the corporation an amount equal to the reduced capital stock. 1 Not only this, but corporate creditors who were such before the reduction may disregard the reduction and enforce payment of their debts from the original unpaid subscriptions as though no reduction had taken place. 2 But creditors whose debts were contracted subsequently to the reduction can look only to the capital stock, as reduced, for security. They will be held to have given credit upon the faith of that amount of stock alone. 3 A reduction of the capital stock is effected only when all statu- tory formalities have been complied with. 4 § 290. Change in tlie . number or par value of the shares. — • It is a principle of law closely related to those already set forth in this chapter, and well settled, that the number of shares into which the capital stock has been divided, and the par value of those shares, can neither be increased nor diminished, in number or in value, without express warrant of authority either from the legislature or to what it actually is. Cf. In re Kirk- stall Brewery Co., L. R, 5 Chan. Div., 535 (1877). In England, by statute, a plan for reducing the capital stock must be presented to and approved by the courts. Be Direct, etc., Co., 55 L. T. Rep., 804 (1866). And a distribution of part of the capital stock among the share- holders proportionally is an unauthor- ized reduction, and the stock will be ordered to be returned. Holmes v. New- castle-upon-Tyne Abattoir Co., 45 L. J. (Chan.), 383 (1875). Where the capital stock is reduced by reason of certain doubtful securities, the securities should not be withdrawn from the assets of the bank and put into a trust. McCann v. First Nat'l Bank, 30 N. E. Rep., 893 (Ind., 1892). 1 Strong v. Brooklyn Crosstown R. R. Co., 93 N. Y., 426 (1883). 2 In re State Insurance Co., 11 Biss., 301 (1882); S. C, 14 Fed. Rep., 28: Bed- ford R R Co. v. Bowser. 48 Pa. St., 29 (1864). Shareholders have no power to avoid liability on their stock by reduc- 39 ing either the amount of it or the par value of the shares. Dane v. Young, 61 Me., 160 (1872). Cf. Bedford R. R Co. v. Bowser, 48 Pa. St., 29 (1864). 3 Hepburn v. Exchange, etc., Co., 4 La. Ann., 87 (1849) ; Palfrey v. Paulding, 7 id., 363 (1852) ; Cooper v. Frederick, 9 Ala., 742 (1846). Cf. In re State Ins. Co., 14 Fed. Rep., 28 (1882); S. C, 11 Biss., 301. 4 See Moses v. Ocoee Bank, 1 Lea (Tenn.), 398, holding that, where a cor- poration has power under its charter to reduce its capital stock, it must clearly appear that it has ordered the reduction to be made ; neither equivocal acts nor inferences nor unauthorized acts of a president or director will be sufficient: Ferris v. Ludlow, 7 Ind., 517 (1856), holding that where the records of a company showed that propositions to reduce its stock had been made, but failed to show any acceptance, there was no reduction. See, also, Grangers' Life, etc., v. Kamper, 73 Ala., 325 (1882). 3 § 291.] INCREASE, SEDUCTION AND OVERISSUE OF STOCK. [CH. XVII. the charter of the company. 1 "When, however, the charter does not fix the number or amount of the shares, it devolves upon the share- holder or directors to fix them; and in such a case it seems that the limit established might lawfully be changed without special authority. 2 B. ILLEGAL INCREASE OF STOCK, BEING OVERISSUED STOCK. § 291. Unauthorized increase of stock may amount to overissued stock. — Where the full capital stock of a corporation has been is- sued, and there is no statute or charter provision authorizing an increase of the stock, it is clear that any issue of stock in excess of the capital stock is not a legitimate increase of the capital stock. It is unauthorized and illegal, and is termed in law an overissue of stock. There is a clear distinction between overissued stock and an irregular increase of stock. The former is where an increase of the stock is made, although no increase is authorized by the charter or by statute. The latter occurs when there is a statutory or charter provision authorizing an increase of the stock, but the formalities prescribed for making that increase have not been strictly com- plied with. Overissued stock is void, while an irregular increase of stock is merely voidable. An overissue of stock often arises by forgery on the part of an 1 Salem Mill-dam Corporation v. Ropes, 23 Mass., 23 (1827); Re Financial Corporation (Holmes Case), L. R., 2 Ch., 714, 733 (1867); Droitwich Salt Co. v. Curzon, L. R., 3 Ex., 35, 42 (1867); Smith v. Goldsworthy, 4 Q. B., 430 (1843). Cf. Sewell's Case, L, R, 3 Ch., 131 (1868). "A corporation with a fixed capital, divided into a fixed number of shares, can have no power of its own volition, or by any act of its officers and agents, to enlarge its capital or increase the number of shares into which it is divided. The supreme legislative power of the state can alone confer that au- thority." It cannot be increased " by the covert or fraudulent efforts of one or more of the agents of the corpora- tion." New York & New Haven R. R Co. v. Schuyler, 34 N. Y., 30, 48 (1865). Cf. Scovill v. Thayer, 105 U. S., 143 (1881). In New York a statute allowing such a change exists. New York Session Laws, 1866, ch. 73. "Where all the shares are reduced in par value from $50 to $38 and the $12 difference is paid to the stock- holders in cash, this is a reduction of capital stock and not a dividend and cannot be taxed as a dividend. Com- monwealth v. Central T. Co., 22 Atl Rep., 209 (Pa., 1891). A reduction of the par value of the common stock and not of the preferred is not allowed in England. Re Union, etc., Co., Lim., 61 L. T. Rep., 327 (1889). 2 Somerset, etc., R R Co. v. Cushing, 45 Me., 524 (1858) ; Ambergate, Notting- ham & Boston & Eastern R'y Co. v. Mitchell, 4 Exch., 540 (1849); S. G, 6 Eng. R'y Cases, 234; In re European Central R'y Co., L, R, 8 Eq., 438 (1859). It has been held allowable, however, for the company to allow the holders o f paid-up shares to return them and take in exchange shares of double the par value as half paid up, and vice versa; both kinds of stock being authorized. Teasdale's Case, L. R, 9 Chan., 54 (1873). 394 OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§§ 292, 293. officer of the corporation who forges the necessary names of the corporate officers to the certificate and puts it in circulation. 1 § 292. Overissued stock is absolutely void. — By overissued stock is to be understood stock issued in excess of the amount limited and prescribed by the act of incorporation. Certificates of stock issued in excess of the certificates that represent the full authorized capital stock of the corporation represent overissued stock. Such stock is spurious and wholly void. This is the settled law, and it prevails equally whether the overissue is the result of accident or mistake, or want of knowledge of the law, or is due to fraud and in- tentional wrong-doing. The animus or intent of the parties to the overissue is not material. Overissued stock, no matter how over- issued, represents nothing, and is wholly and entirely valueless and void. 2 So rigid and well established is this rule that not even a bona fide holder of such stock can give to it any validity or vital- ity. Overissued or spurious stock may, however, it seems, be legal- ized by a subsequent legal increase of the capital stock. 3 §293. Liability of the coiyoration as to overissued stock. — Al- though it is settled law that overissued stock is void and valueless, and that no action lies either to compel the corporation to recog- nize the holder as a stockholder, or to issue in place thereof a valid certificate, yet where overissued certificates of stock, signed or pur- porting to be signed by the corporate officers having the authority to issue stock, and actually issued by such officers, are purchased by any person, or are taken in any manner in good faith and for value, such oonafide holder may sue the corporation in tort and recover damages. 4 "O' iSee § 293. ler, 34 N. Y., 30, 49, GO (1865); Bruff v. 2 The great and leading case on this Mali, 36 id., 200 (1867); Titus v. Great, subject is New York, etc., R. R. Co. v. etc., Road Co., 5 Lans., 250 (1872) ; S. C, Schuyler, 34 N. Y, 30 (1865). Cf. Me- 61 N. Y, 237 (1874); Bank of Kentucky chanics' Bank v. New York, etc., R. R. v. Schuylkill Bank, Parsons' Select Co., 13 id., 599 (1856). See, also, as to Cas., 180, 216 (1846). This was a suit the point that overissued stock is void in equity by a bank against another even in the hands of bona fide holders, bank which, acting as its transfer agent, People's Bank v. Kurtz, 99 Pa. St., 344 had made a large overissue of its stock. (1882) ; Bruff v. Mali, 36 N. Y, 200 (1867) ; Tome v. Parkersburg, etc., R. R. Co., 39 People v. Parker, etc., Co., 10 How. Prac, Md., 36 (1873) ; Willis v. Phila., etc., R 543 (1854) ; Sewell's Case, L. R, 3 Chan. R Co., 6 Week. Notes Cas.. 461 (1879) ; App., 131, 138(1868); Wright's Appeal, 99 Willis v. Fry. 13 Phila., 33 (1879); Peo- Pa. St., 425(1882); Scovill v. Thayer, 105 pie's Bank v. Kurtz. 99 Pa. St., 344 U. S., 143 (1881). (1882). See, also, Daly v. Thompson, 10 s Sewell's Case, L. R, 3 Chan. App., Mees. & W., 309 (1842); In re Bahia, etc., 131 (1868); New York, etc., R. R Co. v. R. R. Co., L. R, 3 Q. B., 584, 595 (1868); Schuyler, 34 N. Y, 30, 56, 57 (1865). Simm v. Anglo, etc., Co., L. R., 5 Q. B. * New York, etc., R. R Co. v. Schuy- Div., 188 (1879): Waterhouse v. London, 395 § 293.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [en. XVII. This rule applies also to overissues of stock which are caused by the forgery on the part of one corporate officer of the names of other corporate officers. 1 etc., R. R Co., 41 L. T. (N. S.), 558 (1879); Mandelbaum v. North, etc., R R Co., 4 Mich., 465 (1857): Wright's Appeal, 99 Pa. St., 425 (1882). In many of these cases the overissue was due to a mis- take of the corporation in allowing a transfer of stock. The failure to sur- render an old certificate does not give a purchaser of stock, notice that an over- issue is being made. Allen v. South Boston R R, 22 N. E. Rep.. 917 (Mass., 1889). A party who purchases over- issued stock, but is not a purchaser in good faith for full value, cannot hold the company liable where the stock was issued by tlie executive committee with- out authority. Ryder v. Bushwick R R. 134 N. Y.. 83 (1892). 1 Where the secretary and treasurer of a corporation, who is also its agent for the transfer of stock, and authorized to countersign and issue stock when signed by the president, forges the name of the latter and fraudulently issues a certificate of stock, the corporation is liable to a bank which has accepted such certificate in good faith as security for a loan. In this case the bank caused inquiry to be made at the office of the railroad company and was in- formed by the secretary and treasurer that the certificate was genuine. The bank was allowed to recover although it had sold the forged stock, but had taken it back upon the forgery becom- ing known. Fifth Avenue Bank v. Forty-second Street, etc., Co., 33 N. E. Rep, 378 (N. Y., 1893). Where the treas- urer is the proper agent to issue stock and the president intrusts him with cer- tificates signed in blank, the corporation is liable for overissued stock issued and sold by the treasurer for his own bene- fit, even though no old certificate was surrendered. Allen v. South Boston R R.. 22 N. E. Rep, 917 (Mass., 1889). Where the secretary of the company has made fraudulent transfers of stock and falsified the share register, and fraudulently induced two of the di- rectors to affix the seal of the company to the certificates, the company is liable to a purchaser of the certificates. The measure of damages is the price paid by the purchaser for the certificate with interest thereon, the application for transfer having been made to the com- pany on that same day. lie The Ottos, etc., Mines, 68 L. T. Rep, 138 (1892); Shaw r. Port Philip & C. Gold Min. Co., L. R, 13 Q. B. D., 103 (1885), where the corporation was held liable on a cer- tificate signed and issued by the secre- tary of the corporation, but who had forged thereto the names of the other corporate officers whose signatures were necessary to the issue of a certificate of stock. Cf. Duncan v. Luntley, 2 McN. & G., 30 (1849). See, also, Manhattan Beach Co. v. Harned, 27 Fed. Rep., 484 (1886), where, however, the issue was by fraud rather than forgery ; Moores r. Citizens' National Bank, 111 U. S., 157 (1883); Brooklyn, etc., R R v. Strong, 75 N. Y, 591 (1878). See, also, §§ 294, 363, N. Y L. J., Aug. 5, 1889; 21 Pac. Rep., 894 (Colo., 1889). A person who takes a certificate of stock issued di- rectly from the corporation to himself, and takes it from the officer is- suing it, as collateral security for a personal obligation of such officer, is bound to inquire into the issue. If the stock is spurious such a holder is not a bona fide holder. Farrington v. South Boston R. R, 23 N. E. Rep., 109 (Mass., 1890). Where the transfer agent of a corporation makes out a certificate of stock and forges the name of a fictitious person to an assignment thereof, and issues a new certificate to such fictitious person and causes the proper officers to sign such certificate, and then signs the fictitious person's name thereto and 396 CH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. ..' 294. A corporation, like a natural person, is liable in damages for the torts and frauds of its agents when acting within the scope of their proper employment, and. when fraudulent certificates are issued by its officers, and pass innocently into the hands of bona fide holders for value, the corporation is estopped to deny the authority of such agents, and cannot escape liability for damages so resulting. If an innocent holder of overissued stock brings an action in equity to compel the corporation to record the transfer, he will be denied that relief, but may have, in lieu thereof, damages at law. 1 The. better remedy in such a case, therefore, is an action at law; . nd the pleasure of damages is the market value of the stock at the time the transfer was demanded. 2 §294. Defenses of (lie corporation to such actions.— It frequently happens that an overissue of stock is made without a strict com- pliance with the formalities of an issue of genuine stock. Gener- ally, certificates of stock must, according to the by-laws of the corporation, be signed by certain specified corporate officers. Often, however, nothing in the charter or by-laws of the corporation reg- ulates the form or contents of a certificate of stock. Accordingly, when action is brought against a corporation on overissued stock, the defense is sometimes set up that the certificates were not signed by the proper officers, or were not issued with the usual formalities, and consequently that, the purchaser having had no- sells it, the company is liable in dam- special amount of stock by the person ages to a purchaser of the certificate, designated therein, or his assignee, and Jarvis v. Manhattan Beach Co., 6 N. Y. the purchaser has a right to rely Supp., 703 (1889); S. C, 53 Hun, 362. thereon and claim the benefit of an Where the signature of the president estoppel in his favor as against the cor- and treasurer to certificates is required poration." See. also. Appeal of Jeans, and the president issues fraudulent cer- 11 Atl. Rep., 862; Paper Co.'s Appeal, tificates to himself and forges the treas- 99 Pa. St., 513. urer's name thereto, the corporation is l Willis v. Phila., etc., R. R. Co., 6 not liable therefor, even to bona fide Week. Notes Cas., 461 (1879); People's purchasers. Hill v. Jewett, etc., Co.,' 28 Bank v. Kurtz, 99 Pa. St., 344 (1882). X. E. Rep., 142 (Mass., 1891). In the 2 People's Bank v. Kurtz. 99 Pa. St., case of Swain v. West Philadelphia, etc.. 344 (1882) ; Willis v. Phila., etc., R. R. R'y(see 18 Atl. Rep., 383), the supreme Co., 6 Week. Notes Cas., 461 (1879); court of Pennsylvania held a corpo- Tome v. Parkersburg, etc.. R. R. Co., ration liable for a fraudulent, false, 39 Md., 36 (1873). It is, however, a con- spurious and void issue of stock by its dition precedent to maintaining such an president " The liability of the railway action that the holder of the overissued company arises on the principle of es- stock discharge any lien upon it which toppel, which the necessities of trade would have properly attached to gen- and commerce require. Stock certifi- uine stock under the same conditions, cates issued by a corporation having Mt. Holly Paper Co.'s Appeal, 99 Pa. power to issue is a continuing con- St., 513 (1882). firmation of the ownership of the 397 295.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [dl. XVII. tice of the infirmity, the corporation is not liable. But such a defense is not favored by the courts. 1 "Where, however, the charter provided that certificates of stock should be signed by the presi- dent, directors and treasurer, fraudulent overissues signed by the president and treasurer alone were held not sufficient to charge the corporation. 2 § 295. Personal liability of the officers of tlie corporation on over- issued stock. — The officers of a corporation who are authorized to issue certificates of stock to the stockholders are liable, in tort, both to the immediate purchasers from them of spurious stock, falsely and fraudulently certified by them, and also to any subsequent pur- chaser buying upon the faith of the false certificate, and sustaining damage thereby. 3 There may be a joint action against the corpora- tion and the corporate agents issuing the stock, or a separate action against either. 4 A corporation may sue in assumpsit its treasurer i New York, etc., R R Co. v. Schuy- ler, 34 N. Y., 30 (1865). Thus, where an officer of a corporation fraudulently is- sued stock for his own use, controlled all the books relating to the stock, and countersigned all the certificates, the corporation was held liable for the spuri- ous stock. Tome v. Parkersburg, etc., R R Co., 39 Md., 36 (1873). So, also, where overissued stock is issued under the genuine seal of the corporation, the corporation is liable. People's Bank v. Kurtz, 99 Pa. St., 344 (1882). See, also, Manhattan Beach Co. v. Harned, 27 Fed. Rep., 484 (1886). The last case, however, was where the corporate officers issued stock, not in excess of the capital stock, but a part of the unissued original capital stock. They issued it not for the corporation, but in fraud of it and for their own benefit See, also, § 293, supra. 2 Hoi brook v. Fauquier, etc., Turnpike Co., 3 Cranch, C. C, 425 (1829). And overissued stock issued by the president to his private debtor, in payment of his private debt, has been held not to con- fer on such debtor a right to hold the corporation responsible. Wright's Ap- peal, 99 Pa. St, 425 (1882). In this case the court assumes that the debtor could not be heard to claim bona fides. SBruff v. Mali, 36 N. Y, 200 (1867); Seizer v. Mali, 41 id., 619 (1869), revers- ing S. C, 32 Barb., 76 (I860); 11 Abb. Prac, 129; Cazeaux i\ Mali, 25 Barb.. 578 (1857). And the holder of genuine stock has an action against them for tlie depreciation of its value by reason of the overissue. Shotwell v. Mali, 38 id., 445 (1862). A person receiving stock from the directors of a corporation, in pledge for a loan to it, they knowing that the stock was overissued, may sue the directors for damages in an action for deceit. Whitehaven, etc., Co. v. Reed, 54 L. T. Rep.. 360 (1886); National Exchange Bank v. Sibley, 71 Ga., 726 (1883). See, also, Daly v. Thompson, 10 M. & W., 309 (1843;. By statute in many of the states such forgeries are made a special criminal offense. Regina r. Nash, 2 Denison's Crim. C, 493 (1852); New York Penal Code, § 591. Concerning the requirements of an indictment for issuing fraudulent stock, see West v. People, 27 N. E. Rep., 34 (111., 1891). 'Bruff v. Mali, 36 N. Y, 200 (1867). And when the action is against the offi- cers responsible for the fraudulent over- issue, if the evidence shows that the entire capital stock of the company had been issued prior to the dates of tlie certificates purchased or held by the plaintiff, and if it appears that the de- fendants prior thereto had, as officers of 398 CH. XVII. J INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§§ 296, 297. who has illegally issued excessive stock and converted the proce3ds to his own use. 1 § 296. Liability oftlie vendor of overissued stock. — In the absence of fraud the purchaser of overissued and spurious stock cannot hold his vendor liable thereon. The hona fide vendor can be held to warrant onlv his own title to the shares, not the right of the corporation to issue them. If he came by them honestly and sells them in good faith there is no recourse to him, even though they turn out to be spurious. 2 § 297. Equity will enjoin voting, transferring or dividends on such stock, and will adjust the rights of all parties. — A court of equity will, upon a proper application, grant an injunction to pre- vent the transfer of illegally-issued stock, or the payment of divi- dends thereon, or the voting of the pretended owners of such stocks. 3 The most effectual remedy in these cases is a suit in equity, insti- tuted by the corporation, whereby, in one proceeding, the rights and liabilities of all persons concerned with the overissue of the stock are fully and finally determined and adjudicated, and the overissued stock itself is retired and destroyed. Such a proceeding is in the nature of a bill to quiet title, or to remove a cloud from the title of the genuine stock. Spurious or overissued stock, issued by corporate officers having the apparent authority, and outstand- ing in the hands of numerous holders, is a cloud upon the title to the genuine stock. It is a cloud which a court of equity will re- move; and a suit to that end may be commenced, either by the corporation 4 or by the stockholders themselves in their own behalf, the corporation, issued spurious certifi- to the liability of brokers for the forgery cates of stock, then there is a presump- of their employees in delivering spurious tion of law that the certificates in con- stock to a customer, see Andrews v. troversy are false and fraudulent, and Clark, 20 Atl. Rep., 429 (Md., 189(k In the burden is upon the defendants to the case Isham v. Post. N. Y. L. J., April show that these particular certificates 18, 1893, a broker was held liable to his were issued, either upon the surrender customer for whom he had purchased of certificates of genuine stock, or upon certificates of stock which turned out the transfer on the books of the com- to be forgeries. See, also, ch. XXV. pany of such stock — facts peculiarly 3 Kent v. Quicksilver Mining Co., 78 within the knowledge of the corporate N. Y., 159. And where a corporate offi- officers. Shotwell v. Mali, 38 Barb., 445, cer issues illegal and unauthorized stock 469 (1862), a well-considered case ; Bruff he may be enjoined from allowing a v. Mali, supra. transfer of it if proof is given of its ille- 1 Rutland R. R v. Haven, 19 Atl. Rep., gal character and of a proposed trans- 769 (Vt, 1890). fer. Sherman v. Clark. 4 Nev., 138 2 State v. North Louisiana, etc., R R (1869). Co., 34 La. Ann., 947 (1882); People's 4 New York, etc., R R Co. v. Schuy- Bank v. Kurtz, 99 Pa. St, 344 (1882); ler, 17 N. Y, 592(1858). Stock purchased Seizer v. Mali, 41 N. Y, 619 (1869). As from the secretary, as secretary, is not 399 § 298.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII. • where the corporation fails or refuses to institute it. 1 "Were it not for this remedy in equity a corporation whose officers have fraud- ulently issued spurious stock would soon be thrown into insolvency and a receivership by reason of the multitudinous suits at law which would be brought, attended as such suits are by attachments and heavy bills of costs. In order to protect, preserve and ad- minister the corporate assets in such cases, and in order to prevent a multiplicity of suits and remove a cloud from the title to the other stock, a court of equity will assume jurisdiction. § 298. Subscriber s right to defeat a subscription to overissued stock, and to recover uacli money paid thereon. — In addition to the remedy in equity, the holder of overissued stock has the further right at law to defeat an action on his subscription therefor; and that, too, even though he knew it to be overissued at the time the subscription was made. There can be no estoppel in such a case ; and not even creditors can enforce any liability on spurious or over- issued stocks. 2 "Where also a subscriber has paid an instalment on his subscription, although he knew when he made the subscription and paid the money that it was an illegal and unauthorized issue, he may rescind, and recover back what he has paid. 3 In Iowa it has been held that payment of a note given for overissued stock cannot be enforced' where the consideration was expressed in the note to be the stock of the corporation to which the note was given, and the directors subsequently made an illegal and unauthorized increase in the stock, the maker of the note having had notice that a large amount of illegal stock had been issued, and that the illegal good if overissued, and if the secretary Cftrk v. Turner, 73 Ga., 1 (1884). Al- sold it for his own benefit, even though though a corporation has taken more it was duly signed. A bill in equity lies subscriptions than its capital stock and to cancel it. Cincinnati, etc., R'y v. Citi- has issued certificates therefor, yet this zeus' Nat'l Bank, 3 R'y & Corp. L. J., does not release subscribers up to the 459 (Cin. Court, 1888). correct amount. Cartright u Dickinson, i Dewing v. Perdicaries, 96 U. S., 193 13 S. E. Rep., 1030 (Tenn., 1890). (1877) ; Wood v. Union, etc., Ass'n, 63 3 Knowlton v. Congress, etc., Co., 14 Wis., 9 (1885) ; Perdicaris v. Charleston Blatch, 364 (1877) ; aff'd, 103 U. S., 49 Gaslight Co., Chase's Dec, 435 (1869). (1880); Reed v. Boston Machine Co., 141 Cf. Taylor v. South & North Ala, R. R. Mass., 454 (1886). And the dissenting Co., 4 Woods, 575 (1882), where the sub- opinion of Dwight, Com'r, in Knowlton scriber acquiesced ten years. The court v. Congress, etc., Co., 57 N. Y., 518, 540 denied any relief. In an action to can- (1874). This case, however, was not eel illegally increased stock the plaintiff strictly a case of overissued stock. A must offer to surrender the part held by different class of cases exists where an himself. Byers v. Rollins, 21 Pac. Rep., increase of capital stock is authorized, 894 (Colo, 1889). but is irregularly made. A subscriber 2 Scovill v. Thayer, 105 U. S., 143 (1881) ; is then liable. See § 289, siqwa. Page v. Austin, 10 Can. Sup. Ct., 132; 400 CH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 298. and valid stock could not be distinguished. 1 Bat it is held that one who subscribes for overissued stock, bona Jide, upon discovering that the stock is spurious cannot have a receiver appointed, pend- ing an inquiry into the legality of the stock, to the end that, in case the stock is judicially declared invalid, such subscriber may re- cover back from the corporation the money so paid for the spurious shares, where the money received by the company had not been kept separate from its general funds, and could not be traced and identified. 2 1 Merrill v. Gamble, 46 Iowa, 615 2 Whelpley v. Erie Railway Go., 6 (1877) ; Merrill v. Beaver, 46 id., 646 Blatch., 271 (1868> (1877); Merrill v. Beaver, 50 id., 404 (1879). (66) 401 PART II. TKANSFEKS OF STOCK. CHAPTER XVIII. LEGACIES AND GIFTS OF STOCK § 299. Definitions of general, specific and demonstrative legacies of stock. 300-301. Importance of the difference between general and specific legacies. 302-303. Legacies of stock are con- strued to be general if the lan- guage will permit. § 304-305. Amount of stock conveyed by certain legacies. 306. Ademption of revocation of a legacy of stock, and abate- ment Duty of executor as regards spe- cific or general legacies. Gifts of stock. 307. 308. § 299. Definitions of general, specific and demonstrative legacies of stock. — A general legacy of stock is a legacy whereby it be- comes the duty of the executor or administrator to give to or pro- cure for the legatee a certain amount of stock, as indicated by the will, there being nothing in the will itself to indicate that the legacy is to be satisfied from stock actually owned by the testator. A spe- cific legacy of stock arises when the testator, in his will, directs or clearly indicates that the legacy is to be satisfied from stock which he owns. A demonstrative legacy of stock is the same as a gen- eral legacy, except that it is to be purchased from a particular fund of the estate. Demonstrative legacies of stock are of little impor- tance as compared with the other two kinds. 1 § 300. Importance of the difference between general and specific legacies. — It is frequently of the greatest importance whether a legacy be a general or a specific one. A large number of decisions, running: back for nearly two hundred years, have been made in en- deavoring to lay down rules on this subject. The complications, 1 That a legacy of stock may be de- " may be either specific or general, ac- monstrative, see Ives v. Canby, 48 Fed. cording to the circumstances. It is Rep., 718 (1891). That legacies of stock never demonstrative. A demonstrative may be demonstrative has been assumed legacy is always pecuniary — differing, by the cases. In the case, however, of however, from an ordinary legacy in Eckf eld's Estate, W. N. C. (Penn.), 19 being referred to a particular fund or (1879), the court says a legacy of stock source of payment" 402 CH. XVIII.] LEGACIES AND GIFTS OF STOCK. [§ 301. contradictions, inconsistent decisions and. doubt that have arisen from the inherent difficulties of the subject are frequently adverted to and deplored by succe sive generations of judges. The importance of determining whether a legacy of stock is gen- eral or specific rests in the fact that if it is specific it is entitled to certain advantages, and, on the other hand, is exposed to certain perils; while, if it is general, it is without those advantages, but is also free from the perils. The advantages of a specific legacy of stock are that debts of the estate are to be paid from other funds; the specific legacy passes, though other legacies fail partially or wholly by reason of deficiencies in the estate; and the specific leg- atee is entitled to all dividends declared after the testator's death, instead of losing the first year's dividends, as in case of a general legacy of stock. General legacies of stock have none of these ad- vantages. On the other hand, a specific legacy of stock is open to the great danger of being revoked by the acts of the testator, and frequently so when the testator has no intention of revoking the legacy. 1 This revocation, arising by implication from the acts of the testator — such as selling the stock bequeathed, or using it in any wayjnconsistent with the idea of its passing under the will — is a danger that does not exist if the legacy is a general one, since general legacies of stock may be carried out by the executor s pur- chasing the stock for the purpose of the legacy. § 301. If a specific legacy will apply equally to paid-up stock and to stock not paid up, the legatee may take the former. 2 If 1 Kenkel v. Macgill, 56 Md., 120 (1880), cific and demonstrative legacy is thus the court saying : " If the legacy is to described : be considered specific, then, in the event " The points of difference between of the testator's parting with the thing specific and demonstrative legacies are or property bequeathed, or if from any these : cause it should be lost or destroyed, the " A specific legacy is not liable to legacy fails. Then, again, such lega- abatement for the payment of debts, cies are not liable to abatement with but a demonstrative legacy is liable to general legacies ; nor are they liable to abate when it becomes a general legacy contribution towards the payment of by reason of the failure of the fund out debts." Where evidently the intent of which it is payable. A specific legacy was to give specific bonds it was so is liable to ademption, but a demonstra- decreed. Davies v. Fowler, L. R, 16 tive legacy is not. A specific legacy, if Eq., 308 (1873); Walton v. Walton, 7 of stock, carries with it the dividends Johns. Ch., 257 (1823) ; Jacques v. Cham- which accrue from the death of the tes- bers, 2 Coll., 435 (1846), holding also tator, while a demonstrative legacy does that the legatee may select his stock not carry interest from the testator's from different classes, but that he must death." pay calls on the stock due at the time 2 Millard v. Bailey, L. R, 1 Eq., 378 of the testator's death but not paid. In (1866) ; Jacques v. Chambers (1846), the case of Mullins v. Smith, 1 Dr. & Sm., supra, 204 (1860), the difference between a spe- 403 § 302.] LEGACIES AND GIFTS OF STOCK. [CH. XVIII. the testator has made payments on the stock before calls have been made, the legatee is entitled to the benefit. 1 If there is both a specific and a general legacy of the same stock, the specific is to be first satisfied. 2 The specific legatee takes all the income and profits of the stock, 3 whereas the general legatee has no interest in the stock until twelve months after the testator's death. 4 The spe- cific legatee takes the stock, although there will then be no prop- erty left to pay pecuniary legacies. 5 However, he can have only so much stock of that kind as the testator dies possessed of; 6 and if the latter dies possessed of none, the specific legatee takes none. 7 The specific legatee does not take dividends declared and due be- fore the testator's death, although such dividends have not been collected. 8 § 302. Legacies of stock are construed to be general if the lan- guage will permit. — It is the policy of courts of justice to uphold and carry out a legacy, and implied revocations are not looked upon with favor. According^, in order to avoid the danger of ademption, to which specific legacies are subject, the rule has be- come established that general legacies are to be favored by the courts; and, if there is doubt as to whether a legacy be specific or general, it will be construed to be of the latter kind. 9 Where, however, the intent of the testator clearly was to give particular stock owned by him, the court will declare the legacy to be a specific one. Thus, where the testator gives the legacy of stock by describing it as " my " stock, the legacy is a specific one. 10 i Tanner v. Tanner, 11 Beav., 69 (1848). 2 Beav., 259 (1840) ; Hayes v. Hayes, 1 2 Barton v. Cooke. 5 Ves., 461 (1805). Keen, 97 (1836); Brainerd v. Cowdrey, 3 Loring v. Woodward, 41 N. H, 391 16 Conn., 1 (1843). The omission of the (1860), holding also that parol evidence word li my " does not necessarily make cannot show a contrary intent of the the legacy a general one. Avelyn v. testator. Ward, 1 Ves. Sr., 420 (1749). The word 4 Webster v. Hale, 8 Ves., 410 (1 803). " my " does not. however, have the same 5 Drinkwater v. Falconer, 2 Ves. Sr., significance in its application to a legacy 622 (1755). of an annuity as it has to a legacy of « Gordon v. Duff, 28 Beav., 519(1860); stock. Kirby v. Potter, 4 Ves., 748 Ashton v. Ashton, 3 P. Wms., 384 (1735). (1799). In the case of Parrott v. Wors- " Evans v. Trip, 6 Mad., 91 (1821). fold, 1 Jac. & Walker, 574 (1820), a leg- 8 Perry v. Maxwell, 2 Dev. Eq. (N. C), acy of "all my stock that I may be 487 (1S34). possessed of at my decease " was held 9 Davies v. Fowler, L. R, 16 Eq., 308 to be general, since there was no "indi- (1873); Tifftu Porter, 8 N. Y., 516, 520; vidual thing given." Bequests in dif- Eckfeld's Estate, 7 W. N. C. (Pa.), 19 ferent sums to different legatees of (1879). " my " stocks and bonds at their par 10 Walton v. Walton, 7 Johns. Ch. 257 value, not describing them particularly. (1823) ; Loring v. Woodward, 41 N. H, are general legacies. They are not void 391 (1860) ; Shuttleworth v. Greaves, 4 for uncertainty. In re Hadden's Will, Mylne & Cr., 35 (1838) ; Miller v. Little, 9 N. Y. Supp., 453 (1890> 404 CH. XVIII.] LEGACIES AND GIFTS OF STOCK. [§ 302. So also where the phrase "standing in my name" 1 is used, or " which I hold;" 2 or a direction is given to make up the specified amount from the general fund if the testator does not hold enough ; 3 or the testator describes the stock as "now lying in the three per cents.;" 4 or uses the word "such;" 5 or makes a legacy of stock out of a quantity of stock; 6 or in another part of the will speaks of the stock as that of which the testatrix may die possessed; 7 or where, after several legacies, all apparently general, the testator bequeaths the remaining stock "standing in my name," — the effect of all these is that the legacies are specific. 8 A legacy of all the dividends, interest and proceeds from stock is a specific legacy, even though the testator did not own such stock at the time he made the will. 9 There has been some dilference of opinion as to whether the fact that the testator, at the time of making the will, possessed an equal or greater amount of stock than that bequeathed, and of the same kind, is to be taken as evidencing an intent to . i Lmllam's Estate, 13 Pa. St., 188 (1850); Gordon v. Duff, 28 Beav., 5l9 (1860); Kampf v. Jones, 2 Keen, 756 (1837). Where, however, other parts of the will indicate that the legacy was general, it was held to be general. See Auther v. Auther, 13 Sim., 422 (1843), holding also that though, by the delay of the executor beyond a year in pur- chasing the stock, it rises, the legatee is entitled to the same amount as if it had been bought at the right time. Fidelity Trust Company's Appeal, 108 Pa. St., 339 and 492 (1885). ^Blackstone v. Blackstone, 3 Watts, 335 (1839). STownsend v. Martin. 7 Hare, 471 (1849), holding that such a legacy is specific and not demonstrative. The case, however, of McGuire v. Evans, 5 Ired. Eq. (N. C), 269 (1848). holds that a legacy of stock, to take effect in case other legacies do not absorb that stock, is demonstrative ; also that in case of legacies of the same stock to two differ- ent persons, each takes a moiety. The cases of Mulling v. Smith, 1 Dr. & Sm., 204 (1860) ; Fountaine v. Tyler, 9 Price, Ex., 94 (1821); and Queen's College v. Sutton, 12 Sim., 521 (1842), hold that such a legacy is specific if the testator leaves stock enough, but is general if he does not leave enough. "Morely v. Bird, 3 Ves., 628 (1800), holding that if the executor has sold the stock the legatees may hold him liable for its value one year after the testator's death. 5 Davies v. Fowler, L. R., 16 Eq., 308 (1873), the court saying that a legacy is specific when a meting out or dividing is evidently intended. 6 Hasking v. Nicholls, 1 Y. & C. Ch., 478 (1842). And if the administrator has paid the dividends to another, he is per- sonally liable. A legacy of " ten shares of the stock of the W. & N. R. Co." is a specific legacy, where a subsequent clause bequeathes "the balance of my stock as per my stock book." Trustees, etc., v. Tufts, 23 N. E. Rep., 10j06 (Mass., 1890). 7 Measure v. Carleton, 30 Beav., 538 (1862). This case also holds that, if an exact partition of the stock is impossible, enough will be sold to render it possiUe. sSleech v. Thorington, 2 Ves. Sr., 560 (1754). A legacy of all of several arti- cles is specific. Tomlinson v. Bury, 14 N. E. Rep., 137 (Mass.. 1887). "Stephenson v. Dawson, 3 Beav., 342 (1840). See, also, Fidelity Trust Com- pany's Appeal, siqn-a. 405 § 303.] LEGACIES AND GIFTS OF STOCK:. [CH. XVIII. make the legacy specific. The weight of authority holds that such a fact is not to be taken into consideration, and that if the words of the legacy make it general, it cannot be construed to be specific simply because by an examination of the testator's effects he is found to have possessed stock similar to that described in the will. 1 § 303. The most common form of a general bequest of stock is where the testator merely bequeaths a specified number of shares of a specified kind to the legatees, without any further words indi- cating that he then held or expected to hold the stock bequeathed. 2 A direction to the executors to invest a certain sum in specified, stock for the benefit of the legatee is a general legacy. 3 So, also, where the executors are directed to transfer to the legatee certain stock. 4 A legacy of the residue of the testator's stock has been held to be a general legacy. 5 A legacy to be paid " out of the four per cents." is general. 6 A codicil which is general in form is held 'Robinson v. Addison, 2 Beav., 515 (1840), the court holding that the legacy was general, and saying the testator " in effect gave such an indefinite sum of money as would suffice to purchase so many shares as he had given ; " Davis v. Cain's Ex'r, 1 lied. Eq. (N. C), 304 (1840); Bransdan v. Winter, Ambl., 56 (1738): Simmons v. Vallance. 4 Brown's Ch., 346 (1793) ; Bishop of Petersborough v. Mortlock, 1 Brown's Ch., 565 (1784) ; Boys v. Williams, 2 Russ. & MyL, 689 (1831); Partridge v. Partridge, Cases temp. Talbot, 226 (1730); Tifft v. Poller, 8 N. Y., 516 (1853), where the court say : " The mere possession by the testator, at the date of his will, of stock of equal or larger amount than the legacy, will not of itself make the bequest specific ; " Osborne v. McAlpine, 4 Redf. (N. Y. Surr.), 1 (1878); Eckfeld's Estate, 7 W. N. C. (Pa.), 19 (1879); Sponsier's Ap- peal, 107 Pa. St., 95 (1884), where the court also held that a codicil repeating a general legacy of stock wdl entitle the legatee to both legacies. In Massachu- setts a doctrine contrary to that stated in the text prevails. See White v. Win- chester, 23 Mass., 48 (1827); Metcalf v. First Parish, 128 Mass., 370 (1880). To same effect, Cuthbert v. Cuthbert, 3 Yeates (Pa.), 486 (1803); Jeffreys v. Jeffreys, 3 Atk., 120 (1744;. 2 Wilson v. Brownsmith. 9 Ves., 180 (1803), holding also that, if there is not , enough of such stock among the tes- tator's assets, the deficiency must be purchased for the legatee. Pearce v. Billings, 10 R. I., 102 (1871), the court saying that the evident intent of the testator was " to have the stock men- tioned purchased for the legatees by his executor, or to have the legatees fur- nished with the means to purchase the stock for themselves." The value of the stocks one year after the testator's death is the amount to be paid to the legatees. In the case of Purse v. Snaplin, 1 Atk.. 413 (1737), where two legacies of stock of 5,000?. each were given, and the testator had but 5,000?. of stock, the court held that the general estate must purchase 5,000/. of the same stock. a Raymond v. Brodbelt, 5 Ves., 199 (1800). 4 Lambert v. Lambert. 11 Ves., 607 (1805) ; Sibley v. Perry, 7 Ves., 522 (1802), the court saying a legacy is not specific " without somethiug marking the sp3cific thing — the very corpus; without de- scribing it as standing in his name, or by the expression ' my stock,' etc." 5 Parrot v. Worsfold, 1 Jac. & W., 574 (1820). Contra, Bethune v. Kennedy, 1 Myl. & C, 114 (1835). * Deane v. Test, 9 Ves., 146 (1803). 406 CH. XVIII.] LEGACIES AND GIFfS OF STOCK. [§§ 304, 305. to be such, although it is but an increase of a previous legacy which is specific, and which is revoked by the codicil. 1 §304. Amount of stock conveyed oy certain legacies. — A legacy of "one hundred pounds, long annuities," has been held to mean not that the legatee is entitled to an annual income from the estate of one hundred pounds, but that he was entitled to have that amount invested for him. 2 A will reciting the amount of stock held by the testatrix, and bequeathing it, or so much as should be standing in her name at her death, does not give to the legatee stock acquired after the making of the will and before the death of the testatrix. 3 A bequest of stock " that I possess " is held to mean stock possessed by the testator at the time of making the will. 4 § 305. There has been some controversy and doubt as to whether a legacy of the testator's "money" would give to the legatee the testator's stock in a corporation. The decided weight as authority holds that it does not. 5 Nor will shares of stock belong to a legatee Johnson v. Johnson, 14 Sim., 313 (1844). 2Att'y-Gen. v. Grote, 2 Russ. & Myk, 699 (1831); Fonnereau v. Payntz. 1 Bro. Ch„ 412 (1785). See Pearee v. Bil- lings, supra. Contra, Stafford v. Hor- ton, 1 Bro. Ch., 421 (1785). See, also, §560. SHotkam v. Sutton, 15 Ves., 319 (1808). So, also, of a legacy of " the whole of my stock in the Housatonic Bank, amounting to $6,000." The legatee does uot take stock subsequently acquired. Foote, Appellant, 39 Mass., 299 (1839); Douglass v. Douglass, Kay, 404 (1854). The case of Fidelity Trust Company's Appeal, supra, states that at common law a specific legacy of stock spoke from the death of the testator, and that the English Wills Act of 1838. and the Pennsylvania act of 1879, were but de- claratory in that respect If the tes- tator, in making a specified bequest of stock, speaks of the stock as " now stand- ing in my name," the statute does not apply, and the bequest speaks from the date of the will. In Miller v. Miller, 2 Beav., 259 (1840), the testator gave " one share to each child him surviving." He then had eight shares and seven chil- dren. At his death he had ten shares and 40' eleven children. Only the eight shares were held to pass. * Cochran v. Cochran, 14 Sim., 248 (1844). This rule is sometimes changed by statute. See, in England, § 24, Wills Act, applied in Trinder v. Trinder, L. R., 1 Eq., 695 (1866), and Goodlad v. Bur- nett, 1 K. & J„ 341 (1855) ; Hepburn v. Skerving, 4 Jur. (N. S.), 651 (1858) ; Wag- staff v. Wagstaff, L. R., 8 Eq., 229 (1869) : Bothamley v. Shersan, L. R. 20 Eq., 304 (1875), and preceding note. Legacy of bank stock conveys all stock deposited in bank, there being no shares of bank stock owned by the testator. Tomlin- son v. Bury, 14 N. E. Rep., 137 (Mass., 1887). A will may bequeath not only the stock standing in the name of the testatrix, but also certificates of stock owned by her but standing in the name of others. Angell et al. v. Springfield Home for Aged Women, 31 N. E. Rep., 1064 (Mass., 1892). 1 Mullins v. Smith. 1 Dr. & Sm., 204 (1860); Hotham v. Sutton, 15 Ves., 319 (1808) ; Lowe v. Thomas. Kay, 369 (1854), affirming 5 De G., M. & G, 315 (1854); Goshen v. Dotterill. 1 Myl. & K, 56 (1832); Hundleston v. Gouldsbury. 10 Beav., 547 (1847) ; Douglas v. Congreve, 1 Keen, 410, 424 (1836); Willis v. Plus- § 305.] LEGACIES AND GIFTS OF STOCK. [CH. XVIII. to whom the testator has given, by a last will and testament, his " securities for money," J or " furniture," and all claims and de- mands of whatever nature, 2 or " every other article," 3 or " ready money," 4 or goods, 5 or " money and effects ; " 6 but they will pass under a bequest of the " personal estate," 7 or " residue of money," 8 or " chattels." 9 If the testator, in describing the stock bequeathed, has very clearly made a mistake in the description, the legacy will be held to apply to the stock intended to be bequeathed. Thus, where the testator has "City Bank" stock, but bequeaths " Me- chanics' Bank " stock, and the intent was to bequeath the former, the court will render a decree to that effect. 10 Where, subsequently to the making of the will, and before the death of the testator, the stock bequeathed is changed in its character by operation of law, the legatee will nevertheless be entitled to the stock in its new form. 11 In England, where "shares" corresponds to the American " stock," but " stock " is a term applicable to a paid-up interest, kett, 4 Beav., 208 (1841); Ogle v. Knipe, L. R., 8 Eq., 436 (1869); Ommaney V. Butcher, 1 Tur. & R, 260, 272 (1823), holding also that a bequest of stock for an indefinite charity fails; Beck, Ex'r, v. McGillis, 9 Barb., 35, 39 (1850). Contra, Waite v. Coombes, 5 De G. & S., 676(1852); Chapman v. Reynolds, 28 Beav., 221 (1860), where the testator had no property but stock ; Bescoby v. Pack, 1 Sim. & Stu., 500 (1823), holding- that '"money" will pass the '-funds." but not stock in private corporations ; New- man v. Newman, 26 Beav., 218 (1858), where the legacy was of " surplus money ; " Jenkins v. Fowler, 63 N. H., 244 (1884). i Turner v. Turner, 21 L. J. (Ch.), 843 (1852). * Delamater's Estate, 1 Whart (Pa.), 362 (1836). ;i Collier v. Squire, 3 Russ., 467 (1827). 4 May v. Grave, 3 De G. & Sin., 462 (1849). 5 Cowling v. Cowling, 26 Beav., 449 (1859). Contra, Kendall v. Kendall. 4 Russ. Ch., 360 (1828). Stock passes un- der a legacy of "my property at K.'s bank," the certificates being there. Re Prater's Estate, 58 L, T. Rep., 784 (1888). 6 Borton v. Dunbar, 30 L. J. (Ch.), 8 (1861). 7 Kermode v. Macdonald, L. R, 3 Ch., 584 (1868). s Dawson v. Gaskoin, 2 Keen, 14 (1837) ; Fulkerou v. Chitty, 4 Jones' Eq. (N. C), 244 (1858). 9 Kendall v. Kendall, supra. 10 Roman Catholic Orphan Asylum v. Emmons, 4 Redf. (N. Y.), 144 (1855); Door v. Geary, 1 Ves. Sr„ 255 (1749), holding that a bequest of " East India stock " will apply to bank stock, when the testator had the latter but none of the former. See, also, Trinder v. Trin- der, L. R, 1 Eq., 695 (1866), where a legacy of " Great Western Railway " stock was held to apply to the stock of a road absorbed by the Great Western Railway: Oakes v. Oakes, 9 Hare, 666 (1852), where a bequestof "shares " was held to apply to " stock ; " Gallini v. Noble, 3 Mer. Ch., 690 (1810); Penticost v. Ley, J. & W., 207 (1820) ; Clark v. At- kins, 90 N. C, 629 (1884), where "bank stock " was held to pass bonds. A pal- pable mistake of the testator in describ- ing a legac)- of bonds will be corrected by the court. Holt v. Jex, 48 Hun, 528 (1888). '» See §306, note 9. :os ch. xvni.] LEGACIES AND GIFTS OF STOCK. [§ 305. which, like a bank deposit, may be used in large or small quanti- ties, a bequest of " shares" does not pass " stock" if there be any " shares " to which the legacy may apply. 1 The words " funds " or "public funds" will include long annuities; 2 and "foreign funds" means securities guarantied by foreign governments ; 3 but " funds " will not include bank stock, 4 nor East India stock.* An uncondi- tional bequest of the dividends of stock is a bequest of the stock itself. 6 But a bequest of a specific sum to be paid from stock does not bequeath the stock itself, although amounting to a charge upon it. 7 A bequest of stock to a legatee " to draw the income arising therefrom during her life-time, and at her death to dispose of the same as she shall see fit," vests the title to the stock, when it is set apart, in the legatee, even though the executors are directed to collect and pay to her the dividends. 8 A bequest of the " rest and residue after deducting " certain specific legacies of stock in- cludes those legacies, if they have lapsed by reason of the death of the legatees. 9 A general bequest of stock applies to full-paid as well as partly-paid stock. 10 Legacies may be made of stock over which the testator has the power of appointment, 11 and a will lOakes v. Oakes, 9 Hare, 666 (1852). 2 Howard v. Kay, 27 L. J. (Ch.), 448 (1858). s Ellis v. Eden, 23 Beav.. 543 (1857); Cadetfc v. Earle, L. R., 5 Ch. D.. 710 (1877), properly holding that New York and Ohio are foreign governments. Cf. Longdale's Settlement Trusts, L. R, 5 Ch. D., 710 (1877), relative to French railway securities. 4 Slingsby v. Granger, 7 H. L. Cases, 273 (1859). 5 Brown v. Brown, 4 K. & J., 704 (1858). 6 A bequest of dividends and income to an institution as a permanent fund is an absolute gift of the stock. Angell v. Springfield Home for Aged Women, 31 N. E. Rep., 1064 (Mass.. 1892); Collier v. Collier, 3 Ohio St., 369 (1854) ; Haig v. Swiney, 1 Sim. & Stu., 487 (1823) ; Page v. Leapingwell, 18 Ves., 463 (1812) ; Fox v. Carr, 16 Hun, 566 (1879), involving a similar question. Cf. Blann v. Bell, 2 De G., M. & G., 775 (1852), holding that this rule applies only to the "funds," but not to stock in private corporations. A legacy of stock to A., " the dividends derived from the same to be paid to her by B., whom I name as trustee for said stock and bonds, as said dividends may accrue from time to time," passes com- plete title to the legatee. No trust exists. Appeal of Arnold, 6 Atl. Rep., 751 (Pa., 1886). " Wilson v. Maddison, 2 Y. & C. Ch., 372 (1843). 8 Onondaga Trust & Deposit Co. r. Price, 87 N. Y., 542 (1882). 9 Carter v. Taggart, 16 Sim., 423 (1848) ; Shuttleworth v. Greaves, 4 Myl. & Cr., 35 (1838), holding that a legacy of stock lapses as to those dying before the tes- tator, though it is given to them, " their executors, administrators or assigns." io Emery v. Wason, 107 Mass., 507 (1871). This case holds also that, where a call on the stock becomes due the day after the testator died, it was the duty of the executor to pay it from the gen- eral fund. » See Re David's Trusts, 1 Johns., 495 (1859); Innis v. Sayer, 3 Mac. & G, 606 (1851); Lawnds v. Lawnds, 1 You. & Jer., 445 (1827;; Nanuock v. Horton, 7 Ves., 391 (1802); Re Gratwick's Trusts, L. R, 1 Eq., 177 (1865); Warren v. Pas- tlewaite, 2 Coll. Ch., 116 (1845); Walker 409 § ■ 306.1 LEGACIES AND GIFTS OF STOCK. [CH. xviir. may provide for an annuity to be derived from stock. 1 In all these cases the intention of the testator is the " pole star " of the courts. § 306. Ademption or revocation of a legacy of stock, and abate- ment. — The ademption of a legacy is a revocation of that legacy in part or wholly, not by an express revocation in the will, but by the acts of the testator. Consequently, an ademption applies only to specific legacies. 2 An ademption of a specific legacy of stock generally arises by a sale of the stock by the testator. If the spe- cific stock bequeathed is not owned by the testator at the time of his death the legal conclusion is that the specific legacy is adeemed, and the legatee takes nothing. 3 A sale of the stock by the testator after the will is made revokes or adeems the legacy, and it is as if never made. 4 A codicil giving all the " personal estate " to another is a revocation of a bequest of stock in the original will. 5 Where the testator specifies the amount of his stock, the specific legatees of it abate proportionately with the residuary legatee, if upon his death it is insufficient. 6 The rule is otherwise if no mention is made of what amount of stock he owns. 7 If the general property of the testator is exhausted in the payment of the debts of the es- tate, specific legacies of stock abate proportionately with other v. Maekie, 4 Russ., 16 (1827), disapproved in Hughes v. Turner, 3 My]. & K, 697 (1834). 1 As to the construction of different provisions in wills, where an annuity on stock is created, see Innes v. Mitch- ell, 9 Ves., 212 (1803); Kerr v. Middlesex Hospital. 2 DeG., M. & G., 576 (1852); Ross v. Borer, 2 Jo. & H., 469 (1862); Yates v. Maddan, 3 Mac. & G., 532 (1857); Blewitt v. Roberts, Cr. & Ph., 274 (1841): Potter v. Baker, 13 B., 273 (1851); Robinson v. Hunt, 4 B., 450 (1S41); Hedges v. Harpur, 3 De G. & J.. 129 (1858); Evans v. Jones, 2 Collyer, 516 (1846); Manserge v. Campbell, 3 De G. & J., 232. 2 A bequest of $2,000 of certain bonds is demonstrative and not specific and not adeemed where the testator had $10,000 of such bonds and sold them. Ives v. Canby, 48 Fed. Rep., 718 (1891). 3 Ford v. Ford, 23 N. H, 212 (1851), although not a stock case, says in re- gard to this branch of the law: "It is now established in England that the only question is whether the specific thing remains at the death of the testa- tor, and that the intention to adeem will not be considered beyond the ex- pressions in the will. . . The weight of American authority is in favor of the English rule." 4 Ashburner v. Macguire, 2 Brown's Ch., 108 (1786); White v. Winchester, 23 Mass.. 48 (1827); Humphreys v. Humphreys, 2 Cox, 184 (1789); Hayes v. Hayes, 1 Keen, 97 (1836) ; Blackstone v. Blackstone, 3 Watts, 335 (1839). 5 Kermode v. Macdonald, L. R, 1 Eq., 457 (1866); affirmed, L. R, 3 Ch., 584 (1868). 6 Elwes v. Causton, 30 Beav., 554 (1862), following Page v. Leapingwell, 18 Ves.. 463 (1812). 'Petre v. Petre, 14 Beav., 197 (1851); De Lisle v. Hodges, L. R, 17 Eq., 440 (1874); Vivian v. Mortlock, 21 Beav., 252 (1855). The debts of the estate may be directed to be paid from the residue of the stock. Choat v. Yeates, 1 Jac. & Walk, 102 (1819). 410 CH. XVIII.] LEGACIES AND GIFTS OF STOCK. [§ 307. specific legacies. 1 A specific legac} 7 of stock is not adeemed by a change in the stock produced by an act of the government. Thus, where the government buys the stock, a specific legatee takes the compensation if it has not yet been collected by the testator, 2 but not if it has been collected and used by the latter. 3 A change by law of the funds iuto funds bearing a lower rate of interest does not adeem a specific legacy of it, 4 even though the testator sells the former and buys the latter kind of funds. 5 A specific legacy of stock by a, feme covert, who had the power to bequeath it, is not adeemed h}' the fact that she had the stock transferred into her own name after the death of her husband. 6 A specific legacy which has been adeemed is not revived by a republication of the will after the ademption. 7 § 307. Duty of executor or administrator as regards a specific or general legacy of stoclc. — TThere a legacy of stock is made.it is the duty of the executor or administrator to carry into effect the wishes of the testator by turning over to the legatee the stock bequeathed if the legacy be specific; or, if the legacy be general, by either set- ting aside for the legatee the required amount of stock from the testator's effects, or purchasing the same for the legatee. The specific legacy of stock vests in the legatee as soon as the executor is satisfied that the general fund will pay the debts of the estate and consents to such vesting. When once given the consent of the executor is irrevocable, and only a court of chancery can reach the stock and subject it to the testator's debts. 8 The liability of the legatee to pay calls on the stock is discussed elsewhere. 9 i Sparks v. Weedon, 21 Md., 156(1863). of fulfillment. In re Grey, 67 L, T. When general legacies of stock abate Rep., 132 (1887). proportionately with other general leg- 5 Partridge v. Partridge, Cases temp, acies, the stock is estimated at its value Talbot, 226 (1736). Roper on Legacies, twelve months after the testator's p. 331, 2d ed. (1848), is inclined to the death. Blackshaw v. Rogers, cited in opinion that a specific legacy of stock is 4 Brown's Ch., 349. not revived by a purchase of similar 2 Walton v. Walton, 7 Johns. Ch., stock after a sale of the stock be- 257 (1823). queathed. SLudlam's Estate, 13 Pa. St., 188 « Dingwell v. Askew, 1 Cox's Ch., (1850). 427 (1788). * Brown v. McGuire, 1 Beat. Ir. Ch., ' Trustees, etc., v. Tufts, 23 N. E. Rep, 358 (1829). But a legacy of stock in an 1006 (Mass., 1890). unincorporated company, which, after 8 Onondaga Trust & Deposit Co. v. the making of the will, is incorporated Price, 87 N. Y., 542 (1882); Hill v. Rock- and the value of the stock changed, ingham Bank. 44 N. H.. 567 (1863), hold- which change the testator accepts, fails ing that the legatee should sue the cor- whether considered as a specific legacy poration at law for refusing transfer adeemed, or a general legacy impossible where the parties interested in the will 9 See § 560, infra. 411 § 308.] LEGACIES AND GIFTS OF STOCK. [cH. XVIII. § 308. Gifts of stock. — Shares of stock in a corporation may be the subject of a gift. No formal method of carrying out the gift is necessary. A formal instrument of transfer, duly delivered to an agent with directions to deliver to the donee, vests title in the donee, though no certificates are transferred. 1 A gift of stock, vested by a due transfer into the name of the donee, cannot be re- voked by the donor. 2 In order to constitute a gift a perfectly clear intent so to do must be proved. 3 Where the gift is made in grati- tude for care to be bestowed on another, the gift will fail upon the death of the donee if it is proved that the stock had not been fullv and finally delivered. 4 A gift of the dividend of stock is a gift of assent ; and in equity if both the corpo- Atl. Rep., 885 (N. J., 1890). A father ration and such parties do not assent A decree of a probate court that the legacy of stock shall be turned over to the legatee cannot be required by the corporation. Under the Vermont stat- ute it is the duty of the executor to transfer stock to the residuary legatee. Witters v. Sowles, 25 Fed. Rep, 168 (1885). As regards sales of stock by an executor, see § 329, infra. If stock specifically bequeathed is not given to legatee, but is used for other purposes, the other legatees must make good its value. Tomlinson v. Bury, 14 N. E. Rep., 137 (Mass., 1887). Executors in New York are not entitled to commis- sion on transfers of stock specifically bequeathed. Schenck v. Dart, 22 N. Y., 420 (1800). A legacy may be paid by the stock of the decedent at a valuation thereby agreed upon. Chase v. Burritt, 14 Atl. Rep., 212 (Conn., 1888). 1 De Caumont v. Bogert, 36 Hun, 382 (1S85), treating also a gift as an advance- ment. See S. C, Re Morgan, 104 N. Y. 74. In England, under the statutes, it is held that a gift of stock does not vest in the donee until registry on the corpo- rate books. Nauney v. Morgan, 57 L. T. Rep., 48 (1887). 2 Standing v. Bowring, L. R, 27 Ch. D., 341 (1884), where the donor trans- ferred into the joint names of donor and donee, and afterwards attempted to dis- pose of the whole stock. A gift of stock fully made and accepted cannot be re- tracted. Walker v. Joseph, etc., Co., 20 who takes stock in the name of a son in order to qualify him as a director, and takes back the certificates, does not thereby make a gift of the stock. Re Gooch, 62 L. T. Rep, 384 (1890). 3 Where, however, the stock is pur- chased by one in the name of another, parol evidence may show as against the creditors of the former that he intended the stock as a gift to the latter. Rider v. Kidder, 10 Ves., 361 (1805). A gift of stock to take effect only upon the death of the donor is not absolute, and is sub- ject to the payment of his debts exist- ing at the time of his death. Sterling v. Wilkinson, 3 S. E. Rep., 533 (Va., 1887). A gift of stock whereby the owner makes himself a trustee of it for his donee is complete, and a recogni- tion of the trust in his will does not render the stock a part of his estate, subject to the dower right of his wife. Dickerson's Appeal, 8 Atl. Rep, 64 (Pa., 1887); Stone v. Hackett, 12 Gray. 227. Although a person buys stock as. trustee, and charges the price on his books against his daughters and cred- its them with dividends, yet if he sold the stock and used the money the stock was not an advancement to them. Herkimer v. McGregor. 25 N. E. Rep., 145 (Ind., 1890). * Jackson v. Twenty-third St R'y Co., 88 N. Y, 520 (1882). When a gift of stock is made in accordance with an agreement to compensate the donee for taking care of the donor, a delivery of 412 CH. XVIII.] LEGACIES AND GIFTS OF STOCK. [§ 308. the stock itself. 1 A gift of stock by one legatee to another, in the belief that the testator so intended the stock to be disposed of, can- not be revoked after an unsealed instrument of transfer is signed and actual transfer made, even though it is afterwards found that the te c tator had no such intent. 2 A stockholder who has trans- ferred his stock into the joint names of himself and his wife cannot dispose of his interest by a last will and testament. It passes to the wife as the survivor. 3 A gift of stock, donatio causa mortis, may be made by a mere delivery of the certificate to the donee. 4 So, also, the delivery and acceptance of a gift of stock is held to be effectual where the donor had the stock transferred into the name of the fdonee and took out certificates in the donee's name, even though the donor died before the donee knew of the gift. 5 the certificate without any transfer suf- fices. Reed v. Copeland, 50 Conn., 472 (1883). But the contract to make the gift must not be in opposition to public policy, nor in fraud of the rights of other stockholders. Nickerson v. En- glish, 142 Mass., 267 (1886). i See § 305. 2 Delamater's Estate, 1 Whart. (Pa.), 362 (1836). 3 Dummer v. Pitcher, 5 Sim., 35 (1831) ; affirmed, 2 M. & K, 262 (1833). A gift of stock direct from the husband to the wife is legal. She thereupon takes a sole and separate estate therein. Dem- ing v. Williams. 26 Conn., 226 (1857). The case of Francis v. New York & B. El. R. R. Co., 17 Abb. N. C, 1 (N. Y., 1885), holds that, when a gift of stock is made to a minor, it is complete and irrevocable, so far as the donor is con- cerned; but the minor may, upon at- taining majority, either accept or re- fuse it. * Grymes v. Hone, Ex'r, 49 N. Y, 17 (1872); Walsh v. Sexton, 55 Barb., 251 (1869); Allerton v. Lang, 10 Bosw., 362 (1863). The last two cases hold that the certificates need not even be indorsed or transferred, but that a mere delivery without any writing is sufficient Cf. § 375. A delivery of a certificate of stock without written assignment is not a good gift inter vivos. Matthews v. Hoagland. 21 Atl. Rep., 1054 (N. J., 1891). No delivery of stock to a wife as a gift ex- ists where after the husband's death the stock is found among his papers in her possession and not indorsed. Morse v, Weston, 24 N. E. Rep., 916 (Mass., 1890). Although no transfer is made of the certificate, yet if it is found among the papers of a deceased person it will be presumed to be his, though standing in the name of his sister who also is dead, the stock having been considered of little value by them. In re Mape's Es- tate, 12 N. Y. Supp, 9 (1890). A donatio causa mortis of stock is revoked by the recovery of the donor, even though it is registered. Stainland v. Willott, 3 Mac. & G., 664 (1850). In England railway stock is not the subject of a donatio causa mortis by a delivery of the cer- tificate, since the transfer can be by deed only. Moore v. Moore. 43 L. J. (Ch.), 617 (1874). 5 Robert's Appeal, 85 Pa, St, 84 (1877). In Maryland it is held that a mere transfer of the certificates of stock, without a registiy on the corporate book, is incomplete as a gift, and cannot be enforced against the personal repre- sentatives of the deceased donor. Balti- more Retort, etc., Co. v. Mali, 66 Md., 53 (1886). Btft a written memorandum left by a decedent to the effect that he thereby gives certain stock to a person, but retains the same during life in or- der that he, the donoi*, may have the dividends, is not a valid gift Re Shield, 53 L. T. (N. S.), 5 (1885). 413 CHAPTER XIX. WHO MAY BUY AND SELL STOCK 309-310. Competency of a corporation to purchase shares of its own capital stock. 311-313. Rule in the United States. 314. The stock is not merged. 315. Purchase by a corporation of stock in another corporation — Purchase by railroad. Purchases of stock by banks and pledges to banks. Purchases of stock by insurance, manufacturing and other cor- porations. Infants as purchasers of stock. Married women as purchasers, owners or vendors of stock. Competency of miscellaneous parties. 316. 317. 318. 319. 320. 321. Sales, purchases and transfers by agents. 322. Purchase of stock by guardians, executors and trustees. 323-324. Sale or pledge of stock by trustee in breach of his trust. 325-326. Transferee of stock from trustee is protected, when. 327. Rights and liability of the corpo- ration allowing a transfer by a trustee in breach of his trust. 328. Sales of stock by a guardian. 329. Sales by executor or administra- tor. 330. Duty and liability of the corpora- tion in sales by an executor or administrator. § 309. Competency of a corporation to purchase shares of its own capital stock. — In England a long line of decisions has established the rule that, at common law, a corporation cannot purchase shares of its own capital stock. 1 This rule is enounced clearly and de- cisively, and is closely adhered to. 3 The corporation may be given an express power for this purpose; but, unless so given, the pur- chase is held to be beyond the legal powers of the directors and of the whole body of stockholders. 3 The object of the rule is to pre- 1 Trevor v. Whitworth. 57 L. T. Rep., 457 (H. of L, 1887), reviewing many cases ; Re Marseilles Extension R'y Co., L. R, 7 Ch., 161 (1871); Evans u Cov- entry, 25 L J. (Ch.), 489, 501 (1856); Cross' Case, 38 L J. (Ch.), 583 (1869); Morgan's Case, 1 De G. & Sm., 750 (1849) ; Ex parte Morgan, 1 Mac, & G, 225 (1849); Eyre's Case, 31 Beav., 177 (1862); 3 R'y & Corp. L. J., 169. Cf. Taylor v. Hughes, 2 J. & Lat. (Irish Ch.), 24(1844), holding that a banking company at com- mon law may buy its own stock the same as a copartnership may buy out a partner. Where a director buys mer- chandise of his corporation, and pays for it in stock of the corporation, and the transaction is ratified in general meeting, the director, on a winding up, is not liable for the value of the mer- chandise. Weeks' Case, 17 L R., Ir., 239. A purchase by a corporation of its own stock and payment by debentures is void, and a resale of the stock at a discount is void. Re London, etc., Co., 59 L T. Rep., 109 (1888). 2 ZuIueta's Claim, L. R, 5 Ch., 444 (1879); Hope v. International Financial Soc, L. R, 4 Ch. Div., 327 (1876), hold- ing also that a stockholder may enjoin the purchase ; distinguishing Teasdale's Case, L. R., 9 Ch., 54. 3 Zulueta's Claim, supra; Hope v. In- ternational Financial Soc, supi'a. See, 414 CH. XIX.] WHO MAY BUY AND SELL STOCK. [§ 309. serve the rights of the corporate creditors, and also to confine the corporation within the express powers given it, and the implied powers necessary to its transaction of business. 1 If the sale is completed, and the corporation afterwards become insolvent, the stockholder who sold the stock to the corporation is liable, on the winding up, as though he never had made such a sale. 2 If, how- ever, the stockholder sells to a person, not knowing that the latter is purchasing as a trustee for the corporation, the vendor is not liable on such stock. 3 The directors authorizing or directing a pur- chase for the corporation of shares of its own capital stock are liable personally to the same extent that the selling stockholder would have been had the sale not taken place. 4 Generally the also, Lindley on Partnership, p. 739 (Cal- laghan & Co., 1881). Under an express power to the directors to enter into any contract and engagement that seemed best for the company, such a purchase was upheld. Singer's Case, W. N. (1869), 206; Cockburn's Case, 4 De G. & Sm., 177 (1850). where power was given by the deed of settlement. See, however, Ward's Case, 29 W. R, 768 (1881), where an express power to purchase its own stock was held not to authorize a traf- ficking in that stock — the buying and selling for purposes of gain. Where a company has power to purchase its own stock and does purchase stock which has not been paid up, the liability on that stock cannot be included as among the debts of the company. Re The Sovereign, etc., Co., 67 L. T. Rep, 336 (1892). Having purchased its own stock from profits, a company may re- duce its capital stock to that extent Re York, etc., Co., 60 L, T. Rep, 744 (1889). 1 Id. Compare, however, Ward's Case, 29 W. R, 768 (1881), where the court says : " If the company could not ques- tion it, neither can a creditor; for he can obtain nothing but what the com- pany can get from the shareholders." 2 Walter's 2d Case, 3 De G. & Sm., 244 (1850); Richmond's Ex'rs Case, 3 De G. & Sm. 96 (1859) ; Munts' Case, 22 Beav., 55 (1856), where the stockholders disagreed and the corporation bought out one faction ; Daniell's Case, 22 Beav., 43 (1856); Bennett's Case, 5 De G, M. & G, 284 (1854), where the stock- holders disagreed concerning the va- lidity of a lease, and the corporation bought out part. If, however, the cor- poration, six years after the transfer, discovers that the transfer was invalid, and summarily retransfers to the vendor, the latter may apply to a court of equity to compel the corporation to keep the stock. Gardiner v. Victoria Estates Co., 12 Ct. of Ses. (Sc. 4th series), 1356 (1885). See, also, § 251, supra, 3 Nicol's Case, 3 De G. & J., 387 (1858) ; Grady's Case, 1 De G, J. & S., 488 (1863), where the vendee was managing agent of the corporation, and the sale of the stock was to stop litigation. Rich- mond's Case, 3 De G. & Sm., 96 (1849), holds, however, that if the vendor's selling agent, his solicitor, knew that the sale was for the benefit of the cor- poration, the stockholder himself is chargeable with knowledge. See Re Orpen, 32 L. J. (Ch.). 633 (1863), holding that it is a question for the jury whether the vendee purchased for the corpora- tion or for himself. Johnson v. Laflin, 5 Dill., 65; 103 U. S., 800 (1878). See, also, § 251. * Evans v. Coventry, 25 L. J. (Ch.), 489, 501 (1856). To same effect, Land Credit Co. of Ireland v. Fermoy, L. R, 8 Eq. Cas., 7 (1869); Marzette's Case, 42 L. T. (N. S.), 206 (1S80). The directors may have contributions from each other for sums paid out by their authoritv for 415 §§ 310, 311.] WHO MAT BUT AND SELL STOCK. [CH. XIX. transfer is made, not to the corporation directly, but to a trustee on behalf of or for the benefit of the corporation. This practice is not at all necessary, 1 and has no effect other than a transfer direct to the corporation itself, unless it be that the vendor of the stock may not know that his vendee purchases for the corporation, and thereby escapes liability on the winding up. If the contract is ex- ecutory, the corporation may repudiate it and refuse to pay the purchase-money for the stock. 2 If, however, the sale is completed, the stock belongs to the corporation, and does not pass to the vendor's assignee in bankruptcy. 3 § 310. "Where the transfer of stock to the corporation is made by one of the original subscribers for stock, it frequently becomes a difficult question to decide whether the transaction was a cancella- tion of the subscription contract or was a sale of the stock to the corporation. Each case turns largely on its own peculiar facts and circumstances. If the transaction is a cancellation, it is legal. In England, if it is a sale, it is illegal. The courts seem to favor a construction whereby the transaction is held to be a sale, and the stockholder made liable on the winding up. 4 § 311. Rule in the United States. — In this country there has been a difference of opinion as to whether a corporation may purchase shares of its own stock. In Illinois, Massachusetts and other states such a purchase is legal and allowable. 5 And, indeed, if there is no statutory liability on stock, and if stockholders do not object, such purchases, and for which one or Div., 622 (1876). See, also, §§ 167-170, more has been held liable to the corpo- supra. ration. Ashhurst v. Mason, L. R., 20 ' First Nat Bank v. Salem, etc., Co., 39 Eq., 225 (1875). The directors are not Fed. Rep.. 89 (1889). In Illinois, in Chicago, liable to the vendor of the stock for the P. & S. R R v. President, etc., of Town failure of the corporation to complete of Marseilles, 84 111., 145 (1876), the court their purchase for it of its own stock, said: "We entertain no doubt that a rail- Abeles v. Cochran, 22 Kan., 405 (1879). road company may, for legitimate pur- 1 See ch. III. poses, purchase shares of stock which 2 The corporation may even refuse to have been issued to individuals. Such is pay the price to the brokers employed believed to have been the general cus- by its directors to buy its stock. Zulu- torn of such bodies; nor have we known eta's Claim, L. R, 5 Ch., 444 (1879). the power to have been questioned." A This, of course, does not authorize the contract whereby the corporation agreed corporation to retain the stock so pur- to take back the stock unless certain chased. things were done within a certain time 3 Great Eastern R'y Co. v. Turner, 42 was sustained. S. C, id., 643, where L. J. (Ch.), 83 (1873). the court says, " the power of the direct- * Hall's Case, L. R, 5 Ch., 707 (1870), ors of a company, when not prohibited distinguishing Snell's Case, L. R, 5 Ch., by their charter, to purchase shares of 22. See, also, Thomas' Case, L. R, 13 stock of their company," is well recog- Eq., 437 (1872) ; Teasdale's Case, L. R, 9 nized; Clapp v. Peterson, 104 111., 25 Ch. 54 (1873); Duke's Case, L. R, 1 Ch. (1882); Chetlain v. Republic Life Ins. 416 CH. XIX.] WHO MAY BOY AND SELL STOCK. [§ 311. there is no reason why the net profits of a corporation should not be applied to purchasing its stock, instead of being used for a Co., 86 111., 220 (1877); Fraser v. Ritchie, 8 Bradw., 554 (1881). where a perfectly solvent concern sold certain property and took its own stock in payment; Dupee v. Boston Water-power Co., 114 Mass., 37 (1873), holding that a stock- holder could not enjoin the purchase, the court saying: " In the absence of legis- lative provision to the contrary, a corpo- ration may hold and sell its own stock, and may receive it in pledge or in pay- ment in the lawful exercise of its corpo- rate powers ; " Leland v. Ha\den, 102 Mass., 542 (1869) ; Crease v. Babcock. 51 Mass., 525, 557 (1846), holding that the stockholders are not liable for the defi- ciency caused by part of the stock being owned by the corporation. In Pennsyl- vania, in Eby v. Guest. 94 Pa. St., 160 (1880). and Early & Lane's Appeal, 89 id., 411 (1879), it was held that "the as- signment of the stock of a coi-poration to itself, as collateral security for a loan, divests the title of the assignor so far as to prevent a sale of it under a fi. fa. against the assignor." But in Coleman v. Columbia Oil Co., 51 Pa. St., 74 (1865), where a stockholder had accepted the benefit of the purchase and then objected to its legality, the court said : "The employment of corporate funds to speculate in the stock of the company to which the funds belong is not a prac- tice to be encouraged ; but the present plaintiff is not in position to censure the practice." He "should have sought an injunction against the company to re- strain the purchase, or to cancel it if done before he had knowledge of it ; or if he would bring an action at law he should have declared for his share of the funds which he complains were mis- applied in buying the shares." In Geor- gia, in the case of Hartridge v. Rockwell, R. M. Charlton, 260 (1826), the court held : "If from the course of business or the state of things the capital of the bank cannot be usefully employed in loans. there can, I think, be no objection against the purchase of its own stock." The legislature, however, thought differently, and by the Penal Code of 1833 made sucli purchases a penal offense. See Robinson r. Beale, 26 Ga., 17 (1858). where the purchase was held to be authorized under a power to purchase goods, etc. See, also, as supporting the doctrine. Farmers' & Mechanics' Bank i?. Cham- plain Transportation Co., 18 Vt., 131, 139 (1846); Iowa Lumber Co. v. Foster, 49 Iowa, 25 (1878), under a power to pur- chase "property that may be deemed desirable in the transaction of its busi- ness." A corporation which has agreed to pay a person a certain sum for his stock in the corporation, if he will trans- fer it to a corporate creditor in payment of the corporate debt, is liable for that sum to the stockholder. Snyder v. Tu- nitas, etc., Co., 13 Pac. Rep., 479 (Cal., 1887). "A corporation may, if it acts in good faith, buy and sell shares of its own stock." Republic Life Ins. Co. v. Swigert, 25 N. E. Rep., 680 (111.. 1890) ; First, etc., Bank v. Salem, etc., Co., 39 Fed. Rep., 89 (1889). An agreement of a corporation to accept its own stock in payment for land sold by it is not per se an ultra vires act. Thompson v. Moxey, 20 Aft Rep., 854 (N. J., 1890). A corpo- ration may purchase shares of its own stock, subject to the right of creditors to object thereto if the capital stock is im- paired thereby. Blalock v. Kernersville, etc., Co., 14 S. E. Rep., 501 (N. C, 1892). A corporation may issue stock to an em- ployee on an agreement to buy it back in case he is discharged. Yeaton v. Eagle, etc., Co., 29 Pac. Rep., 1051 (Wash., 1892). Where the majority stockholders cause the directors to purchase stock of them for the corporation at a price higher than the market price the minority may cause the transaction to be set aside. Wood- roof v. Howes, 26 Pac. Rep., Ill (Cal., 1891). (27) 417 § 312.] WHO MAY BUY AND SELL STOCK. [CH. XIX. dividend. 1 The few cases which appear to uphold a contrary rule are found, upon close examination, to come within the exceptions given above. 1 All of the American courts coincide in the view that a corporation may take shares of its own stock in payment of or security for antecedent debts due to the corporation. 2 A cor- poration may take its own stock by way of gift 3 or bequest. 4 § 312. The objection usually made to allowing a corporation to purchase its own stock is that thereby the corporate funds are expended and no property is received by the corporation, except the right to resell. In some cases, also, a statutory liabilit} 7 at- 1 In Ohio the early case of Taylor v. Miami Ex. Co., 6 Ohio Rep., 166 (1833), held that a bank may receive from the stockholders transfers of stock in pay- ment of ( debts previously contracted by them. See, also, State of Ohio v. Frank- lin Bank of Columbus, 10 Ohio Rep., 91, 97 (1840). But in Cappin v. Greenlees, 38 Ohio St., 275 (1882), the court refused to enforce an executory contract for the sale to the corporation of its own stock, and said : " The doctrine that corpora- tions, when not prohibited by their charters, may buy and sell their own stock, is supported by a line of author- ities. . . . But, nevertheless, we think the decided weight of authority, both in England and in the United States, is against the existence of the power, unless conferred by express grant or clear implication. The foun- dation principle upon which these lat- ter cases rest is that a corporation pos- sesses no powers except such as are conferred upon it by its charter, either by express grant or necessary implica- tion." The proposed purchase was held to be invalid under the constitutional provision imposing a personal liability on all stockholders. But see Morgan v. Lewis, 17 N. E. Rep., 558 (Ohio, 1888). Quo ivarranto does not lie against a cor- poration for purchasing its own stock. State v. Minn., etc., Co., 41 N. W. Rep., 1020 (Minn., 1889). 1 Thus, in German Sav. Bank v. Wulfe- kuhler, 19 Kan., 60 (1877), the bank was insolvent when the stock was purchased by it. The purchase was declared illegal. In Bent v. Hart, 10 Mo. App., 143 (1881), the corporation did not purchase its own stock. The stock was purchased by an- other corporation, and was sustained. In St. Louis, etc., Co. v. Hilbert, 1 R'y & Corp. L. J., 160 (Mo. Ct of App., 1887), the stock purchased by the corporation was not paid-up stock. In State v. Building Assoc, 35 Ohio St, 258 (1880). the peculiar purposes and articles of association of a building association governed the decision. In Barton v. Port Jackson, etc., Co., 17 Barb., 397 (1854), the company mortgaged its road in order to raise money to buy the stock. -The leading case is City Bank of Columbus v. Bruce, 17 N. Y., 507 (1858), where a corporation received $133,000 of its own stock in payment of debts due the corporation, the court saying it is " not aware of any common-law prin- ciple which forbids it." See, also, Ver- planck v. Mercantile Ins. Co., 1 Edw. Ch., 84 (1331). State Bank of Ohio v. Fox, 3 Blatch., 431 (1856), where the stock was taken in payment of a debt due the corporation. In Williams v. Savage Mfg. Co., 3 Md. Ch., 418, 451 (1851), the creditor who had given stock to a corporation in payment of a debt was allowed to deny the amount of the debt and to take back the stock upon payment of the amount actually due. s Lake Superior Iron Co. v. Drexel, 90 N. Y M 87 (1882), where its legality was assumed. See, also, ch. Ill, siqira. * Rivanna Nav. Co. v. Dawsons, 3 Gratt, 19 (1846). 418 CU. XIX.] WITl) MAY BUY AND SELL STOCK. [§ 312. tached to the stock is thereby jeopardized. The latter objection is answered by the principle of law that the transferrer of stock to the corporation is liable on the subscription and statutory liability to the same extent as though no transfer to the corporation had been made. 1 The former objection is merely a limit to the power of the corporation to purchase. In Illinois, the state where the rights of the corporation to make such purchases is most clearly and deci- sively established, the collateral principle that such purchases are to be declared illegal and voidable at the instance of corporate creditors who are injured thereby is distinctly stated and rigidly applied. 2 If the corporation is insolvent at the time of the purchase, it is clearly an invalid transaction, and will be set aside. 3 The rule goes still further, and declares that if a corporation, b} 7 " a purchase of shares of its own capital stock, thereby reduces its actual assets below its capital stock, or if the actual assets at that time are less than the capital stock, such purchase may be impeached and set aside, and the vendor of the stock rendered liable thereon at the instance of a corporate creditor. 4 In Massachusetts not even a dissenting stockholder can complain. 5 1 See § 251, supra. 2 Clapp v. Peterson, 104 111., 26 (1882) ; Peterson v. 111. Land & Loan Co., 6 Bradw., 257 (1880). In Crandall v. Lin- coln, 52 Conn., 73 (1884), where stock was bought for the corporation by a cor- porate agent, the latter was held liable to the receiver of the corporation for the money so expended. The court said : " The statute forbidding the com- pany to make dividends payable from the stock, and to loan money upon a pledge of its stock, by necessary impli- cation forbids the company from pur- chasing its stock. . . . As a rule, to which there are few, if any, excep- tions, when a stockholder convej-s his stock to the company and receives in return a portion of the capital, he holds the money so received subject to the superior equities of creditors." But the selling stockholder, not knowing that his vendee buys for the corporation, is not liable. Johnson v. Laflin, 5 Dill., 65 ; 103 U. S, 800. 3 Currier v. Lebanon Slate Co., 56 N. H., 262 (1875); Alexander v. Relfe, 74 Mo., 495 (1881). A purchase by an in- solvent bank of shares of its own stock from one who had just resigned as vice- president is illegal, and he cannot col- lect a certificate of indebtedness given him therefor. In re Columbian Bank, 23 Atl. Rep., 626 (Pa., 1892). So also of a sale by the president ; even though he held the stock as executor of an estate. Id., 625. Where a corporation is insolv- ent and a stockholder knows that fact, he cannot sell his stock to the corpora- tion in exchange for corporate property, and he will be compelled by the court, in behalf of then existing creditors, to return the property. Commercial Na- tional Bank v. Burch, 31 N. E Rep. 120 (111., 1892). 4 Fraser v. Ritchie, 8 Bradw. (111.), 554 (1881), holding that the right of the cor- poration to purchase its own stock is subject to certain restrictions, " one of which is that it shall not be done at such time and in such manner as to take away the security upon which the credit- 5 Dupee v. Boston, etc., Co., 114 Mass., corporation to purchase stock in order 37 (1873). See §282 as to the power of a to reduce its capita) stock. 419 § 313.] WHO MAY BUY AND SELL STOCK. [CH. XIX. § 313. Frequently statutes are passed expressly prohibiting a corporation from purchasing shares of its own stock. 1 The national banks in this country are prohibited from so doing by the statutes of the federal government. 2 In New York, by statute, both raon- ors of the corporation have the right to rely for the payment of their claims; or in other words, so as not to diminish the fund created for their benefit Each case must, therefore, depend upon and be determined by its own facts and cir- cumstances." Gillett v. Moody, 3 N. Y., 479 (1850). Where directors and stock- holders desire to sell the enterprise, and do so by paying for their stock out of the corporate funds, and then re-insur- ing all risks in another company, and turning over everything to the latter, a receiver of the company so sold out may hold a director liable for moneys so paid out. Guild v. Parker, 43 N. J. L., 430 (1881). A receiver of a corporation seek- ing to set aside a purchase of stock by itself must tender back the stock before suing to recover the money. Pierson v. McCurdy, 33 Hun, 520 (1884). In the case In re Republic Ins. Co., 3 Biss., 452 (1873), where the insolvent corporation had, some three years previously, when the corporation was solvent, purchased stock of various stockholders and still held it, the court held that these old stockholders were not liable for the un- paid subscription price thereof. In Farns- worth v. Robbins, 36 Minn., 369 (1887), the receiver of an insolvent company recovered from a stockholder whose stock the company had purchased. A scheme whereby the corporation takes back the stock and issues certificates of indebtedness for it is invalid as against creditors. The latter are entitled to the assets in preference to the former. Heg- gie v. Building, etc., Assoc, 12 S. E. Rep., 275 (N. C, 1890). Although a company buys its own stock from a stockholder, subsequent creditors cannot complain. Rollins v. Shaver, etc., Co., 45 N. W. Rep., 1037 (Iowa, 1890). 1 See Part VII, infra. 2 R S. of U. S., § 5201. See Johnson v. Laflin, 5 Dill., 65; 103 U. S., 800, holding that, if a stockholder in good faith and without notice sells his stock to one who purchases for the bank, the sale is valid so far as he is concerned, and he is not liable thereon. See, also, Bank v. Lanier, 11 Wall., 369 (1870), holding that the bank cannot take its own stock in pledge. When the president of a bank buys its stock for the bank itself, taking title in his own name, lie is liable as a stock- holder. The purchase for the bank, however, is void. Bundy r. Jackson, 24 Fed. Rep., 628 (1885). Although a na- tional bank must sell its stock taken in payment of a debt within six months, it may sell on credit, taking a note in payment and the stock as collateral. Union Nat. Bank v. Hunt, 76 Mo., 439 (1882). Where a national bank receives its own stock in pledge at the time of making the loan, and sells the stock as collateral, on failure of the debtor to pay, the latter cannot complain that the §tatute has been violated. National Bank of Xenia v. Stewart. 107 U. S., 076 (1882). See, also, Gold Mining Co. v. National Bank, 96 U. S., 640 (1877); Shoemaker v. National Mechanics' Bank, 31 Md., 396; O'Hare v. Second National Bank, 77 Pa. St, 96 ; Stewart v. National Union Bank, 2 Abb. (N. S.), 424 (1869). Although a national bank is prohibited from taking its own stock as security, yet if it does so, the stock being taken in the name of the cashier, it may en- force the security. Only the govern- ment can object after the transaction has been completed. It is immaterial that the stock was transferred to the cashier individually and not "as cashier.' 1 Walden Nat. Bank v. Birch, 130 N. Y., 221 0891). A transfer of the stock of a national bank to the bauk in payment of a debt will not be set aside at the 420 en. xix. j WHO MAY BUY AND SKLL STOCK. [§ 314. eyed 1 and railroad 2 corporations are prohibited from purchasing shares of its own capital stock. § 314. The stock is not merged. — When a corporation buys snares of its own capital stock, the capital stock is not reduced by that amount, nor is the stock merged. 3 So long, however, as the corpo- ration retains the ownership, the stock is lifeless, without rights or powers. It cannot be voted nor can it draw dividends, even though it is held in the name of a trustee for the benefit of the corpora- tion. 4 But at any time the corporation may resuscitate it by sell- ing it and transferring it to the purchaser. Such sale may be made upon the authority of the corporate directors. 5 It may be sold at its market value, and need not be held for its par value, as is necessary in an original issue of stock. 6 instance of the vendor as being in vio- lation of the statute. Chapin v. Mer- chants' Nat Bank, 14 N. Y. St. Rep., 272 (1888). A national bank president and directors are not liable criminally for purchasing the stock of the bank for the bank itself. United States v. Brit- ton, 107 U. S., 192 (1882); id., 108 U. S., 655 (1882). 1 See Part VII, infra. " The evident intention was to prohibit a division of the capital, or any portion of it, among the stockholders, by whatever instru- mentality the powers of the corporation in doing the act might be exerted." Giilett v. Moody, 3 N. Y., 479, 487. See, also, United States Trust Co. v. United States Fire Ins. Co., 18 N. Y, 199, 226 (1808) ; Tracy v. Talmage, 14 N. Y, 162 (1856). But purchasers of the stock from a banking corporation that had pur- chased it in violation of the statute can- not complain. Thej- cannot impeach their own tit! . Case of the Reciprocity Bank, 22 N. Y., 9, 17 (1860). Nor can the vendor of the stock to the bank claim that the sale was invalid. He is estopped. United States Trust Co. v. Harris, 2 Bosw., 75, 91 (1857). 2 See Part VII, infra. See, also, Bar- ton v. Port, etc., P. R Co., 17 Barb., 397 (1854). 3 State v. Smith. 48 Vt, 266 (1876); Williams v. Savage Mfg. Co., 3 Md. Ch., 418, 451 (1851) ; City Bank of Columbus v. Bruce, 17 N. Y, 507 (1858); State Bank of Ohio v. Fox, 3 Blatch., 431 (1856), the court saying: "The stock was not extinguished or destroyed by the purchase thereof by the corpora- tion ; " Vail v. Hamilton, 85 N. Y, 453 (1881) ; American R'y Frog Co. v. Haven, 101 Mass., 398 (1869); Commonwealth v. Boston, etc., R R Co., 2 New Eng. Rep., 647 (Mass., 1886); Ex parte Holmes, 5 Cow., 426 (1826). See, also, §§ 282, 251. * See ch. XXXVII, infra. 5 State Bank of Ohio v. Fox, 3 Blatch., 431 (1856); State v. Smith, 48 Vt, 266 (1876). See, also, § 282. Stockholders cannot enjoin the corporate officers from selling shares of its own stock which it has purchased. Jefferson v. Burford, 17 S. W. Rep., 855 (Ky., 1891). 6 See ch. Ill, supra. It may be issued by way of a stock dividend. See ch. XXXII, infra. Land scrip of a land company, that is, certificates issued al- lowing the holder to exchange the cer- tificate for land at a specified price, after being bought up by the company may be issued as a scrip dividend to the stockholders. A scripholder whose scrip was not bought up by the company cannot object unless there was actual fraud. Rogers v. Phelps, 9 N. Y. Supp., 886 (1890). 421 § 315.] WHO MAY BUY AND SELL STOCK. [CH. XIX. § 315. Purchase hy a corporation of stoclc in another corpora- tion — Purchase hy railroad. — It may be stated as a general rule, with but few exceptions, that a corporation has no implied power to purchase shares of the capital stock of another corporation. Especially is this the rule as regards railroad corporations. It has been firmly settled by well-considered cases that one railroad com- pany cannot purchase shares of stock in another railroad company, especially where the purchase is for the purpose of controlling the latter by means of corporate elections. 1 In a few instances, partic- ular corporations, by their charters, are given the power to invest 1 See § 64. The most important case is Central R. R Co. v. Collins, 40 Ga., 582 (1869), where a stockholder in one railroad obtained an injunction against its purchase, for purposes of con- solidation, of stock in a rival and com- peting railroad. The court declared the purchase to be beyond the corporate powers and contrary to public policy, and says, " it is a general principle that a railroad company, without express authority given by the legislature to make the purchase, cannot purchase stock in another railroad company." Angell & Ames, § 392. To same effect, Hazelhurst v. Savannah, G. & Ni A. R R Co., 43 Ga., 13, 57 (1871), the court saying : "If one railroad may, at its op- tion, buy the stock of another, it prac- tically undertakes a new enterprise not contemplated by its charter. This it cannot dob}' any implication. The power so to do must be clear." In the case of Elkins v. Camden & Atlantic R R Co., 36 N. J. Eq. Rep., 5 (1882), a similar injunction was granted. Such purchase is not authorized by a power to lease other lines, nor to build them. " The purchase of a rival railroad is (not to speak of public policy) foreign to the objects for which the defendant was in- corporated. . . . As a purchase with a view to extinguishing competition, the transaction is clearly ultra vires." It is immaterial that the complainant pur- chased stock for the purpose of obtain- ing the injunction. Salomons v. Laing, 12 Beav., 389, 353 (1850); Great Northern Ry Co. ix Eastern Counties Ry Co., 21 L. J. (Ch.} 837.(1851), where the object was to control the corporation. The court said it was an " attempt to carry into effect, without the intervention of parliament, what cannot lawfully be done except by parliament, in the exer- cise of its discretion with reference to the interest of the public." Maunsell v. Midland Great Western Ry Co., 1 Hem. & M-, 130 (1863), relative to the power of a railroad company to subscribe for the stock of another railroad ; Central R R Co. of N. J. v. Pennsylvania R R Co., 31 N. J. Eq. Rep., 475, 494 (1879), where the defendant was enjoined from build- ing another railroad by means of an inde- pendent corporation operated by " dum- mies." The court said : "A corporation cannot in its own name subscribe for stock or be a corporation under the gen- eral railroad law, nor can it do so by a simulated compliance with the provis- ions of the law through* its agents as pretended corporators or subscribers for stock." Pearson v. Concord R R Co., 13 Am. & Eng. R R. Cases, 102 (N. H., 1883), where a railroad had purchased the controlling interest in the stock of a connecting railroad and was managing it in the interest of the former road. A suit by a stockholder of the defrauded road to enjoin such act was sustained. A foreign corporation cannot buy rail- road stocke for the purpose of uniting competing lines, where domestic corpo- rations are prohibited from so doing. Clarke v. Central R R, etc., 50 Fed. 422 CH. XIX.] WHO MAY BUY AXD SELL STOCK. [§ 315. in other railroad stocks, and in other instances general statutes to that effect prevail. 1 Occasionally prohibitions against such pur- chases are placed in the constitution of a state. 2 Rep., 338 (1892). A railroad has no power to buy the stock of another rail- road. Hamilton v. Savannah, etc., R'y, 49 Fed. Rep., 412 (1892); Columbus, etc., R. R v. Burke, 19 Week. Law Bull., 27 (Ohio, 1887); Mackintosh v. Flint, etc., R R, 34 Fed. Rep., 582 (1888). See, also, Green's Brice's Ultra Vires, 91 (2d ed.). Where a railroad company, in the name of one of its leased lines, contracted to purchase a majority of the stock of still another line, the vendor representing that the last line was unincumbered, the first-mentioned company may avoid the contract by proving that an incum- brance rested on the road to be sold. Southwestern R'y Co. v. Papot, 67 Ga., 675 (18S1). A controlling stockholder in one railroad corporation may become the controlling stockholder in another rail- road corporation. Havemeyer v. Have- meyer, 43 Super. Ct (N. Y.), 506 (1878) ; 45 id., 464 ; aff'd, 86 N. Y., 618 ; O'Brien v. Breitonbach, 1 Hilt., 304. A bondholder cannot object Matthews v. Murchison, 15 Fed. Rep., 691 (1883). Where a rail- road president uses its funds to pur- chase the stock of a construction com- pany that has the stocks and bonds of a contemplated competing line which the construction company has agreed to build, the sale of the stock to such pres- ident may be attacked by parties who were defrauded by the party who sold the stock of the construction company. Langdon v. Branch, 37 Fed. Rep., 449 (1888). A railroad corporation which is advancing money to another corpora- tion may take the bonds and stock of the latter as security. The West Vir- ginia statutes do not prevent such act. County Court v. Baltimore, etc., R. R, 35 Fed. Rep., 161 (1888). 1 Mayor v. Baltimore & O. R R Co., 21 Md., 50 (1863); Zabriskie v. Cleveland, etc., R. R Co., 23 How., 381 (1859), as to the Ohio statute. The case of White v. Syracuse & Utica R R Co., 14 Barb, 559 (1853), held to be constitutional and valid a general law allowing any New York railroad to subscribe to the stock of the Great Western Railroad, Canada West. Matthews v. Murchison, 17 Fed. Rep., 760 (1883), on the North Carolina act As to the Kansas act allowing such purchases, see Atchison, etc., R R Co. v. Fletcher, 10 Pac, Rep, 596 (1886); Ryan v. Leavenworth, etc., R'y Co.. 21 Kan., 365 (1879) ; Atchison, etc., R. R v. Cochran, 23 Pac. Rep., 151 (Kan., 1890). In the case of Kimball v. Atchison, etc., R R, 46 Fed. Rep., 888 (1891), the court held that the Atchison, Topeka & Santa Fe Railroad Company had power under its charter to buy a majority of the stock of the St Louis & San Francisco Railway, a partially competing line. Under the statutes of Pennsylvania it is legal for a railroad company to own all the stock of a mining company which owns land and such land does not es- cheat Coram, v. New York, etc., R R, 21 Atl. Rep., 528 (Pa., 1891); id., 19 id., 290. 2 By the constitution of Pennsylvania any railroad corporation is forbidden to control any other railroad corporation owning or having under its control a parallel or competing line. Under this provision the Pennsylvania Railroad Company was enjoined from purchasing a majority of the stock of the South Pennsylvania Railroad Company. In this noted case (Pa. R R. Co. v. Com- monwealth, 7 Atl. Rep., 368—1886), the court said that the ownership of a ma- jority of the stock gave " control " in the sense of that word as used in the con- stitution. Cf. Pullman Pal. Car Co. v. Missouri Pac. R. R. Co., 11 Fed. Rep., 632 (1882) : affirmed, 115 U. S., 587 (1885), construing the word "control" differ- ently in a contract whereby the defend- ant was to use the plaintiff's cars over 423 § 315.] WHO MAY BUY AND SELL STOCK. [CH. XIX. Where a railroad company has power to purchase, lease or con- solidate with another railroad company, it may buy the stock of the latter company with a view to such consolidation, lease or sale. 1 It is illegal for a railroad company to buy a controlling interest in another railroad for the purpose of electing the board of direct- ors of the latter. A minority stockholder in the latter company may enjoin the former from voting the stock so purchased. 2 A railroad company owning all the stock and bonds of another company does not own the property of the latter. It cannot sue on a cause of action belomrin^ to the latter. 3 roads under the defendant's control. The supreme court of Pennsylvania, in Pa. R R Co. v. Commonwealth, 7 Atl. Rep., 374 (Pa., 1886), also sustained an injunction enjoining a corporation, a majority of whose stock was owned by the Pennsylvania Railroad Company, from purchasing a majority of the stock of a road competing with the Pennsyl- vania Railroad Company. The con- stitution of Georgia forbids and prevents one railroad from buying the stock and control of a competing railroad scheme, even though the railroad of the latter is not even commenced and there is no intention of building it. Hamilton v. Savannah, etc., Ry., 49 Fed. Rep., 412 (1892). 1 Where a railroad corporation has power to consolidate with another, it may purchase the stock of that other in contemplation of the consolidation. Hill v. Nisbit, 100 Ind., 341 (1884). A railroad corporation may purchase the stock of another railroad with a view to buying the railroad itself where the sale of the railroad is authorized. Dewey v. Toledo, etc., Ry., 51 N. W. Rep., 1063 (Mich., 1892). Where a railroad company has power to lease another company's road, it may buy all the stock of the latter instead of taking a lease. Atch- ison, etc., R. R v. Fletcher, 35 Kan., 236, 247 (1886). A railroad corporation having the power to buy or consolidate with other railroads may buy a control- ling interest in the stock of another railroad. Wehrhauer v. Nashville, etc., R R, 4 N. Y. St Rep., 541 (1886). 2 See ch. XXXVII, infra; Millbank v. N. Y., etc., 64 How. Pr., 20 (1882). Cf. Great Western R'y Co. v. Metropolitan R'y Co., 32 L. J. (Ch.), 382 (1863). Where a railroad buys a controlling interest in the stock of a competing railroad, it and its officers and dummies will be enjoined from voting such stock at the instance of a minority stockholder, it being clear that if allowed to control the latter cor- poration the former corporation can enhance its profits at the expense of the latter corporation, by diversion of traffic. Memphis, etc., R. R. v. Wood, 7 S. Rep. 108 (Ala., 1889). One rail- road corporation has no power to ac- quire the bonds of another railroad cor- poration in order to control the elections of the latter, such bonds having a voting power. State v. McDaniel, 22 Ohio St., 354, 368 (1872). Eleven years' delay is fatal to a complaint that another corporation has purchased a majority of the stock of the corporation in which the complaiuantstockholder holds stock, and that such purchaser is diverting the traffic to its own line and is wrecking the corporation which it controls. Alex- ander v. Searcy, 8 S. E. Rep., 630 (Ga., 1889\ 3 Fitzgerald v. Missouri P. R'y, 45 Fed. Rep., 812 (1891). Although one railroad company owns a majority of the stock of another railroad company, yet the identity of the two are separate as re- gards being parties to suits. Jessup v. 111., etc., R. R, 36 Fed. Rep., 735 (1888). A corporation which owns a majority of the stock of another corporation, and 424 CH. XIX.] WHO MAY BUY AND SELL STOCK. [§§ 316, 317. §316. Purchases of stock by banks and pledges to banks.— A banking corporation has at common law no power to purchase or invest in the stock of another corporation, whether that other cor- poration be itself a bank or of a different business. 1 The bank is organized for the purpose of receiving deposits and loaning money, not for the purpose of dealing in stocks. Any attempt to engage in such transaction is a violation of its charter rights and of its duty towards the stockholders and the public. There can be no difference of opinion as to whether a pledge of stock, as collateral security for a loan made by the bank at the time of pledging the stock, is legal. Such a pledge of stock is valid and may be en- forced. 2 As regards a pledge of stock to a bank to secure a debt previ- ously contracted, its legality is unquestioned, and is as free from objections as a pledge made contemporaneous with the loan. 3 § 317. Purchases of stock by insurance, manufacturing anil other companies. — An insurance company has no power or legal right to subscribe for stock in a savings bank and building association, 4 nor buys goods of it, is not bound to see that the latter turns the funds over to a party who owned the goods and con- signed them for sale. Wheeler v. New Haven, etc., Co., 16 Atl. Rep., 393 (Conn., 1889). See on this subject § 6, supra, and chs. 38, 39 and 43, infra. iTalmage v. Pell, 7 N. Y.. 328, 347 (1852); Nassau Bank v. Jones, 95 N Y., 115, 120 (1884); First Nat. Bank v. Nat. Exchange Bank, 92 U. S., 122, 128 (1875), where, in reference to national banks, the court said : " Dealing in stocks is not expressly prohibited, but such a pro- hibition is implied from the failure to grant the power." Tracy v. Talmage, 14 N. Y, 162 (1856); Royal Bank of India's Case, L. R., 4 Ch., 252 (1869); Franklin Co. x\ Lewiston Institution for Savings. 68 Me., 43 (1877). The bank is not liable to the corporate creditors on the stock. 2 Royal Bank of India's Case, supra. " Making advances upon shares in pub- lic companies is within the ordinary course of the dealing of bankers." The stock pledged was stock in another bank. To same effect. Re Barned's Banking Co., L. R., 3 Ch., 105 (1867): Shoemaker v. Nat Mechanics' Bank, 1 Hughes (Ct. Ct. Md.), 101 (1869), as ap- plicable to national banks ; also Na- tional Bank v. Case, 99 U. S.. 628 (1878). Such a pledge to a national bank is not prohibited by the statute that the bank shall not take a real-estate mortgage as security. So held where the property of the corporation whose stock was pledged consisted of real estate. Bald- win v. Canfield, 1 N. W. Rep., 261 (foot- paging), (1879). See, also. Sistare v. Best, 88 N. Y., 527 (1882). Contra, Franklin Bank v. Commercial Bank, 36 Ohio St., 350 (1881), where the legality of the pledge was denied, and the right of the pledgee to have the stock registered in its name not granted. On a reorganiza- tion it is legal for a bank owning some of the bonds to take part in such reorgani- zation and accept stock in the new company. Deposit Bank v. Barrett, 13 S. W. Rep.. 337 (Ky., 1890). 3 First National Bank v. National Ex- change Bank, 92 IT. S., 122, 128. 4 Mutual Sav. Bank & Bldg. Ass'n v. Meriden Agency Co., 24 Conn., 159 (1855), holding the insurance company uot liable on the stock. An insurance 425 317.] WHO MAY BUY AND SELL STOCK. [CH. XIX. to purchase stock in another insurance company. 1 It is difficult to state any rule as regards the right of a manufacturing or trading corporation to purchase shares of the capital stock of another cor- poration. It has been held that neither a note-selling company 3 nor a lumber company 3 has power to invest in the shares of a bank, nor a steamship company to subscribe for stock in a dry-dock com- pany. 4 On the other hand, it has been held that a steamboat com- pany may purchase stock in another rival line, even though the evident purpose be to injure it. 5 It is clearly legal for a manufactur- ing corporation to take the stock of another in payment of a debt. 8 A corporation formed to manufacture and sell gas has no power to buy shares of stock in other gas companies. 7 A steel-spring company may use its surplus earnings to purchase shares of stock in an iron and steel company for the purpose of purchasing steel cheaply from the latter company, especially where there is a combination which has put up the price of steel. 3 Where a corporation owns stock in another corporation and sells it and takes a note in payment, it is no defense to a suit on the note to set up the ultra vires of the above act. 9 company cannot invest in the stock of a bank. State v. Butler, 8 S. W. Rep., 586 (Tenn., 1888). 1 Re Liquidators of the British Nation Life Assurance Association, L. R, 8 Ch. Div., 679 (1878), the court refusing to hold the former liable on a winding up; Berry v. Yates, 24 Barb., 199 (1857)* Pier son v. McCurdy, 33 Hun, 530 (1884). 2 Joint-stock Discount Co. v. Brown, L. R, 8 Eq., 381 (1869). 3 Sumner v. Marcy, 3 W. & M., 105 (1847). 4 New Orleans, F. & H. S. Co. v. Ocean Dry-dock Co., 28 La. Ann., 173 (1876). Although a corporation purchases stock in another corporation contrary to stat- ute, yet a bona fide holder of a note given in payment therefor may collect the note. Wright v. Pipe Line Co., 101 Pa. St., 204 (1882). 5 Booth v. Robinson, 55 Md., 419 (1880). This decision goes to the extreme length in allowing one corporation to invest in the stock of another. A manufacturing corporation is not presumed to bo inca- pable of purchasing stock in another corporation. Parker v. Bernal, 66 Cal, 112 (1884). 6 Howe v. Boston Carpet Co., 82 Mass., 493 (1860). Where an iron company Bells iron to a railway company to be paid for iu stock of the latter, the con- tract is void, and the iron companycan- nofc, it seems, even recover the value of the goods delivei-ed. Valley R'y Co. v. Lake Erie Iron Co., 18 N. E. Rep., 486 (Ohio, 1888). Where one telegraph cor- poration holds the bonds of another and exchanges the bonds for the stock of the latter corporation, a subsequent mortgagee of the first corporation can- not attack the validity of the bonds and mortgage on the property of the second corporation. Boston, etc., Co. v. Bank- ers', etc., Co., 36 Fed. Rep., 288 (1888). This case was affirmed sub nom. United Lines Tel. Co. v. Boston, etc., Co., 147 U. S., 431. The court said in regard to the method of issuing the stocks and bonds, " It violated no principle of law, and no rule of good morals." 1 People v. Chicago Gas T. Co., 22 N. E. Rep., 798 (111., 1889). 8 Layng v. A. French, etc., Co., Lim- ited, 24 Atl. Rep., 215 (Pa., 1892). 9 Holmes, etc., Co. v. Holmes, etc., Co., 53 Hun, 52 (1889) ; affirmed, 127 N. Y., 252. 426 OH. XIX.] WHO MAY BUY AND SELL STOCK. [§ 317. A trust company has no power to hold as trustee and vote the majority of the stock of a great railroad system, especially where it is also the trustee in a trust deed of the company. 1 One company may be enjoined from voting stock in a rival cor- poration where such vote controls and will render the second company subject to the first. 2 Although the statutes of a state authorize incorporation for any legal purpose, yet it may be a question whether incorporation can be had for buying and selling shares of stock in other corporations. The state only, however, can raise this objection. 3 Religious and charitable and other corporations, not for profit, have, it seems, implied power to invest their funds in stock of other corporations. 4 There has been some controversy whether one corporation could sell all its property to another corporation, taking pay in stock of the latter, and dividing such stock among the shareholders of the selling corporation. The weight of author- ity holds that such a transaction is legal if all the stockholders i Clarke v. Central R. R., etc., Co., 50 Fed. Rep., 338 (1893). ^ See § 315 ; also ch. XXXVII. Where a consolidation is effected by one com- pany buying all the stock of another company, and just before the transac- tion is completed the company whose stock is thus sold issues a dividend of interest-bearing securities in order to defraud the purchasing company, the latter may, by a bill in equity, have such securities canceled. Bailey v. Citizens', Gas., etc., Co., 27 N. J. Eq., 196 (1876). 3 A stockholder in the corporation cannot enjoin it from purchasing stock in accordance with its articles of in- corporation. Willoughby v. Chicago, etc., Co., 25 Atl. Rep., 277 (N. J., 1892). It is not for a creditor of the vendor of stock to raise the question whether the vendee — a corporation — had power to purchase the stock. Kern v. Day, 12 So. Rep., 6 (La., 1893). Although the charter authorizes other corporations to hold the stock of a corporation, yet a subse- quent general constitutional provision against one corporation owning the stock of another applies to it. Clarke v. Central R. R, etc., 50 Fed. Rep., 338 (1892). A corporation organized to deal 42' in the stock of a stock-yard corporation and hold personal and real estate may buy competing stock yards ; also buy the stock of a contemplated con^eting company : also buy, guaranty and sell the bonds of such competing com- pany ; also pay money to settle suits against the first-named stock-yard com- pany, and to bind stock-yard men not to erect competing yards for a specified term of years, within a certain terri- tory; and may sell any or all of the above property and right to the first- named company. Ellerman v. Chicago, etc., S. Y. Co., 23 Atl. Rep., 287 (N. J„ 1891). 4 Pearson v. Concord R. R. Co., 13 Am. & Eng. R. R. Cases, 102 (N. H., 1883). " Certain classes of corporations may rightfully invest their moneys in the stock of other corporations, such as re- ligious and charitable corporations, and corporations for literary purposes. The power is not expressly mentioned in their charters, but is necessarily implied, for the preservation of the funds with which such institutions are endowed, and to render their funds productive." To same effect, Hodges v. New Eng. Screw Co., 1 R. I., 312 (1850). § 318.] WHO MAT BUY AND SELL STOCK. [cH. XIX. assent, but may be prevented by any stockholder of the former corporation. 1 Where a corporation owns stock in the name of a trustee for the corporation, it is obliged to indemnify such trustee for calls paid by him. 2 The stock owned by a corporation may be sold by its general business agent and financial manager and rep- resentative, he having apparent power to sell, and the governing body not objecting. 3 §318. Infants as purchasers of stock. — An infant is incompe- tent to purchase shares of stock. Most cases of this class arise upon a winding up of the corporation, when the infant is placed upon the list of contributories, and, in defense, infancy is set up. 4 An infant's purchase of stock is voidable and not void. 5 This seems to be the rule finally arrived at by the English courts, after some hesitation and difference of opinion. The transfer is similar to a deed, and passes an interest to the infant even when coupled with a liability, if it be for his benefit to accept it." Consequently an infant, upon coming of age, is bound to elect whether he will affirm or disaffirm a purchase of stock made by him while yet an infant. 7 He may disaffirm while still an infant, and is then not liable on calls. 8 The plea of infancy is a good defense, 9 but the plea must allege a disaffiliation within a reasonable time after be- coming of age. 10 Where a stockholder sells his stock through a stock-exchange jobber, and the sale is made to an infant, the jobber is liable to the vendor for calls paid by him in consequence of such 1 See ch. XL, infra. 6 id. * Goodson's Claim, 28 W.R., 760(1880). 7 Where, however, the corporation Where one company takes shares of becomes insolvent just before or just stock in another company and puts such after the infant comes of age, he need stock in the name of its treasurer and not affirm or disaffirm, but may await president as " trustees of the stockhold- the action of the corporation. Mitchell's ers of the A. Co.," and the treasurer Case, L. R., 3 Eq., 363 (1870). Where afterwards sells the stock and converts he is silent for two years after coming the money to his own use, he may be of age, and corporate insolvency then compelled to account for the same, occurs, he is bound. Id. For other Murray v. Aiken, etc., Co., 16 S. E. Rep., cases of ratification, see references in 143 (S. C, 1892). §§ 67, 250. 'Walker v. Detroit Transit R'y Co., *Newry & Enniskillen R'y Co. v. 47 Mich., 338 (1882). See, also, Sistare v. Coombe, 3 Ex., 565, 578 (1849). " He be- Best, 88 N. Y., 527. That the corporate came a shareholder by contract during treasurer may sell the stock, see Holden infancy, and during infapcy he dis- v. Metropolitan Nat'l Bank, 138 Mass., 48. affirmed the contract ; therefore, in my 4 See §§ 67, 250. opinion, he ceased to be a shareholder 5 Lumsden's Case, L. R, 4 Ch., 31 liable to be sued for calls." (1868). A minor's sale of stock is void- , to the effect that only a registry will reduce the wife's stock to the pos- session of the husband. See, also, ch. XXXII, infra. The wife's stock, stand- ing in her name at the time of and after marriage, is not subject to her husband's debts. Cochrane v. Chambers, Arnbl., 79, n. (1825). Contra, Stamford Bank v. Ferris, 17 Conn., 259 (1845). In Con- necticut it is held that the wife is not liable in assumpsit to her husband's creditors, to whom she has pledged her stock, although she subsequently pledges it to another. An express prom- ise to pay on her part is necessary. Piatt v. Hawkins, 43 Conn., 139 (1879). Curtis v. Steever, 36 N. J. Law, 304 (1873), clearly and properly holds that the wife's stock, held by her as her sep- arate estate, is not subject to her hus- band's debts. See, also, Cornell's Case, 18 W. N. Cases, 289 (Pa., Nov., 1886), * By 33 and 34 Vict, ch. 93, § 4, mar- natic R'y Co., 42 L. J. (Q. B.), 169 (187:!). ried women may purchase or take paid- up stock, or stock upon which there can be no liability, but if taken without the consent of her husband, he may apply to the court and have it turned over to himself. Previous to this act the cor- poration might refuse to register her as a stockholder, but now the corporation must accept her the same as any other applicant for registry. Regina v. Car- Under this act she may transfer her stock only after it has been formally set aside by statutory authority as" her separate property. Howard r. Bank of Eng., L. R, 19 Eq., 295 (1875). Where the corporation has allowed a transfer by a married woman, it cannot cancel the registry. Ward v. Southeastern R'y Co., 2 El. & EL, 812 (1860). 429 320.] WHO MAT BUY AND SELL STOCK. [CH. XIX. § 320. Competency of miscellaneous parties. — A sale of stock by a person non compos mentis is void. The corporation is bound ab- solutely to know of the lunacy of a transferrer, even though it allows a registry on his ordinary signature and transfer. 1 An as- signee in bankruptcy or for the benefit of creditors takes only the interest and equitable rights of his assignor. A previous unre- corded transfer of the insolvent's stock is protected. 2 A partner may accept stock as collateral security for a loan from the firm, 3 and may sell and transfer partnership stock. 4 and §§ 66, 250, 308; Vandenheyden v. Mallory, 1 N. Y., 452 (1848); Voorhees v. Bonesteel, 16 Wall., 16 (1872). A cer- tificate issued to husband as trustee of wife constitutes her separate estate, where he pays dividends to her. In Kentucky a resident married woman's power of attorney to convey stock is void. Bank of Louisville v. Gray, 2 S. W. Rep., 168 (Ky., 1886). Taking out a certificate in his own name by the husband reduces his wife's stock to his possession, and it passes by his will, even though he made a memorandum to the effect that he held it in trust for her. Cummings v. Cummings, 9 N. E. Rep., 730 (Mass., 1887). Where a hus- band uses his wife's money to purchase stock and takes title in his own name, but considers himself trustee for her, a creditor of the husband, who at the time of incurring the debt knew that the latter held the stock for his wife, cannot subject it to the payment of the debt. Porter v. Bank of Rutland, 19 Vt, 410 (1847). Although a corporation errs in allowing a wife to transfer her stock to her husband, yet the statute of limitations runs against her right of ac- tion from the time of the transfer. Chase v. Hibernia Nat Bank, 10 S. Rep., 379 (La., 1891). In Kentucky, by statute, a wife's bank stock goes to her heirs, and not to her husband, upon her de- cease. Kent's Adm'r v. Deposit Bank, 14 S. W. Rep., 962 (Ky., 1890). Posses- sion by the husband, as* executor, of stock of his wife is not a reduction to possession. Sowles v. Witters, 39 Fed. Rep., 403 (1889). A person taking stock from a person in whose name it stands cannot hold the same as against the lat- ter's wife, where the stock belonged to her separate estate and was not known to be by the person taking it. Stickney v. Stickney, 8 S. Rep., 568 (Ala., 1890). A married woman may give away or pledge her stock. Walker v. Joseph, etc., Co., 20 Atl. Rep., 885 (N. J., 1890). Where the wife authorizes her husband to sell her stock and use the proceeds in his business, he cannot sell the stock and assign the proceeds to another person. The latter cannot collect such proceeds. Deming v. Bailey, 2 Rob., 1 (1864). 1 Chew v. Bank of Baltimore, 14 Md., 299 (1859). A sale of stock is not easily set aside on the ground of mental in- capacity on the part of the vendor. Perry v. Pearson, 25 N. E. Rep., 636 (111., 1890> 2 Dickinson v. Central Nat Bank, 129 Mass., 279 (1880) ; Purchase v. New York Exchange Bank, 3 Rob. (N. Y), 164 (1865). Contra, Shipmau v. ^Etna Ins. Co., 29 Conn., 245 (I860), where the pre- vious transferee delayed unreasonably in claiming ownership of the stock. 3 Weikersheim's Case, L R, 8 Ch., 831 (1873). In Comstock v. Buchanan, 57 Barb., 127 (1864), however, where the stock was registered in both partners' names, a contrary rule was upheld. 4 Quiver v. Marblehead Social Ins. Co., 10 Mass., 470 (1813). Cf. Sargent v. Franklin Ins. Co., 8 Pick, 90 (1829). Stock may belong to a partnership although standing in the individual names of the partners in order to make them stockholders. Fairfield v. Phillips, 430 CH. XIX.] Wno MAY BUY AND SELL STOCK. [§ 320. A director of the corporation itself may buy and sell its stock like any other individual. The information which he has of the affairs of the corporation, whereby he is enabled to bu^y or sell at an advantage over, the person with whom he deals, does not affect the validity of the transaction. He is entitled to the benefit of his facilities for information. There is no confidential relation between him and a stockholder, so far as a sale of the stock between them is concerned ; and, so long as he remains silent and does not actively mislead the person with whom he deals, the transaction cannot be set aside for fraud. 1 It is illegal for the directors to issue to themselves, in exclusion of others, such part of the original or increased capital stock as has not been already issued, the issue being for the purpose of control- ling an election and making a profit. 2 49 N. W. Rep., 1025 (Iowa, 1891). Where one of the partners in the building of railroads, and in many owning stocks, bonds, etc., dies, and his executor by means of experts, etc., makes a settle- ment with the other partner, such settle- ment is binding although the other partner did not impart all the knowl- edge or information he might have given. The subsequent rise in value of some of the securities is immaterial. Colton v. Stanford, 23 Pac. Rep., 16(Cal., 1890). 1 Board of Com'rs of T. County v. Reynolds, 44 Ind., 509 (1873); Carpenter v. Danforth, 52 Barb., 581 (1868). This case was disapproved by the commenta- tor to Story's Eq. Juris., 12th ed., 229 n., but the disapproval is omitted in the 13th ed. So, also, Grant v. Attrill, 11 Fed. Rep., 469 (1882), where the sale was induced by threat of assessments. See, also, Johnson v. Laflin, 5 Dill., 65, 83 (1878); Deaderick v. Wilson, 8 Baxter (Tenn.), 108 (1874); Gilbert's Case, L. R, 5 Ch., 559 (1870) ; § 351, infra. See, also, Heman v. Britton, 14 Mo. App., 109 ; affd, 84 Mo., 657 (1883). In New York, by statute, a director is prohibited from selling stock "short." Laws 1884, ch. 223. Where the president of a company advises a stockholder to sell his stock at a certain price to a certain person, and the sale is made, the president is liable for the difference between that price and the market price, where the person purchased as the secret agent of the presi- dent. Fish v. Budlong, 10 R. I., 525 (1873). A director may buy stock from a stock- holder at less than its real value, and there is no fraud in the fact that the director knew the real value while the stockholder did not. Crowell v. Jackson, 23 Atl. Rep., 426 (N. J, 1891). Where the president sells stock for $120 per share after he has indorsed a false state- ment of the company's affairs, the stock being really worth but $70 per share, the vendee may have the sale rescinded. Prewett v. Trimble, 17 S. W. Rep., 356 (Ky., 1891). It would be " inequitable to permit the directors of a corporation to so manage its business, or to so deal with its property, as to lessen the value of its stock for the purpose of purchas- ing such stock for themselves at a low figure." But this relation does not exist between one director and another di- rector. Perry v. Pearson, 25 N. E. Rep., 636 (111., 1890). The purchaser of stock from the secretary of the company can- not rescind on the ground of fraud, the secretary having given at the time of the sale all the information which he had concerning the company. No confiden- tial or fiduciary relation exists. Krumb- haar v. Griffiths, 25 Atl. Rep., 64 (Pa., 1892). 2 See § 70, supra. 431 § 321.] WHO MAY BUT AND SELL STOCK. [CH. XIX. A joint owner of stock cannot transfer the interest of the other joint owner where the stock is registered in the name of both. 1 On the death of one, the survivor takes title to the whole stock. 2 A drunken person's sale of stock may be set aside if an undue advantage was taken. 3 Where stock is purchased by one person in his own name by due authority for himself and another, the latter is a part owner, and has rights and liabilities as such. 4 The statute of frauds does not apply to such an arrangement. 5 § 321. Sales, purchases and transfers by agents. — Stock may be purchased by an agent; and in making such a purchase the agent is not permitted to make a secret profit, even though he acts with- out compensation. 6 The real owner of stock may compel the nomi- nal owner to transfer the stock to him. 7 The corporation may 1 Standing v. Bowring, L. R., 27 Ch. D., 341 (1884); Comstock v. Buchanan, 57 Barb., 127 (1864). But if the other joint owner dies first, the previous transfer of the survivor is effective and conveys the whole. Slaymakerv. Bank of Gettysburg, 10 Pa. St., 373 (1849). Where two persons own stock in com- mon, replevin will not lie by one as against the other for his part of the stock. Barrowcliffe v. Cummins, 66 Hun, 1 (1892). 2 Garrick v. Taylor, 3 L. T. (N. S.), 460 (1860); Hill's Case, L. R., 20 Eq., 585 (1874). 3 A sale of stock by a drunken person for an insufficient consideration will be set aside ; and if, without his fault, he is unable to restore the amount re- ceived, it will be provided for in the final decree. Thackrah v. Haas. 119 U. S., 499 (1886). is own breach of trust in case there was a decline in the value of the stock. The trust attaches to any stock standing in the name of the trustee, and although the same certificates are not retained, an equal amount of other similar stock owned by the trustee may be applied to the trust. 2 And in all cases where the trustee has sold stock belonging to the trust estate in breach of his duties as trustee, he may be held liable in damages by the cestui que trust or his representative for the value of the stock. 3 Stewart, 6 Atl. Rep., 321 (Pa., 1885) —the last case holding, also, that the trustee cannot sell the stock to himself, even at the market price. Cannot change stock bequeathed. Murray v. Feinour. 2 Md. Ch., 418 (1851). Nor a good investment to a stock investment In re Warde, 2 Johns. &H., 191 (1861); Waite v. Whor- wood. 2 Atkyns, 159 (1741). A trustee of an estate has implied power to sell rail- road stock belonging to the estate in order to reinvest the proceeds in secu- rities which the law allows him to invest in. Toronto, etc., Co. v. Chicago, etc., R. R. 64 Hun, 1 (1892). See, also, Re Bennison, 60 L. T. Rep, 859 (1889). In the case Jones v. Atchison, etc.. R. R., 23 N. E. Rep, 43 (Mass., 1889), the court up- held a sale of stock made by the trustee for the purpose of changing the invest- ment. A trustee selling stock at a high price and then replacing it at a lower figure is liable to the cestui que trust for the high price. Snyder's Adm'r v. McComb's Ex'r, 39 Fed. Rep., 292 (1889). 1 Harrison v. Harrison, 2 Atkyns, 121 (1740) ; Bostock v. Blakeney, 2 Brown's Ch. R., 653 (1789) ; Pocock v. Redding- ton, 5 Vesey, 800 (1801) ; Long v. Stew- art, 5 Vesey, 809, note (1801): Hart v. TenEyck, 2 Johns. Ch., 62, 117 (1816); Re Masoiuberd's Settlement, 60 L. T. Rep, 620 (1889). 2 Pinkett v. Wright, 2 Hare, 120 (1842). A trustee is liable for breach of trust of co-trustee in regard to stock where the former is negligent in keep- ing himself informed as to the transac- tions of the latter in the trust properly. Bullock v. Bullock, 55 L. T. Rep, 703 (1886). Trust stock was pledged by a trustee to secure his own debts in 1864, the pledgee knowing that the stock was trust stock ; the stock was sold by pledgee in 1867; the cestui que trust learned thereof in 1877 and commenced suit against the executors of the surety for the trustee; judgment was rendered in 1882, and executors commenced tins suit against the pledgee within three years after 1882. Held, that no laches or statute of limitations barred the suit. Blake v. Traders' Nat'l Bank, 12 N. E. Rep, 414 (Mass., 1887). 3 A trustee authorized to sell stock, but selling in breach of trust, is liable for the value of the stock at the time of com- mencing suit against him, and interest; also for dividends declared after the breach of trust; or the cestui que trust may demand the value of the stock at the time of the breach of trust, and in- terest, or a replacing of similar stock and dividends. McKim v. Hibbard, 8 N. E. Rep, 152 (Mass., 1886). A trustee to use stock to pay debts may assign a part of the stock to pay a debt due to himself, if in good faith and at a full valuation. Appeal of Patterson, 12 AtL Rep., 679 (Pa, 1888). 436 CH. XIX.] WHO MAY BUY AND SELL STOCK. [§ 3i'5. A specific performance in regard to a trust estate of stock may be decreed. 1 § 325. Transferee of stock from trustee — is protected when. — A vendee or pledgee of stock, directly from a trustee, is or is not pro- tected in his interest in the stock, according as he is or is not charge- able with notice of the fact that the stock belongs to a trust estate, and that the trustee is using it in breach of the trust. Anything that is sufficient to put a party on inquiry is considered equivalent to actual notice, if inquiry be not made and reasonably satisfied. The law imputes to a purchaser the knowledge of a fact of which the exercise of common prudence and ordinary diligence would have apprised him. This is called constructive notice, and has the same effect as an actual notice of the trusteeship. The most com- mon instance of a constructive notice that stock being sold belongs to a trust estate is where the words "trustee" or "in trust," either with or without the name of the cestui que trust, are written on the face of the certificate of stock after the name of the person in whose name it stands on the corporate books. It is well established that such words, indicating a trustee ownership, are notice to the pur- chaser that his vendor is selling trust property, and that he must ascertain whether the trustee has any power to sell the stock. 2 i See § 338, n., infra. 2 "A certificate for shares of stock run- ning to 'A. B., trustee,' or to 'A. B., in trust,' without disclosing the names of beneficiaries or the particulars of the trust, is notice to a purchaser of the shares that 'A. B.' does not hold them in his own right but as a trustee." Ger- ard v. McCormick, 130 N. Y., 261, 267 (1891); Shaw v. Spencer, 100 Mass., 382 (1868), the court saying that the word " trustee" means trustee for some one whose name is not disclosed, and that a custom of trade disregarding such words on certificates of stock is illegal and ineffectual to protect the purchaser. To same effect, Jaudon v. National City Bank, 8 Blatch., 430 (1871); aff'd, 15 Wall., 165, 176, where the court says the purchasers " are chargeable with con- structive notice of everything which, upon inquiry, they could have ascer- tained from the cestui que trust." Gaston v. American Ex. Nat Bank, 29 N. J. Eq. Rep., 98 (1878) ; Walsh v. Stille, 2 Par- sons' Sel. Cases in Eq. (Pa.), 17 (1842) ; Simons v. Southwestern R. R Bank, 5 Rich. Eq., 270 (1853), where a master in chancery held the stock in his own name officially ; Loring v. Brodie, 134 Mass.. 453 (1883) ; Loring v. Salisbury Mills, 125 id., 138 (1878); Sweeney v. Bank of Montreal, 5 Canadian Law Times, 503 (1885); Budd v. Monroe, 18 Hun, 316 (1879); Bank of Montreal v. Sweney, 36 L. T. Rep., 897 (1887). In California, however, it is held that, al- though the word " trustee " on the face of the certificate, followed by the name of the cestui que trust, may give notice that it is trust property, yet that where the word "trustee" is but a cloak for an agency, for the purpose of shielding the real owner from liability on his stock, and to conceal the fact that he is dealing in stocks, the court will dis- regard it, and will not protect the real owner against his agent's unauthorized sale of the stock. Brewster v. Sime, 42 Cat, 139 (1871); Thompson v. Toland. 48 Cal., 99 (1874). Where a certificate of stock runs to a person absolutely and 437 § 325.] WHO MAY BUY AND SELL STOCK. [CH. XIX. There are many other facts which will prevent the vendee from claiming that he is a bona fide holder of the stock. Thus, if the stock is pledged to a bank by the trustee, who is a director of a bank, and the bank is prohibited from loaning to its directors, the bank is not a bona fide holder, though without notice or knowledge of the trusteeship. 1 In England, the house of lords have decided that certificates of stock in railway companies are not negotiable in any respect, and that a bona fide transferee of the certificate is not protected until he has obtained registry in the corporate books. 2 In this country a different rule prevails, and it is acce 1 ted and assumed as element- ary that a In in 'I fide purchaser for value of stock belonging to a trust estate and sold in breach of trust is nevertheless protected in his purchase, although he has not registered the transfer on the cor- porate books. A bona fide purchaser through several mesne con- veyances, starting from a trustee who sells the stock in breach of trust, is protected. 3 passes into bona fide hands, the corpora- tion is not liable for allowing a transfer. even though such stock was held in trust and the corporation knew the fact so to be. No harm was done by the transfer, inasmuch as the certificate had already passed into bona fide hands. Smith ft Nashville, etc., R R, 18 S. W. Rep.. 546 (Tenn.. 1892). A purchaser of certificates of stock need not look back of the last registry of tr nsfer on the corporate books. A breach of trust back of that does not invalidate his title. Winter r. Montgomery, etc.. Co., 7 S. Rep. 773 (Ala.. 1890). Where st- M-k standing in the name of a person as trustee is sold and the certificates are turned in for transfer without the pur- chaser seeing them, he takes good title even though there was a breach of trust, he not knowing of such breach, nor of the trusteeship. Stinson ft Thorn- ton, 56 Ga., 379 (1876). Notice to a per- son attending to the transfer is not notice to the transferee. 1 Albert i\ Savings Bank of Balti- more. 2 Mil.. 159, 171 (1852 . A bank which receives trust stock as security for a loan, and afterward, on payment of the loan, transfers the stock to par- ties designated by the pledgor, is liable to the cestui que trust for aiding in the latter transfer. Hatten t\ Russell, 58 L. T. Rep. 252 (IS*- . 2 Shropshire Union Rys. & Canal Co. v. Queen, L. R., 7 H. L., 496 (1875). Cf. Dodds ft Hills. 2 H. & M.. 424 (1865). >. 880, 416. A cestui que trust of stock in England may defeat a bona fide purchaser's title to the stock by suing for the stock before a transfer is made on the corporate books. Roots ft Williamson, 58 L. T. Rep., 802 (1888). 3 Salisbury Mills ft Townsend, 109 Ma-., 115 (1871); Stinson ft Thornton, 56 Ga.. 377 1 1876) ; Cohen ft Grayun, 4 Md. Ch.. 357 (1848'. Where, however, the trustee has been removed by a court and another trustee appointed in the state of the corporation, a pur- chaser of the certificates held by the old trustee is not protected, his purchase being after the removal, Sprague ft Cachigo Mfg. Co., 10 Blatch., 173 (1872). But in Holbrook ft New Jersey Zinc Co., 57 N. Y„ 616 (1874), it was held that a successful suit in a state not the state of the corporation, to remove a trustee, does not affect a bona fide purchaser of the certificate from the trustee, the pur- chase being made pending the suit : and that the corporation allowing registry 438 CH. XIX.] "WHO MAY BUY AND SELL STOCK. [§§ 320, 327. § 32G. The mere fact that a purchaser of stock knows he is buy- ing from a trustee, and that the stock belongs to the trust estate, puts the purchaser to.no inquiry except that of ascertaining whether the trustee has power to sell the stock or vary the invest- ment. If he has such power the purchaser will be protected, al- though the trustee uses the money for his own private purposes, provided the purchaser has no notice of such an intent on the part of the trustee. 1 The purchaser has a right to assume that the ob- ject of the sale is to invest the funds in a permanent investment or to discharge liabilities. 2 "Where, however, the purchaser knows that his vendor sells or pledges the stock as trustee, and also knows that the sale or pledge is for the private debts or purposes of the trustee, the purchaser is chargeable with knowledge of the breach of trust, and is not protected. 3 Nor is a pledgee of stock from a trustee, acting as trustee, protected where the trustee is authorized merely to sell the stock. 4 Power to sell does not confer power to pledge. 5 § 327. Rights and liability of the corporation allowing a trans- fer by a trustee in breach of his trust. — Where a corporation has notice that a stockholder holds his stock as trustee for another, and the means of ascertaining the character of that trust are within the power of the corporation, it is bound to refuse to allow a registry of the trustee's transfer until it is satisfied that the trustee has power to make the transfer. 6 If the corporation allows the trans- fer and the trustee had no power to make it, the corporation is of the new trustee as holder of the stock, 4 Loring v. Erodie, 134 Mass., 453 and issuing new certificates to him, is (1883). liable in damages to the purchaser from 5 Merchants' Bank of Canada v. Liv- the old trustee. ingston. 74 N. Y., 223 (1878) ; Manhattan i Perry on Trusts, § 225, 3d ed. (1882) ; Bank v. Walker, 13U U. S.. 267 (1889). The Lewin on Trusts, 417, 7th ed. (1879); power of an agent to sell does not au- Godefroi on Trusts, 125, 127 (1879). thorize him to pledge. First Nat'l Bank 2Ashton v. Atlantic Bank, 85 Mass., v. Taliaferro, 19 AtL Rep., 364 (MA, 217 (1861), where the trustee sold land, 1890). took notes in payment and stock as col- 6 Chapman v. City Council, 6 S. E. lateral, and sold the notes with the col- Rep., 158 (S. C, 1888) ; Bayard v. Farm- lateral, ers' & Mechanics' Bank, 52 Pa. St.. 3 Jaudon v. National City Bank, 8 232 (1866), where a refusal of the cor- Blatch., 450 (1871): affirmed, 15 "Wall., poration to transfer until the terms of 165, sub nom. Duncan v. Jaudon ; Walsh the trust were examined by ; ts attorney v. Stille, 2 Parsons' Sel. Cases in Eq. and found to allow the trustee, was sus- (Pa.). 17 (1^42); White v. Price, 29 tained. The corporation cannot, how- Hun, 394(1886); Simmons f. Southwest- ever, retain the copies of the probate ern R R. Bank, 5 Rich. Eq., 279 (1853); records used in investigating. Bird v. Shaw v. Spencer, 100 Mass., 382 (1868), Chicago, L & X. R R Co., 137 Mass., holding also that silence while the 428 (1884). In transfer of trust stock vendee pays an assessment is no waiver, the corporation may very properly re- 439 § 327.] WHO MAY BUY AND SELL STOCK. [CH. XIX. liable to the cestui que trust. The fact that the certificate runs to the holder as " trustee " is sufficient notice to the corporation. 1 Notice to a board of directors is notice to all subsequent boards. 2 The corporation is bound to see that the sale by the trustee is made in accordance with the terms of the trust. Thus, it is liable if it permits a sale and transfer by one trustee when there are two trustees; and a general power of attorney bv the other trustee au- thorizing sales will not protect the corporation in its registry of a transfer signed by one only. 3 It is liable for allowing a registry of a trustee's transfer when the trust is for an unmarried woman, to take effect when she shall marry. 4 If there are several cestuis que trust, the corporation is liable for allowing one of them to transfer the whole interest in the stock, where by mistake of the corpora- tion the stock had been registered in the name of that one. and not in the name of the trustee. 5 If, however, the cestui que trust is guilty of laches in taking steps to obtain his rights, the corporation is discharged. 6 The remedy of the cestui que trust is in equity, not at law. 7 A waiver of former breaches of trust is no waiver of the fuse to allow a registry where the sale is made by the trustee at a price far below its market value. Succession of Boullemet, 3 S. Rep.. 401 (La., 1887). Where stock is transferred to a trustee by the executors, the corporation know- ing of the trust, and the corporation subsequently allows the trustee to trans- fer the stock to third persons, the corpo- ration is liable to the cestui que trust if such last mentioned transfer is fraud- ulent and in breach of trust Marbury v. Ehlen. 19 Atl. Rep., 648 (MdL, 1890). If the will gives the executrix power to sell the stock, the corporation is pro- tected in allowing transfers by the ex- ecutrix and trustee even though it did not know the contents of the will. Al- though the transfer is to a bank, the corporation is not bound to know that the transfer is a pledge and not a sale. Peck v. Providence Gas Co., 21 Atl. Rep., 543 (R I., 1891). Where, upon reorgan- ization, the committee issue transferable certificates exchangeable into stock of the new corporation when it is formed, the new corporation is liable for allow- ing an exchange by a person to whom a trustee has illegally transferred tne certificates issued to him. Mobile, etc., R'y v. Humphries, 7 S. Rep., 522 (Miss., 1890). •See ^ 325, infra. In the case of Stockdale v. South Sea Co., Barnardis- tou's Ch. (folio) 363 (1740), the court said, however : " These great companies are only to consider the person in whose name the stock is standing, unless the trust of that stock is declared in their books." - Mechanics' Bank of Alex. v. Seton, 1 Pet, 299(1828). 3 Bohlen's Estate, 75 Pa. St, 312 (1874). Nor where the signatures of the other trustees are forged by one. Cottam v. Eastern Counties R'y Co., 1 J. & H.. 243 (1860). In England one executor or trustee cannot assign railway stock. All must join. Barton v. North., etc., R'y Co., 58 L. T. Rep., 549 (1884). * Magwood v. R R. Bank, 5 S. C, 379 (1874). 5 Farmers' & M. Bank v. Wayman, 5 Gill (Md.), 336(1847> 6 Albert v. Sav. Bank of Baltimore, 1 Md. Ch., 407 (1849); affirmed, 2 Md., 159 (1S52). 7 Loring r. Salisbury Mills, 125 Mass., 138 (1878). In a suit by a stockholder to hold a corporation liable for his stock 440 CH. XIX. J WHO MAY BUY AXD SELL STOCK. [§§ 328, 329. one complained of; and a judgment against the trustee himself is no bar to the suit against the corporation, except to the extent that satisfaction has been obtained. 1 The corporation may be compelled by the court to purchase an equal amount of stock and register it for the benefit of the cestui que trust. 2 § 328. Sales of stock oy a guardian. — At common law a guard- ian may sell the personal property belonging to him as guardian without obtaining any special license or authority; and a bona fide purchaser from him of such property is protected and is entitled to the property, even though the guardian misappropriates the proceeds of the sale. 3 This rule applies to shares of stock. 4 In most of the states, however, statutes have been passed requiring guardians to obtain the consent of a court before selling the per- sonal property of his ward. 5 If such a statutory permission to sell is required, and the vendee of stock has notice that his vendor sells as guardian, the vendee is bound to see that the requisite permis- sion to sell has been given. 6 An order of the court allowing the guardian to sell is not authority to him to pledge the stock, and the pledgee is bound to take notice of that fact. 7 Where stock is sold by a foreign guardian according to the laws of the state of the guardianship, title passes and the purchaser is protected. 8 § 329. Sales of stock oy an executor or administrator. — It is the duty of an executor or administrator of an estate to collect the assets, pay the debts, and distribute the remainder according to the provision of the will or of the statute of distribution. 9 In order and dividends, by reason of its allowing ing that the corporation is not liable for a transfer by an unauthorized agent of a broach of trust by the guardian in the stockholder, the subsequent owners selling the stock. The court said: "If of the stock are not necessary parties, the guardian defrauds his ward, his The defense of prescription may prevail, sureties are responsible ; if the pur- St. Romes v. Cotton Press Co., 127 U. S., chaser combines in the fraud, he too is 614(1888). chargeable; but the bank cannot inter- 1 Id. fere and arrest the transfer of its stock 2 Bohlen's Estate, mipra. by the legal holder of the scrip upon 3 Field v. Schieffelin, 7 Johns. Ch., 150 such pretenses. It would trammel and (1823); Ellis v. Prop, of E. M. Bridge, 2 embarrass such transactions so as to im- Pick., 243 (1824), holding that a bona pede materially that transferable char- ade purchaser from the guardian of a acter, which is one of the most valuable person non compos metitis is protected, attributes of stock." * Lamar v. Micou, 112 U. S., 452. 475 5 Mass. R. S., ch. 79, § 21. (1884), the court saying: "He had the 6 Atkinson v. Atkinson, 90 Mass., 15 authority, as guardian, without any (1864). order of court, to sell personal property 7 Webb v. Graniteville Mfg. Co., 11 of his ward in his own possession, and S. C, 396 (1878) ; 130 U. S., 267. to reinvest the proceeds." See, also, 8 Ross v. Southwestern R. R, Co., 5? Bank of Va. v. Craig, 6 Leigh, 399, Ga., 514 (1874). 432 (1835), to the same effect, and hold- ^Keylinge's Case, 1 Eq. Cases Abr., 441 § 329.] WHO MAY BUY AND SELL STOCK. [CH. XIX. to pay the debts the executor may sell the personal property of the estate. Accordingly, the rule has become established that the purchaser of personal property from an executor or administrator is not bound to ascertain whether the sale is necessary in order to pay the debts of the estate, nor to see that the proceeds of the sale are applied to the debts. If he buys in good faith and for value, he is protected. Such also are the rules applicable to an ex- ecutor's or administrator's sales of stock. 1 The executors in the state of the decedent may transfer the stock of the estate, and con- vey a title which the corporation is bound to recognize, although the corporation itself is domiciled in another state. 2 The rule is otherwise, however, as regards executors appointed in jurisdictions out of the United States. 3 An executor may pledge estate stock at his bank on a represen- tation that the money is to be used for the estate ; and the bank 239 (1702). holding that, where the exec- utor holds the stock for several years and it declines in value, he is charge- able with its value one year after the death of the testator. I Leitch v. Wells, 48 N. Y., 585 (1872), holding that the bona fide transferee is protected, although the executors had previously set aside the same stock to apply to the payment of a certain amount chargeable by the will to the estate annually. Woods' Appeal, 92 Pa. St., 379 (1880), holding that a bona fide transferee of the executor's trans- feree is protected, although the latter would not have been, even though the former was aware that his title came from an executor. The court held that letters of administration are always evi- dence of power to sell, and that an executorship differed widely from a trusteeship as regards the right to sell Prall v. Tilt, 27 N. J. Eq., 393 (1876); affirmed, 28 N. J. Eq., 479 (1877), where the will authorized advances to the sons, and they represented to the trans- feree that the stock was so advanced to them by the executor. Lowry v. Commercial & F. Bank of Baltimore, Taney (U. S. C. Ct), 310 (1848). In this case the purchaser had no knowledge or notice that the transferrer sold the stock as an executor. Clark v. South Metropolitan Gas Co., 54 L J. (Ch.), 259 (1885), sustaining a sale of stock by an administratrix of an administrator. Re , London, etc., Tel. Co.. L R, 9 Eq., 633 (1870), sustaining the title of a bona fide purchaser from the executrix as against an assignee in bankruptcy of the de- ceased, the assignee having delayed his application for five years. 2 Middlebrook v. Merchants' Bank, 3 Keyes (N. Y.). 135 (1866); Luce v. Man- chester, etc., R R Co., 2 New Eng. Rep., 263 (N. H., 1886); Hobbs v. Western Nat Bank, 8 Weekly Notes, 131 (U. S. C. Ct, 1880). An executor or adminis- trator may transfer stock in a foreign corporation without taking out letters in the state incorporating the company. In re Cape, etc., Co., 16 Atl. Rep., 191 (N. J., 1889). 3 Alfonso's Appeal, 70 Pa. St, 347 (1872), holding that in Pennsylvania, executors of a decedent, whose domi- cile was in Cuba, have no authority, under letters testamentary in Cuba, to transfer stock in a Pennsylvania corpo- ration. '• Domestic creditors, legatees or next of kin should not be sent abroad in quest of property to answer their claims when the decedent left property within the jurisdiction of the state that can be applied to meet their demands." 442 CH. XIX.] WHO MAY BUY AND SELL STOCK. [§ 329. will be protected although the note given by the executor is re- newed several times, and the proceeds of the transaction were passed to the executor's private account. 1 So, also, a bona fide purchaser of stock from a life tenant, to whom the administrator improperly transferred it, is protected The remainder-man's rem- edy is on the administrator's bond. 2 But a pledge of stock by an executor does not protect the pledgee, where the pledgee does not relv on the executor's power, but requires other ineffectual precau- tions to be taken. 3 Where the transferee of the executor knows that the transaction is not for the benefit of the estate, but is a breach of trust, he is not protected. 4 Frequently statutes are found requiring executors, when selling personal property of the estate, to sell the same at public auction. When such a statute exists a purchaser at private sale is not a lonafide purchaser, and is not protected, and is liable for the stocks and dividends paid thereon after his purchase. 5 The hona fide transferee of such a 1 Goodwin v. American National Bank, 48 Conn., 550 (1881) ; Gottberg v. United States Nat. Bank, N. Y. L. J., November 21, 1890, wbere the bonds were even registered in the names of both execu- tors and were pledged by one. Under the English act. where shares are regis- tered in the names of two executors jointly, the signature of both to a transfer is necessary, and the company is liable if it permits a transfer by one. Barton v. London, etc., R'y, 62 L. T. Rep., 164 0889). 2 Keeney v. Globe Mill Co., 39 Conn., 145 (1872). 3 Moore v. American, etc., Co., 115 N. Y., 65 (1889). 4 Prall v. Hamil, 28 N. J. Eq., 66 (1877). The facts in this case differed from those in Prall v. Tilt, supra, in that the transferee knew that the stock was still owned by the executrix. White v. Price, 39 Hun, 394 (1886), the court saying : " A person who takes title from an executor in payment of the executor's personal debts is not a pur- chaser in good faith, and acquires no rights over the prior title or rights of other persons." Also, that a purchaser, buying with knowledge that the right of the executor to sell is denied and is being contested, is not a bona fide holder. Cf. Keane v. Robarts, 4 Madd. Ch., 332 (1819), where it was held that where the executor did business through an agent, the application of the proceeds from sale of the stock to the running account between the executor and his agent was legal. A suit in equity lies to set aside an illegal sale of stock by an executor. White v. Price, 108 N. Y, 661 (1888). A pledgee with notice of stock held by an exec- utor in breach of his duty may be compelled to give up the stock. Odd, etc., Bank's Appeal, 16 Atl. Rep. 606 (Pa., 1889). A pledgee who takes with knowledge that the executor is giving the pledge in breach of trust cannot foreclose the pledge. Bell v. Farmers', etc., Bank, 18 Atl. Rep., 1079 (Pa., 1890). If the administrator sells to himself through "dummies" he may be com- pelled to disgorge. Carter v. Good, 10 N. Y Supp., 647 (1890). 5 Nutting v. Thompson, 57 Ga,, 418 (1876), the court saying also that factors or brokers acting for third persons are also liable; Nutting v. Boardman, 43 Ga,, 598 (1871), holding that the admin- istrator's bondsmen are not proper par- ties to the suit ; Weyer v. Second Nat. 443 § 330.] WHO MAY BUY AND SELL STOCK. [CH. XIX. purchaser, however, is protected. 1 An executor may have the duties of a trustee to perform, and then become subject to the rules governing trustees in their transfers of stock. 2 While a corporation may, under ordinary circumstances, allow an executor or admin- istrator to register a transfer of stock from himself to a purchaser from him, yet, when so long a time has elapsed between the taking out of letters and the transfer that the executor has become prac- tically a trustee, then the corporation must use the same precau- tions as in sales by a trustee. 3 § 330. Duty and Viability of the corporation in sales oy executors or administrators. — There has been great difficulty in ascertaining the rights and duties of the corporation in allowing and refusing to allow a registry on the corporate transfer-book of a sale of stock by an executor or administrator. The Bank of England, at an early day, assumed the power to refuse to allow a registry of an executor's transfer of stock that had been specifically bequeathed, unless the executor satisfied the bank that the sale was necessary to pay the debts of the estate. The courts, however, compelled it to allow registry without investigating specific legacies or the ap- plication of the proceeds of the sale. 4 In this country the question of the liability of the corporation has arisen on a different state of facts. Tho cases of Lowry v. Commercial & Farmers' Bank of Bank of Franklin, 57 Ind., 198 (1877), ration is not liable for a transfer by ber holding the purchaser liable. If the in breach of trust, the corporation hav- executor uses the proceeds of sales ing no knowledge thereof. The fact of stock for his own personal pur- that the stock is transferred to banks poses he is liable for the dividends de- which have no power to purchase is not clared after such sales up to time of notice to the corporation. The execu- accounting, and for market value of torship in this case was merged into a stock at time of accounting. Person trusteeship. Peck v. Prov. Gas Co., 23 taking stock from him with knowledge Atl. Rep., 967 (R I., 1892). of the breach of trust is also liable. 4 Pearson v. Bank of England, 2 McGeary's Appeal, 6 Atl. Rep., 763 (Pa,, Brown's Ch. Rep., 529 (1789); Bank of 1886). England v. Moffat, 3 id., 260 (1791): 1 Nutting v. Thomason, 46 Ga., 34 Hartga v. Bank of England, 3 Ves., 55 (1872). (1796); Bank of England v. Parsons, 5 2 White v. Price, 39 Hun, 394(1886); Ves., 665 (1800); Bank of England v. Prall v. Tilt, supra. Lunn, 15 Ves., 568 (1809) ; Austin v. Bank 3 Where an executor holds stock for of England, 8 Ves., 522 (1803); Mar- nine years and then sells it in breach of ryatt v. Same, id., 524, n. (1793) ; Ayns- trust, the purchaser is bound to take worth v. Same, id. ; Franklin v. Same, 1 notice. The executorship becomes a Russ. Ch., 575 (1826); Churchill v. Same, trusteeship. Peik v. Bank of America, 11 M. & W., 323(1843); Humberstone v. 19 Atl. Rep., 369 (R I., 1890). Where an Chase, 2 Y. & C. Ex. Rep., 209 (1836), executrix has power by the will to sell where the executor represented that the stock held in trust for heirs, the corpo- specific legatee had died. 444 CH. XIX.J WHO MAY BUY AND SELL STOCK. [§ 330. Baltimore, 1 and Stewart v. Firemen's Ins. Co., 2 clearly establish the rule that, where the corporation has reasonable notice of the fact that the executor is committing a breach of trust, the notice aris- ing 1 from the fact that the transfer is made several years after the estate should have been wound up, the corporation is under obli- gation to refuse to allow a registry of the transfer ; and, having allowed it, the corporation is liable to the parties injured thereby. "Where, by statute, executors' sales are to be at public auction, the corporation is bound to ascertain whether the statute was complied with, and is liable for allowing a registry when the sale was a private one. 3 In general, a corporation has a rig-lit to assume that the executor is transferring the stock for the purposes of the estate. It is not obliged to inquire into the purposes of the par- ties, nor to investigate whether the transaction is in good faith or is fraudulent, 4 nor to examine the will. 5 i Taney, U. S. C. Ct, 310 (1848\ The court said the Corporation "not only enabled the executor to perpetrate the wrong by permitting the transfer, but co-operated in it by certifying that the title of transferee was good. Justice, therefore, requires that it should bear the loss." 2 53 Md., 564 (1880), holding also that the corporation was bound to take no- tice of the contents of the will — a posi- tion that is denied by the case of Hutch- ins' Adni'r v. State Bank, 53 Mass., 421 (1847). Where, however, the executrix has power given by the will to apply the stock to her own use in case of need, the corporation is not bound to ascer- tain whether such a state of need ex- ists. Hutchins' Adm'r v. State Bank, supra. 3 Weyer v. Second National Bank of Franklin, 57 Ind., 198 (1877). A con- trary view seems to be held in South- western R. R. Co. v. Thomason, 40 Ga. Rep., 408 (1869). In Indiana, where an administrator cannot sell personal prop- erty except in a certain way, the corpo- ration is liable to the estate if it allows a transfer of stock on its books under a sale by the administrator who has not complied with the law. The purchaser, however, who does not see the old cer- tificates but takes new certificates is- sued by the corporation is protected*. Citizens St. R'y v. Robbins, 26 N. E. Rep, 116 (Ind., 1891). A sale of stock by an executor at private sale was sus- tained in Wilson v. Proprietors of Cen- tral Bridge, 9 R I., 590 (1870), although the statute declares that executors should be liable for double the appraised value of the property if they sold at pri- vate sale. 4 Crocker v. Old Colony R. R. Co., 137 Mass., 417 (1884). See, also, Carter v. Manufacturers' Nat'l Bank, 71 Me., 448 ; Goodwin v. American Nat'l Bank, 48 Conn., 550. s Although the administrator trans- fers the stock to the "heirs and distrib- utees," the corporation is protected in issuing absolute certificates to such dis- tributees, and is not bound to learn or know of a will to the effect that the dis- tributee had only a life interest. Smith v. Nashville, etc., R. R, 18 S. W. Rep., 546 (Tenn., 1892). 445 CHAPTER XX. SALES OF STOCK— THE FORMATION AND PERFORMANCE OF CONTRACT — GAMBLING SALES — FRAUDULENT SALES. THE . FORMATION AND PERFORMANCE OF CONTRACTS TO PURCHASE STOCK. 331. Shares of stock are transferable. 332. Restrictions on right to sell stock and contract against selling. 333. " Pools," " corners " and combina- tions in stock. 334 Contract for sale of stock may be valid without delivery or spe- cific time for delivery. 335-36. Remedies for breach of a con- tract to sell stock. 337-38. Specific performance as a remedy for breach of a con- tract to sell stock. 339-40. Statute of frauds as affecting sales of stock. B. GAMBLING SALES OF STOCK. 341. What are gambling sales of stock. 342. Statutes prohibiting wager con- tracts, and also certain stock contracts. § 343. Test of legality of stock transac- tion. 344. When intent to deliver is question for the jury and wnen not 345-46. Gambling stock contracts as affecting the relations between the principal and his broker. 347-48. Gambling stock transactions as affecting notes, bonds, mort- gages, etc., grow ing out thereof . C. FRAUD AS AFFECTING A SALE OF STOCK. 349. Extent of subject treated herein. 350. What has been held to constitute a fraud herein. 351. Fraudulent sale by agent, etc., in breach of trust 352-53. Fraud may be by corporate reports or prospectus. 354. Remedies for the fraud. 855. Action for deceit. 856. lo-medy in equity. 357. Fraud in selling stock may amount to a conspiracy. A. FORMATION AND PERFORMANCE OF CONTRACTS TO SELL STOCK. § 331. Shares of stock arc transferable. — That shares of stock in a corporation are transferable the same as other personal property is a principle of law coeval with the existence of stock itself. The few decisions holding that shares of stock were real estate were exceptional rulings, and are no longer considered to be good law. 1 Courts of law and of equity have guarded jealously the facilities for the transfer of title to stock, and all unreasonable attempts to restrain the right or readiness of passing title have been declared void as against public policy. The right to transfer stock is of vital importance, since the two chief causes of the phenomenal growth of corporations in recent times are the limited liability of the members and the readiness of withdrawing from the corpora- tion by a transfer of the interest a member has therein. The common law regards shares of stock as personal property, capable i See eh. I. 446 CH. XX.] CONTRACTS TO SELL GAMBLING SALES — FRAUD. [§ 332. of alienation or succession in any of the modes by which personal property may be transferred. 1 § 332. Restrictions on right to sell stock, and contracts against selling. — The right of a stockholder to sell and transfer his stock cannot be restrained by a by-law of the corporation. 2 An agree- ment or contract, however, between the members, or a part of them, not to sell except on certain conditions, is valid, unless it amounts to an unreasonable restraint of trade. 3 In New York a contract whereby stockholders of a corporation agree to deposit their certificates of stock with a trustee for six months, for the pur- pose of preventing any disposition of the stock during that time, is unenforceable and void, as contrary to the statute law of the state and against public policy. 4 The right of transfer is some- times limited by statute, as in New York, where stock in railroad or manufacturing corporations cannot be transferred until all calls 1 Mobile Mutual Ins. Co. v. Cullum, 49 Ala., 558 (1873); Cole v. Ryan, 52 Barb., 168 (1868) ; Heart v. State Bank, 2 Dev. Eq., Ill (1831); Allen r. Montgomery R. R, Co., 11 Ala., 437, 451 (1847); Boston Music Hall v. Cory, 129 Mass.. 435 (1880) ; Sargent v. Franklin Ins. Co., 8 Pick., 90 (1829): Chouteau Spring Co. v. Harris, 20 Mo., 382 (1855) ; Poole v. Middleton, 29 Bear., 640 (1861) Bright well v. Mal- lory. 10 Yerg. (Tenn.). 196 (1836). - Morgan v. Struthers, 131 U. S., 246, 252(1889) ; Fechheimer v. Nat'l Ex. Bank, 79 Va., 80 (1884), where a by-law pro- hibiting transfers except with the con- sent of the directors was declared void ; Bank of Attica v. Manufacturers' & T. Bank, 20 X. Y., 501 (1859): Orr v. Bige- low, 14 N. Y., 556 (1856); Sargent v. Franklin Ins. Co., 8 Pick., 90 (1829); Moore v. Bank of Com., 52 Mo., 377 (1873). A by-law to the effect that a transfer of stock shall be allowed only upon consent of all the other stockhold- ers is void as in restraint of trade. In re Klaus, 29 N. W. Rep., 582 (Wis., 1886>. As regards corporate liens herein, see ch. XXXI, infra. See, also, as to the gen- era' policy of the law to discountenance restrictions on right to sell, Moffatt v. Farquhar, L. R., 7 Ch. D.. 591 (1878\ In this case the directors were compelled to allow a transfer although the pur- pose of the transfer was to multiply votes. As already stated, a by-law that no stockholder shall transfer his stock except by the consent of all stockhold- ers is void. A secretary cannot refuse to register a transfer on account of the motive of the transferrer. In re Klaus, supra. 3 Griffith v. Jewett, 15 Week. L, Bui., 419, and ch. XXXII. The foreclosure and sale of a pledge of stock in the Western Associated Press has been refused where it was shown that the stock merely enti- tled the holder to receive news : that no transfer was allowed except by consent of the association, and such consent had never been given, and the association was not made a party to the suit. Met- ropolitan, etc., Bank v. St. Louis, etc., Co., 36 Fed. Rep., 722 (1888). In this case it is to be noticed that no profits or dividends could arise from the stock. An agreement of the holder of a ma- jority of the stock that he will retain control is no defense by the corporation to an action by the receiver of such stockholder to transfer the stock on the corporate books. Weller i\ Pace To- bacco Co., 25 N. Y. Week. Dig., 531 (1886). ■» Williams v. Montgomery, 68 Hun, 416 (1893). 447 §332.] COKTEACTS TO SELL — GAMBLING SALES — FRAUD. [CH. XX. thereon shall have been full}- paid.' Where the charter or a stat- ute forbids transfers before the full capital stock is paid in, any transfer before such payment has been held to be void. 2 In England sometimes express authority is given to the direct- ors, by the articles of association, to refuse to permit a transfer unless the same is satisfactory to them. 3 They have this power, however, only by express authority, and it is not extended by implication. 4 The power must be reasonably exercised, and its exercise must be free from fraud, caprice and arbitrary power. 5 The corporation cannot refuse to allow a registry on the ground that there was no consideration for the transfer;' 1 nor because a 1 See Part VII, infra. 2 Merrill v. Call, 15 Me., 428 (1839). The case of Quiner v. Marblehead Ins. Co., 10 Mass., 476 (1813), holds that, nev- ertheless, such a transfer vests in the transferee all the transferrer's interest in the stock. Cf. Cohn v. Bank of St Joseph, 70 Mo., 262 (1879). The statutes of a state cannot restrict or interfere with the transferability of certificates of stock in national banks. Doty r. First Nat'l Bank of Larimore, 53 N. W. Rep., 77 (N. Dak., 1892). 3 Shortridge v. Bosanquet, 16 Beav.. 81 (1852); Bargate v. Shortridge, 5 H. L. Cases, 297 (1855) ; In re Joint-stock Dis- count Company, Shepherd's Case, L. R, 2 Eq. Cas., 564 (1866). * Weston's Case, L, R, 4 Ch. App., 20 (1868); Gilbert's Case, L. R, 5 Ch. App, 559 (1870); Chappell's Case, L. R, 6 Ch. App., 902 (1871); Re Stranton Iron & Steel Co., L. R, 16 Eq., 559 (1873); Mof- fatt v. Farqtihar. infra; Slee v. Inter- national Bank, 17 L. T. Rep, 425. Judge Dillon, in Johnson v. Laflin, 5 Dill., 65, 78 ; affirmed, 103 U. S, 800 (1878), says : " Such a power is so capable of abuse and so foreign to all received notions and the universal practice and mode of dealing in these stocks, that it cannot in the absence of legislative expression, be held to exist" See, also, Farmers' & M. Bank v. Wasson, 48 Iowa, 336 (1878), the court holding that a by-law that transfers of stock shall not be valid un- less approved by the board of directors cannot restrain transfers. " Its enforce- ment would operate as an infringement upon the property rights of others, which the law will not permit It would, besides, operate as a restraint upon the disposition of property in the stock of the corporation, in the nature of restraint of trade, which the courts will not tolerate." 5 They cannot refuse to allow any transfers. Robinson v. Chartered Bank, L. R. 1 Eq., 32 (1865). And an objection, not to the transferee, but to the purpose of the transferrer in respect to voting is net sufficient Moffatt v. Farquhar, L. R, 7 Ch. D, 591 (1878). But the board may refuse to give its reasons for re- fusing to allow the transfer, and in that case it will be presumed to have had sufficient reason for the refusal. Ex parte Penny, L. R, 8 Ch., 446 (1872). If misrepresentations are made in in- ducing the directors to allow transfer, they, having discretion, may avoid the same. Payne's Case, L. R., 9 Eq., 22:'. : Master's Case. L. R. 7 Ch., 292; Bishops Case, L. R. 7 Ch., 296. Although a transfer is rejected by the directors the transferee is nevertheless entitled to dividends and the title to the stork. Poole v. Middleton, 29 Beav.. 646 (1861 . Where the company may accept or reject a transferee, and rejects him, the transferee cannot recover back from the transferrer the consideration of the transfer. London, etc., Ass'n v. Clarke, 59 L. T. Rep., 93 (1888). 6 Helm v. Swiggert 12 Ind., 194 (1859). 448 CH. XX.] CONTRACTS TO SELL GAMBLING SALES FRAUD. . [§333. claimant of the stock notifies it not to make the registry. 1 In this country no such power is given to the directors. A person who purchases stock is entitled to a transfer on the books. §333. "Pools" "corners" and combinations in stool: — The courts will not aid either party in carrying out an agreement for advancing the price of stock by means of fictitious dealings designed to deceive others concerning the real value of such stock. 2 Where both the vendor and vendee of stock know that the purpose of the vendee is to control the corporation and illegally issue corporate paper, the sale is illegal and void. 3 An agreement to make a "cor- ner" in stock, by buying it up so as to control the market and then purchasing the future deliveries, is illegal. 4 It is not necessarily unlawful to form a " pool " for the purpose of dealing in a particu- lar stock. 5 An agreement to hold stock and sell together is valid. 6 - 1 Ex parte Sargent, L. R, 17 Eq., 273 (1873). Cf. § 337, infra. 2 Livermore v. Bushnell, 5 Hun, 285 (1875). See, also, in general, § 445, note, and ch. XXXVII, infra. 3 Town Council, etc., v. Elliott, 5 Ohio St, 113 (1855). * Sampson v. Shaw, 101 Mass., 145 (1869) ; Raymond v. Leavitt, 13 Cent. L. J., 110 (1881); Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St., 173 (1871); Arnot v. Pittston. etc., Coal Co., 68 N. Y., 558 (1877) ; Keine v. Kent (N. Y. Sup. Ct., Gen. T.), Daily Reg., March 15, 1887. Cf. Petrie v. Hannay, 3 Term R., 418 (1789). No suit lies against a broker for fraud in carrying out a pool or com- bination to "corner "and advance the price of lard. Leonard v. Poole, 114 N. Y, 371 (1889).- See, also, g§ 445. 476. A person making a " corner " in stocks is not subject to a criminal prosecution therefor. Raymond v. Leavitt, 46 Mich.. 447 (1881). It is not fraud for the owner of the larger part of the capital stock of a corporation to " corner " the market, that is, to enter into contracts with vari- ous parties to purchase stock of the cor- poration, although he knew that such contracts could not be fulfilled by such parties by reason of the fact that he himself held such stock, and it could not be obtained elsewhere. The same rule prevails although such person offered the stock for public subscription and' purchased the greater part of it himself. Salaman v. Warner, 64 L. T. Rep.. 598 (1891). Cf. Barry v. Croskey. 2 J. & H., 1 (1861), holding that the victim of the •'corner " may file a bill in equity to re- cover back the money lost. SQuincey v. White, 63 N. Y. 370, 333 (1875), modifying Quincey v. Young. 5 Daly. 32 (1873). Where several parties buy a certificate of stock in fixed pro- portions and the certificate is taken by one for the benefit of all, he is a bailee for the others and not a vendor. Co- quard v. Wernse, 13 S. W. Rep., 341 (Mo., 1890). The general rule that an action 6 Havemeyer v. Havemeyer, 11 J. & S. (N. Y), 507 (1878) ; S. C. 13 id., 464 ; affd, 86 N. Y, 618 ; Griffith v. Jewett, 15 Week. Law Bull., 419 — an important case. But an agreement not to sell ex- cept by concurrent consent of all signers to the agreement is void as in restraint of trade and against public policy. Fisher v. Bush, 35 Hun, 651 (1885). See, also, § 320, supra. For a full discussion of this subject, see ch. XXXVII, infra. For an interesting statement of the modus operandi of a "corner," see "An Investors Notes on American Rail- roads," by Swann, ch. XII (1886). See ch. XXXVII, relative to purchases for the purpose of affecting corporate elec- tions. (29) 449 § 333.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [CH. XX. A contract by which a shareholder in a corporation agrees to secure to the purchaser of his stock a corporate office at a stated salary, and in case of his removal to repurchase the stock, is void as against public policy and as a fraud on other stockholders, unless it is proved that the transaction is not for the private benefit of the vendor, or that it was consented to by the other stockholders. 1 But a contract to convey a majority of the stock of a corporation, and to procure the resignation of the corporate directors, thereby enabling the vendee to elect directors satisfactory to himself, is a valid and legal agreement.* One railroad company cannot purchase a controlling interest in another railroad company for the purpose of managing or absorbing the latter ; but this rule grows out of the fact that such purchases are beyond the powers of the corporation. 3 It is imma- terial that a vendee already controls one railroad company, and that the stock contracted to be sold will give him the control of another. He is entitled to the stock. 4 An agreement to contribute stock towards a common undertaking is enforceable, the considera- tion being the mutual obligation. 5 But the common undertaking must be a legal one. e affecting a joint enterprise f or the pur- chase, upon speculation, of certain min- ing stocks must join all the parties who enter the " pool " does not necessitate the joinder of one who is out of the jurisdiction. Angell v. Lawton, 76 N. Y., 540 (1879). The representative of a syndicate after selling the stock cannot modify the contract He is liable to the others if he does so. Kountz v. Gates, 47 N. W. Rep. 729 (Wis., 1891). Where there is a joint operation in stocks, a " pool," the transactions being carried on in the name of one only, the others may have specific performance leading to a division of the stocks. Johnson v. Brooks, 46 N. Y. Super. Ct, 13 (1880); Thornton v. St Paul, etc., R'y, 45 How. Pr.. 410(1873); S. C. dismissed, 6 Week. Dig., 309. Guernsey v. Cook, 120 Mass., 501 (1876); Noyes v. Marsh, 123 Mass., 286 (1877). 2 See ch. XXXVII ; Barnes v. Brown, 80 N. Y., 527 (1880). Contra, Jacobs v. Miller, 15 Alb. L. J., 188 (1877); Fre- mont v. Stone, 42 Barb., 169 (1864). Where the agreement was to keep the vendor in a professorship the court will not aid the parties. The agreement is against public policy. Jones v. Scu^der, 2 Cin. Sup. Ct, 178 (1872). 3 See §315. 4 Havemeyer v. Havemeyer, supra; O'Brien v. Breitenbach, 1 Hilt, 304 (1857). Cf. % 315. n. 5 Conrad v. La Rue, 52 Mich., 83 (1883). Where the stockholders enter into a contract by which they give a certain amount of their stock tn a person who agrees to do certain work for the corporation in consideration of tire stock, the remedy for a breach of con- tract on his part is an action for dam- ages, unless by the contract the stock was to be returned in case of non-pei- formance. Gillett v. Bowen, 23 Fed. Rep., 625 (1885). If the action is to re- cover back the stock the corporation is a proper party in order to obtain a transfer. Johnson v. Kirby, 65 Cal., 482 (1884). See, also, in general, Cates «, 6 If the purpose is to rob a railroad one. Tobey v. Robinson, 99 111., 202 and bribe a judge, the court will aid no (1881). 450 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§ 334. § 334. Contract for sale of stock may be valid without delivery or specific time for delivery. — Generally a sale of stock is attended with an immediate delivery of the certificates therefor, or it is agreed that the certificates shall be delivered at some specified time in the future. If, however, the vendor offers to sell his stock and the vendee accepts the offer, the contract is complete and binds both parties, although nothing has been said as to the time when the certificates of stock shall be delivered. The law implies that the contract will be performed by a delivery of the certificates im- mediately or within a reasonable time, and either party may insist upon carrying out the contract. 1 Where the vendor sa}^s, in his Sparkman, 11 S. W. Rep., 846 (Texas, 1839). For the construction of a con- tract by which the owners of all the stock of a mining company turned it over in pledge to parties who would furnish the money to carry on the mine, see Newton v. Van Dusen, 50 N. W. Rep., 820 (Minn., 1891). For the construction of an agreement whereby a stock and bondholder deposits all his stock and bonds as security to another person who advances money to carry on the busi- ness, see Appeal of Huston, 18 Atl. Rep., 419 (Pa., 1839). Where a stock- holder, owning a majority of the stock, transfers it to a person under a contract by the latter to do certain work for the corporation, and make a loan to the former and retain the former as presi- dent, but the stockholder endeavors to sell out to another party, his bill in equity to set aside the transfer as ob- tained by fraud will fail. Healey v. Loveridge, 19 Atl. Rep., 921 (Md., 1890). Where, for the purpose of forwarding a corporate enterprise, one of its chief promoters contracts to give and sell to a third person certain bonds, etc., if the latter will do certain acts, the former cannot, after part performance by the latter, rescind and recover back the bonds, etc., unless he recompenses the latter for his part performance; nor can he rescind at all unless he can recom- pense the latt3i\ His remedy is for dam- ages. So though defendant is charged with fraud in refusing complete per- formance. Snow v. Alley, 11 N. E. Rep., 764 (Mass., 1887). In a joint operation in stocks no bill for an accounting will lie where by mutual consent the joint operation was ended and one sold his stock while the other held his. Keller v. Swartz, 20 Atl. Rep., 627 (Pa., 1890). 1 "The performance of a contract, or the tender of performance, is no part of the contract. The making of a contract is one thing, but the performance thereof, or the tender of performance, is another and quite different thing. The contract set up in the paragraph in question is an executory one, by which the plaintiff agreed to sell to the de- fendant the shares of stock, and the defendant agreed to pay him therefor the sum of $2,500. No time was fixed for the performance ; the law will im- ply, therefore, that it was to be per- formed immediately, or perhaps within a reasonable time. Had a future day been agreed upon for the performance of the contract on each side, there could have been no doubt as to its validity, or the right of either party to enforce it. he having done all he was required to do on his part. The fact that no time was agreed upon for performance does not change the character of the con- tract The contract did not pass any title to the stock, but it was, neverthe- less, a valid contract, and one which either party can enforce, he having been in no default himself." Bruce v. Smith. 44 Ind., 1 (1873); Kerchuer v. Gettys, 18 S. C, 521 (1882); Cheale v. Kenward, 3 De G. & J., 27 (1858). Usage 451 § 334.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [OH. XX. contract, "I have sold" certain stock, deliverable at seller's option, within a specified time, a sale in prcesenti is made, and the vendor assumes to have the stock and to hold it for the benefit of the pur- chaser until deliver} 7 . 1 An agreement to purchase stock when the corporation is created is enforceable only after a complete and legal incorporation is effected. 2 A sale of stock with an agreement to take it back whenever the vendee desires is an enforceable con- tract. 3 Great difficulty often arises in determining whether a contract of sale of stock is an executed or is merely an executory contract of sale. There are a few general rules on this subject, 4 but each may deter mine what is a reasonable time for delivery. Seven da)-s held reasonable. Stewart v. Cauty, 8 M. & W., 160 (1841). In a contract by which one " agrees to deliver " to the other certain stock at a certain price, performance is to be within a reasonable time, and the vendor may tender the stock and then sue for the price. Boehm v. Lies, 18 N. Y. Supp., 577 (1892). Specific performance of a contract to sell stock will not be en- forced, where the time of performance and of payment is not fixed, and where five years have elapsed, and where the vendee, the corporate secretary, mis- represented the value of the stock to the vendor. Diamond, etc., Co. v. Todd, 14 Atl. Rep., 27 (Del., 1888). An agreement to transfer stock at any time to a trustee, for creditors, is not en- forceable against the insolvent estate of the deceased stockholder. Chafee v. Sprague, 13 Atl. Rep., 121 (R I., 1888). An offer to sell stock with a statement that the stock could probably be sent with a draft, even when accepted with a direction to send it on, does not make a binding contract Topliff v. McKendree, 50 N. W. Rep., 109 (Mich., 1891). Where stock is sold on condition that the vendee shall be " in a position to take up the stock," the condition is fulfilled if the vendee accepts the stock and acts as a director, and holds the stock for five months. Wills v. Fisher, 17 S. E. Rep., 73 (N. G, 1893). 1 Currie v. White, 45 N. Y., 822 (1871). When the option is exercised the time of delivery as fixed is as though that time had been specified in the original contract. Kelley v. Upton, 5 Duer, 336 (1866), holds otherwise where the con- tract has also the words "at buyer's op- tion in ninety days." Such a contract is executory as to time of passing title, and tender is necessary. 2 Chikls v. Smith, 55 Barb,, 45 (1869). If stock is sold conditionally, and the condition does not happen, the sale is void. Mitchell v. Wedderburn, 11 Atl. Rep., 760 Old., 1887). 3 See §339. 4 A contract of sale of stock was worded as follows : " I hold of the stock of the Washing- ton and Hope Railway Company $33,250 or 1,350 shares, which is sold to Paul F. Beardsley (the appellee), and which, though standing in my name, belongs to him, subject to a payment of $8,000, with interest at same rate and from same date as interest on my purchase of Mr. Alderman's stock." The court held that this was an exe- cuted contract, by which the ownership of the stock passed to the purchaser, with a reservation of title, simply as security for the purchase-money — an equitable mortgage. The court pointed out the difference between an executed and executory contract of sale as fol- lows : " If an agreement to sell, the moving party must be the purchaser. If a sale, an executed contract with reservation of security, the moving party is the 452 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [§334. contract for the sale of stock is construed and enforced by the courts according to the intent -of the parties as manifested by the written terms and conditions of the contract itself. Various con- tracts relative to the sale of stock are explained and referred to in the notes below. 1 Many cases are also referred to in the notes vendor, the one retaining security. If an agreement to sell, the moving party, the purchaser, must within a reasonable time tender performance or make ex- cuse therefor. If an executed contract, a completed sale, then the moving party- is the vendor, the security holder, and he assumes all the burdens and risks of delay. . . . "It is not always easy to de- termine whether an instrument is a contract of sale or one to sell ; yet cer- tain rules of interpretation have become established. . . . •' Where the buyer is by the contract bound to do anything as a con- sideration, either precedent or concur- rent, on which the passing of the prop- erty depends, the property will not pass until the condition be fulfilled, even though the goods may have been actu- ally delivered into the possession of the buyer." Beardsley v. Beardsley, 138 U. S., 262 (1891). 1 An offer to sell stock, open to accept- ance after January 1st, must be accepted before July 9th. Park v. Whitney, 19 N. E. Rep., 161 (Mass., 1889). An agree- ment of a party to sell bonds for an- other party at a certain price may be enforced by the party who is to give the bonds to the other party to sell. Plumb v. Campbell, 18 N. E. Rep., 790 (111., 1888). The vendor may guaranty that the stock will be at par within a certain time. Suit lies if it is not at par within that time. Hill v. Smith, 21 How., 283 (1858). The fact that the corpora- tion loses a large amount of money after a partner agrees to take stock as a part of his share of the partnership assets does not allow him to decrease the price which it was estimated to be worth. Donahue v. M'Cosh, 30 N. W. Rep., 14 (Iowa, 1886). Only a de facto corporation need be proved. Reynolds v. Myers, 51 Vt, 444 (1879). A contract guarantying a certain dividend over and above certain corporate expenses does not include payment of salaries, etc. Central, etc., Assoc, v. James, 7 S. E. Rep., 862 (Ga., 1888). A guaranty upon the sale of stock that certain divi- dends will be declared is enforceable against the guarantying firm, even though they acted as agents for an un- disclosed principal. Their obligation is primary, and not that of guarantors for the company. Kernochan v. Murray, 111 N. Y., 306 (1888). The memoranda of the contract, together with the cer- tificates of stock, are sufficient pre- sumptive evidence of the existence of the corporation and the legal issue of the stock. Mann v. Williams, 9 N. E. Rep, 807 (Mass... 1887). See, also, Lindley on Partnership, pp. 719, etc.. 4th edition (Callaghan & Co., 1881). Where stock is issued to a person for construction work and he sublets the contract and agrees to divide the stock with others who are to share the expense of construction, they all are liable to the subcontractor. M'Fall v. M'Keesport, etc., Co., 16 Atl. Rep., 47S (Pa., 1889). An option to pur- chase stock within three years is en- forceable, though one party has an op- tion which the other has not. Seddon v. Rosenbaum, 9 S. E. Rep, 326 (Va.. 18S9). When a subscriber to stock agrees to sell $5,000 worth of the same at its " original cost," such cost is the cost to the subscriber and not the par value, nor the cost including loans by the sub- scriber to the corporation. Eagan v. Clasbey, 13 Pac. Rep.. 430 (Utah, 1887). Where a person sells goods to a corpo- ration and agrees to make payment in stock, he must take the stock at par, even though its actual and market value 453 335.] CONTRACTS TO SELL GAMBLING SALES — FEAUD. [cH. XX. below relative to the contracts and rights of agents, promoters and partners in the purchase or sale of stock. 1 § 335. Remedies for breach of a contract to sell stock. — A person who is under contract to sell and deliver shares of stock may fulfill is much less than par. Tilkey v. Au- gusta, etc., R. R., 10 8. E. Rep., 448 (Ga., 1889). A contract calling for "original ground floor or treasury stock " means any of the stock that is issued, where the statutes prohibit fictitious stock. All the stock is then presumed to be " ground floor " stock and to represent at par the actual value received. Will- iams v. Searcy, 10 S. Rep., 632 (Ala., 1891). A contract by a corporation that it will issue its slock for one-fifth of its par value is void under the Alabama constitutional prohibition. The sub- scriber having sold his contract to an- other person cannot collect on such sale. Williams v. Evans, S. Rep., 702 (Ala., 1889). See ch. III. An agency to Bell the stock of a com pan}- refers to the stock then issued by the company. (iates v. National, etc., Union, 49 N. W. Rep., 232 (Minn., 1891). An executory contract to purchase stock is not such a claim against the estate of an insolvent vendee as to be provable against the assignee. In re Ives, 11 N. Y. Supp., G50 (1890). A vendor of the stock of a street railway company may collect damages for breach of the contract of the vendee to construct the street rail- way to certain laud owned by the vendor, even though the corporation, the stock of which was sold, had agreed to acquire certain rights of way and had not done so. Blagen v. Thompson, 31 Pac. Rep, G47 (Ore., 1892). Where a vendor of stock, in addition to the price received, is to have an additional sum equal to the highest price paid to any others for their stock, he cannot recover such additional price by proof that the vendee, in order to stop a stockholder's suit, paid a higher price for other stock. Stewart v. Huntington, 124 N. Y., 127 (1890). 1 For a sale of stock where the vendee was to divide with the vendor the amount for which the stock should be resold by the vendee, see Jones v. Kent, 80 N. Y, 585 (1880). An agreement to divide the profits on stock in considera- tion of information to be furnished is enforceable. Parsons v. Robinson, 15 N. Y Supp, 138 (1891); aflPd, 133 N. Y, 537. A contract whereby an agent, one of the partners, is to have half of what lie could sell partnership shares of stock for, is legal and enforceable by him. Wright v. Wood, 85 N. Y, 402 (1881). A promoter who has brought about the sale of a large plant to new parties who have agreed to organize a new corporation and give the promoter a certain amount of stock therein, cannot, upon the ground that he is being defrauded of his commissions, enjoin the parties from closing the transaction irrespective of the promoter, nor can he have specific performance of the contract to incorpo- rate a company and deliver the stock. There is no fiduciary relation between the parties; the value of the stock can be estimated in damages; there was no allegation of defendant's insolvency, and the promoter has ample remedy at law for damages. Avery v. Ryan. 43 N. W. Rep., 817 (Wis., 1889>. The question of whether a sale or pledge was involved in the relations between a contractor and the party who financiered the mat- ter for him was involved in Griggs v. Day. 11 N. Y Supp., 885 (1890). The fact that a vendee makes out a check to a person and delivers it to him in pay- ment for stock does not prove that the latter is the vendor and liable for mis- representations. Aron v. De Castro, 131 N. Y.. 648 (1892) For a breach of an agreement to give a certaiu quantity of stock in payment for services to be per- formed, the person entitled to the stock may sue for damages. Alford v. Wil- 454 CU. XX.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [§335. the obligation on his part by tendering to the vendee certificates of stock duty indorsed by himself, and containing a power of at- torney authorizing the vendee to obtain a registry of the transfer on the corporate books. 1 It lias been held, however, and evidently son, 20 Fed. Rep., 96 (1884). The cor- poration is not liable for the breach of an agreement among the organizers as to the distribution of stock. Summerlin v. Fronteriza, etc., Co., 41 Fed. Rep.. 249 (1890). Nothing is more common than for the promoters of a company to agree to sell property to the company in consideration of a certain number of paid-up shares, and it is certainly diffi- cult to see why such a contract, if valid and binding on both parties, should not be enforced ; indeed, there is authority for specific performance in such a case. See Fyfe v. Swabey, 16 Jur., 49. M. R Where a party to a contract relative to an incorporation and division of the stock sues to recover his interest accord- ing to the contract, the court will de- cree a proper division of the stock, all parties being allowed the amounts in- vested by them in forwarding the enter- prise. Bates v. Wilson, 24 Pac. Rep., 99 (Colo., 1890). Where the owner of a patent agrees to convey it to a corpora- tion for stock, and then to divide the stock with others, he may be compelled to perform his agreement. But where the patentee does not convey the patent to the corporation, but conveys to an- other corporation, the latter is pi'otected in its title, though some of its incorpo- rators and directors knew all the facts. Davis, etc., Co. v. Davis, etc., Co.. 20 Fed. Rep., 699 (1884). Where a patentee agi'ees with a promoter to sell the patent to the corporation for stock, and divide the stock with the promoter, but the patentee after obtaining the stock sells the certificates to a bona fide purchaser, the latter is protected though the trans- fer is not registered on the corporate books. The purchaser may come into a suit instituted by the promoter against the corporation to compel a transfer. Thurber v. Crump, 6 S. W. Rep., 145 41 (Ky, 1887). Where a person holds property in trust or as agent for others, and conveys that property to a corpo- ration for its shares of stock, the per- sons who had an equitable interest in the property may compel this agent or trustee to transfer to themselves such stock. But all of the principals or ces- tuis que trust must be made parties to the suit. O'Conner v. Irvine, 16 Pac. Rep, 236 (Cal., 1887). Where there is a joint operation in stocks, a " pool," the transactions being carried on in the name of one only, the others may have specific performance leading to a divis- ion of the stocks. Johnson v. Brooks, 46 N. Y. Super. Ct, 13 (1880); Thorn- ton v. St. Paul, etc., Ry., 45 How. Pr., 416 (1873); S. C, dismissed, 6 Week. Dig., 309. Equity has jurisdiction to compel the transfer of stock as between parties. Thus, where stock is issued in payment for property and the party to whom the certificate is issued refuses to divide it among the owners of the prop- erty, as provided by contract, a court of equity may compel the division and may enjoin any election of the corpora- tion until such division is made. Archer v. American, etc., Co., 24 Atl. Rep., 508 (N. J.. 1892). It is a question of fact whether a person selling stock is an agent or vendee of the person from whom he obtained the stock and whether the latter is liable on misrepresentation made by such person. Henneberger v. Mather, 50 N. W. Rep., 369 (Mich., 1891) ; Florida, etc., Co. v. Merrill, 52 Fed. Rep., 63 (1892). A party selling stock ^is not liable for the false representations of the vendee to another person to whom the vendee is reselling the stock. Master- ton v. Boyce, 6 N. Y. Rupp., 65 (1889). '"When certificates of shares are given to a purchaser they are analogous to the sale of chattels, and the assign- § 335.] CONTRACTS TO SELL GAMBLING SALES — FKAUD. [CH. XX. with good reason, that if the vendee objects to the tender, on" the ground that he wishes a registry of the transfer to be made on the corporate books, the vendor must cause such registry to be made in order to render his tender complete. 1 A tender of a certificate indorsed in blank, not by the vendor but b} f some previous owner, is insufficient. The vendee is not obliged to trace his vendor's title from the name appearing on the certificate. 2 In England, where a transfer of shares is to be made by a deed, it is the duty sometimes of the vendor, 3 and sometimes of the vendee, 4 to furnish the necessary deed, according to the custom of the market in which the sale is made. If, after the vendee accepts a tender of the certificates, the corporation refuses to allow a registry and transfer on the corporate books, the vendor is liable to him, since the registry is held to have been guarantied. 5 The vendee may decline to "accept the certificates if the stock has been attached." Hut the vendee cannot decline the tender on the ground that the corporation has issued stock at a discount, nor because it has mort- gaged its property. 7 A contract whereby stock is sold to be paid for in the future is not forfeited by mere failure to pay as agreed upon. 8 merit and delivering of (lie certificate is a symbolical delivery of the shares themselves." Noyes v. Spaulding, 27 Vt, 420 (1855); Merchants 1 Nat'l Bank v. Richards, 6 Mo. App., 454 (1879); East- man v. Fiske, 9 N. II.. 182 (1838); Murin v. Barnum, 21 Barb., 283 (1857); Bruce v. Smith, 44 Ind., 1 (1873). Of. Moore v. Hudson River R R. Co., 12 Barb.. 156; 21 N. E. Rep., 242 (Mass., 1889) ; 5 N. Y. Supp., 937, 940. 1 White, Executor, v. Salisbury, 33 Mo., 150 (1862). -'Hare v. Waring, 3 M. & W.. 3G2 (1838), per B. Parke: "The party is to convey and deliver certificates showing either on the face of them or from the indorsements that the title is in the per- son conveying." 3 Stephens v. De Medina, 4 Q. B., 422 (1843). 4 Shaw v. Rowley, 16 M. & W., 810 (1847). 5 Wilkinson v. Lloyd, 7 Q. B., 27 (1845). e Eastman v. Fiske, 9 N. H, 182 (1838). 7 Noyes r. Spaulding. 27 Vt, 420 (1855). See, also, § 349, etc., infra. 8 Chater v. San Francisco Sugar Re- fining Co., 19 Cal., 219 (1861), where pay- ment was made in notes and labor, and the notes were not paid. Subsequent dividends on the stock are to be applied to the payment of such notes when the dividends have been received by the vendor. A sale of stock to take effect when a not given in payment is paid does not enable the vendee to claim the stuck long subsequently, the note not having been paid. Davison v. Davis. 125 l". S.. 90 (1888). Where, however, two parties, one owning stock, the other bonds, contract to exchange the same. delivery being in escrow at once, and absolutely after the performance of cer- tain things, a failure of one party to perform on his part enables the other to have the contract canceled by a court of equity. Wilson v. Roots, 10 N. E. Rep, 204 (III, 1887). Where fifty shares of stock are sold but only twenty-five shares are delivered, and the vendor de- clines to deliver the balance, a suit by the vendor on the ground of fraud and a rescission will fail. Matthews v. Cadv, 456 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§ 33G. A person who is under contract to purchase stock cannot defeat that contract by the fact that the corporation was insolvent, even at the time the contract was entered into. 1 An agreement to de- liver stock free and clear of all incumbrances does not refer to in- cumbrances against the corporation. 2 The legality of the sale of stock is governed by the law of the state within which it is made. 3 It is no defense to a contract to buy stock for the vendee to allege that the directors have committed an ultra vires act in issuing more stock at a discount. 4 § 33G. Difficulty is often experienced in determining what the measure of damages is for breach of a contract relative to the sale of stock. In certain cases, where the stock has been delivered or tendered, the measure of damages is the purchase price fixed by the contract itself. 5 The vendor may tender the stock to the vendee 61 N. Y., 651 (1875). Although a party to whom bonds and stock have been sold or issued to be paid for in instal- ments has paid in part and is unable to pay the remainder, the vendor cannot rescind and demand back the securities unless he returns the money already paid. American Water-works Co. v. Venner, 18 N. Y. Supp.. 379 (1892). Where the owner of a majority of the stock sells it, the purchase price being only paid in part, and retains the stock in his own name 'until the full price is paid, he cannot be compelled to deliver the stock or to refrain from ousting the vendee from the presidency of the cor- poration where the vendee fails to meet the other payments, even though the vendee has proceeded to improve the property. Stockton v. Russell, 54 Fed. Rep., 224 (1892). iRudge v. Bowman, L. R, 3 Q. B.,689 (186S) ; Gordon v. Parker, 10 La. Rep., 56 (1836), where the question of whether fraud was involved was submitted to the jury. See § 349 et seq. Crubb v. Miller, 19 W. R, 519 (1871), where by reason of a winding up a transfer on the corporate books was no longer pos- sible; Kerchuer v. Gettys, 18 S. C, 521 (1882), holding that a loss by the corpo- ration of its property is no defense. Damages cannot be recovered for the breach of an executor}- contract to pur- chase stock, if at the time of making the contract the corporation had been dissolved and the purchaser was not aware of that fact. Kip v. Monroe 29 Barb., 579 (1859). 2 Williams v. Hanna, 40 Ind., 535(1872). 3 Dow v. Gould & S. C. M. Co., 31 Cal.. 629 (1867). * Faulkner v. Hebard, 26 Vt, 452 (1854). Fraud is a defense, see §§ 349-357. 5 Where the stock is sold to be deliv- ered thereafter, and the vendee refuses to accept the stock, the vendor may ten- der the stock and then sue for the con- tract price. The court said : "The court refused to instruct the jury that it was necessary for Morgan to sell the stock on the market for the best price he could get, and that the measures of damages would be the, difference between the price thus obtained and the contraci price; and this refusal is assigned for error. Of course, the seller would be at liberty, after tender and refusal, to adopt this course ; but it was not essential to his right of action. The measure of damages was the difference between the market price of the stock at the time of the breach and the contract price. This is the ordinary rule; but there was evidence that the stock had no value, and there is no certainty — indeed, no proof — that upon a resale a ly price could have been obtained for 457 § 336.] CONTRACTS TO SELL — GAMBLING SALES — FBAUD. [CH. XX. and sue for the price, or may sell after notice to the vendee and then sue for the difference, or may retain the stock and sue for the the stock, or that it had any market value when Parker finally refused to take. Under these circumstances we see no reason why the price agreed to be paid should not be adopted as the meas- ure of damages, if that was the only mode by which full compensation could be made for the breach of the contract by the purchaser.'' Mobley v. Morgan, 6 Atl. Rep., 694 (188G). " In the absence of special circumstances in an action for conversion of personal property as well as one for failure to deliver it in performance of a contract where con- (1892). In the case Perin v. McGibben, 53 Fed. Rep., 86 (1892), the court granted specific performance of a contract to sell stock in behalf of the vendor and against the vendee. The court said: "The agreement was in form a contract to buy all the shares of stock in the in- corporated companies. The language of the contract shows that the real agree- ment was to buy certain real estate, to- gether with the personal property con- nected with its use for milling and dis- tilling purposes. Without discussing the question whether the sale of shares sideration has been received, the value of stock can be specifically enforced in of the property at the time of such con version or default, with interest, is the measure of compensation." Barnes i\ Brown, 130 N. Y., 872 (1892). As to the remedies for a breach, see, also, Benja- min on Sales. g§ 428-498. For the meas- ure of damages, see chapter XXXV, infra. As regards the pleadings in an action by a vendor of stock to recover damages against the vendee for refusal equity, it is sufficient to say that the sale here was in fact a sale of real estate, and the circumstance that personalty was included in the sale would not af- fect the power of a court of equity to afford relief by requiring specific per- formance." The measure of damages for breach of a contract to purchase stock is the difference between the con- tract price and the market value of the to accept and pay for stock which the stock at the time and place of delivery latter had agreed to accept at a stated price, one year f rom date, if the former desired to sell, see Strothers v. Drexel, 122 U. S., 487 (1887). The vendor may claim damages for a breach in that the vendee does not pay the contract price and take the stock, or he may bring an action "in effect for the specific per- formance thereof," in which case he must allege readiness to deliver the stock. Corning v. Roosevelt, 11 N. Y. Supp., 758 (1890). The court will com- pel the vendee to take and pay for stock where it would compel the vendor to deliver the stock if he defaulted on the contract to sell. Bumgardner v. Leavitt, 13 S. E. Rep., 67 (West Va., 1891). Where the vendor gets judgment for the price of the stock sold but not delivered the court will order him to deposit the stock with the court or lose his judgment. McKeever v. Dady, 18 N. Y. Supp., 439 with interest. Corser v. Hale et al., 24 Atl. Rep., 285 (Pa., 1892). Where a vendee refuses to carry out an execu- tory contract for the sale of shares, the measure of damages is the difference between the price as fixed by the con- tract and the value of the stock at the time of tender ami refusal of the vendee to fulfill. See Barned v. Hamilton, 2 Rail. & Canal Cas., 624 (1841); Tempest v. Kilner, 3 C. B., 249 (1846), and Stewart v. Cauty, 8 Mees. & W., 160 (1841). In Shaw v. Holland, 15 Mees. & W., 136 (1846), the proper measure of damages is said to be the difference between the coutract price and the market price on the day when the contract was broken. If a person sells and conveys property to a company to be paid for in stock, and the vendee refuses to deliver, he may recover the value of the stock. Humeston v. Tel. Co., 20 Wall., 20 (1873). 458 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FKAUD. [§ 336. difference between the contract and market price. 1 The statute of limitations may be a bar to the action. 2 The vendee's remedy for a failure on the part of the vendor to deliver is an action for damages 3 or a bill in equity to obtain spe- Where an agent to sell stock is to have specified amount will be issued to the any excess of price over a sum named to him by the vendor, and the agent finds a customer at an advanced price and the vendor refuses to sell, the agent may recover such profit as he lost thereby. Matting v. Roach, 23 Pac. Rep., 1117 (Cal., 1891). See, also, as to agents, § 334, supra. 1 The vendor's remedies for a breach of a contract to buy stock are : (1) To hold the stock for the vendee and re- quire payment of the entire price ; (2) to sell after notice to the vendee and sue for the difference between the contract price and selling price; (3) to retain the stock and sue for the difference between the contract price and the market value price. In re Ives, 11 N. Y. Supp., 650 (1890). No tender is necessary when the suit is for damages and the vendor intends to retain the stock. Nysewander v. Lowman, 24 N. E. Rep., 355 (Ind., 1890). When suit is brought to recover the price of stock sold a delivery or tender must be shown. Holmes, etc., Co. v. Morse, 53 Hun, 58 (1S89). Where a party is sued on a note he may recoup by setting up that the note was given to plaintiff on plaintiff's agreement to as- sign and deliver certain shares of stock, which was not tendered until eight months after the time agreed upon. Hill v. Southwick, 9 R. I, 299. 2 Williams v. Meyer, 41 Hun, 545 (188G). The statute of limitations runs against a receipt reciting a first pay- ment of stock "standing in my name but owned by him, and he remaining responsible for the balance of the in- stalments when called in," there being no agreement as to the future dispo- sition of the stock and of dividends. Cone v. Dunham, 20 Atl. Rep., 311 (Conn., 1890). A sale of a certificate to the effect that when stock is issued a holder is a valid sale and is not defeated by the statute of limitations. Meehan v. Sharp, 24 N. E. Rep., 907 (Mass., 1890). Where certain owners of stock place it in the hands of a trustee for sale and the trustee invites subscriptions thereto, the subscription contract providing for payment of one-third down and the balance when called for, the statute of limitations is no bar to an action for the two-thirds, although six years have elapsed since the first payment was made. Williams v. Taylor, 120 N. Y., 244 (1890). 3 A person entitled by contract to purchase stock of another may collect damages against the latter for failure to comply. Rand v. Wiley, 29 N. W. Rep.. 814 (Iowa, 1886). Where a person is paid for stock and fails to deliver, the measure of damages for a breach of the contract is what it would cost the party to purchase the stock which he is entitled to. If he cannot purchase it, then the par value of the stock is the measure of value, inasmuch as he would have had to pay that to the corporation in order to have had the stock issued to him. Barnes v. Seligman, 55 Hun, 339 (1890). Where a vendor of stock in a corporation which has a franchise, but nothing else, is entitled to two thousand shares of full-paid stock at a later date, according to the contract of sale, his measure of damages for failure of the vendee to deliver the two thousand shares is nominal damages where there was no market or actual value for the stock. Barnes v. Brown, 130 N. Y, 372 (1892). Where the vendor of stock is unable to obtain the stock for delivery by reason of au injunction against the corpora- tion the vendee may sue for the return of the purchase-money. Rose v. Foord, 30 Pac. Rep., 1114 (Cal., 1892). 459 §§ 337, 338.] CONTRACTS TO SELL — GAMBLING SALES — FEAUD. [CH. XX. cific performance. 1 In almost all cases, however, his remedy is an action for damages only, inasmuch as specific performance of a sale of personalty is rarely granted. § 337. Specific performance as a remedy for oreacli of a contract to sell stock. — It frequently happens that the person who has con- tracted to purchase stock is particularly anxious to procure that stock, and that, under the circumstances of the case, the stock is worth to him a value not to be compensated for by mere money damages. This cannot happen in the case of a contract to sell securities issued by the government, since they may be easily pur- chased in the market. Accordingly it is well established, both in England and America, that a contract for the sale of government securities will not be specifically enforced by a court of equity, but the vendee may sue the vendor in an action at law for damages for breach of contract. 2 § 338. An entirely different rule prevails as regards contracts for the sale of stock of private corporations. If the stock contracted to be sold is easily obtained in the' market, and there are no par- ticular reasons why the vendee should have the particular stock contracted for, he is left to his action for damages. But where the value of the stock is not easily ascertainable, or the stock is not to be obtained readily elsewhere, or there is some particular and rea- sonable cause for the vendee's requiring the stock contracted to be delivered, a court of equity will decree a specific performance and compel the vendor to deliver the stock. This rule, as applicable to contracts for the sale of railway stock, was clearly established in England in 1841, in the case of Duncuft v. Albrecht. :i Contracts for the sale of stock in mining and other 1 See next section. Ross r. (Jnion Pacific R'y Co., 1 Woolw. -'Ross v. Union Pacific R'y Co.. 1 26. 32 (1863), per Miller, J. In Cheale v. Woolw., 20, 82 (1863): Cud or Cuddee v. Ken ward. 8 De G. & J., 27 (1858), the Rutter, 1 P. Wins. Rep., 570 (1719); 5 court said: "There is no doubt that a Viner's Abr., 538 (1715); Dorisou v. bill will lie for a specific performance Westbrook, 5 Viners Abr., 540 (1722); of an agreement to transfer railway Cappur v. Harris, Bunbury's Rep., 135 shares. This was set at rest by Duncuft (1723); Colt u. Netterville, 2 P. Wins., r. Albrecht" In the case of Leach v. 304 (1725); Buxton v. Lister, 3 Atk., 388 Fobes, 77 Mass., 506 (1858). specific per- (1746). Cf. Daloret v. Rothschild, 1 Sim. form a nee of a contract to convey land & S., 590 (1824). and stock was granted chiefly because 3 Duncuft v. Albrecht, 12 Sim., 189 of the land part of the contract Todd (1841); Parish v. Parish, 32 Beav.. 207 v. Taft, SSI Mass., 371 (1863X decreed (1863\ granting also an accounting of specific performance of contract to con- dividends ; Poole v. Middleton, 29 Beav., vey railway Bhares; also Baldwin v. 646 (1861); Turners May. 32 L.T.(N. S.), Commonwealth, 11 Bush, 417 (1875); 56 (1875) ; Beckitt v. Billsbrough, 8 Hare, Ashe v. Johnson's Administrator, 2 188 (1850), dictum. Contra, dictum in Jones' Eq. (N. C), 149 (1855). As to 460 CH. XX.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [§ 33S. private corporations will also be specifically enforced under like circumstances. 1 Specific performance is often granted as between several parties each of whom is entitled to a certain part of stock which is re- when specific performance of a con- tract to sell stock will be specifically enforced, see, also, "White & Tudor's Leading Cases in Equity, vol. I, pp. 914- 923, etc. As to possibility of mandatory injunction in any case, see authorities in Hilliard on Injunction, p. 7, note a. treasurer v. Commercial Coal Min. Co., 23 Cal., 390 (1863). See, also, Frue v. Houghton, 6 Col., 318 (1882). As ap- plicable to manufacturing corporations, see Chater v. San Francisco S. R. Co., 19 Cal.. 200 (1861). Granted in towboat as- sociation in White v. Schuyler, 1 Abb. Pr. (N. S.), 300 (1865). Refused in the case of stock in a land association. Jones v. Newhall, 115 Mass., 2-14 (1S74). And in a paper company. Noyes v. Marsh, 123 Mass., 286 (1877). See Cush- man v. Thayer Mfg. Co., 76 N. Y., 365 (1879). "While the general rule is for courts of equity not to entertain juris- diction for a specific performance on the sale of stock, this rule is limited to cases where a compensation in damages would furnish a complete and .satisfac- tory remedy." This case, however, is not a case of specific performance of a sale of stock, but of compelling the cor- poration to register a transfer. See, also, in general, Austin v. Gillaspie, 1 Jones' Eq., 261 (1854); Nutbrbwn v. Thornton, 10 Vesey, 160 (1804); Shaw v. Fisher, 5 De G., M & G., 596 (1855) ; Wynne v. Price, 3 De G. & Sm., 310 (1849); Wilson v. Keating, 7 W. R, 484 (1859) ; Oriental Co. v. Briggs, 2 J. & H., 625 (1861) ; Paine v. Hutchinson, L. R, 3 Eq., 257 (1866) ; Shepherd v. Gillespie, L. R, 5 Eq., 293 (1867); Birmingham v. Sheridan, 33 Beav., 660 (1864); Stras- burg v. Echternacht, 21 Pa. St.. 220 (1853); Fallon v. Railroad Co., 1 Dill., 121 (1871). In regard to a specific perform- ance of a trust of stock, see Ferguson v. Paschall, 11 Mo., 267 (1848); Cowles v. Whitman, 10 Conn., 121 (1834); Clark v. Flint, 22 Pick, 231 (1839); Mechanics' Bank v. Seton, 2 Peters, 299 (1828). Spe- cific performance of a contract to sell stock will be decreed where the stock has no recognized market value, and cannot be bought in the market. Ap- peal of Goodwin, etc., Co., 12 Atl. Rep., 736 (Pa., 1888). Specific performance was refused in Eckstein v. Downing, 9 Atl. Rep.. 626 (N. H„ 1887), there being no evidence that the vendee had any wish or reason for wishing to own that particular stock or stock in that partic- ular corporation. See. also, Cruse v. Paine, L. R, 6 Eq.. 641. Where a stock- holder, who is also a director, contracts to give a person a certain amount of stock if he will do certain work for the corporation, and the board of directors, including this director, discharge such person without cause, and thus prevent completion, a court of equity will com- pel a delivery of the stock. Price v. Minot, 107 Mass., 49 (1871). In suits in equity to compel a transfer of stock, parties interested by a purchase from the defendant should be brought in. O'Connor v. Irvine, 16 Pac. Rep., 236 (Cal., 1887). Specific performance of a contract to sell stock will be decreed where the property of the corporation is real estate — a brewery — and the real transaction is a sale of the entire prop- erty. Megibben's Adm'rs v. Perin, 49 Fed. Rep., 183 (1892). Specific perform- ance will not be decreed where there is doubt as to the contract actually being made and doubt as to the consideration, one party being dead. Hibbert v. Mac- kinnon, 49 N. W. Rep., 21 (Wis.. 1891). Where a debtor agreed to transfer stock as collateral security for a debt, and died insolvent before doing so, the court refused to enforce specific performance of the agreement to the injury of other 461 338.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [cH. XX. ceived by or held in the name of one of them. A court will com- pel him to distribute the stock in accordance with the contract. Such cases arise often in "pools" of stock, and in selling property creditors. City, etc., Ins. Co. v. Olm- stead, 33 Conn., 476. In general, see, also, Stevens v. Wilson, 3 C. E. Green, 447. An alleged vendee's suit for a divi- dend is res judicata as to a suit for the stock. Shepard v. Stockham, 23 Pac. Rep., 559 (Kan., 1891). The corporation is a proper but not a necessary party to an action by one person to compel an- other person to transfer stock to hi in in accordance with the contract. Say- ward v. Houghton, 23 Pac. Rep.. 100 (Cat, 1890). Where a citizen of Wis- consin claims stock in a Wisconsin cor- poration as against a citizen of Illinois in whose name the stock stands on the corporate books, the corporation is a necessary party defendant and the case cannot be removed to the federal courts. Rogers v. Van Nortwick, 45 Fed. Rep., 513(1891). The corporation is a proper party defendant Kendig v. Dean. 97 U.S.. 423; Budd v. Monroe, 1« TTun. 316; Crump v. Thurber. 115 U. S.. 56. The reason of this rule is that complete possession of the stock can be obtained only by obtaining a transfer of that stock on the corporate books to the plaintiff. Where a person claims that ance of shares in a company, and Lord Romilly refused to decree specific per- formance of a contract of this kind, on the ground that the decree would be in- effectual, as the shares might be trans- ferred immediately after the contract was performed. Sheffield Gas, etc., Co. v. Harrison, 17 Beav., 294: Bluck v. Mailable. 27 Beav., 398; Columbine v. Chichester, 2 Ph., 27. In this last case there were circumstances to show that specific performance was impossible. In order that specific performance of an agreement to take or deliver shares in a company may be decreed, it is necessary tli.it the agreement should be concluded and binding (which it was not in Oriental I Nav. Co. v. Briggs, 4 De G, F. & J., 191), and be untainted by fraud (which was not the case in New Brunswick & Canada Rail. < !o. v. Muggeridge, 4 Drew., 989, and 1 Drew. & Sm., 368; or in Max- well r. Port Tennant Co., 24 Beav., 495), or unfairness (as to agreements between co-directors, see Flanagan v. Great Western Rail. Co., 7 Eq.. 116), and be capable of being performed by the de- fondant (Ferguson r. Wilson. 2 Ch., 77; Columbine v. Chichester, 2 Ph., 27). and he has a contract for the purchase of not involve any breach of trust (Fry on Spec. Perf., p. 177, 2d ed. : and see Flana- gan v. Cheat Western Rail. Co., 7 Eq., 116), or performance by either party of obligations the performance of which a court cannot practically enforce (Flana- gan r. Great Western Rail. Co., 7 Eq. 116; Stockerr. Wedderburn, 3 K & J., 393). An action will He for specific per- stock which the stockholder vendor is about to sell or has already sold to oth- ers, and the first-named person brings a suit in equity to obtain the stock, he must show, first, that it is a case for specific performance ; and second, that the stock was impressed with a trust and that the last purchaser took with notice of that trust See White & Tu- formance of a contract for the purchase dor's Leading Cases in Equity, vol. I, pp. 914, 919, and Pooley v. Rudd, 14 Beav., 34, 43, 44. Lindley on Company Law states the rule as follows : " A contract for the sale of shares by one individual to another is distinguishable in many respects from a contract for the allotment and accept- 462 and sale of shares, if it is capable of being performed (see as to this, Ber- mingham v. Sheridan, 33 Beav., 660, and compare Poole v. Middleton, 29 Beav., 646): and the purchaser will be com- pelled to pay the price, although it may have been expressed to be paid in the deed of transfer, if, in fact, it was not CH. XX.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [§338. to the company in consideration of stock and in buying stock in the names of other persons or agents. 1 Specific performance may also be said to be granted where a corporation is ordered by a court to issue certificates of stock to its stockholders. 2 Specific performance will not be granted, however, where the purpose of the purchaser of stock is to obtain control of a national bank, when the change in management would probably be to the detriment of the bank. 3 Where the vendor's contract is to deliver stock and construct a railway, the court will not decree specific performance, since part of the contract is never the subject of such compulsory performance. 4 If the vendor is not in possession of the desired stock, specific performance will not be granted, 5 except to the amount of stock which he has. 6 Although a court of equity thus paid (Wilson v. Keating, 27 Beav., 121, and 4 De G. & J., 588. This case seems, at first sight, to have been a hard one upon the defendant; but the deed stated that he had paid the money, and tliis he knew was not the fact. He could not, therefore, be treated as hav- ing been misled by the plaintiff or by the contents of the deed) ; and will be compelled to accept a transfer of the shares he has brought and to in- demnify the seller from all liabilities accruing subsequently to the same (Wynne v. Price, 3 De G. & S., 310. As to the right of a mortgagee of shares to an indemnity from his mortgagor, see Phene v. Gillan, 5 Ha., 1); and the seller will be compelled to account for any moneys he may have received from an improper subsequent sale to another person (Beckitt v, Bulbrough, 8 Ha., 188). The court has however, refused to com- pel a purchaser of scrip to accept shares, and indemnify the seller from calls upon them (Jackson v. Cocker, 4 Beav., 59. Compare this with the last case) ; and to compel an allottee of shares to accept them, and to execute the company's deed in respect of them (Sheffield, etc., Gas Co. v. Harrison, 17 Beav., 294) ; and to compel the promoters of a company to deliver shares to a subscriber to the company (Columbine v. Chichester, 2 Ph. 27. In this case, however, the pro- moters did not appear to have any shares which they could allot). Neither will the court interfere to compel the completion of a gratuitous and intended transfer (see Milroy v. Lord, 4 De G., F. & J, 2G4)." i See §§ 333, 334, supra, and § 705, infra. 2 Seech. IV. 3 Foil's Appeal, 91 Pa. St., 434 (1879), the court saying : " I know of no in- stance in this state in which a court of equity has decreed specific performance of a sale of stock." 4 Ross v. Union Pacific R'y Co., 1 Woolw., 26 (1863), per Miller, J. Court will not decree specific performance of a contract of a company to deliver its stock to a constructor of its road, even though the latter, the complainant, is willing to perform. The court cannot compel the latter to perform, and hence will not tie up the stock of the former. Peto v. Brighton, etc., R'y Co., 1 H. & M., 468 (1863). ft Columbine v. Chichester, 2 Phil. Ch., 27 (1846). Specific performance as to is- suing stock is not decreed when per- formance is impossible. Summerlin v. Fronteriza, etc., Co., 41 Fed. Rep., 249 (1890). An injunction against a transfer in the meantime maybe granted. Rutt- man v. Hoyt, N. Y. L. J., July 19, 1S90. 6 Turner u May, 32 L. T. (N. S.), 56 (1875). 463 §339.] CONTRACTS TO SELL GAMBLING SALES — FRAUD. [CH. XX. refuses to grant specific performance, yet it will not always send the party to a court of law, but in some of the states will grant him damages. 1 Laches may constitute a bar to the bill in equity to enforce specific performance. 2 §339. Seventeenth section of statute of frauds as affecting sales of stock. — In England the rule is firmly established that the seven- teenth section of the statute of frauds, relating to contracts for the sale of " goods, wares and merchandise," does not apply to sales of stock. No delivery, payment of earnest money or memorandum in writing is necessary in order to render the contract of sale valid. This principle of law was doubted in the early cases, 3 but was de- termined by the case of Humble v. Mitchell, in 1S39. 4 In 1838 this question arose in this country, apparently for the first time, and it was decided in Tisdale v. Harris/ chiefly on the authority of the early English cases, that a contract for the sale of stock was within the seventeenth section of the statute of frauds. This decision has been uniformly followed in America.' 1 i Wonson v. Fenno, 129 Mass.. 405 (1880); Austin v. Gillespie, 1 Jones' Eq. (N. C), 261 (1854).' 2 Seven years' delay in bringing suit for specific performance is a bar. York v. Passaic, etc., Co., 30 Fed. Hep., 471 (1887). Five years' delay held fatal where " tbe relations of the parties have changed aud the stock has greatly ap- preciated in value." Miuuly v. Davis, 20 Fed. Rep., 353 (1884). Where a per- son sells aud delivers stock to be deliv- ered within a reasonable time, and re- ceives the money for it, aud soon after anuouuces his inability to perform by reason of an injunction, the statute of limitations begins to run from the date of this notice. The two years' statute on verbal promises applies. Rose v. Foord, 28 Pac. Rep., 229 (Cal, 1891). 3 Mussell v. Cooke, Finch's Prec. in Ch., 533 (1720), holding that the statute applied but was not properly pleaded ; Pickering v. Appleby, 1 Comyn's Rep.. 353 (1721), not decided, the judges being divided six and six ; Colt v. Netterville, 2 P. Wms., 306 (1725), not decided, the lord chancellor saying it was too diffi- cult to decide on a demurrer ; Crull v. Dodson, Sel. Cas. in Ch. temp. King (fol. 41, 1724), statute held to apply. 4 11 A. & E.,205, followed in Duncuft v. Albrecht, 12 Sim., 189 (1841), the court saying that the statute applies only to goods capable of part delivery ; Hibblewhite v. McMorine, 6 M. & W., 201, 214 (1840); Tempest v. Kilner, 3 C. R, 249 (1846); Heseltine v. Siggers. 1 Ex., 856 (1848). * 37 Mass. (20 Pick.), 9. «Baltzen v. Nicolay, 52 N. Y., 467 (1873). rigidly applying the rule; North v. Forrest, 15 Conn., 400 (1843), where the court say: "Such contracts fall clearly within the mischiefs which the legislature by the statute intended to remedy. There is as much danger of fraud and perjury in the parol proof of such contracts as in any other." Pray v. Mitchell, 60 Me., 430 (1872); Fine v. Hornaby. 2 Mo. App., 61 (1876); Colvin r. Williams, 3 Har. & Johns. (Md.), 38 (1810); Sherwood v. Tradesman's Nat'l Bank. 10 N. Y. W. Dig.. 522 (1883, Su- preme Ct); French v. Sanger, N. Y. L. J., July 22, 1892. Cf. Brownson -v. Chap- man, 63 N. Y, 625. Contra, dictum, Vawter v. Griffin, 40 Ind., 593, 602 (1872). See Reed on Statute of Frauds, § 234; Hagar r. King, 38 Barb., 200 (1862), holding that the sale of railroad bonds is within the statute. A sub- 464 CH. XX.] CONTRACTS TO SELL GAMBLING SALES — FRAUD. [5 339. A broker, however, as a common agent, may make the memo- randum for both parties. 1 A subsequent part payment of the con- sideration makes the contract valid, 2 and a payment in property 3 or services 4 suffices. The statute does not apply as between part- ners for the purpose of buying stock. 5 A contract for the sale of stock in a corporation not yet incorporated has been held not to be within the statute. 6 The statute must be pleaded in order to be effectual as a defense. 7 The assignee of a contract for the sale of stock, void by the statute of frauds, takes nothing by the assign- ment. 8 An agreement by the vendor of stock to take it back at any time is not affected by the statute, and such an agreement is a part of the executed sale. 9 scription for stock is not a contract for the sale of goods, etc., within the mean- ing of the statute of frauds. Webb v. Baltimore, etc., Co., 26 Atl. Rep., 113 (Md., 1893). In Florida the statute ap- plies, the word personal property being used. Southern Life Ins. Co. v. Cole, 4 Fla., 359, 378. See, also, Mason v. Decker, 72 N. Y., 595 ; affirming 10 J. & S., 115; Johnson v. Mulry, 4 Rob. (N. Y.), 401 (1867), holding that the New York Stock Jobbing Act (Laws N. Y. 1858, ch. 134) did not affect the applica- tion of the statute of frauds. The stat- ute is not sufficiently pleaded by alleg- ing that the contract of sale of stock " was void in law and not binding upon him." Vaupell v. Woodward, 2 Sand. Ch., 143. The question of whether there was a delivery sufficient to take a case of sale of stock out of the statute of frauds was submitted to the jury in Hinchman v. Lincoln, 124 U. S., 38 (1887), discussed in N. Y. Daily Reg., January 28, 1888. Contract to sell stock at the vendee's option within three years is not void by statute of frauds, since the option may be exercised within a year. Seddon v. Rosenbaum, 9 S. E. Rep., 326 (Va., 1889). Without a memorandum in writing a contract for the sale of stock is not enforceable al- though made in the Stock Exchange, whose rules provide that] the contract 6hall be enforceable. Ryers v. Tuska, 14 N. Y. Supp., 926 (1891). i Calvin v. Williams, 3 Hare & J., 38 (1810). 2 Thompson v. Alger, 53 Mass. (12 Mete), 428 (1847). 3 Eastern R R. Co. v. Benedict, 76 Mass. (10 Gray), 212 (1857). * White v. Drew, 56 How. Pr., 53 (1878), holding that the furnishing of reliable information is sufficient. a Tomlinson v. Miller, 7 Abb. Pr. (N. S.), 364 (1869). Nor as between persons, one of whom buys stock in his own name for the joint benefit of both. Sto- ver v. Flack, 41 Barb., 162 (1862). 6 Gadsden v. Lance, 1 McMull. Eq. (S. C), 87 (1841); Green v. Brookins, 23 Mich., 48, 54 (1S71), where a person was induced to subscribe on parol contract that a purchaser for the stock would afterwards be found. In Massachu- setts, on similar facts, except that a cer- tain person agreed to purchase, a con- trary decision was rendered. Board- man v. Cutter, 128 Mass., 388 (1880). 7 Porter v. Wormser, 94 N. Y, 431, 450 (1884). 8 Mayer v. Child, 47 Cal., 142 (1873). 9Fitzpatrick v. Woodruff, 96 N. Y., 561 (1884) ; Thorndike v. Locke, 98 Mass., 340 (1867) ; Fay v. Wheeler, 44 Vt., 292 (1872); Bank of Lyons v. Demmon, Hill & Denio, Supp., 398 (1844). An agree- ment by promoters with a subscriber for stock that they would take the stock from him within a certain time, if he desired, is valid and enforceable. Meyer (30) 465 § 340.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [CH. XX. So, also, the agreement of third parties to take the stock, or to protect from loss the party buying it, is enforceable if founded on a sufficient consideration. 1 § 340. Other sections of statute of frauds as affecting sales of stock. — The provision of the statute of frauds relative to answering for the debts, defaults or miscarriages of another does not apply that the vendee of stock shall not lose money by the purchase may be enforced by the vendee when he proves that the stock has no market value and that he has tried to sell it but has failed. Phipps v. Sharpe. 21 Atl. Rep, 901 (Pa., 1891). A statement of a party who is endeavor- ing to sell stock for another, that he will see the latter whole in the matter, creates no liability on the part of the former. Willis' Appeal, 18 Atl. Rep.. 987 (Pa., 1890). A person who writes to a party when the latter subscribes for stock that the former will pay the sub- scription if the road is not completed within a certain time is a surety and may be held liable. Allison r. Wood, 23 Atl. Rep. 559 (Pa., 1892). An agreement of a stockholder that another stock- holder shall be made "whole" for any loss due to not selling stock is without consideration and void. Martin's Es- tate. 4 R'y & Corp. L, J., 449 (Orphans' Ct. Phil., 1888). A person induced to subscribe by an agreement of a third person to purchase the stock at par at anytime may collect from the latter the difference between the price at which the former sells and the par value, the latter having declined to perform. Lewis v. Coates. 5 & W. Rep, 897 (Mo., 1888). See, also, § 334. A memorandum " We agree to pay A. Rampacker the par value of this stock . . . upon the surrender of this certificate" in- dorsed on the back of the certificate enables him to tender the stock and collect the par value, even though there was no consideration for the promise- Wheaton r. Rampacker, 26 Pac. Rep., 912 (Wyo., 1891). An agreement of per- sons holding a majority of the Btock, they being directors also, that a person purchasing stock from them shall be v. Blair, 109 N. Y., 600 (1888) ; Morgan ?\ Struthers, 131 U. S., 246 (1889). An agreement to take back bonds if the vendee desires to return them is valid and enforceable. Johnston v. Trask, 1 16 N. Y., 136 (1889). A guaranty that a vendor will take back the stock sold if the vendee desires is enforceable, even after the company sells out to another company for its shares of stock, the vendee not assenting. Richter v. Frank, 41 Fed. Rep., 859 (1890). An agreement of the vendor to buy back the stock is enforceable. Graham v. Houghton. 20 N. E. Rep., 876 (Mass., 1891). The a ment of the vendor of stock to buy it back at the price paid, and one per cent, a month in addition, is not usuri- ous as a matter of law. Phillips v. Mason, 66 Hun, 580 (1893). Where the vendor agrees to refund the money upon the return of the stock sold, the vendee cannot sue for the money unless he returns the stock. Henderson r. Wheaton, 28 N. E. Rep, 1100 (111.. 1891). Where stock is sold with a contract on the part of the vendor that he will re- purchase it if desired "at the end of one year," the time may be extended by oral agreement. Weld v. Barker, 26 Atl. Rep. 239 (Pa.. 1893). The vendee in enforcing the contract of the vendor to take the stock back must make and allege a tender. Taylor v. Blair, 13 N. Y. Supp, 154 (1891). 1 Where a stockholder subscribes for an increased capital stock on the agree- ment of parties "to take the stock if the subscriber does not want it, the latter may hold the former liable for the dif- ference between what the latter pays for the stock and what he is able to sell it for. Herd et al. v. Thompson, 24 Atl. Rep., 282 (Pa., 1892). A guaranty 466 CII. XX.] CONTRACTS TO SELL — GAMBLING SALES — FKAUD. [§ 341. to a guaranty that there will be a certain dividend on stock pur- chased, 1 nor to a broker's relation towards his client. 2 The pro- vision of the statute relative to transfers of land does not apply to stock, 3 since shares of stock are personal property. 4 A transfer of stock for the purpose of defrauding the transferrer's creditors is void, and a court of equity will set it aside, 5 or the stock may be attached or sold under execution the same as though no attempt at transfer had been made. 8 B. GAMBLING SALES OF STOCK. § 341. Wliat arc wager stock sales. — Executory contracts for the sale of stock may be made with an intent to actually deliver the stock, or they may be made with an intent not to deliver it, but to pa} 7 in cash the amount lost or won by the rise or fall of the market price of the stock. A sale with the former intent is, at common law, l<#gal and valid. 7 A sale with the latter intent is a gambling general manager and may at the end of two years sell the stock back to them at a stated price is contrary to public pol- icy and void. The vendors need not repurchase. The arrangement is unfair to the corporation. Wilbur v. Stoepel, 46 N. W. Rep., 724 (Mich., 1890). ^loorehouse v. Crangle, 36 Ohio St., 130 (1880). 2 Genin v. Isaacsen, 6 N. Y. Leg. Obs.. 213 (1845) ; Rogers v. Gould, 6 Hun, 229 (1875). 3 Watson v. Spratley, 10 Ex., 222 ; Pow- ell v. Jessopp, 18 C. B.. 336 (1856); Walker v. Bartlett, 18 C. B., 845 (1856); Ashworth v. Munu, L. R, 14 Ch. D., 363, 368 (1880). 4 See ch. I. 5 Skowhegan Bank v. Cutter, 49 Me., 315 (1860) ; State v. Warren F. & M. Co., 32 N. J. Law Rep., 439 (1868); Bayard v. Hoffman, 4 Johns. Ch., 450 (1820) ; Had- den v. Spader, 20 Johns. Rep., 554 (1822) ; Scott v. Indianapolis Wagon-works, 48 Ind., 75 (1874^; Moore v. Metropolitan Nat'l Bank, 55 N. Y., 41 (1873). The fraudulent transferee must be made a party defendant. Hyatt V. Swivel, 52 N. Y. Super. Ct„ 1 (1885). See, also, ch. XXVII. But the fraudulent trans- feree is not liable unless he has accepted the stock. Skowhegan Bank v. Cutler, 49 Me., 315 (1860) ; Cartmell's Case, L. R, 9 Ch., 691 (1874). Acceptance is a ques- tion of fact. Pirn's Case, 3 De G. & S., 11 (1849). But he cannot plead the stat- ute of frauds himself. Smith v. 49 and 56 Quartz M. Co., 14 Cal., 242 (1859). 6 Beckwith v. Burrough, R. I., Feb. 9, 1884. See §§ 482, 484, infra. "Irwin v. Williar, 110 U. S, 499, 508 (1883), the court saying : " The generally accepted doctrine in this country is . . . that a contract for the sale of goods to be delivered at a future day is valid, even though the seller has not the goods nor any other means of get- ting them than to go into the market and buy them ; but such a contract is only valid when the parties really intend and agree that the goods are to be de- livered by the seller and the price to be paid by the buyer ; and if under guise of such contract the real intent be merely to speculate in the rise or fall of prices, and the goods are net to be delivered, but one party is to pay to the other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, then the whole transaction constitutes nothing more than a wager, and is null and void. And this is now the law in England by force of the statute of 8 and 467 •§341.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [CH. XX. or wao-er contract, and is not enforceable. 1 The essential difference between a wager contract and a contract not a wager is whether there is an intent to deliver the property sold. 2 9 Vict. ch. 109, § 18, altering the com- mon law in that respect." In England it is held that although the parties may have contemplated tliat, as a whole, there would be a mere payment of dif- ferences between them, yet, inasmuch as the actual contracts entered into in- volved the liability for the actual deliv- ery of the stock dealt with, they were not gaming or wagering transactions. Universal Stock Exch. v. Stevens, 66 L. T. Rep., 612 (1892). It may be specula- tion ; nevertheless it is valid. Clark v. Foss,7 Biss., 540(1878); Smith v. Bou- vier, 70 Pa. St., 325 (1S72) ; Kirkpatrick v. Bonsall, 72 Pa. St., 155 (1872), where the court say: "We must not confound gambling, whether it be in corporation 6tocks or merchandise, with what is commonly termed speculation. Mer- chants speculate upon the future prices of that in which they deal, and buy and sell accordingly." Hatch v. Douglas, 48 Conn., 116 (I860); Flagg v. Baldsvin, 38 N. J Eq. Rep., 219 (1884); Kent v. Milt- enberger, 13 Mo. App., 503 (1883). A corporation organized to act as a broker in buying and selling grain is subject to the same rule as regards gambling con- tracts that individuals are. Peck v. Doran, etc., Co., 57 Hun, 343 (1890). Con- cerning this subject of stock gambling see Cook on The Corporation Problem, pp. 67-73. 1 " Wagers at common law are valid and enforceable in the courts ; " and, with certain exceptions growing out of the peculiar subject of the wager, they have been held to be valid contracts. Dewey on Contracts for Future Deliv- ery and Commercial Wagers (1886), 10. To same effect Good v. Elliott, 3 Term R, 693 (1790); Gilbert v. Sykes, 16 East, 150 (812); Atherford v. Beard, 2 Term R, 610 (1788); Morgan v. Pebrer, 4 Sco., 230(1837); Hussey v. Crickitt, 3 Camp., 693 ; Grant v. Hamilton, 3 McLean, 100 (1842); Campbell v. Richardson, 10 Johns., 400 (1813); Buun v. Riker, 4 Johns., 436 (1809); Johnson XX Fall, 6 Cal., 359 (1856); Johnson v. Russell, 37 Cat, 670 (1869); Dewees v. Miller, 5 How., 347 (1848); Porter V. Sawyer, 1 How., 519 (1832); Griffith r. Pearce, 4 Houston, 209 (1869); Richardson v. Kel- ley, B5 111.. 491 (1877); Petillon v. Hippie. 90 111., 420 (1878); Trenton Ins. Co. v. Johnson, 2 Zabr., 526 (1854); Dunman v. Strother, 1 Tex., 89 (1846); McEIroy v. Carmichael, 6 Tex., 454 (1851); Wheeler r. Friend, 22 Tex.. 683 (1859); Monroe v. Smeiley, 25 Tex., 486 (i860). Contra: In Pennsylvania — Edgell v. McLough- liu, 6 Whart, 176 (1841); Phillips v. Ives, 2 Roundtree v. Smith, 108 U. S., 269 such a transaction is a wager," citing (1882); In re Hunt, 26 Fed. Rep., 739 (1886). Dewey, in his recent work on Contracts for Future Delivery and Commercial Wagers, states the rule ac- curately as follows: -Where the par- ties to a contract in the form of a sale agree expressly or by implication at the time it is made that the contract is not to be enforced, that no delivery is to be made, but the contract is to be settled by the payment of the difference be- tween the contract price and the mar- ket price at a given time in the future, many cases. If there is an intent to de- liver, then the transaction is legal, though the parties " exercise the option of settling the difference in price, rather than make delivery of the property." Ward r. Vosburgh, 31 Fed. Rep., 12 (1887). As regards sales and margins, see § 157, infra. A note given in New York to settle a gambling cotton debt is governed by New York laws as to its legality. Sondheim v. Gilbert, 18 N. E. Rep., 687 (Ind., 1888). •1G8 CH. XX.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [§342. § 342. Statutes prohibiting wager contracts, and also certain stock contracts. — There are two classes of statutes affecting stock sales as regards their speculative character. One class tloes not specify sales of stock, but declares in general terms that all gaming and wager- ing contracts shall be void, thereby rendering actions for the recov- ery of money won on such wagers unsustainable. Such statutes exist in England l and New York. 2 The second class of statutes is more explicit, and prohibits specified transactions in stock, irre- spective of whether such transactions be wager contracts or not. Statutes affecting speculative sales of stock exist in many of the states. In Massachusetts short sales are prohibited; 3 in Pennsyl- vania, sales for future delivery; 4 in Ohio, sales of stock for future delivery, where the vendor has not on hand or the vendee the 1 Rawle, 36 (1828); Bruas' Appeal, 55 Pa. St., 294 (1867); in Vermont — Col- lamer v. Day, 2 Vt, 144 (1829) ; Tarlton v. Baker, 18 Vt, 9 (1843) ; in New Hamp- shire—Clark v. Gibson, 12 N. H., 386 (1841); Winchester v. Metter, 52 N. H., 507 (1872); in Maine — McDonough v. Webster, 68 Me., 530 (1878); Gilmore v. Woodcock, 69 Me., 118 (1879) ; Missouri — Waterman v. Buckland, 1 Mo. App., 45 (1876) ; and Massachusetts — Ball v. Gil- bert, 12 Met, 399 (1847): Babcock v. Thompson, 3 Pick., 446 (1826); Sampson v. Shaw, 101 Mass., 150 (1869). The su- preme court of the United States say, in Irwin v. Williar, supra: " In England it is held that the contracts, although wagers, are not void at common law, . . . while generally, in this country, all wagering contracts are held to be il- legal and void as against public policy," citing Dickson's Executor v. Thomas, 97 Pa. St, 278 (1881); Gregory v. Wendell, 40 Mich., 432 (1877) ; Lyon v. Culbertson, 83 111., 33 (1876) ; Melchert v. American U. Tel. Co., 3 McCrary, 521 (1882) ; 11 Fed. Rep., 193 ; Barnard v. Backhaus, 52 Wis., 593 (1881); Love v. Harvey, 114 Mass., 80 (1873) ; Embrey v. Jemison, 131 U. S., 336 (1889). 18 and 9 Vict, ch. 109, § 18; Grize- wood v. Blane, 11 C. B., 526 (1851). Agreements between buyers and sellers of stock to pay or receive the differ- ences between their prices on one day and their prices on another day are gam- ing and wagering transactions within the meaning of the statute. Thacker v. Hardy, L. R, 4 Q. B. D, 687 (1878). The statute does not necessarily affect " corners " in stocks. Barry v. Croskey, 2 J. & H, 1 (1861). As to the applica- tion of this statute, see, also, Heinman v. Hardie, 12 Ct of Ses., 406 (Sc, 4th series, 1885). 2 1 R. S. of N. Y., 662, § 8 (vol. Ill, p. 1962, 7th ed.). As applied to stock cases, see Kingsbury v. Kirwan, 77 N. Y., 612 (1879) : Story v. Saloman, 71 N. Y, 420 (1877); Harris v. Tumbridge, 83 N. Y, 92 (1880) ; Yerkes v. Saloman, 11 Hun, 471 (1877). 3 Gen. Stat Mass., ch. 105, § 6. For cases arising under this statute, see Howe v. Starkweather, 17 Mass., 243 (1821); Sargent v. Franklin Ins. Co., 25 id., 98 (1829); Barrett v. Mead, 92 id., 337 (1865); Brigham v. Mead, 92 id., 245 (1865); Barrett v. Hyde, 73 id., 160 (1856) ; Durant v. Burt, 98 id., 161 (1867) ; Brown v. Phelps, 103 id., 313 (1869); Price v. Minot, 107 id., 49 (1871): Colt v. Clapp, 127 id., 476 (1879); Rock v. Nicholls, 85 id., 342 (1862) ; United States v. Vaughan, 3 Binn., 394 (1811) ; Wyman v. Fiske, 85 Mass., 238 (1861); Pratt v. American Bell Tel. Co., 5 N. E. Rep., 307 (1886), following the decisions under the New York statute from which the statute in question was copied. 4 Laws of Pa., 1841, p. 398, § 6. This statute has been repealed. For decisions, 469 § 342.] CONTRACTS TO SELL GAMBLING SALES — FEAUD. [CH. XX. means to pay ; ! in Illinois, all options are made gambling contracts, and are void ; - in Georgia, short sales cannot be enforced. 3 In New York, the statute of 1812, 4 re-enacted in the Revised Statutes of 1828, 3 prohibiting short sales, was repealed by implication by the statute of 1868, declaring the sale to be valid though there be no consideration or payment of consideration, or no ownership by the vendor of such stock at the time of the sale. Various other states have statutes on this subject. 6 In England the statute of 1734, 7 prohibiting gambling in the public funds, was repealed in ISfiO. 8 It is evident from the history of these statutes against stock gambling see Krause v. Setley, 2 Phil. Rep., 32 (1856) ; Chillas v. Snyder. 1 id.. 289 (1850)i 'Ohio Laws, May, 1885. Gambling contract in grain, Lester v. Buel, 30 X. E. Rep., 821 (Ohio, 1892). 2 Revised Stat of 111., § 178. For de- cisions, see "Wolcot r. Heath, 7 s ! TIL 133 (1875); Pickering v. Cease, 79 111., 328 (1875 ; Pixley v. Boynton, 79 111., 351 t is::.,: Sanborn v. Benedict, 79 111., 309; Cole v. Milmine, 88 111., 349 (1878). This statute is restricted by the decisions to cases where the transaction is to be " adjusted only by differences." But see Ward v. Vosburgh, 31 Fed. Rep.. 12 (1887). In Illinois by statute an option to buy coal at a future time is void. Osgood v. Bauder, 39 N. W. Rep., 887 (Iowa, l s ^ s . A Bale with an agreement of the vendor to take the stock back at the same price and interest within a certain time if the vendee desired is not a gambling contract under the Illinois statute. Richter r. Frank, 41 Fed. Rep., 859 (1890). Concerning an indictment under the Illinois law for keeping a "bucket shop," see Soby t\ People. 25 X. E. Rep, 109 (111., 1890). In Illinois by statute a " put " is void. Schneider v. Turner. 22 N. E. Rep., 497 (III, 1889). 2 Georgia Code, § 2638. *2R. L, 187. § 18. 6 1 R. S., p. 7 H I, § 6. For cases coming under this statute, see Dykers v. Town- send, 24 X. Y, 57 (1861). disapproving Stebbins v. Leowolf, 3 Cush.. 14:3 (1849). See, also. Thompson r\ Alger, 5:} Mass.. 428 (1847), on the New York statute; Staples v. Gould, 9 X. Y, 520 (1854). (criticising Gram v. Stebbins, 6 Paige, 124 — 1836) ; Frost v. Clarkson, 7 Cowen, 24 (1^27 1 ; Cassard v. Heinmann, 14 How. Pr., 84 (1856k affirmed, 1 Bosw., 207. In Xew York a director is prohibited from selling "short." L 1884. ch. 22:5. In Arkansas a broker and others are liable criminally for doing business in futures. Fortenbury v. State, 1 S. W. Rep.. 5* (1886). b A promissory note is void under the Tennessee act against gambling in futures where such note was given therein. Snoddy v. American Xat'l Bank, 13 S. W. Rep., 127 (T^nn., 1890'. The California constitution renders void a transaction wherein a broker buys stock for the customer with the broker's money and holds the stock as security and charges the customer interest and commissions. Cushman v. Root. 26 Pac. Rep. 883 (Cat, 1891). Gambling stock transactions are void under the Ken- tucky statute. Lyons v. Hodgen, 13 S. W. Rep., 1076 (Ky., 189a.y and receive the gain or loss, is for the jury. 4 In the application of this rule, however, great care is to be exercised in submitting the ques- 1 Dos Passos on Stock Brokers and Stock Exchanges (1882), p. 405, says; " The history of these stock-jobbing acts seems to prove conclusively that they have never been effective in pre- venting speculations in stocks. In al- most every instance in which they have been adopted, after lingering for years on the books, scorned and violated by the ' unbridled and defiant spirit of spec- ulation,' despite the earnest efforts of the courts to enforce them, they have finally been repealed. It is, perhaps, better to allow the evil to correct itself, as it surely does, than to bring the ad- ministration of justice into contempt by filling the books with useless laws, which are at all times openly violated and laughed at, and which seem hardly more effective to prevent the practice at which they are aimed than legislation 2 Particularly in Pennsylvania are such stock wagers void by public policy. Worth v. Phillips, 89 Pa. St, 250 (1879); Fareira v. Gabell, 89 Pa. St., 89 (1879) ; Ruchizky v. De Haven, 97 Pa. St., 202 (1881) : Dickson's Executor v. Thomas, 97 Pa. St., 278 (1881); Bruas' Appeal, 55 Pa St., 294 (1867). 3 See §^ 345, 346. See, also, Green- hood on Public Policy, pp. 230-237. ■» Whitesides v. Hunt, 97 Ind., 191 (1884); Gregory v. Wendell, 39 Mich., 337 (1878). And all the circumstances are to be taken into consideration. Bev- eridge v. Hewitt, 8 Bradw., 467 (1881) Hawley v. Bibb, 14 Reporter, 172 (1881) Brand v. Henderson, 107 111., 141 (1S83) Barnard v. Backhaus, 52 Wis., 593 (1881); Kirkpatrick v. Bonsall, 72 Pa, St., 155 (1872). against the laws of nature." 471 §344.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [CH. XX. tion and charging the jury. Thus, an " option," "put," "call," "straddle," or other similar stock exchange contract, may be made with an intent to actually deliver the stock, and, if so, are unobjec- tionable and are enforceable. 1 The parties may be asked directly whether they intended that a delivery should be made. 2 If one party intended to have a delivery the transaction is valid, even though the other party intended otherwise. 3 As between a party and his broker, however, greater difficulty arises, and in some juris- dictions the intent between them governs their relations, irrespect- 1 For definitions of these- terms, see § 445, n. A " put " is not per se con- clusive evidence of an intent not to deliver. Bigelow v. Benedict, 70 N. Y., 202 (1877). A "straddle" follows the same rule. The parties may have in- tended to deliver the stock. Harris v. Tumbridge, 83 N. Y., 92 (1880); Story v. Salomon, 71 N. Y, 420 (1877). Cf. Ex parte Young. 6 Biss., 53 (1874); "Webster v. Sturges, 7 Bradw., 56 (1880); Tenney v. Foote, 4 Bradw., 594 (1879) ; Lyon v. Culbertson, 83 111., 33 (1876); Gilbert v. Gouger, 8 Biss., 214 (1878). A short salo is not per se a wager, nor is it presumed to be. Maxton r. Gheen, 75 Pa. St., 166 (1874); Huss v. Rau, 95 N. Y, 359 (1884); Knowlton v. Fitch, 52 N. Y. 288 (1873); White v. Smith, 54 N. Y, 522 (1874); Cameron v. Durkheim, 55 N. Y, 425 (1874) ; Third Nat'l Bauk v. Harrison, 10 Feci. Rep, 243 (1882). A sale, delivery to be in twelve months, or if vendor wishes before then, is not a gambling contract Wolffe v. Perry- man, 9 S. Rep., 148 (Ala., 1891). These decisions rest upon the principle of law laid down in Stanton v. Small, 3 Sandf. (N. Y), 230, that "a contract for the sale of goods, to be delivered at a future time, is not invalidated by the circum- stances that, at the time of the contract, the vendor neither had the goods in his possession, nor has entered into any contract to buy them, nor has any rea- sonable expectation of becoming pos- sessed of them at the time appointed for delivery otherwise than by purchasing them after making the contract" There are many cases to the same effect. See Noyes v. Spaulding. 27 Vt, 420 (1855) ; Shales v. Seigmoret, 1 Ld. Raymond, 440 (1691) ; Frost v. Clarkson, 7 Cow., 25 (1827); Dewey on Contracts for Future Delivery, 97 ; Thacker v. Hardy, L. P., 4 Q. B. D., 685 (1878), holding that, if the intent at the time of buying was to deliver, it is not a wager, even though that intent be afterwards changed. As to the legality of a "corner," see § 333. Where there is evidence of some intent to deliver, the transaction is not gam- bling. Mitchell v. Hartley, 16 N. E. Rep, 645 (Ind., 1888). 2 Yerkes v. Saloman, 11 Hun, 471 (1877); Cassard v. Hinman, 6 Bosw., 14 (I860); First Nat Bank v. Oskaloosa, 23 N. W. Rep, 255 (1885) ; Ex parte Young, 6 Biss., 53 (1874). In the case of Porter v. Viets, 1 Biss., 177 (1857), the court re- fused to admit parol evidence that the contract was gambling, for the reason that it varied a written contract 3 Wall v. Schneider, 17 Reporter, 700 (1884); Irwin v. Williar, 110 U. S., 499 (1884); Whitesides v. Hunt 97 Ind., 191 (1884); Pixley v. Boynton, 79 III., 351 (1875); Ward v. Vosburgh, 31 Fed. Rep., 12 (1887); Powell v. M'Cord, 12 N. E. Rep., 262 (111., 1887); Lehman v. Strass- berger, 2 Woods (C. C), 554 (1873); Con- ner v. Robertson, Louisiana Sup. Ct (1886). Contra, Fareira v. Gabell, 89 Pa. St., 89 (1879); Beveridge v. Hewitt. 8 Bradw., 467 (1881). In Tennessee, by statute, dealing in futures is gambling, if either party does not intend to de- liver. See McGrew v. City Produce Ex- change, 4 S. W. Rep., 88 (Tenn., 1887). 472 CH. XX.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [§ 344. ive of the intent of the party dealing with them. 1 The fact that stock transactions were carried on bv "margins" is no evidence that they were gambling contracts, 2 excepting in Pennsylvania and New Jersey. In these states this fact alone seems to be sufficient evi- dence of a wager. 3 A wager contract is not proved by the fact that the party selling stock to be delivered at a future time intends to purchase that amount of stock in time for the delivery, or vice versa. 4 " An executory contract for the sale of goods for future delivery is not infected with the quality of a wager by reason of the fact that at the date of the contract the vendor had not the goods ; had not entered into any arrangement to provide them, and had no expectation of purchasing them, unless by a subsequent pur- chase in the market." 5 The financial responsibility of the parties, 6 1 See §§ 345, 346. 2 Sawyer v. Taggart 14 Bush,' 727 (1879); Wall v. Schneider, 17 Rep., 700 (1884) ; Bartlett v. Smith, 13 Fed. Rep., 263 (1882) ; Whitesides v. Hunt, 97 Ind., 191 (1884); Union Nat. Bank v. Carr, 15 Fed. Rep., 238 (1883); Hatch v. Doug- las, 48 Conn., 116 (1880). Many other cases do not directly pass on this ques- tion, but assume that the deposit of a margin, as a security to the broker, does not prove an intent not to have a delivery of the stock. SRuchizky v. De Haveu, 97 Pa. St., 202 (1881); Dickson v. Thomas, 97 Pa. St, 278 (1881) ; Fareira v. Gabell, 89 Pa St., 89 (1879) : Maxton v. Green, 75 Pa. St., 166 (1874): North v. Phillips, 89 Pa St., 250 (1879) ; Flagg v. Baldwin, 38 N. J. Eq. Rep., 219 (1884) ; Justh v. Hol- liday, 11 Wash. L. Rep., 418 (1883). 4 In the case of Ashton v. Dakin, 7 W. R., 384 (1859), the court held it not to be a wager contract to order a broker to buy stock, "and let the bargain be so as to day of payment that you may have an opportunity of reselling it for me by such a day, when I expect the market will have risen, and then you will pay the seller for me with the money you receive from the purchaser, and I shall receive the gain from you, if any, or pay you the loss." So, also, Smith v. Bouvier, 70 Pa, St., 325 (1872), holds that stocks bought and sold upon specula- tion are not necessarily wager contracts. A person may sell without owning the stock, and at time of delivery buy to deliver, and yet the transaction be not a wager, where the jury finds that there was an intent to deliver in both the sell- ing and buying. See, also, Thacker v. Hardy, L, R, 4 Q. B. Div., 685 (1879); Sawyer v. Taggart, 14 Bush, 727 (1879). A purchase of corn may be legal al- though made to fill certain sales which the party had made previously. A mort- gage given to a broker for advance- ments made in the transaction is valid. Douglas v. Smith, 38 N. W. Rep., 163 (Iowa, 1888). 5 Conner v. Robertson, 37 La. Ann., 815 (1885), the court saying also that Larymer v. Smith (1 B. & C, 1) has been repeatedly overruled. See, also, supra, page 472, note 1. eKirkpatrick v. Bonsall, 72 Pa. St, 155 (1872); First Nat'l Bank v. Oska- loosaP. Co., 66 Iowa. 41 (1885); In re Green, 7 Biss., 338 (1877) ; Beveridge v. Hewitt, 8 Bradw., 467 (1881); Justh v. Holliday, 11 Wash. Rep., 418 (1883); North v. Phillips, 89 Pa. St., 250 (1879) : Patterson's Appeal, 16 Rep., 59 (Pa., 1883) ; Flagg v. Baldwin, 38 N J. Eq., 219; Colderwood v. McCrea, 11 Bradw., 543 (1882). The fact that one of the parties is already under obligation to other parties to purchase cotton several times greater in value than his fortune is evidence of an intent to gamble. Beadles v. McElrath, 3 S. W. Rep., 152 473 >}§ 345, 346.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [CH. XX r . and their other transactions in the same line, l are admissible as evidence as to whether there was an intent to deliver the stock or merely to pay the gain or loss. The burden of proving that a stock transaction is a gambling contract is upon him who affirms it. 2 § 345. Gambling stock contracts as affecting the relations between the principal and Ids broker. — A broker is but an agent of his principal. As such he may hold the principal liable for commis- sions and for losses paid on stock transactions where those stock transactions are legitimate and legal. Where, however, the stock contracts are of a wager or gambling nature, a more difficult ques- tion arises, and the decisions are irreconcilable. In England, in 1878, Judge Lindley, in Thacker v. Hardy, 3 a carefully-considered case, held that, where the principal has been carrying on gambling transactions, he cannot escape or repudiate his liabilities to his broker in those transactions, even though the latter knew of the gambling character of the business. The principal is liable to his broker as though the transactions were free from such objections. This is the well-established rule in England. 4 § 346. In this country an opposite rule prevails for the most part. (Ky., 1887). The fact that a party is financially unable to pay for property is evidence that the contract is gam- bling. Myers v. Tobias, 16 Atl. Rep, 641 (Pa., 1889). i K irk patrick v. Bonsai), 72 Pa St.. 155 (1872); Beveridge v. Hewitt. 8 Bradw., 467 (1881); Irwin v. Williar, 110 U. S., 499 (1884). Contra, Tomblin v. Callen, 28 N. W. Rep., 573 (Iowa, L886>. The jury in passing upon the de- fense to a note that it was given in a stock-gambling operation may consider all the acts and accounts and the actual dealings. Gaw v. Bennett, 25 Atl. Rep., 1114 (Pa., 1893). As to the competency of evidence herein, and that evidence of custom of settling by differences is incompetent, see Scofield v. Blackmarr, 4 Atl. Rep., 208 (Pa., 1886). 2 Dewey on Contracts, etc., p. 207, says : " All the cases except Barnard v. Backhaus, 52 Wis., 503 (1881); Cobb v. Prell, 15 Fed. Rep., 774 (1883); Bever- idge v. Hewitt, 8 Bradw.. 467 (1881); Stebbins v. Leowolf, 3 Cush., 137 (1849), and possibly Chandler's Case, Ex parte Young, 6 Biss., 53, hold that these con- tracts are presumed to be bona fide; and in order to show them to have been used as covers for wagers, an agree- ment to that effect must appear to have been made. According to these ex- cepted cases option contracts are pre- sumed to be invalid, and proof must be made that they are bona fide." 1 See, also, Dewey, p. 46. 3 L R, 4 Q. B. D., 685. In Illinois the burden of proof is on the defend- ant to prove a gambling intent on the part of both parties. In Wisconsin a contrary rule seems to prevail. See Ward v. Vosburgh, 31 Fed. Rep., 12 (1887). *i2eHart, Weekly Notes, 85 (1870); Cooper v. Neil, 13 Weekly Notes, 128 (1878); Ex parte Rogers, L. R, 15 Ch. D., 207 (1879); Faikuey v. Reynons, 4 Burr., 2069 (1767); Jessopp v. Lutwyche, 10 Ex., 614 (1854); Knight v. Cambers, 15 C. B., 562 (1855); Knight v. Fitch, 15 C. B., 566 (1855); Lyne v. Siesfield, 1 H. & N., 278 (1856) ; Rosewarne v. Billing, 15 C. B. (N. S.), 316 (1863) ; Pidgeon v. Burslem, 3 Ex., 465 (1849). Contra, Byers v. Beattie, 16 Weekly Rep., 879 (1868, Ex., Irish). 474 OH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§ 346. The great weight of authority holds that, where the broker has knowledge of the purpose to gamble in stocks and aids in carrying out that purpose, he cannot recover for services rendered or losses incurred and paid by himself. 1 A few cases hold to the same effect as the English rule. 2 Many cases which seem, to favor the English rule do so only by dicta, inasmuch as the transactions involved in such cases are held not to be wager contracts. 3 In Pennsylvania and New Jersey the American rule is rigidly enforced. The broker is held to be dealing as a principal, not as an agent, in all stock- gambling transactions. 4 lie cannot recover commissions nor losses. 5 If his principal is an infant the broker is liable to such infant for all sums received by way of margins. 6 If, however, the parties do » Irwin v. Williar, 110 F. S., 499, 510 (1883); Flagg v. Gilpin, 19 Atl. Rep., 1084 (R. I., 1890) ; McClean v. Stuve, 15 Mo. App., 317 (1884), per Thompson, J. ; Ream v. Hamilton, 15 Mo. App., 377 (1884). Cf. Kentu. Miltenberger, 13 Mo. App, 503, 511 (1883). See, also, as supporting above rule, Everingham v. Meighan, 5 Wis. Leg. News, 25 (1882); In re Green, 7 Biss., 338 (1877); Bartlett v. Smith, 13 Fed. Rep., 263 (1882); Tenney v. Foote, 4 Bradw., 594 (1879) ; affirmed, 95 111., 99 (1880), defeating a note given to the broker ; Calderwood v. McRae, 11 Bradw., 543 (1882) ; Webster v. Sturges, 7 Bradw., 56; Barnard v. Backhaus, 52 Wis., 593 (1881), defeating notes ; Bev- eridge v. Hewitt, 8 Bradw., 467 (1881); Whitesides v. Hunt, 97 Ind., 191, 203 (1884); Melchert v. American U. Tel. Co. t 11 Fed. Rep., 193 (1882); First Nat'l Bank of Lyons v. Oskaloosa Packing Co. (Iowa), 23 N. W. Rep, 255 (1885), hold- ing a note void ; Stewart v. Garrett, 4 Atl. Rep., 399 (Pa., 1886); Stewart v. Schall, 34 Alb. L. J., 98 (Md., 1886). Suit by broker against customer for moneys lost in purchase of grain for the cus- tomer. Mohr v. Micsen, 49 N. W. Rep., 862 (Minn., 1891). Brokers are bound to know that banks have no power to pur- chase cotton futures on margins. Can- not recover commissions and losses. The ultra vires contract was not exe- cuted, inasmuch as the corporation received no property. Jennison v. Citi- zens' Sav. Bank, 44 Hun, 412 (1887). A broker may recover commissions, etc., from his principal when the former knew nothing of the hitter's intention to gamble. Lehman v. Feld, 37 Fed. Rep., 852 (1889). Broker may recover from principal though latter intended a gam- bling contract. Edwards v. Hoeffing- hoff, 38 id., 635 (1889) ; Boyd v. Hanson, 41 id., 174 (1890). 2 Brown v. Speyers, 20 Gratt. (Va.), 296 (1871); Wyman v. Fiske, 85 Mass., 238 (1861), on the ground that the note sued on was a voluntary payment to the broker; Warren v. Hewitt, 45 Ga., 501 (1872); Marshall v. Thurston. 3 Lea (Tenn.), 741 (1879), where also a note had been given; Jackson v. Foote, 12 Fed. Rep., 37, also a note case, the court say- ing that, as between the broker and his principal, the decision probably would be different. Cf. Tinsley's Case, 10 Fed. Rep., 249. 3 Lehmann v. Strassberger, 2 Woods, 554 (C. C, 1873); Rumsey v. Berry, 65 Me., 570 (1876); Sawyer a. Taggart, 14 Bush, 727 (1879); Durant v. Burt, 98 Mass., 161 (1867); Williams v. Carr, 80 N. C, 294 (1879). •*Ruchizky v. De Haven, 97 Pa. St., 202 (1881). 5 North v. Phillips, 89 Pa. St.. 250 (1879); Flagg v. Baldwin, 38 N. J. Eq. Rep, 219 (1884); Fareira v. Gabell, 89 Pa. St., 89 (1879), holding that notes given to the broker are void. 6 Ruchizky v. De Haven, supra. An in- fant gambling in stocks on a margin 475 §§ 347, 348.] CONTRACTS TO SELL GAMBLING SALES — FKAUD. [CH. XS not raise the question of the legality of the transaction, the court cannot. 1 In Ohio it is held that the broker may be made to ac- count for profits, even though the transaction was a gambling one. 2 A note and mortgage given to the broker in settlement of a gambling transaction will not be interfered with. 3 The broker is not liable for a sale of the stock on failure of margin, without notice to the principal, where the business is gambling. 4 §§ ?>47, 343. Gambling stock tra nsactions as affecting notes, bonds, mortgages, etc., growing out thereof.— The penalty of engaging in a stock-gaiubling operation is that, in case the transaction is de- clared by a court of justice to be illegal as a wager contract, the court declines to aid either party. 5 As a general rule all liability on the part of either party is unenforceable. Money paid by the principal cannot be recovered back. 6 Neither principal can collect the gains of the transaction, and neither is liable for a loss. 7 Notes given in settlement are void and not collectible, 8 even in the hands may recover from the brokers all that he deposited with them. Mordeeai v. Pearl, 6a Hun. 558 (1892) 1 Gheen v. Johnson. 90 Pa. St, 38 (1879); Williams v. Carr, 80 N. C, 294 (1879) 2 Norton v. Blinn, 39 Ohio St. 145 (1888) Where gambling stock transac- tions are closed and the account settled, and the balance due the customer is left on deposit with the broker, the latter must pay it over. Peters et ah v. Grim, 24 Atl. Rep., 192 (Pa., 1892). 3 Clark v. Foss, 10 Chicago Legal News (U. S. D. Ct, 1878). Cf. Tantum v. West (N. J.), Central Rep.. March 23, 1886. * North v. Phillips, 89 Pa, St, 250 (1879) » Reese v. Fermie, 13 W. R, 6 (1864), holding that the court will not aid one who has been tricked in gambling in stocks. 6 Gregory v. Wendall, 39 Mich., 337 (1878); Id., 40 Mich., 432 (1879); Wyman v. Fiske, 85 Mass., 238 (1861). Cf. Nor- ton v. Blinn, 30 Ohio St., 145 (1883). In Tennessee, by statute, a contrary rule prevails. McGrew r. City Produce Ex- change, 4 S. W. Rep., 38 (Tenn., 1887); Dunn v. Bell, id., 41 (Id.), holding, also, that where there are several partners or co-conspirators who take the principal's money they are liable therefor jointly and severally. Under the New York statute money paid by a customer to a broker on gambling speculations may be recovered back. Peck v. Doran, etc., Co., 10 N. Y. Supp.. 401 (1890). Where a gambling contract is illegal by statute, a customer who gave money to the broker to gamble with, according to orders, cannot recover it back. Sale de- liverable in a certain month, on a day to be fixed by seller, is not a gambling contract. White v. Barber, 123 U. s, 392 (1887); 17 Atl. Rep.. 791. Certificate of deposit given to broker in gambling transactions may be recovered back. Dempsey v. Harm, 12 Atl. Rep., 27 (Pa., 1887). 7 Grizewood v. Blane, 11 C. B., 526 (1851); Webster v. Sturges, 7 Bradw., (111.), 560 (1880); Ex parte Young, 6 Biss., 53 (1874): Thompson v. Cum- mings, 68 Ga.. 124 (1881); Yerkes v. Solomon, 11 Hun, 471 (1877). A partner, however, may have contribution for losses paid at the express request of the other member of the firm. Petri' v. Hannay, 8 Term Rep., 418 (1789) "Barnard v. Backhaus, 52 Wis.. 593 (1881); Fareira v. Gabell, 89 Pa. St.. 89 (1879) ; Lowry v. Dillman, 18 N. W. Rep., 4 (Wis., 1884); Davis v. Davis, 21 N. E. 476 CH. XX. J CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§349. of bona fide purchasers. 1 Bonds and mortgages given in payment are void. 2 Due-bills, 3 acceptances 4 and guaranties 5 of notes are not valid or enforceable. If a part of the consideration is void the whole contract and all securities given thereunder are void. 6 C. FRAUD AS AFFECTING A SALE OF STOCK. § 349. Extent of subject treated herein. — In a previous chapter of this treatise the effect of fraud and fraudulent representations on a subscription for stock was fully treated. There is little dif- Rep., 1112 (Ind., 1889); Justh v. Holi- day, 17 Central L J.. 56 (1883); 11 Wash. L. Rep., 418 ; Cunningham v. Third, etc., Bank of Augusta, 71 Ga., 400 (1883); Tenney v. Foote, 4 Bradw., 595 (1879); affirmed, 95 111., 99. Of. Wynian v. Fiske, 85 Mass., 238 (1861). Person loan- ing money and taking notes therefor cannot be defeated in suit on notes by evidence that he knew the loan was to be used in gambling operations. De- fendant must prove, also, that plaintiff intended that the money should be so used. Waugh r. Beck, 6 Atl. Rep, 923 (Pa., 1886). Checks, notes, etc., in gam- bling contracts are void. Kahn v. Wal- ton, 20 N. E. Rep., 203 (Ohio, 1889); Embrey v. Jemison, 131 U. S., 336 (1889). 1 Barnard v. Backhaus, 52 Wis., 593 (1881) ; Steers v. Lashley, 6 Term Rep, 61 (1794); Tenney v. Foote, 4 Bradw. (111.), 594 (1879) ; Cunningham v. National Bank of Augusta, 71 Ga., 400 (1883); Lowry v. Dillman, 18 N. W. Rep., 4 (1884). Contra, Crawford v. Spencer, 4 S. W. Rep., 713 (Mo., 18S7), citing Third National Bank v. Harrison, 10 Fed. Rep., 243; also, contra, Lilley v. Rankin, 55 L. T. Rep., 814 (1886). An accommoda- tion indorser to the note may set it up. Justh v. Holliday, 17 Cent. L. J., 56 (1883); 11 Wash. L. Rep, 418. Note to bank is valid, though the proceeds were to pay a stock-gambling debt and the bank knew that fact Marshall v. Thurston, 3 Lea (Tenn.), 741 (1879). Cf. Cannon v. Bryce, 3 B. & A., 179 (1819). 2 Amory v. Merry weather, 2 B. & C, 573 (1824); Flagg v. Baldwin, 38 N.J. Eq. Rep, 219 (1884); Griffiths v. Sear.-. 112 Pa. St., 523 (1886); Barnard v. Backhaus, 52 Wis., 593 (1881). A judg- ment entered by confession on a bond given for a gambling debt may be set aside. Everitt v. Knapp, 9 Johns., 331 (1810); Beveridge v. Hewitt, S Bradw., 467 (1881). A court of equity will en- join the transfer of a note and will decree the cancellation of a mortgage given by a married woman in payment of her husband's stock -gambling debt?. Tantum v. West, 6 Atl. Rep., 316 (N. J., 1886). But will not where given by the part}- himself to his brokers. Clark v. Foss, 10 Chicago Legal News (1878). A mortgage to a broker to pay losses on gambling speculations is void and not enforceable. Walters v. Comer, 5 S. F. Rep, 292 (Ga., 1888). But see Craw- ford v. Spencer, 4 S. W. Rep, 713 (Mo., 1887). 3 Rudolf v. Winters, 7 Neb, 125 (1878). 4 Steers r. Lashley, 6 Term Rep, 61 (1794). Rawlings v. Hall, 1 Carr. & P., 11 (1823), holds that the broker on the witness stand need not admit that the consideration was a gambling debt, since it would subject him to a common- law criminal prosecution. 5 Tenney V. Foote, 95 111., 99 (1880). 6 Tenney v. Foote, svpra. See, also, Fareira v. Gabell, 89 Pa St., 89 (1879). But where, upon the close of a success- ful " corner," which is illegal by stat- ute, one of the parties leaves his share of the profits with the other party to invest, the latter must account for it when called upon so to do. Where, 477 § 350. j CONTRACTS TO SELL GAMBLING SALES FRAUD.' [ell. XX. ference in the principles of law governing fraud as affecting sales of stock from fraud as affecting subscriptions for stock. Most of the cases assume that the same principles apply to both kinds of transactions. Consequently the questions of what constitutes fraud herein; what remedies the defrauded person has; and the general principles governing this branch of the law, will be fully under- stood only by a comparison of these two parts of this work. 1 §350. What has been held to constitute a fraud herein.— It is difficult to lay down rules as to what does and what does not amount to fraudulent misrepresentations. The courts, consequently, let each case stand upon its own facts. Certain states of fact have, however, been passed upon as constituting fraud, and as such they aid in coming to a conclusion on facts in somewhat similar cases. Thus, it has been held to be a fraudulent repre- sentation to make false statements as to the location, explora- tions and developed state of a mine; 2 or that a patent owned by the company was of great value, and that certain other persons were owners of stock; 3 that the company was prosperous, when in fact large overissues of stock had been made: 4 or that the corpo- rate property was free from incumbrance ; 5 or that the corporation would guaranty certain dividends; 6 or any false statement or gen- eral fraudulent act, or fraudulent concealment of a material fact upon the close of an unsuccessful "cor- prosperous, that there was no stock for ner," the parties losing settle among sale, and that defendant was selling themselves, hut one of them fraudu- stock of others and not his own. Miller lently overstates the losses, he is liable v. Curtise, 13 N. Y. Supp., G04 (1891). to account for the amount fraudulently 5 Southwestern R R Co. v. Papot, 67 allowed him. Wells v. McGeoch, 34 N. Ga.. 875, 692 (1881), the court saying: W. Rep., 769 (Wis., 1888). " It is, we think, sufficient to show that 'See ch. IX. In the important case the misrepresentation or suppression of of Western Bank r. Addie, L. R, 1 fact was of such a nature as to prove H. L. (Sc), 145 (1867), part of the shares that the property purchased was of no had been subscribed for and part pur- value to the purchaser for the purpose chased. The court applied the same for which it was bought, or that it principle to both. would be reasonable to suppose that the 2 Morgan v. Skiddy, 62 N. Y., 319 purchaser would not have contracted (1875). for it had he had knowledge of the ex- s Miller v. Barber, 66 N. Y., 558 (1876). istence of this defect" It is fraudulent 4 Cazeaux v. Mali, 25 Barb., 578 (1857). to make misstatements to the effect that False representations as to solvency and the corporation is out of debt and is financial condition of the corporation making certain profits. It is no defense are material, and the purchaser may that the defendant might have ascer- testify that he would not have pur- tained the facts from the corporation, chased the stock except for the repre- Redding r. Wright, 51 N, W. Rep, 1056 sentations. Pridham v. Weddington, 12 (Minn.. 1892). S. W. Rep., 49 (Tex., 1889). It is fraud ** Gerhard i\ Bates, 20 Eng. L. & Eq. t to state falsely that the company is 129 (1853). 478 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§350. whereby the purchaser is induced to complete the sale of stock. 1 It may or may not be a fraudulent representation to state that the stock is worth a certain sum. 2 It is a fraud on the vendee of stock to sell him as paid-up stock- that which is not paid up, although issued as paid up, the vendor having participated in the issue. 3 It is fraud in the vendor to rep- 1 See further illustrations in chapter IX. Declaring a dividend in good faith and sound discretion is not fraud by reason of its turning out to have been ill-advised. Burnes v. Pennell, 2 H. of L. Cases. 497 (1849). A representation that the stock '-is good property or in- vestment and is about to make a divi- dend " is a false representation when untrue, and where the person taking the stock as executor from a preceding executor objected to receiving it on ac- count of his doubt or ignorance as to its character. Lawton v. Kittredge, 30 N. H., 500 (1855). Representations that a corporate property is valuable and one of the best properties in Colorado, when in fact the company was a bubble com- pany, raises a question of fraud for the jury to pass upon. Bradley v. Poole, 98 Mass., 169 (1867). The payment of an excessive and speculative price for stock is not fraud and is no ground for setting the sale aside. Moffat v. Winslow, 7 Paige Cb., 124 (1838). The vendor war- rants the title to the stock, but not its quality or value. Allen v. Pegram, 16 Iowa, 163 (1864). A sale of stock in a company formed to purchase a railroad cannot be set aside merely because its title to the railroad fails. State v. North. La. & T. R. R. Co., 34 La. Ann., 947 (1882). In the case of Wright's Appeal, 99 Pa. St., 425 (1882), it was held that the corporation was not liable for the conversion of stock by its president, who obtained the certificates indorsed in blank from the owner on false repre- sentations that the corporation wished to use them. Newlands v. National, etc., Association, 53 L. T. (N. S.), 242 (1885); March v. Eastern R. R. Co.. 43 N. H., 515 (1862), holding that the fact that the earnings were not distributed by divi- 41 dends until after a sale of stock does not constitute fraud. A confidential agent who uses his position to obtain stock of which the principal has been deprived wrongfully must turn it over to the principal. Hardenburgh v. Bacoil. 33 Cal., 356 (1867). 2 That it is not, see Union Nat'l Bank v. Hunt, 76 Mo., 439 (1882). A false rep- resentation that the stock sold is worth eighty cents on the dollar — it being worth but forty cents — will not sustain an action for deceit. Ellis v. Andrews. 56 N. Y.. 83 (1874). It is fraudulent t<. represent that the stock is worth par when in fact it is worthless. If the vendor persuades the vendee to make no inquiries, the latter may recover, although he made none. The measure of damages is not the value of the land given for the stock, but the difference between the actual and the represented value of the stock. Nysewander v. Low- man, 24 N. E. Rep., 355 (Iud., 1890). False representations may consist of statements that the stock is worth a certain price and is sold to plaintiff at a reduced price in order to obtain his services. Maxted v. Fowler, 53 N. W. Rep., 921 (Mich., 1892). 3 Sturges v. Stetson, 1 Biss., 246 (1858) holdiug that the vendee is not liable on a note given in payment thereof. Fos- dick v. Sturges. 1 Biss., 255 (1858), hold- ing that the vendee may recover back money paid. Reeve V. Dennett. 11 N. E. Rep., 938 (Mas>.. 1887), where the capital of $1,000,000 was issued for a worthless patent; holding also that the misrepresentations may invalidate also a second and subsequent purchase of stock, even though in the meantime the vendee has become a director in the corporation. 9 §350.] CONTEACTS TO SELL GAMBLING SALES — FEAUD. [CH. XX. resent that property is to be turned in by him to the corporation at a certain price and then to refuse to carry out the latter con- tract. 1 Where the vendor agrees to sell at a value to be ascertained by an examination of the corporate books and affairs, it is fraud in the vendee to cause false memoranda to be made by the employees of the corporation. 2 It is not fraud, however, for a director or other corporate officer to buy or sell stock at a profit due to his official knowledge of the condition of the corporation; 3 nor to ob- tain the stock by a threat of a call. 4 The fact that a check given in payment for stock is not honored, although the money is in bank, is not fraud where payment was refused because of other frauds of the vendor ; 5 nor is it fraud to issue certificates before anything has been paid thereon, there being no participation by the vendor. 6 It is fraud, however, to represent the company as having a full-paid capital stock when in fact the stock was wholly issued in pa} T ment of a worthless mine. The person making such representation is liable to the vendee. 7 There are various facts which constitute fraud herein, and various principles of law applicable to the remedy to be pursued. Many cases are occurring constantly, and the decisions on this subject are becoming of great importance. 8 1 Seaman v. Low, 4 Bosw., 337 (1859). 8 Hager v. Thompson, 1 Black, 80 (1801). 3 Board of Com'rs of T. Co. V. Rey- nolds, 44 Ind., 509 (1873). Where one of the partners in the building of railroads, and in owning stocks, honds, etc., dies, and his executor, after an examination of all the assets by means of experts, •etc., makes a settlement with the other partner, such settlement is binding although the other partner did not im- part all the knowledge or information he might have given. The subsequent rise in value of some of the securities is immaterial. Colton v. Stanford, 23 Pac. Rep., 10 (Cal., 1890). The purchaser of stock from the secretary of the com- pany cannot rescind on the ground of fraud, the secretary having given at the time of the sale all the information which he had concerning the company. No confidential or fiduciary relation ex- ists. Krumbhaar v. Griffiths, 25 Atl. Rep., 04 (Pa., 1892). And see § 320. * Grant r. Attrill, 11 Fed. Rep., 409 (1882). As to other cases of fraud by the vendee, see Johnson v. Kirby, 05 Cal., 482(1884); Hemppling v. Burr, 20 N. W. Rep.. 190 (Mich., 1880). 5 Lomius v. Coe, 117 Mass., 45 (1874). » Woodruff v. McDonald, 33 Ark., 97 (1878). 7 Cross v. Sackett, 2 Bosw. (N. Y.), 017 (1858). See, also, §§ 40, 48, supra. But an assertion that the capital stock is a certain amount is not an assertion that it has been all paid in. Colt v. Wollas- ton, 2 P. Wms., 154 (1723). When a promoter misrepresents to a subscriber the price paid by the promoter for prop- erty conveyed by him to the company, the subscriber may sue him for dam- ages. Teachout v. Van Hoesen, 40 N. W. Rep., 90 (Iowa, 1888). A sale or pledge of stock stamped " non-assess- able." when in fact it was not legally paid up, renders liable for false repre- sentations the president and secretary who made such sale or pledge and who knew that it was not paid-up stock. Windram v. French, 24 X. E. Rep., 914 (Mass., 1800). 8 Where a debtor turned over to his 480 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§ 350. Fraud in the sale of stock frequently arises in the organization of the company. The parties who cause the company to be organ- ized are called the " promoters " of it. As such they are disquali- fied from making a profit by selling property to the company at a creditor, as trustee, the controlling stock of a corporation, for the latter to man- age, and the latter afterwards, by threats of abandoning the enterprise, forced the debtor to sell him the stock outright, a court of equity will set aside such sale and hold the creditor liable as a trustee. Ryle v. Ryle, 7 Atl. Rep., 484 (N. J., 1886). Failure of vendor to state that the company is a joint-stock association and not a corporation is not fraud avoiding the sale of the stock. Curtiss v, Hurd, 30 Fed. Rep., 729 (1887). Director selling stock cannot be defeated in his action for the price by reason of fraudulent representations of the cor- porate treasurer inducing defendant to purchase. Doane v. King, 30 Fed. Rep., 106 (1887). Question for the jury whether it was fraud in representing that stock was paid up, when in fact first payment only had been made, and balance had been paid by dividends. Kryger v. An- drews, 35 N. W. Rep., 257 (Mich., 1887). Fraud may be by directors in fraudu- lently making dividends. See ch. XXXII, infra. Where, after an agreement to sell land for stock, the owner of the stock attends a corporate meeting and votes to sell all corporate property at sixty cents on the dollar, which is done, the purchaser of the stock may have the land returned. Harris v. Piatt, 31 N. W. Rep., 135 (Mich., 1887). Cases of fraud on the part of the vendee sometimes occur, where the vendee is given a ma- jority of the stock, and then uses his control of the corporation to defraud the vendor in the execution of his con- tract to pay for the stock. Hardenburgh v. Bacon, 33 Cal., 356 (1867). Jury de- cided it to be fraud on part of corporate officers representing that the company was without debt They are liable in damages for false representations. Fa- vill v. Shehan, 26 N. W. Rep., 131 (Iowa, 1885). Fraud may be by agent's repre- sentations as to cost of mining the coal, of transportation and of market price. Booth v. Smith, 7 N. E. Rep., 610 (111., 1886). On a question of testimony by the defendant, see Reeve v. Dennett, 6 N. E. Rep., 378 (Mass., 1886). Defendant entitled to bill of particulars as to when and by whom the misrepresenta- tions were made. Blanco v. Navarro, N. Y. Daily Reg., April 2, 1887, p. 640. It has, been held that one who was in- duced by fraud to purchase stock in an insolvent corporation may bring suit to have his part of the corporate assets as- certained, to the exclusion of a debt due from the corporation to the person in- ducing him to purchase. Poole v. West, etc., Co., 30 Fed. Rep., 513 (1887). The person making sales of stock by false representations may be indicted for ob- taining money by false representations. Commonwealth v. Wood, 8 N. E. Rep., 432 (Mass., 1886). The statute of * frauds as to the answering to the debt, defaults, etc., of another person has no application to a sale of stock herein. The fact that the corporate property sold several years later for a small amount is immaterial and not admis- sible. French v. Fitch, 35 N. W. Rep, 258 (Mich., 1887). Where a stockholder sells a controlling interest to a person who is to pay therefor by improving the corporate property, but who elects a board of directors and defrauds the vendor, the latter's remedy is a difficult one. Cates v. Sparkman, 11 St W. Rep., 846 (Texas, 1889). The fraud or mistake' must have been such that the agreement' would not have been made in its ab- sence, where a rescission of the contract' is sought by decree. Means v. Rees, 26 Fed. Rep., 210, SI© (1886)1 Where an agent to sell a mine induces his princi- pals to place in his name- all their stock, (31) 481 § 350.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [en. XX. much larger price than they gave for the property. The promot- ers act in a fiduciary capacity. Hence, when they have made a profit at the expense of the company they may be compelled to turn over that profit to the company, or, if they have sold stock and he sells the propert- and accounts to them for part onty of the price, and refuses to return the stock, they may sue him for an accounting without pre- viously tendering back the amount they received or demanding the stock. Woos- ter v. Nevills, 14 Pac. Rep., 390 (Cal.. 1887). False representations as to cor- porate property, business and prospects, and use of corporate prospectus which the vendee knows contains false state- ments, sustains rescission of transfer of land for stock. Person purchasing land with full knowledge of fraud is not pro- tected. Certificates may be filed with clerk of court awaiting retransfer of land. Ormsby v. Budd, 33 N. W. Rep., 457 (Iowa, 1887). Vendee of stock can- not rescind or collect damages on ground that the corporation was not legally in- corporated. If it is a de facto corpora- tion the vendor is not liable. Harter v. Eltzroth, 111 Ind., 159 (18S7). It is fraud ft>r a person to sell as stock of another that which belongs to himself. Matnrin V. Tredinnick, 2 New Rep.. 514 (1863) Vendee of stock for which he gave real estate may have a reconveyance of the real estate decreed, where the sale of stock was induced by fraudulent repre- sentations. Gray v. Robbius, 11 Atl. Rep, 860 (N. J., 1887). For a case of misrepresentations, see. also, N. Y. Daily Reg., March 21, 1888. A manag- ing director who buys stock on credit, and then aids in levying an attachment on the stock against the vendor and con- ceals the same from the vendor, and buys in the stock at a low price, and then repudiates his debt to the vendor, is guilty of fraud. Young v. Fox, 37 Fed. Rep., 385 (1888). Where the presi- dent in selling stock makes false repre- sentations the vendee is not bound to investigate them. He may defeat a note given in payment. Wannell v. Kern, 57 Mo., 478 (1874). A representation that a bond is an " A No. 1 " bond is not a ma- terial representation. Deming v. Darling, 20 N E. Rep., 107 (Mass., 1889). See, also, instances in § 334, supra. The vendee fails in his suit for damages if he does not contradict the defendant's testimony that the plaintiff vendee knew all the facts at the time of the sale. Nelson v. Louling, 62 N. Y., 615 (1875); aff'g 4 J. & S., 544. A statement that the last dividend was seven per cent, and that the fiscal year ended on January 1 is a fraudulent suppression of the truth where the last dividend was a year prior to the past June 1. Tyler v. Savage, 143 U. S., 79 1 1892) "Whore the contract of sale con- tains express warranties, parol repre- sentations as warranties are not admit- ted to prove false representations. Humphrey r. Merriam. 49 N. W. Rep., 199 (Minn., 1891). A statement filed with the state commissioner as required by statute, in regard to the amount of the paid-up stock, is not such a repre- sentation as will sustain an action for damages for fraudulent representations inducing a person to take the notes of the company. Hunnewell v. Duzbury, 28 N. E. Rep., 267 (Mass., 1891). The fact that statements as to the affairs of the company are not fded as required by statute does not amount to fraud in the sale of stock, nor do representations that the stock will pay twenty per cent dividends amount to fraud. The question as to the validity of stock having once been litigated cannot be again raised in an action for deceit in the sale of the stock. The mere act of conspiracy is not sufficient to sustain the action un- less damage is shown. Robinson v. Parks et ah, 24 Atl. Rep., 411 (Md., 1893). A representation as to the amount of water that can be obtained on water com- 482 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§ 351. of the company, the purchasers of the stock from them may rescind the purchase and hold them personally liable therefor. 1 It may be fraudulent for the directors to issue to themselves shares of the company's unissued stock in order to control elec- tions or to make a profit. 2 An agent is not liable for misrepresentations made by his prin- cipal, but it may be a question of fact whether the vendor is a principal or agent. 3 § 351. Fraudulent sale &?/ agent, etc., in 'breach of trust— A bona fide purchaser for value and without notice of stock from a vendor who delivers the certificates therefor indorsed in blank by another, or indorsed by the vendor himself, is protected and entitled to the stock, although it afterwards transpires that the agent was selling as agent of another and had been guilty of a breach of trust. 4 pany stock is material. A tender of the certificates is sufficient where there has been no transfer on the books. Hill v. Wilson, 25 Pac. Rep., 1105 (Cat, 1891). Expressions of opinion as to the future, although exaggerated, are not repre- sentations. Columbia Elec. Co. v. Dixon, 49 N. W. Rep., 244 (Minn., 1891). Notes given in the purchase of stock in a cor- poration whose sole business is to carry on an infringing telephone business are without consideration and void. Clemshire v. Boone, etc., Bank, 14 S. W. Rep., 901 (Ark., 1890). Where stock is issued to several persons for a patent and they return part of it to a trustee for the company to sell for working capital, and a subscriber to the com- pany's stock gives his note to the com- pany and the company indorses the note to one of the first-named parties, who turns out his own stock to fill the subscription, the latter may recover on the note, and is not liable for false rep- resentations of one of his associates and an agent of the company. King u Doane, 139 U. S., 166 (1891). A sale of stock will not be set aside on the ground of inadequacy of price unless so gross as to shock the conscience and give de- cisive evidence of fraud. Perry v. Pear- son, 25 N. E. Rep., 636 (111., 1890). It is not sufficient to prove that defendants managed the manufacturing business of the company, to sustain an action for fraud in stating that the company was doing a good business and making ten per cent., it appearing that the business was new, and defendants did not state that they knew of the financial condi- tion. Hatch n Spooner, 13 N. Y. Supp., 642 (1891). A vendor of stock may col- lect the price although the stock was worthless and known so to be by the vendor. Hunting v. Downer, 23 N. E. Rep., 832 (Mass., 1890). Statement that drill holes in coal fields showed certain results are material, and not matters of opinion. Martin v. Hill, 43 N. W. Rep., 337 (Minn., 1889). i See ch. XLIII. §§ 705-708. 2 See § 70, supra. » See §p 335, 336, supra. * The case of McNeil v. Tenth National Bank, 46 N. Y., 325 (1871), is not only the leading case on the estoppel of the principal from repudiating the sale or pledge of his stock by his agent, whom he intrusted with the certificates in- dorsed in blauk, but it is one of the leading cases on the law of the quasi- negotiability of stock. Honold v. Meyer, 86 La. Ann., 585 (1881) : Strange v. Houston & T. C. R. R. Co., 53 Tex., 162 (1880); Dovey's Appeal, 97 Pa. St., 153(1881). Where certificates of stock are deposited with the broker, duly transferred in blank, a bona fide holder 483 § 351.] COXTRACTS TO SELL — GAMBLING SALES — FRAUD. [CD. XX. But the transferee is not protected where he is not a bona fide pur- chaser. 1 Where the same person acts as agent for both the trans- ferrer and the transferee, and absconds with the purchase price aftei the certificates have been delivered, but before registry on the cor- porate books, the transferee is protected. 2 Where the corporation knows that the vendor is selling as the agent of the stockholder, who has given to the agent the certificates indorsed in blank, it must see to it that the agent has full power to sell the stock, and is liable for allowing a registry where the agent has not such power. 3 If the principal authorized the sale or ratified it, he of course can- of such certificates from the broker is protected as against the real owner. Ryman v. Gerlach, 20 Atl. Rep., 302 (Pa., 1893); and see many cases in chap- ter on Stock Brokers, where this princi- ple of law is often involved. The case of Taylor v. Great, etc., R. R Co., 4 De G. & J.. 559 (1859), to the contrary, turns on the English doctrine that transfers in blank are not valid. The case of Donaldson v. Gillet, L. R, 3 Eq., 274 (1800), where the pledgee of one who held the certificate indorsed to himself was not protected, since the pledgor had purchased as agent and had fraudulently taken title in his own name, would not be good law in this country, where the failure to have the transfer registered has no effect on the pledgee's rights under such circumstances. Rumball v. Metropolitan Bank. L. R,2 Q. B. D., 194 (1877), where a broker committed a breach of trust The court said the stockholder " is in the position of a per- son who has made a representation, on the face of his scrip, that it would pass with a good title to any one on his tak- ing it in good faith and for value, and who has put it in the power of his agent to hand over the scrip with this repre- sentation to those who are induced to alter their position on the faith of the representation so made." Moodie v. Seventh Nat Bank, 3 Weekly N. G, 118 (1870), holding that if the purchaser takes partly for an antecedent debt he is not a bona fide holder to that extent Dovey's Appeal, 97 Pa. St., 153 (1881). The books are full of cases wherein an agent has committed a breach of trust in the sale of stock. For many instances of this kind of fraud and the various principles of law applicable thereto, see chs. 19, 22, 24. An assignee in insolv- ency of the agent does not take the stock. See § 320. An agent to collect dividends who loans the stock at a profit is liable for its loss, even "though he in- formed the owner of the loan and she did not object Persch v. Quiggle, 57 Pa. St, 247 (1808). A bona fide purchaser from the agent is protected. State Bank v. Cox, 11 Rich. Eq., 344 (1800); West etc., Co.'s Appeal, 81 Pa. St, 19 (1870): Otis v. Gardner, 105 111., 436 (1883); Gulick v. Markham, 6 Daly, 129 (1875) ; Martin v. Sedgwick, 9 Beav., 333 (1840); Appeal of Linnard, E Rep., 877 (Pa., 1880). 1 Talmage v. Third Nat Bank, 91 N. Y., 531 (1883) ; Crocker v. Crocker, 31 N. Y., 507 (1805) ; Weaver v. Borden, 49 N. Y., 286 (1S72), where the agent fraudulently bought in his own name and then fraud- ulently sold; Williamson v. Mason, 12 Hun, 97 (1877). Purchaser from agent with notice of fact that he held as agent, and that he had sold to himself, is not protected. Bank of Louisville v. Gray, 2 S. W. Rep., 168 (Ky., 1886). 2 Ex parte Shaw, L. R, 2 Q. B. D.,463 (1877). 3 Woodhouse v. Crescent Mutual Ins. Co., 35 La Ann., 238 (1882), holding also that the transferee who is charged with receiving with notice may be joined as a party defendant ; St Romes v. Cotton Press Co., 127 U. S., 614 (1888). 484 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§352. not afterwards complain. 1 Where an agent to sell is able to sell for more than he accounts for to his principal, the latter cannot recover the difference unless the sale was actually made. 2 Although a customer may rescind a purchase of stock made for him by his broker, when he discovers that the broker sold him stock owned by such broker, yet if the customer has exchanged such stock for reorganization stock he must tender back the reorganization stock. 15 In England the courts do not protect a purchaser of certificates of stock unless the latter has not only purchased but has obtained a registry on the corporate books. 4 An agent's power to sell stock does not authorize him to pledge it. 5 A person who knows, or has the means of knowing, that another person holds stock as an agent only, cannot take such stock in pledge from the agent, although the latter represents that the money is to be used for his principal. The principal may re- cover the stock if he has not authorized the pledge. 6 A bona fide purchaser of certificates of stock from a pledgee is similarly pro- tected. 7 § 352. Fraud may be by corporate reports or prospectus. — A re- port of corporate officers to the stockholders, setting forth the condi- tion of the affairs of the corporation, is deemed to be a statement to the public also, and it may be relied upon by any one in purchasing shares. This principle of law was first clearly established in Eng- 1 As to the admissibility in evidence Easton v. London, etc., Bank, 55 L. T. of receipt showing that agent was au- Rep., 678 (1886). Even in England, if a thorized to sell by order of the princi- broker transfers stock in breach of trust pal's brother, see Dwyer v. Fuller, UN. to a bank, and the bank afterwards at E. Rep., 686 (Mass., 1887). Pledge of his request transfers the stock to another stock by agent is not a conversion, person, the bank, being ignorant of his where the principal receives without agency, is not liable to the principal for objection and retains a receipt from the the value of the stock. Marshall v. Nat'l, agent setting forth such pledge. Met- etc.. Bank of Eng., 66 L. T. Rep., 525 calf v. Williams, 11 N. E Rep., 700 (1892). See. also, §§ 378, 379. (Mass., 1887). 5 Merchants' Bank of Canada v. Liv- 2 Edison v. Gilliland, 42 Fed. Rep., 205 ingston, 74 N. Y., 223 (1878). See §§ 321, (1890). 326. 3 Mayo v. Knowlton, 10 N. Y. Supp., 6 Fisher v. Brown, 104 Mass., 259 230 (1890). (1870). 4 In England it is held, even in regard 7 A bank taking a pledge of nego- to American certificates of stock, that a tiable bonds in good faith may hold bona fide purchaser of certificates of them though it turn out that the stock, duly indorsed, from an agent pledger was not the owner of them, but selling in breach of faith, is not pro- held them as security that a mortgage tected until registry is obtained. Colo- would be canceled. Saloy v. Hibernia, nial Bank v. Hepworth, 57 L. T. Rep., etc.. Bank, 1 S. Rep., 657 (La., 1887). As 148(1887). But see Williams v. Colonial to sales by trustees, etc., nee ch. XIX, Bank, 57 L. T. Rep, 188 (1887); and see supra. 485 § 352.] CONTRACTS TO SELL GAMBLING SALES — FRAUD. [CH. XX. land in 18G0, in the case of Davidson v. Tulloch. 1 It was there held that there need be no privity between the officers issuing the report and the person purchasing shares of stock from third persons. If such purchaser made his purchase relying upon material statements in corporate reports which were false, he has his remedy against all persons who knowingly made or issued the report. 2 The lead- ing case in this country on the liability of corporate directors for fraudulent representation as to the condition of the company, not made to a purchaser of stock personally, but to the public gener- ally, is Cross v. Sackett, 3 decided in 1858, where fraudulent divi- dends and representations based thereon were made. i 6 Jur. (N. S.). 543 ; S. C, 3 Macq. (H. of L.), 783. 2 Scott v. Dixon, 29 L. J. (Ex.). 62, n. (1859), explained in Peck v. Gurney, L. R, 6 H. L., 398 (1873). as follows : "The report, though originally made to the shareholders, was intended for the in- formation of all persons who were dis- posed to deal in shares ; and the repre- sentation must be regarded as having been made not indirectly, but directly to each person who obtained the report from the bank where it was publicly announced it was to be brought, in the same manner as if it had been person- ally delivered to him by the director." Gerhard r. Bates, 20 Eng. L. & Eq.. 129 (1853); Cullen v. Thompson, 6 L. T. (N. S.). 870 (1862), holding that, where di- rectors of a joint-stock company issue false and fraudulent reports to the pub- lic, and the manager, secretary and other officers of the bank supply the detailed statements for such report, knowing them to be false and that they are to be used for purposes of deceit, and a third party, acting on such re- ports, purchases shares in the company and suffers loss thereby, each of the officers of the company who knowingly assisted in the fraud is personally liable to such third party for the loss caused by such misrepresentation in the report, though the report was signed only by the directors and not by the subordinate officers. 3 2 Bosw., 617: 6 Abb. Pr., 247; 16 How. Pr., 62, the court saying : " When an instrument is made to deceive the public generally, and is adapted as well as intended to deceive some portion of the public, and as well one person as another, and was used as it was designed it should be, and fraudulently induces some one to act to his prejudice by act- ing in the mode it was intended to influ- ence them to act who might be deceived by it, the person who made the instru- ment and caused it to be thus fraudu- lently used is liable to the person who has been defrauded bj- it In such a case the person injured has been sub- jected to damages by his fraudulent acts, and the fraudulent wrong-doer is liable for the consequences." Cazeaux v. Mali, 25 Barb.. 578 (1857). "It is not essential that the reference should be addressed directly to the plaintiff ; if it were made with the intent of its influencing every one to whom it might bf. communicated, or who might read or hear of it, the latter class of persons would be in the same position as those to whom it was directly communicated, but they must have come to a knowledge of it before their purchase." Morse v. Swits, 19 How. Pr., 275 (1859), holding a bank officer liable for false statements in a report published in accordance with the requirements of a statute. The court said : " Being published, the public or any individual of the public has a right to believe it. And if, believing it, any one of the public acts on that belief, the makers and publishers of this falsehood are to be held liable for the conse- 4«0 CH. XX.] CONTRACTS TO SELL— GAMBLING SALES FRAUD. [§§ 353, 354. § 353. A somewhat different rule prevails in England as to false statements contained in a prospectus of a corporation. A prospectus is issued for the purpose of inducing persons to subscribe for stock. Its object is not to promote the sale of that stock. Accordingly it was decided in Peek v. Gurney, 1 in 1873, that "the purchaser' of shares in the market, upon the faith of a prospectus which he has not received from those who are answerable for it, cannot, by action upoii it, so connect himself with them as to render them liable to him for the misrepresentation contained in it as if it had been ad- dressed personally to himself." In New York a directly opposite rule prevails. In the case of Morgan v. Skiddy, 2 in 1875, the court of appeals held that, "if the plaintiff purchased his stock relying upon the truth of the prospectus, he has a right of action for deceit against the persons who, with knowledge of the fraud and with in- tent to deceive, put it in circulation. The representation was made to each person comprehended within the class of persons who were designed to be influenced by the prospectus ; and when a prospectus of this character has been issued, no other relation or privity be- tween the parties need be shown except that created by the wrong- ful and fraudulent act of the defendants in issuing- or circulating: the prospectus, and the resulting injury to the plaintiff." §354. Remedies for the fraud. — -There are three methods by which a person who has been fraudulently induced to buy or sell stock may remedy the wrong. 3 He may bring an action at law quences they have caused " (citing cases), so voted is legal. The by-laws provid- See, also, Salmon v. Richardson, 30 ing for such a vote override a general Conn., 360(1862); Fenn v. Curtis, 23 Hun. statement in a prospectus to the con- 384 (1881), holding corporate secretary trary, the stockholders knovviug of the liable to purchaser of shares from an in- by-law. Compton v. Chelsea, 128 N. Y.. dividual, the secretary having signed 537 (1891). the certificate of stock and also a circu- l L. R., 6 H. L., 377, overruling Sey- lar stating that the corporation was a mour v. Bagshaw, 18 C. B., 903 (1856), corporation when in fact it was not. and Bedford v. Bagshaw, 4 H. & N., 538 And see §§ 40, 48, supra. A person buy- (1859): explaining Scott v. Dixon. 29 L. ing stock in what was supposed to be J. (Ex.), 62, n. (1S59), and Gerhard v. a corporation, but is a partnership, can- Bates, 2 El. & Bl.. 476 (1853), and itself not recover back his money from all of explained in Cargill v. Bower, L. R., 10 the participants. Perry v. Hale, 10 N. Ch. D., 502(1878). In Bell airs v. Tucker, E. Rep., 174 (Mass., 1887). A corpora- L. R, 13 Q. B. D., 563 (1884), the court tion is not liable for misrepresentations seems to have assumed a different posi- of the president in selling stock belong- tion, and to have treated the prospectus ing to himself. Prosser v. First Nat'l the same as any other method of mis- Bank, 106 N. Y., 677 (1887). Where representation, stockholders in an apartment house cor- 2 62 N. Y, 319. poration are entitled to rent apartments 3 " A person who has been induced by at a rental to be fixed by a majority vote fraudulent representations to become of the stockholders, an increased rental the purchaser of property has upon dis- 487 §35-1.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [CH. XX. for the consideration, or an action at law for damages for thp de- ceit, or he may file a bill in equity to have the transaction set aside. The second remedy is the most difficult and the last the most easy to maintain. In special cases other remedies are open to the purchaser. He may compel the defrauding party to abide by the statements that were made. 1 If the contract is executory it may canceled by mut- ual agreement. 2 The pleadings in enforcing the remedies which the vendee has vary, of course, according to the remedy which is pursued. 3 covery of the fraud three remedies open to him. either of which he may elect. He may rescind the contract absolutely and sue in an action at law to recover the consideration parted with upon the fraudulent contract To maintain such action he must first restore, or offer to restore, to the other party whatever may have been received by him by virtue of the contract ** He may bring an action in equity to rescind the contract and in that action have full relief. Such an action is not founded upon a rescission, but is main- tained for a rescission, and it issufficient, therefore, for the plaintiff to offer in his complaint to return what he has re- ceived and make tender of it on the trial. Lastly, he may retain what he has received aud.bring an action at law to re- cover the damages sustained. This action proceeds upon an affirmance of the con- tract, and the measure of the plaintiff's recovery is the difference between the article sold and what it should be ac- cording to the representations." Vail v. Reynolds, 118 N. Y., 297 (1890). Where the sale of stock has been induced by fraud the vendee may follow the money paid by him and recover it back if the identity of the fund can be shown. Moore v. Williams, 62 Hun, 55 (1891). 1 Where an apartment house corpo- ration induces by prospectus subscrip- tions on representations that certain subscriptions entitle the holder to a perpetual leasehold in the apartments selected by the subscriber, he cannot afterwards be evicted on the ground that the building cost more than was ex- pected and further rent must be paid. Compton v. Chelsea. 8 N. Y. Supp., 622 (1890) ; aff'd, 128 N. Y, 537. Where a person organizes a railroad corporation and takes a contract for its construc- tion, and causes all the stock and a large quantity of bonds to be issued to him- self, and then sells these stocks and bonds and has knowledge of represen- tations made by corporate officers to his vendee that the company owes nothing except the bonds, he cannot afterwards enforce a claim for doing extra work under a contract, whore such contract did not appear on the books of the company. The transaction is a fraud on his part Chicago, etc., R'y v. Miller, 51 N. W. Rep., 981 (Mich., 1892). Al- though a purchaser of stock cannot rescind, he having been guilty of delay, yet he may sue the vendor upon a war- ranty that the stock will be worth more than what it was sold for. Maxted v. Fowler, 53 N. W. Rep., 921 (Mich., 1892). 2 A subscription may be cancelt d by and with the consent of the directors when fraud is involved. Four years afterwards corporate creditors cannot attack it McDermott v. Harrison, 9 N. Y Supp., 184 (1890). See ch. X If there has been a mutual mistake in re- gard to what the stock really repre- sented in property, an action for money had and received or a suit to cancel the sale will lie. Norton v. Bohart 16 S. W. Rep., 598 (Mo., 1891). 3 In the case of Smith v. Tracy, 36 N. Y., 78 (1867), the vendee sued the vendor 488 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§355. § 355. Action for deceit. — In order to sustain an action for dam- ages for deceit, whereby plaintiff was induced to buy or sell. shares of stock, it is necessary for the plaintiff to prove that statements were made or acts done which were fraudulent, that the person guilty of them knew that they were fraudulent, and that the plaint- iff acted on such statements or acts in buying or selling the stock. 1 In England a statement made recklessly, or without regard as to whether it is true or untrue, may constitute a fraudulent intent. 2 for a breach of warranty, alleging that the vendor's agent made certain repre- sentations as to the condition of the corporation. The action failed on the ground that the vendor did not author- ize the agent to make a warranty. In the case of Ayers v. French, 41 Conn., 142 (1874), the court held that fraud, in- ducing the owner of stock to part with it, may be remedied by the action of trover with a count in case for a fraudu- lent procurement and conversion of the stock. In the case of National Ex- change Co. v. Drew, 2 Macq. (H of L.), 103 (1855), it was held that where a per- son is induced by the fraudulent reports and representations of corporate officers to purchase stock, and the corporation loans him money to do so, it cannot re- cover back the money loaned. See Lightfoot v. Creed, 8 Taunt., 267 (1818), holding that the vendee should declare not for money paid, but specially on the contract. i Arkwright v. Newbold, L. R., 17 Ch. D., 301 (1881); Arthur v. Griswold, 55 N. Y., 400, 410 (1874), the court saying : " The rules of law require a reason- able degree of certainty as to each req- uisite necessary to constitute the cause of action, viz., representations, falsity, scienter, deception and injury." 2 In the important case of Derry v. Peek, 61 L. T. Rep., 265 (1889). the House of Lords decided that in order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Fraud is proved when it is shown that a false statement has been made (1) knowingly ; (2) without belief in its truth; (3) recklessly. But if a man make a false statement honestly believing it to be true, it is not sufficient to support an action of deceit to show that he had no reasonable grounds for his belief. The directors of a tramway company issued a prospectus in which they stated that they were authorized to use steam power, and that by this means a great saving in working would be effected. At the time of making this statement they had not in fact obtained authority to use steam power, but they honestly believed that they would ob- tain it as a matter of course. Held (reversing the judgment of the court below), that they were not liable in an action of deceit brought by a share- holder who had been induced to apply for shares by the statement in the pro- spectus. In an action for deceit by a misrepresentation in a prospectus as to the net profit on the capital employed, the action being against one who was a promoter, and also one of the vendors, and whose name appeared in the pro- spectus and who became a director, the plaintiff must prove (1) that the defend- ant's statement was untrue ; (2) that it was dishonest ; (3) that he believed it to be untrue. Glasier v. Rolls, 62 L. T. Rep., 133 (1889), reversing 60 id., 591, and following the House of Lords in Derry v. Peek, 61 id., 265. Peek v. Gur- ney, L. R, 6 H. L, 377 (1873), the court saying : " It is said that the prospectus is true as far as it goes, but half a truth will sometimes amount to a real false- hood." See, also, ch. IX, § 147. In Bellaires v. Tucker, L R, 13 Q. B. D, 563 (1884), however, the court say : " The action is one for deceit It is necessary 489 §355.] CONTRACTS TO SELL GAMBLING SALES FRA'D. [CH. XX. In New York the rule is more stringent. The case of Wakeman v. Dalley 1 applies to this class of cases the rule that "an action founded upon the deceit and fraud of the defendant cannot be maintained in the absence of proof that he believed, or had reason to believe at the time he made them, that the representations made by him were false, and that they were for that reason fraudulently made, or that he assumed or intended to convey the impression that he had actual knowledge of their truth, though conscious that he had no such knowledge." This case held that a director is not liable for false representa- tions on the company's printed business cards, of which he was ignorant, even though his name was attached thereto. In Cali- fornia it is held that the purchaser of stock who has given a note in payment cannot defeat an action on the note by setting up that the purchase was induced by fraud. lie must first disaffirm the contract and return the certificate, and such return must be made before the trial. 2 But where the purchaser brings* an action for deceit he need not return the consideration nor rescind the con- tract. 3 His injury is to be duly measured, and credit may be given for the real value of the stock. 4 A director is not liable for the not only to prove that the statements in a prospectus or any other document are not true, but it must be proved that they are fraudulently put forward with in- tent to deceive."' 1 51 N. Y., 27 (1872) ; Nelson v. Luling, 4 N. Y. Sup. Ct.. 544 (1873); aff'd, 62 N. Y.. 645 : Schweuck v. Naylor, 102 N. Y., 683 (1886). The case of Holmes v. Moffat, 120 N. Y., 159 (1890), was an ac- he represented as of his own knowledge that tiny were true, when in fact he had lx » such knowledge." Cole v. Cas- si-lv. 188 Mass., 437 (1885). In an action for fraud inducing the purchase of stock scienter must be proved. It is sufficient that the defendant had no good reason to believe that material representations made by him were true. A statement that §1,500,000 worth of ore tion for false representations and deceit was lying on the ground aroundythe mine in the sale of stock, but the decision is a material representation. Brandt turned upon technical rules relative to v. Frederick, 47 N. W. Rep.. 6 (Wis.. the trial. See, also, Clark v. Edgar, 80 1890). In Wisconsin, in a sujf by a) Mo., 106 (1884) ; Gee v. Moss, 68 Iowa, vendee of stock against the vendor for 8(1! The action for deceit does damages for obtaining money and prop- not lie against the corporation, at least where no fraudulent intent is proved. Pinedo v. Germania, etc., Co., N. Y. Daily Reg., July 29, 1885. See, also, § 157. In an action of tort for deceit against a director for inducing a person to purchase stock, "the plaintiff must prove representations of material facts which are false, and which induce him to act; and either that the defendant knew them to be false, or that the facts being facts susceptible of knowledge. erty by false and fraudulent representa- tions, the defendant may be arrested. Warner v. Bates, 43 N. W. Rep., 957 (Wis., 1889), giving the complaint and affidavit. 2 Gifford v. Carhill, 29 Cal., 589 (18R6). 3 Miller v. Barber, 66 N. Y., 558, 564 (1876) ; Newberry v. Garland, 31 Barb.. 121 (1860). 4 See ch. XXXV. In an action for false representations inducing the pur- chase of stock, the defendant may show 490 CH. XX.] CONTKACTS TO SELL — GAMBLING SALES FRAUD. [§355. misrepresentations and frauds of his co-directors, unless he has ex- pressly authorized or tacitly permitted commission thereof. 1 The mere fact of being a director " is not per se sufficient to hold a party liable for the frauds ami misrepresentations of the active managers of a corporation. Some knowledge of and participation in the act claimed to be fraudulent must be brought home to the person charged." 2 "Where, however, proof is given tending to show that the defendants were jointly engaged in a common scheme to defraud the plaintiff, the acts and declarations of one are admis- sible in proof against all; 3 and frauds of a similar nature, at or near the same time as the one complained of, may be shown. 4 The fraud practiced •need not have been the sole inducement to the pur- chase. 5 A party may be liable herein although he was neither a corporate officer nor the vendor of the stock. If, with intent to cheat and defraud the vendee, he induces him, by fraudulent means, to purchase stock for value which he knows to be worthless, he is liable for the damage sustained, although the purchase is actually made from another.'' A sale of stock does not transfer a right of action for damages caused by false representations made to the vendor by the party from whom the vendee purchased. 7 In an action by a purchaser of stock against the company and two di- that the stock was worth as much as it would have been had the represeuta- tions been true. Doran v. Eaton, 41 N. W. Rep., 244 (Minn., 1889). i Weir v. Barnett, L. R, 3 Ex. D., 32. 2 Arthur v. Griswold, 55 N. Y., 400, 406 (1874); Morgan v. Skiddy, 62 N. Y., 319. Where a party purchases stock re- lying on a prospectus which states that reports had been prepared for the di- rectors by the engineers, and giving ex- tracts from the reports, the directors are not personally liable in an action for de- ceit, even if it is shown that the reports were not prepared on instructions from the directors, but were prepared on in- structions from the vendors to the com- pany. It is necessary to prove that the reports were untrue. Angus v. Clifford, 65 L. T. Rep., 274 (1891), reversing 63 L. T. Rep., 684 (1890). 3 Miller v. Barber, 66 N. Y., 558, 567 (1876). * Id. 5 Morgan v. Skiddy, 62 N. Y, 319, 328 (1875) ; Ex parte Carling, 56 L. T. Rep., 115 (1887). Plaintiff need not prove that he relied Solely upon the misrepresenta- tions. Hatch v. Spooner, 13 N. Y. Supp., 642 (1891). 6 Hubbell v. Meigs, 50 N. Y, 480, 490 (1872). Upon the effect of false and fraudulent representations on an action for damages, see Tockerson v. Ohapin, 52 N. Y. Super. Ct., 16 (1885). It is no defense to such an action that the orig- inal conversion was by some one else. Kuhn v. McAllister, 1 Utah, 275 (1875) ; S. C, sab nom. McAllister v. Kuhn, 95 U. S., 87 (1877). 7 Kennedy v. Benson, 54 Fed. Rep., 836 (Iowa, 1893). Where fraudulent repre- sentations are made inducing a party to sell his stock, and then the purchaser wrecks the corporation, the vendor may hold the latter liable for damages. The as- signee of the cause of action may sue in trover for conversion, but cannot sue for damages for fraudulent representations, inasmuch as the latter cause of action is not assignable. Smith v. Thompson et al, 54 N. W. Rep., 168 (Mick, 1892). 491 § 356.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [CH. XX. rectors for deceit, the verdict may be against one or more of the defendants and may be sustained by one or more of the misrepre- sentations alleged. 1 Several persons defrauded of their contract whereby they were to receive stock cannot sue jointly. Each must sue separately. 2 The measure of damages for fraud inducing the purchase of stock "is the difference between the value of the stock at the time it was purchased and the price paid for it." 3 § 356. Remedy in equity. — A court of equity has concurrent juris- diction with a court of law in enabling a purchaser of stock to re- cover back money paid, where the purchase was induced by fraud chargeable to the vendor. 4 The remedy in equity, for a sale or purchase of stock induced by fraud, is by a bill \o set aside the 1 Lare v. Westmoreland, etc., Co., 25 Atl. Rep., 812 (Pa, 1893), holding, also, that the party purchasing the stock may rescind or may retain the stock and sue for damages. 2 Summerlin v. Fronteriza, etc., Co., 41 Fed. Rep., 249 (1890). 3 Redding v. Godwin, 46 N. W. Rep., 563 (Minn., 1890). See, also, § 581. In an action for damages for fraud induc- ing the plaintiff to purchase stock, the measure of damages is " not the differ- ence between the contract price and the reasonable market value if the property had been as represented to be, even if the stock had been worth the price paid for it ; nor, if the stock were worthless, could the plaintiff have recovered the value it would have had if the property had been equal to the representations. What the plaintiff might have gained is not the question, but what he had lost by being deceived into the purchase." The defendant "was bound to make good the loss sustained, such as the moneys plaintiff had paid out and inter- est, and any other outlay legitimately attributable to defendant's fraudulent conduct; but this liability did not in- clude the expected fruits of an unreal- ized speculation." Smith v. Bolles, 132 U. S., 125 (1889). * Where a person is induced to sub- scribe for stock on the fraudulent rep- resentations of the president that the company is in a prosperous condition, the person may file a bill in equity to recover back the money, and equity has jurisdiction on the grounds of discov- ery, account, fraud, misrepresentation and concealment Both the compauy and the president individually were made defendants and held liable. Tyler v. Savage, 143 U. S., 79 (1892). See, also, Hill v. Lane, L. R, 11 Eq., 215, where the court say : " It is so well settled that this court will entertain jurisdic- tion in such cases that it would be a mis- fortune, indeed, to the public if there were any sufficient ground for consid- ering that the jurisdiction is doubtful. . . . Although courts of common law may have jurisdiction in some such cases, there is clearly concurrent juris- diction in this court," doubting Ogilvie v. Currie, 37 L. J. (Ch.), 541 (1868) ; Camp- bell v. Fleming, 1 Ad. & EL, 40 (1834). A bill in equity is a proper remedy for fraud inducing a sale of stock. An- driessen's Appeal, 16 AtL Rep., 840 (Pa., 1889). Where the president sells stock for $120 per share after he has indorsed a false statement of the company's af- fairs, the stock being really worth but $70 per share, the vendee may have the sale rescinded. Prewitt v. Trimble, 17 S. W. Rep., 356 (Ky., 1891). In a suit to rescind for fraud the plaintiff must prove that the stock was not worth what he paid for it or could not be sold for that sum. Aron v. De Castro, 13 N. Y. Supp., 372 (1891); affirmed, 131 N. Y., 651. In an action in equity to rescind a 492 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [§356. whole transaction. 1 This remedy follows the rules usually pre- scribed in such suits. It is not necessary for the complainant to prove a fraudulent intent. Innocent acts or misrepresentations sale of stock for fraud the corporation is not a necessary party. The value of the stock need not be shown, and the amount paid with interest may be re- covered. But six years' delay after dis- covering the fraud is a bar. Higgins V. Crouse, 63 Hud, 134 (1892). In an ac- tion to rescind for fraud the defrauded subscribers need not join as plaintiffs, although they all purchased at the same time and on the same terms. Moore v. Robertson, 11 N. Y. Supp., 798 (1890). Where the vendors represent that the money will be used to buy a secret process, and they pay over the money to the company for that purpose, and it is mingled with other funds and is not used to purchase the process because the process is a fraud, the vendees may re- scind as to the vendors but cannot make the receiver of the company pay over the money. Id. The vendor may ten- der back the stock and file a bill in equity to cancel the sale on the ground that he was induced to purchase by false statements that the corporation owned the secret process ; that a patent had been applied for ; that it was ready to commence business, and that com- plainant would be made president and manager. Benton v. Ward, 47 Fed. Rep., 253 (1891). An equitable suit does not lie to rescind a sale of worthless bonds. A suit at law is the proper rem- edy. United States Bank v. Lyon County, 47 Fed. Rep., 514 (1891). A purchaser of stock who was induced to purchase by fraud cannot maintain a suit in equity when he fails to show more than a right to pecuniary damages for mis- representations. Whitney v. Fairbanks, 54 Fed. Rep., 985 (Vt, 1893). A cred- itor holding an unpaid promissory note cannot by bill in equity bring in the directors to hold them liable for false representations and also claim that the company was not duly incorporated, and also bring in a subsequent corpora- tion that took all the assets of the first, and also bring in those persons who finally obtained such assets — all in one bill brought to collect the debt Na- tional Bank v. Texas, etc., Co., 12 S. W. Rep., 101 (Tex., 1889). See, also, to the effect that a court of equity has juris- diction, London, etc., Co. v. Central T. Co., (N. Y. K J., June 12, 1891). Where bank stock is sold by fraudulent and false representations, the bank being aware thereof and receiving indi- rectly the money paid for the stock, the sale may be rescinded and the money recovered back from it even though it is insolvent. Florida, etc., Co. v. Murrill, 52 Fed. Rep., 63 (1892). Several subscribers who have been in- duced by the same misrepresentations contained in a prospectus to subscribe for stock may join in a suit in equity for the benefit of themselves and others similarly deceived to set aside their subscriptions. Bosher v. Richmond, etc., Co., 16 S. E. Rep., 360 (Ya., 1892). Several purchasers of stock may con- tribute to the bringing of a test case to decide whether representations induc- ing the purchase were fraudulent. Da vies v. Stowell, 47 X. W. Rep., 370 1 Stainbank v. Fernley, 9 Sim., 556 (1839), where a sale by a director who has issued false reports and declared illegal dividends was set aside. The cor- poration is a proper party to such ac- tions, if a registry has been obtained by the person who has obtained the stock by fraud, since a retransfer on the cor- porate books is asked for. See, also, Bradley v. Luce, 99 111., 234 (1881). A judgment creditor of a foreign corpora- tion cannot enjoin it from transferring stock and bonds owned by it The remedy sought must be something in addition to the injunction. Rogers v. Michigan, etc., R, R., 28 Barb,, 539 (1858). 493 § 356.] CONTRACTS TO SELL GAMBLING SALES FRAUD. [cH". XX. suffice for this purpose, although they would be insufficient to sus- tain an action for deceit. 1 Where, however, the fraud is chargeable to the corporate officers or third persons, and the vendor of the stock is innocent, the vendee cannot rescind the sale, unless such corporate officers or third persons acted as agents for the vendor. 2 Equity will sometimes compel the vendor to make good his rep- resentations. Thus, where the vendor represented that the corpo- rate property was unincumbered, equity will at the instance of the purchaser of stock enjoin the vendor from enforcing a lien which he has on such property. 3 The right to rescind the contract for fraud is waived by taking a bond of indemnity against liability on the stock, such bond being taken upon discovery of the fraud. 4 Laches also is a bar.* The purchaser repudiating the transaction must tender back the stock received by him. 6 (Wis., 1890). Where negotiable bonds are stolen from the owners and they pass into bona fide hands, and then the thief obtains them by force from such bona fide hands and returns them to the first owner, the latter is entitled to keep them. London, etc. Co. v. London, etc., Bank, 61 L. T. Rep., 37 (1889). In Eng- land this remedy I v hill in equity is held to be " precisely analogous to the com- mon-law action for deceit." in that dam- ages may be awarded. Peek v. Gurney. L, R. 5 EL I,. ::77. 390 (1873), the court saying also: "There can be no doubt that equity exercises a concurrent juris- diction in cases of this description, and the same principles applicable to them must prevail both at law and in equity." i Arkwright V. Newbold, L. R, 17 Ch. D., 301 (1881). A suit in equity lies to rescind a sale of stock induced by fraudulent representations. Intent to defraud need not be proved. Martin v. Hill, 43 N. W. Rep., 337 (Minn., 1889). z Moffat v. Wiuslow, 7 Paige, 124 (1838). Benjamin on Sales, 4th Am. ed., § 467a, says "the only remedy of a shareholder in a joint-stock company, who has been induced to purchase shares by the fraud of the agent of the company, is rescission of his contract and restitutio in integrum." 1 3 Jones v. Bolles, 9 Wall., 364 (1869). 4 Bridge r. Penniman. 51 Superior Ct (N. Y. i 1 83 ( 1885). Where the vendee of stock becomes a director and has access to the books, and complains of fraud in the sale, and then takes a sum of money from the vendor in settlement, he can- not again complain upon the failure of the company. Powell V. Adams, 12 s. W. Rep., -ji;:, (Ma, 1889). 5 A year's delay by the vendor of stock after being advised by his attorney that he bad a good case of fraud is fatal. Perry r. Pearson, 25 N. E. Rep.. 836 (111., 1890). Delay of six years after knowledge of fraud inducing a pur- chase of stock is fatal. Andriessens Appeal, 16 Atl. Rep.. 840 (Pa., 1889). Three years' delay in tendering back the bonds is not fatal, nor is the fact that the vendee resold the bonds on the same terms, and the sub-vendee re- turned them to the first vendee. Wooster v. Sage, 67 N. Y., 67 (1876); aff d. 6 Hun, 285 ; Mayo r. Knowlton, 134 N. Y., 250 (1892). 6 In order to rescind a fraudulent sale of stock, the stock and also all other property received must be tendered back. Wain wright r. Weske, 23 Pac. Rep., 12 (Cal., 1889); Francis v. New York & B. EL R. R Co., 108 N. Y, 93 (1888); 17 Abb. N. C, 1, holding, also, that where the vendee has transferred 494 CH. XX.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [§ 35T. If the person fraudulently obtaining stock has transferred it to another party, or is about to transfer it, an injunction may be ob- tained. 1 The corporation should then be made a party. 2 § 357. Fraud in selling stock may amount to a conspiracy. — A combination of persons to fraudulently raise the price of a stock by misrepresentations and fraudulent practices may amount to a said stock to another his action fails. Defrauded vendee must tender back the stock unconditional!}'. If he has used the stock in another transaction, even with the vendor, his right to rescind for fraudulent representations is barred. Bridge v. Penniman, 105 N. Y., 642 (1887). But where the vendee has sold part of the stock he cannot maintain a suit in equity to collect money damages for loss occasioned by misrepresenta- tions inducing him to purchase. His remedy is at law. No cancellation of the contract is involved. White v. Boyce, 21 Fed. Rep., 228 (1884). Selling some of stock before repudiating pur- chase for fraud is no bar to repudia- tion. 1 R'y & Corp. L. J., 434. Rescis- sion is not barred although the vendee has lost the stock by forfeiture, the vendor having knowledge thereof- Maturin v. Tredinnick, 4 New Rep., 15 (1864). If the party selling the stock states that he is selling stock owned by the corporation, when as a matter of fact he is selling his own stock, the vendee upon discovering the fraud may rescind the sale, and recover back the purchase price paid. He rieed not tender the same stock which he received, inas- much as stock has no "ear mark." If he has exchanged the stock for the stock of another company into which his company has been merged, he may borrow stock of the first company and make a tender of that. He must, how- ever, rescind promptly upon the discov- ery of the fraud. Although he does not discover the fraud for four years he may then rescind. Mayo v. Knowlton, 134 N. Y., 250 (1892). A suit to cancel a a ile of stocks and bonds, on the ground of fraud on the part of the purchaser, will not lie where the money paid at the sale has not been returned or tendered, even though the seller spent the money before he discovered the alleged fraud, and is unable to obtain the amount of money necessary for a tender. Such is the rule even though the amount to be distributed will be due to the plaintiff in case he succeeds in the suit. Rigdon v. Walcott, 31 N. E. Rep.. 158 (111., 1892). 1 See §§361, 362. 2 Although the party seeking the stock of which he has been deprived by fraud makes the party complained of and the corporation itself parties defendant, yet if the certificates are not obtained from the party holding them the court will not order the corporation to issue new certificates. The outstanding certifi- cates may pass into the hands of a bona fide purchaser. Joslyn v. St. Paul, etc., Co., 46 N. W. Rep., 337 (Minn.. 1890). Where a citizen of Wisconsin claims stock in a Wisconsin corporation as against a citizen of Illinois, in whose name the stock stands on the corporate books, the corporation is a necessary party defendant, and the case cannot be removed to the federal courts. Rog- ers v. Van Nortwick, 45 Fed. Rep., 513 (1891). Where stock is deposited with a trustee for purposes of reorganization, and transferable certificates are issued therefor by the trustee, a claimant of stock which another person has de- posited, and for which such other per- son has the trustee's certificate, cannot compel the trustee to deliver up the stock until the trustee's certificate is re- turned, even though the party holding it is a party defendant. Bean v. Amer- ican L. & T. Co., 122 N. Y, 622 (1890). 495 357.] CONTRACTS TO SELL — GAMBLING SALES FRAUD. [CH. XX. criminal conspiracy. In England, in 1858, the directors of a joint- stock bank were found guilty of a conspiracy to defraud, where, knowing the bank to be insolvent, they issued a balance sheet showing a profit, and declared a dividend, and issued advertise- ments inviting the public to invest on such representations. 1 i Regina v. Brown et al, 7 Cox's Criminal Cases, 442 (1858); Regina v. Esdaile, 1F.& F., 213 (1858) ; Queen v. Gurney. See Durrell & Hyde on Di- rectors and Officers, 115; Queen v. Stewart, id., 119 ; Queen v. Murch, id., 118; Burnes v. Pennel, 2 E L C, 479. There cannot be such an offense against the United States by the directors of a national bank, since the offense is not recognized by statute. United States v. Britton, 108 U. S., 199 (1883). It is diffi- cult for a corporate creditor to seek collection by making out a conspiracy. Brackett v. Griswold, 13 N. Y. Supp., 192 (1891). 496 CHAPTER XXI. SALES OF STOCK — SALES WHILE SUITS ARE PENDING AFFECTING THAT STOCK; FORGERY; LOST AND STOLEN CERTIFICATES OF- STOCK; CONFISCATION OF STOCK A- PURCHASES WITHOUT A CERTIFICATE OF THE STOCK. § 358. Rights of a purchaser of certifi- cate of stock where the cor- poration has registered trans- fer to another without sur- render of certificate. 359. Liabilit3 r of the corporation herein. 860. Rights of purchaser of stock without certificates. B. SALES OF STOCK WHILE SUITS ARE PENDING AFFECTING THAT STOCK. § 361. Legal proceedings as affecting a sale of an outstanding cer- tificate of stock. 362. Lis pendens as affecting a pur- chase of stock. C. FORGERY. § 363. Forgery as affecting a sale of stock. § 364. Rights and liability of transfer- ees of forged certificate of stock, there being no inter- vening registry on corporate bocks. 365-66. Liability of corporation to real owner of stock for allow- ing registry of forged trans- fer. 367. Rights of transferees who pur- chase after a registry has been obtained. D. STOLEN OR LOST CERTIFICATE § 368-69. Stolen or lost certificates of stock indorsed in blank. 370. Owner of a lost certificate of stock may obtain new certifi- cates. 371. E. CONFISCATION OF STOCK. A. PURCHASES WITHOUT A CERTIFICATE OF THE STOCK. § 358. Bights of a pur chaser of certificate' of stock where the cor- poration has registered transfer to another without surrender of certificate. — It has often happened that an owner of stock, after selling his stock and delivering to the vendee the certificate there- for indorsed in blank, has gone to the corporation before such transfer is registered, and by misrepresentation or other fraudulent means induced the corporation to issue to another purchaser a new certificate of stock without a surrender of the old one. It is the duty of the corporation to refuse to register a transfer unless the old certificate is delivered up. The outstanding certificate is a con- tinuing affirmation by the corporation that no registry of a trans- fer of the stock represented by that certificate will be allowed until the certificate itself is presented and surrendered. This affirma- tion is sometimes declared in a by-law, 1 and sometimes it is printed 'Bridgeport Bank v. New York, etc., (1880); New York, etc., R. R R Co., 30 Conn., 231 (1861); Strange Schuyler, 34 N. Y, 30 (1865). v. Houston, etc., R R. Co., 53 Tex., 162 (32) 497 R. Co. v. § 359.] FORGERY STOLEN STOCK. [CH. XXI- on the face of the certificate itself. 1 The obligations of the corpo- ration, however, to require a surrender of the old certificate upon obtaining a rejnstrv is the same whether there is a bv-law, or a statement on the certificate, or neither of these. It exists without anv express declaration. 2 § 359. LiaMlity of the corporation herein. — It is the duty and right of a corporation to refuse to allow a registry of a transfer of stock unless the outstanding certificate representing the stock is de- livered up and canceled. And it is a duty which the corporation is bound to fulfill. If it allows a transfer to be registered without the old certificate being produced and surrendered, it is liable to anv person who, without notice, purchases or has purchased the outstanding certificate. 3 This rule is well established, and is based i Cushman v. Thayer Mfg. Co., 76 N. Y., 365 (1879). 2 Factors' & T. Ins. Co. v. Marine D. D. & S. Co., 31 La. Ann.. 149 (1887). As re- gards the English rule herein, see 2 R'y & Corp. L. J., 577 and 625. 3 Id., where a pledgee recovered dam- ages against the corporation for issuing now certificates without a surrender of the one which the plaintiff held ; Smith r. American Coal Co., 7 Lans., 317 (1878), where an unrecorded transferee recov- ered damages against a corporation for issuing certificate to purchaser at exe- cution sale on attachment against the transferrer. See, also, § 486 et seq. Cushman v. Thayer Mfg. Co., 76 N. Y., 365(1879); Bank n Lanier, 11 Wall.. 889 (1870), the court saying: "It is equally clear that the hank, in allowing this stock to be transferred to other parties while the certificates were outstanding in the hands of bona fide holders, was guilty of a broach of corporate duty." and is liable. Now York & N. H. R. R. Co. n Schuyler, 34 N. Y., 30, 81 (1865); Bolbrook v. New Jersey Zinc Co. 57 N. Y.. 616 (1874), the court saying : " It cannot be denied that, if a corporation having power to issue stock certificates does in fact issue such a certificate, in which it affirms that a designated per- son is entitled to a certain number of shares of stock, it thereby holds out to persons who may deal in good faith with the person named in the certificate that he is an owner and has capacity to trans- fer the shares. This proposition does not rest on any view of the negotiability of .-took, but on the gomral principles appertaining to the law of estoppel.*' Moorea V. Citizens' Nat'l Bank, 111 U. S, 1888) where the court seem to hold that the person receiving new certifi- cates without requiring a surrender of the old ones is not BUCh a bona transferee of stock as may hold the cor- poration liable. Brisbane r. Delaware, L & W. R R. Co., 91 N. Y.. 204 (1 affirming 22 Hun, 588, and holding that until the purchaser of the outstanding certificates presents them, the corpora- tion is protected in paying dividends to the transferee without the old certifi- cates. If no certificate has been issued the rule does not apply. First Natl Bank v. GifTord. 47 Iowa, 575 (1877 The unregistered holder of the certifi- cates is protected, since, if he were obliged to notify the corporation at the time he purchases the stock. " the value of these certificates as a basis of credit. would be greatly impaired, particu- larly where the pledge is made at a distance from the domicile of the cor- poration."' Smith r. Crescent City, etc.. Co.. 30 La. Ann., 1378 (18781 See. also. Bridgeport Bank i\ New York & N. H. R R. Co.. 30 Conn.. 231 (1861), the court saying : " The bona fide holders of such I '.is OH. XXI.] FOEGERT STOLEN STOCK. [§ 359. on the usages and requirements of trade, and on a wise public pol- icy which favors the protection of those who invest their money in certificates of stock, relying upon the corporation to protect the holder of such certificates. 1 Thus the corporation has been held liable where seventeen years have elapsed since a new certificate was obtained, the latter having been obtained on the ground that the outstanding certificate has been lost. 2 The corporation need certificates had a right to rely on the certificate, under the circumstances, as securing to them the stock which they represented against all other parties." Strange v. Houston & T. C. R. R. Co., 53 Tex., 162 (1880), to the same effect, on the ground that the non-production of the original certificate "is notice to the company that a superior title may he in a third party." If a corporation allows a transfer to be made on its books with- out the transfer on the old certificate being signed, it is liable to the owner of the old certificate, even though the old certificate is delivered up and the attor- ney in fact of the owner shows his power of attorney at the time of the transfer on the books. Taft v. Presidio, etc., Co., 24 Pac. Rep., 436 (Cal., 1890). Lee v. Citizens' Nat. Bank, 2 Cin. Sup. Ct, 298 (1872), holding that the holder of the old certificates is entitled to have the illegal registry canceled. In Eng- land there seems to be no decision di- rectly in point. A dictum, however, in Shropshire U. R'y & Canal Co. v. Queen, L. R, 7 H. L., 496, 509 (1875), does not support the rule which prevails in this country. The court said : Whether a transfer of shares in a company can or cannot be made without the production of the certificates of the shares is "en- tirely within the discretion of the di- rectors. They were not bound to permit a transfer without the production of the certificate; but though not bound to permit a transfer, I apprehend they would not be in any way answerable if the transfer should be in any case made without the production of the certifi- cates of the shares." The case of Hart v. Frantino, etc., Gold Min. Co., L. R., 5 Ex., Ill (1870), holds, however, that where the corporation cancels the stock- holdership of one who purchased after registry without a surrender of the old certificates having been obtained, he may hold it liable in damages. As be- tween two unrecorded transfers, one having the certificates, and the other — a subsequent purchaser — not having it, the former prevails. Societe Gen. v. Tramways Union Co., L. R., 14 Q. B. D., 424 (1884). See, also, cases in § 351. 1 Factors' & T. Ins. Co. v. Marine D. D. & S. Co., 31 La. Ann.. 149 (1879), the court saying: "We think that, by thus making stocks transferable by mere de- livery of the certificate, the law has in- tended to interdict corporations from transferring stocks on their books, ex- cept upon surrender of the certificate or upon proof of its loss or destruction. These certificates of stock have become such important factors in trade and credit that the law has intended to sur- round those who take them with the safeguards it accords to the holders of the other great agencies of commerce — bills, notes, bills of lading, etc." 2 Cleveland & M. R. R. Co. v. Robbins, 35 Ohio St., 483 (1880). But is not liable for dividends paid in the meantime. It was held, further, that a by-law allow- ing such issue of new certificates in case of loss had no effect as regards the plaintiff, and that the statute of limita- tions ran against the plaintiff only from the time he had notice of the new cer- tificate. By statute, in New York, the person claiming to have lost his certifi- cate may be compelled to give a bond of indemnity to the corporation before obtaining new certificates, and a holder 499 § 360.] FORGERY STOLEN STOCK. [CH. XXI. not assume any risk, but may refuse to permit a registry on its books of the transfer unless the old certificate is produced and sur- rendered. 1 Where, however, the corporation is compelled to make the registry by legal proceedings, as in case of execution sales, it cannot be held liable to the holder of the outstanding: certificate. 2 The corporation, when sued by the holder of the old certificate, is required either to replace the stock which has wrongfully been taken from the plaintiff, or it is obliged to compensate him in damages. § 360. Bights ofjmrcliaser of stock without certificates. — A pur- chaser of stock who does not receive the certificates of the stock he has purchased, but who nevertheless obtains a registry on the cor- porate books, and receives new certificates without a surrender of the old, and who sells the new certificates, is not liable in damages to the holder of the old certificates. 3 The remedv of the latter is of the old certificates may have the ben- efit of this bond. New York Session Laws, 1873, ch. 151. See § 370. Such a subrogation was refused in Greenleaf v. Ludington, 15 Wis., 553 (1862). 1 The corporation may refuse to isf sloelc to his trans feree. — A certificate of stock is a paper issued by the corporation to a stockholder, stating that the person specified therein is the owner of a certain number of shares of its capital stock. The as- signment of this certificate is made, it seems, in three different ways : First, it has been held that it may be made by a simple de- livery of the certificate without any writing. 4 Again, it may be 1 See §§ 308, 465, note. * See § 308, where a delivery of a cer- 2 See§360. tificate of stock causa mortis was held 3 First Nat Bank v. Gifford, 47 Iowa, good, without any writing assigning the 575 (1877) ; Brigham v. Mead, 92 Mass., certificate ; and § 465, note. See, also. 245 (1865). See, also, § 382. Fraser v. Charleston, 11 S. C, 486 (187- 514 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 375. made bv a formal instrument of assignment duly signed bv the transferrer. This instrument may be separate from the certificate of stock, but generally is printed in blank on the back of it. In either case, in order to make the transfer complete by a registry of it on the corporate books, it is necessary for the transferrer to go to the office of the corporation and sign the transfer in the corpo rate transfer book, whereby the transfer is recorded. The third and most usual method of assigning a certificate of stock is by a formal instrument of assignment, similar to the one explained above, united with a power of attorney authorizing a person, whose name is generally left blank, to be subsequently filled in, to sign the corporate transfer book, whereby the transfer is recorded. This instrument of transfer and the power of attorney are gener- ally printed in blank on the back of the certificate of stock. It enables the transferee to obtain a registry without the presence of the transferrer, provided the corporate registry agent is satisfied with the signature and intent of the transferrer to assign the stock. The blank power of attorney is generally filled in by the transfer clerk, who inserts his own name and thereby becomes the attorney. 1 This power of attorney is not revoked by the death of the trans- ferrer before it is used. 2 A general power of attorney to sell land and build houses does not justify a sale of stock. 3 A general power of attorney authorizing an agent to sell and transfer stocks, etc.. authorizes him to sign the stockholder's name to a transfer. 4 Per- o Cf. Sitgreaves v. Farmers', etc., Bank, South Boston R R, 22 N. E. Eep., 917 49 Pa. St., 359 (1870) : Davis v. Bank of (Mass., 1889). England, 2 Bing., 393 (1824); Burrall 2 Fraser v. Charleston, 11 S. G, 486 v. Bushwick R R Co., 75 N. Y., 211 (1878) ; Leavitt v. Fisher, 4 Duer (N. Y.), (1878): Dunn v. Com. Bank of Buffalo, 1 (1854); United States v. Cutts, 1 Sum- 11 Barb., 580 (1852). A deed of release ner, 133 (1832). of shares of stock is a sufficient transfer. 3 Camden, etc., Assoc, v. Jones, 21 Hastings v. Blue Hill, etc., Corp'n, 26 Atl. Rep., 458 (N. J., 18911 holding also Mass., 80 (1829). If a corporation allows that the corporation is liable for allow- a transfer to be made on its books with- ing a transfer of stock where the stock- out the transfer on the old certificate holder did not sign the transfer nor being signed, it is liable to the owner of authorize another to transfer it the old certificate, even though the old 4 Tafft v. Presidio, etc.. Co., 22 Pac. certificate is delivered up and the attor- Rep.. 485 (Cat, 1889). Where a person ney in fact of the owner shows his power gives to another a general power of at- of attorney at the time of the transfer on torney covering the sale and transfer of the books. Taft v. Presidio, etc., Co., 24 all stocks, etc., the attorney may, upon Pac. Rep, 436 (Cal., 1890). delivering up the certificate therefor to 1 The fact that the officer of the cor- the corporation, transfer the stock of poration fills in his own name as agent his principal into his own name. The to transfer does not make him the corporation is not bound to inquire agent of the stockholder as regards no- further than the power of attorney, nor tice of the agent's frauds. Allen v. is it given notice by the fact that the 515 §§ 376, 377.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. mitting, without inquiry, a transfer under a power of attorney thirteen years old is not proper vigilance on the part of a corpora- tion. 1 § 376. Questions which arise herein. — The assignment of a cer- tificate of stock by the transferrer to the transferee, considered apart from the actual registry of such assignment on the corporate books, involves the question whether such an assignment should be under seal; whether, after the assignment, the transferrer can claim any rights of ownership as against the transferee, even though there be no registry of the transfer; and whether a transfer and power of attorney duly signed by the transferrer, but left in blank as to the name of the transferee and attorney, are legal and may pass from hand to hand until some holder cares to fill up the blanks. These and incidental questions are discussed in the follow- ing sections. § 377. A seal is not necessary to a transfer of stock. — In Amer- ica an assignment or transfer of a certificate of stock need not be under seal. 2 Formerly it was the custom to have all such transfers made bv deed, dulv sealed. As the nature of stock and certificates of stock, however, came to be understood more clearly, it became a rule of law that a transfer of the certificate, like the transfer of choses in action, did not require a seal. Not even the presence of the seal gives the transfer the character of a sealed instrument. The seal is a superfluity and is disregarded. 3 In England, on the other hand, transfers of railway stocks are generally required by charter to be under seal. This is held to give the instrument the character of a deed; and hence, in accord- ance with the ancient technical rule of law that a deed must be filled out as to the grantee and other essential particulars before it is sealed in order to be valid, it has been held in England that a transfer of a certificate of stock, duly signed and sealed, but with attorney is one of its directors. Id. A 10 Mass., 476 (1813); Atkinson v. Atkin- stockholder's power of attorney to his son, 8 Allen, 15 (1864). If, however, agent "to exchange old issues or cer- the by-laws require it, the transfer must tificates of stock, and to receive new be under seal. Bishop v. Globe Co., 135 issues or certificates in lieu thereof," Mass., 132 (1883), holding, also, that the does not authorize the agent to sell or word "seal "is insufficient pledge the stock. The corporation is 3 German Union B. Ass'n v. Send- liable for allowing a transfer to a third meyer, 50 Pa. St., 67 (1865) ; Comruer- person on such authority. Quay v. cial Bank v. Kortright, 22 Wend., 348 Presidio, etc., R R, 22 Pac. Rep., 925 (1839); McNiel v. Tenth Nat'l Bank, (Cal., 1889). 46 N. Y., 325 (1871): Bridgeport Bank v. i Pennsylvania R R Co.'s Appeal, 86 N. Y. & N. H. R R Co., 30 Conn., 231, Pa. St., 80. 274 (1861) ; Easton v. London, etc., Bank, 2Quiner v. Marblehead Social Ins. Co., 55 L. T. Rep., 678 (1886). 516 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 378. the name of the transferee in blank, is void absolutely. 1 In those English companies, however, whose charters do not require trans- fers to be sealed, the transfer may be by an ordinary instrument in writing, and the presence of a seal will be disregarded. 2 §378. The assignment of the certificate of stock estops the trans- ferrer from claiming any further title in the stoclc as against sub- sequent dona fide transferees, although, such assignment he not registered. 3 — There is no case which denies this principle of law. On close examination of the cases which seem to militate against it, it will be found that the issue involved was whether the unreg- istered transferee was protected against third persons who claimed title back of the transferrer. The transferrer himself is not al- lowed to impeach his unregistered transferee's title. Even in Con- necticut, where at an early day the court held that the registry was the originating act of the title of the transferee, the court was considering the rights of third persons, and not the rights of the 1 Hibblewhite v. McMoriue, 6 M. & W., 200 (1840), per Parke, B. ; Taylor v. Great Indian P. Ry Co., 4 De G. & J., 559 (1859); Societe Gen. v. Tramways Union Co., L. R., 14 Q. B. D., 424 (1884), where transfer was to be by deed ; affirmed, L. R., 11 App., 20. Cf. §§ 325, 380, 416. 2 Re Tees Bottle Co., 33 Law Times (N. S.), 834 (1876); Walker v. Bartlett,36 Eng. L. & Eq., 369 (1856): Re Barned's Banking Co., L. R, 3 Ch., 105 (1867); Ex parte Sargent, L. R., 17 Eq„ 327 (1873); Ortigosa v. Brown, 47 L. J. (Ch.), 168 (1878). Transfer of certificates in England must be under seal. Re Balkis, etc., Co., 58 L. T. Rep., 300 (1888). The American cases incline to the opinion that, even though a seal were required, the sealed transfer would not be void because of the blanks left in it. Bridgeport Bank v. New York, etc., R. R. Co., supra; Com. Bank v. Kortright, supra; Matthews v. Massa- chusetts Nat'l Bank, 1 Holmes, 396, 407, (1874); McNiel v. Tenth Nat'l Bank, supra. 3 Scott v. Pequonnock Bank (U. S. C. Ct.), 15 Rep., 137 (1883) ; Brown v. Smith, 122 Mass., 589 (1877); Fitchburg Sav. Bank v. Torrey, 134 Mass., 239 (1883); Duke v. Cahawba Nav. Co., 10 Ala., 82 (1846): Chouteau Spring Co. v. Harris, 20 Mo.. 382 (1855): St. Louis P. Ins. Co. v. Goodfellovv, 9 Mo., 149 (1845); Gil- berts. Manchester Iron Manuf. Co., 11 Wend., 627 (1834); Sargent v. Essex Manuf. Co., 26 Mass., 202(1829); Nesmith V. Washington Bank, 23 Mass., 324 (1829) ; Sargent v. Franklin Ins. Co., 8 Pick., 90 (1829); Conant v. Reed, 1 Ohio St., 298 (1853); Baltimore City P. R'y Co. v. Sewall, 35 Md., 238 (1871); Bank of America v. McNiel, 10 Bush, 54(1873); United States v. Vaughan, 3 Binn. (Pa.), 394(1811); Beckwith v. Burroughs, 13 R. I, 294 (1882) ; Farmers' & M. Bank v. Wasson, 48 Iowa, 336(1878); Carroll v. Mullanphy Sav. Bank, 8 Mo. App., 249 (1880) ; B'way Bank v. McElrath. 13 N. J. Eq., 24 (1860) ; Smith v. Crescent City, etc., Co., 30 La. Ann., 1378(1878); Peo- ple's Bank v. Gridley, 91 111., 457 (1879). Nor can the transferrer avoid the as- signment before registry on the ground that no consideration passed. Hall v. United States Ins. Co., 5 Gill (Md.), 484 (1847); Cushman v. Thayer Mfg. Co., 76 N. Y., 365 (1879). Such an assignment satisfies a contract to sell stock. White V. Saulsbury, 33 Mo., 150 (1862); Mer- chants' Nat'l Bank v. Richards, 6 Mo. App., 454 (1879). The fact that the cor- poration subsequently refuses to regis- 517 379.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. transferrer himself. 1 That the transferrer cannot question the completeness of his transfer of title is a rule binding not only on himself, but also upon his assignees in bankruptcy or insolvency. 2 The transferrer is estopped also from attacking the assignment of the certificate on the ground of informalities in the transfer. 3 § 379. Effect of charter provision requiring registry. — This rule prevails even though the certificate or by-laws, or charter itself, declares that a transfer shall not be legal or complete or effectual until it is registered on the corporate books. 4 As between the transferrer and transferee, the unregistered assignment is complete and effectual in contradiction of such declarations. The courts construe these provisions of the certificate or by-laws or charter to be intended, not to affect the rights of the transferee as against the transferrer, but to affect the rights of the transferee as against attaching creditors of his transferrer and other third parties claim- ing an interest in the stock, and also to affect his right to claim dividends, the privilege of voting, and other rights of a stockholder.'' ter the transfer does not prevent title passing, as between transferrer and transferee. Crawford v. Provincial Ins. Co., 8 Upper Can., C. P., 263 (1859). 1 Northrop v. Newtown & B. T. Co., 3 Conn., 552 (1821): Fisher v. Essex Bank, 5 Gray, 373 (1855), the rights of attach- ing creditors being involved. -Ex parte Dobson. 2 Mont, D. & D., 685 (1842); Dickinson v. Central Nat'l Bank. 120 Mass., 279 (1880); Morris v. ( amion, 8 Jur. (N. S.), 653 (1862); Sibley v. Quiusigamond Nat'l Bank, 133 Mass., 515 (1882). 3 Holyoke Bank v. Goodman Paper Mfg. Co., 9 Cush., 576 (1852); Maguire's Case, 3 De G. & S., 31 (1849); Sheffield A. & M. R'y Co. v. Woodcock, 7 M. & W., 574 (1841); Cheltenham & G. W. N. R'y Co. v. Daniel, 2 Q. B.. 281 (1841); Home Stock Ins. Co. v. Sherwood, 72 Mo., 461 (1880). The legal sufficiency of the instrument of transfer cannot be questioned by the transferrer. Chew v. Bank of Baltimore, 14 Md.. 299 (1859). « Johnson v. Laflin, 103 U. S., 800, 804 (1880), affirming 5 Dill., 65 (1878); Noyes v. Spaulding, 27 Vt, 420 (1855), where the court say : " That provision is similar to the statute in this state in relation to the transfer of real estate, under which it has uniformly been held that the title passes to the grantee as between the parties to the conveyance, though the deed is unrecorded. . . . The object of having the transfer recorded on the books of the corporation is notice, and that is the only object For that reason the transfer, though unrecorded, is good against the party and all those who have notice in fact of the transfer." United States v. Cutts, 1 Sumner. 133 (1832); First Nat'l Bank v. Gifford, 47 Iowa, 575 (1877). The same provision was involved in nearly all the cases cited in preceding sections. See, also, Johnson v. Under- bill, 52 N. Y., 203 (1873); Bank of Utica v. Smalley, 2 Cowen, 770 (1824) ; Bald- win v. Caufield, 26 Minn., 43 (1879). where the court say that charter " pro- visions of this kind are intended solely for the protection and benefit of the cor- poration ; they do not incapacitate a shareholder from transferring his stock without any entry upon the corporation books." 5 Continental Nat'l Bank w, Eliot Nat'l Bank, 7 Fed. Rep., 369 (1881); Mer- chants' etc., Bank v. Richards, 6 Mo. App., 654 (1879); and cases cited supra, and § 465, infra. 518 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§§ 380,381. §380. Certificate of stock may l)e assigned with the name of the transferee left blank. — By a commercial usage, which has been repeatedly recognized as valid by the courts, certificates of stock may be assigned by a transfer duly signed by the transferrer, but with the name of the transferee left blank. 1 Generally the com- • bined instrument of transfer and power of attorney on the back of the certificate is signed by the stockholder and delivered to the purchaser, with the names of the transferee and of the attorney left blank. Such a certificate of stock, transferred in blank, may be sold and passed from hand to hand; and each purchaser of it is entitled to the same rights against his transferrer or previous transferrers as he would have if the names of the successive holders appeared on the certificate itself. Any purchaser of the certificate, duly signed but transferred in blank, may fill up the blanks and insert his own name. 2 He may fill in his own name as transferee, and the name of an agent as the attorney to make the registry, or he may leave the latter blank and allow the registry clerk to fill in his own name, as is frequently done. B. METHOD OF REGISTERING A TRANSFER OF STOCK. § 3S1. Registry an important part of a transfer of stock. — The effect of obaining a registry or of neglecting to obtain a registry of the transfer on the corporate books, immediately after purchas- 1 Walker v. Detroit Transit R*y Co., up the blanks and constitute himself the 47 Mich.. 338 (1882) ; Pennsylvania R E. attorney. These points are too well set- Co. 's Appeal. 86 Pa. St., 80 (1878) ; Cut- tied to need discussion." Holbrook v. ting v. Damerel, 88 N. Y. 410 (1882); New Jersey Zinc Co., 57 N. Y., 616, 623 German Union B. Ass'n v. Sendmeyer, (1874). As to the English rule, where 50 Pa. St., 67 (1865) ; Ex parte Sargent, the charter requires transfers to be L. R, 17 Eq., 273 (1873) ; Ortigosa v. under seal, see § 377. See, also, Colo- Brown, 47 L. J. (Ch.), 168 (1878); Re nial Bank v. Hepworth, 57 L. T. Rep., Barned's Banking Co., L. R, 3 Ch., 105 148 (1887); Williams v. Colonial Bank. (1867). Cf. §£ 325, 377, supra; § 416. id., 188 -1887); Nanney v. Morgan, 57 infra. "Even in the absence of such id., 48 (1887). usage, a blank transfer on the back of - Broadway Bank v. McElrath. 13 N. r the certificate, to which the holder has Eq., 24 (1860); Matthews v. Mass. Nat'l affixed his name, is a good assignment ; Bank, 1 Holmes, 396 (1874); Bridgeport and a party to whom it is delivered is Bank v. N. Y. & N. H. R R Co., 30 authorized to fill it up by writing a Conn., 231 (1861) ; Kortright v. Buffalo transfer and power of attorney over the Com. Bank, 20 Wend., 91 (1838) ; affirmed, signature." McNiel v. Tenth Nat'l Bank, 22 Wend., 348 (1839); Otis, Adm'r, v. 45 N. Y, 325, 331 (1871). "There is no Gardner, 105 111., 436 (1883); Mount force in the suggestion that the power Holly L. & M. T. Co. v. Ferrie, 17 N. J. of attorney in the present case was in- Eq.. 117 (1864); Prall v. Tilt. 28 N. J. complete, because there were blanks for Eq., 479 (1877) ; Leavitt v. Fisher, 4 Duer, the number of shares and for the name 1, 20 (1854). of the attorney. Any holder might fill 519 § 382.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXIL ing the same from the vendor, has given rise to much litigation and much apparent confusion. A registry of the transfer is im- portant in two respects : First, as regards the rights of the purchaser in reference to the corporation; second, in regard to the rights of the purchaser as regards third persons who are either creditors of the old registered stockholders or have claims upon the stock in question. So far as the corporation is concerned, it is bound to recog- nize only the registered stockholder. 1 To him is accorded the right to vote, draw dividends, and exercise the general rights of stock- holdership. The unregistered purchaser of stock cannot claim such rights. All the cases agree in this result of a neglect to register a transfer. As regards the rights of third -persons, however, the courts of the different states vary widely in their opinions. Generally the question arises by reason of an attachment or execution levied by a creditor of the transferrer against the stock standing on the corpo- rate books in the name of the transferrer, who has already sold and assigned the certificate of stock to another. As a general rule, it may be said that a purchaser of a certificate of stock is usually pro- tected as fully without a registry on the corporate books as he would be by a registry, so far as subsequent attachments and most other possible equities against the stock are concerned.-' This is the rule in New York and most of the states. In Connecticut, Illinois and a few other states a contrary rule prevails. In Massachusetts and New Hampshire a late statute has changed the old rule so that it now accords with that of New York.' § 382. Formalities of making registry. — The customary method of registering a transfer of stock on the corporate books is simple. The registered stockholder, or his attorney in fact, whose name is written in the blank power of attorney, applies to the corporate officer having charge of the transfer books, and requests a registry of the transfer to a person designated by a name written in the form of transfer. Books of transfer are kept for purposes of regis- tering, and upon such an application and a surrender of the old cer- tificate the old stockholder or his attorney makes the registry and a new certificate is issued. 4 Any suitable registry or stock-list, or formal entry on the corpo- rate books, suffices. No special book need be kept for that pur- pose. 5 Where the company does not keep a transfer book the 1 Registry herein means not only an 4 Burrall v. Bushwick R R. Co., 75 actual registry, but also a request to the N. Y., 211 (1878); Greeu, etc., Co. v. corporation to allow registry where im- Bulla. 45 InoL 1 (1873). properly refused by it. See § 382. 5 "A11 that is necessary, when the 2 These various questions are cousid- transfer is required by law to be made ered in chs. XXI and XXVII. upon the books of the corporation, is 3 This statute is given in full in £ 490. that the fact should be appropriately 520 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 382. transfer of stock is complete when the owner of stock transfers the certificate on the back and delivers it to the secretary in order that a new certificate may be issued to the transferee. 1 The demand for registry should be made upon the principal officer or clerk at the office of the corporation. When so made it is sufficient. 2 The method of registry may be regulated by the by-laws of the corpora- tion. Thus, a by-law that the stock shall be transferable by in- dorsement in writing, made in the presence of the cashier or two other witnesses, has been sustained as valid, and is complied with only by the presence and signature of the cashier or of the wit- recorded in some suitable registry or stock-list, or otherwise formally entered upon its books. For this purpose the account in a stock ledger, showing the names of the stockholders, the number and amount of the shares belonging to each, and the sources of their title, whether by original subscription and payment or by derivation from others, is quite suitable, and fully meets the re- quirements of the law." National Bank v. Watsontown Bank, 105 U. S., 217 (1881). 1 Chemical Nat'l Bank v. Colwell, 132 N. Y., 250 (1892). A stockholder is liable by statute on stock where he has merely transferred the certificate and no effort has been made to complete the transfer on the corporate books. Where there is no transfer book, but certificates are merely canceled and new ones issued, this is sufficient to effect a transfer on the corporate books. Plumb v. Bank of Enterprise, 29 Pac. Rep., 699 (Kan., 1892). Where the corporation keeps a stock certificate book but no transfer book, a transfer on the back of a certificate, which is then canceled and pasted back in the certificate book, and a new cer- tificate issued to the transferee, is a suf- ficient transfer to constitute a transferee a stockholder. He may vote at elections, and an assignment by the corporation on the direction of officers elected by such a transferee is valid. Such a trans- fer is valid also, although a by-law pro- vided that before selling his stock a stockholder must offer it to other stock- 52 holders for purchase. American Nat'l Bank v. Oriental Mills, 23 AtL Rep., 795 (R. I., 1891). 2 " It is sufficient for him to apply at the bank during the usual hours of business, and make his demand upon the officers and clerks who may be in attendance there; and, in case they are not authorized to transact that particu- lar business, they must either refer him to the proper officer in the bank or pro- cure the attendance of such officer, or of the board of directors, if necessary, without any unreasonable delay. . . . In the absence of any proof to the con- trary, it may be fairly presumed that the principal officer or clerk in attend- ance at the bank, during the usual hours of business, is authorized to per- mit such a transfer when proper." Com. Bank of Buffalo v. Kortright, 22 Wend., 348, 351 (1839); Case v. Bank. 100 U. S., 446 (1879), where application to the cashier was held to be proper ; McMurrich v. Bond H. H. Co., 9 U. C. (Q. B.), 333 (1852), where the application was to the secretary ; Re Goodwin v. Ottawa & P. R'y Co., 13 U. C. (C. P.), 254 (1863), where an application to sec- retary and treasurer was sustained ; Green Mount. & S. L. T. Co. v. Bulla (1873), siqjra, where the application was to the president. Presentation of the certificate of stock duly indorsed to the person in charge of the office of the cor- poration is a sufficient demand of trans- fer. Dunn v. Star, etc., Ins. Co., 19 N. Y. Week. Dig., 531 (1881). 1 ^ 382.] FORMALITIES OF TEANSFEB AND REGISTRY. [CH. XXII. nesses. 1 So, also, of a by-law requiring registry in the presence of the president and secretary of the company. 2 But a by-law requir- ing the assent of the president of the corporation to the registry of a transfer would be in restraint of trade and void. 3 A delivery of certificates to the corporation, and a mere request to the corpo- rate officers to make the transfer, is not a registry until the entry is actually made. 4 The fact that the registry clerk marks on the instrument of trans- fer the words "received for record" does not constitute a registry. 5 A memorandum on the stock book that the stock has been trans- ferred as collateral security is sufficient to give the transfer pre- cedence over an attachment. 6 It has been held that, where the corporation has a branch registry office in another state, a registry in the branch office is not an effectual registry until it has been reported and entered in the books of the main office of the corpo- ration. 7 If the corporation does not keep books for the registry of transfers of stock, a mere notice to the corporation that a transfer has been made constitutes a registry. 8 But if the statute or char- ter requires a transfer to be made on the corporate books, no regis- try is possible until such books are obtained and opened. 9 If the corporation n< ver issues certificates of stock, the stockholder cannot demand them. 10 If the corporation cannot allow the regis- try on account of an injunction, it is nevertheless bound to re- spect the rights of a transferee who gives notice to it of the trans- iDaue v. Young, 61 Me., 160 (1872). 6 Moore r. Marshalltown. etc., Co., 46 -'Planter-. - & M. M. Ins. Co. r. Selma N. W. Rep.. 750 (Iowa, 18 Saw Brmk. 63 Ala.. 585 (1879> " Pinkerton v. Manchester & L. R. R. 3 Sargent v. Franklin Ins. Co., 8 Pick., Co.. 42 X. H., 424 (1861). 90(1829). 8 Crawford v. Prov. Ins. Co., 8 U. I . . * Brown v. Adams, 5 Biss., 181 (1870). (C. P.), 263 (1859); Agricultural, etc.. >: Nor will a mere entry of credit to the Wilson, 24 Me., 273 (1844), holding that a transferee, on the treasurer's books, transfer on the books of a corporation suffice. Marlborough Mfg. Co. v. Smith, of stock for which certificates had not 2 Conn.. 579 (1818). Cf. § 35a been issued is sufficient to pass the prop- 5 Northrop r. < urtk 5 ( 'nun.. 246 (1824). erty in the stock, and a valid considera- But a memorandum entered on the stub tion for a note given in payment in the stock book opposite to the cer- 9 McCurry v. Suvdam, 10 X. J. Law, tificate issued, that that certificate has 245(1828:. Where the corporation keeps been transferred, is a sufficient registry no stock ledger, a transfer is sufficiently as against attaching creditors of the registered when the old certificate is sur- transferrer. Fisher v. Jones, 3 S. Rep., rendered, a new one issued, and the new 13 Ala.. l v ^7. A mere letter from the name entered on the subscription list- transferee to the corporation that he Stewart v. Walla Walla, etc., Co., 20 has purchased the certificate is insuffi- Pac. Rep., 605 (Wash. Ter., 1889). cient, even though suHi letter is pinned w Thorp v. Woodhull, 1 ^andf. Ch., Ill to the transfer 1 ook. Newell v. Willis- (1844). See §§ 60, 192. ton, 138 Mass., 240 (1885 . 522 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 382. fer. 1 The issue of a new certificate of stock is not essential to the completeness of a registry of the transfer. 2 If the corporation de- lays unreasonably in allowing a registry it is liable in damages to the applicant for registry. 3 The instrument of transfer must be in proper form. 4 Unless the old stockholder or his duly authorized attorney offers to make the registry, the corporation may refuse to allow it. 5 The power of attorney must run from the previous registered stockholder, and not from an intermediate unregistered transferee of the certificate." Transfers under bankruptcy or insolvent laws are to be registered like voluntary transfers. 7 In England a written acceptance of the stock b} T the transferee is required. 8 A mere notice to the corporation that an assignment has been 1 Purchase v. New York Exchange Bank, 3 Rob.. 164 (1865). 2 First ISat. Bank v. Gifford, 47 Iowa, 575 (1877) ; Chouteau Spring Co. v. Har- ris, 20 Mo., 382 (1855). 3 Sutton v. Bank of England, 1 C. & P.. 193 (1824), where the bank delayed longer than one day, the customary time, and refused to give any reason therefor; Catchpole v. Ambergate, N., etc., R'y Co., 1 El. & B., Ill (1852), where, by reason of the delay, the stock was forfeited, notice of forfeiture going to the old stockholder. See, also, Healey on Law and Pr. of Companies, p. 81. Although the directors are entitled to reasonable time to decide whether to make a transfer, yet if they have al- ready made up their minds, the measure of damages for refusal is the price of the stock on the day when the applica- tion was made. Re The Ottos, etc., Mines, 68 L. T. Rep, 138 (1892). 4 Queen v. General Cemetery Co., 6 E. & B., 415 (1856), holding that the deed of transfer, where a deed is necessary, must be properly drawn. See, also, Societe Generale, etc., v. Walker, L. R, 11 App., 20 (1885). 5 Mechanics' Banking Ass'n v. Mari- posa Co., 3 Rob. (N. Y.), 395 (1865). 6 Dunn v. Commercial Bank, 11 Barb., 580 (1852). 7 Dutton v. Connecticut Bank. 13 Conn., 493 (1840); State v. Ferris, 42 Conn., 560 (1875). 8 Ortigosa v. Brown, 47 L. J. (Ch.), 168 (1878). The Joint-stock Company's Ac t of 1856 required such an acceptance. The act of 1862, repealing the act of 1S56, prescribed that transfers should be made as was customary, unless the by- laws prescribed otherwise. Hence, in the absence of by-laws, the written ac- ceptance is held to be customary and necessary. In England, where a trans- fer of stock is made by first applying to the company, and having the com- pany certify that the certificate of stock had been lodged with the company, and then the money is paid, it is held that the party purchasing the stock on the faith of this certificate of the company can- not hold the company liable although it turns out that the vendor was not en- titled to the stock, and consequently, the whole capital stock being already is- sued, that the transfer could not be made. The court held that the certifi- cation was ultra vires and hence not enforceable. Bishop v. The Balkis, etc.. Co., Limited, 63 L. T. Rep, 316 (1890); affirmed, id.. 601 (18911 the court, how- ever, dissenting from the view that the certification was ultra vires, but hold- ing that the certification did not war- rant the title nor the validity of the various documents. 523 § 383.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XX IT. made need not be considered by the corporation. 1 Where, how- ever, the transferee giving such notice does not obtain registry because the corporation refuses, for any reason, to make the regis- try, the mere notice must be borne in mind by the corporation, and the rights of the applicant preserved by it, as regards future registries. 2 §383. Formalities of registry may he waived ty the corporation. — The corporation may waive the formalities connected with a regis- try of transfer, and when it does so the transferee becomes a stock- holder as completely as though registry had been regularly made. 3 Frequently the waiver arises by placing the transferee's* name on the list of stockholders, although no formal registry has been had. 4 Even a charter requirement that the consent of the directors to a registry of transfer shall be obtained may be waived by the corpo- ration. 5 The corporation, by paying dividends to an unregistered transferee of stock, thereby waives the formalities of registry." When the corporation refuses to allow a registry for reasons other than those connected with the mere formalities of registry, or for reasons not given to the applicant, it waives its right to insist on them, and cannot afterwards claim that the appellant did not con- form to such technicalities. 7 A failure, however, on the part of the 'Stockwell v. St. Louis M. Co., 9 Ma App., 133(18 - See p. 523, note 1. See, also. § 532, 3 Richtnondville Mfg. Co. r. Prall, 9 Conn., 487(1833); Clowes v. Brettell, 11 M. & W.. HU (1843); Sadler's < nse, 3 De G. A (1849): Chambersburg Ius. Co. o. Sin it 1 1. 11 Pa St.. 130(1849); Walter's Case, :'■ De < :. & s.. | 18 Baine v. Whitehaven, etc. R*y Co., 3 H. L, C, 1 (1830); Wills V. Murray. 4 Ex., 843 (1850 : Yelland's Cm De G. & Si,,.. 395 (1852); Powers » Hunting, 1 C. B. (N. S.), 533 (185*3 ; Benderson v. Royal British Hank. atJ L .!. 7. IU 112 (1857); Daniel! v. Same, 1 II. & X.. 685 (1857); Bast G. R'y Co. v. Bartholomew, L, R„ 3 Ex., 15 (1867); [nd's Case, L B,, 7 Ch.. 485 0872); Weber v. Fickey, 52 M). See, also, ?? 258, 260, 262 4 Upham v. Burnham, 3 Eiss., 431, 520 (1873). <• parte Walton, 26 L. J. (Ch.), 545 (1857)l Likewise where the by-laws contain Buch a provision. Chambers- burg Ins Co. r. Smith, 11 Pa St.. 120 (1849), holding also that an oversight whereby the attorney who makes the registry omits to sign the registry is im- material. ■Cutting v. Damerel, 88 N. Y., 410 38 ?Townsend v. Mclver, 2 S. C, 25 (1870); Bond >: Mt Hope Iron Co., 99 Mass., 505 (1868), holding that the cor- poration must put the refusal on the ground of non-conformity with formali- ties at the time of the application, and cannot afterwards raise such. Chou- teau, etc., Co. v. Harris 20 Mo., 382 (1855); Robinson v. Nat'l Bank of New Berne, 95 N. Y.. 637 (1884). where the court say : "The requirement of a reg- istry, existing only for its own protec- tion and convenience, must be deemed waived and non-essential when it wrongfully refuses to obey its own rule." 524 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§§ 384, 385. corporation to notify the transferee of a refusal to allow registry is no waiver of such registry. 1 § 384. Either the transferrer or the transferee may apply to the corporation for a registry of transfer. — A person who appears on the corporation books as the holder of stock, but who in fact has sold the stock, has a right to have his transfer recorded on the cor- porate books, thereby releasing him from liability on the stock. 2 The vendor may request the corporation to register the transfer, and the corporation may make it at his request. If he refuses so to do, the vendor may bring suit in a court of equity to compel the corporation to register the transfer. 3 It has been held, also, that an intermediate vendor of the stock, Avhose name has never ap- peared on the corporate books, may likewise compel a registry to be made. 4 After an ultimate vendee has been registered, the oris- inal vendor cannot have an intermediate vendee and vendor regis- tered as the stockholder. 5 The corporation may register the transfer, even against the wishes of the transferee. 6 The transferee also has a right to apply for and compel a registry of the transfer of stock to himself. 7 C. RIGHTS AND DUTIES OF THE CORPORATION IN A.LLOWIXG OR REFUS- ING REGISTRY. * § 385. Corporation may require proof of identity; also of genu- ineness of signature, etc. — When a transfer of stock is presented to the corporation for registry, if the corporation is in doubt as to the identity of the person presenting it, whether he be the stock- iGustard's Case, L. R, 8 Eq., 438 ^Shaw v. Fisher, 5 De G., M. & G., (1869). 596 (1855). 2 " The purchase was in itself author- 6 Upton v. Burnham, 3 Biss., 520, 525 ity to the vendor to make the transfer. (1873). . . , A court of equity will compel a ~ Norris v. Irish Land Co., 8 E. & B., transferee of stock to record the trans- 512 (1857); Daly v. Thompson, 10 M. & fer, and to pay all calls after the trans- W., 309 (1842) ; Johnston v. Laflin, 5 fer. ... If so, it is clear that the Dill., 65 (1878): 103 U. S., 800; Hill v. vendor may himself request the transfer Pine River Bank, 45 N. H., 300 (1864): to be made." Webster v. Upton, 91 U. S., Presbyterian Con. v. Carlisle Bank, 5 65, 71 (1875). "If a subsequent transfer Pa. St., 345 (1847); Mechanics' Bank v. of the certificate be refused by the bank, Seton, 1 Peters, 299 (1828) ; Arnold v. it can be compelled at the instance of Suffolk Bank, 27 Barb., 424 (1857) ; Sar- either of them." Johnston v. Laflin, 103 gent v. Franklin Ins. Co., 8 Pick., 90 U S., 800, 804 (1880). (1829) ; Cushman v. Thayer Mfg. Co., » Wynne v. Price, 3 D. & S., 310 (1849) ; 76 N. Y., 365 (1879). But the complaint Birmingham v. Sheridan, 33 Beav., 660; must be full and accurate in its aver- Eustace v. Dublin T. C. R'y Co., L. R, ments. Edwards v. Sonoma Bank, 59 6 Eq., 182 (1868). Cal., 136 (1881). 4 Paine v. Hutchinson, L. R, 3 Ch., 388 (1868). 525 § 386.J FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. holder alreadv registered on the books or the attorney of such, the corporation may require proof of such identity. 1 If it is in doubt as to the competency of the transferrer to sell the stock, 2 legal proof of such competency must be given. 3 If the applicant for registry applies as the attorney of the registered stockholder, the corporation may require satisfactory evidence of the genuineness of the latter's transfer, or may require the presence of the stock- holder himself. 4 386. Corporation cannot refuse registry on account of the mo- tive of tlie transferrer or transferee in the transaction. — The cor- poration has nothing to do with the motive or purpose of the vendor or vendee of the stock. 5 It can refuse a registry only when there is doubt as to the legal right of the applicant to have such registry. It cannot refuse on the ground that the transfer would injure the corporation, nor on the theory that the object of the transfer is to increase the votes of the transferee. 6 In England often the directors are by charter given a discretionary power to refuse a transfer. 7 1 Telegraph Co. v. Davenport. 07 U. S., 369 (1878) : Davis v. Bank of England, 2Bing. k 393 vhere the com the corporation '• may take reasonable time to make inquiries, and require proof that the signature to a power of attorney is the writing of the person whose signature it purports to be." Bayard v. Farmers' & M Bank, 52 Pa. St.. 232 (1866). 2 See g§ 318, 319. 3 Id. * Supra, note 1 ; and see §§ 363-367. 5 Townsend v. Mclver. 2 S. C. 96 (1870); People v. Paton. 5 X. Y. St Rep., 316 (l v ~7 . But a transfer, merely nomi- nal, to obtain for the transferee certain special privileges, such as free admission to a place of amusement may be a fraud on other stockholders and will be set aside. Appeal of Academy of Music, 108 Pa. St, 510 (1885). Equity will not compel a corporation to register a trans- fer of stock when the purpose of the transfer is to obtain the control of the corporation and wreck it Gould v. Head, 41 Fed. Rep.. 242 (1890). In an action to compel the unincorporated Standard Oil '• trust " to transfer on its books trust certificates which the plaint- iff has purchased, the defendants, who that the plaintiff is a competitor of the trust and purchased the certifi- - in order to break up the trust and compel it to buy the plaintiff out may be compelled to t II of particulars. Rice r. Rockefeller. X. Y. Daily Reg.. May 29, 1888( The plaintiff in thi- finally succeeded. See 134 ST. Y., 171 (18'.' « Moffatt R Farquhar. L. R, 7 Ch. D. 591 (1878). 7 See Heal ey on Law and Practice of Companies. 79. Where the directors are authorized by the articles of incorpora- tion to reject a transfer of stock on the ground that they do not approve of the transferee, "the discretionary power is of a fiduciary nature, and must be exer- cised in good faith ; that is, legitimately for the purpose for which it is conferred. It must not be exercised corruptly, or fraudulently, or arbitrarily, or capri- ciously, or wantonly. It may not be exercised for a collateral purpose. In exercising it the directors must act in good faith in the interest of the com- pany and with due regard to the share- holder's right to transfer his shares, and they must fairly consider the question 526 CH. XXIT.] FORMALITIES OF TRANSFER AND REGISTRY. [§387. § 3S7. Corporation may interplead between two claimants to stock. The task imposed upon a corporation in determining whether to refuse or to allow a registry of stock is a difficult and dangerous one. It is easy to avoid the risk of forgery or of failure of the applicant to identify himself. But circumstances frequently are such that the corporation dare not allow registry to either of two parties, each of whom claims to be the sole and absolute owner of the stock, and each of whom claims the right of registry or notifies the corporation not to register the other claimant as a stockholder. These cases arise on various occasions, but most often where the stock has been attached or sold on execution by the transferrer's creditors before the transferee had obtained registry : or where, by the fraud of the old stockholder's agent, the certificate has passed into the hands of a bona fide purchaser: or where, by a breach of trust, an executor or adminstrator, or trustee or guardian, has sold the trust stock and appropriated the proceeds ; or under other states of fact wherein there are two claimants of the stock, each having rights which can be clearlv ascertained onlv by litigation. It is not incumbent on the corporation to decide between these con- flicting parties and rights. 1 Such a requirement would expose it to unreasonable risks and compel it to assume the functions of a court. TThere there is a reasonable doubt as to the facts involved or as to the respective rights of the claimants of the stock, and the corporation is sued by one of the claimants for refusing to allow a registry by him. the corporation may interplead, and thus compel the claimants to ascertain their rights through the medium of a court of justice. 2 A similar interpleader may be made where the of the transferee's fitness at a board cides between the defendants if the case meeting." It is not a sufficient reason is ready as between them. If not ready. that the transferee is not a member of a it directs an action or an issue, or a ref- particular family, and the directors will erence to a master, to ascertain con- be ordered to make the transfer. Re tested facts, as may be best suited to Bell Bros.. Limited, 65 L. T. Rep.. 245 the nature of the case: "or the court (1891). may leave it to the defendants to pre- 1 The discussion of the duty nf the pare the case between them as they may corporation in various circumstances is be advised, which v% ould be the effect given under chapters devoted to them. of a general order to interplead." State -Mechanics" Bank v. Richards. 6 Mo. Ins. Co. r. Gennett, 2 Tenn.'Ch., 100 App.. 454 (1SS1 : afFd. 74 Mo., 77: State (1874 . citing, as cases on above rules of Ins. Co. n Gennett. 2 Tenn. Ch.. 100; practice. East. & West. etc.. Co. v. Li t- Leavitt v. Fisher. 4 Duer (N. Y. >. 1 tledale, 7 Hare. 62 (1848); Martinius v. (1854). If the court decides that the in- Helmuth. 2 V. & B., 412 (1814X note; terpleader is properly filed by the corpo- Horton v. Baptist Church. 34 Vfc, 317 ration herein, it generally on a motion (1861); Rowe v. Hoagland. 7 N. J. Eq., dismisses the proceeding with costs to 131 ^1^4 V ;: Crawford v. Fisher. 1 Hare, the corporation, and the court also de- 441 (1842): Condit v. King, 2 Beas. Ch., 527 § 337.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. corporation is sued for dividends which are claimed by two oppos- ing parties. 1 An interpleader is proper, however, only after suit has been actually commenced against the corporation. 2 There is some doubt and considerable difficulty in laying down rules as to when a corporation may safely claim a right to refuse to act, and to compel the claimants to litigate between themselves before it allows a registry to either. The policy of the law doubt- less is to go very far in allowing the corporation to refuse to incur responsibility by taking action. Where, however, the rights of one claimant are reasonably clear, the corporation should suspend action for a reasonable time within which the contesting party may ap- ply to the courts; and if no such action is brought, it should allow a registry bv the first-named claimant, 3 Any other rule would en- able any person to practically deprive a stockholder of the possession of his stock temporarily, by simply notifying the corporation that he claims the stock. 4 Where, however, the corporation has allowed one claimant to register his transfer, or has recognized him as a stockholder, the right of the corporation to interplead is gone. 5 It 383 (1861); Hendrickson tt Decow, Sax.. 595 (J802); City Bark tt Bangs, 2 Paige, 570 (1831); Angell tt Hadden, 16 Ves.. 202 (1809). The case of State Ids. Co. r. Gennett, 2 Tenn. Ch.. 82 (1871, Bays: " The law is that the mere pretext of a conflicting claim is not sufficient The court must be able to see from the facts stated that there is a question to be tried." See, also. Norton r. Union Trust Co.. N. Y. Daily Reg., April 18, 1887, p. 744. In Englaud, by section 35 of the Companies Act, 1S02. a corporation may interplead between two claimants of stock, and need not pay costs. Re Edie. etc.. 58 L, T. Rep., 305 (1888). An interpleader was sustained in Bangor, etc., Co. tt Robinson, 52 Fed. Rep., 520 (1892). •Salisbury Mills tt Townsend, 109 Mass., 115 (1871); Diamond, etc., Co. v. Todd, 14 Atl. Rep., 27 (Del., 1888). Quere, as to whether an action for dividends can be maintained before the right of the claimant to the stock is established. Hughes tt Vermont Copper Min. Co, 72 N. Y., 207 (1878). See ch. XXXII. 2 Buffalo Grape Sugar Co. tt Alberger, 22 Hun, 349 (1880). A corporation can- not interplead as between stockholders for the purpose of determining the own- ership of stock, there having been no claim made upon it in regard to registry or in regard to dividends. It must be shown also that the company has not acted in a partisan manner as between the different claimants. Hinckley r. Pfister, 53 N. W. Rep., 21 (Wis.. 1892). If the corporation allows a transfer to be made during the pendency of a suit between two claimants therefor, and the corporation has notice, it is liable to the successful party, who is thereby de- prived of the stock. Hawes tt Gas ; etc., Co., N. Y. L. J.. March 29. 1890. See. also, the editorial on that day. 3 Townsend v. Mclver, 2 S. C. (N. S.). 25 (1870). * Re Tahiti Cotton Co., L. R, 17 Eq., 273 (1874); Ex parte Sargent, L. R, 17 Eq., 273 (1873). » Dalton tt Midland R'y Co., 12 C. B.. 458 (1852); Cady v. Potter, 55 Barb., 463 (1869): Mt. Holly. L. & M. T. Co. v. Fer- rie, 17 X. J. Eq.. 117 (1864). If the party has favored one of the two parties, as by voluntarily agreeing with the sheriff to recognize an execution, an interpleader will not lie. Cromwell v. American, eta, Co., 11 N. Y. Supp., 144 (1890). A 528 CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§§ 388, 3S9. cannot afterwards remove the name of the registered stockholder, especially where such stockholder has acted in reliance upon such registry. 1 § 388. Corporation must ooey mandate of court ordering registry and issue of new certificates. — The authorities on this proposition of law are few in number, but they are decisive in protecting the corporation from liability where it proceeds under mandate of a court. Thus, where a decree is obtained commanding the corpora- tion to register a transfer, the corporation is protected in obeying the decree, even though it is reversed on appeal, there having been no stay of proceedings. 2 Cases herein may arise also where the registered stockholder alleges that he has lost his certificate, and the court compels the corporation to issue to him a new one; 3 also where an attachment or execution has been levied, the old certifi- cate of stock being outstanding. 4 There is a limit, however, to the power of courts in these matters. If the whole capital stock has been issued and the certificates therefor are outstanding, a court cannot order the issue of other certificates, unless the decree at the same time practically nullifies a corresponding outstanding certifi- cate. 5 § 389. Remedies of a transferee of stock against the corporation for refusal to alloiv registry. — Where, for any reason, the corpora- tion refuses to allow the registry of a transfer of stock, when it is corporation cannot refuse to transfer certificate to the life tenant of stock, stock on the ground that the vendor the corporation is still bound to notify fraudulently induced the company to a purchaser of that certificate that it issue the stock to him where the com- represents a life interest only ; otherwise pany has been guilty of laches in not the corporation is liable to the remain- seeking a remedy before the transfer, der-man. Caulkins v. Memphis, etc.. The vendee in this case was a director. Co., 4 S. W. Rep., 287 (Tenn., 1887). A American, etc., Co. v. Bayless, 15 S. W. corporate officer is guilty of contempt Rep., 10 (Ky., 1891). if he refuses to obey an order of court 1 Ward v. Southeastern R'y Co., 6 Jur. requiring him to make certain transfers (N. S.), 890 (1860) ; Hart v. Frontino, etc., of stock upon the surrender of the old Co., 22 L. T. (N. S.), 30 (1870) ; Cohen v. certificates. King v. Barnes, 113 N. Y., Gwynn, 4 Md. Ch., 357 (1848). Unless 476, 655, 656 (1889). there clearly is a clerical mistake and 3 See §§ 368-370. the issue is to the wrong party. Smith 4 See § 488. v. North Am. Min. Co., 1 Nev., 423 5 See § 284. Where stock is depos- (1865). The corporation is liable for ited with a trustee for purposes of re- such mistakes. Harrison v. Pryse, Bar- organization and transferable certifi- nardiston (Fob), Ch., 324 (1740). cates are issued therefor by the trustee, 2 Chapman v. New Orleans G. L. & a claimant of stock which another per- Banking Co., 4 La. Ann., 153 (1849). son has deposited, and for which such See, also, Purchase v. N. Y. Exchange other person has the trustee's certificate, Bank, 3 Rob., 164 (1865). But when the cannot compel the trustee to deliver up court directs the corporation to issue a the stock until the trustee's certificate is (34) 529 S 390.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. the duty and obligation of the corporation to allow it, the trans- ferrer or the transferee who applies for registry may, in general, pursue one of three remedies. He may apply to a court of law for a mandamus to the corporation to compel it to open its books and allow the registry; or he may bring a suit in equity, praying that the corporation be decreed to allow the registry, or to pav him damages if registry is impossible ; or he may sue the corporation at law for damages, on the ground that by its refusal it has been guilty of a conversion of his stock. § 390. Remedy by mandamus. — The authorities are in irreconcil- able conflict on the question whether a mandamus lies to compel a corporation to allow a registry on its books of a transfer of stock. The weight of authority holds very clearly that the mandamus will not lie under such circumstances. 1 This rule is based largely on the returned, even though the party hold- issued to another; Wilkinson v. Provi- ing it is a party defendant. Beau v. American L. & T. Co., 122 N. Y., 622 (1890). 1 The leading case in this country is Shipley v. Mechanics' Bank, 10 Johns., 484(1813), where the court say: "The applicants have an adequate remedy, by a special action on the case, to recover the value of stock if the bank have unduly refused to transfer it. There is no need of the extraordinary remedy by mandamus in so ordinary a case. It might as well be required in every case where trover would lie. It is not a matter of public concern, as in the case of public records and documents; and there cannot be any necessity or even a desire of possessing the identical shares in question." Ex parte Firemen's Ins. Co., 6 Hill, 243 (1843); People v. Parker Vein Coal Co., 10 How. Pr., 543(1854); State v. Rombauer, 46 Mo., 155 (1870); State r. St. Louis, etc., Co., 21 Mo. App., 526 (1886); King v. London Assurance Co., 1 Dowl. & R, 510 (1822); Stackpole v. Seymour, 127 Mass., 104 (1879); King v. Bank of England, 2 Doug., 524 (1780) ; Curry v. Scott, 54 Pa St., 270. 276: Gray v. Portland Bank, 3 Mass., 364, 381; State n Guerrero, 12 Nev., 105 (1877); People v. Miller. 39 Hun, 557 (1886); Baker v. Marshall, 15 Minn., 177 (1870), where the stock had already been dence Bank, 3 R I., 22 (1853); Kimball v. Union Water Co., 44 Cat, 173 (1872); Birmingham Fire Ins. Co. v. Com., 92 Pa St., 72 (1879), where the court says that, even if the "courts were inclined to enlarge the remedy, it could not be done in a case where the right is dis- puted, where no public interest is in- volved, where no reason is shown for a transfer of a specific and favorite thing. and where the remedy by action is fully adequate." Townes v. Nichols, 73 Mb., 515 (1882), where the court vigorously says: "All the authorities declare that the remedy by mandamus cannot be re- sorted to in a case like this, unless the legal right of the petitioner to the pos- session of the thing sought for is clear and unquestionable. If there be doubt as to what his legal right may be, in- volving the necessity of litigation to settle it, mandamus must be withheld. Mandamus is the right arm of the law. Its principal office is not to inquire and investigate, but to command and exe- cute. It is not designed to assume a part in ordinary lawsuits or equitable proceedings. It is properly called into requisition in cases where the law has been settled, or in cases where questions of law or equity cannot properly and reasonably arise. Its very nature im- plies that the law, although plain and CH. XXII.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 390. historical origin of the writ of mandamus, and on the theory that the stock of a private corporation has no peculiar value and may be readily obtained in open market or fully compensated for in damages. It is doubted, however, whether these reasons will be sufficient to restrain the manifest tendency to enlarge the scope of this writ, particularly with reference to stock transactions. There is a strong line of decisions which holds that a mandamus lies to compel a corporation to allow a registry of a transfer of stock, particularly where the corporation has no good and sufficient rea- son for refusing the registry. 1 Perhaps the strongest argument clear, fails to be enforced and needs as- sistance." See, also, Rex v. "Worcester Nav. Co., 1 Mon. & R., 529 (1828) ; Queen v. Liverpool & M., etc., R'y Co., 21 L. J. (Q. B.), 284 (1852) ; Murray v. Stevens, 110 Mass., 95 (1872), where the court say, in refusing a mandamus to compel a registry of stock : " Without under- taking to lay down an invariable rule on the subject, we think it must be said that this process was not intended and is not well adapted for the trial of mere questions of property." State V. Warren Foundry & M. Co., 32 N. J. L., 439 (1868), where a previous transfer had been registered, although possibly in fraud of creditors ; Freon v. Carriage Co., 42 Ohio St, 304 (1884), refusing a man- damus, although it is said " that this stock has no market value, that the cor- poration is doing a growing and profit- able business, that its good-will en- hances the value of the stock, and that by reason of these things damages will not be an adequate remedy. These facts do not change the rule. They are ele- ments in assessing damages which may be fully ascertained in an action at law." See, also, Pomeroy on Eq. Juris., g 1412; State v. People's Bld'g, etc., As- sociation, 43 K J. L., 389 (1881); State v. Timken, 2 Atl. Rep., 782 (N. J., 1886) ; Tobey v. Hakes, 7 Atl. Rep., 551 (Conu., 1886), refusing a mandamus on the corporate secretary ; Bank v. Har- rison,- 66 Ga., 696. See, also, Lindley on Partnership, pp. 143, 520, 1036. Man- damus does not issue to compel a cor- poration to transfer stock when there is no written transfer of the certificate, and another party claims it. Burnsville, etc., Co. v. State, 20 N. E. Rep., 421 (Ind., 1889).' Mandamus does not lie to com- pel a corporation to transfer stock. People v. Brandis, etc., Co., N. Y. L. J.. Dec. 11, 1889. Mandamus does not lie against the Bank of England to compel it to register a transfer of stock to an in- dividual and a corporation jointly. Law Guarantee, etc.Soc. v. Bank of England, 62 L T. Rep., 496 (1890). i People v. Goss Mfg. Co., 99 111., 055 (1881) ; State v. First Nat'l Bank, 89 Ind., 302 (1883); Green, Mount, etc., Co. v. Bulla, 45 Ind, 1 (1873); People v. Crockett, 9 Cat, 112 (1858); Townsend v. Mclver, 2 S. C, 25 (1870); State v. Cheraw, etc., R. R Co., 16 S. C, 524 (1881); Cooper v. Swamp, etc., Co., 2 Murph. (S. C), 195 (1812); Norris v. Irish Land Co., 8 El. & Bl., 512 (18 Regina v. Carnatic R'y Co., L. R., 8 Q. B., 299(1873); Crawford v. Prov. Ins. Co., 8 U. C. (C.P.), 263 (1859); Goodwin v. Ottawa & P. R'y Co., 13 U. C. (C. P.), 254 (1863), holding also that the man- damus may run to the corporation itself without specifying any officers, and that an evasive answer by them is equivalent to a refusal to register. It has been held that mandamus will issue to aid the sheriff in transferring stock sold on an execution sale. This rule, however, would work harshly in states where the purchaser of the outstanding certificate may have some rights. Where such a possibility exists the mandamus should be denied. State v. First Natl Bank, 531 § 391.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII. against granting a mandamus for this purpose lies in the fact that by a bill in equity not only can a registry be specifically decreed and ordered by the court, but the rights of the corporation and any other claimant can be fully and finally heard and disposed of. §391. Remedy ~by suit in equity.— This is, it seems, the surest, most complete and most just remedy for compelling a corporation to register a transfer of stock, and for* adjusting the various con- flicting rights or claims of other parties. 1 It is a remedy applicable supra; Bailey v. Strohecker. 38 Ga., 259 (1868) : Durham v. Man., etc., Co., 9 Oreg., 41 (1880). Mandamus will lie to com- pel the corporation to transfer the stock on its books where any other record would be inadequate because there is no market value for the stock, and because the company has fraudu- lently transferred its property for the purpose of injuring the value of the stock. The mandamus will lie although a suit is pending in equity to accom- plish the same purpose. Slemmons v. Thompson, 31 Pac. Rep.. 514 (Oreg., 1 1 Cushman v. Thayer Mfg. Co., 70 X. Y., 365 (1879); Walker v. Detroit Tran- sit R'y Co., 47 Mich., 388; Iasigi v. Chicago, B. & Q. R R. Co.. 120 Mass., 46 (1880); Mechanics' Bank v. Seton, 1 Peters, 299 (1828); Wilson v. Atlantic, etc.. R. R. Co., 2 Fed. Rep. 459 (1880); Middlebrook v. Merchants' Bank, 3 Abb. Ct. of App., 295 (18G6); Buckmaster v. Consumers' Ice Co., 5 Daly, 513 (1874). In the case of Rice v. Rockefeller et Cases sup- porting this rule abound in all the states. They will be found together with others in chapter XXXV. If the corporation illegally refuses to allow a registry, but afterwards does allow it the corporation is not liable in damages for the decline of the market value of 534 CHAPTER XXIII. RULES FOR CORPORATIONS IN REGARD TO REFUSING OR ALLOW- ING REGISTRIES OF TRANSFERS OF STOCK. §393. 394. 395. 396. 397. 398. 399. 400. 401. Purpose of the chapter. Right to refuse until the trans- ferrer pays the unpaid sub- scription price. Whether the corporation may refuse to register a transfer to an irresponsible transferee. Corporation may refuse to reg- ister as transferees persons who are incompetent to con- tract. Trustees, executors, guardians, agents and pledgees. Sales of stock by executors or administrators. Sales by trustees. Sales by guardians. Forgery of transfer. §402. 403. 404. 405. 406. 407. 408. 409. 410. Corporation must require a sur- render of the outstanding cer- tificate. Alleged loss of the old certifi- cate. Attachment or execution. Decree of a court that certifi- cates be issued. Theft of certificates indorsed in blank. Interpleader by the corporation. Restrictions by corporation on stockholder's right to sell or transfer. Lien of the corporation. Formalities of registry which the corporation may insist upon. § 393. Purpose of the chapter. — It is proposed in this chapter, as a continuation of the last, and as a recapitulation of the various rights, liabilities and duties of the corporation in refusing or allow- ing a registry of a transfer of stock, to state briefly the rules which prevail herein. The stand-point taken is that of the corporation. The minute and particular application of the general rules govern- ing this subject are not stated here at length; but an effort has been made to give, in systematic order, certain directions which will enable a corporation, when in doubt as to whether to allow or refuse a registry, to decide the question intelligently and safely. § 394. Eight to refuse until the transferrer pay s the unpaid sub- scription price. 1 — A corporation cannot refuse to register a trans- fer of stock merely because the subscription price has not been fully paid in, unless the charter or the statutes of the state ex- pressly give that right. Kor can it refuse registry, even though a call for part of the subscription price has been made, is due, and remains unpaid. It must allow a registry, but may continue to hold the transferrer liable for the call. The corporation has no lien on the stock for the subscription price, nor has it a right to re- strict transfers until calls or parts of the subscription price not yet called are paid. The policy of the law is to favor the right of transfer, and no impediments by the corporation are allowed to re- 1 See chapter XV. 535 §§ 395-397.] eules begclating eegistet. [ch. xxiii. strict that right. As regards parts of the subscription not yet called in, the transferrer is released from liability and the transferee as- sumes the liability. As regards calls made before the application for registry but not yet due, the transferrer is liable, but, it seems, not the transferee. As regards calls made before the application and due before such, the transferrer and not the transferee is liable. As regards calls made after the application the transferee alone is liable. In Pennsylvania, however, a different rule prevails, and by statute the transferrer, if he is the original subscriber, is liable until the whole subscription is paid. In New York, by statute, both railroad and manufacturing corporations may refuse to allow reg- istry of transfers until unpaid calls have been paid. § 395. Whether the corporation may refuse to register a transfer to an irresponsible transferee. 1 — Greater difficulty is experienced in finding a working rule on this subject. On one point, however, all the authorities agree. If the corporation is insolvent, or in such a state of decline that insolvency seems inevitable, the corporation may refuse to allow a registry of transfer from a responsible to an irresponsible insolvent transferee. The policy of the law is to protect corporate creditors, even at the expense of restricting the right of transfer. The above rule applies not only where the subscription is unpaid, but also where it has been paid and only a statutory liability exists. Where, however, the corporation is solvent and a stock- holder applies for a registry of transfer from himself to an irre- sponsible transferee, it seems that the corporation cannot refuse to make the registry. § 396. Corporation may refuse to register as transferees persons who are incompetent to contract. 2 — If the transferee of a certificate of stock is an infant or person of unsound mind, the corporation may refuse to register such transferee as a stockholder. The reason of the rule is that such persons would not be obliged at law to re- spond to the obligations of a stockholder, and consequently are not entitled to its privileges. With married women at the present day the law is different. At common law they were incompetent to be- come a stockholder, the same as an infant is at the present time. But the statutes of all the states have substantially removed these disabilities, and enabled a married woman to transact business as a feme sole, so far as her separate estate is concerned. She may be- come a stockholder in a corporation, but cannot bind her husband's estate for the liabilities of such stockholdership. § 397. Trustees, executors, guardians, agents, pledgees?— In regis- tering transfer to a trustee, executor or guardian, the corporation 1 See chapter XV. s See chapter XTV. 2 See chapter XIV. 536 CH. XXIII.] RULES REGULATING REGISTRY. [§ 398, may be required to register the transferee as holder in his official capacity. A trustee who purchases or receives stock to hold in trust for the benefit of another may, it seems, require the corpora- tion to register the transfer and issue new certificates to himself in his own name as "trustee." In England the rule appears to be different. The reason of this rule is that the liability of a trustee on stock is in many of the states different from that of a complete owner of the stock, and also because where stock is held by a trustee as trustee, it is the duty of the corporation to refuse to allow the trustee to sell and register a sale of the stock unless the instrument creating the trust authorizes such sale. So also an executor or ad- ministrator or guardian may compel the corporation to place his official title after his name in the stock registry. Pledgees, how- ever, and agents, have not this right. The corporation need not write the word "pledgee" after the transferee's name either in the stock registry or on the certificate. Such is the rule, for the reason that the corporation is not obliged to protect the rights of the pledgor, nor to recognize the pledgeeship of the transferee. The same rule applies to transferees who take as agents of the trans- ferrer. § 398. Sales of stock by executors or administrators.* — A corpo- ration may with safety, and in fact is obliged to, allow an execu- tor or administrator to register a transfer of the sale of stock belonging to the estate upon presentation by the executor or ad- ministrator of the letters testamentary or letters of administration. The executor or administrator may then register a transfer of the stock to himself, or directly from the name of the deceased to a purchaser from the executor; or from the deceased to the execu- tor, and then from the executor to the purchaser. One executor may sell and register a transfer of the stock. The corporation is not bound to inquire whether it is necessary that the sale be made in order to pay the debts of the estate, nor to see to it that the executor actually applies the proceeds of the sale to that purpose. Where, however, the corporation has actual knowledge through its officers that a breach of trust is contemplated by the executor, it is bound to refuse registry, and will be liable to the estate for neglecting so to do. So also, where such a long time has elapsed between the taking out of the letters and the sale by the executor that the latter has become practically a trustee, the corporation must use the same precaution as in sales by a trustee. In the case of specific legacies of stock, the corporation need take no notice of them, but must allow the executor to transfer the stock into his 1 See chapter XIX 537 §§ 399-401.] BULKS EEGULATING EEGISTKY. [CH. XXIIL own name, since he may need it to pay debts, and the corporation is not bound to investigate such questions. §399. Sales ~by trustees. 1 — A trustee who holds stock belonging to the trust estate has no right to sell and transfer such stock un- less he is expressly authorized so to do by the instrument creating the trust. Consequently the law imposes upon the corporation the duty of refusing to allow a trustee to transfer the stock unless he clearly has a right so to do. If the corporation neglects this duty it is liable to the trust estate, and, in case of a breach of trust by the trustee, may be compelled to replace the stock or pay damages. If the trustee has an express power given to him to sell, the corpo- ration may allow him to make the transfer. If no such power is given, the corporation must refuse. The trustee is bound to rea- sonably satisfy the corporation of his right, but the corporation cannot permanently retain the papers submitted to it for that purpose. §400. Sales by guardians? — A guardian has a right to change the investment of the funds in his charge, and consequent^ has a right to sell stock held by him in his official capacity. Accordingly, the corporation may allow him to register a transfer of stock held b}' him as guardian, and cannot require the guardian to obtain an order or decree from a court authorizing such transfer. An order or decree is often obtained by the guardian, however, for his own protection, and is to be commended. In New York the rights and duties of guardians are regulated by statute, and other states have similar statutes. , § 401. Forgery of transit r. — A corporation is bound and required to detect a forgery whereby the name of the owner of a certificate of stock is signed to it and a transfer made which the corporation is requested to register. The stockholder in whose name the old certificate was made out, and whose name was forged to the trans- fer, may hold the corporation liable if it fails to detect the forgery and allows a registry of the forged transfer. He may compel it to replace the stock or pay damages. This rule is due to the fact that the corporation is a custodian of the books whereby a stockholder obtains his rights of stockholdership, and it cannot deprive him of these rights by allowing others to take them from him by the aid of the corporation and without his consent. It is in the power of the corporation to require the presence of the transferrer at the time of registry, or at least clear proof that the signature is genu- ine. The corporation, however, has recourse over against the per- son who applied for registry on the forged transfer, however inno- 1 See chapter XLX. 2 See chapter XIX. 538 CII. XXIII.] EULES EEGCLATING EEGISTEY. [§§ 402-404. cent the latter may be. He is held to have impliedly represented that the transfer was genuine. §402. Corporation must require a surrender of the outstanding certificate. 1 — If a corporation permits a registry of a transfer of stock, and issues new certificates to the transferrer without requir- ing a surrender of the old certificate, it assumes a dangerous posi- tion and one which it is not obliged to assume. If the certificate which is not delivered up is in the hands of a bona fide purchaser for value and without notice, he may hold the corporation liable for allowing a registry of transfer to another without requiring a delivery of the certificates. It is negligence and a breach of duty •* iJ CD «. on the part of the corporation to allow a registry without a surren- der of the old certificate. It generally refuses to do so, as is its duty, and is sustained by the law in its refusal. There are occasions, how- ever, where the law compels the corporation to register the trans- fer without a surrender of the old certificate. TThen so compelled to do, the corporation cannot be held liable by the purchaser of the outstanding certificate, but he must seek his remedy against others. Such compulsory registry, excusing the corporation, may exist in cases of alleged loss of the old certificate, a decree of a court compelling the registry, and, under the latter, an attachment i CD O •/ ' ' / or execution against the stock. 2 § 403. Alleged loss of the old certificated — According to the rule of nearly all the states a corporation is not obliged to issue a new certificate of stock to the owner of an old one, which he alleges he has lost, unless such person gives to the corporation a suffi- cient bond of indemnity to protect it against liability in case it turns out that the old certificate was not lost, but was sold and passed into bona fide hands. In New York this rule is fixed by statute. The corporation is liable to the holder of the outstanding certificate, if it is outstanding, and consequently should be pro- tected against that liability by a bond from the applicant for regis- try. In Louisiana a statutory advertisement is made and a bond of indemnity dispensed with. But in the other states the court compels the loser to give a bond, varying in amount according to the amount of the stock and the clearness of the proof of loss. § 404. Attachment or execution.* — Nearly all the states have laws whereby shares of stock are rendered subject to levy of attach- ment and to sale on levy of execution. Such attachment or execu- tion can be levied only at the domicile of the corporation, since the certificates are mere evidences of title, and the res itself of the stock exists only where the corporation is created. When, there- i See chapter XXI. s See chapter XXI. 2 But see § 488. < See chapter XXVII. 639 § 405.] RULES REGULATING REGISTRY. [CH. XX1IL fore, an execution sale, or an attachment followed by an execution sale, takes place where the corporation exists, the purchaser at such sale generally has not the outstanding certificate, but never- theless demands registry of himself as stockholder in accordance with the law authorizing the attachment and execution. In the meantime the judgment debtor whose stock is thus attached or sold under an execution generally has sold or will sell his certifi- cate of stock to a loriafide purchaser for value. If it happens that both parties claim the stock, the duty and privilege of the corpora- tion is plain. It may refuse to decide between them, and when sued by either may interplead and compel the claimants to settle the right between them in the courts. But frequently it happens that the corporation does not know whether the judgment debtor lias sold the outstanding certificate or not. By the law of most of the states, if such certificate was sold before the attachment or exe- cution was levied the purchaser would be protected, and the cor- poration would be liable to him for registering as a stockholder the purchaser at the execution sale. Accordingly, in that case, it is the duty of the corporation to refuse to register the purchaser at the execution sale. It cannot afford to take the risk, and is not obliged to take it. If the court then compels it to make the regis- try of transfer to the execution purchaser, the court will also, prob- ably, compel such purchaser to give a bund of indemnity to protect the corporation. If such a bond is not required by the court the corporation must nevertheless obey the decree. What rights the purchaser of the outstanding certificate would then have, has not as } r et been passed upon by the courts. § 405. Decree of a court that certificates he issued. 1 — A corpora- tion must of course obey the decree of a court that it issue a cer- tificate of stock to a specified person. But a court will rarely resort to such an extreme remedy where it is probable or possible that there may be an outstanding certificate in the hands of an inno- cent holder representing the same shares. As a principle of law the court has no power to decree such an issue ordinarily, since the whole capital stock has been issued, and its decree amounts prac- tically to an order to make an overissue of stock. Generally the court decrees damages to be paid, or directs the corporation to pur- chase stock for the purpose of re-issuing it to the specified party. This occurs frequently where the corporation has unjustly deprived a person of his stock. A different class of cases arises where the corporation has refused to allow a registry because the outstanding certificate is not surrendered. Such cases include those of alleged loss of certificate, an execution sale of the stock, and, possibly, a 1 See chapter XXIL 540 •CH. XXIII.] EULES REGULATING EEGISTEY. [§§ 40G, 407. suit in equity at the domicile of the corporation to recover from another stock which the complainant claims. A decree in such a suit in most states would be ineffectual to deprive of his rights one who purchased from the defendant bis certificate of stock before the decree was rendered. It would accordingly be a harsh decree that compelled the corporation to register the successful complain- ant as a stockholder. The corporation should not be compelled to assume the risk of being sued b} T the purchaser of the outstanding certificate. The complainant should be compelled to give a bond of indemnity, or else be contented with a personal judgment against the defendant. The demands of trade and of an investing public require that the safety of a purchaser of a certificate of stock should be assured, except against attachments, execution sales or decrees duly obtained and notified to the corporation before the bona fide purchaser received the certificate of stock. § 406. Theft of certificates indorsed in blank. 1 — The corporation has a duty to perform as regards certificates of stock which have been stolen from the owner who held them indorsed in blank. If the owner notified the corporation of the theft it must refuse to register a transfer to a purchaser of such stolen certificate. Since the owner's negligence may have estopped him from reclaim- ing the stock, the corporation may refuse to recognize either party as a stockholder, where there is a reasonable question of negligence, and when sued by either may interplead. If the corporation al- lowed a registry before it was notified of the theft, it is difficult to see on what principle it is to be held liable to the owner. Such a case seems not yet to have arisen. If notified of the theft before anything is learned concerning the whereabouts of the certificate, the case is to be treated the same as when the certificate is alleged to have been lost. § 407. Interpleader by the corporation. 2 — Whenever there are two or more conflicting claims made to stock and demands are made on the corporation to allow registry, it is the privilege of the cor- poration, if there is a reasonable legal doubt as to the rights of the parties, to refuse to register either party, and when sued by one to interplead and compel the parties to contest the matter between themselves in the courts. The law does not oblige the corporation to turn itself into a court of justice and decide the rights of the parties. The corporation, however, cannot interplead if it has alreadv committed itself bv registering one of the claimants as the stockholder. Nor can the corporation resort to an interpleader where one of the claimants is clearly wrong. The right of inter- pleader and the power of the corporation to refuse to register a i See chapter XXL 2 See chapter XXII. 541 §£ 408-410.] RULES REGULATING KEGISTKV. [ch. XXIII. transfer until compelled to do so by the courts, where an outstand- ing certificate is not surrendered, constitutes the two most effective safeguards of the corporation in allowing or refusing registrj^. § 408. Restrictions hy corporation on stockholder's right to sell or transfer. 1 — The law has uniformly and decisively discountenanced and overruled all attempts of a corporation to prevent the sale and transfer of its stock by the stockholder. Such attempted restric- tions are generally made by means of by-laws. Thus, a by-law re- quiring the consent of the directors or other corporate officers to a transfer, or a by-law requiring the stockholder when he sells to sell his stock to specified persons, is null and void. Restrictions may be created by a contract mutually agreed to by the stockholders, but cannot be imposed upon them by the majority of the stock- holders nor by the board of directors. When, however, such re- strictions are created by the charter, they are valid, since they arise with the corporation and stock itself. Thus, in England, the char- ter frequently authorizes the directors to refuse a registry unless the transferee is satisfactory to them. Even here, however, the directors must be reasonable in the use of their discretion. In this country the most frequent restriction created by charter is that of a lien for debts due to the corporation from the transferrer. § 409. Lien of the corporation? — The charters of many corpora- tions contain an express provision that the corporation may refuse to allow a stockholder to register a transfer of his stock until he has paid any and all debts which he may at that time owe to the corporation. Such a lien need not be stated in the certificate of stock. While it may not be created generally by a by-law, yet certain phrases in charters have been held to uphold a lien that is declared and made effectual by a by-law. Where the lien exists the corporation may refuse to allow a registry of transfer of any stock owned by the debtor until all debts due from him to the cor- poration are paid, whether due or not due, including, it seems, un- paid subscriptions. It does not apply, however, to debts due from a transferee of the certificate who never obtained registry or ap- peared as a stockholder on the corporate books. Nor does it apply to debts due from the registered stockholder, but incurred after the corporation was given notice that he had sold his stock to another. The corporation may waive its lien and allow registry without the debts of the old stockholder being paid. A registry without re- quiring payment is a waiver in itself. § 410. Formalities of registry which the corporation may insist upon}— Where, as is ordinarily the case, the owner of stock has 1 See chapter XX. s See chapter XXII. • See chapter XXXL 542 CH. XXIII.] RULES REGULATING REGISTRY. [§ 410. sold it by signing the transfer and power of attorney on the back of the certificate, leaving the names of the transferee and of the attorney blank, the corporation may require the names of the transferee and of the attorney to be filled in before it allows a registry. If it is in doubt as to the genuineness of the signature of the former owner of the certificate, it may require his presence or reasonable proof that he actually made the signature. It cannot compel the transferrer to be present, but may require the presence of the attorney authorized to make the registry. The registry itself is generally made by the corporate officer, but he may re- quire the attorney to make it. A surrender of the old certificate is required, and new certificates in the name of the transferee are issued. The by-laws may prescribe that the registry shall be in the presence of certain corporate officers. A mere request to reg- ister is not registry, although the old certificate is left with the clerk, together with the transfer, and he marks " received for record " on the same. If the corporation does not keep a transfer book or stock book, a surrender of the old certificate and the issue of a new one is sufficient to constitute a transfer and registry. The appli- cant may inquire of the corporate officer in charge for the registry clerk, and is not bound to ascertain the individual himself. Reg- istry at a branch office may not be a legal registry until entered at the main office. The corporate registry may be on its ledger with- out any issue of certificate. If it keeps no registry at all, mere notice to it of a transfer constitutes a legal registry. The corpora- tion has no right to delay registry unreasonably for the purpose of obtaining advice or for any other reasons. It may require that the power of attorney run directly from the former registered stock- holder and not from an intermediate one. A written acceptance of the stock by the transferee cannot be insisted on by the corpo- ration. The formalities of registry may be waived by the corpo- ration, and any act which indicates that it considers a transferee to be a stockholder is effectual to make him such so far as the cor- poration is concerned, though no registry was had. Either the transferrer or the transferee or an intermediate un- registered transferee may apph 7 to the corporation for the purpose of obtaining a registry. The corporation cannot refuse it merely because of the motive of the transferrer or of the transferee in making the sale and transfer. "Whenever the corporation refuses to allow a registry the applicant may sue it for damages, or he may go into a court of equit} 7 and ask that the corporation be decreed to allow registry or to pay damages in lieu thereof. A few cases hold that he may compel registry by a mandamus against the cor- poration, but the weight of authority holds otherwise. 543 CHAPTER XXIV. NON-NEGOTIABILTY OF STOCK AND DANGERS INCURRED IN THE PURCHASE OF CERTIFICATES OF STOCK. A. NON-NEGOTIABILITY. § 411. Nature and kinds of negotiable instruments. 412. Certificates of stock are not ne- gotiable instruments. 413. The term " gutm-negotiability," as applied to certificates of stock, throws little light upon tht' subject 414. The distinction between the "legal" and the "equitable" title in the transfer of certifi- cates of stock is unsatisfac- tory. 415. The only method of treatment of the subject seems to be by inquiring under what facts the holder or purchaser is pro- tected. 41G. The particular rules protecting a bona fide purchaser of cer- tificates of stock are based on estoppel. B. DANGERS INCURBED IN PURCHASING STO( K. § 417. Liabilities, risks ami rights of one . who owns or purchases a <■• r- tilicate of stock. 418. Liability on unpaid par value, that is. the unpaid subscrip- tion price of the stock. 419. Forfeiture tor non-payment of calls. 420. Statutory liability. 421. Liability where the purchaser lias the transfer made to a nominal holder. 422. No liability for assessments after the par value of stock has been paid in. § 423. Liability when stock was issued for property. 424. Liability as partners by reason of defective incorporation or for other reasons. 425. Danger of corporate lien. 426. Overissued stock. 427. Danger that transferrer or pre- \ ious holder is an infant, mar- ried woman or lunatic. 428. Purchase of stock by or from a corporation. 429. Purchase from joint owner.-. partner.- and agents. 430. Purchase of stock at sheriff "s ution sale, or from as- signee in bankruptcy, or for benefit of creditors. 481. Purchase from a pledj 482. Pledgee is protected in the same w ay as purchaser of stock. 433. Dan.' r of purchasing from an cutor, administrator or guardian. 434. I'm (base from a trustee. 435. Sale by vendor to another pur- chaser without delivery of cer- tificates of stock. 436. Danger of forgery. 187. Loss or theft of " certificates in- dorsed in blank. 438. Danger that a previous holder has been deprived of that same stock bv fraud. 439. Statute of frauds. 440. Gambling sales of stock. 441. Method of assigning a certificate of stock. 442. Registry of transfer. 443. Purchaser not affected by rights of holders of that stock back of the last registry. 444. Summary. A. NON-NEGOTIABILITY. § 411. Nature and lands of negotiable instruments. — Negotiable instruments at the present day are promissory notes, bills of ex- change, checks, bank-notes, bonds of the United States, of states, of foreign governments, of cities and counties and municipalities 544 CH. XXIV.] RISK IN PURCHASING STOCK. [§412. generally, certificates of deposit, interest coupons and bonds of corporations. 1 Bills of lading have only a quasi-negot'vdbWityr These different instruments, however, are not necessarily nego- tiable, but are so only when in writing; when containing an un- conditional promise or order to pay; when the payment is to be in money only; when the amount is certain; when it is payable to a specific person, and not in the alternative; when it is payable at a certain time; when it contains words such as " to A. or order," or " to bearer," or their equivalent; and when delivery has been duly made. 3 If the instrument is lacking in anyone of these quali- ties it falls back into the category of non-negotiable — that is, merely assignable — instruments. Again, a holder of one of the above-named negotiable instruments can have the benefit of its negotiability only when he has purchased it in good faith, for value, before the instrument was due, and without notice of the equitable rights of previous holders or makers; that is, he must be a bona fide holder. "When all these elements of negotiability and owner- ship co-exist, the advantage of negotiability over non-negotiability is this: that the holder of the instrument is entitled to the face value thereof, and his right cannot be affected, decreased or de- feated by any facts or equities between previous holders which would defeat the security as between them, unless it be void for usury or other similar cause. § 412. Certificates of stock are not negotiable instruments. — It is very clear, and it is well established, that certificates of stock are not negotiable instruments. 4 A certificate of stock is not a prom- 1 Daniel on Negotiable Instruments, mercial or negotiable paper. Leitch v. 3d ed., book VI; Dos Passos on Stock Wells, 48 N. Y., 585, 613 (1872), says: Brokers, ch. IX. As to bonds of eor- " Since the decision of the case of Mc- porations see ch. XLVI. Neil v. Tenth National Bank. . . . cer- 2 Id. See, also, Bank of Batavia v. tificates of stock, with blank assign- N. Y., etc., R R. Co., 33 Hun, 589 (1S84). ments, and powers of attorney attached, 3 Id. must be nearly as negotiable as com- 4 Certificates of stock are not negoti- mercial papers." Weyer v. Second Nat'l able. Hammond v. Hastings, 134 U. S., Bank, 57 Ind., 198, 208 (1877), says : " The 401(1890). " Certificates of stock are not difference between a promissory note securities for money in any sense ; much and a certificate of bank stock is so wide less are they negotiable securities." Me- and marked that a rule of law govern- chanics' Bank v. New York & N. H. R R ing the transfer of the former is by no Co., 13 N. Y, 599, 627 (1856) ; Barstow v. means applicable to the latter." Sewall Savage M. Co.. 64 Cal.. 391 (18S3) ; Clark v. Boston Water-power Co., 86 Mass., v. American Coal Co., 53 N W. Rep., 291 277 (1862), says: "The authorities cited (la., 1892). Weaver r. Barden, 49 N. Y., show that a certificate of stock is not a 286, 288 (1872), says that a certificate of negotiable instrument, and without any stock has none of the qualities of com- authorities it is apparent that it has not (35) 545 §§ 413. 414.] RISK IN PURCHASING STOCK. [CH. XXIV. ise or order to pay money, nor has it any of the essentials of a negotiable instrument. Moreover, it has been repeatedly decided by the courts that a certificate of stock is not negotiable, and no custom of trade or of brokers can give to it that character. §413. The term " quasiwegotiaMlity" as applied to certificates of stock, throws little light upon the subject 1 — It is little satisfaction to the court, the practitioner, the student or the owner of stocks to be told that certificates of stock have a quasi-negotia.bi\itj. The terra itself has been coined to describe the character of certain things which can be understood onlv by a studv and knowledge of the characteristics of the thing described. Especially is this true of certificates of stock. The information sought is not whether the certificate is ^^.sv-negotiable, but whether the holder of it is protected under different states of fact and circumstances. He who intends to purchase such certificates wishes to know what dan- gers or risks he incurs by the purchase. The practitioner is inter- ested, not in the general character of the instrument, but in the law as applicable to his particular case. Many of the cases concede to certificates of stock a quasirnegotmbiWtj ; but it is extremely doubtful whether such discussions do not confuse the understanding of the character of such an instrument more than they explain it. §414. The distinction between the "legal" and the "equitable" title in the transfer of certificates of stock is unsatisfactory. — Many of the cases involving the rights of a transferee of stock discuss and treat the subject from the point of view that the transferee is pro- a negotiable character." To same ef- the public convenience."' In Bank v. feet, Mandk'l:auni v. North Am. Min. Lanier, 11 Wall., 869, 377, the court Co., 4 Mich., 40)0. 473 (1857), holding, Bay that although certificates of stork however, that by statute in that state "neither in form nor character are ne- certificates of stock are practically ne- gotiable paper, they approximate to it gotiable. Shaw v. Spencer. 100 Mass.. as nearly as practical ila" 382 (1808), says: "It is clear that a cer- 'Daniel on Negotiable Instruments, titicate of stock transferred in blank is ^1708. says: "The phrase f gHnsj-nego- not a negotiable instrument. . . . liability ' has been termed an uuhappy No commercial usage can give to such one. and certainly it is far from satisfac- an instrument the attributes of negotia- tory, as it conveys no accurate, well- bility." Sherwood v. Meadow Valley defined meaning. But still it describes. M. Co.. 50 Cal., 412 (1875): Bridgeport better than any other short-hand cxpre*- Bauk v. New York & N. H. R. K. Co., 30 sion, the natuie of those instruments Conn., 231, 275 (187i), holding that which, while not negotiable in the sciim> "the certificate accompanied by the of the law-merchant, are so framed and assignment and power of attorney thus so dealt with as frequently to convev ;i- executed in blank has, perhaps, a spe- good a title to the transferee as if they cies of negotiability, although of a pe- were negotiable." culiar character, but one necessary to 546 CH. CTV 1 RISK IN PURCHASING STOCK. [§ 414. tected in his ownership when the legal title passes to him, but is not so protected when only the equitable title passes. Unfortunately it happens that, under the same state of facts, one court will hold that only the equitable title passes; another that the legal title passes; and a third court will hold that both the legal and equitable passes. The result is confusion, doubt and difficulty, with little light as to the real status of certificates of stock. 1 1 Such also seems to be the view taken in Lowell on Transfer of Stock (1884), p. 105, where the learned authors say : "It is often supposed, for example, that the right of a creditor to seize stock which has been sold before it is trans- ferred upon the books depends upon the passing of the legal title; but we shall attempt to prove that the legal title has in reality no effect upon the matter." The same authority shows the confusion resulting from this distinction of the legal from the equitable title in the fol- lowing note to page 103 : " That the legal title passes before the transfer on the books. In the following cases this is made part of the ratio decidendi: Ross v. Southwestern *R. Co., 53 Ga., 514, 532 : Merchants' Nat. Bank v. Richards, 6 Mo. App. 454, 463 ; S. C, 74 Mo., 77 ; Carroll v. Mullauphy Savings Bank, 8 Mo. App, 249. 252 ; McNeil v. Tenth Nat, Bank, 46 N. Y., 325; Leitch v. Wells. 48 N. Y., 585; Smith v. American Coal Co., 7 Lans., 317; Noyes v. Spaulding, 27 Vt, 420; Cherry v. Frost, 7 Lea, 1. In the following cases the same principle was laid down obiter: State v. Leete, 16 Nev., 242, 250 ; Eastman v. Fiske, 9 N. H., 182; New York, etc., R. v. Schuyler, 34 N. Y, 30, 80 ; Grymes v. Home. 49 N. Y, 17 ; Johnson v. Underhill, 52 N. Y. 203 ; Holbrook v. New Jersey Zinc Co., 57 N. Y., 616: Cushman v. Thayer Mfg. Co., 76 N. Y, 365 ; and see Purchase v. Exchange Bank, 3 Rob., 164. . . . That the legal title does not pass until transfer on the books. In the following cases this principle is made part of the ratio decidendi: Union Bank v. Laird, 2 Wheat, 390 ; Lowry v. Commercial Bank. Taney, 310 ; Brown v. Adams. 5 Biss., 181 ; Williams v. Mechanics* Bank. 5 Blatch., 59 : Becher v. Wells Flouring Mill Co., 1 Fed. Rep., 276; Marlborough Mfg. Co. v. Smith, 2 Conn., 579; North- rop V. Newton & Bridgeport Turnpike Co., 3 Conn., 544; Oxford Turnpike Co. v. Bunnell, 6 Conn., 552; Dutton V. Connecticut Bank, 13 Conn.. 493 ; Van- sands v. Middlesex Co. Bank, 26 Conn., 144 ; Coleman v. Spencer, 5 Blackf., 197 ; Helm v. Swiggett, 12 Ind., 194 (semble); Weyer v. Second Nat. Bank of Franklin, 57 Ind., 198; Fisher v. Essex Bank. 5 Gray, 373; Boyd v. Rockport Steam Cotton Mills. 7 Gray, 406; Blanchard v. Dedman Gas Co., 12 Gray, 213: McCourry v. Suydam, 5 Halst, 245 ; . . . Stebbins v. Phoenix Ins. Co., 3 Paige, 350; Mechanics' Bank v. New York, etc., R Co., 13 N. Y, 599; New York, etc., R. Co. v. Schuyler, 38 Barb., 534 ; Lockwood v. Mechanics' Nat. Bank, 9 R I., 308, 331, 335. In the following cases the same doctrine is laid down obiter: Black v. Zacharie, 3 How., 473 ; United States v. Cutts, 1 Sumner, 133 (this was, however, a case of govern- ment debt, not of corporate stock): Planters' & Merchants' Ins. Co. v. Selma Savings Bank, 63 Ala., 585 ; Otis v. Gard- ner, 105 III., 436 (semble); and see Kel- logg v. Stockwell, 75 111., 68 ; People's Bank v. Gridley, 91 111., 457; Bruce v. Smith, 44 Ind., 1 ; State v. First Nat. Bank of Jeffersonville, 89 Ind.. 302; Shaw v. Spencer, 100 Mass., 382 : Sibley v. Quinsigamond Nat. Bank, 133 Mass., 515; White v. Salisbury, 33 Mo., 150; Boatmen's Ins. Co. v. Able, 48 Mo., 136; . . Conant v. Seneca Co. Bank, 1 547 §§ 4:15, 416] RISK IN PURCHASING STOCK. ["CH. XXIV. | 415. The only method of treatment of the subject seems to be by inquiring under what facts the holder or purchaser is protected. — The court, the practitioner, the purchaser or the holder of cer tificates of stock wishes to know what liability and what dangers are incurred by the purchase and ownership of a certificate of stock. It becomes important for him to ascertain whether forgery or theft; or improper registry by the corporation: or breach of trust by a trustee, executor or agent formerly holding that par- ticular stock: or fraud whereby a former owner was deprived of that same stock: or legal proceedings, such as attachment, execu- tion, mandamus and decrees of the court; or any other fact or equitable right between former owners of the stock which he pur- chases, can affect him, a bona fide purchaser for value and without notice of those rights. These questions cannot be solved or an- swered by any general rules or theories, since certificates of stock have a law. an origin and a nature different from other kinds of securities. The fact that a registry of transfer is required to l><- made on the corporate books adds further complication to the rights of a holder. General rules formed from and applicable t<> other instruments or securities cannot, with any certainty, clear- ness or satisfactory results, be applied to certificates of stock. They should be treated of by themselves. The future character and status of certificates of stock will be much clearer, better and more satisfactory to the investing public if the law governing them be formed on its own l>asi<. § 416. The particular rules protecting a bona fide purchaser of certificates of stock are based on estoppel. — Nearly all if not all of the rules whereby a purchaser of stock is protected against the rights of previous holders grow out of the fact that such previous holder or holders have enabled persons to sell the stock, and con- sequently are estopped from claiming that they did not intend so to do. 1 This law of estoppel protects the purchaser against not only the rights of previous holders, but against the claims of the Ohio St.. 298 : United States v. Yaughan, troit Transit R'y Co.. 47 Mich., 338, 347 3 Binn.. 394 (semble); Bank of Com- (1882). See, also, Fatman v. Lobach, 1 merce's Appeal, 73 Pa. St.. 59; Fraser v. Duer. 854 (1852); Moodie v. Seventh Charleston. 11 S/C, 486 (*embh " Natt Bank. 8 W. N. C. 118 (1881): 'Wood's Appeal. 02 Pa. St.. G79. 390 Matthews V. Mass. Nat'l Bank, 1 Holmes. (1880): McNeil v. Tenth Nat'l Bank. 46 396 (1SS4). The agreement of a stock - N. Y.. 325. 329 (l s 71 1 ; Weaver v. Barden, holder to surrender his stock in liquida- 49 N. Y.. 286, 287 (1S72 : Moore v. Metro- tion of an unpaid assessment is without politan Nat'l Bank, 55 N. Y., 41. 47 consideration and does not bind a pur- (1873) ; Mount Holly, etc.. Co. v. Ferrie, chaser of the certificate. Hill v. Atoka, 17 N. J. Eq.. 117 (1864); Walker v. De- etc., Co., 21 S. W. Rep., 508 (Mo., 1893). 548 CH. XXIV.] RISK IN PURCHASING STOCK. [§ ^In- corporation itself. Indeed, to such an extent has the law of es- toppel been applied to protect a lona fide purchaser of stock that he is protected now in almost every instance where he would be protected if he were purchasing a promissory note or other nego- tiable instrument. The courts are steadily extending the applica- tion of the law of estoppel herein, and in the course of time it is possible that certificates of stock may become more negotiable than negotiable instruments themselves. In England an entirely different rule prevails. Certificates of stock iu that country are merely evidences of ownership of stock, and this muniment of title is not negotiable nor quasi-negotiable. The purchaser of it is not protected against equities involved in the title of prior owners of the certificate. Only a transfer on the corporate books shuts off those equities. Indeed, this rule is in- sisted upon in England so rigidly that not even the certificates of stock issued by American corporations and held by Englishmen are given the quasi-negotiability of the American law. 1 1 The English courts refuse to follow the American rule in regard to the prac- tical negotiability of certificates of stock transferred in blank, although such cer- tificates of stock are issued by an Amer- ican corporation. Hence, where the English owner of such cert'ficates de- livered them to a broker to forward to America for a transfer, and the broker fraudulently sold them for his own pur- poses to other persons, it was held that no title was conveyed to such other persons, and that the American law did not apply. The court said, however, that there was sufficient in the case to put the purchasing party upon notice. Colonial Bank v. Cady, 63 L. T. Rep., 27 (1890). As between the trustee in bank- ruptcy of a defaulter and the party to whom the defaulter has transferred shares of stock without a transfer on the corporate books, the latter is en- titled to the stock. Re Dodds, 64 L. T. Rep.. 476 (1891). In England the de- posit of the certificates with the com- pany for transfer, and the acceptance of them by the company, does not constitute a full transfer on the corporate books, and the real owner of the certificates may reclaim them before the complete transfer is made. Moore v. North, etc.. Bank. 64 L. T. Rep., 456 (1891). In the case of Simmons v. The London, etc., Bank, 63 L. T. Rep.. 789 (1890), affirming 62 id., 427. the court held that a bank to whom a broker had pledged stocks be- longing to his customer was not a bona fide purchaser, under the facts in that case, and consequently wag not pro- tected even though a bona fide pur- chaser might have been. Although in England an unregistered transferee of stock is not protected against another transfer which is registered, yet he is protected where he lodged his transfer with the corporate secretary, and the latter accepted it for transfer before the second transfer was made. Xanney i\ Morgan, 85 L. T. Rep., 238 (18S7). In England an American certificate of stock indorsed in blank gives no more rights to a bona fide purchaser than to a mala fide purchaser. Until a registry is made, the registered owner may claim his property and set up all equities to Tegain possession. "Williams r. London, etc.. Bank. 59 L. T. Rep., 643 (1888); Dodds v. Hills, 2 H. & M, 424 (1865): Roots v. Williamson, 5 L T. Rep., 802 (1888). In England certificates of stock 549 £j: 417-419.] RISK IN PUfiOHASING STOCK [cH. XXIV. B. DANGERS INCURRED IN PURCHASING STOCK. § 41T. Liabilities, risks and rights of one who owns or purchases a certificate of stock. — It is proposed to state separately and in de- tail the liabilities on the subscription price and by statute incurred by one who owns or purchases a certificate of stock; also the risks or dangers incurred by a purchase of stock as affected by the rights of previous holders of that stock; also a few of the rights of an owner or purchaser of a certificate of stock as regards the general incidents appertaining to stockholdership. These subjects are dis- cussed in full in other parts of this work, and consequently the au- thority for rules laid down herein must be sought for in those parts. The purpose here is to state succinctly and m language free from technical phraseology the position occupied by a bona n' pur- chaser of a certificate of stock. | 418. Liability on unpaid par value, that is, the unpaid sub scription price of the stock. 1 — In general the purchaser of a cer- tificate of stock is immediately liable on the subscription price of the stock so far as it has not been paid by previous holders of the stock purchased and has not been called by the corporation. The transferrer is bound to pay all calls made before the transferee purchases. If the transferee does not immediatelv register his transfer on the corporate books he is liable to pay to the trans- ferrer such calls as are made after the transfer and which the cor- poration compels the latter to pay. The transferee, it has been held, is notliable for uncalled ami unpaid parts of the subscription, even though the certificate is silent as to whether the par value of the stock has been paid in or not. Where, however, the certifi- cate states that the stock is paid-up stock, or the transferee before purchasing inquires of the corporation and is told that the stock is paid up, he may purchase in reliance thereon, and cannot after- wards be held liable, even though the stock turns out not to have been fully paid up. ^ 419. Forfeit itre far nonpayment of calls. 1 - Where the corpora- tion is given by its charter or by statute the right to forfeit and indorsed in blank convey title by estop- L. K.. 22 Ch. D., 830 (1883), gives no pel to a bona fide purchaser when the protection to the bona fide purchaser transfer need not be by deed under seal, until he is registered. See, also, Shrop- Runiball r. Metropolitan Bank, L, R, 2 shire, etc., Co. v. Queen, L. R, 7 H. L., Q. B. D., 194 (1877); Ex parte Sargent, 496(1875); Briggs v. Massey, 42 L. T . L. R, 17 Eq., 378 (1878). Hut this is 49.(1880). See, also, §§ 32*5, 377, generally not the case. Ortigosa v. supra. Brown, 47 L. J. (Ch.), 168(1877); Don- > See cb. XV. aldson v. Gillott. L. R, 3 Eq., 274 (I860) ; 2 g ee c^ V IIL and the late case of France v. Clark. 550 CH. XXIV.] RISK IN PURCHASING STOCK. [§§ 420-422. sell stock for non-payment of the subscription price when called in by the corporation, a notice to the stockholder of the intended for- feiture is always required. This notice, however, is given always to him who appears by the corporate registry to be the stock- holder. Accordingly a transferee or owner of stock who has not obtained a registry of his transfer on the corporate books is liable to lose his stock by a forfeiture for non-payment of calls, and may lose it without knowledge of the call or forfeiture unless he ap- pears on the registry of the corporation as the owner of the stock. §420. Statutory liability. 1 — The liability by statute of a pur- chaser of certificates of stock to corporate creditors, in addition to the subscription price which is treated of above, exists in a great many cases. In the first place this liability may not exist at all against any one, either transferrer or transferee. It rarely exists in the case of railroad corporations. Where the statutory liability exists the liability of a purchaser of stock is as follows: If the transferee immediately registers his transfer on the corporate books he becomes at once liable by statute for debts of the corporation contracted after such registry, and the transferrer is not liable thereon. The transferee may or may not be liable on corporate debts contracted before he purchased, according to the words of the statute creating the liabilitv. The transferrer is liable on cor- CD «/ porate debts contracted after he sold the stock but before the transfer was registered. In the latter case the transferrer has re- course to the transferee. § 421. Liability where the purchase?' has the transfer made to a nominal holder.- — Where a person purchases stock and takes it in the name of a "dummy," the stock never having been registered in the name of the real owner, the latter is not liable on such stock, according to the English rule. In America a contrary rule prevails, and the courts hold him liable on the ground that he is a principal, and as such is liable as an undisclosed principal for the acts of his agent, the "dummy." § 422. No liability for assessments after the par value of the stock has been paid in. 3 — By well-established principles of law stock- holders are liable on their stock only to the extent of the unpaid par value of the stock, unless the statute expressly provides other- wise. Neither the directors, nor all the other stockholders com- bined, in corporate meeting assembled or otherwise, can compel a dissenting stockholder to pay any more money into the corpora- tion or subject him to further liability on his stock. JSor can the i See ch. XII. * See ch. XIIL 2 See §§ 253, 265. 551 §§ 423, 421.] RISK IN PURCHASING STOCK. [CH. XXIV. legislature, subsequently to his purchase of the stock, pass a law increasing his liabilitv, unless the power to alter or amend the charter is reserved to it, in which case such a law would be consti- tutional. § 423. LwMlity when stock was issued for property.^ — Shares of stock may be issued under an agreement that payment is to be made in labor, services, material or contract work. If so issued, and the labor or material received by the corporation is fairly equal in value to the par value of the stock, the transferee of sneh stock takes it as full-paid stock, and cannot be held liable for any further amount, even though the value of the property turns out subsequently to have been overestimated, but was made in good faith. Where, however, the property is intentionally overvalued and stock is issued for it, the persons receiving the stock are liable to have the transaction set aside, the value of the property or work done credited to them, and the real value of the stock, not neces- sarily the par value, charged to them, or be compelled to return the stock. As to transferees the case may be different. If they purchased with notice of the fraud they are not protected; but if they purchased without notice or knowledge that the property was intentionally overvalued, but supposed that the stock was issued as paid up by payment in property or work taken at a bona fide value, or if they have no knowledge of how the stock was paid, but take it as paid-up stock, they may retain the stock, and are not liable for anv further amount thereon. § 424. Liability as partners b>/ reason of defective incorporation or for other reasons. 2 — Where a supposed corporation has not been duly incorporated, owing to a failure of the incorporators to com- ply with the statutory requisites, or because a corporation for that business is not provided for, the supposed corporation has been held to be but a partnership, and all the stockholders held liable as partners. A failure to file the articles of association, or to sign and publish them, or the omission from them of any of the essential facts required to be stated, however, does not ordinarily defeat the attempted incorporation and render the stockholders liable as partners. Again, the stockholders are, in some jurisdic- tions, liable to be held to be partners, as regards creditors of the enterprise, where the corporation organizes in one place and pro- ceeds to do all its business in another place. In most cases, however, the corporation has been recognized and upheld, and the stockholders protected in their limited liability. The latter class of decisions is the stronger, and certainly more to be com- mended and followed. In any case a transferee is not liable for i See cha II and IIL 2 See ch. XIIL 552 CH. XXIV.] KISK IN PURCHASING STOCK. [§§ 425-427. all precedent debts of the concern, but only for those incurred sub- sequently to the registry of his transfer. § 425. Danger of corporate lien} — Frequently corporations are given by charter or statute a lien on a stockholder's stock for debts due from him to the corporation. When such lien exists a pur- chaser of the certificate in open market buys subject to the risk that the one from whom he buys owes the corporation a debt, and that the corporation will not allow the transferee of the certificate to obtain a registry until such debt is paid. In many of the states the lien of the corporation cannot be created by by-law. Generally it exists by reason of a provision of the charter. When it does legally exist it extends to all debts owed by the last registered stockholder, whether the debt be due or not due, and includes un- called parts of the subscription price of the stock. It does not, however, apply to debts due from one who has bought and sold the certificate without appearing on the registry as a stockholder. The corporation may waive the lien, and a registry without insist- ing on the lien is such a waiver. The lien of the corporation ex- tends to debts incurred by the transferrer after the transfer but before the corporation is notified thereof. § 426. Overissued stock. 2 — The capital stock of a corporation is fixed by statute. There is no power in the corporation itself to increase that amount. It can be done only by a legislative enact- ment. Accordingly, if the corporation issues certificates of stock when the whole capital stock has already been issued, the new issue, if an equivalent amount of outstanding certificates is not surrendered, is an overissue, and is void. Any issue of stock in excess of the amount of the capital stock as fixed by the charter is null and void. The purchaser of such certificates, however, is not without his remedy. His certificate is so much waste paper, and he is not a stockholder; but he .may sue the corporation for damages, and recover to the extent of his injury. The purchaser may also sue the corporate officers who participated in the issue of the spurious stock, and may recover damages. He cannot, how- ever, hold an innocent transferrer liable. The latter, if he knew nothing of the overissue, is not to be held as a guarantor of the validity of the stock which he sells. t § 427. Danger that transferrer or previous holder is an infant, married woman or lunatic? — A purchase of stock from an infant is a dangerous investment. When the infant comes of age he may elect to disaffirm, and may hold the transferee liable for the stock, iSee chapter XXXI. 8 See §§ 65, 66, 250, 308, 318, 319, 310. 3 See chapter XVIL 553 §^ 428, 429.] BISK IN PURCHASING STOCK. [CII. XXIV. There is less danger, however, in accepting a transfer of stock from an infant who has previously purchased the stock which he sells. This previous purchase, and also his sale of the stock, are technically voidable acts; but after the stock has passed from his control the law disregards the doubtful medium of title, and con- siders the purchaser from the infant as the legal stockholder. As regards married women, the common law allowed the husband to sell her stock after he had reduced it to possession by register- ing it in his own name on the corporate books. In modern times, however, the right of a married woman to hold and convey per- sonal property as though unmarried has been established in most states by statute. Her right to sell shares of stock owned by her- self exists where she may sell other personal property similarly owned, and this right depends upon the law and statutes of her domicile. A purchase of stock from a lunatic is void. § 428. Purchase of stock by or from a corporation} — In England a corporation cannot purchase shares of its own capital stock. In this country there is a difference of opinion as to the law. The statutes governing the corporation, however, sometimes prohibit such purchases. Such is the case with national banks, and in New York with railroad and banking corporations. In any case, however,- whether the corporation purchased the stock legally or illegally, a purchaser of the same stock from the corporation itself is not affected by the invalidity of the title of the corporation. Again, it is a general rule, both in England and America, that one corporation has no right to purchase stock in another corporation. Sometimes the statutes allow such purchases, but more often ex- pressly provide to the contrary by prohibiting them. Neverthe- less, whatever rule applies to a purchase by a corporation of stock in another corporation, the law is very clear that a purchaser of such stock from the corporation is protected in his purchase. The unauthorized act of the corporation in purchasing has no effect upon the legality of its sale of the stock. § 429. Purchase from joint oivncrs, partners and agents. 2 — One joint owner cannot sell stock standing in the name of two or more as joint owners. One partner may sell and convey stock standing in. the partnership name. As regards purchases of stock from agents, greater difficulty occurs. If the purchaser does not know that the vendor is selling as an agent, but supposes he is buying stock owned by the person with whom he is dealing, the purchaser is always protected. The same rule, after considerable doubt and discussion, has been established, even though the purchaser knows that the agent is selling as agent. The sale is valid, and the pur- 1 See chapter XIX. 2 See chapter XIX. 554 CH. XXIV.] KISK IN PURCHASING STOCK. [§§ 430, 431. chaser is protected, provided he has no reason to suspect that the agent is selling in fraud of the owner's rights or in contradiction of his orders. § 430. Purchase of stoclc at sheriff's execution sale, or from as- signee in bankruptcy, or for benefit of creditors} — A purchase of stock at an execution sale by the sheriff is a dangerous investment. Almost always the judgment debtor has already sold and trans- ferred his certificates of stock to a hona fide purchaser. If such bona fide purchaser has registered the transfer on the corporate books before the attachment or execution is levied, the purchaser at the execution sale gets nothing. If no such registry has been made, but the judgment debtor sold and transferred the certificate before the levy of attachment or execution, in most of the states, including New York, such a purchaser takes title and the execution purchaser none. In Connecticut, New Hampshire and a few other states a contrary rule prevails. If, however, the judgment debtor sells the certificate after the attachment or execution is levied, the purchaser takes no title — the execution purchaser is entitled to the stock. A purchaser of stock from an assignee in bankruptcy or in- solvency, or for the benefit of creditors, takes a good title if he ob- tains the certificates of stock. If, however, the insolvent has sold such certificates to another, the latter is entitled to the stock. §431. Purchase from a pledgee? — A pledgee of stock has no right to sell or repledge the stock held as collateral by him, unless the pledgor intended that he should do so. If, however, the pledgee sells or repledges the stock to one who takes it in good faith, for value, and without notice of the fact that he is dealing with a pledgee of the stock, such a hona fide purchaser is protected. He is protected absolutely, and can keep the stock if he purchased it. If, however, he merely took it in pledge from the pledgee, he is obliged to give up the stock to the real owner, where the latter tend- ers to the repledgee the amount of the debt owed by the pledgee to the repledgee, for which the stock was given as security. Where, however, a person buys or takes in pledge stock from one who makes known the fact that he is holding the stock as pledgee, the former is not a hona fide purchaser. Moreover, he is not a hona fide holder where he would not be a hona fide holder of a promissory note transferred under similar circumstances, as, for instance, where he loans the money at an usurious rate of interest; or where he knows that the person with whom he is dealing is but an agent, and is pledging his principal's stock. In all these cases, where the pur- chaser or pledgee of stock is not a hona fide holder, the real owner and original pledgor of the stock may reclaim his stock from the » See chapter XXVL 2 See chapters XIX, XXVL 555 §§ 432-434.] BISK IN PURCHASING STOCK. [CH. XXIV. repledgee, or purchaser from the pledgee, where the original pledgor could recover it from the first pledgee. The repledgee or purchaser from the pledgee stands in the shoes of the first pledgee, and has no better rights than the latter. § 432. Pledgee is protected in the same way as purchaser of stock} The rules contained in this chapter explain the rights, dangers and liabilities incurred by the purchaser of stock. The same rules pre- vail for the most part in favor of one who receives stock in pledge. A purchaser and a pledgee are treated in the cases as being simi- larly protected or similarly not protected. There is, however, one important exception to this rule. If a person who is about to take stock from another knows that the latter is disposing of the stock as an agent, the former may purchase the stock and be protected, but cannot take it in pledge and be similarly protected. An agent to sell is not an agent to pledge. Another exception to the simi- larity of position of a vendee and pledgee of stock is that by stat- ute, frequently, the latter is not liable on stock where the former is liable. § 433. Danger of purchasing from an executor, administrator or guardian. 2 — There is practically little danger incurred in purchas- ing stock from any one of these. It is the duty and right of the executors or administrators to sell the personal property and con- vert it into money. As regards guardians they have the right to change the funds from one investment to another unless a statute prescribes otherwise. Accordingly a purchaser of stock from any one of those is protected in his purchase, even though he knows that his vendor is selling in his official capacity. If, however, the vendee knows that a breach of trust is involved or contemplated, he is not a bona fide purchaser and is not protected. All the ex- ecutors or administrators need not join in a sale of the stock owned by the estate. A sale and transfer by one is sufficient. § 434. Purchase from a trustee. 3 — An entirely different rule pre- vails as regards stock held by a trustee as trustee. A purchaser of stock which he knows the vendor holds as belonmnn: to a trust es- tate is bound to ascertain whether, by the instrument creating the trust, the trustee has a power to sell. If he has no such power, and the vendee knows that he is buving trust estate stock, the latter is not protected, but is a party to any breach of trust that may be in- volved by the sale. If, however, the purchaser has no notice or knowledge that his vendor is selling trust stock, the former is a bona fide purchaser to that extent. He is not bound to know that the stock is trust estate stock, and consequently he is protected in his 1 See chapter XIX, XXVL » See chapter XIX. 1 See chapter XIX. 556 / CH. XXIV.] RISK IN PURCHASING STOCK. [§§ 435-437. purchase. Any facts that would put an ordinarily intelligent man on, inquiry as to whether the stock belongs to a trust estate is notice, and prevents the purchaser from claiming to be a bona fide purchaser. Thus, such a notice is held to be given by the fact that on the face of the certificate of stock, and following the name of the stockholder, the word " trustee " or equivalent words are writ- ten. In California, however, the mere word " trustee" conveys no notice. § 435. Sale ay vendor to another purchaser without delivery of certificate of stock. 1 — A purchaser of certificates of stock has no reason to fear that the vendor can sell the stock to another person and thereby defeat the rights of the purchaser with the certificates. If the purchaser without certificates does not obtain registry on the corporate books, he obtains nothing as against the purchaser with the certificates, even though the latter's transaction was sab- sequent in time to the former. If, however, the former obtains registry on the corporate books, the corporation is at fault, and is liable to the purchaser with the certificates. The corporation must either issue new certificates to the latter or pay damages. § 436. Danger of forgery. 2 — Forgery cannot be the source of a good title to any chose in action, whether a promissory note, bond and mortgage, or a certificate of stock. Consequently a purchaser of stock takes the risk that some previous owner of the stock, whose name appears on the certificate either as the registered owner or as transferee, was deprived of his title by forgery. If the forgery has been made^the purchaser cannot claim or hold the stock, although he had no actual knowledge of the forgery. He, however, has recourse to his vendor, and may compel him to repay the amount paid for the stock. Where, however, the forgery was committed prior to the last registered transfer of that stock, a bona fide purchaser from or subsequent to the last registered holder of that stock is protected. All rights and equities to particular shares of stock are cut off by a registry and sale of the new certificates. The party whose name was forged has recourse then only to the corporation, or to the party obtaining registry, or to previous holders. This limitation to the dangers incident to the purchase of stock extends to other rights and wrongs as well as to a case of forgery, and is of great importance in protecting a bona fide pur- chaser of stock. § 437. Loss or theft of certificates indorsed in olank. 3 — It is ex- tremely doubtful whether a purchaser of a certificate of stock which was indorsed in blank, and which has been lost by the owner 1 See chapter XXL 8 See chapter XXI. a See chapter XXT. 557 §§ 438, 439.] RISK IN PURCHASING STOCK. [CH. XXIV. and found by another who sells it, or which has been stolen by the latter, would be protected in his purchase, even though he buys in good faith. In a case of negotiable paper, such a purchaser would, of course, be protected. But probably the purchaser of the certifi- cate of stock would not be. No case holds that he would be pro- tected, while many hold that he would not. If the real owner was guilty of gross negligence, perhaps the purchaser from the thief or finder of the certificate indorsed in blank would be protected. In one case this question of negligence was submitted to the jury. Again, sometimes a person sells stock without delivering the certifi- cate - the vendor telling the vendee that the certificates have been lost. Such a title is very precarious. The purchaser should refuse to buy until new certificates are issued b}' the corporation to the vendor — an issue which the corporation will make upon a suitable bond of indemnity being given to it by the person who alleges a loss. If the purchaser does not take this precaution, he buys sub- ject to having his title defeated by another purchaser who obtained the certificates which are alleged to have been lost. §438. Danger that a previous holder lias been deprived of that same stock by fraud. 1 — Shares of stock are the same as other kinds of property, in that a person who has been deprived of his stock by fraud cannot follow the stock and take it from the hands of a bona fide purchaser for value. The remedy of the defrauded per- son is for damages against the person defrauding him, or for a re- transfer of the stock, if the latter still holds it, together with an injunction against the transfer of the latter. But if the person ob- taining the stock by fraud sells it, even in violation of an injunc- tion, the bona fide purchaser for valueand without notice is protected. The defrauded party may, however, sue the person defrauding him in the state of the corporation, and, by an attachment or execution, obtain the stock if it has not passed into bona fide hands. Such a danger, however, is the ordinary danger of an attachment or execu- tion. A lis pendens of a suit involving stock never charges the vendo* of the stock with notice, as is the case of a Us pendens af- fecting real estate. Cases of fraud in the sale of stock frequently arise in cases of sales by agents and an appropriation of the pro- ceeds; also when fraudulent representations are made to the vendor. §439. Statute of frauds. 2 — The statute of frauds requires that sales of personal property exceeding in value a certain amount, generally fifty dollars, shall be valid and enforceable only when the property is partly or wholly delivered, or partly or wholly paid for at the time of the sale, or the terms of the sale are reduced to writ- 1 See chapter XX. * See chapter XX 558 CH. XXIV.] RISK IN PURCHASING STOCK. [§§ 440-442. ing. In this country a sale of stock must conform to this statute. Generally the sale is made by a delivery of the certificate indorsed in blank. Such a sale constitutes a delivery, and is legal, and is not void by the statute of frauds. The statute applies both to sales of stock which are considered as completed and to sales which are to be completed in the future. § 440. Gambling sales of stock} — A gambling sale or contract to sell stock is void absolutely, and cannot be enforced. As a matter of practical experience, however, it is difficult to prove that a stock sale is a gambling sale. It is such only when both the vendor and vendee intend, not to actually have a delivery of the stock, but to wait and see whether the stock rises or falls in the market, and then to settle the contract by the loser paying the loss. An intent by one of the parties that there shall be no delivery will not make the sale a gambling one. It must be the intent of both. § 441. Method of assigning a certificate of stock. 2 — A certificate of stock is generally assigned by the owners signing the blank trans- fer and power of attorney on the back of the certificate. The transfer gives title to him whose name is afterwards filled into the blank transfer thus signed. The blank power of attorney is for an entirely different purpose. It enables the person whose name is filled in to register the transferee as a stockholder in the corporate books. Generally the power of attorney is filled in with the name of a clerk or agent of the transferee, or a clerk of the corporation who has charge of the registry books. After the registered holder has signed the transfer, leaving the transferee's name in blank, the certificate passes from hand to hand until some holder cares to fill his name into the blank. He may then obtain registr\' - , or he may execute another transfer and sell the certificate. Transfers need not be under seal in this country. In England, by statute, they generally are required so to be. §442. Registry of transfer. 2 — A registry of transfer is made by surrendering an old certificate of stock to the corporation, making an entry of the transfer on the corporate registry, and taking from the corporation a new certificate issued in the name of the transferee. The entry is generally made by a corporate officer, but he may insist on its being made by the person apply- ing for transfer. The object of obtaining the registry is to obtain a right to vote, to receive dividends, and various other incidental stockholders' rights; also to cut off corporate liens and the rights of third parties who may attach or claim the stock. If there is a reasonable legal doubt as to the right of the applicant to obtain registry, the corporation may refuse it, and thus obtain the protec- i See chapter XX. 2 See chapter XXII. 5j9 §§ 443. 444.] PJSK IN TUKCHASIXG STOCK. [ch. XXIV. tion of being compelled to make it by legal proceedings. If two parties claim the stock, each denying the right of the other, the corporation may interplead, provided there is a reasonable legal doubt as to who is entitled to the stock. If the corporation im- properly refuses to register a transfer when requested, the applicant may have his remedy in damages, but in most states cannot have a mandamus. § 443. Purchaser not affected by rights of holders of that stock lack of the last registry. 1 — This rule is peculiar to stock certificates, and cuts off rights even of a former owner who has been deprived of the stock by forgery. In this respect certificates of stock are more negotiable than negotiable paper itself. The person who obtains registry first, after the illegal act has been done, is not pro- tected by this rule. But his bona fide purchaser of the new certifi- cates and all subsequent purchasers are protected, and cannot be compelled to give up the stock to the prior owner who was de- prived of it illegally. § 444. Summary. — It will be seen, by a review of the sections of this chapter, that the dangers of loss incurred by the purchase of a certificate of stock are not serious or numerous; and it is well that such is the result. Perhaps the most striking industrial feature of modern times is the accumulation of personal property, and the in- vestment of that property, not in landed estates, but in the stocks and bonds of corporations. Such investments are made, not alone by capitalists, but by thousands whose savings have no other satis- factory mode of disposition. The constant tendency of the statutes and of the decisions of the courts to protect lona fide purchasers of certificates of stock is to be commended and aided. Beyond all question, the surplus wealth of the future will be invested in cor- porate bonds and stocks. It is well, then, in these days of the forma- tive period of the lawgoverning stock, that the principles governing the transfer of certificates should be formed for the protection and security of an investing public, and should be against secret liens, attachments, claims and negligence of both the corporation and third persons. 1 See §§ 367, 369. 560 PART III. MISCELLANEOUS EIGHTS OF STOCKHOLDERS. CHAPTER XXV. STOCK-BROKERS AND THEIR CONTRACTS. § 445. Definitions and scope of the sub- ject. 446. ~\\ ho may be a broker and cus- tomer. 447. Facts making person a broker or customer unintentionally. 448. Broker must obey specific orders of customer. 449. Must act in good faith and in reasonable time. 450. Cannot purchase from or sell to himself. 451. Duties and liabilities of cus- tomer towards broker. 452. Duties and liabilities of a broker towards customer. 453. Method of completing a broker's contract. ,5 454. 455. 456. 457. 458. 459. 460. 461. 462. Privity of contract between broker and opposite parties. Privity of contract between the opposite customers. Intervening sub-brokers and sub-customers. Purchases or sales on margins — Broker as a pledgee. Broker's rights and duties on failure of margin. What will excuse notice and de- mand for more margin. Customer's remedies and dam- ages herein. Broker's remedies and damages herein. Broker's customs and usages. § 445. Definitions and scope of the subject. — By far the greater part of purchases and sales of stock is made, both in this country and in England, through organizations specially formed for that purpose and called stock exchanges. A stock exchange is a place of business where those who make up the membership of the ex- change buy and sell stocks and bonds. These persons are called stock-brokers. A stock-broker is one who buys and sells stock as the agent of another, the latter being called a customer of the stock-broker. 1 Accordingly, in an ordinary purchase of stock through stock-brokers, there are. generally, at least four persons 1 In Sibbald v. The Bethlehem Iron Company, 83 X. Y., 378 (1SS1), Finch, J., favors the definition from Pott v. Turner, 6 Bing., 702, 706, where a broker is defined as " one who makes a bargain for another and receives a com- mission for so doing." Storv on Agency, § 28 (9th ed.), says: '-The true definition of a broker seems to be that he is an agent employed to make bargains and contracts between other persons in matters of trade, commerce or navigation, for a compensation com- monly called brokerage." 36 561 § 445.] BROKERS AND THEIR CONTRACTS. [CH. XXV involved — the two brokers and their respective customers. Stock- brokers have a language of their own. They have coined and put into general circulation certain phrases and terras descriptive of their business. These terms have become so closely identified with the subject of stock and transactions in stock that the courts have defined their meaning and explained their application. 1 1 A " bull " is a dealer who endeavors to make the price of stocks go higher. A " bear " is a dealer who endeavors to make the price of stocks go lower. A "short" sale is a sale of stocks which the seller does not possess, but which he expects to purchase later on at a lower figure, thus fulfilling his coutract and making profit by the decline. In the meantime the broker generally borrows the stock from other parties to deliver to the vendee, and to be returned to the person loaning the stock at the end of the transaction. The broker is bound to continue the transaction for a reason- able time. The customer deposits with the broker a small amount of money as security, called a margin, and he is bound to keep the margin good. Hess v. Rau, 95 N. Y.. 359 (1884); Winter. Smith, 54 N. Y., 522 (1874); Knowlton v. Fitch, 52 N. Y, 288 (1873) ; Appleman v. Fisher, 54 Md., 540 (1871); Sistareu Best, 88 N. Y, 527, 533 (1882). A " long " purchase of stock is a purchase in the expectation that the stock will rise in value. Stock options are of three kinds — puts, calls, and straddles. A "put" is a contract whereby a person has the privilege of requiring another person to take from the former certain specified ntock at a specified price at any time within a specified period of time, the former not being bound to sell. See Bigelow v. Benedict, 70 $T. Y, 202 (1877). A "call " is a contract whereby a person has the privilege of requiring another person to sell or deliver to the former certain specified stock at a specified price at any time within a certain specified period, the former not being bound to purchase. A " straddle '" or "spread-eagle" is a combination of a put and a call. It gives a person the double privilege of delivering to or de- manding from another person certain stock at a certain price within a specified time. Harris r. Tumbridge, 83 N. Y.- 92 (1880); Story v. Salomon, 71 N. Y. 420 (1877). A ' corner" exists where the "bears" have sold a large quantity of stock "short," and cannot borrow the stock to fill their contracts, but must buy it from those who have cornered the market on that stock. See Cameron v. Durkheim, 55 N. Y, 425, 438 (1874). As to the legality of these various trans- actions, see §§ 341-348, especially § 344, n. It is not fraud for the owner of the larger part of the capital stock of a corporation to "corner" the market, that is, to enter into contracts with vari- ous parties to purchase stock of the cor- poration, although he knew that such contracts could not be fulfilled by such parties by reason of the fact that he himself held such stock, and it could not be obtained elsewhere. The same rule prevails although such person of- fered the stock for public subscription and purchased the greater part himself. Salaroan v. Warner, 64 L. T. Rep.. 598 (1891). A "loan" of stock is still another transaction. The initiated do not re- quire to be told that when a man sells stock on the exchange he must deliver it, and if he does not own any he must borrow it of some one who does. When he borrows the stock, he advances the market price of it to the lender, who pays interest on this money. The trans- action is really a call loan. The lender of the stock can call for his stock at any- time, and the borrower can call for his 562 CH. XXV.] BROKERS AND THEIR CONTRACTS. [§§ 446, 447. This chapter treats of the rights, duties and liabilities of stock- brokers. 1 There are various incidental subjects, however, which enter largely into brokers' contracts, such as pledges of stock 2 and gambling sales of stock. 3 These subjects are fully treated elsewhere. § 446. Who may be a broker and customer. — Any person may be a stock-broker who may make a contract, but it is beyond the power of a national bank to act as a broker. 4 Strict rules prevail as to who may be a customer. An infant is not bound by his contracts .with or through a stock-broker any more than he is bound by his other contracts. Moreover, if the broker carries on stock transac- tions for an infant he is liable to the latter for all moneys lost thereby. 5 Again, a broker who sells or buys stock in the name of an infant is himself liable to the other party in case the contract is not completed by reason of such infancy. 6 On the other hand, if the broker's customer hands in the name of a third person, an infant, as the seller or purchaser, such customer is liable to the broker for liabilities thereby incurred by the latter. 7 § 447. Facts malting person a broker or customer unintentionally. The relationship of broker and customer may be established and exist although one of the parties is personally ignorant of such a relationship. 8 A broker also may be liable as such in transactions money. When a strong bearish feeling is running, and too much short selling has been indulged in, stocks become scarce, and those who have them will only lend at a concession, either at less than current interest rates; or "flat," that is, without interest ; or actually at a premium, according to the urgency of the demand. 1 See, also, on this subject, Lindley on Partnership, 721, etc 2 Ch. XXVL 3 See ch. XX. 4 First Nat'l Bank of Allentown v. Hock, 89 Pa. St., 324 ; Weckler v. First Nat'l Bank, 42 Md., 581 (1879). But Williamson v. Mason, 12 Hun, 97 (1877), holds that a bank has power to take stock from a customer and agree to sell it and credit customer with the proceeds, and that the bank is liable for the con- version of such stock by its cashier. SRuchizky v. De Haven, 97 Pa. St.. 202 (1881). The transactions in this ca-e were held to be gambling contracts. Heath v. Mahoney, 12 Week. Dig., 404 (1881). The broker himself may be an infant and may repudiate his obliga- tions. See 4 Law Notes, 314. « Nickalls v. Merry. L. R., 7 H. L., 520 (1875) ; Heritage v. Paine, 34 L. T., 947 (1876); Maxted v. Paine, L. R, 4 Ex., 81 (18691 The first case holds him lia- ble although ignorant of the infancy of his customer. See same case, Merry v. Nickalls, 41 L. J. (Ch.), 767 (1872). Broker is liable although the name of the in- fant was passed to him by another broker. Dent v. Nickalls, 29 L. T., 536 (1873). It is no defense to the broker that the infant's father was the real customer. Nickalls v. Eaton, 23 L. T., 689 (1871). See, also, § 250, mpra, as to liability to the corporation. : Peppercorne v. Clinch, 26 L. T., 656 (1872). 8 Thus the customer may be bound by the acts of his clerk. Webb v. Chal- loner, 2 F. & F, 120 (1860). So also where the firm does a broker business through its agents, the transactions by the agents on their own private ac- 563 448.] BROKERS AND THEIR CONTRACTS. [CH. XXV. where he had no intention of incurring any liability. 1 A broker is nothing more nor less than an agent for a special purpose. The agency may arise by the acts of the parties without any specific agreement. § 448. Broker must obey specific orders of customer. — A broker is bound to obey and carry out strictly the orders of his customer in the purchase or sale of stock. This rule is rigidly insisted upon by the courts. The orders of the customer ma} r be such as he wishes to give, and when given they must be obeyed, or liability will be incurred by the broker. 2 When the customer fixes a limit at which the broker may purchase, the latter cannot bind the cus- tomer by a purchase at a higher figure. 3 Frequently the customer gives to the broker a "stop order," which is an order to sell or buy, as the case may be, at a certain specified figure, or upon a specified contingency. Under this order the broker must sell or buy when the price or contingency occurs, but not until after it occurs. If the market changes too quickly for him, he must sell or buy at the market price immediately after the fixed price or contingency arises. 4 The customer may leave it in the discretion counts, but ostensibly for the firm, will bind the firm. Wells, Fargo & Co. v. Welter, 15 Nev., 276 (1880). Cf. 6 N. Y. Supp., 665. 1 As where he continues to allow his name to remain in the firm name after its dissolution. Hixon v. Pixley, 15 Nev., 475 (1880). Also where one of the firm is a trustee and defaults therein, the firm having charge of the trust es- tate's stocks. De Ribeyre r. Barclay. 23 Beav., 107 (1856). As a silent partner lie cannot prevent a customer from set- ting off against a liability a debt per- sonal to the ostensibly sole broker. Read v. Jaudon, 35 How. Pr., 803 (1868). A stock-broker is bound to obey orders promptly. Galigher v. Jones, 129 U. S., 193. 2 Parsons v. Martin, 77 Mass., Ill (1858). Tims, where the customer au- thorizes a sale if the stock goes down to 51, but the broker sells when it goes down to 52, he is liable for an unauthor- ized sale. Clarke v. Meigs. 10 Bosw.. 337 (1863). Cf. Whelan v. Lynch, 60 N. Y. r 469 (1875) : Jones v. Marks, 40 111., 313 (1866). But the broker may correct a palpable error in the order given him by his customer. Luff man v. Hay, 13 N. Y r . Week. Dig., 324 (1881). :J Whether a limit was fixed is a ques- tion for the jury, if the facts are dis- puted. Cf. Smith v. Bouvier, 70 Pa. St., 375 (1872). The customer may ratify the unauthorized purchase. Genin v. Isaacson, 6 N. Y. Leg. Obs., 213 (1848). If the power to sell depends on the con- struction of writings, it is a question of law only. Davis v. Gwynne, 57 N. Y.. 676 (1S74) ; S. C, 4 Daly, 218 (1871). But the written order may be subsequently modified by parol. Burkitt v. Taylor, 86 N. Y., 618 (1881); Clarke v. Meigs, 10 Bosw., 337 (1863). Or be waived. Hope v. Lawrence, 50 Barb., 258 (1867), 4 Porter v. Wormser, 94 N. Y., 431 (1884); Bertram v. Godfrey, 1 Knapps Rep. P. C. 381 (1830). The latter case involved an absolute order to sell should the stock reach a certain price. Where a broker is carrying a "short" sale on a "stop order," and purchases before the price of the "stop order" is reached, and the customer a week later then orders the broker to purchase, the purchaser may recover the profit that a purchase at the latter date would 564 CH XXV.] BROKERS AND THEIR CONTRACTS. [§ 449. of the broker as to the best time for buying or selling. 1 When this is done the broker must exercise such discretion in good faith. and with reasonably good judgment and care. 2 § 4:4:9. Must act in good faith and in reasonable time.— The broker must make the purchase or sale in good faith on the best terms possible, and must give the enstomer the advantage of the transaction as actually made. Any material failure to do this, or to make the sale or purchase as directed, will release the customer from the transaction, although it was reported to him as made in accordance with orders. 3 The broker is allowed a reasonable time within which to make the sale or purchase. 4 have netted. Campbell v. Wright, 118 N. Y., 594 (1890). Brokers cannot disre- gard a " stop order," and act before that price is reached, even though prices are fluctuating rapidly. Id. See, also, §459. 1 Such discretion when given is re- voked only by clear notice of revocation. Davis v. Gwynne, 4 Daly, 218 (1871). 2 Harris v. Tumbridge, 83 N. Y., 92 (1880). 3 Where the broker buys in his own name at a price less than the price re- ported to the customer, sells without notice, and subsequently pretends to sell again, the whole transaction is void as to the customer. Levy v. Loeb, 85 N. Y, 365 (1881) ; 89 id., 386. So, like- wise, where he purchases an option in- stead of cash purchase, and reports a higher price than that paid. Voris v. McCready, 16 How. Pr., 87 (1856). So, likewise, where the broker varies the order from a cash purchase to an op- tion, he himself taking the risk of the option. Dey v. Holmes, 103 Mass., 306; Pickering v. Demerritt. 100 Mass.. 416 (1868). A broker who sells bonds and then reports no sale, but loans money to the customer on the bonds as collat- eral, may be held liable to account for the sale. Bischoffsheim v. Brown, 34 Fed. Rep., 145 (1888). ■* Fletcher v. Marshall, 15 Mees. & W., 755 (1846). Cf. Dickinson v. Lilwal, 1 Starkie, 128 (1815), which holds that the transaction must be carried out on the day of the order. The broker is en- titled to his commission although his customer fails before the transaction is made. Inchbald v. The Western Coffee Co., 43 L. J. (C. P.), 15. The contract is to be carried out within a reasonable time. A broker's custom is evidence as to what is reasonable time. Stewart r. Cauty, 8 Mees. & W., 160 (1840). A few hours' notice held insufficient. Johnson v. Mulvy, 51 N. Y, 634 (1872). '-Usu- ally the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject of course to the right of the seller to sell independently. But that having been granted him, the right of the principal to terminate his authority is absolute and unrestricted, except only that he may not do it in bad faith and as a mere device to es- cape the payment of the broker's com- missions." Sibbald v. The Bethlehem Iron Co., 83 N. Y, 378. 384 (1881). A customer is under no obligation, when he learns that his broker has not sold stock as ordered, to notify the broker that he abandoned any claim to the stock and held the broker responsible for their value. Nor is he obliged to re- deem the stock from the sub-broker. Allen v. McConihe, 124 N. Y, 342 (1890). In this case the court allowed as dam- ages against a broker who delayed sell- ing when ordered to sell, the difference between the price when the order was given and the price when the sale was actually made. Where for four years both the broker and the customer have apparently abandoned an alleged pur- 565 §§ I ■ 51.] BBOKEBS AND THEIU OONTRAf [CH. annot purchase from or sett to himself.— A broker can- not, in behalf of his customer, buy or sell with himself as the other principal. The law will not allow him to act both as agent ami as principal at the same time. Such an act is a constructive fraud on account of his fiduciary relation, and will be set aside. 1 Custom or annot Legalize such a transaction. 3 The broker ma v. how- eve:. by parol evidence that he did not deal with himself, though writings indicate otherwise. 1 And there is no rule which prevents the broker from acting as agent both for the selling and the buying customer. 4 ■ 151. Duties and UabUiti towards broker, A stock-broker is but the agent of his customer. Aa such he mav - bind his stomer by acts within the - e of his authority, and compel the customer to respond to his liability. Thus, the br< may proceed the transaction, paying out his own money as though it was his own business, and may then compel the customer to repay to him the money so expended in the customer's behalf. 1 chase of stock on a margin, it tion for the jury whether ther abandonment or whether the i oued to be liable. v . .n r. brokt-r ordered to porchasi on a _in need r. dry porchas once. Ir is sufficient if he ly to fulfill when cali : the price on the day of the giving of the order. Ingraham r. Taj Atl. Rep. 601 i Mayo r. Knowlton, 134 X. Y. »•. Bot \ v.. 4-:: kman v. Rothschi Kfarye v. Stroma, 5 Foil. Rep. 183(188 U Uett, L K.. : H. L., 803, 818, 82 374) Even tl; the purchase was in good faith and at a than the market | 58 X. Y.. 48E Gillett v. Pe ne. 3 Beav.. 3 In Bryan r. Baldwin. 53 N. Y.. 832 87 the court say : " The plaintiff, being -tx-k. and in that char- acter exposing it foi - raid n> purchaser unless the del' ant assented to such pur ■310: Torry r. Bank of Or- leans. 7 Paige, 64S 1842); Hawl Cra:.- 3 ~." - sale to plaintiff was I table at tl tn of the defendant Ed- wards on Bailment- - The defend- ant was at liberty to ratify the sale, and had - ;t would bare been valid J] porpoaea The ratification would hav, it lawful, and relieved it from any imputation of b- tious him. . . . But the defer has • but has elect- the purchase by the plaintiff as illegal. Th> - the sale, and that _- avoided by the dt: . the part remitted to their rights the same as though no sale had been at- tempted." tonwealth r. Cooper. 1 381) The custom of brok. buy in large quantities and sell in small quantities is illegal. Robinson a lett. L R.. 7 II. I.. - . -71). > Porter r. Wormeer, 94 N. Y.. 431 ♦Knowlton r. Fitch. IS K Y.. M 5 B Wilk ins. 7 C. I Whitehooaa n Moore. 13 ; S : Dails 1. 12 C. B.. 53! - n, 3 De G., M. & G., 556 353> 5(N XXV.] THEIE C05 TE ACTS. L5S rrv out the transaction, tbe broker may settle with the opposite party by paying the loss incurred by !ng or selling the stock eh nd may then sue his cus- mer for the diff< . - thus paid. 1 rer his dis- bursements, commissions and ir." The customer is liable to the : -d. although the : turns out to be spur r unauth' If the brol: " over the full value of the b he must first tender the stock to the or he mi - sell it after due I I ) the customer, and - accm in the Ef he is seeking to re .rer for diffe - paid the - te ker in settlement, assui \ s his I clear! - bat the customer authorized the "_'. Duties and —The rtain d and incurs certain liabilities in his rani .-. T -: ? Mass - 3 Bay line r Bu rth. 5 Raihv. Cas.. Parke. B. ; Mai L. T.. 561 187C : Biedenuan v. 5! , L_ a . - - ind inte were paid to other brok charged to stonier. Robinson r. - " I . ■ I though -jrious. Smith v. Heath. 4 On com- mi.-.- - chbald v. "Western Cof - L J ex- uses will not be allov >h -.omary. Mary Rei - - 1 880 . But the titled to commissi - nly when he has rendered some - :omer. - bald v. ' hem Iron I N. Y.. 376 1881): Hoffman r. L ng- ston. 46 V Y. Super. Cl 552 SE The case of Hatch v. Dong - 116 (1880), holds that tomary monthly charges and in! n- son Hue 1875> The broker may recover from the principal the purchf- ks bought the broker, bat not delivered, before the corpora tion becai- ".vent Chap- man v. Shepherd. L R. 2 C. P. Mem era of syndicate are jointly lia- ble to a broker employed by them. 56 :.:.-...' 121 J\. Y. . - - Adamson v. Jarv:';. 1 B g I 6 I93fi 7 J eckham v. Ketchum, 5 E also, for spurious stock innocently given to the broker to sell. - : laman, 8 C. B., 345 - * Merwiri r. Hamilton. 6 Duer. 214 Bell, 3 Com. B But after once tendering it he rep it on hand. - .:. 64 Pa In B k r. Tormey. 32 Md.. 169. the necessary al g us were held to be a purchase of stock according to an order, at fair market price, which was paid, and the custon: • :.ed and pay- ment demanded : willingness to deliver - : refusal of customer to pay ; fsale: a proper sale and loss, ■llock r. 81 ES.12Q.] 365(1848 . b ild v. Morley, 8 Term R, 610 Ifi '■ Ward r. Yan Duser, 2 Hall K Y ~ ..In White r. Baxter, 71 EL Y.. • the court held that a cus- th his broker to latter again-: lose from I -" : -xchange for non-com- pliance with its rules is a valid and en- Table contract. 452.] BROKERS AND THEIR CONTRACTS. [CH. XXV relations towards his customer. It is said that he cannot sell on credit, since that is not the usual course of his business. 1 He is liable in damages for failure to buy or sell in accordance with his express orders. 5 * Where the customer fails to carry out the trans- action, but the broker does carry it out at a profit, the profit be- longs to the customer. 3 But the customer is not entitled to stock held for him by the broker until he pays the broker all his reason- able disbursements thereon. 4 The broker may deposit a margin with the opposite broker, according to custom, and not be respon- sible to his customer if it is lost, 5 although the rule may be other- wise as to a delivery of the stocks themselves. 6 The broker is required to exercise reasonable diligence and care and no more. 7 The broker b&s a lien on the customer's property in his hands for all debts due to the former. 8 But he has no such lien if he knows that the customer is acting as agent for another. 9 It is a question of doubt whether a broker who has received in good faith com- missions from a person guilty of embezzlement is liable to pay over to the persons injured by his customer commissions so received. 10 A broker may, by bill of discovery, be compelled to disclose acts i 2 Kent's Com., 622 (b). 12th ed. 2 Speyer v. Colgate, 4 Hun, 622 1 1 875 ; Whelan v. Lynch, 60 N. Y, 469 (1875), the case of a wool-broker. Sec. also, Jones v. Marks. 40 111., 313 (1806). The damages may sound in tort, thus | in- venting a release in bankruptcy from barring the action. Parker v. Crol. 5 Bing., 63 (1828). Under the New York code he may be arrested if he does not use the money for the purpose desig- nated. Dubois v. Thompson, 1 Dal}\ 309. And in England he is liable criminally. Regina v. Cronmire, 54 L. T. Rep., 580 (1885). » Fowler v. N. Y. Gold Ex. Bank, 67 N. Y, 138 (1876). •»See McEwan v. Woods, 11 Q. B.. 13, where the broker paid calls made on the stock after its sale. &Gheen v. Johnson, 30 Pa. St, 38 (1879). 6 Brown v. Boorman, 11 CI. & F.. i (1844). -Phillips v. Moir, 69 111., 155 (1873); Gheen v. Johnson, 90 Pa. St, 38 (1879). As to the construction of a contract wherein the broker invests the cus- tomer's money as the broker sees tit. and the broker guaranties the return of the capital and interest and all profits made, sec /// re Assignment of Ver- milye, 10 Atl. Rep., 605 (N. J.. 1887). As to the liability of stock-brokers and job- bers and vendees towards the vendors, see, also. White & Tudor'a Leading Cases in Equity, vol. I. pp. 922-929. 5 Jones v. IVppercorne, 5 Jur. (N. S.), Pt 1. p. 140. ■'Fisherr. Brown, 104 Mass., 259(1870) ; Pearson v. Scott, L. R., 9 Ch. D., 198 (1878). io See Butler v. Finck, 21 Hun, 210 (1880). The case of Taft v. Chapman, 50 N. Y, 445 (1872), seems to hold that the broker is not liable where he acted without knowledge of his customer's acts. See, also, S. C. under name Brown- son v. Chapman, 63 N. Y., 625 (1875). Sec. als<\ Porter v. Parks, 49 N. Y., 564 (1872), § 350, n. The case Kissam v. An- derson, 145 U. S., 435 (1892), reversed the decision below (Anderson v. Kissam, 35 Fed. Rep., 699, holding the broker liable) on the ground that it was for the jury to say whether the bank, whose funds were used by the president to pay the broker, had notice of payment by 568 CH. XXV.] BROKERS AND THEIR CONTRACTS. [§§ 453, 45 I . amounting to misconduct. 1 The question of the broker's liability, where the stock delivered by him to his customer is forged or stolen stock, is considered elsewhere. 2 §453. Method of completing a broker's contract— The formal- ities and method of completing a stock-broker's contract are gov- erned largely by the usages of the stock exchange. It is well established law that, when a man sells or buys shares through his broker on the stock exchange, he enters into an implied contract to sell or buy according to the custom and usages prevalent in that body. 3 These usages and customs are to be found, for the most part, in the rules of the stock exchange, so far as the formal- ities of completing the contracts are concerned. Occasionally, however, such formalities are reviewed and sanctioned by the courts. 4 § 454. Privity of contract between IroTcer and opposite parties — A broker who buys or sells stock does so subject to certain liabili- ties towards the parties to whom he sells or from whom he buys. If he does not send in the name of his customer, he is liable on the transaction as though he were the principal himself. 5 He has been held liable for a forgery perpetrated by his customer. 6 Where-, however, the broker hands in the name of his customer, and that name is accepted, the broker is thereby discharged, 7 unless, of course, the name is unauthorized, or is that of an infant. 8 Upon the disclosure by the broker of his customer's name, the opposite the broker to the president. A broker in equity, to register the transfer made who takes money as a margin, knowiflg through brokers. Paine v. Hutchinson, that the money comes from a trustee L. R., 3 Eq. Cas., 257 (1866). and is trust estate money, is liable to 5 Wynne v. Price, 3 De G. & Sm., 310 the estate for money lost thereby. Leake (1849). v. Watson, 20 Atl. Rep.. 343 (Conn., 1890;. « Royal Exchange Ins. Co. v. Moore, i Green v. Weaver, 1 Sim., 404 (1827). 11 Week. Rep., 592 (1863). The broker See Raulings v. Hall, 1 Carr. & P., 11 herein sold in his own name, but the op- Mg23). posite party knew he acted as a broker. 2 See ch. XXI; also, see Andrews v. ^ Maxted n Paine (2d action), L. R., 6 Clark, 20 Atl. Rep., 429 (Ind., 1890). Ex., 132 (1871), holding that the broker 3 s e e §462. does not guaranty his customer's re- * Thus, a usage by which the ultimate sponsibility, nor that he is the real pur- purchasers name is handed to the seller chaser. So also of the stock-jobber. for the purpose of having the latter ex- Grissell v. Bristowe, L. R, 4 C. P., 36 ecute a transfer to the former is upheld. (1868). Contra, Cruse v. Paine, 37 L. J. Sheppard v. Murphy, 16 W. R, 948 (1868). (Ch.), 711 (1868). The custom of giving the seller time to 8 See § 446. Broker handing in the investigate and object to a purchaser name of a customer without authority may be insisted on by the seller. Sum- is himself liable. Maxted v. Norris, 21 ner r. Stewart. 69 Pa. St., 321(1871). The L. T., 535. Cf. Shepherd v. Gillespie, purchaser may be compelled, by a bill L. R., 5 Eq. Cas., 293 (1867). 569 §§ 455, 456.] BROKERS AND THEIR CONTRACTS. [CH. XXV. party has the option of holding either the broker or his customer responsible, but cannot hold both. 1 § 455. Privity of contract between the opposite customers. — When the broker of one customer has agreed with the broker of another customer on the terms of a purchase and sale of stock, there im- mediately arises a privity of contract between the two customers. The purchasing customer is liable to the selling customer for all calls and liabilities arising on the stock after the broker's contract is made, if the selling customer is obliged to pay such liabilities by reason of his being the registered stockholder. 2 So also the pur- chasing customer may hold the selling customer responsible for the carrying out of the contract. 3 It has been held that the remedy may be an action at law 4 or in equity. 5 The right of set-off for other debts applies as between the two customers, 6 but not for debts due from one of the brokers to the opposite customer. 7 § 450. Intervening sub-brokers and sub-customers. — Where a cus- tomer's broker employs another broker to transact the business, the customer cannot compel the second broker to complete the contract as he might compel the first broker. 8 The second broker cannot claim a lien on the stock for debts due him from the first broker. 9 If the first broker merely introduces the parties he can- 1 Watson v. Miller, 11 Week. Notes, 18(1876), A custom or usage releasing the broker from this liability is void. Magee v. Atkinson, 2 Mees. & W., 440 (1837). Cf. Jones v. Littledale, 1 Nev. & Per., 677 (1S37), the sale being of hemp. Also Thomson v. Davenport, 9 Barn. & Cr., 78 (1829), holding that the purchaser's option remains open until the name of the undisclosed principal is given. It is for the jury to say which one the opposite customer gave credit to, irrespective of a stock exchange cus- tom. Mortimer v. McCallau, 6 Mees. & W.. 58 (1840). 2 Hawkins v. Maltby, L. R, Ch. App., 200 (1869); affirmed, S. C, L. R, 6 Eq., 505 ; Evans v. Wood, L. R, 5 Eq. Cas., 9 (1867); Hodgkinson v. Kelly, L. R, 6 Eq. Cas., 496 (1868); 37 L. J. (Ch.), S37; Remfrey v. Rutter, 1 Ell., Bl. & Ell., ss; (1858); Allan v. Graves, 39 L. J., 157 (1870). A stock exchange custom, mak- ing the broker a principal, does not pre- vent the customer suing as principal. Laugton v. Waite, 16 W. R, 508 (1868). Refusal of directors to register the sale does not enable the purchasing customer to recover back the purchase price. Stray v. Russell, 1 El. & El., 888 (1859). 3 Even though the selling customer did not authorize the use of his name. but knew of it and did not object. Shepherd v. Gillespie, L. R., 5 Eq. Cas., 293 (1807). 4 Street v. Morgan, L. I!., I Ex., 3s J. See, also. Davis v. Haycock, L. R, 4 Ex., 373(1869). 5 Sheppard v. Murphy, 16 W. R, 948 (1868). 6Carr v. Hinchliff, 4 Barn. & Cr., 547 (1825). 7 Fish v. Kempton, 7 C. B., 687 (1849). See, also, Sweeting v. Pearce, 7 C. B. (N. S.). 449 (1859). Unless, possibly, where the customer supposed the op- posite broker was the principal. See Keller r. Munson, 7 Mass.. 318(1811). 6 Booth v. Fielding, 1 Week. Notes, 245 (1866). 9 Fisher v. Brown, 104 Mass., 259 (1870). 570 CH. XXV.] BROKERS AND THEIR CONTRACTS. [§ 457. not charge a commission therefor, although custom allows it. 1 The real customer may hold an intermediate customer liable. A sub- broker or correspondent broker is not obliged to ascertain the re- lations and agreements between the chief broker and the customer. The sub-broker may hold all stocks as security for all accounts be- tween himself and the chief broker, there being no notice given of the customer's rights. If there is any surplus after the sub-broker's debt is paid, a customer who placed his own stock in the chief broker's hands to sell is preferred to another customer who had purchased on a margin and left the stock as security. 2 If brokers in New York take orders through a local broker in another place, they are liable for false and fictitious orders given to them by him in the name of a customer. 3 §457. Purchases or sales on margins — Broker as a pledgee. — By far the larger part of a stock-broker's business consists of pur- chases and sales of stock on what is called a "margin." 4 The cus- tomer deposits with the broker, as security, a sum of money equal to but a small part of the value of the stock involved. This sum of money is the " margin." If the customer's order is to purchase, then the broker keeps both the margin and the purchased stock as security against loss in the final closing of the transaction. If the customer's order is to sell, then the broker sells ; but, having no stock to deliver, he borrows the same from other parties and de- livers it to the purchaser, the broker still keeping the margin as security. Frequently no stock passes, nor is intended to pass, but merely the ultimate profit or loss called " differences " is paid ; the losing customer loses the whole or part of his margin, the winning- customer getting back his margin and also the profits, less com- missions. This is a gambling contract, and, like all gambling con- tracts, whether in or out of a stock exchange, is not enforceable. 5 But a purchase or sale of stock on margins, where there is no proof i Gibson v. Crick, 1 Hurl. & C., 142 3 Caswell v , Putnam, 120 N. Y., 153 (1862). He may hold the intermediate (1890). customer or agent liable for set-off due 4 A margin " means, in the broker's from the latter to the broker. Jaycox lexicon, additional collateral security v. Cameron, 49 N. Y, 645 (1872). against loss to the broker while he is 2 Willard v. White, 56 Hun, 581 (1890). . . . carrying stock for his em- See, also, § 460. A sub-broker who plover." McNeil v. Tenth Nat. Bank of knows that the stock deposited as col- N. Y., 55 Barb., 59 (1869). lateral with the chief broker belongs to 5 McBurney v. Martin, 6 Conn., 502. A the customer is liable in damages for broker cannot recover commissions or conversion where he receives such stock disbursements from his customer, where on further orders and it transpires that the transactions were gambling aud in- such use of the stock was unauthorized, tended so to be by both. Harvey v. Mer- Ryman v. Gerlach, 25 Atl. Rep., 1031 rill, 22 N. E. Rep., 49 (Mass., 1889). (Pa., 1893). 571 457.] BROKERS AND THEIR CONTRACTS. [cn. XXV. of an intent not to actually deliver the stock, is legal. 1 The rela- tion between a customer and his broker, in cases where the broker buys for his customer and retains the stock as security, is the re- lation of a pledgor towards a pledgee, the customer ' being the pledgor, the broker being the pledgee, and the stock being the arti- cle pledged. 2 Some of the most important questions connected with brokers' contracts arise out of this pledgee relationship. This subject, however, is fully treated in the following chapter. Like 1 See chapter XX, where the char- acter, effect and non-enforceability of a broker's gambling contracts are fully treated. A " margin " transaction is not necessarily gambling and invalid. The important case of Hatch v. Douglas, 48 Conn., 116 (1880), clearly sets out the legality of such contracts. The court said : " It is pretty evident that the par- ties did not contemplate that the stock should be actually transfen - ed to the defendant. . . . The defendant [cus- tomer], through his agents, the plaint- iffs, actually purchased the stock, and there was an actual delivery — not to the principal, but to the agents for the principal." The brokers knew "that the defendant wns speculating, and that they advanced him money for that pur- pose. But that was neither illegal nor immoral. . . . No case has been de- cided which declares such a contract illegal. If we should so hold, it would be difficult if not impossible to draw the line between legal and illegal trans- actions." The California constitution renders void a transaction wherein a broker buys stock for the customer with the broker's money and holds the stock as security and charges the 'customer in- terest and commissions. Cusham v. Root, 26 Pac. Rep., 883 (Cal.\ 1891). A broker holding as pledgee stock purchased for a customer on margin need not keep that identical stock on hand, and it is sufficient if he keeps an equal quantity on hand over and above stock of the same kind held by him for other cus- tomers. Caswell r. Putnam. 130 N. Y.. 153(1890). Iu Massachusetts it is held that a broker carrying stocks on a mar- gin is not a pledgee. Covell v. Loud, 135 Mass., 41 (1883). A broker holding stock as collateral security on a margin does not hold the stock in a fiduciary capacity. McBurney v. Martin, 6 Rob, 51 13 : Lambertson v. Van Boskerk, 49 1 Low., 256 ? 4 Hun, 628. In England the carrying of stock by a broker on a mar- gin is called "contango," and the broker is held to be the owner of the stock. In the case of Bentinck v. The Loudon, etc., Bank, 68 L. T. Rep., 315 (1893), the court said: "In all these transactions, there- fore, where money is borrowed by a stock-broker in this way on contango or continuation, whether it is got from the dealer, whether it is got from other stock-brokers, or whether it is got from the bankers, the result is the same; that the arrangement is one by which he be- comes, as between himself and his client, the See, also, in general. <' 477, infra. A notice after the sale is insufficient, and the question of whether a notice was given is for the jury if it is denied. Gillett v. Whiting, 120 N. Y. 402 (1890), * Baker v. Drake. 66 N. Y, 518 (1876). Cf. Gregory v. WendalL 40 Mich., 432 (1879), involving a purchase of corn. CH. XXV.] BROKERS AND THEIR CONTRACTS. [§ 459. the broker is merely authorized to sell he is not bound to sell. 1 If a broker sells illegally without giving due notice he cannot recover anything from his customer. 2 § 459. What will excuse notice and demand for more margin. — All these rights of the customer to notice of failure of margin, de- mandofmore margin, notice of intent to sell, and of time and place of sale, may be waived ; and brokers generally require their custom- ers to sign written contracts to that effect. 3 It is doubtful whether the death of the customer will authorize the broker to close the transaction without notice. 4 A custom of brokers to dispense with Stocks alone, in brokers' transactions, give rise to the relation of pledgor and pledgee. Where the broker closes the transaction without notice, and later the customer gives an order which, if the transaction had not been closed, would have yielded a profit, the cus- tomer may recover damages to the amount of that profit. Rogers v. Wiley, 131 N. Y., 527 (1892). 1 Robinson v. Norris, 51 How. Pr., 442 (1874); Esser v. Linderman, 71 Pa. St., 76 (1872). Cf. Harris v. 'lumbridge, 83 N. Y., 92 (1880). On a short sale of grain the broker is not bound to sell as soon as the principal refuses to advance more margin. Perin v. Parker, 18 N. E. Rep., 747 (111., 1888). 2 See note 2, p. 574. 3 Thus, a written authority to the brokers "to sell at their discretion, at public or private sale, without any notice whatever, the stocks or gold which they might be carrying for the plaintiff, whenever the margin should fall below" a certain figure, waives all the custom- er's rights herein. Wicks v. Hatch, 62 N. Y, 535 (1875). See, also. Cameron v. Durkheim, 55 N. Y, 425 (1874). The customer may waive his rights after the broker has made the unauthorized sale. Stewart v. Drake, 46 N. Y, 449 (1876) ; Milliken v. Dehon, 27 N. Y., 364 (1863). But authority "to close the account, without notice, by purchase or sale, at public or private sale," does not waive right to notice of failure of margin and demand for more. Stenton v. Jerome, 54 N. Y, 480 (1873) ; Keufield v. Latham, 2 Cal. Leg. Rec, 235. The demand for further margin may be waived, and waiver may be inferred from the nego- tiations and proposition. Harris v. Pryor, 18 N. Y Supp., 128 (1892). A common form of the contract which the broker requires the customer to sign is the following : " hereby agree to maintain with you at all times a margin of per centum of the par value of all stocks and bonds against which you have made or may hereafter make advances to , and a like margin on stocks or bonds which have borrowed or may here- after borrow through you to make de- liveries on sales made for account or otherwise. " In case margin should become impaired and the same is not promptly made good in response to personal no- tice or notice sent by wire or letter and directed to usual address, you are authorized in your discretion to buy or sell at the New York Stock Exchange or at public or private sale, without fur- ther notice, such securities as may be necessary to place the account in condi- tion satisfactory to you. or to close the same entirely, as you may prefer. " In case of my decease you are hereby authorized to close my account by pur- chase or sale of securities as the same may require. " 4 The broker Avill be protected in con- tinuing the transaction until personal representatives are appointed. Hess v. Rau, 95 N. Y., 359 (18S4). Cf. Lacey v. Hill, L. R, 8 Ch. App., 921 (1873). 575 § 460.] BROKERS AND THEIR CONTRACTS. [CH. XXV. these notices is void, and not binding on the customer. 1 The fact that a panic occurs, or unusual fluctuations of the market happen, does not excuse a broker from giving such notice. 2 §460. Customers remedies and damages herein. — For an un- authorized sale by a broker of stock held upon a margin, the cus- tomer has ample remedies. He may claim the benefit of the sale or may claim the value of the stock. 3 Or the customer may require the broker to replace the stock, and upon his failure so to do, the customer may replace it himself and charge the broker with the loss. 4 Or the customer raav recover the advance in the market price from the time of the sale up to a reasonable time to replace the stock after notice of the sale.' The unauthorized sale by the broker herein is not necessarily a fraudulent sale. fi The suit should be at law, 7 and demand and tender need not be alleged. 8 Where a broker bu} T s or sells stock on his customer's account in violation of the terms of his contract, and thereby makes a profit, the customer has his option either to repudiate the transaction altogether and sue for damages, or he may adopt it and claim for himself the benefit made by his agent. 9 It has been held that, 1 Markham v. Jaudon, 41 N. Y. 285 (1869): Taylor v. Ketchum, 35 How. Pr., 289 (1861); S. G, 5 Robt, 507. Contra, Appleman v. Fisher, 34 Mil.. 540 (1871), a case of a gold-broker ; also Colkert v. Ellis. 10 Phil., 375 (1875), where both parties were brokers and knew the custom. If the customs are expressly made a part of the contract, insolvency of the customer authorizes sale without notice, such being the cus- tom. Lacy v. Hill, L. R„ 18 Eq., 182 (1874). -Markham v. Jaudon, 41 N. Y., 235 (1869); Brass v. Worth, 40 Barb., 648 (1863); Ritter v. Cushman. 7 Robt. 294 (1867). See, also, § 448. 3 Taussig v. Hart. 58 X. Y., 425 (1874); Caswell r. Putnam, N. Y. Daily Reg., March 7, 1887; Strong v. Nat'l, etc., Ass'n, 45 N. Y. 718 (1871). « Baker v. Drake, 53 N. Y., 211, 217 (1873); Colt v. Owens, 90 N. Y, 368 (1882). s Colt v. Owens, 90 N. Y, 368 (1882), 418 (1881). Cf. Andrews v. Clerke. 3 Bosw.. 585 (1858). 6 Stratford v. Jones, 97 N. Y, 586 (188 " Delevan v. Simonson, 3 J. & S., 243 (1873). In the case of Butts v. Burnett, 6 Abb. Pr. (N. S.), 302 (1869), involving the arrest of a broker who had sold the pledge before the note was due, the court said : " It is very questionable, I think, whether a demand after default in pay- ment of the debt for which property is pledged as security will render a refusal to deliver the pledged property a tor- tious conversion of it. No doubt the pledgor can redeem upon a tender of the debt, or he may recover the differ- ence between the value of the pledge and the debt. But to lay the founda- tion for an action for commission, I am of opinion that an offer and demand must be made on the day, and is not sufficient if made after the day on which the debt has become payable." 8 Clark t\ Meigs, 22 How. Pr., 240 holding that prices within thirty days (1873); 13 Abb. Pr., 467. after the sale is a reasonable rule. See, "Kimber i\ Barber, L. R., 8 Chan., 56 also, Gruman v. Smith, 81 N. Y, 25 (1872); Marsh v. Keating. 1 Bing. N. G, (1880); Capron v. Thompson, 86 N. Y. 198 (1834) ; Taussig v. Hart, 49 N. Y, 301 576 CH. XXV.] BROKERS AND THEIR CONTRACTS. [§ 460. where the broker fails to buy according to the instructions of his cus- tomer, and the customer suffers a loss by reason of the failure, the object of the purchase being to cover a short sale, the measure of damages is the difference between the price at which the stock was sold short and the market price upon the day when the order was given to the broker to buy in. In other words, the plaintiff may in such a case recover the profits which he would necessarily have made had his order been properly executed. 1 And the rule is the same when the loss to the customer results from the failure of the broker to sell as instructed, or where the broker sells at an im- proper or manifestly unfavorable time. 2 A customer who owns (1872) ; S. C, 58 N. Y., 425 (1874) ; Pick- ering v. Demeritt, 100 Mass., 416 (1868) ; Day v. Holmes, 103 id., 306 (1869). For the measure of damages where a broker converts his customers securities, and then is unable by reason of his insolv- ency to replace them, see Chamberlain v. Greenleaf, 4 Abb. New Cas., 92, 178. Sometimes an advance in the price of the stock, within a reasonable time after notice of the conversion is re- ceived, is allowed. Gruman v. Smith, 81 N. Y., 25 (1880). See § 460. And what is a reasonable time in such a case is a question for the jury. Baker v. Drake, 66 N. Y, 518 (1876); Stevens v. Hurlbut Bank, 31 Conn., 146 (1862); Stewart v. Cauty, 8 Mees. & W., 160 (1841) ; Field V. Lelan, 6 Hurl. & N., 617 (1861). Cf. Allen v. Dykers, 3 Hill, 593 (1842); 6N. Y. Supp., 137. 1 In an action to recover damages, where a firm of stock-brokers sold for a customer, upon his order and for his account, three hundred shares of stock, short, at 186, and subsequently without the customer's order or knowledge bought in stock to cover the sale, and then a few days later, the stock having declined several points, the customer ordered them to cover their sale, to which order no attention was paid, it was held that the proper measure of damages was the difference between the price at which the stock was sold short and the market price upon the day when the order was received to pur- chase, with interest, deducting commis- sions, etc. White v. Smith, 54 N. Y., 522 (1874). See Magee v. Atkinson, 2 Mees. & W., 440 (1837). In Allen v. Mc- Conihe, 124 N. Y, 342 (1890), the court allowed as damages against a broker who delayed selling when ordered to sell, the difference between the price when the order was given and the price when the sale was actually made. 2 In Harris v. Tumbridge, 83 N. Y, 92 (1880), it appears that the plaintiff pur- chased through the agency of the de- fendant a stock option, a privilege known as a "straddle," upon which the defendants guarantied that the fluctua- tions in the stock during the pendency of the contract should amount to eight per cent On the next day after the purchase defendant sold the stock short, which resulted in a loss to the plaintiff, who had at the time of the pui-chase authorized defendant, as her agent, to exercise the option. As to the measure of damages the court say : " An objection is taken to the rule of damages. It is insisted that as plaintiff never gave any directions to ' put ' or ' call ' the stock, she should not have recovered as if she had. But in the ab- sence of such directions it was defend- ant's duty, under the circumstances of this case, as we have already said, to have closed the 'straddle' contract by exercising the option at the most favor- able time, and to have acted for her in that respect with reasonable care and skill. As he did not do so, she is en- titled to recover what she has lost by (37) 577 § 461.] BROKERS AND THEIR CONTRACTS. [CH. XX?. particular certificates of stock and pledges them with his broker may reclaim such certificates from the broker's assets upon the in- solvency of the latter, but he cannot claim any particular stocks which the broker has purchased for him, even though he is able to identify them as being the ones which were purchased for him, in- asmuch as his equities are no better than the equities of other customers. 1 "Where a party telegraphs to sell a certain stock, the sale to be " short " and speculative, the damages for failure of the telegraph company to deliver the message are too remote and spec- ulative even though the stock goes down on the market. 2 § 461. Brokers' remedies and damages herein. — If a broker sells out his customer's stock without notice, he cannot recover any loss from the customer, even though the broker's loss is greater than the customer's usual measure of damages for the conversion. 3 But where the broker's act is strictly according to law, he is of course entitled to recover from his customer any loss that has been sus- tained in excess of the margin. 4 It is a well-settled rule that if a broker, acting in good faith and without default, incurs personal loss or damage in the course his neglect ; and the price of the stock from day to day during the running of the option having been shown, it was for the jury to determine that amount." Cf. Speyer v. Colgate, 4 Hun, 622 (1875). "Where a broker sold stock for his cus- Spencer, Gl. Cf. Stewart v. Drake, 4(1 X. Y.. 449 (1871). In Baker v. Drake, supra, where a broker unauthorized to do so sold stock which he was carrying for his customer, it was held, in an ac- tion for damages, that the measure of tomer without authority and in viola- damages was the advance in the market tion of an agreement not to sell, and it appeared that for thirty days after no- tiqe was given to the customer of the sale the stock could have been pur- chased in the market for the price at price from the time of the sale up to a reasonable time to replace it after notice of sale. 1 Sillcocks v. Gallaudet, 66 Hun, 522 (1892). As to sub-brokers or corre- which it was sold or even for less, it spondent brokers, see § 456. was held, in an action to recover dam- 2 Cahn v. W. U. Tel. Co., 48 Fed. Rep., ages, that the customer, having had a 810(1891); 46 id., 40. The measure of reasonable time after he was notitied of damages for error in the delivery of the sale of his stock to replace it at the telegraph messages to buy stock is the same or a lower price, was entitled only to nominal damages. Colt i\ Owens, 90 N. Y., 368 (1882). Cf. Randall v. Al- bany City National Bank, 1 N. Y. State Rep., 592 (Sept., 1886). See, also, McAr- thur v. Seaforth, 2 Taunt, 257. But when the action of the broker is fraud- ulent the customer may, upon obtain- ing knowledge of the facts, repudiate the whole transaction and recover back the money paid. Levy v. Loeb, 89 N. Y., 386 (1882) ; reversing S. C, 15 Jones & " difference between the market value of the shares at the time when the dis- patch should have been delivered and the sum paid for them in the market on the receipt of the message." Pearsall v. Western U. Tel. Co., 124 N. Y.. 356 (1890). 3 Gillett v. Whiting, 120 N. Y., 402 (1890). Contra, Gruman v. Smith, 81 N. Y. 25 (1880). See, also, Capron v. Thompson, 86 N. Y., 418 (1881), and g 458 * Schepeler v. Eisner, 3 Daly, 11 (1869). 578 en. XXV.] BROKERS AND THEIR CONTRACTS. [§ 4G2. of transacting the business of his agencv, or in following the in- structions of his principal, he may recover from the principal full compensation therefor. 1 Accordingly, where a broker buys stock upon his customer's order and pays for it, and upon a decline in value the customer refuses to accept it, the broker may recover the price paid by him, and not merely the difference between that price and the market value on the day of his demand. 2 § 462. Brokers' customs and usages. — It has been a greatly dis- puted question as to how far and when a custom or usage among stock-brokers or at stock exchanges may enter into and govern stock-brokers' contracts. At an early day the rule was laid down by the English courts, that he who buys or sells stock through a stock-broker must be considered as dealing with him according to the usages of the market in which he deals, and the customs which prevail in relation to that species of business. 3 The American rule 1 Sedgwick on Damages (7th ed.), 86 ; Lindley on Partnership (4th ed.), 731, where the English authorities upon the right of a stock-broker to indemnity from his principal, and the measure of damages in such cases, are collected and fully considered; citing Sutton v. Tatham, 10 Ad. & E., 27 (1889); Bay- liffe v. Butterworth, 1 Exch., 425 ; Bowlby v. Bell, 3 C. B.. 284 ; Bayley V. Wilhins, 7 id., 886 (1849); McEwen v. Woods, 2 Car. & K., 330; Taylor v. Stray, 2 C. B. (N. S.), 175; Stray v. Rus- sell, 1 El. & EL, 888 ; Chapman v. Shep- herd, L. R, 2 C. P., 228 ; Biederman v. Stone, id., 504 ; Mollett v. Robinson, L. R, 7 H. L., 802 ; S. C, 7 C. P., 84 ; 5 C. P., 646 ; Pollock v. Stables, 12 Q. B., 765 ; Lacey v. Hill, 8 Chan.. 921 ; Dos Passos on Stock-brokers, 123, 802. 2 Giddings v. Sears, 103 Mass., 311. Cf. Field v. Kinnear, 4 Kan., 470. Where there is a rescission of a contract for the sale of stock, the measure of the damages is the value of the stock at the time and place of the proposed delivery. White v. Salisbury, 33 Mo.. 150 (1862) ; Vance v. Tourne, 13 La., 225. 3 In the case of Biederman v. Stone, L. R, 2 Com. PL, 504 (1867), the court says : " It has been held in a great num- ber of cases that persons buying or sell- ing stock or shares through members of the stock exchange are bound by the rules which govern the transactions of that body." To the same effect, see Bayliffe v. Butterworth, 5 Railw. Cas., 283, per Parke, B. ; Mitchell v. Newhall, 15 Mees. & W., 308 (1846); Maxted v. Paine (2d action), L. R., 6 Ex., 132 (1871); Grissell v. Bristowe, L. R., 4 C. P.. 36, 47 (1868) ; Appleman v. Fisher, 34 Md., 540 (1871); Coles v. Bristowe, L. R., 4 Ch. App., 3; Stray v. Russell, 1 El. & EL, 888 (1859) ; Davis v. Maycock, L. R, 4 Ex., 373 (1869); Nickalls v. Merry, L. R. 7 H. L., 530 (1875). Cf. Pollock v. Stables, 12 Q. B., 765 (1848) ; Taylor v. Stray, 2 C. B. (N. S.), 197 (1857) ; Morrice v. Hun- ter, 14 L, T., 897 ; Kingsbury v. Kirwin, 43 Super. Ct,, 451 (1878); 77 N. Y., 612. But the usage must not be illegal. Robin- son v. Mollett, L. R, 7 H. L., 802, 818, 826 (1874); Hodgkinson v. Kelly. 37 L. J. (Ch.), 837 (1868); Taylor v. The Great Indian Peninsular R'y Co., 4 De G. & J., 559, 573 I 1859). ^or be the custom established by that one transaction. Westropp v. Solaman, 8 C. B., 345 (1849). It must be reasonable. Goldschmidt v. Jones, 32 L. T. (N. S.), 220. The usage may show how the business is to be transacted, but must not be unreason- able. Rosenstock v. Tormey, 32 Md.. 169 (1869), holding also that the broker's correspondence with his city broker is not competent to prove purchases and sales. A usage that is contrary to an 579 § 462.] BROKERS AND THEIR CONTRACTS. [CH. XXV. is more guarded, and allows usages of brokers to interpret the lan- guage of the contract, and where it is obscure to ascertain its nat- ure and extent, but not to vary its terms, introduce new conditions or authorize acts contrary to its provision. 1 The customer ma}', however, b} T express agreement, waive his common-law rights and allow usage to govern the transaction. 2 act of parliament, requiring the broker to notify his customer of the particular numbers of the shares purchased on his account, is void. Perry v. Barnett, L. R, 15 Q. B. D., 388 (1885). Cf. Seymour v. Bridge, L. R, 14 Q. B. D., 460 (1885). 'Parsons v. Martin, 77 Mass., Ill (1858); Hopper v. Sage, 112 N. Y., 530 (1889); Lombardov. Case, 30 How. Pr., 117 (1865); 1 Add. Contr. (4th Araer., 8th Eng., ed., 1883), marg. p. GO, c. 2 ; 21 Am. L. Reg. (N. S), 176. Cf. Wi- nans v. Hassey, 48 Cal., 634 (1874> The case of Baker v. Drake. 60 N. i '., •~>1> (1876), holds that stock-brokers' ■ cannot add to or make part of the contract Cf. Horton v. Morgan, 19 N. Y., 170 (1859;; Peckham n Keteh- um, 5 Bosw., 506 (1859); Whitehouse v. Moore, 13 Abb., 142 (1861). If there is doubt as to the existence of the usage the question is for the jury. Dent v. Nickalls, 29 L. T., 636 (1873). Upon the effect of usage in other transactions, see Corn Ex. Bank v. Nassau Bank, 91 N. Y., 74 (1883); Richmond v. Union Steamboat Co., 87 N. Y., 240 (1881); Walls v. Bailey, 49 N. Y., 464 (1872 j Vail v. Rice. 5 N. Y, 155 (1851) ; Dela- field v. State of Illinois. 26 Wend.. 192 (1841); Dawson v. Kittle, 4 Hill, 107 (1843): Boardman v. Gaillard, 1 Hun, 217 (1874); Minnesota C. R'y Co. v. Mor- gan, 52 Barb., 217 (1868); Sipperly v. Stewart, 50 Barb., 62, 68 (1867); Duguid v. Edwards, 50 Barb., 288 (1867) ; Haskms v. Warren, 115 Mass., 514, 536 (1- Dickinson v. Gay. 89 Mass., 29; Parrott v. Thatcher, 26 Ma-.. 4'J'i 1 1830); Green- leaf v. Moody, 13 Allen, 363 (1866); Tilley v. County of Cook, 103 U. S.. 155 (1880); National Bank v. Burkhardt. 100 U. S., 686 (1879); Vermilye r. Adams Ex. Co., 21 Wall., 138 (1874); Forrester v. Boardman, 1 Story, 43 (1839) : Oelrichs v. Ford, 23 How., 49 (1859); Renner v. Bank of Columbia. 9 Wheat., 582 (1824) ; Cape v. Dodd, 13 Pa. St, 33 (1850); Cor- bett v. Underwood, 83 111., 324 (1876); Phillips r. Moir, 69 111., 155 (1873) ; Bissell v. Ryan, 23 111., 566 (i860): Williams v. Gilman, 3 Maine, 276 (1825); Partnd-e v. Forsythe, 29 Ala., 200 (1856); Halwer- son v. Cole, 1 Spear (S. C), 321 (1843); Hagg v. Snaith, 1 Taunton, 347 (1808); Gibson v. Crick, 1 H. & C, 142 1 18 Fleet v. Murton, L. R, 7 Q. B., 126 Brokers' usages cannot vaiv lixed principles of law. Hopper v. Sage, 2n X. E. Repi, 350 (N. Y., 1889). 2 Van Brunt, J., in Robinsou v. Nor- ris, .->1 Bow. Pr.. 442 (1874), says, in his clear and decisive diction : "It has been settled by our court of appeals that no custom among brokers can deprive par- ties of rights which the law gives them, but they have not decided that these rights may not be waived by agree- ment I think it perfectly clear that if the broker informs his customer of the terms upon which he will act for him as his broker, and in view of that no- tice the customer gives an order, he is bound by the terms on which the broker proposed to act for him." See, also, Baker v. Drake, 66 N. Y. 578 (1876). See, in general, Colket v. Ellis, 32 Leg. Int, 82 Sutton v. Tatham, 10 Ad. & El., 25 (1839); Bayley ?•. Wilkins. 18 L. J. (C. P.), 273 (1849); Duncan v. Hill. L. R, 6 Ex., 255 (1871); Sheppard r. Murphy, Ir. L. R„ 2 Eq., 569 (1868); Bowring v. Shepherd, L. R., 6 Q. B., 309 (1871); Evans r. Wain, 71 Pa. St.. 69 (1872) ; Sweeting v. Pearce, 7 C. B. N. S.), 449 (1859); Shaw v. Spencer, 100 Mass., 382 (1868); Day v. Holmes, 103 Mass., 306 (1869). 580 CHAPTER XXVI. PLEDGES AND MORTGAGES OF STOCK 463. Definitions of pledge, mortgage and lien. 464. Mortgages and pledges of stock. 465. How a pledge of stock arises or is made. 466. Pledgee may have the stock reg- istered in his own name or the name of another. 467. Stock-broker purchasing stock for a customer on a margin is a pledgee. 468. Miscellaneous rights of pledgee and pledgor. 469. Pledgee need not retain or return to the pledgor the identical certificates or shares of stock which were pledged, but. must have equal quantity always on hand. 470. Pledgee's liability on subscrip- tion and statutory liability on stock. 471. Pledgee has no right to sell or repledge the stock, even tem- porarily, except upon notice, unless the debt is assigned with the stock. 472. Purchasers or pledgees of stock from pledgee with notice are not protected. 473. Bona fide repledgees or pur- chasers of pledged stock are protected. 474. Pledges by agents, trustees, ex- ecutors, etc., legally and in breach of trust. 475. Pledgor's remedies. 476. Pledgee's remedies when debt secured is not paid. 477. Notice of sale of stock by pledgee to apply to debt secured — Waiver of notice. 478. Formalities of sale. 479. Pledgee himself cannot purchase at the sale. §463. Definition of pledge, mortgage and lien. — A pledge may be defined to be a delivery of personal property as a security for some debt or engagement. A mortgage of personalty, on the other hand, is a sale with the condition attached, that, if the mort- gagor performs some act, the sale shall be void. In a pledge the title remains in the pledgor, and the pledgee has a special property in the thing pledged. 1 In a mortgage the title passes to the mort- gagee, subject to being revested in the mortgagor upon payment of the debt. In pledges the thing pledged must be delivered to the pledgee. In mortgages, generally, the possession of the thing mortgaged remains with the mortgagor. A pledge differs also from a lien. A pledge, by implication, gives the pledgee a power to sell on due notice, in case the debt is not paid at maturity, while a lien gives merely the power of de- tention until the debt is paid. 2 § 464. Mortgages and pledges of stoclc. — Shares of stock may be the subject of a mortgage or pledge. 3 A mortgage of stock, how- 1 See Parsons on Contracts, I, p. 569 ; s " Nothing is better settled than that II, p. 113; III, p. 272. shares in the capital stock of a corpora- 2 Donald v. Suckling, L. R, 1 Q. B., 604 tion are the subject of pledge." Dayton 581 § 464.] PLFDGE OF STOCK. [ch. xxvr. ever, is not often made ; and, unless there is a clear intent to the con- trary, the courts will treat the transaction as a pledge rather than a mortgage. 1 In fact, it is difficult to ascertain from the cases how- shares of stock may be mortgaged ; and a few early decisions, which held certain transactions to be mortgages, would to-day be held to be pledges. 2 There are but few clear cases of a mortgage of stock Nat'l Bauk v. Merchants' Nat'l Bank, 37 Ohio St., 208 (1881). " It was formerly doubted whether it [stock] could be the subject of a pledge, but it is now held that it can be." Newton v. Fay, 92 Mass., 505 (1865). The pledge may be for a running liability, and' is not re- leased by an extension of any particu- lar debt. Merchants' Nat'l Bank v. Hall, 83 N. Y., 338 (1881). Stock may be given by the debtor to his creditor to sell for the benefit of the creditor, and the surplus to be returned to the debtor. Beckwith w, Burrough, 13 R. I., 294 (1881). This probably makes the cred- itor the agent of the debtor. The pledge may he to secure the carrying out of a contract. Vaupell r. Woodward, 2 San. If. Ch., 143 (1844). If the loan se- cured by the pledge of stock is usurious. the pledgor may recover back the stock without payment The pledge is void. Couslan.l v. Davis. 5 Bosw., 619 (1859). If stock is pledged to secure an usurious note, the pledgor may under the New York law sue to recover back the stock without paying the debt Dickson r. Val- entine.'! N.Y.Supp., 540 (1889); also§ 166. The pledge of stock may provide that, for part payments of the deht, the pledgor may withdraw part of the stock pledged. First Nat'l Bank r. Root, 8 N. E. Rep, 105 (Ind., 1886). If a person agrees to deposit stock to secure the debt of another and fails to do so, he is liable, not for the debt, but for the value of the stock. Appeal of American, etc.. Co., 12 Atl. Rep, 270 (Pa., 18s; . \< to pledges to secure parties who advance money to the company, see ch. XX and §76. 'Newton v. Fay, supra; Nabring >: Bank of Mobile, 58 Ala., 204 (1877) ; Mer- chants' Bank v. Cook, 4 Pick., 405 (1826) ; Mechanics', etc., Association v. Conover, 14 N. J. Eq., 219 (1862); Doak r. Bank of the State, 6 Ired. L., 309 (1846). In England security is given by a pro. called a sale with a contract of repur- chase. The court holds that this is not a pledge. " An essential term of a pledge is that on fulfillment by the pledgor of the conditions of the bar- gain, commonly called redemption, the pledgee is bound to hand back to the pledgor the very thing deposited with him." Whereas in a sale and contract of repurchase, the identical property in numbers, eta, need not be returned. Simmons r. Joint, etc., Bank, 62 L. T. Rep., 427 (1890). 2 Thus, in Huntington V. Mather. 2 Barb.. 538 (1848), the court Bay: "There are two leading considerations to be regarded in determining whether the transaction is a pledge or a mortgage, namely, the title and the possession. If it is a mortgage, the legal title pass, s to and is vested in the creditor. With a pledge it is different; the legal title, until a sale on default of payment or re- demption, continuing in the pledgor. . . . The essential difference as to matter of right is that in one the title passes and in the other it does not But the difference in substance and fact is that, in the case of a pawn or pledge, the possession must pass out of the paw- nor, but in the case of a mortgagor it need not." The court, however, influ- enced probably by the equities of the case, held the transaction to be a mort- gage, and that the right of the debtor to redeem was barred by the ten-year stat- ute of limitations. In the case of Smith v. 49 and 56 Quartz Win. Co.. 14 Cal.. 582 €H. XXVI.] PLEDGE OF STOCK. [§ 464. to be found. It seems that a formal instrument of chattel mort- gage of stock, duly executed and registered at the municipal clerk's office, as required by law in case of chattel mortgages, would not constitute an effectual mortgage of stock, and the mortgagee would not be protected where he does not receive the certificate of stock from the mortgagor, or does not obtain a registry of transfer on the corporate books. 1 Where a railroad company owns shares of 242 (1859), the court held the transaction to be a mortgage rather than a condi- tional sale of the stock. The question of pledge was not considered. Manns v. Brookville Nat'l Bank, 73 Ind, 243 (1881), speaks of the transaction as a mortgage ; and Williamson v. New Jer- sey Southern R. R. Co., 26 N. J. Eq., 398 (1875), says that such a mortgage need not be recorded in the municipal clerk's office, as required by the chattel mortgage act. In both cases the trans- action might better have been treated as a pledge. In Adderly v. Storm, 6 Hill, 624 (1844), the court said : " I have already said that this was not a pawn or pledge of the stock ; neither was it strictly a mortgage." At the present day it would be held to be a pledge. Wil- son v. Little, 2 N. Y., 443 (1849); Has- brouck v. Vandervoort, 4 Sand., 74 (1850). In the case of Brewster v. Hart- ley, 37 Cal., 15 (1869), the court say: " The transfer in writing of shares of stock not only does not prove that the transaction is not a pledge, but the stock, unless it is expressly made assign- able by the delivery of the certificates, cannot be pledged in any other man- ner. In the case of Thompson v. Hol- laday, 14 Pac. Rep.,— (Oreg., 1887), a chat- tel mortgage on shares of stock was in- volved. It was declared void because it was given to a receiver who pre- viously held the stock as receiver. Some- times a chattel mortgage of stock arises where a railroad mortgage covers not only real estate, but also all personal property, bonds and stock which ai*e or shall be owned by the mortgagor corpo- ration. 1 The clearest ax d most satisfactory case is Spalding v. Paine's Aduvr, 81 Ky., 416 (1883), where a chattel mort- gage of a share of stock was duly re- corded in the proper county, the mort- gagor retaining the certificate of stock. The mortgagor subsequently sold and transferred the certificate of stock to a bona fide purchaser. The court held that the recording of the mortgage was of no avail, that there could be no mort- gage of choses in action, and that the bona fide transferee took the stock. Pryor, J., well says : " Much of the business of the country is conducted on the faith of the pledge of such stock as collaterals; and to adjudge that the holder of the stock by transfer on the books of the corporation, or by indorse- ment and delivery by the owner, is sub- ordinate m his claim to the mortgagee, upon the doctrine of constructive notice, would paralyze trade and open a wide field for the fraudulent disposition of such valuable interests at the expense of honest and confiding purchasers." Cf. Manns v. Brookville Nat'l Bank, 72 Ind., 243 (1881); Foster v. Potter, 37 Mo., 525 ; Vowell v. Thompson, 3 Cranch, 428 (1859). See, also, Holyoke v. McMurtry, 50 N. W. Rep., 767 (Neb., 1891). A mort- gage of stock is valid as between mort- gagor and mortgagee without a trans- fer of certificates. The mortgagee after foreclosure may compel the corporation to transfer without making the trans- feree a party. Tregear v. Etiwanda, etc., Co., 18 Pac. Rep., 658 (Cal., 1888). Stock may be mortgaged and no deliv- ery of the certificates need be made. Though a foreclosure is made irregu- larly, the mortgagor may ratify it, or may be barred by the six-year statute 583 § 404.] PLEDGE OF STOCK. [CH. XXVI. stock in an elevator compan}', such stock is not subject to the gen- eral mortgage executed by the railroad company. 1 A pledge of stock without a delivery is not strictly and legally a pledge. It "may have amounted to a mortgage, but it could amount to noth- ing more ; and if a mortgage, it did not place the mortgagee in possession, but gave him merely a naked right to have the prop- erty appropriated and applied to the payment of his debt." 2 A mere direction to the corporation cannot constitute a pledge. 3 But where no certificate has been issued to the stockholder he may pledge the stock by an instrument in writing. 4 Where, on the other hand, the certificate of stock is delivered to the creditor as security, it is evident that possession of the property is given to of limitations. Campbell v. "Woodstock Iron Co., 3 S. Rep., 369 (Ala., 1887). 1 Humphreys v. McKissock, 140 U. S., 304 (1891). A chattel mortgage does not include shares of stock, although broad enough in its terms to do so, where both parties testify that it was not the intent to include the stock, and the mortgagee allowed the mortga- gor's assignee to take away the stock. Younkin v. Collier, 47 Fed. Rep., 571 (1891). 2 Christian v. Atlantic, etc., R R. 133 U. S., 233, 242 (1890). A pledge to se- cure the debt of another is not waived by temporarily allowing that other to have the pledge for a short time. Wing V. Holland T. Co., 5 N. Y. Supp., 382 (1889). An agreement that certain bonds in the possession of a third party shall be held in pledge is not a good pledge. Actual delivery is necessary to consti- tute a pledge. Seymour v. Hendee, 54 Fed. Rep., 563 (Vt., 1893). Where stock is placed in a trustee's hands and a trustee's certificate is taken therefor, a pledge of the trustee's certificate is not a pledge of the stock sufficient to cut off subsequent attachments of the stock. Bidstrup v. Thompson, 45 Fed. Rep., 452 (1891). "Where one party loans money to another party to buy stock in a certain company, such stock to be delivered to the former party in pledge, and the lat- ter party uses the stock for another pur- pose, the loan of the money is not a mere loan, but the money is impressed with a trust, and this trust follows the stock except as against bona fide hold- ers. Barnard v. Hawks, 16 S. E. Rep, 329 (N. C, 1892). A pledge made by a separate written assignment of the stock, the certificates remaining in the pledgor's possession and continuing to stand in his name on the corporate books, is not good as against the pledg- or's receiver who takes possession of the certificates. Atkinson v. Foster, 25 N. E. Rep, 528 (111., 1890). aCumming r. Prescott, 2 Y. & C. (Ex.), 488 (1837); Lallaude v. Ingram, 19 La. Ann., 364 (1867), the court saying: "In all cases of pledge, the pledgee must be put in possession of the thing pledged ; and, if it be a claim, the evi- dence of the obligation must be trans- ferred and delivered. Shares in stock can- not be pledged unless they be evidenced by certificates which must be transferred and delivered to the pledgee." But see § 465. * First Nat Bank v. Gifford, 47 Iowa. 575 (1877), where such a pledgee was protected against a third person who had advanced the money to the pledgor to purchase the stock. See, also, Brig- ham v. Mead, 92 Mass., 245 (1865); Thorp v. Woodhull, 1 Sand. Ch„ 411 (1844). Unissued stock may be pledged by the person entitled to it When issued, it at once becomes a pledge. Appeal of Harris, 12 Atl. Rep., 743 (Pa., 1888). 584 CH. XXVI.] PLEDGE OF STOCK. [§ 465. the creditor, but that the debtor still considers the stock to be his. Such a transaction is a pledge and a mortgage; and consequently, since the giving; f stock certificates as security is almost invariably effected by a delivery of the certificates, a mortgage of stock may be said to be possible, but not probable or even sensible. The de- livery of a certificate of stock with a blank power of attorney, as collateral security, constitutes a pledge and not a mortgage; 1 and the same rule prevails even though an absolute transfer or registry is made on the corporate books. 2 § 465. How a pledge of stock arises or is made. — A pledge of stock is general!}'- made by a delivery of the certificates of stock indorsed in blank to the pledgee, and a memorandum in writing to the effect that the stock is held in pledge is generally signed and given to the pledgor, and a copy thereof attached to the certificates of stock. In a few cases a mere delivery of the certificate without a written transfer has been held sufficient to constitute a pledge." A mere delivery of the certificate of stock indorsed in blank, how- ever, is sufficient to constitute a pledge, without any memorandum in writing to that effect, and without a registry of the same being made on the corporate books. 4 Not even a provision of the char- ter or a by-law of the corporation to the effect that transfers are not valid until registered on the corporate books can prevent a pledge of stock being made by a mere delivery of the certificates indorsed in blank, or indorsed to the pledgee, without such regis- try. 5 The provision requiring such registry would seem not to 1 Mechanics' B. & L. Association v. corporation. Crescent, etc., Co. v. De- Conover, 14 N. J. Eq., 219 (1862); Lewis blieux, 3 S. Rep., 726 (La., 1888). v. Graham, 4 Abb. Pr., 106 (1857). But 4 Mount Holly, etc., Co. v.- Ferree, 17 see Greene v. Dispean, 14 R. I., 575 N. J. Eq., 117 (1864); Finney's Appeal, (1884). 59 Pa. St, 398 (1868) ; Blouin v. Liqui- 2 Nabring v. Bank of Mobile, 58 Ala., dators, etc., 30 La. Ann., 714 (187S): 204 (1877) : \Yilson v. Little, 2 N. Y., 443 Merchants' Nat'l Bank v. Richards. 6 (1849). The question of whether a sale Mo. A pp., 454 (1879); aff d, 74 Mo., 77; or pledge was involved in the relations Broadway Bank v. McElrath, 13 N. J. between a contractor and the party who Eq., 24 (1860) ; Cornick v. Richards, 3 Lea. financed the matter for him was dis- 1 (1879); Baldwin r.Canfield, 26 Miun., 43 cussed in Griggs v. Day, 11 N. Y. Supp., (1879); Pitot v. Johnson, 33 La. Ann., 885 (1890). 1286 (1881) ; New Orleans Nat'l Banking s See Brewster v. Hartley, 37 Cal., 15; Ass'n v. Wiltz, 10 Fed. Rep., 330 (1881); Jarvis v. Rogers, 13 Mass., 105 ; Robin- Continental Nat'l Bank v. Eliot Nat'l son v. Hurley, 11 Iowa, 410; but see Bank. 12 Rep., 35 (1881). Cf. State v. Lollande v. Ingram, 19 La. Ann., 364 First Nat'l Bank, 89 Ind., 302 (1883). The (1867); United States v. Cutts, Sumner, pledgor may, by word of moutb, extend 133. Contra, Nisbit v. Macon, etc., Co., stock already pledged to further ad- 12 Fed. Rep., 686 (1882). See, also, § 375, vancements by the pledgee. YanBlarcom infra. A pledge of the certificates of v. Broadway Bank, 9 Bosw., 532 (1862). stock is effective without notice to the 5 McNeil v. Tenth Nat'l Bank, 46 N. Y, 585 § 165.] PLEDGE OF STOCK. [CH. XXVI. concern the pledgee in any way, except that he could not claim the dividends without the registry; and in a few states, where an attachment of the stock for the pledgor's debts would cut off a previous unregistered vendee's or pledgee's rights, he by not regis- tering encounters that risk. 1 A transfer of stock, whether regis- tered on the corporate books or not, may be shown to be a pledge, and parol evidence is admissible to prove that fact. 2 325 (1871); Dickinson v. Central NaVl Bank. 129 Mass., 279 (1880); Fraser r. Charleston, 11 S. G, 480 & T. Ins. I to. v. Marine D. D. Co.. 31 La. Ann.. 149 (1879); Pitot r. Johnson. 33 La. Ann., 1286 (1881); Continental Nat'l Bank v. Eliot Nat'l Bank, supra; Lowry v. Com. Bank, Taney, 310 (1848); Bloniu v. Liquidators, etc., 30 La. Ann., 714 (1878 : Lightness Appeal, 82 Pa.St.301 ; CTnited States v. Cutts, 1 Sumn., 133 : Leitch v. Wells, 4s N. Y oinmercial Bank of Buffalo'-. K ight, 22 Wend Wend., 91 ; Otis v. Gardner, 105 III.. 436 (1883). As regards Buch provisions re- quiring registry, a pledge of stock stands on the same footing as a sale of stock. See, also, / 379, supra. The unr pledge is protected against the pledgor's assignee in bankruptcy. Re Shell L. J. (Bankr.), 6 (1865> 'Thus, in states where am attachment has precedence over not only trans- fers without registry made alter the at- tachment is levied, but over unregis- tered transfers made before the levy of attachment, a pledge, like a sale of stock, is protected against attachment on the pledgor's debts only by registry. Weston v. Bear R. & A. Co., 5 CaL, 186 (1855); Williams V. Mechanics' Bank, 5 Blatchf., 59 (1862: State Ins. Co. v. Sax, 2 Tenn. Ch.. 507 State v. First Nat'l Bank. 89 Ind., 802(1883) ;Ship- man v. .Etna Ins. Co.. 29 Conn., 945 (1860) ; Pinkerton v. Manchester, etc., R R. Co., 42 N. H.. 424 (1881); Oxford Turnpike Co. v. Brund, 6 Conn., 552 (1827). Of. Strout v. Natoma W. & M. Co., 9 CaL, 78 (1838). But the purchaser at the execution sale is not protected against the pledgee, if he purchased with notice. Weston v. Bear R. & A. Co., 6 CaL, 425 1 1856). And if notice of the pledge is given to the corporation, the pledgee is protected against attach- ments, although no registry is had. ■ ■ Ins. Co. v. Genuett. 2 Tenn. Ch.. 100 (1874). See. also, § 486 et seq. As regards the ordinary rights of stock- holderahip, it is no object to the pledgee to obtain registry. Even if red he cannot vote nor have a ■ •e in corporate meetings. See i 468. As to the dividends, however, he is en- titled to them as against the pledgor, bin irse can obtain them from the corporation only by obtaining reg- istry. 2 Brick v. Brick. 98 U. S.. 514 (18 Wilson r. Little. 2 N. Y., 443 Ginz v. Stumpb. 73 End., - Newton v. Fay. 92 Masa, 505 (1865) ; Mc- Mahon V. Mary. .-,1 N. Y., 155 (187S Becher v. Wells Flouring Mill Co., 1 Fed. Rep, 276 (1880); Burgess r. Selig- man. 107 XT. i i Pinkerton v. Railroad Co., 42 N. II.. 424; Batman r. Howell, 10 N. E. Sep., 504 Mass., 1883 , An apparent sale of stock is not proven to be a pledge on the evidence of plaint- iff contradicted by defendant, when the full value of the stock was paid and a receipt therefor given by the plaintiff. Travels V. Leopold. 16 N. E. Rep., 902 ill!.. 1888). A pledgor may bring a suit for an accounting and to establish the fact that the transfer of stock was a pledge, and he may restrain a suit by the pledgee against the corporation for the stock. McDowell's Appeal, 16 Atl. Rep., 753 (Pa., 1889); 5 N. Y. Supp., 050. 586 CH. XXVI.] PLEDGE OF STOCK. [§ 466. A corporation may pledge its unissued stock, 1 but there is a dif- ference of opinion as to whether the pledgee is liable as an abso- lute stockholder on such stock. 2 The question of usury in the note secured by a pledge of stock may affect the pledge itself." A lona fide pledgee of stock is protected against claims of former owners of that stock to the same extent that an absolute purchaser of the stock would be protected. The g"i/flwi-negotiability of certificates of stock protects a pledgee and a vendee alike. 4 The negotiability of a note is not destroyed by a provision that certain bonds are given as collateral security for its payment. 5 VQQ. Pledgee may have the stoelc registered in his own name or the name of another. — Where certificates of stock indorsed in blank are delivered to a person in pledge as collateral security for a debt or for any other purpose, the pledgee may fill in the blanks and have the sto.ck registered in his own name on the corporate books; 6 i Fisher v. Seligman. 7 Mo. App., 383 (1879); Griswold v. Seligman. 72 Mo.. 110(1880): Burgess v. Seligman. 107 U. S., 20 (1882); Melvin v. Lamar Ins. Co., 80 111.. 446 (1875); Protection Ins. Co. v. Osgood, 93 111., 69 (1879) Contra, Brew- ster v. Hartley, 37 Cal.. 15 (1869 . Where a corporation pledges its own stock, the pledgee may sell that stock for non- payment of the debt at less than par. This rule prevails even though the char- ter provides that the stock shall not be sold below par. Peterborough, etc., R R. Co. v. Nashua, etc.. R R Co., 59 N. H., 385 (1879). Unissued stock may be issued by the corporation as a pledge to secure a loan, and the corporation can- not set up that it was issued at less than par in violation of the constitution. The issue is good in the hands of the pledgee to the extent of the loan. Casquet r. Crescent City B. Co.. 49 Hun. 496 08921 Where the company issues its stock as collateral security to notes given to it by its subscribers in payment for such stock and then sells the notes, the stock follows the notes and may be subjected to the payment of judgments on the notes. If the corporation has issued the stock to others it must pay the judg- ments. Houston, etc.. R'y v. Bremond. 18 S. W. Rep., 448 (Tex.. 1886). A mort- gage is valid as against the corporation giving it. although the officers give to the mortgagee their individual notes as additional security and cause the corpo- ration to issue stock to themselves with- out payment, which they deposit also as collateral with the mortgagee. The giv- ing of the mortgage is not an increase of indebtedness such as is prohibited by the Pennsylvania constitution. Powell's Appeal. 19 Atl. Rep.. 559 (Pa.. 1890). Questions relative to the pledge by a company of its own bonds are consid- ered elsewhere. See eh. XLVL 2 See^ 138. 247. 474 - See Little v. Barker. 1 Hoff. Ch., 487 (1840). and cases on p. 5Sl,n.3.sHnra;. His remedies as a pledgee are not released or affected by his pursuit of other remedies. See Sickles v. Richardson, 23 Hun, 559 (1881). Judgment on the debt does not release the stock pledged. "Until the debt is paid, the pledgor, under the terms of the bailment, has no right to have the pledge given up to him." Donnell >.\ WyckulT. 7 Atl. Rep., 672 (N. J.. 1887} See, also, Hill v. Beebe, 13 N. Y., 556, 563, 567. 603 cir. xxvi.] PLEDGE OF STOCK. [§*?' insolvent estate of the pledgor, and obtain his proportionate part thereof. 1 § 477. Notice of sale of stoclc vy pledgee to apply to debt secured - Waiver of notice. — In case the pledgee pursues the remedy of sell- ing the stock without any judicial proceedings, he must give the pledgor reasonable notice of the intent to sell and of the time and place of sale. 2 A sale without a notice is a conversion of the stock. 3 The pledgee must demand payment of the debt secured by the pledge of stock, and a waiver of notice of sale is not a waiver of a right to have such a demand made. 4 A notice of intent to sell, however, is equivalent to a demand of payment. 5 A broker's cus- tom to the effect that no notice is necessarv is illegal and void. 6 The time and place of the proposed sale must be specified in the notice. 7 The time between the service of the notice and the time 1 People v. Remington, 121 N. Y., 328 (1890). The pledgee may prove his en- tire claim against the insolvent pledg- or's estate without first resorting to sui - - rendering or accounting for the pledge. In re Ives, 11 N. Y. Supp., 655 (1890). See, also, § 473, supra. Where stock is pledged to secure several debts, some of which are secured in other ways, the pledgee may apply the proceeds of the pledge to those debts which are not se- cured by indorsements. Fall River Nat. Bank v. Slade, 26 N. E. Rep., 843 (Mass., 1891). In a suit to foreclose a pledge of stock where the pledgee has other se- curities also, the court will not compel the pledgee to sell the other securities first. Work v. Ogden, N. Y. L. J., May 20, 1890. 2 " To authorize the defendants to sell the stock purchased, they were bound, first, to call upon the plaintiff to make good his margin; and, failing in that, he was entitled, secondly, to notice of the time and place where the stock would be sold ; which time and place, thirdly, must be reasonable." Mark- ham v. Jaudon, 41 N. Y, 235, 243 (1869). See, also, Stratford v. Jones, 97 N. Y, 586 (1885); Baker n Drake, 66 N. Y, 518 (1876); Conyngham's Appeal, 57 Pa. St., 474 ; Stearns v. Marsh, 4 Demo, 227(1847); Neiler v. Kelley, 69 Pa. St, 403 (1871) ; Cushman v. Have;, 46 111., 145 (1867). A joint owner is entitled to no- tice. Clark v. Sparhawk, 2 Weekly Notes, 115 (1875). 3 Fowle v. Ward, 113 Mass.. 548 (1873) ; Hemppling v. Burr, 26 N. W. Rep, 496 (Mich., 1886); 21 N. E. Rep, 510(111., 1889). 4 Lewis v. Graham, 4 Abb. Pr , 106 (1857): Brass v. Worth, 40 Barb., 59 (1863); Wilson v. Little. 2 N. Y. 443 448 (1849), saying: "It is well settled that where no time is expressly fixed by contract between the parties for the payment of a debt secured by a pledge, the pawnee cannot sell the pledge with- out a previous demand of payment, al- though the debt is technically due im- mediately." Genet v. Howland, 45 Barb.. 560 (1866). 3 Nabring v. Bank of Mobile, 58 Ala., 204 (1877). So, also, of notice of intent to foreclose. Howe v. Bemis, 2 Gray, 203. Demand of payment may be made by long urging for payment, even though the word "demand" is not used. Car- son v. Iowa, etc., Co., 45 N. W. Rep., 1068 (Iowa, 1890). The giving of a note to a broker pledgee does not extend the time within which the pledgor was to deposit further margin. Gould v. Trask, 10 N. Y Supp., 619 (1890). 6 Markham v. Jaudon, 41 N. Y, 235 (1869). "Conyngham's Appeal, 57 Pa. St, 603 § 477.] PLEDGE OF STOCK. [CH. XXVI. when the sale is to take place must be reasonable in length, so as to give the debtor on opportunity to obtain money to pay the debt. 1 In Massachusetts, by statute, sixty days' notice must be given. 2 A notice by a newspaper advertisement is insufficient. 3 It must be served personally, and it seems that it cannot be served on one who has charge of the pledgor's office for the transaction of business. 4 By an express agreement the pledgor may waive his right to notice of the time and place of the sale. 5 Such contracts are fre- 474 (1868) ; Genet v. Howland, siqira; Canfield v. Minn., etc., Ass'n, 14 Fed. Rep., 801. See Schouler on Bailments, 206-212. It lias been held in Maryland that a notice of the place is unneces- sary. Worthington v. Tormey, 34 Md., 182 (1870). But such decision would be unsafe, and probably would not be fol- lowed elsewhere. In New York, the place of sale formerly, by custom, was at the Merchants' Exchange, No. Ill Broadway, but is now both there and at the Real Estate Exchange in Liberty street. 1 In Maryland, etc., Co. v. Dalrymple, 25 Md., 242, a week's notice was held sufficient. Lewis tt Graham, 4 Abb. Pr., 106 (1857), holding that thirty-four days, where the pledgor resides in Illi- nois and the sale is to be in New York, is sufficient; Bryan tt Baldwin, 7 Lans., 174 (1872) ; affirmed, 52 N. Y, 232, holding that two days was sufficient ; Stevens tt Hurlbut Bank, 31 Conn., 146 (1862), holding that a sale on the same day is unreasonable and the notice in- sufficient. See other cases in ch. XXV, §§ 457, 458; Willoughby tt Comstock, 3 Hill, 389 (1842), where two days was held sufficient. Edwards on Bail- ments, 285. As to place of sale, see ch. XXV, §S 458, 476. 2 Gen. Stat, ch. 151, § 9. 3 Lewis tt Graham, supra; and see § 119. * Bryan v. Baldwin. 52 N. Y, 232 (1873). Of. Milliken tt Dehon, 27 N. Y, 364 (1853). 5 Maryland Fire Ins. Co. tt Dalrym- ple, 25 Md., 242 (1866) ; Genet tt How- land, supra; and see ch. XXV, §§ 459, 462; Milliken r. Dehon. 27 N. Y, 364: Stevens tt Hurlbut Bank. 31 Conn., 146; Hyatt tt Argenti, 3 Cal., 151; "Wheeler tt Newbould, 16 N. Y, 392 ; Stenton tt Jerome, 54 N. Y, 4S0 ; Wicks tt Hatch, 62 N. Y., 535; Butts tt Burnett, 6 Abb. Pr. (N. S.), 302 (1869). Pledgor of stock- may, by the terms of the agreement creating the pledge, waive his right to no- tice of sale for non-payment of the debt Appeal of Jeanes, 11 Atl. Rep., 862 (Pa., 1887). Formerly the validity of a waiver was doubted. Campbell v. Parker, 9 Bosw., 322: Wilson v. Little, 2 N. Y, 443. 448; Gilpin tt Howell, 5 Pa., 41; Hanks v. Drake, 40 Barb., 186; Sterling tt Jaudon, 48 id., 459. Authority to the pledgee to sell " at public or private sale, at his discretion," thirty clays after notice, waives notice of sale. McDowell tt Chicago, etc., 16 N. E. Rep.. 851 (111., 1888). Notice may be waived. Chou- teau tt, Allen, 70 Mo., 290 (1879). In the case of Huiskamp tt Wise, 47 Fed. Rep., 236, 249 (1891), where the pledgee was au- thorized to sell before maturity and with- out notice if the security became insuffi- cient, the court held that " the pledgee could not make sale of the collateral until after the default in the payment of the note, without notice and demand of payment to the pledgor." In the case of Williams tt United States Trust Co., 14 N. Y Supp., 502 (1891), a provis- ion that the pledgee might sell without notice and at the exchange or at public or private sale, and that the note should become due at once if the security de- preciated a certain amount, was upheld. The pledgor may, subsequently to the 604 CH. XXVI.] PLEDGE OF STOCK. [§ 478. quently entered into with stock-brokers by customers buying stock on a margin. But an express power to the pledgee to sell the pledge on certain contingencies is not a waiver of a right to notice. 1 § 478. Formalities of sale. — A sale of stock on notice by a pledgee, for the purpose of applying the proceeds to the pledgor's debt, must be at public auction. 2 A private sale is unauthorized making of the pledge, release his right to redeem. He may agree that the pledgee may sell the pledge at any time at privale sale and that the proceeds shall, after repayment of the amount loaned, be divided equally between the pledgor and pledgee. Rutherford v. Mass. M., etc., Ins. Co., 45 Fed. Rep., 712(1891). The fact that the pledgee, under a waiver of notice, of demand and public sale, sells the stock and debt to an enemy of the corporation does not in- validate the sale. Carson v. Iowa, etc., Co., 45 N. W. Rep., 1068 (Iowa, 1890). Al- though the pledgor agrees that the pledgee may sell part of the pledge without notice upon default, this does not release the remainder of the pledge from being additional security for the debt Bank of Africa v. Salisbury, etc., Co., 66 L. T. Rep., 237 (1892). Where the pledgees are given power to sell " in such manner as they, in their discretion, may deem proper, without notice," a sale without notice after the maturity of the loan is legal. Williams v. United States Trust Co., 133 N. Y., 660 (1892). An approved form of a note and waiver is as follows : " $ . New York, , 18—. after date promise to pay to the order of , dollars, at , for value received, with interest at the rate of per cent, per annum, having pledged to the said the under- mentioned securities (with authority to sell the same on non-performance of this promise, in such manner as they, in their discretion, may deem proper, without notice, either at any brokers' board or at public or private sale, and to apply the proceeds thereon), viz. : . " In case of depreciation in the mar- ket value of the security hereby pledged, or which may hereafter be pledged, for this loan, a payment is to be made on account on demand, so that the said market value shall always be at least per cent more than the amount unpaid of this note. In case of failure to do so, this note shall be deemed to be due and payable forthwith, anything hereinbefore expressed to the contrary notwithstanding, and the ■ — may immediately reimburse by sale of the security. It is understood and agreed that if such sale be by public auction, the said shall be at liberty to purchase for own account any property offered at such sale ; and it is further agreed and understood that the above-mentioned securities, or sub- stitutes therefor, or additions thereto, shall also be held as collateral and be applicable to any other note or claim held against by said , and that in case the proceeds of the whole of the collaterals shall not cover principal, interest and expenses, hold bound to pay on demand any deficiency. " Due . 1 Stevens v. Hurlbut Bank, 31 Conn., 146 (1862) ; Lewis v. Graham, 4 Abb. Pr., 106. See, also, Wilson v. Little, 2 N. Y., 443; Genet v. Howland, 30 How. Pr. 360 ; Stenton v. Jerome, 54 N. Y, 480. Cf. Milliken v. Dehon, 27 N. Y, 364 (1863). But an express power to sell on a specified day is held to waive right of notice. Bryson v. Raynor, 25 Md., 424 (1866). 2 Conyngham's Appeal, 57 Pa. St., 474 (1868); Rankin v. McCullough, 12 Barb., 103(1851); Genet v. Howland, 45 Barb., 560 (1866); Ogden v. Lathrop, 65 N. Y, 158 (1875). An express power to 605 § 479.] FLEDGE OF STOCK. [CH. XXVI. and illegal, even though the utmost market price is obtained. 1 The pledgee cannot have the sale made at a broker's board or in a stock exchange, since only the members of the association are allowed to bid for stocks sold therein, while the law requires that the public shall be allowed to bid at a pledgee's sale. 2 Frequently a special agreement is made between the pledgor and pledgee, especially be- tween a customer and his stock-broker, whereby the pledgee is allowed to sell at a broker's board. 3 Such an agreement, however, does not authorize a private sale at a broker's board. 1 A sale is valid though the stock is sold for only a small part of its value. 5 § 479. Pledgee himself cannot purchase at the sale. — It is a well- established rule that, where a pledgee pursues the remedy of selling the stock upon notice, the pledgee himself is disqualified from pur- chasing the stock. 6 The rule is based on the principle that the law carefully protects the interest of the pledgor, and will not open the sell has been held to authorize a private stock, and in that character exposing it sale. Bryson v. Ray nor, 35 MA, 424 ( 1 866). Or a sale at a broker's board. Id. 1 Castello v. City Bank of Albany. 1 Leg. Obs., 25(1842); Willoughby r. Corn- stock, 3 Hill, 389 (1842) ;. Cf. Nabring v. Hank of Mobile, 58 Ala., 205 (1877). The pledgee's right to object is waived by long delay. Hayward v. National Bank. 96 U.S., 611(1877). 2 Brass v. Worth. 40 Barb., 648 (1863): Rankin v. McCullough, 12 Barb.. 103 (1851). A sale in New York is legal. King v. Texas, etc., Ins. Co., 58 Texas. 6G9 (1883). s Wicks r. Hatch, 62 N. Y. 535 (1875). In Maryland a contrary rule prevails. Maryland Fire Ins. Co. v. Dalrymple. 35 Md, 242 (1866). See ch. XXV. * Allen v. Dykers, 3 Hill, 503; 7 id, 497. 5 A bona fide purchaser at a pledgee's sale is protected, though he purchased for less than the real value of the stock, and though a receiver had previously been appointed of the pledgor's prop- erty and it had been transferred to the receiver. Dudley v. Gould, 6 Hun, 97 (1875). 6 Easton v. German, etc., Bank, 127 U.S., 532 (1888); Bryan v. Baldwin, 52 N. Y, 432 (1873). the court saying: "The plaintiff being the pledgee of the for sale, could not become the purchaser unless the defendant assented to such purchase. This sale to the plaintiff was not void, but voidable, at the election of the defendant" Maryland Fire Ins. Co. V, Dalrymple. 85 Md.. 242(1866). Nor can he buy where the pledge is being sold on a forfeiture sale for non-payment of calls. Freeman v. Harwood, 49 Me.. 195 (1859). See, also. Sickles i\ Richard- son, 23 Hun, 559 (1881> where the sale of the property pledged was on an at- tachment The pledgor's sdence may constitute a ratihVation of the pledgee's purchase. Carroll v. Mullanphy Sav. Bank. 8 Mo. App. 219 (1880). If the pledgee is a corporation, its president caunot purchase for it Star Fire Ins. Ckx r. Palmer, 41 Super. Ct, 267 (1876). Lewis r. Graham, 4 Abb. Pr., 106 (1857), holds that a special partner of the pledgee firm may purchase. And see Ch. XXV. p l.m Cf. Finney's Appeal. 59 Pa. St, 398 (1868). Where a pledgee bank having a right to sell at private sale and without notice sells the pledge through its president, who buys the pledge himself, and the president openly pays the bank for it long delay on the part of the bank in complaining is fatal. Raymond v. Palmer, 6 S. Rep, 692 (La.. 18891 606 CU. XXVI.] PLEDGE OF STOCK. [§ 479. door to possible devices of the pledgee for purchasing the stock for himself at a low price. The pledgee cannot purchase, either di- rectly or indirectly, in his own name or in the name of another. 1 The effect of a purchase by the pledgee for himself is that the whole proceeding of the pledgee for subjecting the pledge to the payment of the debt is utterly futile, and voidable at the election of the pledgor. The pledgor cannot claim that the pledgee has converted the stock by purchasing at the sale,' 2 but he may disre- gard the notice and sale and whole proceeding as being ineffectual and voidable. The pledge relationship continues as though no attempt had been made by the pledgee to subject the pledge to the payment of the debt. 3 "Where, however, the pledge is foreclosed by legal proceedings similar to those for the foreclosure of chattel mortgages, either party may bid at the public judicial sale. 4 The pledgor may authorize the pledgee to purchase at the sale and retain the pledge. 5 Stock held in pledge to secure a debt cannot be sold before the debt is due. 6 The pledgor may release his equity to the pledgee. 7 1 Minnesota Assoc, v. Canfield, 121 U. S., 295 (1887). 2 Bryan v. Baldwin, 52 N. Y., 232 (1873). If the pledgee buys it in there is no conversion. The pledge continues. Terry v. Birminghan, etc., Bank, 9 S. Rep., 299 (Ala., 1891). » Bryson v. Raynor, 25 Md., 424 (1866) : Middlesex Bank v. Minot, 45 Mass., 325 (1842); Hestonville, etc., R. R. Co. v. Shields, 3 Brews. (Pa.), 257 (1869). If the pledgee purchases at the sale the pledge continues. The pledgor does not waive his rights by settling in igno- rance that the pledgee purchased. Sharpe v. National Bank, 7 S. Rep., 106 (Ala., 1888). * Pewabic Min. Co. v. Mason, 145 17. S., 349 (1892). In Newport, etc., Bridge Co. v. Douglass, 12 Bush (Ky.), 673, 720 (1877), the pledgee of bonds from the company issuing them obtained a fore- closure of the pledgery suit, and bought the bonds in and was then held to be the absolute ownei of them. 5 Chouteau v. Allen, 70 Mo., 290 (1879). A pledgee cannot himself purchase the stock at the sale, but the pledgor may lawfully contract so as to allow the pledgee to purchase at such sale, or may ratify such purchase after it has been made. If there is no such contract or ratification, however, the sale is void and the parties remain in the same posi- tion as though no sale had taken place. Appleton v. Turnbull, 24 Atl. Rep., 592 (Me., 1891)) "National Bank v. Baker, 21 N. E. Rep., 510 (111., 1889). 'Small v. Saloy, 7 S. Rep., 450 (1890). A pledgor may sell the securities pledged, and the sale may be to the pledgee. The sale may be oral and will be upheld, the debt being canceled thereby. Brown v. Farmers', etc., Co., 117 N. Y., 266 (18S9). Cf. Ryle v. Ryle, 41 N. J. Eq., 582. Re- ceiving the surplus in ignorance of ille- gality is no waiver. Allen v. American, etc., Ass'n, 52 N. W. Rep., 144 (Minn.. 1892). 607 CHAPTER XXVII. LEVY OF ATTACHMENT AND EXECUTION UPON SHARES OF STOCK § 480. An execution at common law could not reach shares of stock. 481. Nor, it seems, could a court of equity subject stock to the payment of debts. . 482. By statutory provisions execu- tions are genprally sufficient to reach the debtor's stock — Strict compliance necessary — Levy on stock fraudulently conveyed away. 4S3. Attachment of stock as allowed by the statutes of the various states. 484. Attachment of stock held in pledge or by trustee, and of stock which the debtor has fraudulently transferred away. 485. Stock can be attached only in the state creating the corpora- tion. § 486. Rights of an unregistered trans- feree of a certificate of stock as against au attachment or execution levied on that stock. 487. Rule in New York, Pennsylvania, New Jersey. Minnesota, South Carolina. Texas, Louisiana and the federal courts. 488. Rights aud duties of the corpora- tion in such cases. 489. Rule in Connecticut. Maine, Ver- mont, Indiana, Iowa, Maryland, Wisconsin, Alabama and Cali- fornia. 490. Rule in Massachusetts and New Hampshire. 491. Shares of stock cannot be sub- jected to the payment of the stockholder's debts by the pro- cess of garnishment § 480. An execution at common law could not reach shares of stoclc. — A share of stock is in the nature of a chose in action, and at common law a chose in action could not be reached by or made subject to a levy of execution. Consequently it has been uniformly held bv the courts that at common law a levv of execution could not be made on shares of stock. Unless, therefore, the process of execution has been extended by statute so as to reach such prop- erty, the stock of a judgment debtor cannot be subject to the pay- ment of his debts by means of an execution. 1 An attachment, •Van Norman v. Jackson County Circuit Judge, 45 Mich., 204 (1881); Ooss v. Phillips, etc., Co., 4 Bradw., 510 (1879) Blair v. Compton, 33 Mich., 414 (1S76); Slaymaker v. Bank of Gettysburg, 10 Pa. St., 373 (1849); Foster v. Potter, 37 Mo., 525 (1866); Howe v. Starkweather, 17 Mass., 240 (1821); Nabring v. Bank of Mobile, 58 Ala., 204 (1877); Denton v. Livingston, 9 Johns., 96 (1812), per Chancellor Kent ; Nashville Bank v. Ragsdale, Peck (Tenn.), 296 (1823). Even where the stock is held to be real estate. Cooper v. Canal Co., 2 Murph. (N. C), 195 (1812). Cf. Gue r. Tide- water Canal Co., 24 How. (U S.), 257 (1860). At an early day, when the nature of stock was little understood, an attachment was attempted on the corporate property for the debts of a stockholder. It failed. Williamson v. Smoot, 7 Mart (La), 31 (1819). Stock cannot be taken on a tax warrant. Barnes v. Hall, 55 Vt Rep., 420. Cf M'Neal v. Mechanics', etc., Assoc, 3 Atl. Rep., 125 (N. J., 1885); Smith v. 608 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 481. bring entirely statutory, can be levied on shares of stock only when the words of the statute declare that an attachment may be levied on such property. 1 § 481. Nor, it seems, could a court of equity subject stock to the payment of debts. — There is some doubt whether a court of equity has power to subject a judgment debtor's choses in action to the payment of his debts, where the only ground for the interference of the court is that, unless it does interfere, such property cannot be reached by the judgment creditor. In New York, previous to the statutes regulating this subject, the jurisdiction of a court of equity therein was emphatically denied in one case, 2 and with equal em- phasis declared to exist in another case. 3 The English authorities are quite uniform in holding that a court of equity has no such jurisdiction. 4 And in America, for the most part, a similar con- clusion is arrived at. 5 Where, however, the debtor has conveyed away his stock for the purpose of defrauding his creditors, a court of equity will aid the judgment creditor, inasmuch as it has juris- diction in all matters involving fraud, trust or accident, or other ingredient of similar character. 6 Northampton Bank, 4 Cush., 1 (1849). A tax collector caunot levy on and sell stock under the law relative to attach- ments. Kennedy v. Neary, etc., R'y, 9 S. Rep., 608 (Ala., 1891); and § 566. Execution against a corporation cannot be levied on stock owned by the corpo- ration itself, such stock having been purchased by it under statutory author- ity at a forfeiture sale for non-payment of calls. Robinson v. "Spaulding, etc., Co., 13 Pac. Rep., 65 (Cat, 1887). An at- tachment of stock does not prevent a sale of property by the corporation. Gottfried v. Miller, 104 U. S., 521 (1881). The question of whether an execution may levied on a seat in an exchange is considered in ch. XXIX. 1 Plimpton v. Bigelow, 93 K Y„ 592, 602 (1883); Merchants' Mut Ins. Co. v. Brower, 38 Tex., 230 (1873). 2 Donovan v. Finn, Hopk. Ch., 67, 91 (1823). See, also, Daniell's Ch. Pr., vol. II, p. 1037, note. 3 Storm v. Waddel, 2 Sand. Ch., 495, 511 (1845). * Dundas v. Dutens, 1 Ves., 196 (1790); Bank of England v. Lunn, 15 Ves., 5G9 (1809); Grogan v. Cooke, 2 Ball & B. (Ir. Ch.), 230 (1812); Nantes v. Corrock, 9 Ves., 183 (1803) ; McCarthy r. Gould, 1 Ball & B. (Ir. Ch.), 387 C1810), applying the same rule to dividends. In King v. Dupine, 2 Atk., G03, note (1744), a court of equity subjected to the payment of a debt the debtor's reversionary interest in an annuity. In Horn v. Horn, AmbL, 79 (1749), the court refused aid, inas- much as the debtor had been impris- oned under a cap. satis. 5 Williams v. Reynolds, 7 Ind., 622 (1856); Disborough v. Outcalt, Saxton's Ch. (N. J.), 298, 306 (1831): McFerran u Jones, 2 Litt. (Ky.), 219 (1822); Erwin v. Oldman, 6 Yerg., 185 (1834). Contra, dictum, Watkins v. Dorsett, 1 Bland's Ch., 530 (182S). In Brightwell v. Mal- lory. 10 Yerg. (Tenn.). 198 (1836), the proceeding was statutory. * See §§ 339, 340, on Statute of Frauds ; also Taylor v. Jones, 2 Atk., 600 (1743), holding that the debtor's transfer of stock in trust was in fraud of creditors ; Hadden v. Spader, 20 Johns. (N. Y.\ 554 (1822); Scott v. Indianapolis Wagon Works, 48 Ind., 75 (1874) ; Van Norman v. Jackson Circuit Judge, 45 Mich., 204 (1881); Lathrop v. McBurney, 71 Ga., (39) 609 § 482.] ATTACHMENT AND EXECUTION. [CH. XXVII. § 482. By statutory provisions executions are generally sufficient to reach the debtor's stock — Strict compliance necessary — Levy on stock fraudulently conveyed away. — Nearly all of the states of the Union have enacted statutes extending the scope of executions so as to render subject to them all choses in action, including shares of stock in a corporation. Frequently special provisions are made applicable to stock, and prescribing the steps which are necessary in rendering the execution lew effectual. Where an execution is CD «. levied in accordance with such statutes its provisions must be sub- stantially complied with, and if not complied with the sale is not merely voidable, but is wholly unauthorized and void. 1 It is fatal to the lev)'- and sale if the sheriff fails to give to the corporation the notice that is generally required bv statute; 2 or if the sale by the sheriff is not made promptly as advertised in accordance with the statute. 3 The sale itself is not complete until the sheriff gives the proper instruments of title to the purchaser, and until then the cor- poration is not obliged to recognize the latter as having any rights. 4 815 (1883); Gillett v. Bate. 86 N. Y.. 87; State Bank v. Gill, 23 Hun, 410 (1881), and §§ 482, 484. •Blair v. Compton, 33 Mich.. 414 (1876). holding that, where the sheriff sold without knowing or stating how many shares of stock the debtor owned, and which were being sold, the sale was void. See, also, People ?'. Goss, etc., Mfg. Co., 99 111., 355 (1881), revers- ing Goss, etc., Mfg. Co. v. People, 4 Bradw., 510. The procedure in levy of execution on stock, as laid down by the charter of the corporation, supersedes the procedure of a previous general statute. Titcomb v. Union Marine, etc, Ins. Co.. 8 Mass.. 326 (1811). And vice versa, Howe v. Starkweather, 17 Mass., 240 (1821). The sheriff need not sell the stock in parcels, but may sell the whole at once. Morris v. Conn., etc., R. R Co. (Montreal Ct. of Appeal, September, 1886). An execution sale of stock will be set aside where it was made with an intentional concealment of the sale from the stockholder, the execution debtor. Voorhis v. Terhune, 13 Atl. Rep., 391 (N. J., 1888). If no notice is given to the debtor of the levy on his stock, a sale under the attachment is not good. Com- mercial Nat Bank v. Farmers', etc., Bank, 47 N. W. Rep.. 1080 (Iowa, 1891). A levy and sale of "all the shares" which defendant owns is not good. The number of shares must be ascertained ami stated. Keating v. J. Stove, etc., Co., 18 S. W. Rep., 797 (Tex., 1^92). 2 Princeton Bank v. Crozer, 22 N. J. Law, 383 (1850), where no notice was given, but the stock was merely men- tioned in the inventory returned by the sheriff. Oral notice by the sheriff to the corporation that stock has been attached is insufficient. Moore v. Marshalltown, etc., Co., 46 N. W. Rep., 750 (Iowa, 1890). 3 Titcomb v. Union Marine, etc., Ins. Co., 8 Mass., 326 (1811), and Howe v. Starkweather, 17 Mass., 240 (1821), where the sale was made after the proper day, without a re-advertisement, and consequently was held to be void. The court said : " The sale of them upon exe- cution not being justifiable at common law. the statute must be strictly pursued to give any property to the purchaser." An execution sale of stock at 9 o'clock at night, when few are present, is void. McNaughton r. McLean, 41 N. W. Rep., 267 (Mich., 1889). 4 Morgan v. Thames Bank, 14 Conn., 99 (1840). 610 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 483. A court of equity will not compel a corporation to allow a transfer of stock by a purchaser at an execution sale where the price paid at such sale is so small as to shock the conscience of the court. 1 Whether or not an execution can be levied on stock which has been fraudulently transferred away by the judgment debtor de pends upon the wording of the statute allowing the levy of execu- tion on stock. If it allows a levy on all interests of the debtor, whether legal or equitable, then the fraudulent transfer may be disregarded and the stock seized as though still standing in the name of the judgment debtor. 2 If, however, the statute does not expressly provide for a levy on an equitable interest, the judg- ment creditor's remedy is not an execution, but a suit in equity to set aside the fraudulent transfer. 3 § 483. Attachment of stoclc as allowed l>y the statutes of the vari- ous states. — The states of the Union have quite generally passed statutes providing for the attachment of a debtor's property where the debtor is a non-resident or is guilty of a fraud, or where other facts exist which bring the case within the attachment statute. In- asmuch as in modern times a large part of the property of indi- viduals consists of shares of stock in corporations, the attachment statutes generally provide specially for the attachment of stock, and give specific directions in reference to the steps necessary to be taken in making such attachment. 4 In New York an attach- 1 Mississippi, etc., E. R v. Cromwell. 91 ell's Annotated Stat, 1883 ; Minnesota, U. S., 643; Randolph v. Quidnick Co., Gen. Stat. 1878, § 156; Missouri, R. S. 135 U.S., 457(1890). Inadequacy of price 1879, § 417; Nebraska, Common Laws is not sufficient cause for setting aside 1881, cli. 3, § 201 ; Nevada, Gen. Stat an execution sale of stock. Conway V. 1885, ch. 4, §§ 3149,3150; New Hamp- John, 23 Pac. Rep., 170 (Cal., 1890). shire, Gen. L 1878, ch. 224, § 13; New 2 Scott v. Indianapolis Wagon Works, York, Code of Civil Proa, § 647 ; also 48 Ind., 75 (1874). Cf. State v. Warren § 649, as amd. by L. 1879, ch. 541 ; also Foundry, etc., Co., 32 N. J. L., 439 (1868). §§ 650, 651, 708 (2); Ohio, R S. 1880, See, also, § 484, infra, relative to attach- title 1, div. 6, ch. 2, § 5524 ; Pennsyl- ments on stock that has been fraudu- vania, Brightley's P. Dig., § 71 ; South lently conveyed away. Carolina, Code of C. Proa, ch. 4, §§ 256, 3 Van Norman v. Jackson County Cir- 258; Wisconsin, R. S. 1878, § 2738. cuit Judge, 45 Mich., 204 (1881). See Where both an attachment and an exe- § 481. cution on stock are allowed by statute, 4 California, Code of C. Proa, § 5141 ; the former is said to be the preferable Colorado, Code of C. Proa, § 97 ; Con- remedy when the corporation has a necticut Gen. Stat. (1875), § 6; Georgia, lien on the stock or there is a claimant Code of 1882, §§ 3289-3291 ; Indiana, to the stock. AVeaver v. Huntingdon, R S. (1881), § 933; Iowa, McClain's An- etc., Coal Co., 50 Pa. St., 314 (1865); Lex notated Stat, 1880, § 2967; Maine, R. S. v. Potters, 16 Pa. St, 295 (1851). An at- 1884, ch. 81, §27; Maryland, R Code of tachment of stock covers the dividends 1874, § 20; Massachusetts, Public Stat. also. Upon vacating the attachment 1882, ch. 161, §§ 71-73; Michigan, How- damages maybe recovered. Jacobus r. 611 483.] ATTACHMENT AND EXECUTION. [CH. XXVII. ment of stock is provided for; but an execution without a previous attachment is not allowed. 1 It has been held that shares of stock may be attached under the general provisions of an attachment law which does not specif} 7 shares of stock as being subject to an attachment. 2 The formalities prescribed by the statute must be complied with fully as in the case of a levy of execution upon stock. 3 Mononagahela, etc., Bank, 35 Fed. Rep., 395 (1888). Decrease in value of stock while subject to attachment does not render the sureties on the undertaking liable therefor. Miller v. Ferry, 50 Hun, 256 (1888). An attachment bond should not be increased merely because the price of the stock may go down. Id. In New York shares of stock cannot be levied on under a writ of execution, al- though they may be attached and sub- sequently sold by execution in that suit. Code of Civil Procedure, §§ 647, 6-19-651. See 4 Wait's Pr., 36, J. Stock may be reached, however, by proceedings sup- plementary to execution. See. in gen- eral, Barnes v. Morgan, 3 Hun, 703 (1875); O'Brien v. Mechanics' & T. Ins. Co., 56 N. Y., 52 (1874); Smoot v. Heim, 1 Civ. Proc. Rep., 208 (1881) — cases arising under the attachment law. The statute may provide for the sale of stock at the place where the corpora- tion exists, in case the taxes upon such 6tock are not paid. A purchaser of the outstanding certificates after the assess- ment has been made takes subject to the tax and tax seizure. Parker v. Sun Ins. Co., 8 S. Rep., 618 (La., 1890). Un- der the English statute, 1 and 2 Vict, ch. 110, § 14, and 3 and 4 Vict., ch. 82, § 1, stock in any public company stand- ing in the name of any person against whom judgment shall have been ob- tained, whether "in his own right or in the name of any person in trust for him," may be charged by a judge's or- der with the payment of the amount of the judgment. The statute says : " The interest of any judgment debtor, whether in possession, remainder or reversion, and whether vested or con- tingent," may be so reached. Cragg v. Taylor, L R, 2 Ex., 131 (1867); Baker v. Tynte, 2 Ell. & E., 897 (1860). 1 See preceding note. 2 Chesapeake & O. R. R. Co. v. Paine, 29 Gratt (Va.), 502 (1877), where stock was held to be included under the word " estate," and the procedure prescribed for garnishment was followed and up- held. So, also, Curtis t>. Steever, 36 N. J. L Rep., 304 (1873), where an at- tachment of stock was upheld though the statute merely allowed attachment of " rights and credits." In Haley v. Reid, 16 Ga., 437 (1854), however, an at- tachment of stock was not allowed where the statute allowed levy "upon the estate both real and personal." See, also. Merchants' M. Ins. Co. v. Brovver, 38 Tex., 230 (1873). It has been held that there can be no attachment of stock under a statute which allows an attachment of " real and personal prop- erty." Foster v. Potter, 37 Mo., 525. Shares of stock are "personal property " subject to attachment, although the stat- utes provide only for levy of execution upon them. Union Nat'l Bauk v. Byram, 22 N. E. Rep., 842 (111., 1889). The or- dinary attachment statute authorizing the attachment of shares of stock is not applicable to shares of stock in a club organized for lawful sporting purposes and being more of the nature of a stat- utory joint-stock association than a cor- poration. Lyon v. Denison, 45 N. W. Rep., 358 (Mich., 1890). 3 Stamford Bank v. Ferris, 17 Conn., 259 (1845), where the attachment failed because the sheriff did not leave a copy of the writ, duly indorsed, with the cor- poration, even though the cashier of 612 OH. XXVII.] ATTACHMENT AND EXECUTION. [§ 4S4. § 484. Attachment of stock held in pledge or by trustee and of stock which the dibtor has fraudulently transferred away. — As has been said in the case of an execution levied on shares of stock, an attachment may be levied on the same when the words of the attachment statute are so broad as to render subject to the attach- ment all equitable interests of the debtor whose stock is attached. Thus, it has been held in Ohio and ~±sew Jersey that, although the debtor has transferred his stock for the purpose of defrauding his creditors, an attachment of the stock will lie nevertheless. 1 An attachment may be levied upon stock although the stock has been mortgaged or pledged, and the attaching creditor is seeking to reach merely the equity of redemption. 2 An attachment is not the best remedy for a pledgee who wishes to subject the pledge to the corporation was absent A transfer subsequent to such irregular attach- ment is valid and carries title. See, also, § 484. 1 National Bank of N. L. v. Lake Shore & M. S. R. R. Co., 21 Ohio St., 221 (1871), holding also that the attachment is good, even though the corporation deny that the defendant owns any stock therein ; Curtis v. Steever. 36 N. J. L. Rep., 304 (1873) the court saying that the attachment is good, since the fraud- ulent transfer is void ; and holding that the transferee may bring a suit for tres- pass, and that the attaching creditor may then set up the fraud in defense. Of. State v . Warren Foundry, etc., Co., 32 N. J. L., 439 (18G8). See, also, § 482, supra. Where an insolvent debtor transfers all his property to trustees for the benefit of creditors, excepting certain shares of stock which are transferred to them in trust in order not to render the trustees liable thereon, and ten years later a creditor levies on the equity in such stock, causes its sale and purchases it at a nominal figure, equity will not com- pel the corporation to transfer the stock to such creditor on the corporate books. Randolph v. Quidnick Co., 135 IT. S., 457 (1890). 2 Edwards v. Beugnot, 7 Cat, 162 (1857), holding also that, if the mort- gage is recorded on the corporate books, notice must be served on the mortgagee also; and that, where one attachment was served on the corporation and an- other on the mortgagee, the latter at- tachment prevails and takes the sur- plus : Norton v. Norton, 43 Ohio St., 509 (1885), holding that the court will order the stock to be sold, the pledgee paid and the balance held uuder the attach- ment See. also, Vantine v. Morse, 104 Mass., 275 (1870); New England, etc., Co. v. Chandler, 16 Mass., 275 (1820). Of. Cooke v. Hallett, 119 Mass., 148 (1875). A garnishment for the surplus is ineffectual. Kyle v. Montgomery, 73 Ga.. 337 (1884); Seeligson v. Brown, 61 Texas, 114(1884); Mechanics', etc., Ass'n v. Conover, 14 N. J. Eq., 219 (1862); Foster v. Potter, 37 Mo., 525 (1866); Manns v. Brookville Nat'l Bank, 73 Ind., 243 (1881); Nabring v. Bank of Mobile, 58 Ala., 204 (1877). If a purchaser at an execution sale purchases merely a nom- inal equity of redemption and pays a fair price for the same, the court will order the corporation to allow a trans- fer to him in order that he may so redeem. See dictum in Randolph r. Quidnick Co., 135 U. S., 457 (1890). Stock held as collateral is property sub- ject to garnishment under the statutes of Texas. Smith v. Traders' Nat'l Bank, 12 S. W. Rep., 113 (Texas, 1889). See, also, §§ 340, 491. 613 8 485.] ATTACHMENT AND EXECUTION. [CH. XXVII. the payment of the debt. 1 His remedy is by foreclosure or a pub- lic sale on notice to the pledgor. Dividends on the stock which is attached follow the stock, and are covered by the attachment. 2 An attachment on stock standing on the books in a debtor's name is not good where it is shown that in fact he held the stock as trustee for another. 3 An attachment will lie in Rhode Island for stock which is registered in the name of a person other than the defendant, the transfer by the defendant having been in fraud of creditors. 4 Where the corporation has a lien on stock for debts due from the stockholder to the corporation, it may enforce the lien by an attachment. 5 § 4S5. Stock can be attached only in the state creating the corpo- ration. — Shares of stock in a corporation are personal property, whose location is in the state where the corporation is created. 6 It is true that, for purposes of taxation and some other similar pur- poses, stock follows the domicile of its owner; but, considered as property separated from its owner, stock is in existence only in the state of the corporation. All attachment statutes provide for the attachment of a non-resident debtor's property in the state, and generally, under such statutes, the stock owned by a non-resident in a corporation created by the state wherein the suit is brought may be attached and jurisdiction be thereby acquired to the extent of the value of the stock attached. 7 But under no circumstances can a defendant's shares of stock be reached by levy of attachment in an action commenced outside of the state wherein the corpora- tion is incorporated. For purposes of attachment, stock is located where the corporation is incorporated and nowhere else. 8 The iLee v. Citizens' Nat'l Bank, 2 Ciu. *Sabin v. Bank of Woodstock, 21 Vt., Super. Cfc, 298, 312 (1872). See § 476. 353 (1849). - .Moore v. Gennett, 2 Tenu. Ch., 375 « Evens v. Monet, 4 Jones' Eq. (N. G), (1875). 227 (1858). ;i Mowry v. Hawkins, 18 Atl. Rep., 784 T National Bank of N. L. r. Lake (Conn., 1889). Execution or garnishee Shore & M. S. R R Co., 21 Ohio St., process cannot be levied on stock held 221 (1871); Chesapeake & O. R R. Co. by an individual as trustee, where the v. Paine, 29 Gratt (Va.), 502 (1877). An debt is his individual debt Nor can it attachment and sale of stock made on a be levied on the dividend from such debt not justly due will be enjoined as stock. So held where stock was owned regards registry on the corporate books, by a city in trust for the citizens. Hitch- and the sale declared void. Seligman v. cock v. Galveston W. Co., 50 Fed. Rep., St, Louis, etc., R R Co., 22 Fed. Rep., 263(1890). 39(1884), * Beckwith v. Burroughs. 14 R. L, 366 8 Winslow j. Fletcher, 13 Am. & Eng. (1884). And the purchaser at the exe- Corp. Cas., 39 (Conn., 1886), the court cution sale may file a bill in equity to saying that "stock in a corporation for clear the title to the stock. Cf. S. C, the purposes of an attachment has its 13 R L, 294 ( 1881). situs where the corporation is located." 614 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 485. shares owned by a non-resident defendant in the stock of a foreign corporation cannot be reached and levied upon by virtue of an at- tachment, although officers of the corporation are within the state engaged in carrying on the corporate business. 1 Nor can such an attachment be levied although the foreign corporation has a branch registry office in the state where the attachment is levied, and al- though the certificates of stock are also in such state. 2 Certificates of stock are not the stock itself — they are but evidence of the stock; and the stock itself cannot be attached by a levy of attach- ment on the certificate. 3 As was well said by the supreme court of Pennsylvania, stock cannot be attached by attaching the certificate any more than lands situated in another state can be attached by an attachment in Pennsylvania levied on the title deeds to such land. 4 There can be no attachment of stock as the property of an Under the statutes of Tennessee, how- corporation to exercise certain powers ever, requiring a foreign corporation doing business in that state to file its articles of incorporation with the secre- tary of state, it was held that it became a domestic corporation sufficiently to authorize an attachment of stock in that state. Young v. South, etc.. Iron Co., 2 S. W. Rep. 202 (Tenn., 1886). Bonds which are pledged by a non-resi- dent cannot be attached by serving a notice on the pledgee. Tweedy v. Bo- gart. 15 Atl. Rep., 374 (N. J., 1888). i Plimpton v. Bigelow, 93 N. Y., 592 (1883), reversing 29 Hun, 362, the court saying: "We do not doubt that shares for the purpose of attachment proceed- ings may be deemed to be in the posses- sion of the corporation which issued them, but only at the place where the corporation by intendment of law al- ways remains, to wit, in the state or country of its creation. . . . Mani- festly the res cannot be within the juris- diction, as a mere consequence of a legislative declaration, when the actual locality is undeniably elsewhere." To same effect, Preston v. Pangburn, N. Y. L J., March 7, 1892. Garnishment pro- ceedings also will not apply. The de- fendant may move to have the attach- ment levy set aside. Martin v. Mobile & O. R, R. Co., 7 Bush (Ky.), 116 (1870), holds that a statute authorizing a foreign does not make it a domestic corporation. Certificates of stock in a corporation of another state cannot be subjected to the payment of the stockholders' debts, either by attachment or a bill in equity. Morton v. Grafflin, 13 Atl. Rep., 341 (Md., 1888). '^Christmas v. Biddle, 13 Pa. St., 223 (1850), approved in Childs v. Digby. 24 Pa, St., 23 (1854). In this case the attachment was levied in Pennsylvania on certificates of stock in Pennsylvania, but belonging to a citizen of Mississippi, and the corporation was created by the laws of Mississippi. Certificates of stock in a corporation cannot be attached any- where except in the state where the corporation is incorporated. Armour, etc., Co. v. Smith, 20 S. W. Rep., 690 (Mo., 1892). 3 Christmas v. Biddle, supra; Moore v. Gennett, 2 Tenn. Ch., 375 (1875). 4 Christmas v. Biddle, supra. In Wins- low v. Fletcher, 13 Am. & Eng. Corp. Cas., 39 (Conn., 1886), the court well says : " While the certificates are in themselves valuable for some purposes, and to some extent may properly be re- garded as property, yet they are dis- tinct from the holders' interest in the capital stock of the corporation, and are not goods and effects within the mean- ing of the statute relating to foreign at- 615 § 486.] ATTACHMENT AND EXECUTION. [CH. XXVII. unregistered holder through whom title has passed to another. 1 This rule is peculiar to certificates of stock. § 486. Hi yhts of an unregistered transferee of a certificate of stock as against an attachment or execution levied on that stock. — The most difficult and unsettled question connected with an attach- ment or execution levied on stock is the question of how far a pur- chaser of the certificate of stock from the stockholder and debtor is protected in his ownership where such purchaser does not have his transfer registered on the corporate books before the attachment or execution is levied. The question is especially important, since it affects the rights of a bona fide purchaser of stock in the open market, and constitutes one of the greatest dangers incurred in the purchase of certificates of stock. It has been held that if a stockholder whose stock has been already attached or sold on execution sells his certificate of stock after the lew of such attach- ment or execution, the vendee or transferee buys subject to such levy, even though he had no knowledge of it. The stock, in con- templation of law, has already been seized by the levy, and the purchaser is bound to take notice of that fact. 2 The only means of avoiding this danger in the purchase of stock is by an inquiry at the office of the corporation at the time of making the purchase. A different question, however, presents itself when the stock- holder against whose stock an attachment or execution is levied has already and before such levy sold and transferred his certificate of stock, but that transfer has not been registered on the corporate books. The courts of the different states are in irreconcilable con- flict on this question of whether the unregistered transferee is protected in his purchase. The better rule, and the rule which ultimately will prevail, is that an unrecorded transfer of stock is in this respect like an unrecorded deed of land, and gives good tachment. They are no more subject being in the state. Id Cf. p. 615, note to an attachment or a trustee process supra. than a promissory note. The debt is 1 Lippett 7'. American, etc.. Co., 14 subject to attachment, but the note R I., 301 (18*5). Thus, where A., the itself, which is simply evidence of the registered stockholder, transfers the eer- d br, is not So with stock. That may tificate of stock to B. and B. transfers it be attached, but the certificate cannot to C, and C. obtains registry directly be." Negotiable bonds held outside of from A., there can be no attachment of the jurisdiction of the court cannot be the stock against B. attached by serving the attachment on 2 Chesapeake & O. R. R Co. v. Paine, the corporation which issued the bonds. 29 Gratt. (Va.), 502 (1877); Shenandoah Von Hesse v. Mackaye, 55 Hun, 365 Valley R R Co. v* Griffith, 76 Va., 913 (1890); affirmed, 121 N. Y., 694. An at- (1882). Cf. Dudley v. Gould, 6 Hun, 97 tachment cannot be levied on bonds in (1875). a foreign corporation, the bonds not 616 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 487. title as against subsequent attachments or levies of execution, even though made in ignorance of the unrecorded transfer or deed. §487. Rule in New York, Pennsylvania, New Jersey, Minne- sota, South Carolina, Texas, Louisiana and the federal courts. — ■ The decided weight of authority holds that he who purchases for a valuable consideration a certificate of stock is protected in his ownership of the stock, and is not affected by a subsequent attach- ment or execution levied on such stock for the debts of the regis- tered stockholder, even though such purchaser has neglected to have his transfer registered on the corporate books, thereby allow- ing his transferrer to appear to be the owner of the stock upon which the attachment or execution is levied. Such is the rule pre- vailing in the federal courts and in the courts of the above-named Frequently this rule is justified and explained on the 'to states. 1 l JS!ew York: The case of Smith v. American Coal Co., 7 Lans., 317 (1873), fully discusses and sustains this rule. See, also, Comeau r. Guild Farm Oil Co., 3 Daly, 218 (1870), where Van Brunt, J., says that the sheriff, "by the levy of such an attachment, could not acquire any better or greater title to the stock than a person would have done who had purchased this stock of the person in whose name it stood on the day of the levy of the attachment. And the principle is well established in this state that such a purchaser would not acquire any interest whatever as against a prior purchaser for value." Where the cor- poration causes an attachment to be levied on the stock of a stockholder of record who has sold his certificates to an- other person and causes a sale to be made to deprive the latter of his stock, he may hold the corporation liable. Sims v. Bonner, 16 N. Y. Supp., 801 (1891). See also, in general, Dunn v. Star, etc., Ins. Co., 19 N. Y. Week. Dig, 531 (1884). An assignment of the certificates to a re- ceiver in another state takes precedence of an attachment against the stock at the home of the corporation. The court will direct the corporation to register the transfer. Weller v. Pace, etc., Co., 5 R'y & Corp. L. J., 5 (N. Y. Sup. Ct, 1888). Pennsylvania: For Pennsylvania, see Eby v. Guest, 94 Pa. St., 160 (1880); Fin- ney's Appeal, 59 Pa. St, 398 (1868); Com- monwealth v. Watmouth, 6 Whart., 117 (1840), holding also that the sheriff need not levy on stock which he knows has ahead}- been sold to an unregistered transferee. When the transferrer noti- fies the corporation of the transfer, a subsequent attachment of the stock as the property of the transferrer is not good, although the transfer was not re- corded in the corporate book. Tilford, J etc., Co. v. Gerhab, 13 Atl. Rep. 90 (Pa., 1888); United States v. Vaughan, 3 Binn., 394 (1811), where the unregistered transferees resided in foreign lands. Minnesota: A sale and transfer of corporate stock, although not entered on the books of the corporation, is effectual as between the parties, and takes precedence of a subsequent at- tachment in behalf of a creditor of the vendor. Lund et ah v. Wheaton, etc., Co., 52 N. W. Rep., 268 (Minn., 1892). New Jersey: Broadway Bank v. Mc- Elrath, 13 N. J. Eq., 24 (1860); S. C, sub nom. Hunterdon Bank v. Nassau Bank, 2 C. E. Gr., 496; Rogers v. Stevens, 8 N. J. Eq., 167 (1849). South Carolina: Fraser v. Charleston, 11 S. C, 486, 519 (1878). Texas: Seeligson v. Brown, 61 Texas, 114 (1884). Louisiana: Pitot v. Johnson, 33 La. Ann., 1286 (1881); Smith v. Crescent City, etc., Co., 30 La. Ann., 1378 (1878). The attaching creditor of one who ap- 617 § 487.] ATTACHMENT AND EXECUTION. [CH. XXVII. ground that registry and by-laws or charter provisions requiring registry of transfers on the corporate books are not for the pur- pole of notifying the creditors of the old registered stockholder that he no longer owns the stock, nor for any similar purpose, but are for the purpose of protecting the corporation in paying divi- dends and allowing the stock to be voted. Another and stronger reason is that the law favors the transfer of stock certificates, and decreases, so far as possible, all secret dangers incurred in their purchase. By protecting the purchaser against subsequent attachments and executions the law removes one of the chief risks incurred by hold- ing certificates of stock without a registry, and thereby increases the safety and desirability of such investments. If the corporation improperly refuses to allow the transferee of stock to register his pears on the books of a corporation as registered owner of share; of its stock cannot hold the stock against the true equitable owner, who holds the certifi- cate of stock duly indorsed by the debtor. Kern v. Day, 12 S. Rep., 6 (La., 1893). Cf. Bidstrup v. Thompson, 15 Fed. Rep., 452 (1891), where the pledge had not been completed. Federal Courts: In regard to stock in national banks, the federal courts have firmly established the rule that the un- registered transferee is protected against a subsequent attachment or execution. Continental Nat'l Bank v. Eliot Nat'l Bank, 5 Fed. Rep., 369 (1881), with a full review of the authorities by Judge Lowell; Scott V. Pequonnock Nat'l Bank, 15 Fed. Rep, 491 (1883), where the rule was applied, although the national bank was in Connecticut, a state which strongly favors the opposite rule. The court said: "The tendency of modern decisions is to regard certificates of stock attached to an execution blank, assignment, and power to transfer, as approximating to negotiable securities, though neither in form nor character negotiable." Under the federal statutes, the rights of a transferee of national bank stock, under an unrecorded trans- fer, good at common law, are superior to the rights of a subsequent attaching creditor of the transferrer without no- tice. Doty v. First Nat'l Bank of Lari- more, 58 N. W. Rep, 77 (N. Dak., 1892). Even in Massachusetts, where the courts upheld an opposite rule, the state courts will follow the above rule when the Btock of a national bank is in question. Sibley tt Quinsigamond Nat'l Bank, 133 Mass., 515(1882); but see State v. First Nat'l Bank of J.. 69 Ind.. 302 (1883). The statute of a state cannot restrict or interfere with the transferability of cer- tificates of stock in national banks. Doty V. First Nat'l Bank of Larimore, 53 N. W. Rep., 77 (N. Dak., 1892). Will- iams r. Mechanics' Bank, 5 Blatch., 59 (1862), is not in accord with the other federal decisions. Tennessee: As regards Tennessee, com- pare Cornick v. Richards, 3 Lea, 1 (1879), with State Ins. Co. v. Sax, 2 Tenn. Ch., 507 (1875). Maryland: In Maryland, by statute, stock which is pledged cannot be at- tached. Morton v. Grafflin, 15 Atl. Rep., 298 (1888). But see Noble t'. Turner, 16 id., 124. In England the creditor of a regis- tered stockholder cannot subject the stock to his debt as against the owner of the certificates, who has allowed the stock to remain in the name of the debtor in order to qualify the latter as a director. Cooper v. Griffin, 66 L T. Rep, 660 (1892). 618 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 488. transfer, and the stock is afterwards attached by a creditor of the stockholder, the transferee may, if he chooses, hold the corporation liable in damages for its refusal to allow the registry. 1 § 488. Bights and duties of the corporation in such cases. — The corporation has a dangerous duty to perform when stock has been attached or sold under levy of execution, and a registry is requested by the purchaser at such sale or by a purchaser of the outstanding certificate of stock. If the purchaser of the certificate demands registry before registry has been allowed to the purchaser at the execution sale, and if the former claims to have purchased the cer- tificate before the attachment or execution was levied, the right of the corporation is clear. It may refuse to allow the registry, and when sued therefor may interplead and compel the claimants to litigate the matter between themselves. 2 But where the corpora- tion does not know whether the outstanding certificate is in the hands of a purchaser or not, and a registry is demanded by a pur- chaser at an execution sale, the rights and duties of the corporation are not so clear. It has two courses open to it: 3 it may refuse to allow a registry until compelled to do so by a court, or it may allow registry without being so compelled. The former is the safer course, since the corporation will probably be thereby protected from all liability to a possible purchaser of the outstanding certifi- cate. 4 The corporation, it seems, is protected in its obedience to the decree of a court. 5 It is quite probable, also, that no court in any of the above-named states would require the corporation to issue new certificates of stock to a purchaser of stock at an execu- tion sale unless such purchaser give to the corporation a bond of indemnity, whereby an unknown purchaser of the outstanding cer- i Robinson v. National Bank of New fair contest in good faith by the corpo- Berne, 95 N. Y., 637 (1884). See, also, ration, orders the stock to be transferred Plymouth Bank v. Bank of Norfolk, 27 to the purchaser under such seizure and Mass., 454 (1830). sale, the corporation cannot be liable to 2 See ch. XXII, § 387. The proper the holder of the certificate who took remedy for the purchaser from the judg- no steps to protect himself." Fried- ment debtor to pursue under such cir- lander v. Slaughter-house Co., 31 La. cumstances is to enjoin the corporation Ann., 523 (1879). Where, also, the un- and the purchaser at the execution sale registered transferee contested in the from registering the latter as a stock- courts the right of the purchaser at the holder. Smith v. Crescent City, etc., Co., execution sale, and was defeated in the 30 La. Ann., 1378 (1878). If an attach- lower court, and appealed without stay- ment has been levied he should enjoiu ing the decree below, the corporation is that. Cheever v. Meyer, 52 Vt. 66 (1879). not liable for obeying the decree of the 3 Robinson v. National Bank of New lower court, although the appeal is suc- Berne, 95 N. Y., 637 (1884). cessful. Chapman v. New Orleans Gas 4 " Where a judicial tribunal of com- Light, etc., Co., 4 La Ann., 153 (1849). petent jurisdiction of last resort, after a 5 See §§ 359, 388. 619 § 488.] ATTACHMENT AND EXECUTION. [CH. XXVII. tificate may be protected. 1 The other course open to the corporation, that of allowing a registry by the purchaser at the execution sale without being compelled to do so by a court, is pursued by the cor- poration at its peril. If it afterwards transpires that the outstanding certificate had been purchased before the attachment or execution was levied, the corporation is liable in damages to such purchaser for allowing the registry, 2 but not unless such purchaser gave a valuable consideration for the certificate and alleges that fact in his pleading. 3 Until such purchaser demands a registry from the corporation it may safely pay dividends to the execution purchaser. 4 These rules are complicated, but they protect all parties. If the statute prescribes that the corporation shall register as a stock- holder the purchaser at the execution sale, the writ of mandamus will lie to compel the corporation to make such registry; 5 but the relator must allege that he presented to the corporation the re- quired papers, and was refused such registry. 6 A court of equity will not compel a corporation to allow a transfer of stock by a purchaser at an execution sale where the price paid at such sale is so small as to shock the conscience of the court. 7 1 The supreme court of Ohio, in Naf 1 Bank of N. L. v. Lake Shore & M. S. R R Co., 21 Ohio St., 221 (1871), very prop- erly and very distinctly refused to com- pel a registry, although conceding that the execution purchaser is entitled to dividends. The court said : " Can it be that, because the defendant refused to assume the peril of deciding between the contending claimants by issuing other certificates for the same stock to the plaintiff upon demand, that it thereby became a wrong-doer and con- verted the plaintiff's stock to its own use, and rendered itself liable to respond in the full value of the stock to the claimant who could establish his right in a court of law? The very statement of the proposition refutes it." Where the attachment is on stock that the complainant alleges was transferred in fraud of creditors, mandamus will not lie to compel the corporation to allow a registry under the execution sale. State v. Warren Foundry & M. Co., 32 N. J. L., 439 (1868). As to the mode of plead- ing that the defendant company has been compelled to transfer the stock to a purchaser at an execution sale, see Wyoming, etc., Assoc, r. Talbott, 21 Pac. Rep., 700 (Wyom., 1889). 2 Smith r. American Coal Co., 7 Lans. (N. Y.), 817 (1873). If the purchaser at the execution sale still has the certifi- cates the purchaser of the old certifi- cate may bring suit against him and the corporation to compel a retransfer. Rogers v. Stevens, 8 N. J. Eq., 167 (1849). In a suit by a purchaser at an execution sale to cut off the rights of a judgment debtor the corporation is an indispensable party, since it alone can allow a transfer on the books. St Louis & San F. R'y Co. v. Wilson, 114 U. S., 60 (1884). See, also, the late case of Hazard v. Nat'l Ex. Bank, 26 Fed. Rep., 94 (1886), holding the corporation liable in damages to the purchaser of the out- standing certificate. 3 Littell v. Scran ton Gas & Water Co., 42 Pa St, 500 (1862). 4 Smith v. American Coal Co., supra. 5 Bailey r. Strohecker, 38 Ga, 259 (1868). See, also, § 390. 5 Lippett V. American Wood Paper Co., 14 R I., 301 (1883). "Mississippi, etc., R. R r. Cromwell, 91 U. S., 643; Randolph v. Quidnick, 620 en. xxvii.] ATTACHMENT AND EXECUTION. [§ 489. § 4S9. Rule in Connecticut, Maine, Vermont, Indiana, Iowa, Mart/land, Wisconsin, Alabama and California. — The courts of these states all hold that, where regulations exist requiring a transfer of stock to be registered on the corporate books in order to be effectual, an attachment or execution levied on stock stand- ing in the defendant debtor's name will cut off the rights of a previous purchaser of the certificate who has not completed his transfer b} r registry. 1 Sometimes these regulations requiring a registry are contained in the charter, sometimes only in the by- laws, and sometimes are merely printed on the face of the certifi- cate of stock. 2 Even in these states, however, it is well established 135 U. S., 457 (1890). Inadequacy of price is not sufficient cause for setting aside an execution sale of stock. Con- way v. John, 23 Pac. Rep., 170 (Cal., 1890). 1 See note following. 2 Oxford Turnpike Co. v. Bunnell, 6 Conn., 552 (1827); Dutton v. Conn. Bank, 13 Conn., 493 (1840), where the provision was in the by-laws ; Skowhe- gan Bank v. Cutler 49 Me., 315 (1860); Fiske v. Carr, 20 Me., 301 (1841) ; Warren v. Brandon Mfg. Co., cited in 52 Vt, 75 (1879); State v. First Nat'l Bank of J., 89 Ind., 302 (1883) : Coleman v. Spencer, 5 Blackf. (Ind.), 197 (1839); Fort Mad- ison, etc., Co. v. Batavian Bank, 32 N. W. Rep., 336 (Iowa, 18S7); 42 id. 331; Re Murphy, 51 Wis., 519 (1881), where the provision was by statute. Also, under a statute, Weston v. Bear River, etc., Min. Co., 5 Cal., 186 (1855); Nagle v. Pacific Wharf Co., 20 Cal., 529 (1862). Of. Supply, etc., Co. v. Elliott, 15 Pac. Rep, 691 (Cal., 1887). In California an attachment takes precedence over an unrecorded prior transfer of the certifi- cate, the by-laws providing for transfer of title by registry. Conway v. John, 23 Pac. Rep., 170 (Cal., 1890). If the unregistered purchaser buys the judg- ment obtained under the attachment the latter is merged. Strout v. Natoma Water & Min. Co., 9 Cal., 78 (1858). As to North Carolina, see Morehead v. Western N. C. R. R Co., 2 S. E. Rep., 247 (1887). The statutory law of Ala- bama on this subject is indicated in Fisher v. Jones, 3 S. Rep, 13 (Ala., 1887). In Alabama by statute the at- taching creditor takes title in preference to an unregistered transferee, and the same rule prevails where the registered holder is a mere "dummy " for another. White v. Rankin, 8 S. Rep., 118 (Ala., 1890). In Alabama the unregistered pledgee is not protected against attach- ments. Notice to the corporate officer of the attachment may be oral. Abels v. Mobile, etc.. Co., 9 S. Rep, 423 (Ala., 1891). Under the Alabama attachment statute the attachment takes precedence over a prior transfer of the certificates, where such transfer is not recorded on the corporate books within fifteen days. Berney Nat'l Bank v. Pinckard, 6 S. Rep., 364 (Ala., 1889). In Maryland a subsequent attachment precedes a pledge of the certificates. Noble v. Turner, 16 Atl. Rep., 124 (Md., 1888). Where an agreement to sell is negoti- ated, but before the certificate is trans- ferred an attachment is levied on the stock, it is held in Tennessee that the attachment prevailed. Young v. South, etc., Iron Co., 2 S. W. Rep., 202 (Tenn., 1886). A sale of stock after an attach- ment suit has failed, and before that decision is reversed, gives the purchaser good title. Loveland v. Alvord, etc., Co., 18 Pac. Rep., 682 (Cal., 1888). For a lurid and yet just invective against the decisions of California, Indiana, Colo- rado and other states allowing attach- ments in those states to have priority against a prior transfer of stock, see 12 621 § 489.] ATTACHMENT AND EXECUTION. [CH. XXVII. that if the person who levies the attachment or purchases at the execution sale has notice that the defendant debtor had transferred his certificate before the attachment or execution was levied, the purchaser of the outstanding certificate may have his remedy. If the attaching creditor has notice before the attachment is levied the purchaser may obtain a perpetual injunction against the attach- ment. 1 Moreover, if the purchaser at the execution sale has notice, he may be prevented from obtaining registry and claiming the stock. 2 It is also held that where the unregistered transferee of the certificate of stock has notified the corporation thereof and de- manded registry, which is not granted, any attachment or execution levied subsequently to the improper refusal by the corporation to register does not take precedence over such purchaser. 3 Where R'y & Corp. L. J., 145. As to Illinois, see People's Bank v. Gridley. 91 111.. 457 (1879). The laws of 1883, p. 110, changed the rule for that state. iCheever v. Meyer, 52 Vt. 66 (1879); Scripture v. Francistown Soapstone Co., SON. H., 571 (1871); Black v. Zacharie, 3 How., 482 (1845). A purchaser at an execution sale takes no title as against a prior purchaser of the certificate where the former knew of the latter's purchase when the execution sale took place. Wilson v. St. Louis, etc., R R, 18 S. W. Rep, 28G (Mo., 1891). If the purchaser at the execution sale buys with knowledge that the judgment debtor does not own the stock at the time of the sale he takes no title to the stock. Blakeman v. Puget Sound Iron Co., 13 Pac. Rep., 872 (Cal., 1887). 2 People v. Elmore, 35 Cal., 653 (1868); Weston v. Bear River, etc., Min. Co., 6 Cal., 425 (1856); Van Cise n Merchants' Nat Bank, 33 N. W. Rep. 897 (Dak., 1887); Farmers' Nat Gold Bank v. Wil- son, 58 Cal., 600 (1881), holding, also, that the execution sale will not be en- joined, since the claimant may attend and give notice of his claim ; Newberry v. Detroit, etc., Iron Co., 17 Mich., 141, 158 (1868), per Cooley, J. Where the plaintiff bought for itself at the execu- tion sale and had notice it is liable in tort to the unregistered purchaser of the old certificates. Bridgewater Iron Co. v. Lissberger. 116 U. &, 8 (1885). But Jones v. Latham, 70 Ala., 164, seems to hold that, if the execution is levied without uotice of an unrecorded traus- fer, a subsequent notice before the sale to the purchaser at the sale is ineffectual, and docs not affect the latter. :; Merchants' Nat. Bank v. Richards. 6 Mo. App.,454 (1879); afFd, 72 Mo.. 77: Colt r. [ves, 31 Conn.. 25 (1862); state Ins. Co. v. Gennett, 2 Tenn. Ch.. 100 (1874); Plymouth Bank 0. Bank of Nor- folk. 27 M;i>s.. 454 (1830); Sargent v. Franklin Ins. Co.. 25 Mass., 90 (1829). Contra. Fiske r. Carr, 20 Me., 301 (1841). But not if the transferee merely sends a letter to the corporation requesting a transfer, without sending the evidences of his title and the old certificate. New- all v. Williston, 138. Mass., 240 (1885*. The corporation is liable in damages if it levies the attachment under such cir- cumstances. Sargent v. Franklin, etc.. Co., supra. Where registry is allowed it cuts off a subsequent attachment, even though the transferee has not formally accepted the stock as required by statute. Woodruff v. Harris, 11 U. C, Q. B., 490 (1854). A memorandum on the stock book that the stock has been transferred as collateral security is sufficient to give the transfer precedence over an attachment Moore v. Marshall- town, etc., Co., 46 N. W. Rep., 750 (Iowa, 1890). 622 CH. XXVII.] ATTACHMENT AND EXECUTION. [§ 490. the unregistered purchaser is cut off by au attachment ho cannot compel his vendee to pay for the stock which is made valueless by the attachment. 1 § 490. Rule in Massachusetts and New Hampshire— The courts of Massachusetts were the first to lay down the rule which places an attachment or execution levy ahead of an unregistered pur- chaser of the certificate of stock. The evil consequences of the rule, however, seem to have becolne apparent to her courts; and it was held that, although the unregistered purchaser was not pro- tected where the charter of the corporation required registry, 2 yet, where only the by-laws or the certificate itself created such a re- quirement, the unregistered purchaser was protected and took pre- cedence over the attachment or execution. 3 The legislature of Massachusetts seems to have had a still clearer perception of the demands of trade and of the interests of those who invest in cer- tificates of stock, and, in 1884, enacted a statute which probably will be construed to make an attachment or execution levied on stock no more effective than in New York state. 4 A similar stat- utory change has been made in New Hampshire. 5 i Rock v. Nichols, 85 Mass., 342 (1862). 2 Fisher v. Essex Bank, 71 Mass., 373 (1855); Newall v. Williston, 138 Mass., 240 (1885); Central Nat'l Bank v. Willis- ton, 138 Mass., 244 (1885) ; Boyd v. Rock- port Steam Cotton Mills, 73 Mass., 406 (1856); Blanchard v. Dedham Gas Light Co., 78 Mass., 213 (1858). 3 Sargent v. Essex M. R'y Co., 26 Mass., 202 (1829) ; Boston Music Hall v. Cory, 129 Mass.. 435 (1880), holding that a delay of four years was not fatal to the unregistered purchaser's rights. 4 " The delivery of a stock certificate of a corporation to a bona fide purchaser or pledgee for value, together with a written transfer of the same, signed by the owner of the certificate, shall be a sufficient delivery to transfer the title as against all parties ; but no such trans- fer shall affect the right of the corpora- tion to pay any dividend due upon the slock, or to treat the holder of record as the holder in fact, until such trans- fer is recorded upon the books of the corporation, or a new certificate is i sued to a person to whom it has been so transferred." Act of May 9, 1884. The enactment of a similar statute is respectfully recommended to the states mentioned in § 489. Since the first edition of this work was printed several states have enacted a statute similar to this Massachusetts statute. Where a father delivers stock to his son in order to qualify the latter as director, and the son transfers the certificate back to his father, the creditor of the son cannot at- tach the stock as against the father, al- though the stock stands on the corporate books in the name of the son. Andrews v. Worcester, etc.. Co., 33 N. E. Rep., 1109 (Mass., 1893). 5 Formerly in New Hampshire an at- taching creditor took precedence over an unrecorded transferee. Pinkerton v. Railroad Co.,42N.H.,424 (1861); Buttrick v. Nashua, etc., R. R, 62 N. H., 413(1882). But in 1887 the legislature passed an act to the effect that the delivery of a certificate of stock to a bona fide pur- chaser or pledgee should transfer the title as against all parties. (Ch. 16, L. 1887.) 623 §491.] ATTACHMENT AND EXECUTION. [CH. XXVII. § 491. Shares of stock cannot he subjected to the payment of the stockholder s debts by the process of garnishment. — The process of garnishment is proper only where a debt is due from a third per- son to the defendant debtor. It is not a proper remedy for reach- ing shares of stock owned by the debtor. 1 The corporation owes the stockholder no debt, and by no fiction of law can it be held to be a debtor of the defendant debtor. Consequently, where the sheriff levies an attachment, not according to the procedure governing at- tachments, but according to the procedure of garnishment, the whole proceeding is void, and a subsequent transfer of the stock by the defendant debtor is valid. 2 1 Planters & M. Bank v. Leavens, 4 Ala. (N. S.), 753 (1843) ; Ross v. Ross, 25 Ga., 297 (1858), where the court say : " Is stock in this railroad such a debt (' in- debtedness ') of the railroad to the stock- holder that a garnishing creditor of the stockholder can enter, up judgment for it, against the railroad? It is not; it is a debt which the railroad dare not pay, even to the stockholder himself. The road may pay him dividends on it, but that is all." See, also, Foster v. Potter, 37 Mo., 525 ; § 484, n., supra. Stock held as collateral is property subject to gar- nishment under the statutes of Texas. Smith v. Traders' Natl Bank, 12 S. W. Rep., 113 (Tex., 1889). *Mooar v. Walker. 4G Iowa, 164 (1877). Cf. Chesapeake & O. R R. Co. v. Pain-, 29 Gratt. (Va. •. 502. But see Harrell v. Mexico, etc., Co., 11 S. W. Rep., 863 (Texas, 1889). Garnishee process must conform to the statute relative to at- tachments, and if served on the holders of the certificates instead of on the cor- poration it is ineffectual. Younkin v. Collier, 47 Fed. Rep., 571 (1891). 624 CHAPTER XXVIII. CONSTITUTIONALITY OF AMENDMENTS TO CHARTERS STOCKHOLDER TO OBJECT. RIGHT OF A § 492. A corporate charter is a contract between three parties — the state, the corporation and the stockholders. 493. The charter as a contract between the corporation and tli6 stock- holders. 494. Charter as a contract between the state and the corporation. 495. 496. Charter as a contract be- tween the state and the stock- holders. 497. Charter amendments imposed upon the stockholders. 498. Charter amendments offered to the stockholders. § 499. Auxiliary and incidental amend- ments are constitutional, though some of the stockhold- ers dissent. 500. Material amendments offered to the stockholders can be ac- cepted only by a unanimous vote. 501. Amendments under the reserved power of the state to alter or amend the charter. 502. Dissenting stockholder's remedy against an illegal amendment. 503. Assent and acquiescence as a bar to the stockholder's remr edy. § 492. A corporate charter is a contract between three parties — the state, the corporation and the stockholders. — The charter of a corporation having a capital stock is a contract between three par- ties, and forms the basis of three distinct contracts. 1 The charter is a contract between the state and the corporation; second, it is a contract between the corporation and the stockholders; third, it is a contract between the stockholders and the state. § 493. The charter as a contract between the corporation and flic stockholders. — That the charter is a contract between the corpora- tion and the stockholders has within the last fifty years been firmly established, and is now unquestioned law. The cases of ISTatusch. 1 See State Bank of Ohio v. Knoop, 16 How., 369 (1853); Port Edwards, etc., R'y v. Arpin, 49 N. W. Rep., 828 (Wis.. 1891); Northern R. R. Co. v. Miller. 10 Barb., 260 (1851); Cooley on Constitu- tional Limitations (5th ed.). p. 337, where the learned author says : " Those char- ters of incorporation, however, which are granted, not as a part of the ma- chinery of the government, but for the private benefit or purposes of the cor- porators, stand upon a different footing. and are held to be contracts between the legislature and the corporators, having for their consideration the liabilities and duties which the corporators assume by accepting them ; and the grant of the franchise can no more be resumed by the legislature, or its benefits diminished or impaired without the consent of the grantees, than any other grant of prop- erty or valuable thing, unless the right to do so is reserved in the charter it- self." (40) 625 494.] AMENDMENTS TO CHARTERS. [CH. XXVIII. v. Irving' 1 in England, and Livingston v. Lynch 2 in this country, followed by a long line of supporting decisions, distinctly hold that the charter is a contract prescribing to the corporation that it shall not attempt to materially change, extend, alter or abandon the particular business which that charter authorizes the corporation to do. Any attempt of the corporation to make such a change, ex- tension, alteration or abandonment of that business is called an ultra vires act. It is an act which a single stockholder may pre- vent by injunction or set aside by a suit in equity. This subject, however, is fully treated in another part of this work." § 494. Charter as a contract bettveen the state and the corpora- tion. — As between the state and the corporation the corporate charter is a contract, protected by that provision of the United States constitution which prohibits a state from passing any law which will impair the obligation of the contract. 4 Hence it is be- yond the power of the state to repeal or materially annul such a corporate charter, unless the power of amendment and repeal has been expressly reserved by the state, or unless all the parties to the contract consent to the change. All the franchises, privileges and express and implied powers necessary and essential to carrying out the corporate purposes arc protected by this contract. 5 This 1 This case, decided by Lord Eldon in 1824, is reported in (Jow on Partnership, 398; also 2 Cooper's Ch, 358. 2 4 Johns. Ch., 573 (1820). Thus, in Clearwater v. Meredith. 1 "Wall., 23 (1863), the court say : " The relation be- tween the corporation and the stock- holders is one of contract. The stock- holder subjects his interest to the con- trol of the proper authorities to accom- plish the object of the organization; but he does not agree that the purpose shall be changed in its character at the will of the directors, or a majority of the stockholders even. The contract cannot be changed without the consent of both contracting parties." 3 Seech. XL, 4 This rule of law, first enunciated in the ease of Trustees of Dartmouth Col- lege v. Woodward, 4 Wheat, 518 (1819), by Marshal], C. J., has become thor- oughly established. As early as 1806 a court said : " We are also satisfied that the rights legally vested in this or in any corporation cannot be controlled or destroyed by any subsequent statute, unless a power for that purpose be re- served to the legislature in tin' act of in- corporation." Wales r. Stetson, 2 Mass.. 143 (1806). In England the unwritten constitution is not superior to the pow- ers of parliament, and consequently the rule is different In that country, as is said by Lord Coke, "the power and ju- risdiction of parliament is so transcend- ental and absolute that it cannot be controlled or confined, either for causes or purposes, within any bounds." Stev- ens v. Rutland & Burlington R. R Co., 29 Vt, 545 (1854); Thorpe v. Rutland & Burlington R R Co., 27 Vt, 140 (1857); Trustees of Dartmouth College V. Woodward, 4 Wheat. 518. 613(1819). Consequently, the English authorities are of little use in this chapter. 5 State Bank of Ohio v. Knoop, 16 How., 369 (1853); Thorpe v. Rutland & Burlington R R Co., 27 Vt, 140 (1857), per Redfield, J. The latter case dis- cusses the nature of the privilege thus protected. 626 CH. XXVIII.] AMENDMENTS TO CHARTERS. [§§ 495, 496. branch of the law is important to stockholders in cases where the corporation neglects or refuses to protect itself against legislative amendments or repeals violating the charter contract between the corporation and the state. In such cases the stockholder ma}^ en- join or remedy the wrong by bringing an action in place of and on behalf of the corporation, making it a party defendant, together with the parties who, under the authority of the state, have vio- lated the contract. 1 A stockholder's action to prevent the payment of a tax levied upon the corporation in violation of a statutory ex- emption from taxation is an action of this character. 2 Corporate charters, however, are subject to constitutional provisions enacted subsequently to the granting of the charters unless there is a clear contract to the contrary. 3 §§ 495, 496. Charter as a contract oetween the state and the stoclc- liolders. — As between the state and the stockholders, also, the cor- porate charter is a contract protected by the United States consti- tution. 4 In consequence thereof the state cannot materially amend the charter, except by the unanimous consent of the stockholders, unless the power of amendment is expressly reserved by the state 1 Greenwood v. Freight Co., 105 U. S., 13 (1881). The character of such an action, also the parties, pleadings and rules of relief, are explained in Part IV. 2 Dodge v. Woolsey, 18 How., 331 (1855) ; State Bank of Ohio v. Knoop, 16 How., 369 (1853). See, also, Wilmington R. R. v. Reid, 18 Wall., 264 (1871) ; Dela- ware R. R. Tax, 18 Wall., 206 (1873). See. also, § 562. 3 Pennsylvania R. R. v. Miller, 132 U. S., 75 (1889). 4 " A charter of incorporation granted by a state creates a contract between the state and the corporators which the state cannot violate." This has been held so often by this court that " it is supererogation to repeat it." Wilming- ton R. R. v. Reid, 13 Wall., 264 (1871). It " has been the settled law of this court since the Dartmouth College case." Delaware R. R. Tax, 18 Wall., 206 (1873). To the same effect, see Zabriskie v. Hackensack & N. Y. R. R. Co., 18 N. J. Eq., 178 (1867) ; Lothrop v. Stedman, 42 Conn., 583 (1875); Stevens v. Rutland & Burlington R. R Co., 29 Vt, 545 (1854). " An act granting corporate privileges to a body of men is, when accepted, a 627 contract between the state and the cor- porators. . . . It is sustained by everything that we are bound to regard as authority " — by the courts, by the opinion of the legal profession and by the acquiescence of the people. Erie & Northeast R. R. v. Casey, 26 Pa. St.,. 287 (1856), per Jeremiah Black, J. See, also, Sinking Fund Cases, 99 U. S., 700 (1878). "That an act of incorporation is a con- tract between the state and the stock- holders is held for settled law by the federal; courts and by every state court in the Union. All the cases on the sub- ject are saturated with this doctrine. It is sustained not by a current but by a torrent of authorities. No judge who has a decent respect for the principle of stare decisis — that great principle which is the sheet-anchor of our juris- prudence — can deny that it is immov- ably established." " If anything is settled it is this rule of construction that a corporation takes nothing by its charter except what is plainly, ex- pressly and unequivocally granted." Per Black, J. Bank of Pennsylvania v. Commonwealth, 19 Pa. St, 144 (1852). 497.] AMENDMENTS TO CHARTERS. [CH. XXVIII. at the time of granting the charter. It is this contract which con- stitutes the subject of the present chapter. § 497. Charter amendments imposed upon tlie stockholders. — The right of the legislature to amend a charter against the will of the stockholders has been the subject of much litigation. Such amend- ments are clearly divisible into two kinds. The first are those which, by their terms, are absolute and compulsory, and become a part of the charter irrespective of the action or willingness of the corporation or the stockholders to accept them. Such amend- ments are unconstitutional and void, unless made under a re- served power to amend. 1 Of such a kind are amendments repealing an exemption of stockholders from taxation. 2 So, also, a statute passed subsequent to the granting of a charter, and increasing the liability of a stockholder on his stock for the debts already incurred, is unconstitutional and void unless the legislature has reserved the rio-ht to alter or amend the charter. 3 Under such a reservation the 1 Such as an amendment changing the route and terminus. Ames v. Lake, etc., R. R, 21 Minn., 241 (1875). Amend- ment under reserved right cannot affect rights of previous creditors against the corporation. Bank of Old Dominion v. McVeigh, 20 Gratt. 467 (1871). A cor- porate charter right to take certain rate of interest is a contract and is protected against subsequent legislation. Hazen v. Union Bank of Tennessee, 1 Sneed. 115 (1853). See, also, dictum in Phil., etc., Co."s Appeal, 102 Pa. St.. 123 (1888), that an amendment to a charter which en- larges it without imposing any new or additional burden upon it is a mere license and may be revoked, citing John- son v. Crow, 6 Norris, 184 ; Christ Church v. Philadelphia, 24 How., 300. May sub- sequent to charter authorize sale of cor- porate franchises, etc., to pay debts. Louisville, etc., T. R Co. v. Ballard, 2 Mete. (Ky.\ 165(1859). The case of Cross v. Peach Bottom R'y Co., 90 Pa. St., 392 (1879), holds that " the legislative reservation is in the nature of a police power, designed for the protection of the public welfare ; and where such protection becomes neces- sary, the law-making power may act without consulting either the interests or will of the company ; and in such case it may well be that not only the com- pany but its stockholders must submit. , . . The reservation . . . was only intended to enable the legislature to act without the consent and against tli«' will of the corporation." Under its reserved power to amend, the legisla- ture may require several railroads to ac- quire, build to and use a union depot Mayor, etc., v. Norwich, etc., R R, 109 Mass., 103(1871). 2 Thus, in a case of a statute authoriz- ing t lie taxation of stock which by the corporate charter is exempt, the statute is unconstitutional. Gordon v. Appeal Tax Court, 3 How., 133 (1845); Farring- ton v. Tennessee, 95 U. S„ 679 (IK I . An exemption from taxation which is a gift may he repealed. Philadelphia v. Con- tributors, etc.. 19 Atl. Rep., 490 (Pa., 1890). See § 66a 3 It certainly is as regards corporate debts already incurred. Commonwealth v. Cochituate Bank. 8 Mass., 42 ; Wheeler v. Frontier Bank, 23 Me., 308. And has been held to be so as regards future cor- porate debts. Ireland v. Palestine, etc., Turnpike Co., 19 Ohio St., 369 (1869). Contra, Stanley v. Stanley, 26 Me., 191 (1846) ; Coffin v. Rich. 45 Me., 507 (1858 Shufeldt v. Carver, 8 111. App., 645 (1881); Fogg v. Sidwell, 8 111. App., 551 628 CII. XXVIII.] AMENDMENTS TO CHAKTERS. [§ 497. statute is legal and binding. 1 The limits of this reserved power of the legislature are stated elsewhere in this chapter. A statute imposing additional liability upon the shareholders cannot be repealed so as to affect those who were corporate cred- itors previously to the repeal. 2 But, whenever the statute imposing (1881); Child v. Coffin. 17 Mass., 64 been incorporated and gone into busi- (1820), dictum; Gray v. Coffin, G3 Mass., ness under a charter which does notim- 192, 200 (1852) ; Stanley v. Stanley, 20 pose such liability. The exercise of this Me., 191 (1846) ; Hauthorne v. Calef, 53 power by the legislature, in such a Me., 471 (1866). See Weidenger v. Spru- case, is held to be only a repeal of part ance, 101 111., 278 (1881). And it is said of the corporate franchises. South Bay that a stockholder may restrain by a Meadow Dam Co. v. Gray, 30 Me.. 547 proper proceeding the acceptance by the (1849); Sleeper v. Goodwin. 31 N. W. corporation of an unconditional amend- Rep., 335 (Wis., 1887). Cf. Close v. Glen- ment to the charter by which the lia- wood Cemetery, 107 U. S., 466 (1882). bility of the shareholders is increased. Owen v. Purdy, 12 Ohio St., 73 (1861); Fry's Ex'r v. Lexington, etc., R R. Co., 2 Mete. (Ky.), 314 (1859). Cf. Bailey v. Hollister, 26 N. Y., 112 (1862); Thomp- son v. Guion, 5, Jones' Eq. (N. G), 113 (1859); Mowrey v. Indianapolis, etc., R R. Co., 4 Biss., 78 (1866); Lauman v. Lebanon Valley R R Co., 30 Pa. St., 42 (1858); Hamilton, etc., Ins. Co. v. Hobart, 2 Gray, 543 (1854) ; Gardner v. Hamilton, etc., Ins. Co., 33 N. Y., 421 (1865). Where the incident of individ- ual liability was repealed by an amend- ment to the state (Missouri) constitution after the debt accrued, but before the in- crease of stock was issued, the holders of the new stock were not held liable under the former constitution. Ochiltree v. Railroad Co., 21 Wall., 249 (1874). 1 Frequently, and now almost univer- sally, the legislature has a reserved See §§ 242, 280, supra. So, also, it is said that under this reserved power the legislature may impose a statutory lia- bility for the future debts- and obliga- tions of the corporation. Sherman v. Smith, 1 Black, 5S7 (1861); Matter of Lee's Bank of Buffalo, 21 N. Y, 9 (1860) ; Matter of the Empire City Bank, 18 id., 199 (1858). Cf. Bailey v. Hollister, 26 N. Y, 112 (1862); Sinking Fund Cases, 99 U. S., 700 (1878) ; Oldtown. etc., R R Co. r.Veazie, 39 Me., 571 (1855); Greeu v. Biddle. 8 Wheaton, 1, 84 (1823); Gard- ner v. Hope Ins. Co., 9 R I., 194 (1869). Such increased liability may be imposed by a new constitution of the state. Re Reciprocity Bank, 22 N. Y, 9 (1860); Re Empire Bank, 18 N. Y. 199 (1858); Re Lee's Bank of Buffalo, 21 N. Y, 9 (1860) ; affirmed, sub nom. Sherman v. Smith, 1 Black, 587 (1861). In The Con- solidated Ass'n v. Lord, 35 La. Ann., power to alter, amend or repeal the 425 (1883), the court refused to uphold charters of corporations granted by it. New York Const, of 1846, art. 8, §£ 1 and 2 ; Matter of New York Elevated R R. Co.. 70 N. Y, 327 (1877); Johnson v. Hudson River R R. Co., 49 id., 455 (1872); Bank of Chenango v. Brown. 26 id., 467 (1863); Ashuelot R. R Co. v. Elliott, 58 N. H., 451, 454 (1878). Under an amendment which imposed further liability on the stockholder. 2 Hawthorne v. Calef, 2 Wall., 10 (1864); Conanttt Van Shaick, 24 Barb., 87(1857); Norris v. Wrenschall, 34 Md., 492 (1871); Provident Savings Institu- tion v. Jackson Place, etc., Co., 52 Mo., 552 (1873); St. Louis R R, etc., Co. v. this reserved power the legislature, it is Harbine, 2 Mo. App., 134 (1876) ; Cen- held, may impose a statutory liability, tral, etc., Mechanical Association v. Ala- in addition to the liability at common bama. etc., Insurance Co., 70 Ala., 120 law, upon stockholders after they have (1881); Woodruff v. Trapnall, 10 How., 629 498, 499.] AMENDMENTS TO CHARTERS. [CH. XXVIII. the liability is penal in its nature, a repeal of it, even so as to affect existing debts, is constitutional at any time before the corporate creditor obtains judgment on his claim. 1 An important exception to the general rule stated above exists in regard to amendments under the police power of the state. The state may amend the charter of a railroad corporation by reducing its traffic charges. requiring it to build fences, and in various other ways for the pro- tection of the public. 2 § 49S. Charter amendments offered to the stockholders. — The sec- ond class of amendments to a charter — the amendments which occur most frequently and give rise to many difficulties - — are those which allow the corporate directors or a majority of the stockhold- ers in corporate meeting assembled to engage in anew or different or more extensive or more contracted business than that author- ized by the original and unamended charter. §499. Auxiliary and incidental amendments are constitutional, though some of the stockholders dissent. — An amendment made to a corporate charter is either a material and fundamental change from the original plan, or it is an auxiliary and incidental change, consistent with the carrying out of the original plan. 3 The latter 190. See. also. Story v. Furman, 35 X. V., 21 1 1 1862); Rochester v» Barnes, 26 Barb,, 1858); Sinking Fund Cases. 99 U.S., 700 (1878). Cf. Jerman's Adm'r v. Ben- ton, 79 Mo.. 148; Woodhouse v. Com- monwealth Ins. Co., 54 Pa St.. 307 (1867); #e State Insurance Co., 14 Fed. Rep., 28(1883); S. C, 11 Biss., 301 ; Pal- frey r. Paulding, 7 La. Ann., 363 (IS Re Telegraph Construction Co., L. R, 10 Eq., 384 (1870); Cooper r. Frederick, 9 Ala., 743 (1846); Tn r< Credil Fonri< r of England. L. R.. 11 Eq., 856 (1871 ; < toffin v. Rich, 15 Me,, 507; 5 S. Rep.. 120 (Ala., 1888). A statutory liability of stock- holders cannot be repealed as regards corporate creditors ■who are such at the time of the repeal. McDonnell v. Ala., etc., Ins. Co., 5 S. Rep., 130 (Ala, 1888). Registered transferees are liable the same as their transferrers, even though before the transfer the statutory liabil- ity was decreased by statute. The lia- bility to old creditors follows the stock. Nat'l Com. Bank v. McDonnell, s» S. Rep., 149 (Ala., 1891). A statute giving the corporation a summary remedy against a stockholder for non-payment of calls may be repealed. Ex parte Northeast, etc., R. R. Co., 37 Ala.. 679. 1 Breitung v. Lindauer, 37 Mich.. 217 d v ?7>: Onion Iron Co. v. Pierce, 4 Biss.. 307 (1869); Gregory r. German Bank, S Col., 832 (1877); Cooley's Constitutional Limitations (5th ed.\ 444, 474. Bee § 333. *See ;• 675, infra. 3 The general principle of law govern- ing this branch of the subject is well expressed in Woodfork v. Union Bank, 3 Coldw. (Tenu.), 488 (1866). "The con- tract or charter, after acceptance, is inviolable between the state and the cor- poration, as it is also between the corpo- ration and stockholders. Neither the one nor the other can disregard its obli- gations or alter its essential franchises without the unanimous concurrence of the stockholders. ... If the alter- ations proposed in the charter of a private corporation by legislative enact- ment are merely auxiliary and not fun- damental, they may be accepted by a majority of the corporators; and when so assented to they are binding on the whole ; but it is otherwise . . . when the alterations are fundamental, radical 630 CH. XXVIII.] AMENDMENTS TO CHARTERS. [§ 499. class of amendments are constitutional and valid. The acceptance of an auxiliary amendment should be by the stockholders in meet- ing- assembled instead of by the board of directors. 1 But acceptance may arise from user; 2 and hence it generally happens that an inci- dental or auxiliary amendment to a charter is deemed to have been accepted by user and a vote of acceptance by the directors or by user alone. 3 An amendment may be said to be auxiliary and inci- dental when it merely grants new powers or authorizes new meth- ods and new plans for the purpose of carrying out the original plan and effecting the real object of that plan. The individual motives and interests of a stockholder are disregarded. Whatever is for the benefit of the corporation is conclusively presumed to be for the benefit of each stockholder. A change immaterial to the corporation is immaterial to each and every stockholder. 4 Whether an amendment materially changes the corporate plans or not is a question of law for the court. 5 Accordingly each case is to be decided according to the peculiar circumstances of that case, and no general rules can be laid down which will apply to all cases. and vital. The acceptance must then be unanimous." 'Marlborough Mfg. Co. v. Smith, 2 < bnn., 579 (1818); Brown v. Fairmount Mine Co., 10 Phil., 32 (1873). Cf. Ven- ner v. Atchison, etc., R R, sub. 2 See § 640. 3 Illinois, etc., R R v. Znumer, 20 111., 658 (1858). See, also. Blatchford v. Ross, 5 Abb. Pr. (N. S.), 434 (1869); Re Excel- sior Co., 16 Abb. Pr., 14 (1862). In Ven- ner v. Atchison, etc., R R, 28 Fed. Rep., 581 (1866), it is held that the directors are the proper persons to accept an amendment 4 Supervisors of Fulton County v. Miss. & Wabash R R Co., 21 111., 338 (1859); Delaware R R Co. v. Tharp, 1 Hous. (Del.), 149 (1856) ; Irvine v. Turn- pike Co., 2 Penr. & W., 466; 111. Riv. R R Co. v. Zimmer, 20 111., 654 (1858): Sprague v. 111. River R R Co.. 19 III., 174 ; Banet v. Alton & Sangamon R. R. Co., 13 111., 504 (1851). Cf. Hester v. Memphis & Charleston R R Co., 32 Miss., 378 (1856); Witter v. Miss., Oua- rhita & Red River R R Co., 20 Ark., 463 (1859). The cases of Zabriskie v. Hackensack & N. Y. R R. Co., 18 N. J. Eq.. 178 (1867); Dayton & Cincinnati R R Co. v. Hatch, 1 Disney, 84, and Central R R Co. v. Collins, 40 Ga., 617, repudiate the distinction between the material and immaterial changes. All changes are held to be equally material. 5 Winter v. Muscogee R R. Co., 11 Ga., 438 (1852); Witter v. Miss., Oua- chita & Red River R R Co., 20 Ark., 463 (1859) ; Memphis Branch R R Co. v. Sullivan, 57 Ga., 240 (1876). Cf. Soutbern Pa. Iron & R R Co. v. Stev- ens, Ex'r, 87 Pa. St., 190 (1878). b Certain changes in the route of a railroad have been held to be immate- rial, Wilson v. Wiiles Valley R R. Co.. 33 Ga., 466 (1863) ; Johnson v. Pensacola & Ga. R. R Co., 9 Fla., 299 (1860) ; Peo- ria & Oquawka R. R. Co. v. Elting, 17 111.. 429 (1856) ; Banet v. Alton & Sanga- mon R R Co., 13 111., 504 (1851) ; build- ing branch lines, Peoria & Rock Island R R Co. v. Preston, 35 Iowa, 115 (1872); Greenville & Columbia R R Co. v. Coleman, 5 Rich. Law (S. C). 118 (1851); issuing preferred stock, Everhart v. West Chester & Pbila. R R. Co., 28 Pa. St., 339 (1857); Rutland & Burlington R R Co. v. Thrall, 35 Vt, 536 (1863); 631 § 500.] AMENDMENTS TO CHARTERS. [ch. xxvnr. § 500. Material amendments offered to the stockholders can be accepted only uy a unanimous vote. — On the other hand, a mate- rial and fundamental change in the charter by an amendment to that charter is an unconstitutional violation of the contract rights of any stockholder who does not assent to such an amendment. Considerable difficulty is experienced in determining what is a Curry v. Scott, 54 Pa. St., 270 (1867); or more common stock, City of Cov. v. Cov. & Cm. Bridge Co., 10 Bush. 69 (1873); Buffalo, etc., R R v. Dudley, 14 N. Y., 336(1856); Joslyn v. Pacific, eta, Co., 12 Abb. Pr. (N. S.), 329 (1872* Cf. Hughes v. Autietam, etc., Co., 34 Md., 316 (1870); extending the time for com- pleting the road. Agri. Branch R. R. Co. v. Winchester, 13 Allen, 29 (1866 ; Poughkeepsie, etc., Co. v. Griffin, 24 N. Y., 150 (1861): Bailey v. Hollister, 26 N. Y., 112 (1862); power to amend being reserved, Taggart v. Western R R. Co., 24 Md., 563 (1866); Union Hotel Co. v. Hersee, 79 N. Y.. 454 (1880); Danbury, eta, R R Co. v. Wilson, 22 Conn.. 435 (1853); consoli- dations that take the place of part of the line as laid out. Sprague v. 111. Riv. R R Co., 19 111.. 174 (1857); Hauua v. Cin. & Fort Wayne R. R. Co., 20 Ind., 30 (1863); change of cor- porate name, Bucksport & Bangor R. R. Co. v. Buck, (is Me., 81 (1878 ; Clark r. Monongahela Nav. Co., 10 Watts (Tenn.), 364 (1840); changing the terminus, Pacific R. R v. Renshaw, I s Mo.. 210 (1852); Ross v. Chicago, etc.. R R. Co., 77 111., 134 (1875); reduction of capital stock and shortening of the road, Troy & Rutland R. R. Co. ?\ Kerr. 17 Barb., 588(1854). Cf. Oldtown, etc., R R v. Veazie, 39 Ma, 571 (1855 enlarging the capital stock and extend- ing the road, such changes not appearing on the record to be detrimental. Peoria &Oquawka R. R. Co. v. Elting, 17 III.. 420 (1856); Rice r. Rock Island R. R. Co.. 21 111., 93 ; and minor changes in general, Union Agri. & Stock Ass'n r. Mill, 31 Iowa, 95 (1870); also extensive changes, 111. River R R. Co. i: Zimmer, 20 111.. 1858); such as extending the road. Cross v. Peach Bottom R'y Co., 90 Pa. St, 392 'I s T'.i : purchasing another rail- road. Venner v. Atchison, etc.. R R Co., 28 Fed. K.p.. 581 (1886); or increasing the Dumber of directors, Mower r. Staples, 32 Minn.. 284 (1884). See, also. day r. Coffin, 9 Cush., 192 (1852); Child r. Collin. 17 Mass.. 64 (1820): Langley v. Little, 26 Me., 162 (1846); Payson v. Withers. :. Biss„ 269 (1873); Joy o. Jack- son. etc. Co., 11 Mich., 155 (1863) ; Bank v. Richardson, 1 Me., 79; Greenville, etc., R R Co. v. Johnson, 8 Baxt. 332: Fall River Iron Works v. Old Colony R R. Co., 5 Allen, 221. An amendment may authorize the directors to change the lo- cation of toll gates. Bardstown, • tc., Co. v. Rodman. 13 S. W. Rep.. 917 (Ky.. 1890> In thecaseof Atchison, el ■.. R R Co. v. Fletcher, tOPac, Rep. 596 (Kan.. . an amendment authorizing a cor- poration to buy the stock of another railroad corporation and to guaranty us bonds was held to be valid. The court sni'l: -It is settled that the legislature may authorize a body of corporators to exercise new powers or franchises with- out impairing those previously granted, and, if the new powers can be exercised without a departure from the original compact between the corporators, there is no reason why they should not be ac- cepted and exercised on behalf of the company by a majority of the stock- holders. . . . No franchises are di- minished, no contract impaired. At most its powers are enlarged to carry out successfully the object of its incor- poration. So to speak, auxiliary powers are added, but its charter not violated or the benefits thereby granted in- fringed. 632 CiT. XXVIII.] AMENDMENTS TO CHARTERS. [§ 500. material and fundamental change. Each case is decided upon its own facts, and consequently the best light as to the spirit of what constitutes a material change is obtained by a study of the facts of cases which have been decided. 1 1 Under the circumstances of the cases it has been held a material change to shorten and vary the route. Winter v. Muscogee R R Co., 11 Ga., 438 (1852); to vary the route, Middlesex Turnpike Corporation v. Locke, 8 Mass., 268 (1811); Same v. Swan, 10 Mass., 384 (1813); Hester v. Memphis & Charleston R R Co., 32 Miss., 378 (1856); Witter v. Miss., Ouachita & Red River R R Co., 20 Ark., 463 (1859); Champion v. Memphis, etc., R R Co., 35 Miss., 692 ; Simpson v. Denison, 10 Hare, 54 ; chang- ing a terminus, Manheim, etc., Co. v. Arndt, 31 Pa. St., 317 (1858); Mari- etta, etc., R R Co. v. Elliott, 10 Ohio St., 57; Middlesex, etc., Co. v. Locke, 8 Mass., 267; Same v. Swan, id., 385; Thompson v. Guion, 5 Jones' Eq., 113; permitting a railroad to go into water transportation business. Hartford & New Haven R R Co. v. Croswell, 5 Hill, 383 (1843), a leading case; Marietta & Cin. R R. Co. v. Elliott, 10 Ohio St., 57 (1859) ; shortening the line, Bank v. City of Charlotte, 85 N. C, 433 (1881); allowing business to be commenced be- fore the full capital stock is subscribed, Memphis Branch R R. Co. v. Sullivan, 57 Ga., 240 (1876) ; dividing the line and forming two or more corporations, Leed & Evensburg Turnpike Road Co. v. Phillips, 2 Penr. & Watts (Pa.), 184 (1830); Supervisors of Fulton County v. Mississippi & Wabash R R Co., 21 111., 338 (1859); Carlisle v. Terre Haute & Richmond R. R Co., 6 Ind., 316 (1855) ; transferring a railroad subscription from one railroad to another, Pitts- burg, etc., R. R v. Gazzam. 32 Pa. St., 340 (1858) ; making the charter perpet- ual and increasing power to hold prop- erty, Prop, of the Union Lock & Canals v. Towne, 1 N. H., 44 (1817); allowing ii life insurance company to insure against fire and marine loss, Ashlon v. Burbank, 2 Dill., 435; extending the line, Stevens v. Rutland & Burlington R R Co., 29 Vt, 545 (1855). See, also, Noesen v. Town of Port Washington, 37 Wis., 168 (1875), where there was an amendment authorizing the purchase of a railroad running at right angles to the old, but a release was upheld; in- creasing the par value of the stock, Mahon v. Wood, 44 Cal., 462 (1872); consolidating the corporation with an- other corporation, Illinois Grand Trunk R R Co. v. Cook, 29 111., 237 (1862); McCray v. Junction R R. Co., 9 Ind., 358 (1857) ; Shelby ville & Rushville Turn- pike Co. v. Barnes, 42 Ind, 498 (1873); Booe v. Junction R R. Co., 10 Ind., 93 (1857) ; New Orleans, Jackson & Great Northern R R Co. v. Harris, 27 Miss., •* 517 (1854); Clearwater v. Meredith. 1 Wall.. 25 (1863); Knoxville v. Railroad Co., 22 Fed. Rep., 758 ; Kean v. John- son, 1 Stock. (9 N. J. Eq.), 401 (1853); Black v. Delaware & Raritan Canal Co.. 24 N. J. Eq., 455 (1873) ; criticised in Mow- rey v. Ind. & Cin. R R Co., 4 Biss., 78. Cf. Lauman v. Lebanon Valley R. R. Co., 30 Pa. St., 42 (1858) ; Fry's Execu- tor v. Lexington, etc., R. R. Co., 2 Mete. (Ky.), 314 (1859), the court say- ing: "Each shareholder in an incorpo- rated company has a right to insist on the prosecution of the particular objects of the charter. He cannot be deprived of his rights and privileges without his assent. Such alterations of the charter as are necessary to carry into effect its main design may be made without his consent. But an alteration which ma- terially and fundamentally changes the responsibilities and duties of the com- pany, or which superadds an entirely new enterprise to that which was orig- inally contemplated, ma} r be resisted by the stockholders, unless such altera- tions are provided for in the charter 633 501.] AMENDMENTS TO CHAETEES. [CH. XXVIII. § 501. Amendments under the reserved power of the state to alter, amend or repeal the charter.— The extent of the power of the leg- islature to amend a charter, where it has reserved that power, is not yet fully settled, and is full of difficulties. There is a strong itself, or in the general laws of the state in force at the time the act of in- corporation was passed." Until, how- ever, the corporation accepts such amendment the stockholders cannot complain. To same effect. Delaware, etc., R. R. Co. v. Irick, 23 N. J. L., 321 (18E Amendments which have not been acted upon do not release the subscriber. Gravely v. Commonwealth, 10 S. E. Rep. 431 (Va., 1889). See, in general, Pearce v. Madison R R. Co., 21 Hew., Ill ; Tut- tle v. Michigan Air Line Co., 85 Mich., 247 (1877); New Jersey, eta, R R Co. v. Strait, 35 N. J. L., In all these cases neither a mandatory statute, nor a vote of the directors, nor a ma- jority of the stockholders, can compel a dissenting stockholder to accept lne 'change. It would be unconstitutional. The stockholder may say: "I have agreed to become interested in a rail- road company, and have contracted in view of the profits to be expected and the perils and losses incident to that de- scription of business; but I have not agreed that those to be intrusted with the capital I contribute shall have power to use it in a business of a different character, and attended with hazards of a different description." Marietta, etc., R. R. Co. v. Elliot, 10 Ohio St, 57 L859) Even though the legislature, after a turnpike corporation is organized, au- thorizes it to issue stock in payment for another turnpike, yet a dissenting stock- holder may prevent the purchase by showing that it decreases the value of his stock. Shaw v. Campbell, etc.. Co., 15 S. W. Rep., 245 (Ky.. 1891 n Acts rel- ative to a corporation may be so radi- cal as to constitute a new charter in- stead of amendments to the old one. Youngblood v. Georgia Imp. Co., 10 S. E. Rep., 124 (Ga., 1889). Where a mu- nicipality has subscribed for stock and issued its bonds indorsed by the rail- road company to raise money to pay the subscription, the legislature cannot authorize the company to apply its as- sets to the payment of such bonds. A stockholder may enjoin it Hill v. Glas- gow R. R, 41 Fed. Rep., 610 (1890). The legi.lature cannot, in the amendment itself, authorize the majority to bind the minority herein. New Orleans, etc., R R Co. v. Harris, 27 Miss., 517 (1854). An amendment cannot deprive the mem- bers of the corporation of the privilege of electing its directors. The legislature cannot arbitrarily name and appoint trustees of an educational corporation, the charter providing that vacancies shall he tilled by the remaining trusb Sheriff V. Lowndes. 10 Md.. 357 (1SC0). It cannot give to the city of Louisville the power to elect the trustees of the University of Louisville, an educational corporation. City of Louisville v. Presi- dent, etc., 15 B. Monr., 642 (1855). It cannot vest the government of an in- corporated academy in a new board of trustees, Noiris v. Trusties, etc., 7 Gill & J., 7 (1834). On the right of a dissent- ing stockholder in general, see, also, Goodwin u. Evans, 18 Ohio St, 150, 106 (1868); Railway Co. U Allerbon, 18 Wall., 233, 235 (1873); Printing House v. Trustees, 104 U. &, 711 (1881); Rob- ert^ Appeal, 92 Pa St, 407; Buffalo, etc., it. R. Co. v. Potter, 23 Bail... 21 356 : Efoey i: Henderson. 32 La. Ann.- 1069; Waring v. Mayor, etc., of Mobile, 24 Ala., 701 (1851; ; M, .. R R Co- r. Cross, 20 Ark., 443 (1859); Clinch v Financial Co., L. R, 4 Ch., 117 (1868); Dougan's Case, L. R, 8 Ch.. 540; Bar- rett v. Alton, etc., R R. Co., 13 111., 504 (1857). See. also, Gray v. Monongahela Nav. Co.. 2 Watt. & S.. 156 (1841); Cur- rie V. Mut. Ass. Soc, 4 Hen. & M., 315 (1809); Zabriskie v. Cleveland, etc.. R. 634 CH. XXVIII.] AMENDMENTS TO CHARTERS. [§ 501. tendency in the decisions, and a tendency which is deserving of the highest commendation, to limit the power of the legislature to amend a charter under this reserved power. It should be restricted to those amendments only in which the state has a public interest. Any attempt to use this power of amendment for the purpose of authorizing a majority of the stockholders to force upon the mi- nority a material change in the enterprise is contrary to law and the spirit of justice. Under such reserved power the legislature ha£ only that right to amend the charter which it would have had in case the Dartmouth College case had decided that charters were not contracts. 1 In other words, by this reserved right the restraint of the federal constitution is done away with. The power, how- ever, to make a new contract for the stockholders is not thereby given. The power to make amendments and to repeal and alter charters has been reserved in most of the states of the Union. 2 It is clearly established that the legislature cannot, under this reserved power, amend the charter so as to change the whole character of the en- terprise and compel the corporation to proceed under the amended R. Co., 23 How., 381 (1859) ; Cincinnati, etc., R. R. Co. v. Cole, 29 Ohio St., 126 (1876); St Mary's Church, 7 Serg. & R, 517 ; Lyons v. Orange, etc., R R. Co., 32 Md., 18 (1869); 111. Riv. R. R Co. n Beers, 27 111., 185 (1862) ; Hope Ins. Co. v. Beckman, 47 Mo., 93 (1870); Same v. Koeller, 47 id., 129 (1870) ; Wetumka & Cooso R. R. Co. v. Bingham, 5 Ala., 657 (1843) : Palfrey v. Paulding, 7 La. Ann., 363 (1852); State v. Sibley, 25 Minn., 387 (1879); Bangor, etc., R. R. Co. v. Smith, 47 Me., 34(1859); Shields v. Ohio, 26 Ohio St, 86 (1875) ; S. C, 95 U. S., 319 ; State v. Maine, etc., R. R Co., 66 Me., 488 ; S. C, 96 U. S,, 499; New Jersey v. Yard, 95 id., 104, 113 (1877); S. C, contra, 37 N. J. L, 228 ; Smead v. In- dianapolis, etc., R R. Co., 11 Ind., 104 (1858); Sumrall v. Mut Ins. Co., 40 Mo., 27 (1867); Kenton Co. Court v. Bank Lick Turnp. Co., 10 Bush, 525 (1874) ; Regents v. Williams, 9 Gill & J., 365 (1839); S. C, 31 Am. Dec, 72; St. John's College v. Purnell, etc., 23 Md., 629 (1865); White v. Syracuse R. R. Co., 14 Barb., 560 (1853) ; Schenectady, etc., Plank R. Co. v. Thatcher, 11 N. Y.. 102 (1854);Caley v. Philadelphia, etc., R. R Co., 80 Pa. St., 363 (1876). See, also, Burlington, etc., R R Co. v. White, 5 Iowa, 409 (1857) : South Georgia, etc., R. R. Co. v. Ay res, 56 Ga., 230 (1876), where, however, a sale of the road was made without legislative authority. 1 County of San Mateo v. Southern Pacific R. R. Co., 8 Sawyer, 238, 279 (1882); Detroit v. Detroit & Howell Plank-road Co., 43 Mich., 140 (1880). 2 Constitution of Alabama, XIII, 1 ; Arkansas, V, 48 ; California, IV, 31 : 1879, XII, 1; Colorado, 1876, XV, 3; Delaware, II, 17 ; Iowa, VIII, 12 ; Kan- sas, XII, 1 ; Maine, Laws of 1831 ; Mas- sachusetts, St. 1830, ch. 81 ; R S., ch. 44 ; §23, Gen. St, ch. 68, §41; Maryland, III, 48, par. 2 ; Michigan, XV, 1, 8 ; Mis- souri, VIII, 14; New Jersey, Amend. IV, 7, par. 11, cl. 11 : New York, VIII. 1, R. S., pt I, ch. XVIII, title 3, § 8 ; North Carolina, VIII, 1 ; Nebraska, 1875, XI ; Nevada, VIIL'l ; Ohio, XVIII. 2; Oregon, XI, 2: Pennsylvania, XVI. 10 ; South Carolina, XII. 1 ; Tennessee, XI, 8 ; Texas, 1875, XII, 5, 7 ; Wisconsin, XI, 1. 635 § 501.] AMENDMENTS TO CHARTERS. CH. XXVIII. charter. 1 The restrictions of the state constitution still exist, and individuals cannot be forced by the state into new contracts. 2 An amendment under the reserved power cannot change the character of the enterprise, nor take away rights already acquired under the charter. It must not be foreign to the purposes and objects of the original charter. 3 1 In Pennsylvania it is held that the reserved power, when used so as to make an amendment compulsory on the corporation, " is in the nature of a po- lice power, designed for the protection of the public welfare." Cross v. Peach Bottom R'y Co., 90 Pa, St., 392 (1879). "The power of amendment was never reserved with reference to any question between the corporation and its stock subscribers, but solely with reference to questions between the corporation and the state, where the latter desired to make compulsory amendments against the will of the former." The corpora- tion cannot be compelled t<> proceed. All the state "can do is to grant it the power, and then it is for the corporation to accept it or not, as it pleases." Under its reserved power to amend, the state may give a remedy against a mill-dam corporation for injuries by Qood. Mo- nongahela Nav. Co. u. Coon, 6 Pa St.. 379 (1847), holding, also, that by accept- ing an amendment which is granted on condition that the reserved power to amend shall apply to the corporation, it is subject to such power, Kenosha, Rockford & Rock [sland R R Co. v. Marsh, 17 Wis., 13 (1862); Troy & Rut- land R R Co. v. Kerr, 17 Barb., 581 (1854). In The City of Knoxville r. Railroad Co., 22 Fed. Rep., 758 (1884), the court say: " It was not competent for tlie legislature to do more in this re- spect than to waive the public rights, It could not divest or impair the rights of the shareholders, as between them- selves, as guarantied by the company's charter, without their conseut. It was upon the faith of the stipulations con- tained in the said charter that the share- holders subscribed to the capital stock, and thereby made themselves members of the corporation." In the case, also, of Orr v. Bracken County, etc., 81 Ky., 593 (1884). an amendment under the re- served power, changing the method of voting, was decided to be of no effect until the stockholders accepted it. The court said: "The right to amend the charter may he expressly reserved, but that right does not confer the favor of taking from the corporators the control of the corporate property." See, also, ch. XXXVII, as to amendments affect- ing the right to vote. Query, whether a mandatory consolidation would belt Mowrey v. Ind. & Cm. R R C I Biss., 78 (1866). When legal, a manda- tory change does not require acceptance l>y the stockholders. Zabriskiev. Hack- ensack & X. Y. R R Co.. is N. J. Eq., 178 1867). But when the mandatory amendment goes beyond the legal lim- it--, ii musl he accepted by the corpora- tion as though it were made optional with the corporation. Kenosha, Rock- ford & Rock Island R R, Co. i: Marsh, 17 Wis., 13 1863;. See, also. § 497, supra. - lev on Constitutional Limita- tions (5th til.), 454 As to repeals of charters under this reserved power, see ch. XX XV III. 3 This power has its limits. "It can repeal or suspend the charter; it can alt.r or modify it; it can take away the charter; hut it cannot impose a new one and oblige the stockholders to accept iu . . . The power to alter and modify does not give power to make any substantial additions to the work." Zabriskie v. Eackensack & N. Y. R R Co., 18 X. J. Eq., 178 (1867). "The power of alteration and amendment is not without limit ; the alterations must be reasonable; they must be made in good faith, and be consistent with the G30 CH. XXVIII.] AMENDMENTS TO CHARTERS. [§ 501. It may, however, go to any extent in authorizing the corpora- tion itself, by a unanimous vote of the stockholders, to make funda- mental changes. The latest and best view taken of this reserved power of the state is that under it a fundamental amendment to the 6harter does not authorize a majority of the stockholders to accept the amendment and proceed, but that unanimous consent of the stockholders is necessary. 1 The constitutionality of various amendments to charters in which the legislature reserved the right to amend or repeal is considered in the notes below. 2 scope and object of the act of incorpo- ration. Sheer oppression and wrong cannot be inflicted under the guise of amendment or alteration."' Shields v. Ohio, 95 U. S., 325 (1877) ; Spring Val- ley Water-works v. Board of Supervis- ors of San Francisco, 61 Cal., 3 (1881). The amendment must "not defeat or subsequently impair the object of the grant, or any rights vested under it." Close v. Glenwood Cemetery, 107 U. S., 466 (1882). See, also, Miller v. State, 15 Wall., 478 (1872); Mayor, etc., of Wor- cester v. Norwich & Worcester R R. Co., 109 Mass., 103 (1871). The motives of the legislators cannot be inquired into. Northern R. R. Co. v. Miller, 10 Barb., 260 (1851) ; Matter of Elevated R. R. Co., 70 N. Y., 327, 351. See 113 N. Y., 111. i Mills v. Central R. R Co., 41 N. J. Eq., 5 (1886), where a statute subsequent to the charter authorized the consolida- tion of railroad companies. The court said : " The legislature did not intend to affect the rights of stockholders inter sese, and the act does not do so, either expressly or by implication. After shareholders had entered into a contract among themselves, under leg- islative sanction, and expended their money in the execution of the plan mutually agreed upon, the plan could not, even by virtue of legislative enact- ment, be radically changed by the ma- jority alone, and dissentient stockhold- ers be compelled to engage in a new and totally different undertaking, because such action would impair the obligation of the dissenting stockholders' contract with their associates and the state." The court said also, that^ under its re- served power to amend a charter, the state cannot give " a power to one part of the corporators as against the other which they did not have before." It has been held, however, that, under its reserved power, the legislature may authorize a road to lease to another. Durfee v. Old Colony & Fall River R. R Co., 87 Mass., 230 (1862). A consolida- tion thereunder has been held legal. Bishop v. Brainerd, 28 Conn., 289 (1859) ; Durfee v. Old Colony, etc., R R, 87 Mass.. 230 (1862). Also not legal. Ke- nosha, Rockford & Rock Island R R. Co. v. Marsh. 17 Wis., 13 (1862); Mow- rey v. Ind. & Cin. R R. Co., 4 Biss., 78 (1866). Authorizing one railroad to sub- scribe for stock in another railroad has been held legal. White v. Syracuse & Utica R R Co., 14 Barb, 559 (1853). Also borrowing money and building branches. Northern R R. Co. v. Miller, 10 Bark, 260 (1851). Also reducing cap- ital stock. Joslyn v. Pacific Mail Steam- ship Co., 12 Abb. Pr. (N. S.), 329 (1872). See, also, White Hall & Platts- burgh R R Co. v. Myers, 16 Abb. Pr. (N. S.), 34 (1872); State v. Accommoda- tion Bank of La., 26 La. Ann., 288 (1874) ; Kenosha. Rockford & Rock Island R R Co. v. Marsh. 17 Wis., 13 (1863). The extension of the line from six to seven- teen miles was held to require a unan- imous acceptance in Zabriskie v. Hack- ensack & N. Y. R R Co., 18 N. J. Eq., 178(1867). 2 The case of Commissioners, etc., v. 637 § 502.] AMENDMENTS TO CHARTERS. [CH. XXTIII. § 502. Dissenting stockholder's remedy against an illegal amend- ment. Where an unauthorized arid illegal amendment has been accepted by a corporation and is about to be acted upon, a stock- holder has'two remedies. If he has not paid his subscription, he Green, etc., Co., 79 Ky., 73, holding that the right to take tolls cannot be abol- ished where the company has main- tained and kept in repair the rivers, nlving upon the right to take toll, is re- ferred to in Louisville Water Co. v. Clark, 143 U.S., 1 (1892). Concerning this subject, see Part VI, infra. In the case of Ohio & M. R'yi). People. 123 111., 467 (1888), the court referred to but did not decide the question whether a state could withdraw its consent to a consolidation after the consolidation had been made. Under the reserved power to amend or repeal a charter the legislature may amend the charter of an agricultural college, which has pri- vate stockholders but to which the state contributes funds, so that instead of the state having four directors out of eleven, the state shall have seven out of twelve. Jackson v. Walsh. 28 Atl. Rep., 778 (Mb*., 1892). Where a gas company has an exclusive right to supply gas to a city, subject to the right of the legislature to alter or revoke the same, the legislature may authorize the city to construct its own gas works. A municipal ordinance is not such a contract as is protected by the constitution of the United States in regard to impairing the validity of con- tracts. It is a contract that is protected in the same way as contracts of indi- viduals. Hamilton, etc., Co. v. Hamil- ton City, 146 U S., 258 (1892). Where an amendment exempts the company from taxation and provides that it shall furnish the city with water free of cost, a repeal of the exemption repeals the obligation as to water. Louisville Water Co. v. Clark, 143 U. S., 1 (1892). An ex- emption from taxation may be repealed under the reserved right to amend, etc. Wagner, etc.. Institute's Appeal, 19 AtJ. Rep., 297 (Pa., 1890). Under the re- served power to amend or repeal a char- 638 ter the legislature may compel it to pay wages weekly to its employees. State v. Brown, 25 Atl. Rep. 246 (R I. 1892). Under the reserved right to amend the charter the legislature may amend so as to confine the road to a particular route, and outstanding contracts of the company do not prevent such an amend- ment. Macon, etc.. R. R. r. Stamps, 11 S. E. Rep.. 442 (Ga.. 1890). Where, sub- sequently to the incorporation of a com- pany, a general act reserves to the legis- lature the right to amend or repeal any and all charters, the legislature may re- peal any amendments to the charter, so tar as such amendments are passed after the general act, where the amend- ments do net expressly waive the legis- lative right of amendment or repeal. But any amendment should lie "saving, whenever that power was exerted, all rights previously vested." An exemp- tion from taxation may be repealed under the reserved power. (Approving Tomlinson v. Jessug, 15 Wall., 454, and Railroad Co. v. Maine, 96 U. S, 499.) Creditors stand upon the same footing in this respect. Louisville Water Co. V. Clark, 1t:5 U. S., 1 (1892> In regard to the question as to the constitution- ality of a radical amendment to a char- ter under the reserved right to amend, see Railroad Co. v. Maine. 96 U S„ 499; Sinking Fund Cases, 99 U. S., 700 ; Com- monwealth r. Essex Co., 13 Gray, 253; Commonwealth r. BonsaU, 3 Whart.. 559; Pennsylvania College Cases, 13 Wall.. 190; State V. Miller. 15 Wall., 478; Spring Valley Water-works v. Shottler, 110 U.S.. 317: Close of Glen- wood Cemetery, 107 U. S., 466 ; Jack- son r. Walsh. 23 Atl. Rep, 778; Sage v. Dilliard, 15 B. Monroe. 357; State r. Adams, 44 Mo., 570 ; Allen v. McKean, 1 Sumner, 276. CH. XXVIII.] AMENDMENTS TO CHARTERS. [§ 50L>. may consider himself released from his liability to pay the sub- scription, or he may begin suit in equity to obtain an injunction against or to set aside any action by the corporation under the amendment. 1 If the stockholder has already paid his subscription, then his only remedy is an injunction or a suit to set aside. 2 In 1 This rule is recognized and applied in most of the cases of this chapter. See, also, Clearwater v. Meredith, 1 Wall., 25, holding that the stockholder was released, and saying : " Clearwater could have prevented this consolidation had lie chosen to do so." Nugent v. Supervisors, 19 Wall., 241 (1873). A change of the termini under an amend- ment to the charter releases previous subscribers, there being no reserved right to make such amendment. Snook v. Georgia Imp. Co., 9 S. E. Rep., 1104 (Ga., 1889). A subscriber is released by an amendment changing the termini, the original charter not providing for such changes. Youngblood v. Georgia Imp. Co., 10 S. E. Rep., 124 (Ga., 1889). A fundamental change in the corpora- tion releases subscribers. Greenbrier, etc., Exposition v. Rodes, 17 S. E. Rep., 305 (W. Va., 1893). A change in the plan of organization so as to have a larger capital stock than was originally intended releases a subscriber. Norwich, etc., Co. v. Hockaday, 16 S. E. Rep., 877 (Va., 1893); Champion v. Memphis, etc.. R. R. Co., 35 Miss., 692 (1858). A charter amendment enlarging the corporate ob- jects from fire and accident to Are, ma- rine and inland insurance releases dis- senting stockholders. Ashton v. Burbank, 2 Dill., 435 (1873). In England cases generally arise releasing the subscriber when the memoranda of association vary from the prospectus. Stewart's Case, L. R., 1 Ch., 574 (1866) ; Webster's Case, L. R, 2 Eq., 741 (1866); Ship's Case, 2 De G, J. & S., 544(1865); Dawes v. Ship, L. R, 3 H. of L., 343 (1868). Cf. Nixon v. Brownlaw, 3 H. & N., 686 (1858); Norman v. Mitchell, 5 De G, M. & G, 648 (1854). See, also, Dorris v. Sweeney, 60 N. .¥., 463 (1875). After a winding-up has commenced there can be no release herer'n. Oakes v. Turquand, L. R, 2 H. I.., 325 (1S67). In opposition to this rule of law there are some decis- ions holding that the subscribers' only remedy is an injunction. Were it not that the great weight of authority holds otherwise, this view would be com- mended as the only logical result of the law. There is no reason why a stock- holder who has not paid his subscrip- tion should be better off than he who has met that obligation. See § 187 ; also Hays v. Ottawa, etc., R R. Co.. 61 III., 422 (1871) ; Pacific R R. v. Hughes, 22 Mo., 291 (1855) ; Martin r. Pensacola R. R Co., 8 Fla., 389 (1859) ; Ware v. Grand, etc., R'y Co., 2 Russ. & M., 470 (1831): Bank v. Charlotte, 85 N. C, 433 (1881). The plea of release must allege accept- ance by the corporation, and injury to the defendant sued on his subscription. Hawkins v. Miss. & Tenn. R. R. Co., 35 Miss., 688 (1858). An increase of the capital stock as allowed by the charter does not release subscribers. Port Ed- wards, etc., Ry. v. Arpin, 49 N. W. Rep., 828 (Wis., 1891). Where the statutes under which the company is organized allow the objects of the company to be changed on a vote of the stockholders. a dissenting stockholder is not released from his subscription by such change. Mercantile Statement Co. v. Kneal, 53 N. W. Rep., 632 (Minn., 1892). 2 This remedy also is supported by a large number of the cases in this chap- ter. See Stevens v. Rutland & Burling- ton R. R. Co., 29 Vt„ 545 (1855) ; Black v. Del. & Raritan Canal Co., 24 N. J. Eq., 455 (1873); Mourey v. Ind. & Cin. R. R. Co., 4 Biss., 78 (1866). The stock- holder cannot enjoin parties from ap- plying to the legislature for the amend- ment. Story v. Jersey, etc., Co., 16 N. J. Eq., 13 (1863), reviewing the cases; 639 § 503.] AMENDMENTS TO CHAJJTEES. [ch. xxv in. Pennsylvania it has been held that the stockholder may have an injunction herein, but only until the corporation shall have pur- chased his interest in the corporation. 1 This decision, however, has been doubted, and hardly seems consistent with well-estab- lished principles protecting persons in their rights to retain their property except as taken from them under the power of eminent domain. 2 § 503. Assent and acquiescence as a bar to the stockholders rem- ,,/,,.— A stockholder may be estopped from objecting to an amend- ment by his express or implied acquiescence therein. Any acts indicating an acceptance by him of the amendment bind him and bar his suit. 3 Acquiescence may sometimes grow out of his silence or delay, under circumstances that called on him to dissent if he so intended. 4 His assent, however, is not to be presumed, but must be Stevens v. Rutland, etc., R R. Co.. 29 Vt, 545(1855)l 1 Luuman v. Lebanon Valley R R Co., . -12 fis:,s); approved in State v. Bailey, 16 Ind., 4G (1861> < '/• Ship v. Crosskill, L. R, 10 Eq., 73 (1870k Stew- art v. Austin, L. R. B Eq., 399 (1866), holding that the recovery back cannot be in a court of equity. -Mowreyr. Ind. & Cin. R. R Co., i Hiss.. 78 (1866). Changes and amend- ments as to the route do not release the subscriber where he took part therein. Ovventon, etc.. Co. V. Smith, 13 S. W. Rep., 126 (Ky., 1890). : ' Bedford R 1!. Co. v, Bowaer, 48 Pa. St, 29(1864). Longdelay may constitute a ratification herein. Gifford v. New y R. K < •>. 10 N. .1. Eq., 171 (1854); Bangor, etc., R. R. Co. v. Smith, 47 Me.. 34 (1859); State r.Sibley,25Minn.,887(1879 ; Hope, etc.. Ins. Co. t\ Beckman, 47 Mo.. 93 (1870); Hope, etc., Ins. Co. v. Koel- ler, 47 Mo., 129 (1870); Covington v. Covington, etc., Co., 10 Bush, 69 (1873); Kenton, etc., Court r. Bank. etc.. Co., 10 Bush, 529 (1874); Sumrall «. Sun, etc.. Co., 40 Mo., 27 (1867); Smead r. Indian- apolis, etc., R R, 11 Ind., 104 (1858). Cf. Pingry r. Washburn. 1 Aiken (Vt), 264 (1826). See, in general, Memphis, etc., R. R Co. i\ Sullivan, 57 Ga., 240; Houston v. Jefferson College, 63 Pa. St. 428 ; Danbury, etc., R. R Co. r. Wilson 22 Conn.. 185; Vermont, etc., R R. Co. r. Vermont Cent R R Co., 34 Vt.. 2; Hayworth v. Junction R. R Co., 13 Ind., 848 (1859); Milla v. Central R R Co., 41 N. .1. Eq., l (1886); Zabriskie v. Hacken- sack, etc.. R. R Co., 18 N. J. Eq., 178: parte Booker, 18 Ark., 338; Upton v. Jackson, 1 Flipp C ft, 413; Goodin v. Evans, 18 Ohio St, 150, and ch. XLIV. If the stockholder subscribed after the amendment was made he cannot com- plain. Eppes r. Miss., etc., R R. Co., 35 Ala. (N. S.). 54 (1859); McClure P. Peo- ple's Freight Co., 90 Pa. St., 2C9 (1879). If a stockholder does not object to an amendment, it is not for a person whose land is being taken under eminent do- main proceedings to object Ames v. Lake Superior, etc., R R., 21 Minn., 241, 291 (1875) * Commonwealth v. Cullen, 13 Pa. St., 133 (1850); Martin v. Pensacola & Ga. R R. Co., 8 Fla.. 370 (1869); Owen t. Purdy, 12 Ohio St., 73 (1861). Contra, Hamilton Mutual Ins. Co. v. Hobart, 2 Gray. 548 (1854> Although a stock- holder may enjoin a consolidation of his company with another under a statute passed after the incorporation, the ob- ject of the consolidation being different from that of the original corporation, yet where the stockholder delays apply- ing to the court for nearly a year and in the meantime the consolidated com- 640 CH. XXVIII.] AMENDMENTS TO CHARTERS. [§ 503. proven. 1 A court of equity will go far to aid a dissenting stock- holder, where he applies promptly and before large investments and many changes are made on the faith of the acts complained of. But laches will not be tolerated by the courts, especially where important interests are involved. 2 party has borrowed money and given mortgages, and such mortgages are about to be foreclosed, the complaining stockholder is guilty of laches and his remedy is barred. Rabe v. Dunlap, 25 Atl. Rep., 959 (N. J., 1893). A consolida- tion of railroads under an amendment to the charter may be prevented by a single stockholder. But several years delay in complaining is fatal. The stock- holder then can only recover the value of his stock and past dividends. Deposit Bank v. Barrett, 13 S. W. Rep., 337 (Ky., 1890). Where stockholders in a college exchange their stock for scholarships, a removal of the college to another loca- tion under an amendment to the charter, such amendment having been made twenty-five years prior to such removal, will not be enjoined. Bryan v. Board, etc., 13 S. W. Rep., 276 (Ky., 1890). 1 March v. Eastern R. R Co., 43 N. H., 515 (1862) ; Prop., etc., Union Lock & Canals v. Towne, 1 N. H., 44 (1817) ; Ire- land v. Palestine, etc., Turnpike Co., 19 Ohio St., 369 (1869). 2 See ch. XLIV. (41) 641 CHAPTER XXIX. "TRUSTS" AND UNINCORPORATED JOINT-STOCK ASSOCIATIONS. A. "TRUSTS." § 503a. Definition and legality of a "trust" '>. Further inquiry as to the le- B .iitv of a "trust" 503c. Liability of trustee and certifi- Adera 503J. Qualificati< US, powers, et- the trustees and of certifi- cate-holders. R, UNINCORPORATED JOINT-STOCK ASSO- CIATIONS. § 504. Definitions — Joint-stock compa- -. clubs, exchanges, etc. — ( Ownership of land. 505. 8 joint-stock companies. Joint-stock companies may arise by implication of law. How a person becomes a mem- ber — Transfers. 508. Liability of members to creditors and to the company. OS by ineiu Ust offi- - ana the company. 510. Dissolution. nition andUgaiity of a ~ trust"— The word "trust" was first used to mean an agreement, between many stockholders in many corporations, to place all their stock in the hands of trust- ees and to receive therefor trust certificates from the trusts The stockholders thereby consolidate their interests and become trust certificate-holders. The trustees own the stuck, vote it. elect the others of the various corporations, control the business, re- ceive all the dividends on the stock, and use all these dividends to pay dividends on the trust certificates. The trustees are period- ically elected by the trust certificate-holders. The purpose of the ••trust " is to control prices, prevent competition and cheapen the cost of production. The Standard Oil Trust, the American Cot- ton-Seed Oil Trust and the Sugar Trust were examples of this method of combination. 1 i The committee of the house of rep- resentatives at Washington, in their re- explain the nature of tl - 'lard Oil Trust and Sugar Trust very clearly. The committee reports "that there exist a certain number of corporations Oi ized under the laws of the din" Btstoa and -ubject to their control ; that these corporations have issued their stock to various individuals, and that these individual stockholders have sur- rendered their stock to the trustees named in the agreements creating these tru>ts. and accepted in lieu thereof tific;. led by the trustees named therein. The agreements provide that the various corporations whose stock is surrendered to the trustees shall pre- serve their identity and carry on their business." See 4 R'y & Corp. L. J Mr. S. C T. Dodd, the general solicitor and originator of the Standard Oil Trust, defines a tn. an arrange- ment by which the stockholders of va- 64-2 • H. XXIX.] •"..: STS" AND DNDfC .TED ASSOCIATION IE But the word "trust" has a wider and more popular use. It is used to designate any combination of producers for the purpose of controlling prices and suppressing competition. In this sense of the word, all contracts, agreements and schemes whereby those who were competitors combine to regulate prices are "trusts.** During the past five years these trusts have come into great prominence. They multipled rapidly and extended into many branches of business. They became the object of great popular opposition and their legality was fiercely assailed, both in the courts and by means of prohibitory statutes. The courts have held with great uniformity that these combina- tions are illegal if their purpose is to restrict production, raise prices or restrain trade. The law is clear that any combination of com- peting concerns for the purpose of controlling prices, or limiting production, or suppressing competition, is contrary to public policy and is void. This principle of law has been applied with great rio-or to trusts, the recent combinations in trade. ATanv cases show- ing the different circumstances under which this rule has been ap- plied are given in the notes below. 1 on this subject arranged in the order of the states are as follows : California: A contract whose effect is to give a monopoly in bags by the vendor agreeing to sell to one party ex- clusively is illegal, and no damages can be collected. Pacific, etc.. Co. v. Adler, 27 Pac. Rep, 36 (Cal., 1891). Although the state is prosecuting a suit to forfeit the charter for entering into a combina- tion, yet a sale of part of the corporate property to a stockholder pending the suit is legal and the receiver cannot follow the property. A writ of prohibi- tion will issue against him. Havemeyer v. Superior Court. 24 Pac. Rep., 121 (Cal.. 1890} Where all the manufactur- ers of lumber at a certain point con- tracted to sell to a corporation all the product of the mills so far as such prod- uct was sold in four counties, and the mills agreed not to sell to any other parties in those counties except upon a forfeit to the corporation, the court held that any one of the mills could repudiate the contract In a suit brought by the corporation against one of the mills for refusing to live up to the contract, the court held that the rious corporations place their stocks in the hands of certain trustees, and take in lieu thereof certificates showing each shareholder's equitable interest in all the stock so held. The result is twofold ; 1. The stockholders thereby become in- terested in all the corporations whose stocks are thus held. 2. The trustees elect the directors of the several corpo- rations." See 7 Ry. & Corp. L. J. 236. 1 The state will at the instance of the attorney-general forfeit the charter of a corporation whose stockholders have entered into a " trust *' with the stock- holders of competing corporations for the purpose of forming a monopoly in and raising the price of sugar. People v. North R S. Rep. Co.. 121 N. Y.. 582 - I . This case broke up the " Sugar Trust " and drove it into transferring all its property to a New Jersey corpora- tion organized for that purpose. The next important case was State r. Stand- ard Oil Co., 30 N. E. Rep. 279 (Ohio, 1892) This case declared illegal the Standard Oil Trust. That trust is now in process of liquidation. These two cases are now the leading authorities on this subject. Various other decisions 643 § 503a.] "teusts" and UNINCORPORATED ASSOCIATIONS. [CH. XXIX. These cases indicate the complicated questions and important litigation that have arisen by reason of the trusts. It is believed, however, that the volume of such litigation will decrease rather great trusts have been than increase in the future. Most of the corporation could not recover. Santa Clara, etc., Co. v. Hayes, 18 Pac. Rep., 891 (Cat, 1888). Illinois: Although the general stat- ute authorizes incorporation for any •lawful purpose," yet an incorporation to buy a majority of the stock of each of four competing gas corporations in a city is illegal where the purpose is to create a monopoly. The state may by suit have the charter forfeited. People v. Chicago Gas T. Co., 22 N. E. Rep., 798 (111., 1889). All gas companies owe a duty to the public. An agreement of two companies in one city to keep out of each other's territory is void. Chi- cago, etc., Co. v. People's, eta, Co., 13 N. E. Rep., 169 (111., 1887). Iu Illinois all the grain dealers in a town secretly combined and made contracts by which they controlled the price of grain and the local store-house accommodations. The parties succeeded, but disagreed in their division of the profits. An action for an accounting was brought by one against another. The court refused to aid either party. The law will leave the guilty conspirators as it finds them. Craft v. McConoughy, 79 111., 34G (1875) Kansas: Insurance business is not in- ter-,! ate business. Foreign insurance companies that combine to control and increase the rates of insurance on prop- erty inside the state violate the statute against trusts, and their local agents are subject to prosecution therefor. State v. Phipps, 31 Pac. Rep., 1097 (Kan., 1893). Kentucky: The agreement of two rival boats to divide their earnings in a cer- tain proportion, and if either owner sells he shall not go into the business again for a year, is void. The party who has sold and then returned at once to the business is not liable iu damages. Anderson v. Jett, 12 S. W. Rep., G70 (Ky., 1889). Louisiana: A stockholder cannot hold a director liable for the stock becomiug worthless by reason of the fact that the director and others sold their stock amounting to three-fourths of the stock to the Cotton Seed Oil Trust, and that the trust then dissolved the corporation by a three-fourths vote as allowed by statute, although the directors as such voted for the dissolution. Trisconi v. Winship, 9 S. Rep., 29 (La., 1891). A pooling contract between two railroads competing for business between the Bame points is void as against public policy. The court will leave the parties where they are. The arrangement in this case w as for a division of earnings. Texas, etc., R'y v. Southern Pac. R'y, 6 S. Rep., 888 (La., 1889). In Louisiana, \\ here several firms owned a large quan- tity of Indian bagging, and combined and agreed not to sell except upon the consent of a majority of these who were parties to the agreement, the court re- fused to uphold the agreement) and re- fused to enjoin one of the parties from violating his compact India Bagging iation v. Kock, 14 La. Ann., 168 1 1 B59). Massachusetts: The combination of two parties who each claim a patent on an article not a prime necessity nor a staple commodity iu the market is legal and may be specifically enforced. Glou- cester, etc., Co. «, Russia, etc., Co., 27 N. E. Rep., 1005 (Mass., 1891). In Com- monwealth v. Smith, 9 N. E. Rep., 62!) (Mass., 1887), where certain shade-roller manufacturers formed a corporation to sell their product, the court enjoined one of the parties from repudiating the agreement, but said: "The agreement does not refer to an article of prime ne- cessity, nor to a staple of commerce, nor to merchandise to be bought and sold in the market ... It does not look to 644 CII. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 503«. driven from their original mode of organization and have reorgan- ized b}' conveying all their property to a corporation organized for the purpose of taking over the property. Such has been the case with the Sugar Trust and the Cotton-seed Oil Trust. The decisions of affecting competition from outside — the parties have a monopoly by their patents — but only to restrict competi- tion in price between themselves. . . . When it appears that the combination is used to the public detriment, a differ- ent question will be presented from that now before us." Michigan: In ascertaining the market price of articles sold, the price as fixed by a combination in the trade will not be considered. Love joy* r. Michels, 49 N. W. Eep., 901 (Mich., 1891). A con- tract of a concern not to manufacture a certain line of articles in some states for five years is void. Western, etc., Ass'n v. Starkey, 47 N. W. Rep., 604 (Mich., 1890). Where three persons interested in a match factory agreed to unite their property with that of their competitors in one large corporation, a monopoly — the Diamond Match Company — the courts will not enforce the contract be- tween these three persons which speci- fies the proportion in which each of the three was to participate in the profits coming to them jointly from the monop- oly. The history, character and purpose of the match monopoly are fully stated in this decision. Richardson v. Buhl, 43 N. W. Rep., 1102 (Mich., 1889). Minnesota: By-laws of an exchange restricting the freedom of members to reduce prices and establish offices for selling are void. Kolff v. St. Paul, etc., Exchange, 50 N. W. Rep., 1036 (Minn., 1892). Missouri: See Skrainka v. Scharring- hausen, 8 Mo. App., 522 (1880), uphold- ing a pooling contract of certain owners of stone quarries located in St. Louis, on the ground that the restraint was local in its effect. Nebraska: Where the stockholders of a distilling corporation transfer their stock to trustees, for the purpose of entering into a trust, such trustees being the holders of the stock of various other corporations engaged in the same business, and trust certificates are issued by them in place of the stock, the state, at the instance of the attorney-general, will cause the charter to be annulled on the ground of misuser, the corporation being no longer engaged in a lawful business. Although the corporate prop- erty was transferred just before judg- ment, the court will not allow its de- cree to be evaded. State v. Nebraska Distilling Co., 46 N. W. Rep., 155 (Neb., 1890). New Jersey: Where a contract be- tween a domestic railroad company and* a foreign railroad company is declared illegal and void by the court on the ground that it seeks to create a mo- nopoly in the coal business, and the court orders the domestic railroad company to cease complying with such contract, the court will appoint a receiver of such company if it attempts to evade the de- cree, but on proof that no evasion has been attempted, the court will refuse to appoint a receiver. Stockton, Att'y- Gen'l, v. Central R. Co. of N. J., 25 Atl. Rep., 942 (N. J., 1893). It is not illegal for one stockyard company to buy out another stockyard company. Will- lcughby v. Chicago, etc., Co., 25 Atl. Rep., 277 (N. J., 1892) ; Ellerman v. Chi- cago, etc., S. Y. Co., 23 Atl. Rep., 287 (N. J., 1891). New York: See People v. North River, etc., Co., supra. Where several carbon manufacturers have formed a combina- tion by leasing their several concerns to a trustee and also assigning to him their orders for carbons, and subsequently one of them withdraws, the withdraw- ing concern cannot sue for and claim the amount due upon one of the orders assigned to and filled by such trustee. 645 503a.] " TRUSTS " AND UXINCOEPORATED ASSOCIATION-. [en. XXIX. the New York court of appeals against the Sugar Trust and of the supreme court of Ohio against the Standard Oil Trust have convinced the trusts that their original mode of organization was illegal and must be abandoned. The result has been that the trusts for the The defendant having interpleaded, the trustee takes the money. Pittsburg C. Co. v. McMillan, 119 N. Y., 46 (1890). Where a manufacturer of a peculiar kind of machinery under a patent agrees with a trustee for several corpo- rations that he, the manufacturer, will sell his machinery to them alone, and they agree to give him a percentage of their profits, the agreement is legal and may be enforced by him. Good v. Da- l.n id, 121 N. Y., 1 (1890). A combina- tion of coal dealers for the purpose of preventing the solicitation of Inl- and for the purpose of regulating the •retail price, is a conspiracy, and is pun- ishable as a criminal offense under the New York law. People r. Sheldon, <>*> Hun, 590 (1893). Where many manu- facturers under various patents form a corporation and convey to it the patents and take hack licenses under which the corporation regulates the price, and they agree nol to use any new patents and not to manufacture any new kind of harrow, the combination is illegal. Any one of the parties may by suit in equity be relieved from its terms. Strait 17. National Harrow Co.. 18 N. Y. Supp., 224 (1891). It is established "that no con- tracts are void as being in general re- straint of trade where they operate simply to prevent a party from engag- ing or competing in the same business." Hence, an agreement of one steamship company to pay another company a certain sum for withdrawing its line of boats was upheld as against the dissent of a stockholder in the former company. Leslie v. Lorillard. 110 N. Y. 019(1888). A large number of the proprietors of boats on the canals made a combina- tion. The income from every boat, over and above a certain amount al- lowed to the boat for expenses for wear and tear, was turned into the "pool." At certain times the fund in the "pool" was to be divided among the parties ac- cording to the number of their boats. In an action to enforce payment under the agreement the court held that the whole arrangement was illegal, void and not enforceable. Stanton r. Allen. 5 Denio, 434 (1848). The proprietors of five lines of boats engaged in canal transportation agreed to combine and do business at certain rates for freight and passage. The net earnings were to be divided among themselves in a fixed proportion. One of the parties sued an- other to compel 1 1 i in to make payment The court held that the combination was void under the statutes of New York, and said : " It is a familiar maxim that competition is the hfe of trade. It follows that whatever destroys or even relaxes competition in trade is injurious if not fatal to it." Hooker v. Vande- water, 4 Denio, 349 1847) A. coal com- pany b< ught coal from several corpora- tions upon their contract not to sell to any other pai tie- in that locality. The purpose was to enable the purchaser of the coal to have a monopoly of the mar- ket. The party which purchased the coal diii not pay for it. The coal com- pany which had sold brought suit for the price, but the court held that the suit must fail. The company had taken part in an illegal contract and combina- tion. In such cases the parties are out- side of the pale and protection of the law. The courts will not aid either party. Aruot r. Pittston, etc., Coal Co., G8 N. Y, 558 (1877). Many salt manu- facturers in New York state combined to limit the production and control the price of salt. They formed a corpora- tion, and each of the parties leased to the corporation his manufactory of salt. Each of the parties was. however, to continue the manufacture of salt in his 616 ch. xxix.] "trusts" and unincorporated associations. [§ 503a. most part have reorganized and reappeared in the form of gigantic corporations. How far the law will interfere with this class of corporations remains to be seen. In the Chicago Gas Company case the supreme court of Illinois forfeited the charter of the company manufactory, but only to a limited ex- tent, and was to sell the product to a corporation at a fixed price. The agree- ment was carried out. One of the par- ties could not collect from the corpora- tion the price for the salt delivered to it, and accordingly he brought suit. But the court decided that he could not collect. He lost his salt, and also the price of it. The law declares such com- binations illegal, and will not aid any of the parties. Clancy v. Onondaga Fine Salt, etc., Co., 62 Barb.. 395 (1862). The agreement of the various members of the "Wire Trust" not to sell at less than a certain price is void. A forfeit cannot be recovered back by one of the parties. De Witt, etc., Co. v. N. J., etc., Co., 9 Ry. & Corp. L. J., 314 (N. Y. O, 1891). The receiver of one of the corpo- rations forming a "trust" may enjoin it from reorganizing in the shape of one large corporation. Gray v. De Castro, etc., Co., 10 N. Y. Supp., 632 (1890). Al- though the charter of one of the corpo- rations whose stock is held by a " trust " is forfeited, yet the receiver cannot have a receiver appointed of the "trust" property. This would amount to a re- ceivership of all the property of a stock- holder in an insolvent corporation. Gray v. North River, etc., Co., N. Y. Law J., June 6, 1890. The receiver of the company whose charter is forfeited has no right to an accounting from the other corporations as partners. He is confined to the property of his own company. Gray v. Oxnard, etc., Co., 11 N. Y. Supp., 118 (1890); affirmed in 59 Hun, 387 (1891), on the ground that an illegal contract cannot be enforced. A receiver of an insolvent corporation may recover money due it from an illegal " trust," though the corporation was a party to the " trust." Pittsburgh, etc., Co. V. McMillan, 6 N. Y. Supp., 433 (1889). A contract between two corpo- rations whereby the stockholders of the former were to buy only from the stockholders of the latter and the stock- holders of the latter were to sell only to the stockholders of the former was up- held in Live-Stock Assoc, etc. v. Levy, 3 N. Y. St. Rep., 514 (1886). A trust be- ing illegal, a certificate-holder may have a receiver appointed of all the stock and assets held by the trustees, and may have an accounting by the trustees. Cameron v. Havemeyer, 12 N. Y. Supp., 126 (1890). Where a " trust " passes into a receiver's hands by reason of insolv- ency, the receiver may recover debts due the " trust " from the constituent corporations. Pittsburgh, etc., Co. v. McMillan, 6 N. Y. Supp, 433 (1889). The purchaser of a trust certificate issued by the trustees, the certificate being in a form similar to that of certificates of stock, may compel the trustees to trans- fer the same to him on their books, al- though he is a competitor of the trust and has opposed it in all ways possible. Rice v. Rockefeller et al, 134 N. Y, 174 (1892). In this case the court, speaking of the nature of a trust, said : " The agr-eement constituted not a partner- ship, but a trust in behalf of the bene- ficiaries. And while it is not a corpo- ration, it, by the agreement, took some of the attributes of a corporation in so far that, through its trustees, certificates of shares in the equity to the property held by them were issued, and were transferable in like manner apparently as are those of corporations." The case of Diamond Match Co. v. Roeber, 106 X. Y, 473 (1887), was not a " trust " case, and is no authority on the subject. Ohio: The Candle Manufacturers un- incorporated association, formed to con- trol prices, etc., is illegal. A member cannot recover his share of the profits. 647 § 503a.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX. on the ground that it was formed to bring about an illegal combi- nation. New Jersey, on the other hand, grants broad charters to the combinations and receives a heavy toll for the privileges and immunities granted. Emery v. Ohio Candle Co., 24 N. E. Rep., 660 (Ohio, 1890). Many salt manufact- urers formed a " trust," by agreeing to sell all their product to an unincorpo- rated joint-stock association. The lat- ter was composed of, and its directors were elected by, the manufacturers. The purpose of the combination was to have the association buy the salt from the manufacturers and sell it to the pub- lic. Competition would thereby be pre- vented. The court held that the com- bination was void, and refused to enjoin one of the parties from breaking his contract with the association. Central Ohio Salt Co. v. Guthrie, 35 Ohio St, 666 (1880). Pennsylvania: Five Pennsylvania coal corporations, which together controlled a certain kind of coal, combined and agreed that sales should be made through a committee and a general agent, and that thereby prices should be fixed, freights made, and sales and de- liveries adjusted. If any company sold more than a fixed proportion it was to pay a certain amount to the others. The combination was made and carried out in New York. In the course of time one of the companies sued another to recover its proportion of the amount which tlu> latter was to pay for the ex- cess of coal sold by it The Pennsylva- nia court held that it could not recover ; that the combination was illegal and void ; and that it was a conspiracy under the New York statute against the com- mission of any act by two or more per- sons " injurious ... to trade or commerce." Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St, 173 (1871). The courts will refuse a charter to a company whose business is to be " to promote the business of such retail dealers as become members thereof, and to protect them," etc., the intent being to combine the retail coal dealers. Mat- ter of Richmond Retail Coal Co., 9 R'y & Corp. L. J., 81 (Phil., 1890). Tennessee: It is illegal for an Ohio corporation to purchase a majority of the stock of a Tennessee corporation for the purpose of controlling the latter, even though they are engaged in a sim- ilar business, the object being to form a monopoly. Hence the purchasing com- pany cannot enforce the contract as to certain things which were to be done by the vendor of the stock. Buckeye, etc.. Co. v. Harvey. 20 S. W. Rep, 427 (Tenn., 1892). A combination of four cotton-seed oil corporations by an agree- ment that the possession and use of all their property should be turned over to certain persons to run is a partnership, and contrary to the rule of law that a corporation cannot become a partner. One of the four corporations sued and recovered repossession of its property. Mallory v. Hanover, etc., Works, 8 S. W. Rep., 346 (Tenn., 1888). Wisconsin: See Kellogg v. Larkin, 3 Pin. (Wis.). 128(1851). Tlie United States Courts: Where a car manufacturing corporation leases all its property to another corporation for a term of years and agrees not to en- gage in business during that time, "the contract between the parties is void, be- cause in unreasonable restraint of trade, and therefore contrary to public policy." Central Trans. Co. r. Pullman's Car Co., 139 U. S., 24 (1891), quoting from and approving of Alger v. Thacher, 19 Pick., 51. In the case United States v. Trans- Missouri Freight Assoc, 53 Fed. Rep., 440 (1892), the court held that an agree- ment between several competing rail- way companies, that an association be formed for the purpose of maintaining just and reasonable rates, preventing unjust discriminations by furnishing 648 en. xxix.] ''trusts" and unincorporated associations. [§ 503a. In more recent times, in England, the genuine " trust " has been used for legitimate investment purposes. The trustees are author- ized to invest the funds of the "trust" in the stocks and bonds of adequate and equal facilities for the in- terchange of traffic between the several lines, without preventing or illegally limiting competition, is legal, and is not in violation of the federal statute against trusts. The court said: "The rule of law which recognizes the rights of the public to have the benefit of fair and healthy competition, and to require that equal facilities and reasonable rates shall be secured to all, does not con- demn a contract between railway com- panies operating competing lines, which is made for the sole purpose of prevent- ing strife, and preventing financial ruin to one or the other, so long as the pur- pose and effect of such an agreement is not to deprive the public of its right to have adequate facilities and fixed and reasonal>'" ''rices. . . . The object and puipose of the agreement and the formation of the association thereunder was to maintain just and reasonable rates, and to prevent unjust discrimina- tions, in compliance with the terms of the act regulating commerce by furnish- ing equal facilities for the interchange of traffic between the several lines." A copy of the agreement itself was given in this report. It is an agreement to regulate rates, but does not provide for a division of the traffic. A contract by a manufacturing company not to man- ufacture for a certain period if it is paid a certain percentage on sales made by others is illegal and void. Oliver v. Gilmore, 52 Fed. Rep., 562 (1892). It is no defense to an infringement suit that the complainant has formed a monop- oly of all patents bearing upon the matter. Strait v. National Harrow Co., 51 Fed. Rep., 819 (1892). An assignment of patents by one of several parties to a corporation formed to unite various pat- ents in a certain business is absolute and cannot be revoked, even though the party was by agreement to have a salary of $6,000 per year and this salary has not been paid. Bracher v. Hat Sweat Mfg. Co., 40 Fed. Rep.. 921 (1892). A person who has sold his bakery to a cor- poration which is a " trust," taking stock in the corporation in payment, may tender back the stock and retake possession of his bakery. The act of congress against combinations applies. American, etc., Co. v. Klotz, 44 Fed. Rep., 721 (1891). Where the stockhold- ers of a corporation enter into a con- tract for and in behalf of the corpora- tion and for its benefit, and the corpo- ration accepts that benefit, the latter is bound and affected by the contract and subject to the liabilities of the contract the same as though it had directly en- tered into it. Hence it is that a corpo- ration is guilty of entering into a " trust " in a case where its stockholders enter into the " trust." American P. Trust v. Taylor, etc,, Co., 46 Fed. Rep., 152 (1891). In this case the court held that the trustees were agents, and that the corporations were among the prin- cipals, and that it was ultra vires of the corporations to purchase stocks, bonds and various properties through these agents, the trustees. Hence one of the corporations cannot be enjoined from breaking the contract Where, in order to enter into a combination, one of the corporations assigns all its property to its stockholders, and they assign it to the new consolidated and absorbing cor- poration, and also agree with that cor- poration not to compete with it in business, the first-named corporation may be started in the business anew and will not be enjoined. American Pre- servers Co. v. Norris. 43 Fed. Rep., 711 (1890). In controversies between a cer- tificate-holder and the trustees the court will not consider the legality of the "trust." Gould v. Head, 41 Fed. Rep., 240 (1890). A certificate-holder cannot 649 § 503 The statutf applies to illegal trusts of stork to unite competing railroads. Clarke v. Central R R», 50 Fed. Rep^ 338 (1892). In the case United States r. Patterson, 54 Rep, l (tor, (Mass.. 1898) the federal statute was held to apply in cer- tain particulars, and not to apply in others. The act of congress relative to monopolies does not authorize an in- junction except on the part of the gov- ernment. Blindell v. Hagan, 54 Fed. Rep.. 40 (1893). An indictment of a number of lumbermen for raising the price of lumber fifty cents a thousand feet will not lie under the federal stat- ute. United States v. Nelson, 52 Fed. Rep., 646(1892). Indictment under the federal law against monopolies quashed. In re Corning. 51 Fed. Rep, 205 (1892); In re Terrell, id., 213; In re Greene, 52 Fed. Rep.. 104 (1892). England: The house of lords, the highest court in England, in 1891 af- firmed the decisions of the courts below in the case Mogul Steamship Co. v. Mc- Gregor (66 L. T. Rep, 1, affirming 61 id., 820 and 59 id., 514), and held that an ac- tion of conspiracy would not lie against a company that gave lower rates of freight to parties who shipped exclu- sively by them, there being in the trans- action no desire to injure others and no ill-will. The defendant shipping com- panies and owners had combined to- gether and formed a "conference" or '• ring," and their agents in China had issued circulars to shippers there to the effi ct that exporters in China who con- fined their shipments of goods to vessels owned by members of the "conference" should be allowed a certain rebate, pay- able half-yearly, on the freight charged. The court held that the "conference," being formed by the defendants with the view of keeping the trade in their own hands, and not with the view of ruining the trade of the plaintiffs, or through any personal malice or ill-will tow aids them, was not unlawful, and that uo action for conspiracy was main- tainable. Lord Coke, in the great and leading "Case of the Monopolies," 11 ( Joke, s l (171 1), declared that a monopoly was illegal aud void. Lord Coke said that a monopoly led to three results: au increase in price, a decrease in quality, and the impoverishment of artisans and others. An agreement of manufactur- ers that oue ■ shall not employ the dis- charged hands of any other except upon the written consent of the latter is void. Mineral Water, etc., Co. v. Booth, 57 L T. Rep.. 573 (1887). A com- pany which is organized in violation of a statute cannot collect debts which are due to it. Jennings v. Hammond, 51 L. J. (Q. B.), 492 (1882), the company in this case being organized in violation of a statute which prohibited more than twenty persons uniting in an associa- tion or partnership except under certain conditions. In another case many man- 650 Oh. xxix.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 503&. profits in another. It is a mode of investment on a large scale, and is made on the principle of an average gain and loss. 1 The American "Car Trust " is practically an agreement of several owners of cars to place them in the hands of an agent to sell on the instalment plan, the agent having the power to issue certificates representing an interest in the instalments. 2 § 503&. Further inquiry as to the legality of a lt trust" — There are other things to be considered in determining whether or not a "trust" is legal. Does it vest personal property or real estate in a trustee for a longer period than is allowed by law? Is the for- mation of a trust for the purpose of carrying on business author- ized by law? Is the shifting of the parties interested — that is, the certificate-holders — allowed in cases of trusts? These questions will be considered in the order named. It is the policy of the law to limit the time during which a per- son may tie up his personal property or real estate. Generally this time is fixed as the life-time of the survivor of any two persons then living and designated by the person creating the trust. Each state, by its statutes, generally provides and names the time during which property may be tied up by a trust, and if a trust is formed for a period longer than that allowed by statute the trust itself is void. 3 There is little doubt that merchandise, land and shares of stock may be placed in trust. The law is clear that "every kind ufacturers, in consequence of troubles between themselves and their employees, entered into an agreement and gave a bond that they all would abide by the rates of labor, hours of work and other regulations which a majority of those who entered into the combination should decide upon. The court held that the compact was in restraint of trade ; that it was illegal and void, and that the bond could not be enforced. Hilton v. Eckersley, 6 El. & BI., 47 (1856). Cf. Ontario Salt Co. v. Mer- chants' Salt Co., 18 Grant's Ch., 540 (1871 ), where a Canadian " pool " on salt was sustained ; "Wicken r. Evans, 3 G. J., 318 (1829). The word "monopoly" originally meant an exclusive privilege granted by the crown. The courts held that the crown could not grant it. See Case of Monopolies, supra; Mitchell v. Reynolds, I P. Williams, 181, 187. Con- cerning the subject of trusts and mo- nopolies and exclusive privileges in general, see Cook on The Corporation Problem, ch. V, and pp. 114-116. 1 See Healey on Company Law and Practice, p. 191. For the form of arti- cles of agreement of this, kind of a " trust," and for a detailed statement of the various provisions that are made, varying according to the character of the enterprise and the purposes of the participants, see Sykes v. Beadon, L. R, 11 Ch. D., 170(1879i ; Smith v. Anderson, L. R, 15 Ch. D., 247 (1880) ; Wig-field v. Potter, 45 L. T, 612 (1882) ; Credit Mo- bilier v. Commonwealth, 67 Pa. St., 233 (1870), the last case being a " trust " created to construct a railroad, the cestui que trust being the stockholders of a designated corporation. 2 See ch. L, infra. 3 Gerard's "Titles to Real Estate," p. 228. Moreover, if the time is to be measured by the life of a person then living, a trust which is to exist for a fixed period, however short, without 651 503k] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX. of valuable property, both real and personal, that can be assigued at law may be the subject-matter of a trust." ! A different question arises, however, in determining whether a trust may be created to carry on business and trade, or to control a concern which carries on business. 2 At common law the placing of personal property in trust for the purpose of carrying on business in the name and under the management of the trustees is legal and allowable. 3 The statutes of the various states, however, must be consulted in reference to this point. 4 reference to the life of a person then living, is void. Id., pp. 228, 229. In New York the suspension can be for only two lives in being, and, in certain . twenty-one years thereafter. 2 R. S., 723, § 15 (p. 2176, 7th ed} This stat- ute applies equally to real and persona] property. Gerard on Titles to 1 Estate, 235; Howe v. Van Schaick, 7 Paige, 221 (1838); Bean v Bowen, 17 How. Pr., 306: Holmes v. Mead, 52 X. V.. 332, 344 1878> The statutory prohibition against the accumulation of the income of trust property, except in the rase of infants, applies both to real estate and per-' malty. Gerard's "Titles to Real Estate," p 2 1 PeVry on Trusts, § 67. 2 Under the statutes of New York a trust of property consisting of real estate is void, unless the purpose of the trust is to sell the land for the benefit of creditors; or to sell, mortgage or lease it for the henefit of legatees or for satis- fying a lien on the land; or to receive the rent and use it for the support of a eei tain person; or to accumulate the rent for a certain person. See 2 R S. of N. Y, 728, § 55 (p. 2181, 7th ed.). Ac- cordingly a modern " trust," whose property consists of real estate in New York, would be void. But as to per- sonal property the law is generally dif- f eren t. 3 For decisions at common law to the effect that property may be vested in trust.rs for the purpose of carrying on business, see Ex parte Garland, 10 Ves., 110 (1883): Scott v. Izou, 34 Beav., 434 (1865). In the case of Holmes V. .Mead, 52 X. Y. 332 (1873), the court said: "A trust in personal property, which is not in conflict with the statute regulating the accumulation of interest and pro- tecting the suspension of absolute own- ership in property of that character, is valid when the trustee is competent to take, and a tru>t is for a lawful purpose well defined, so as to be capable of be- ing specifically executed l>y the court. . . . Trusts of personal property are not alTected by the statute of uses and trusts, which applies only to trusts in real property." IuGottr. Cook. 7 1' 521, 584 (1889 . the chancellor said: "The Revised Statutes have not at- tempted to define the obj< cts for width express trusts of personal property may be created, as they have done in relation to trusts of real estate. Such trusts, fore, may be created for any pur- poses which are not illegal." See, also, Graff v. Bonnett, 31 N. Y„ 139 (1865). In Power v. Cassidy. 79 N. Y, 602, 613 (1880), the court said: "The law does not limit or confine trusts as to personal property except in reference to the sus- pension of ownership, and they may be created for any purpose not forbidden by law." To same effect, Bucklin v. Bucklin, 1 Keyes (N. Y.\ 141 (1864); Yoebel v. Wolf, 113 N. Y, 405 (1889). 4 Many of them, including Michigan, Wisconsin, Minnesota, California, Da- kota. North Carolina, Georgia, Penn- sylvania, Connecticut, Kentucky and Vermont, have statutes expressly speci- fying the objects for which a trust may 652 €H. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 503c. There is little difficulty in determining the question whether it is allowable in law to create a trust where the cestuis que trust — that is, the certificate-holders — change and fluctuate in their identity. The law does not require the cestui que trust to remain continuously one and the same person. He is not indefinite, even though by transfer of interest his identity may change. 1 A more formidable objection to the legality of "trusts" is that they are similar to an unincorporated joint-stock association, and that the latter are illegal, inasmuch as they assume the powers, privileges and name of a corporation. It was on this ground that the decision in Louisiana declared that the American Cotton Oil Trust was illegal, and was disqualified to do business within that state. The court held that, under the statutes of Louisiana, an un- incorporated joint-stock association is illegal; that a "trust" was one kind of an unincorporated joint-stock association, and conse- quently that it was illegal and void. 2 But this view of the law would not be sustained elsewhere in this country; nor would it be sustained under the old common law of England. Unincorporated joint-stock companies have existed for vears and are common throughout all the other states of the Union. They are legal methods of carrying on business. 3 § 503c. Liability of trustee and certificate-holders. — The law is clear that a trustee who carries on any kind of business is liable personally, and to the entire extent of his private fortune, for all the debts incurred in the management and execution of the trust. 4 It be created. See Stimson's American corporated companies. At that time Statute Law, § 1703. they were regarded as " dangerous, mis- 1 See Harrison v. Harrison, 36 N. Y., chievous and, in short, public nui- 543 (1867), affirming 32 Barb., 162 ; sances." But the statute was repealed Holmes v. Mead, 52 N. Y., 332, 343 (1873) ; in 1826, and Lindley, the great English Conkling v. Washington University, 2 judge and jurist, says of it : " Juster Md. Ch., 497 (1849); Perry on Trusts, views of political economy and of the §66. In regard to this matter, a " trust " limits within which legislative enact- is legal on the same principle that it is ments should be confined have led to legal for a bondholder secured by a rail- the repeal of the statute in question, way trust deed or mortgage to sell and which, though deemed highly beneficial transfer his interest to anothei\ half a century ago, probably gave rise 2 State of Louisiana v. American Cot- to much more mischief than it pre- ton Oil Trust, 1 R'y & Corp. L. J., vented." Lindley on Partnership, 193 — 509 (1887), the court saying: "A joint- the great English work on corporations, stock company is not known to the laws Moreover, a careful examination of the of Louisiana." English authorities up to the 1 present 3 See § 504, infra. In England there day shows conclusively that at common formerly was doubt upon this subject, law an unincorporated joint-stock asso- but this doubt was due to the "Bubble ciation is legal and valid. Id., 192, 196. Act." This statute was passed in 1720 Cf. 21 N. E. Rep., 605 (111., 1889). for the purpose of suppressing unin- 4 Thompson v. Brown, 4 Johns. Ch., 653 § 503c] " TKUSTS " AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX. is possible, however, that the use of the words "as trustee," in the contract entered into, will protect him against this liability. 1 And there is little doubt that the creditors of the trust may collect their debts from its property. This has been a doubtful point, but is now reasonably well settled. It matters not whether the trustees have expressly bound the trust property to pay the debts. Where the trustee is insolvent, a creditor of the trust may proceed against its property to procure payment of a debt incurred in the execution of the trust. 2 But a different rule prevails as regards the cestui que trust, the beneficiary. The cestui que trust cannot be held liable for the debts created by the trustees or for debts incurred in the execution of the trust. This question has arisen chiefly in cases where trustees have carried on the business of an insolvent person for the benefit of the creditors of the latter. 3 And the same conclusion is reached in cases where an executor, administrator or trustee carries on a business for the benefit of a beneficiary. 4 619 (1820); Wild v. Davenport, 7 Atl. Rep., 295 (N. J., 1887); Stephens V. .lames, 3S. E. Rep., 160 (Ga.. 1887); Rog- ers r. Wheeler, 43 N. V.. 598 (16 Jones v. Seligman, 81 N. Y., 190 (1880). 1 Contracts entered into by Che tin of a trust deed for many shareholders bind the latter but not the former per- sonally, where the trustees were author- ized to make the contracts and did so as trustees. It is immaterial that the con- tracts are under seal. Cook r. ( I ray, 133 Mass., 106 (18S2). But see Stephenson v. Told. 82 N. W. Rep., 340 (Iowa, 1887); 1 Parsons on Contracts (6th ed.\ *122. As to the mode of compelling payment of a debt incurred by a trustee who has issued scrip to represent the property, see Mayo v. Moritz, 24 N. E. Rep., 1083 (Mass., 1890), holding that the remedy is not for a receiver to wind up the trust. 2 Cater v. Everleigh, 4 Desaus.. 19 (1809); James v. May rant, 4 Desaus., 691 (1815); Montgomery v. Everleigh, 1 Mc- Cord Ch., 267 (1826); Magwood r. Pat- terson, 1 Hiles Ch., 228 (1833); Gaudy v. Barrit, 56 Ga., 640 (1876) ; Tennant v. Stoney. 1 Rich. Eq., 222, 243 (1845 : Wylly v. Collins, 9 Ga., 223 (1851): Frost v. Shackleford, 57 Ga.. 261 (1876) ; Ferriu r. Myrick, 41 N. Y., 315 (1869). Contra. Worral v. Harford, 8 Ves. Jr., 8 (1802); Mulliall r. Williams. 82 Ala.. 489 (1858 : Jones r. Dawson, lit Ala., 672 (1851). See, also. New v. Nicoll, 73 N. Y., 107 (1878); Noyea v. Blakernan, 6 N. Y., 567 (185S •its v. Flint, 14 J. & S. (N. Y.\ 498 (1880); <',, x ,-. Hickman, 8 H. L. Cases. 368 (1860); fie Stanton Iron Co., 21 Beav., 164 (1855); Selwyn r. Harri- son. 2 J. & II.. 834 i L862). See Bingaman r. Hickman, 8 Atl. Rep., 644 (Pa.. L88*S . 4 In the case of E.v parte Garland, 10 Yes.. 110 (1808), where a testator di- rected that a certain sum be used to carry on a business, and the executor so used it, and the business became in- solvent, liekl, per Lord Eldon, that no other part of the testator's property was liable for the debts thereby incurred; overruling Hankey r. Hammond, 1 Cooke's Bank. Law, 67 (1786). Lord Eldon further said : " On the other hand, the ease of the executor is hard. He becomes liable, as personally re- sponsible, to the extent of all his prop- erty, . . . though he is but a trustee. But he places himself in that position by his own choice." In the case of In re Johnson, L. R, 15 Ch. D, 548 (1880), the cases are reviewed. Lord Eldon's 654 CH. XXIX.] " TKUSTS " AXD UNINCORPORATED ASSOCIATIONS. [§ 503c. It has been held also that the trustee cannot render the cestui que trust liable, even though the trustee contracts with the creditor to that effect. 1 There is little doubt that these old principles of law are appli- cable to " trusts." The courts of England have decided that a modern '• trust" is not a partnership or mere association, but is similar to an old common-law trust estate. This conclusion was reached in con- struing an English statute which prohibits certain partnerships or associations from doing 1 business. 2 decision that it is not the general estate of the testator which is liable, but only so much as he has authorized to be em- ployed in the business, is stated to be still the law. See, also, Strickland v. Symons, L. R, 26 Ch. D., 245 (1884). An estate is not liable for debts created by a partnership continued by order of the will. Stewart v. Robinson, 115 N. Y., 328 (1889). 1 Stanton v. King. 8 Hun (N. Y.), 4 (1876); affirmed, 69 N. Y, 609. See 15 Am. L. Rev., 456; Burch v. Brecken- ridge, 16 B. Mon., 488; New v. Nicoll, 12 Hun, 431 (1877) ; affirmed, 73 N. Y, 127. 2 In England a statute exists which forbids any company, association or partnership consisting of more than twenty persons from carrying on any business for the acquisition of gain, un- less it is registered as a company under the Joint-stock Company's Act, and complies therewith as regards reports, etc. It has been held that a " trust " is not a "company, association or part- nership," and consequently is not af- fected by this statute. "Wigfield v. Pot- ter, 45 L. T., 612 (1882); Crowther v. Thorley, 32 W. R, 330 (1884); In re Siddall, L. R, 29 Ch. D., 1 (1885) ; Smith v. Anderson, L. R, 15 Ch. D., 247 (1880). The last case cited was an ac- tion to have the " trust " dissolved on the ground that it was a partnership, and was doing business in violation of the statute. The court refused to grant the relief desired, and said that the cer- tificate-holders were not partners and did not form an association. " There has never been anything creating any mutual rights or obligations between these persons. They are from the first entire strangers, who have entered into no contract whatever with each other, nor has either of them entered into any contract with the trustees or any trustee on behalf of the other, there being nothing in the deed pointing to any mandate or delegation of authority to aot for the certificate-holders as between themselves, and nothing, as it appears to me, by which any liability could ever be cast upon the certificate-holders either as between themselves or as be- tween themselves and anybody else. . . . If there is any business at all, it is to be carried on by the trustees. Whatever is to be done is to be done by the trustees." And Cotton, L. J., said; " The trustees here are the only persons who are dealing with the investments, and they are dealing, not as agents for some principal, but as trustees in whom the property and the management of it are vested, and who have the power of changing the investments and securi- ties. That is just like the case which often occurs where the executors or trustees of a will are directed to carry on a business. The fact that they are to account to others for the profits made is a matter utterly immaterial as be- tween them and those with whom they deal. They deal with those persons as the only persons contracting, and hold themselves out as personally liable. These persons have no right whatever as as against the persons beneficially en- titled." This case was one involving a 65c § 503cZ.] "trusts" axd unincorporated associations, [ch. xxix. Such being the case, it seems to be clear that the trustees and the property of a modern " trust " are liable for all debts incurred by it, but that the holders of the trust certificates are not in any way liable therefor, unless they have expressly agreed to assume that liability. § 503«:Z. Qualifications, powers, rights and duties of the managers and certificate-holders of a " trust." — Any person may serve as a trustee, "provided that person is competent to take the legal title to the property. 1 The trustees of a "trust" correspond somewhat to the directors of a corporation. They generally are elected annually by the certificate-holders in a regularly called meeting of themselves. The instruments creating the "trust" usually provide for the elec- tion of trustees, and for their succession and term of office. There is nothing in the old law of trust estates which forbids this change of trustees. 2 Where, by the trust deed, a majority of the cestui* que trusth&XQ power to fill a vacancy caused by the incapacity or inability of the H trust" See, also, dicta to the same ef- fect in Credit Mobilier '•. Common- wealth, 61 Pa. St.. 338(1870). 1 Perry on Trusts, ?• 39. 2 "The person who creates the trust may mould it into whatever form he pleases; he may therefore determine in what manner, in what event and upon what conditiou the original trustees may retire and new trustees may be substituted. All this is fully within his power, and he can make any legal pro- visions which he may think proper for the continuation and succession of trustees during the continuation of the trust" Perry on Trusts, £ 287. In England, under the vesting acts, the court held that it had power to vest the estate of a modern "trust" in new trustees where one of the old trustees was dead, another was insane, and under the trust agreement the certili- cate-holders had elected new trustees. In re Siddall, L. R, 29 Ch fc D., 1 (1885). A similar power was given to trustees of personal property in New York by ch. 185, L. 1882. As regards the com- mon-law rules and powers of the courts herein, see Perry on Trusts. £ 356 ■et seq. At common law, upon the death of the surviving trustee, his executor or administrator became the trustee. Boone r. Citizens' Bank, etc., 84 N. Y. f 83,87 (1881): De Peyster v. Beekman, 55 Bow. 1'r. Kep., 90 (1877). In the Cost-book Company Case of Johnson v. Goslett 18 G R, 728 (1856), the follow- ing provision appears: "The trustees of the said lease shall, when and if re- quired by the directors, execute a deed Bring that they hold the said mine under and by virtue of such lease as trustees for the benefit of the share- holders in the said company, according to their respective shares and interests therein ; and if any or either of the said trustees or any future trustees shall resign or die or become incapable or unwilling to act then new trustees or a new trustee may be appointed by any of the general meetings of shareholders hereinafter provided for. in the place of the trustees or trustee so resigning or dying or becoming in- capable or uuwilling to act as afore- said; and the said premises shall be forthwith assigned to and vested in the said new trustee or trustees jointly with the continuing trustee or trustees, or in such new trustees only, as the case may 656 CH. XXIX.] "trusts" and unincorporated associations. [§ 503^. trustee, thev mav substitute a new trustee when the old trustee re- moves to and becomes a resident of a foreign country. 1 The extent of the powers of the trustees of a " trust " is a mat- ter of great interest to the public and the certificate-holders. Espe- cially is this the case since the extent of the trustees' powers is kept a secret from all except the favored few. Often the certificate- holders are not allowed to examine and know the contents of the trust instrument which defines the powers of trustees. It is true that the law guards jealously against any assumption of powers by the trustee be} T ond those which are expressly conferred by the trust instrument. 2 The trustees who hold the stock in the various corporations which make up the " trust " are trustees and not vendees of the stock. 3 The trustee ordinarily has no power to sell the stock. 4 There are other incidents which explain the position of the- trustee. He mav sue and be sued in his own name on all matters* and contracts pertaining to the trust. 5 He is not liable to the cestui que trust for losses incurred by his- management of the property of the trust. He is bound merely to exercise ordinary discretion and to obey the directions of the instru- require, at the expense of the said com- pany." 1 Farmers' Loan & Trust Co. v. Hughes, 11 Hun, 130 (1877). In this case the deed of trust provided that the trustees or their survivor might be re- moved by the vote of a majority in interest of the holders of the bonds re- ferred to in the trust deed, at any meet- ing called for that purpose ; and fur- ther, by a separate and distinct provis- ion, that in case of the death, removal, resignation, incapacity or inability of both or either of said trustees to act in the execution of the trust, then a ma- jority of the holders of such bonds might designate and select, in writing, one or more competent persons to fill the va- cancy so occurring. The property may be made to vest in new trustees without transfer, if the trust instrument is so drawn. Perry on Trusts, § 284. ! Perry on Trusts, §§ 454, 460. 3 People v. North River S. Rep. Co., 121 N. Y., 582 (1890). * See ch. XIX. The trustees of the American Cattle Trust cannot sell shares of stock which they hold. Gould v. Head, 38 Fed. Rep., 886 (1889; ; Id.,_41i Fed. Rep.. 242 (1890). 5 In this respect the trustee is not the same as the director of a corporation. " A trustee is a man who is the owner of the property, and deals with it as principal, as owner and as master, sub- ject only to an equitable obligation to account to some persons to whom he stands in the relation of trustee, and who are his cestuis que trust. . . . The office of director is that of a paid servant of the company. A director never enters into a contract for himself, but he enters into contracts for his prin- cipal ; that is, for the company of whom he is a director and for whom he is act- ing. He cannot sue on such contracts, nor be sued on them unless he erceeds his authority. That seems to me to be the broad distinction between trustees and directors." Smith v. Anderson, L. R., 15 Ch. D., 247 (1880). (42) 657 % 503d J " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [en. XXIX. ment creating the trust. It is only for a breach of trust that he may be made to account to the cestui rws trust. 1 In the case of the modern ' trust" it has been doubted whether the consent of all the trustees is essential to its contracts and acts, as is the case with the old common-law trust. 2 But, in general, these matters are regulated and provided for by the instrument which creates the " trust." The compensation of the trustee is usually fixed by the trust deed. If not, it falls within the provisions of the statutes, or a rea- sonable compensation is allowed by the common law. 3 The property of the "trust " cannot be seized for the individual debts of the trustee, 4 but the interest of the certificate-holder may be reached so as to subject it to the payment of his debts. 5 In this respect the certificates resemble shares of stock. The trust property, where it consists of personal property in the nature of bonds, stocks, notes or evidences of indebtedness, or cor- responds to the capital stock of a corporation, may be taxed at the place where the main oflice or place of business of the " trust" exists. The extent of the taxation depends, of course, upon the statutes of the state wherein the tax is laid. 6 There is more difficulty in determining whether a certificate- holder may terminate his interest in the " trust " and demand his proportion of the property. In certain "trusts," whose property consists of shares of stock, he undoubtedly may. 7 But in general a single certificate-holder cannot have the whole "trust" dissolved fSimonton v. Sibley, 122 U. S., 220 see 2 Albany L Journal. 201, 288. In (1887). Where a railroad construction New York, by 'statute, all transfers of contract is assigned to trustees to be personal property made in trust, for use carried out and the profits to be paid to of the person making the same, are the stockholders of a designated corpo- void as against his creditors, existing or ration, the stockholders may compel the subsequent 2 R. S.. 135, g l i?th ed, trustees to pay over such profits. The p. 3827, and cases there cited), See.also, trustees cannot set up that they were Graff v. Bonuett. 31 N. V., 1. 14, 18. also directors of tlie railroad. Hazard tt 6 Ricker r. Aim ri can Loan & Trust Dillon, 34 Fed. Rep., 185(1888 Co., 140 Mass., S46 (1885). See, also, -'.Mills v. Burd, 29 Fed Rep., 410 (1887). People r. Assessors, etc., 40 N. Y., 154 3 Perry on Trusts, § 917. (1869); In re County of Washington r. • Gibson v. Stevens, 7 N. H.. 352 (1834), Estate of Jefferson, 28 N. W. Rep., 256 where a trustee was authorized to con- (Minn., 1886), citing many cases on this tinue the testator's business. The prop- subject. It is well settled in New York erty was held not subject to the state that under its statutes no shares of trustee's personal debts. stock in either domestic or foreign cor- 5 It can be reached, doubtless, just as porations are subject to taxation except the bonds of a bondholder under a rail- shares of stock in national banks. See road mortgage or trust deed may be § 565, infra. reached. As to the rule at commm law, ' See § 5036. 658 CH. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 504. and wound up before the time fixed by the trust agreement for its dissolution has arrived. 1 If the " trust " itself is forbidden by the statutes of the state wherein it exists, it never will be wound up by the courts. The law will not compel a trustee to account for property or transac- tions which grow out of a contract which is prohibited by statute. The courts leave the parties where they are found. They are out- side of the protection of the law. 2 If, however, the "trust" is legal it may be terminated at any time by a decree of a court, upon the consent of all the parties who are interested in it. 3 But a " trust " will not be dissolved and wound up merely because the trustees have been guilty of a breach of trust. The remedy in such a case is to enjoin or remove the trustees. 4 "Where, however, the trust is insolvent and incapable of proceeding, a dissolution and winding up of its business will be de- creed by a court. 5 B. UNINCORPORATED JOINT-STOCK ASSOCIATIONS. § 504. Definitions — Joint-stock companies, clubs, exchanges, etc. — Ownership of land.— A joint-stock company may be defined to be an association of persons for the purpose of business, having a capital stock divided into shares, and governed by articles of as- sociation which prescribe its objects, organization and procedure, and the rights and liabilities of the members, except that the arti- cles cannot release the members from their liability as partners to the creditors of the company. 6 i Smith v. Anderson, L. R, 15 Ch. D., 20 N. J. Eq., 172 (1869) ; Howell v. 247 (1880). The same rule prevails in Harvey, 5 Ark., 270 (1842) : Van Ness v. unincorporated joint-stock associations. Fisher, 5 Lans., 236 (1871); Brien v. See Smith v. Virgin, 33 Me., 148 (1851). Harriman, 1 Tenn. Ch., 467 (1873); Hal- See, also % Waterbury v. Mercantile, etc., laday v. Elliott, 8 Oreg., 84 (1879) ; Bag- Ex. Co., 50 Barb., 157 (1867), holding that ley v. Smith, 10 N. Y., 489 (1853). In such company will not be wound up Sibley v. Minton, 27 L. J. (Eq.), 53 merely because the directors have been (1858), the court held that, in an action guilty of a breach of trust. by an adventurer in a cost-book mining 2 In re Padstow, etc., Co., L. R, 20 company to wind up the company and Ch. D., 137 (1882). adjust the losses, all the co-adventurers 3 Perry on Trusts, § 920, were necessary parties. 4 Id., §§ 816-853. 6 i n Hedge & Home's Appeal, 63 Pa. 5 See Baring v. Dix, 1 Cox, 213 (1786); St., 273 (1869), it is denned to be "a Bailey v. Ford, 13 Sim., 495 (1843) ; Jen- partnership whereof the capital is di- nings v. Baddeley, 3 K. & J., 77 (1856), vided or agreed to be divided into shares, where insolvent copartnerships were and so as to be transferable without the wound up, though the time for which express consent of all the copartners." they were to exist had not yet expired. In the statutes of Massachusetts the See, also, Seighortner v. Weissenborn, words " joint-stock company " are used 659 § 504.] "trusts" and unincorporated associations. [CH. XXIX. A joint-stock company lies midway between a corporation and a copartnership. It is, however, to be distinguished from them, 1 and to mean a corporation organized under the general incorporation act of the state, Attorney-General v. Mercantile Ins. Co., 121 Mass., 524 (1877). But this is not an accurate use of the terra. •• The articles of association of an unin- corporated joint-stock company bear the same relation to it that the charter bears to an incorporated company. They regulate the duties of the officers and the duties and obligations of the members of such a company among themselves; they specify the capital, limit the duration and define the busi- ness of the company." Bray >: Harwell, si N. Y., 600 (1880), per Earl, J. See. also, White v. Brownell, 42 Abb. Pr. (N. S.), 162, 193 (1862). In Bobbins >: Butler, 24 111., 387, 426, 432 (1866), it is said that joint-stock companies "have none of the rights and immunities of . . . a regularly incorporated com- pany. These stock companies are noth- ing more than partnerships; and every member of the company is liable for the debts of the c «rn, no matter what the private arrangements among them- selves may be." To the Bame effect, see Moore r. Brink. 4 Hun. 402 (1875); Skin- ner v. Dayton. 19 Johns., 518 (1888); Wells v. Gates, 18 Barb., 564 (1864); Keasley v. Codd, 2 Carr. & P., 408(1836> 'The term joint-stock company appears to have originated in England in com- paratively recent times. . Joiut stock companies may be said to be partner- ships or individuals associated for some specified purpose under a designated name or description, to which, by some general or special statute, when they have been formed or composed in a specified manner, some of the powers or proper attributes of a corporation have been given." Dayton, etc., R R Co. v. Hatch, 1 Disney, Cin. Super. Ct, 84, 90 (18551 Factors', etc., Insurance Co. i'. Harbor, etc., Co., 37 La. Ann., 888, 239 (1885), speaks of a joiut-stock com- pany as "a nondescript organization, composed of the owners of certificates showing the proportion of their respect- ive interests in its assets and liability for its obligations, and who are co- owners or proprietors in common. As no one is bound to own property in indivision, it follows that such owners who wish a division have a right to have that property sold, and after a liquidation of the affairs of the concern to have the residue distributed ratably among themselves." At common law a partnership or joint-stock association may do business under any name that it cl looses. 8 888, note; Preachers', etc.. Soc. r. Rich, 45 Ma, 568; 2 Perry on Trusts, g 730; Bwasey v. American Bible Soc.. 57 Me., 583; Cory, etc., Soc, v. Beatty, 81 N. J. Eq. 570. • It differs from a corporation in that a joint-stock company has no limited liability as regards its stockholders; and it raim.it sue or be BUed in the name of the association. It differs from a co- partnership in that it is not dissolved by a transfer of stock ; and each mem- ber has not the same powers of trans- acting business and disposing of the as- sets as in a partnership See Cox n Bodfish, 86 Ma, 802 (1853). A company organized under the statutes of Penn- sylvania and having mixed character- istics of a partnership and corporation, is a corporation bo far as removal to the federal court is concerned. Bushnell r. Park Bros. & Co., 46 Fed. Rep., 209 (1891). The ordinary attachment stat- ute authorizing the attachment of shares of stock does not apply to a club organ- ized for lawful Bporting purposes and being more of the nature of a statutory joint-stock association than a corpora- tion. Lyan v. Denison, 45 N. W. Rep.. 858 (Mich.. 1890). In Illinois it is a criminal offense for individuals or an incorporated association to use a name that implies incorporation. Hazelton, 660 CH. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 504. also from clubs, 1 from social, benevolent 2 and mutual aid 3 organi- zations, and from associations formed for business purposes, but without a capital stock, 4 especially in respect to the right of ex- etc, Co. v. Hazelton, etc., Co., 30 N. E. Rep.. 339 (111., 1892). i Park v. Spaulding, 10 Hun, 128 (1877) ; Ridgely v. Dobson. 3 Watts & S., 118 (1842); Loubat v. Le Roy, 40 Hun, 546 (1886); Flemyng v. Hector, 2 Mees. & W., 172 (1836); Re St, James Club, 2 De G., M. & G., 383 (1852); Ewing v. Midlock, 5 Port (Ala.), 82 (1837); Todd v. Enily, 8 M. & W., 505 (1841); Raynell v. Lewis, 15 M. & W., 517 (1846); Wood v. Finch, 2 F. & F., 447 (1861); Cross v. Williams, 10 W. R, 302 (1862) ; Cockerel v. Aucompe, 5 W. R, 633 (1857); Koeh- ler v. Brown, 31 How., 235 (1866) ; Waller v. Thomas, 42 How., 337 (1871); Hop- kinson v. Marquis of Exeter, 16 W. R, 266 (1869) ; Gardner v. Frunatte, 19 W. R, 256 (1870); Delanney v. Strickland, 2 Stark., 416; Coldicott v. Griffiths, 8 Ex., 898 ; Ebbinghousen v. Worth Club, 4 Abb. N. G, 300. 2Penfield v. Skinner, 11 Vt, 296 (1839) ; Beaumont v. Meredith, 3 Ves. & B., 180 (1814). See, also, Thomas v. Ellmaker, 1 Parsons' Sel. Eq. Cases, 98 (1844). Or Masonic lodges. See Ash v. Guie, 97 Pa. St., 493 (1881). See, also, Cohn v. Boi st, 36 Hun, 562 (1885) ; Goodman v. Jedidjah Lodge. 9 Atl. Rop., 13 (Md., 1887); Schmidt v. Abraham, etc., Lodge, 2 S. W. Rep., 156 (Ky., 1886). By-law of benevolent society that, for non-pay- ment of dues, name shall be dropped, is legal and self-executing. Rood v. Rail- way, etc., Ass'n, 31 Fed. Rep., 62 (1887). See McCallion v. Hibernia, etc., Soc, 12 Pac. Rep., 114 (Cat, 1886), involving a secession from a benevolent association. Benevolent associations are not neces- sarily copartnerships. Brown v. Stoer- kel, 41 N. W. Rep., 921 (Mich.. 1889). SLafand v. Deems, 81 N. Y., 507 (1880); Frits v. Muck, 62 How. Pr., 69 (1881); Pipe v. Bateman, 1 Iowa, 369 (1875). Of. Thomas v. Ellmaker, 1 Par- sons' Sel. Eq. Cases, 98 (1844); Olery v. Brown, 51 How. Pr., 92 (1875). See, also, Boone on Corporations, § 338. 4 Such as stock exchanges. See White v. Brownell, 4 Daly, 162 : Clute v. Love- land, California (1885); Leech v. Harris, 2 Brews.. 571 (1869) ; Slate v. Chamber of Com., 20 Wis., 63 (1865) ; Weston v. Ives, 97 N. Y., 222 (1884), relative to sale of a seat by the exchange to pay the member's debts. See, also, Piatt v. Jones, 96 N. Y, 24 (1884). As to a levy of exe- cution on a seat in an exchange, see Bowen v. Bull, 12 N. Y. Supp., 325 (1890) ; Powell v. Waldron, 89 N. Y, 328 ; Rit- terband v. Baggett, 4 Abb. N. C, 67; Laudheim v. White, 67 How. Pr., 467. A seat in the exchange is property which may be reached by creditors. But if an assignee in bankruptcy refuses to take it and pay the dues, the bankrupt who pays them may retain the seat Spar- hawk v. Yerkes, 142 U. S., 1 (1891). A stock exchange may expel a member who does not fulfill his contracts made within the exchange, due notice, etc., being given to him in the matter. Lewis v. Wilson, 121 N. Y, 284 (1890). Seat of a member of an exchange may be reached, though by-laws contra. Haben- icht v. Lissak, 20 Pac. Rep., 874 (Cat, 1889). Stock exchanges cannot expel members for carrying case into courts instead of arbitrating. People v. N. Y. Cotton Ex., 8 Hun, 216 (1876). As to power of board of trade to expel mem- ber, see Pitcher v. Board of Trade of Chicago, 13 N. E. Rep., 187 (111., 1887). Expulsion from unincorporated associa- tions. Ottor. Journeymen, etc., Union, 17 Pac. Rep., 217 (Cat, 1888). See, also, § 700b, infra. For improving a water- power. Troy Iron & Nail Factory v. Corning, 45 Barb., 231 (1884). For build- ing a school-house. Maustin v. Durgin, 54 N. H., 347 (1874). For protecting business interests. Caldicott v. Griffiths, 8 Ex., 898 (1853). See, also, Tenney v. 661 § 504.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX. pulsion. 1 A joint-stock company, although it exercises the power to issue stock, the same as a corporation, yet when organized for the purpose of transacting any lawful business is itself a lawful mode of carrying on business. 2 New Eng. Protection Union, 37 Vt, 64 (1864): Abels v. McKean, 18 N. J. Eq., 462 (1867); Henry v. Jackson, 37 Vt, 431 (1865); Frost v. Walker, 60 Me., 468(1865). Building associations. Strohen v. Franklin, etc., Ass'n, 8 Atl. Rep.. 843 (Pa., 1887) ; Quoin v. Smith, 108 Pa. St., 325 ; Jackson v. Cassidy, 4 S. W. Rep., 541 (Tex., 1887); Auld v. Glasgow, etc., Society. 56 L. T. Rep., 776 (1887). A building association has power to bor- row money and give security for it North, etc., Assoc, v. First Nat'l Bank, 47 N. W. Rep., 300 (Wis., 1890). A budd- ing and loan association can foreclose a mortgage irrespective of payments by the mortgagor on his stock in the asso- ciation. Peoples', etc., Assoc, v. Fur. v. 30 Atl. Rep, 890 (N. J.. 1890). For a full explanation of the character and mode of business of a mutual benefit building association or corporation, where regu- lar dues are paid and the money loaned to the members on mortgages without interest, see People r. Lowe, 117 N. Y.. 175 (1889). As to the stockholder's right in a building association to withdraw and sue for his payments under a by- law providing therefor to the extent of one-third of the funds in the treasury, see Texas, etc., Assoc, v. Kerr, 13 S. W. Rep., 1020 (Tex.. 1890> Concerning a building association, stock complication and the rights of creditors of a stock- In >lder. see Wilson v. Schoenlaub, 12 B. W. Rep., 361 (Mo., 18S9). In Pennsyl- vania by statute the law against usury does not apply to building co-operative associations. See Albright i: Lafayette, etc., Assoc, 102 Pa. St., 411 (1883); Win- get V. Quincy, etc., Assoc. 21 N. E. Rep., 12(111., 1889). In a Michigan co-opera- tive savings and loan corporation if a member sells his stock to the company, he cannot afterwards redeem or sell it- It is not a loan as other authorities have held. Michigan Bldg.. etc., Assoc, v. McDcvitt, 43 N. W. Rep, 760 (Mich., 1889). See Atwood v. Dumas, 21 N. E. Rep, 236 (Mass., 1889). 1 An action is not maintainable to com- pel an unincorporated voluntary polit- ical association to admit a person to mem- bership, McKane v. Adams, 123 N. Y., 609 (18G0). A member of a union can- not bring a suit in equity to declare void and illegal a by-law that members shall be fined for accepting employment in connection with non-union persons, and to enjoin the infliction of a fine upon himself. His remedy is at law or by application to the attorney-general. Thomas v. Musical, etc., Union, 121 N. Y„ 45 (1890). A by-law that the mem- bers of a news association shall not publish news furnished by other as- BOCiations in the same territory is valid. The penalty for violation may be suspension, Matthews u. Associated Pre.-s. til Hun. 199 1 i*9i). Bee, also, notes gupra. Where a member of a lodge was expelled for entering into a con- spiracy to blackball applicants for ad- mission, the court refused to restore him by mandamus, and said that such a case was different from one where property rights or money demands are involved. State r. ( I rand Lodge, 22 Atl. Rep., 63 (N. J.. 1S911 Where the ex- pelled member has the right by by-law to appeal from the decision to a corpo- rate meeting, the courts will not inter- fere until such appeal is taken. Screw- man's, etc., Assoc. «, Benson, 13 S. W. Rep., 379 (Tex., 1890). Expulsion from a club under a by-law. Commonwealth r. Union League, 19 Atl. Rep., 1030 (Pa., 1890). 8 " It is too late to contend that part- nerships with transferable shares are illegal in this commonwealth. . . . The grounds upon which they were 602 CH. XXIX.] "trusts" and unincorporated associations. [§ 504. The earlier cases declaring that joint-stock companies were ille- gal were so decided largely because of the Bubble Act, existing from 1720 to 1726. 1 Very high English authority, after a thorough review of the English cases, gives the opinion that at common-law joint-stock associations are legal. 2 In Louisiana and Illinois a contrary conclusion has been arrived at. 3 formerly said to be illegal in England, apart from statute, have been aban- doned in modern times." Phillips v. Blatchford, 137 Mass.. 510(1884). "These companies, being consonant with the wants of a growing and wealthy com- munity, have forced their way into ex- istence, whether fostered by the law or opposed to it." Greenwood's Case, 3 De G.. M. & G., 459, 477 (1854); Towns- end i\ Goewey, 19 Wend., 423. A labor- ing men's association for the purpose of opposing capitalists has been upheld. Snow v. Wheeler, 113 Mass., 179 (1873). i Enacted, 6 Geo. 1. ch. 18, § 18; re- pealed, 6 Geo. 4. ch. 91. Lindley says of this act : "Juster views of political economy and of the limits within which legislative enactments should be con- fined have led to the repeal of the stat- ute in question, which, though deemed highly beneficial half a century ago, probably gave rise to much more mis- chief than it prevented." 2 Lindley on Partnership, 192. In a thorough and exhaustive note on this subject the learned author refers to Rex r. Dodd, 9 East, 406 (1808), holding that a company with a prospectus limiting the liability of subscribers is illegal, as a trap to ensnare the unwary ; Josephs v. Pebrer, 3 B. & C, 639 (1825), holding that unincorporated companies with transferable shares are illegal, and Buck v: Buck, 1 Campb., 547 (1808). R. v. Stratton, id., 549, n., to same effect. That Kinder v. Taylor, Coll. on Partn., 917, 2d ed. (1810); Du verger v. Fellows, 5 Bing., 248 ; affirmed, 10 B. & C, 826, and Blundell v. Winsor, 8 Sim., 601, contained dicta only so far as they passed on the legality of these compa- nies. The following cases clearly estab- lish the legality of joint-stock associa- tions : Harrison v. Heathorn, 6 Man. & Gi\, 81 (1843); Garrard v. Hadley, 5 Man. & Gr., 471 ; Ex parte Barclay, 26 Beav., 177; Ex parte Aston, 27 Beav., 474; Ex parte Grisewood, 4 De G. & J., 544; Shepparf v. Oxenford, 1 K. & J., 491; R. v. Webb, 14 East, 516; Walburn v. Ingilby, 1 M. & K, 61 : and see Pratt v. Hutchinson. 15 East, 511 : Ellison v. Bignold, 2 J. & W., 510; Nockels v. Crosby, 3 B. & C, 814: Kimpson v. Saunders, 4 Bing.,-5 ; Brown v. Holt, 4 Taunt, 587. And the learned jurist comes to this conclusion : '* The case of Blundell v. Winsor, always re- lied upon as an authority by those who contend that such a company is illegal, has never met with approbation from the bench, nor has it ever been fol- lowed. Upon the whole, therefore, it appears that there is no case deciding that a joint-stock company with trans- ferable shares, and not incorporated by charter or act of parliament, is illegal at common law : that opinions have nevertheless differed upon this ques- tion ; that the tendency of the courts was formerly to declare such companies illegal; that this tendency exists no longer: and that an unincorporated company with transferable shares will not be held illegal at common law un- less it can be shown to be of a danger- ous and mischievous character, tending to the grievance of her majesty's sub- jects. The legality at common law of such companies may therefore be con- sidered as finally established." 3 See § 503b, supra; 21 N. E. Rep., 605 (111., 1889). 663 § 504. j "trusts" and unincorporated association's. [CH. XXIX. The real estate of an unincorporated joint-stock association is generally held in the names of trustees for its benefit. 1 The English cost-book raining companies were organized on this principle. 2 i Where the association holds laud in the name of trustees for the benefit of certificate-holders, the latter are an equi- table lien on the proceeds from tbe sale of the land, and even a consolidation with another association does not dis- turb this lien. Crawford r. Gross At!. Rep.,356 (Pa., 1891). A conveyance of land to certain individuals as trustees for the members of an unincorporated association is not void by the statute of uses and trusts. Turner v. I nt maj an. etc.. Co.. 18 N. W. Rep., 1062 (Mich., 1889). In matters of deeds, usage and long lapse of time may validate deeds made out by an unincorporated associa- tion as a corporation. Baeder o. Jen- nings, 40 Fed. Rep., 199 (1889). Where an unincorporated association owns land which is held in trust for it by individ- uals, it may. upon becoming incorpo- rated, comp I the trustees to deed to it the land. Organized Labor Hall v. Gebert. 22 Atl. Rep., 578 X. J., 1891% A deed to a corporation not in existence is void. Provosl i». Morgan's, etc., s. Co., 8 S. Rep., 584 (La., 1890). If a tr. who holds land for the benefit of a cor- poration commits a breach of trust, any stockholder may cause him to be re- moved. Fisk r. Patton, 27 Pac. Rep., 1 (Utah, 1891). A new unincorporated association cannot claim the land of the one which it succeeds where the mem- bers are not the same. Allen i: Long, 16 S. W. Rep.. 43 (Tex.. 1891). Although the association has been dormant for many years, yet a new association formed of part of the members of the old cannot convey the land of the old one. Allen v. Long, 16 S. W. Rep., 43 (Tex., 1891). A deed to an unincorpo- rated association vests title in it as soon as it is incorporated. Clifton, etc., Co. v. Randall. 47 N. W. Rep., 905 (Iowa. 1891). A deed to a corporation not in existence is void. Provost r. Morgan's, etc., S. Co., 8 S. Rep.. 584 (La., 1890). Cf. ch. XLI. infra. -These mining companies existed in the counties of Cornwall and Devon- shire. They were first heard of in the courts about the year 1850. Their plan of organization and operation arose from custom. Their organization and mode of business were as follows : Many persons, desirous of working a mine, would cause the title or lease thereto to be taken in the names of one or more persons called trustees. The business was then carried on by an agent called a "purser." or by a board of managers elected by the participants, who were culled tbe "adventurer-." The latter, of course, were (he bene- ficiaries of the "trust.*' Any advent- urer bad a right to transfer bis interest to a transferee. There was DO fi capital stock. Calls for money were made <»n the adventurers, according to their sli often a< it was needed. Kur a full Statement of the character of ■ mining companies, see Kittow r. Liskeard Union, L. R., 10 Q. B. D. (1874)l See, also, In n Bodwin, etc., Co., 28 !'■. :iv.. 870 (1857), holding that the court would not take judicial notice of the nature of a cost-book mining company : Bybart v. Parker, 4 C. B. (N. S.),209 (1858), holding that the purser could not sue at law on an unpaid call; In re Wrysgan, etc., Co., 28 L J. (< h.\ 894 (1859), as to right to relinquish shares, also describing the functions of the purser and managing directors; Johnson v. Goslett, 18 C R. 728(1856), affirmed in 8 C. B. (N. &), 569 (1857), giving the full terms of the articles of agreement; Thomas r. Clarke, 18C. R, 662 1 1856), where the court said : "Every partnership has a right to make its own regulations as to the mode of transfer- ring shares or interests therein : " In re Prosper, etc., Co., L R, 7 Ch., 286 (1878fc 664 CH. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 505. § 505. Statutory joint-stock company. — There is an essential dif- ference between a joint-stock company as it exists at common law and a joint-stock company having extensive statutory powers con- ferred upon it by the state within which it is organized. The lat- relative to rights upon a resignation ; Mayhew's Case, 5 De G., M. & G., 837 (1854), holding that by a transfer of his share " the liability of the transferrer is entirely divested from him and passes to the transferee ; " In re Wrysgan Co., 5 Jur. (N. S.), 215 (1859), where the court said : " The various phases of absurdity which these joint-stock companies dis- play are such that the marvel in my mind is daily increasing how any man can become a member of a joint-stock company ; " Northey v. Johnson, 19 L. T., 104 (1852), holding that after trans- fer the transferrer is not liable for the debts incurred. It is clearly established that the ad- venturers in a cost-book mining com- pany ai-e personally and individually liable as partners for the debts incurred in the enterprise. Peel v. Thomas, 15 C. B., 714 (1855); Newton v. Daly, 1 F. 6 F., 26 (1858) ; Harvey v. Clough, 8 L. T. (N. S.), 324 (1863); Tredwen v. Bourne, 6 M. & W., 461 (1840) ; Ellis v. Schmoeck, 5 Bing.. 521 (1829); Lauyon v. Smith, 3 B. & S., 938 (1863), holding a transferrer liable for debts incurred previous to the transfer. To same effect, Teake v. Jackson, 15 W. R., 338 (1867). They are liable, also, to indemnify the directors or trustees. Ex parte Chippendale, 4 De G, M. & G, 19, 52 (1854). See, also, Birch's Case, 2 De G & J., 10 (1857), and Fenn's Case, 4 De G, M. & G., 285 (1854), where the members who had exercised their right to withdraw were held not liable. In Hart v. Clarke, 6 De G, M. & G, 232 (1855), an advent- urer compelled the company to ac- count to him for his share of the profits. The adventurers have no interest in the land, and consequently a transfer of their shares is not a transfer of an interest in land. Sparling v. Parker, 9 Beav., 450; Powell v. Jessopp, 18 C. B., 336 (1856) ; Hayter v. Tucker, 4 K. & J., 243 (1857). The cost-book mining company was frequently spoken of as a species of joint-stock company. In re Wrysgan Co., supra; Teake v. Jackson, 15 W. R., 338 (1867); Watson v. Sprat- ley, 10 Ex., 222 (1854). See Watson v. Spratley, supra, where the court said : "The interest of the shareholder in the great incorporated joint-stock compa- nies, and in the smallest mine con- ducted upon the cost-book principle, is, in its essential nature and quality, iden- tical. For an American mining case applying similar principles, see Treat v. Hiles, 32 N. W. Rep., 517 (Wis., 1887). It is well settled that the shareholders in an unincorporated association cannot convey or dedicate to the public any land that may be held by trustees for its benefit. Ward v. Davis, 3 Sandf. Rep. (N. Y.), 502 (1850). The interest of one of the cestnis que trust of such a trust, consisting of real estate, is per- sonalty, and descends as such upon his death. Mallory v. Russell, 32 N. W. Rep., 102 (Iowa, 1887). As to the effect of a deed, grant or bequest of real estate to an unincorporated association, see Webb v. Weatherhead, 17 How., 576 (1854) ; Gerard's Titles to Real Estate, p. 490 (2d ed.); Owens v. Missionary Soc. of the M. E. Church, 14 N. Y„ 380 (1867); Washburn on Real Prop., vol. Ill, p. 264 (4th ed.) ; Holmes v. Mead, 52 N. Y., 332 (1873); Goesele v. Bimeler, 5 McLean, 223(1851); German Land As- sociation v. Scholler, 10 Minn., 331 (1865); Peabody v. Eastern Methodist Society in Lynn, 87 Mass., 540 (1857); Towar v. Hale, 46 Barb., 361 (1866); Dart on Vendors and Purchasers, vol. I, p. 21 (5th ed.); Chapm v. First, etc., Soc, 74 Mass., 582 (1857); African, etc., Church v. Conover, 27 N. J. Eq., 157 ; Leonard v. Davenport, 58 How. Pr., 665 § 505.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [ciI. XXIX. ter kind of joint-stock companies are found in England and in the state of New York. To such an extent have these statutory powers been conferred on joint-stock companies that they differ from cor- porations only in not having a seal, and in the members not being exempt from liability as partners for the debts of the company. Accordingly, joint-stock companies, both those of England and New York, have been held to be corporations in many respects although expressly declared by statute not to have that character. 1 3S4; Sherwood tt American Bible Soc., 4 Abb. App., 227 ; McKeon tt Kearney, 57 How. Pr., 349; Gibson r. McCall, 1 Rich., 174; Byam v. Beckford, 140 Mass., 31 (1885), holding that, although a deed to the association is ineffectual, yet that it passes title to the members of the association. They cannot take by devise in New York. "White v. Howard. 46 N. Y.. 144 (1871); Trustees, etc., v. Hart's Ex'rs, I Wheat, 1 (1819) 1 See Thomas tt Dakin. 22 Wend, 9 (1830); Warner v. Beers. 25 Wend., 103; Parmley V. Tenth Ward Bank. 3 Edw., 395 (1838): People tt Watertown, 1 Hill. 610(1841): Bank of Watertown v. Wa- tertown. .25 Wend., 686 (1841); Wil- loughby v. Comstock. 3 Hill, 389 (1 Leavitt o. Yates, 4 Edvr.. l::t ,1840); L. avitt tt Tyler, 1 Sandf. Ch„ 007; Peo- ple v. Niagara, 4 Hill, 00 (1842); Bois- gerard v. New York Banking Co.. 2 Sandf. Cb.. 231 (1844); Matter of Bank of Danville, 6 Hill, 370; Gifford tt Liv- ingston, 2 Den., 380 i L845 ; Case tt Me- chanics' Banking Ass'u, 1 Sandf., 693; Leavitt tt Blatchford, 17 N. Y. 501 (1842); 5 Barb., 9; Culver tt Sanford, 8 Barb.. 00". (1850); Gillett tt Moody, 3 N. Y.. 478 (1850); Talmage r. Pell, 7 N. Y, 328 (1852); Tracy w Talmage, 18 Barb., 456(1854); Gillett tt Phillips, 13 N. V.. 114(1855); Falconer tt Campbell, 2 McLean, 195 (1840); Duncan r. Jones, 32 Hun, 12 (1884). The English joint- stock company is much the same. '•The company has a name as an asso- ciation, maintaining the identity of the body through all changes of its mem- bers; its property is divided into trans- ferable shares, and it has conferred upon it the legal capacity to sue and be sued in the name of one of its officers, and such a suit . . . may be brought by or against a member as well as a third person." It is a corporation though the English statute declares it is not. Oliver tt Liverpool & London Life A: Fire Ins. Co., 100 Mass., 531 (1868); affirmed, sub nom. Liverpool Ins. Co. a Massachusetts, 1<> Wall.. 566(1870). So, also, with the New York joint-stock companies. Fargo tt Louisville, New Albany & Chicago R'y Co.. 6 Fed. Rep., 787(1881); Sanford v. Board of Supervis- ors of N. Y.. 15 How. Pr., 172 (1858); Waterbury tt Merchants' Union Ex. Co., 50 Pari... 157 (1867). As regards the liability of the members for the debts of the company, it is held to be a copartnership Boston & Albany R. R Co. tt Pearson, 128 Mass., 445 (1880): Oliver tt Liverpool & London Life & Fire Ins. Co., ubi supra. The refusal of the legislature to call them corpora- tions is important as cutting off the ex- emption of the members from liability to creditors: an exemption which, at common law, belongs to all corpora- tions. Joint-stock companies in Eng- land have always been largely statu- tory. See Van Sandau v. Moore, 1 Russ., 391 [*441], (1826). In the state of New York the English decisions on these companies are doubtless good authority, since they exist under statutes which are much alike. A New York joint- stock association cannot sue as such in the federal courts. Chapman tt Barney, 129 U. S., 677 (1889). In New York the statutes relative to taxation of corpora- tions do not apply to joint-stock com- 666 CH. XXIX.] "trusts" and unincorporated associations. 50G-8. § 506. Joint-stock companies may arise hy implication of law. — Joint-stock companies are generally formed by the mutual agree- ment and direct intent of the parties. They may, however, arise by implication of law. Thus, an ineffectual attempt at an incorpo- ration may make the parties members, not of a corporation, but of a joint-stock company. 1 In like manner, after the charter of a cor- poration expires and the parties continue to do business, they do so as a joint-stock company. 2 § 507. How a person becomes a member — Transfers.— A person becomes a member of a joint-stock company by any act which in- dicates an intent to become a member on his part, and a consent or acquiescence therein by the company itself. 3 He may also be- come a member by a transfer made to him of another member's interest, unless the articles of association restrict the right of transfer. 4 § 508. Liability of members to creditors and to the company.— A joint-stock company is, in regard to the liability of its members to creditors of the company, a partnership; 5 its members are liable as partners; 6 and the ordinary rules of partnership exist between pauies. They are not corporations. People v. Coleman, 133 N. Y., 279 (1892) ; Hoey v. Coleman, 46 Fed. Rep., 221 (1891). An unincorporated joint-stock association is legal in New York. Under the statutes of that state such associations are corporations for many 60 Me., 468 (1872). But not of subscrip- tion without any participation. Hedge & Home's Appeal. 63 Pa. St., 273 (1869). i Transfer of the certificate of stock has such effect although not regis- tered in the stock-book. Butterfield c. Beardsley, 28 Mich , 412 (1874). Trans- purposes. People v. Wemple, 117 N. Y, fer may be before the certificates are 136 (1889). issued. Butterfield v. Spencer, 1 Bosw., 1 Re Mendenhall, 9 Bankr. Reg., 497 ; 1 (1856). But if the articles of associa- Whipple v. Parker, 29 Mich., 369, 380 tion prohibit transfer, the transferee (1874) ; and see ch. XIII. Cf. Foster v. takes only the right to profits, not as a Pray, 29 N. W. Rep., 155 (Minn., 1886). partner but as an assignee. Harper v. - National Bank of Watertown v. Lon- Raymond, 3 Bosw., 29 (1858). So also don. 45 N. Y. 410 (1871). where transfer is allowed only on con- 3 The formalities need be no greater sent of certain officers who refuse, than in forming an ordinary partner- Kingman v. Spurr, 7 Pick., 234 (1828). ship. National Bank v. Van Derwerker, A transfer does not carry dividends al- 74 N. Y. 234 (187S); Pettis v. Atkins, ready declared. Harper v. Raymond. 60 111., 454 (1871); Machinists' Bank v. ubi sujwa. If a transfer is improperly Dean, 124 Mass., 81 (1878). Cf. Volger allowed, the company is liable to the v. Ray, 131 id., 439 (1881). It is not nee- party injured. Cohen v. Gwynn, 4 Md. essary that certificates of the stock be issued in order to constitute member- ship. Dennis v. Kennedy, 19 Barb, 517 (1854); Boston & Albany R. R. Co. v. Pearson, 128 Mass., 445 (1880). Evidence of subscription and payment of an as- sessment is sufficient. Frost v. Walker, Ch., 357 (1848). As to the liability of the transferee see next section. 5 Kellogg Bridge Co. v. United States, 15 Ct. of CI., Ill; Allen v. Long, 16 S. W. Rep, 43 (Tex., 1891). Cf. Chandler v. Brainard, 31 Mass., 285 (1833). 6 Westcott v. Fargo, 61 N. Y., 543 667 § 508.] "trusts" and unincorporated associations. [CH. XXIX. the members themselves, 1 including the right to contribution as be- tween themselves, 2 and also between a member and third persons. 3 The question whether a stockholder may limit his common-law or (1875); Witherhead v. Allen, 3 Keyes, 562 ; Cross v. Jackson, 5 Hill, 478 (1843) ; Skinner v. Dayton, 19 Johns., 513 (1822); Wells v. Gates, 18 Barb., 554 (1854); Boston & Albany R. R, Co. v. Pearson, 128 Mass., 445 (1880): Taft v. Ward, 106 Mass., 518 (1871); S. C, 111 Mass., 518 (1873); Bodwell v. Eastman. 106 Mass., 525 (1871); Tappan v. Bailey, 45 Mass., 529 (1842); Cutter v. Estate of Thomas, 25 Vt, 73 (1852); Frost v. Walker, 60 Me., 468 (1872); Kramer v. Arthurs, 7 Pa. St., 165 (1847); Gott v. Dinsmore, 111 Mass., 45 (1872); Newell v. Borden. 128 id., 31 (1879). See, also, § 504. Con- tra, Irvine v. Forbes, 11 Barb, 587 (1852); Livingston v. Lynch, 4 Johns. Ch., 573 (1820;, overruled as dicta by Townsend v. Goewey, 19 Wend.. 428 (1838); Ridenour a Mayo, 40 Ohio St, 9 (1883). In Frost v. Walker, 60 Me., 468 (1872), the court said: "An unincorpo- rated joint-stock company is a mere partnership, and each member is per- sonally liable for all its debts. It is im- portant for the public to know that if persons connect themselves with a com- pany of this description they are every one of them liable to pay the demands upon it." The officers who enter into a contract for the company are liable thereon personally. " It is immaterial whether they be so held because they held themselves out as agents for a principal that had no existence, or on the ground that they must, under the contract, be regarded as principals, for the simple reason that there is no other principal in existence." Lewis «. Tiltou, 64 Iowa, 220 (1884); FredenhaU a Tay- lor, 26 Wis., 286 1 1870) A lease to an un- incorporated association binds person- ally all members assenting to it. Reding r. Anderson, 84 N. W. Rep., 800 (Iowa, 1887). Members of co-operative trading associations are liable as partners for the debts of the concern. Davison v. Holden, 10 Atl. Rep., 515 (Conn., 1887). i Bullard r. Kinney, 10 Cal., 60 (1858). The remedy of one member against another is in equity. Huth v. Hum- boldt, etc., 23 Atl. Rep., 1084 (Conn., 1892). One member cannot sue another at law for his part of the profits of the business, which is under control of the latter. Myrick r. Dame, 68 Mass.. 248 (1852;; Dull r. Maguire, 99 Mass., 300 (1868); Whitehouse v. Sprague, 7 Atl. Rep- 1? (Conn.. 1886). Person in- duced to put money into an enterprise on false representations that it is a joint- stock company may recover back his money. Libby i\ Ahrens, 2 S. E. Rep., 387 (S. C, 1887). Director of an unin- corporated association who contracts for it is not liable personally. Abbott v. Cobb, 17 Vt, 593 (1845); Alexander v. Worman, 6 H. & N., 100 (I860). 2 Morrissey v. Weed. 12 Hun. 401 (1878); Skinner v. Dayton, 19 Johns., 513 (1822); Ray r. Powers, 134 Mass., 22 (18881: Witman v. Porter, 107 Masa, 622 (1871); Tyrrell v. Washburn, 88 Mass., 466 (1863). But not if the expense was incurred contrary to the articles of association. Danforth v. Allen, 8 Mete, 334 (1844); Clark v. Reed, 28 Mass., 446 (1831). One stockholder cannot sue an- other at law for his part of the assets. Whitehouse v. Sprague, 7 AtL Rep., 17 (1886). 3 His interest cannot be reached by execution. Kramer i\ Arthurs, 7 Pa. St.. 165 (1847). But see Lindley on Parte. (2d ed.), 696. Acquiescence in the dealings of other members with third persons binds a member. Penn. Ins. Co. r. Murphy, 5 Minn., 36 (1860); Wells v. Yates. 18 Barb, 554 (1854). For the liability as affected by the trans- fer of stock, see Smith r. Virginia, 33 Me., 148 (1851). 668 CH. XXIX.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [§ 508. statutory liability by an express contract with the company's cred- itors to that effect is discussed elsewhere. 1 The member's subscrip- tion may be enforced by a suit at law. 2 And sometimes are liable also for debts contracted after they have sold their stock. See Shamburg v. Abbott, 4 Atl. Rep., 518 (Pa., 1886). The members of an unincorporated association to en- force the liquor laws are not liable to an attorney for services in prosecuting cases. McCabe v. Goodfellow, 133 N. Y., 89 (1892). The vice-president and the treasurer of an unincorporated fair as- sociation are liable for premiums of- fered. Murray v. Walker, 48 N. W. Rep., 1075 (Iowa, 1891). Members of a joint- stock company are personally liable for the debts of the company. Durham, etc., Co. v. Clute, 17 S. E. Rep., 419 (N. C, 1893). The members of a joint-stock company are liable for its debts. Peo- ple v. Coleman, 133 N. Y., 279 (1892). In the case of Seacord v. Pendleton, 55 Hun, 579 (1890), the court reviewed the authorities and decided that the stock- holders in a bank which was not incor- porated were not liable to depositors, there being no allegation that the stock- holders had any articles of association or partnership, or had performed any act, or had knowledge of the business or consented thereto. A subscription agreement prior to incorporation in which the parties state the number of shares taken and in which they agree to pay the contractors, who are parties to the contract, a specified sum is a joint undertaking on the subscriber's part. The contractors may hold them liable as partners, the agreement not limiting their liability to the number of shares taken by each. An immaterial alteration after a part have signed does not release any one. The agreement of the contractors to hold each subscriber liable only on his subscription if he would pay that is without consideration and void. Any subscriber could ex- pressly limit his liability to his subscrip- tion. Davis v. Shafer, 50 Fed. Rep., 764 (1892). If proof is given by plaintiff that a copartnership existed and the de- fense is that it was a corporation, the defendant must prove that fact. Al- though the company had a president and secretary, this in itself does not raise a presumption of a corporation. Clark v. Jones, 6 S. Rep., 362 (Ala., 1889). A notice to stockholders that they will be held liable under a statute is not served on the members of an unincorporated association by serving such notice on the chief officer of such association. Wells v. Robb, 23 Pac. Rep., 148 (Kan., 1890). Where a creditor of a bank sues the stockholders as partners the burden of proof is on him to prove that no cor- poration existed, it being shown that the bank always acted as a corporation and held itself out as such and was sup- posed so to be by the stockholders. Hallstead v. Curtis, 22 Atl. Rep., 977 (Pa., 1891). The supposition or belief of the members that they are not liable be- yond the par value of their stock does not protect them from liability. Far- num v. Patch, 60 N. H., 294 ; and see § 233, note. 1 See § 216, supra. 2 If the subscription runs to the trust- ees personally they may sue thereon. Otherwise all must join as plaintiffs. Cross v. Jackson, 5 Hill, 478 (1843); Townsend v. Goewey, 19 W T end., 423 (1838). It seems that a subscription to a voluntary association is enforceable by a corporation which took the place of the proposed voluntary association, where the subscriber knew of the change of plan and did not object City Sav. Bank v. Whittle, 63 N. H., 587 (1885). Subscription to its stock is col- lectible the same as subscriptions to stock of corporations. Bullock v. Fal- mouth, etc., Co., 3 S. W. Rep., 129 (Ky., 1887). 609 § 508.] " TRUSTS " AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX. In enforcing the liability of members of a joint-stock company by a suit in equity, if the parties are very numerous or unknown they need not all be joined as defendants. 1 Suits by or against un- incorporated associations must be brought in the name of all the members. 2 A member who transfers his interest is nevertheless liable for precedent debts of the association. 3 A purchaser of stock in an unincorporated association is not liable for debts contracted before he became a member. 4 The rights and liabilities of a mem- ber depend upon the law of the place of the domicile of the com- pany itself. 5 The rules applicable to stockholders in corporations are, by analogy, applied to members in these companies, especially as regards their defenses to subscriptions 6 and meetings of the com pan v. 7 These associations cannot be taxed on a franchise, as corporations may be. 8 'Mandeville v. Riggs, 2 Pet, 482 (1829). reversing Rigfts r. Swann, 3 Cr., 183. See, also, Phipps v. Jones, 20 Pa. St, 260 (1853); Dennis v. Kennedy, 19 Barb., 517 (1854); Wo,, a v. Draper, 21 Barb., 187 (1857); Smith v. Lockwood, 1 Code Rep. X. S.), 319 (1851); Birming- ham v. Gallagher, 113 Mass., 10 Snow v. Wheeler, 118 Maes., 179 [It Pipe r. Bateman, 1 Iowa, 369 (18 Marshal] v. Loveless, Cam. & N., 217 (1801); Lloyd r. Loaring, 6 Vea, 77:; (1802); Deem- r. Albany, etc., Line, 14 Blatch., 471 (1878). As regards the prac- tice in bringing action- against mem- bers of an unincorporated association. see Kueeland on Attachments, ch. XVI i Williams v. Bank of Mich., 7 W«>n,l., 542(1*31); Detroit, etc., Bank v. Detroit etc.. Verein, 44 Mich., 31:', (1880); Mears v. Moulton, 30 Bid., 142 [1868); Mo- Giearyv. Chandler, 58 Me., 587 (1870). One or more members of an unincor- porated association may sue for the benefit of all. Liggett U Ladd, 21 Pac. Rep., 133 (Oreg., 1888). 'Morgan's Case, 1 De G. & Sm.. 750 (1849): Tyrrell v. Washburn, 88 Mass., 466 (1*03). ♦ Stockdale r. Moginn, 19 AtL Rep., 295 (Pa., 1S90). Transferee of a share m an unincorporated company is liable for all debts existing at the time of or after the transfer. Taylor r. Hill, 1 N. R, 566 (1863). Although a stockholder pur- chased his stock from the association which was insolvent at the time, yet he cannot offset this as capital contributed by him. BarndoUar v. De Bois. 21 Ail. Ei< p., 988 (Pa., 1891). "-Cutler v. Estate of Thomas. 25 Vt, 78(1852* 6 That the full capital stock must be subscribed before any subecriptioD is collectible, see Bray r. Farwell, 81 N. Y., 600 (1880} Contra, Tappan v. Bailey, 45 Mass., 529 (1842); Boston & Albany R R Co. v. Pearson. 128 Masa, 445 (1880); Pitchford v. Davis, 5 Mees. & W., 2 (1839). Forfeiture of stock re- leases the member only as to subse- quent debts. Skinner v. Dayton, 19 Johns., 513 7 Notice of the time and place must be given. Irvine V. Forbes, 11 Barb., 587 (1852), The members cannot act except in meeting assembled. The ma- jority do not rule. Livingston r. Lynch. 4 Johns. Ch., 573 (1820); Irvine ?'. Forbes, ubi supra. But the articles may provide otherwise. "Waterbury v. Merchants' Union Ex. Co., 50 Barb., 157 (1867). 8 HoadIey v. County Com'rs, 105 Mass., 519 (1870); Gleason r. McKay, 134 Masa, 419 (1878). holding the statute to be unconstitutional Cf. % 505. 670 CH. XXIX.] "trusts" and unincorporated associations. [§§ 509, 510. § 509. Actions by members against officers and the company. — The members may bring an action to remedy the fraud, 1 ultra vires acts 2 and negligence 3 of the trustees. In New York a member may, by statute, sue the company, in the same manner that a stock- holder in a corporation may sue the corporation. 4 § 510. Dissolution. — Where the term of existence of a joint-stock company is fixed by its articles of association, it cannot be dis- solved at the instance of a member before the expiration of that time. 5 It may be dissolved where the enterprise becomes wholly 1 The other members are not proper ultra vires act he is not liable thereon. parties. Boody r. Drew, 46 How. Pr., 459 (1874). An officer may be enjoined but not removed. The suit must not be in the interest of a rival company. Waterbury v. Merchants' Union Ex- press Co., 50 Barb., 157 (1867). Trustees receiving gifts are liable therefor to the company. In re Fry, 4 Phil. Rep., 129 (1860). Cannot sell to the company. Robbins v. Butler, 24 111., 387 (1860). Treasurer- may be compelled to pay over funds belonging to the company. Sharp v. Warren, 6 Price, 131 (1818). The trustees are liable in tort for their frauds on the company. Dennis v. Ken- nedy, 19 Barb, 517 (1854). A committee to build may be made to account where they secretly contract with themselves, though the contract is nominally with other persons. Whitman v. Bowden, 2 S. E. Rep, 630 (S. C, 18S7). 2 A member cannot be compelled to accept the stock of another company for his interest, a consolidation of the two having been made. Frothingham v. Barney. 13 Hun, 366. But he may not be able to prevent the consolidation. McVicker v. Ross, 55 Barb., 247 (1869). An ultra vires act may be enjoined. Abels v. McKean, 18 N. J. Eq., 462 (1867). The members need not make good to the officers debts paid by the latter, growing out of ultra vires acts. Cram's Appeal, 66 Pa. St., 474 (1878). But the officers themselves are liable to third persons. Sullivan v. Campbell, 2 Hall. (N. Y.), 271 (1829). And possibly the members. Id. If a member has not participated or acquiesced in the Roberts' Appeal, 92 Pa. St., 407 (1880). Cf. Van Aernam v. Bleistein, 102 N. Y., 355 (18S6), holding the members liable for a libel ; aff'g 32 Hun, 316. 3 In re Fry, 4 Phil. Rep. 129 (I860). 4 Code of Civil Procedure, § 1919: Westcott v. Fargo. 61 N, Y., 542 (1874) : Saltsman v. Shults, 14 Hun, 256. At common law the name is not recognized and the suit would fail. Habicht v. Pemberton, 4 Sandf., 657 (1851); Pipe v. Bateman, 1 Iowa. 369 (1855); Ewing v. Medlook, 5 Port. (Ala.), 82 (1837); Schmidt v. Gunther, 5 Daly, 452 (1874). 5 Von Schmidt v. Huntington. 1 Cal., 55. See, also, Smith v. Virgin, 33 Me., 148 (1851). Cf. Lindley on Partn., 234: Lafond v. Deems, 81 N. Y, 507 (1880). The minority cannot force a dissolution as in the case of partnership. Equity will not aid, unless there be good reason for dissolution. Hinkley v. Blether, 3 Atl. Rep., 655 (Me., 1886). Minority of an Odd Fellows lodge cannot compel sale of property and distribution. Rob- bins v. Waldo, 7 Atl. Rep., 540 (Me.. 1887); and seeBagley r. Smith, 10 N. Y.. 489. A court will wind up a partner- ship even before its fixed time of exist- ence has expired, if it is insolvent or unprofitable or incapable of proceeding. Jennings v. Baddeley, 3 K. & J., 78: Baring v. Dix, 1 Cox, 213; Bailey v. Ford, 13 Sim., 495 ; Holliday v. Elliott. 8 Oreg., 84; Seighortner v. Weissen- born, 20 N. J. Eq., 172; Brien r. Har- riman, 1 Tenn. Ch., 467; Howell v. Har- vey. 5 Ark., 270 ; Van Ness v. Fisher, 5 Lans., 236. The death of a member does 671 § 510.] "tkusts" and unincokporated associations. [cii. XXIX. impracticable or its attainment impossible, but not always because of the misconduct of its officers. 1 The death of a member does not dissolve it; 2 nor does a transfer of one's interest. 3 The disso- lution of one of the subordinate unincorporated organizations by the general organization does not vest in the latter the property of the former. 4 The incorporation of the association by a part of the members does not dissolve the association. 5 Upon dissolution the trustees of the company are bound to convert the property into cash and distribute it. 6 In proceedings for a dissolution all the members need not be made parties. 7 not dissolve it. Phillips v. Blatchford, 137 Mass.. 510 (1884). 1 Waterbury v. Merchants' Union Ex- press Co., 50 Barb., 157 (1867). Contra. Mills v. Hurd : 32 Fed. Rep.. 127(188 *McNeish«, Hulless Oal Co., 51 Vt.. 316. Cf. Walker r. Wait, 50 Vt. 66a The death of a stockholder does not dis- solve the association, nor release his es- tate from subsequently incurred debts. Phillips v. Blatchford, 137 Mass., 510 (1884). 3 A transfer of his stock by a member does not dissolve a joint-stock associa- tion under the Pennsylvania law. In re Globe Refining Co., 25 Atl. Rep., 128 (Pa., 1892). < Wicks t'. Monihan, 130 N. Y., 232 (1891). The withdrawal of a charter by a higher body from one of its branches does not affect the right of the latter to its property. Wells v. Monihan, 13 N. Y. Supp., 156 (1891). 5 A part of the members of an un- incorporated association cannot pro- ceed to incorporate it against the ob- jections of the others. Rudolph v. Southern, etc., League, 23 Abb. N. C, 199 (1889). Where an unincorporated association appoints a committee to in- corporate, and they do so, and then pro- ceed to run an opposition business, the association cannot enjoin them from so doing. Paulino r. Portuguese Ben. Aae'n, 2G Atl. Rep., 36 (R I., 1893). 'Frothingham v. Barney, 13 Hun, 366 ; Butterfield v. Beardsley, 28 Mich., 413(1874). Upon the expiration of the time for which the company was organ- ized it becomes dissolved, and the assets must be distributed if any one of the members insists thereon. Mann t>. But- ler, 2 Barb. Ch., 362 (1847). Distribution of funds of incorporated association. As- ton r. Dashaway. 22 Pac. Rep., 660 ; aff' d in 23 id., 1091 (1890). As to the land, see g 504, supra. As to the rules govern- ing the distribution of the assets of a mutual benefit building corporation, see People r. Lowe, 117 N. Y., 175 (1889). 7 Such as non-residents who cannot be reached. Angell v. Lawton, 76 N. V.. 540 (1879). The complainant may bring the proceeding in behalf of himself and others having a common interest with him. Mann v. Butler, 2 Barb. Ch., 362 (1847> 672 CHAPTER XXX. STOCKHOLDERS' RIGHT TO INSPECT THE BOOKS OF THE CORPORA- TION. S 511. Common-law rights. 512. Common-law action for damages for refusal. 513. Mandamus is the preferable rem- edy. 514. Not granted as a matter of course unless the right is stat- utory. 515. When it will and will not be granted. § 516. Allegations and form of writ 517. Right to inspect minutes of meetings of directors. 518. Statutes giving right of inspec- tion. 519. Orders to corporation to allow inspection — Subpoena duces tecum — Bill of discovery. § 511. Common-law rights, — The stockholders of a corporation- had, at common law, a right to examine at any reasonable time any one or all of the books and records of the corporation. 1 This 1 Stockholders "have the right, at common law, to examine and inspect all the books and records of the corpo- ration at all seasonable times, and to be thereby informed of the condition of the corporation and its property." Per Redfield, J., in Lewis v. Brainard, 53 Vt., 519 (1881). In the case of Common- wealth v. Phoenix Iron Co., 105 Pa. St., Ill (1884). the court said: "In the ab- sence of agreement, every shareholder has the right to inspect the accounts — a right subject to the necessities of the company, yet existing." Also, " The doctrine of the law is that the books and papers of the corporation, though of necessity kept in some one hand, are the common property of all the stock- holders." The right exists although " its exercise be inconvenient to the book-keepers and managers of the part- nership business." In the case of Huy- lar v. Cragin Cattle Co., 40 N. J. Eq., 392 (1885), the court said : " Stockhold- ers are entitled to inspect the books of the company for proper purposes at proper times, and they are entitled to such inspection though their only ob- (43) 6 ject is to ascertain whether their affairs have been properly conducted by the directors or managers. Such a right is necessary to their protection." Dead- erick v. Wilson, 8 Baxt (Tenn.), 108. Mr. Simon Sterne, in the Cyclopaedia of Political Science, Political Economy and United States History, vol. HI, p. 526, says : "Another problem pre- sented by the existing condition of the railways in the United States is that which arises from secrecy of manage- ment This evil must be dealt with radically. One of tlie prime motives for secrecy of management is the enor- mous advantage which at the present day it gives to the managers in the maintenance of their power. They alone know where the stockholders are to be found, and can therefore control votes by the knowledge of how to reach or buy them, thus perpetuating their control. Another motive is the advan- tage thus afforded for stock speculations. The board of managers, by keeping unto themselves the knowledge that their property is losing heavily in compara- tive traffic, can sell their own holdings 73 § 512.] INSPECTION OF CORPORATE BOOKS. [CH. XXX. rule grew out of an analogous rule applicable to public corpora- tions and to ordinary copartnerships, the books of which, by well- established law, are always open, to the inspection of members. 1 A director has an absolute right to examine all the books of the company, 2 even though he is hostile to the corporation. 3 But in Connecticut a contrary rule is laid down where he is seeking infor- mation in order to organize a rival company. 4 A creditor of the corporation or any person who is a stranger to it can obtain access to its records by a bill in equity for discovery. 5 § 512. Common-Jaw action for damages for refusal— The legal right of a stockholder of a corporation to examine the corporate books is a right which gives him a cause of action at law for dam- ages against the corporate officers if they refuse to allow the in- spection. 6 The plaintiff is entitled to nominal damages, and to and go short of the market under cir- cumstances which will yield them an absolute certainty of profit on the tians- nction. This gives them an enormous advantage over the community by de- pleting the pockets of the unwary, who find themselves saddled with stocks at high prices, bought months in advance of the public announcement that the road is in difficulties. The knowledge of rapid gains in the development of business likewise gives, so longa^ it can be kept secret, a like advantage in pur- chase of stock. Tins a Ivantage has been exploited to such a degree in the United St a s that the investing public has be- come inspired with a general distrust for railroad stock investment." 1 Commonwealth v. Phoenix Iron Co., sitjira. 2PeopleuThroop.l2WendL,181(18 Charlick v. Flush, etc., R. R. 1«» Abb. Pr., 130 (I860) ; /// re t iaucimino, N. Y. L J., Dec. 23 (1890> 'People v. Throop, supra. 4 A director who is actively organizing a rival company has no right to examine the letter files of the former in order to aid the latter. The secretary may forci- bly take them from him. Hemingway v. Hemingway, 19 Atl. Rep., 766 (Conn., 1890). 5 Bill of discovery lies at instance of corporate creditors in courts of one state to compel corporate officers to give names of stockholders of corpora- tion in another state with view to en- forcing statutory liability in latter state. Tost v. Toledo, etc,, R R Co.. 11 X. E. Rep., ■"•I" (Masa, 1887); 144 Mass., 841. As to the remedy by subpoena, etc.. see 519, infra. As to the general right of a stockholder to examine the hooks of a corporation an 1 tie recognition of such right in equity by discovery, see Cires- ley's Eq. Ev., 116, 117: Kynaston r. East India Co., 3 Swansfc, 249: Bolton v. Liverpool, 3 Sim., 467; 1 Myl. & K., 88: Brace v. Ormond, 1 Meriv., Lewis v. Brainerd, 68 \'t.. 510 (1 as to the right to inspection and to take- copies of records in a county clerk's or register's office, see Randolph r. State. -J s. Rep.,714 (Ala., 1883 ; 11 inson >: Eich- stae.lt. 85 N. W. Rep., 80 (Wis.. 1887); Brewer v. Watson, 71 Ala., 299; Phelan r. state. 76 Ala., in-. Webber v. Townley, 43 Mich.. •".:'.! : Diamond Match Co. v. Powers. 51 Mich.. Mo; People v. Cornell, 47 Bail... 829; People r. Reilly, 38 Hun, 429; People v. (adv. 99 N. Y .. 620. A stockholder lias the legal right to inspect the books of the corporation of which he is a member, but the company is not liable for a refusal of the secretary to allow a stockholder to examine the books. Legendre IX New Orleans, etc., Ass'n. 12 S. Rep.. 837 (La, 1893). 674 CH. XXX.] INSPECTION OF CORPORATE BOOKS. [§§ 513, 511. such further damages as he may prove. He ueed not allege or prove any special reason or purpose of his desire and request to examine the books. 1 § 513. Mandamus is the preferable remedy. — But an action for damages is generally totally inadequate as a remedy. 2 The stock- holder wishes to inspect the corporate books and does not wish damages or a lawsuit. Accordingly, in certain cases, upon the application of a stockholder who has been denied the privilege of examining the corporate records, it has been the practice of the courts to issue a mandamus to the corporate officers commanding them to allow a specified stockholder to examine the books of the corporation. 3 § 514. Not granted as a matter of course unless the right is statu- tory. — The writ of mandamus, however, does not issue herein as a matter of course. It is an extraordinary remedy to be invoked only upon special occasions. The courts do not grant the manda- mus until it has taken into careful consideration all the facts and circumstances of the case. The condition and character of the books, the reasons for refusal by the corporatic n, the specific pur- pose of the stockholder in demanding inspection, the general rea- sonableness of the request, and the effect on the orderly transaction of the corporate business in case it is granted, are all considered in granting or refusing the writ. It is granted only in furtherance of essential justice. 4 1 Lewis v. Brainerd, 53 Vt, 510 (1881). allow it, and not otherwise." Comraou- 2 In Coekburn v. Union Bank, 13 La. wealth v. Phoenix Iron Co., supra; Ann., 289 (1858), the court said a suit S. C, 6 Atl. Rep., 75 (1886). explaining for damages " might Jast for a long the method of procedure, and holding time and petitioner suffer gi-eat loss by that the applicant need not apply to a being debarred from an examination " court of equity. The old rule that man- of the books. " He does not ask for damns will issue only for a public pur- damages, but for the exercise of a right, pose is no longer a rule of law so as to If he has the right he ought to have prevent its use herein. Commonwealth, the exercise of it as soon as possible ; etc., supra, questioning King v. Bank of for the deprivation of his right cannot, England, 2 B. & Aid., 620 (1819) ; and perhaps, be accurately estimated in King v. London, etc., Co., 5 B. & Aid., damages. It maybe many years before 899 (1822). See, also, King v. Clear, 4 the amount of the damage can be Barn. & C, 899 (1825); 6 S. Rep., 88 (Ala., known."' 1889). 3 " It would seem, from the weight of 4 " The application is addressed to the authority and in reason, that a share- sound discretion of the court" The holder is entitled to mandamus to com- reasons for granting it " should be clear pel the custos of corporate documents and cogent ... To hold that every to allow him an inspection and copies person who shows himself to be a holder of them at reasonable times for a speci- of stock is at liberty to demand an ex- fied and proper purpose upon showing animation of the transfer books when a refusal on the part of the custos to and as often as he pleases, and if re- 675 515.] INSPECTION OF CORPORATE BOOKS. [CH. XXX. "Where a statute gives to stockholders the right to examine cor- porate books, mandamus seems to be granted as a matter of right. 1 §515. When it will and will not be granted. — It will not be granted to satisfy curiosity, nor to aid the stock-market specula- tions of the stockholders. 2 Either some property rights of the holds the certificates made out in his name, to compel the corporation to fused to apply for a writ of mandamus to enforce an absolute right, would be to establish a rule highly prejudicial to the interests of all corporations and their stockholders. . . . The power of the court should be exercised in such cases with great discrimination and care." People v. Lake Shore & M. S. R. R. Co., 11 Hun, 1 (1877); affirmed, sub nom. Re Sage, 70 N. Y., 220 (1877> See, also, People ex rel. Field r. North- ern Pac. R R Co., 50 N. Y. Super. Ct, 456 (1884); S. C, 18 Fed. Rep.. 471. " Discretion in these matters should be exorcised in a reasonable manner and subject to precedent" Reg. 0. Wilts. & Berks. Canal Nav., 29 L T., 922 (1874). A reference may be ordered by the court to determine the truth of tin' allegations in the affidavits used to obtain a mandamus. People r. St. Louis, etc., Ry Co., If Hun. 552 (1887). Man- damus is tin' preferable remedy. Le- gend re v. New Orleans, etc., Ass'n, 12 S. Rep., 837 (La., 1893). 1 Under the "Wisconsin statute author- izing a stockholder to examine the stock books and accounts, a mandamus may be issued to the officer having the books in charge. State ft Bergenthal. 39 N. W. Rep., 506 (Wis., 1888). Under a constitutional right to see the list of stockholders, a stockholder has no abso- lute right to take a list of them. Em- pire P. Ry Appeal, 19 Atl. Rep., 659 (Pa., 1890). Mandamus lies to enforce th" statutory right of inspection. Peo- ple v. Pacific Mail Steamship Co., 50 Barb., 280 (1861). Mandamus lies to compel the resident agent of a foreign corporation to open its transfer books to a stockholder as required by statute. People ft Paton, 20 Abb. N. C, 195 (1887). Mandamus will lie in behalf of the wife of a deceased stockholder, who allow her to examiue the transfer books in order that she may vote intelligently at a coming election. People v. Eadie, 63 Hun, 320 (1892). Mandamus lies to open for the inspection of a stockholder and for taking memorandum therefrom such corporate books as the statute pre- BCribes shall be opened to him. Matter of Martin, 02 Hun, 557 (1891). Man- damus lies to allow inspection as re- quired by the statute, and the fact that the applicant holds a certificate of stock is sufficient Martin r. Williams, etc., Co., 25 Abb. N. C, 350 (1890). Where there is a state statute allowing stock- holders to examine the corporate books, a national bank in the state is subject thereto and mandamus will issue. Winter a. Baldwin, 7 S. Rep., 734 (Ala., 1890). Under a statute to the effect that " the stockholders of all private corpora- tions have the right of access to, of in- spection and examination of the books, records and papers of the corporation, at reasonable and proper times," a stockholder has the "right to examine the books at any and all reasonable times," and "when this right is claimed and refused, he is entitled to a man- damus on the averments that he is a stockholder of the corporation ; that he has demanded the right of inspection ; that the time was reasonable and proper ; and that the right was denied him." He may make the examination through an agent Foster ft White, 6 S. Rep, 88 (Ala., 1889). 2 The writ will not be " granted to en- able a corporator to gratify idle curios- ity." People v. Walker, 9 Mich., 828 (1861). " The interests of all the corpo- rators require that the writ shall not go at the caprice of the curious or susni- 676 OH. XXX.j INSPECTION OF CORPORATE BOOKS. [§515 stockholder must be involved, or some controversy exist, or some specific and valuable interest be in question, to settle which an in- spection of the corporate records becomes necessary. 1 Mandamus will be granted in order to enable the applicant to ascertain w r ho cious." Commonwealth v. Phoenix Iron Co., supra. " Courts should guard against all attempts by combinations to use its writ of mandamus to accomplish their personal or speculative ends." People v. Lake Shore & M. S. R. R. Co., supra. Nor will the court grant " a mere wrecking petition to ruin a going concern." In re West Devon, etc., Mine, L. R., 27 Ch. D., 100 (1884). Mere suspicion is not enough, even though the applicant stockholder intends to bring suit against the directors. Cen- tral, etc., R R. Co. v. Twenty, etc., R'y Co., 53 How. Pr., 45 (1877). 1 Thus, where there had been no divi- dends for nine years, and the officers were partners in a competing concern, and refused to allow inspection, it was granted in order to enable the applicant to ascertain whether the real facts jus- tified an action for fraud on the part of the officers. Commonwealth v. Phoenix Iron Co., supra. Granted also to allow applicant to ascertain whether a by-law existed entitling him to an office by promotion. Reg. v. The Saddlers' Co., 10 W. R., 77 (1861). Mismanagement and intent to bring suit need not be al- leged. " Oftentimes frauds are discov- erable only by examination of the books by an expert accountant." Huyler v. Cragin Cattle Co., supra. It is granted also to a stockholder who has a suit or controversy with a party other than the corporation itself. Mayor of Southamp- ton v. Graves, 8 T. R, 590 (1800); Rex v. Newcastle, 2 Strange, 1223 (1737). It has been granted to enable a stock- holder to see the discount book, al- though there is no suit between him and the corporation, and no intent to bring one. Cockburn v. Union Bank. 13 La. Ann., 289 (1858). At an early day, however, it was held that " the members have no right, on speculative grounds, to call for an examination of the books and muniments in order to see if, by possibility, the company's af- fairs may be better administered than they think they are at present. If they have any complaint to make, some suit should be instituted, some definite mat- ter charged, ... or there should be some particular matter in dispute be- tween members, or between the corpo- ration and individuals in it; there must be some controversy, some specific pur- pose, in respect of which the examina- tion becomes necessary." King v. The Merchant Tailors' Co., 2 Barn. & Ad., 115 (1832). The applicant must allege the extent of his interest, also wherein his object of inspection is just and use- ful. Hatch v. City Bank of New Orleans, 1 Rob. (La.), 470 (1842). The case of State v. Bienville Oil Works, 28 La. Ann., 204 (1876), states that the two preceding cases " failed through want of precision and deSniteness in stating some well- defined purpose, some reasonable cause, and showing that they had some inter- est in the matter." A charter provision that the corporate powers " shall be ex- ercised by a board of directors " is im- material herein. Id. Where a reduction of capital stock is contemplated, a large stockholder has a right to inspection to ascertain whether the business is being " prudently and profitably " carried on. Id. Not granted to allow applicant, a director, to inspect and make entries. Rosenfeld v. Einstein, 46 N. J. L., 479 (1884). General purpose of ascertaining "the condition of the company" held insufficient. People v. Walker, 9 Mich., 328 (1861). The stockholder may take memoranda or a list of the stockholders. Commonwealth v. Phoenix Iron Co., 105 Pa. St., Ill (1884); Cotheal v. Brower, 5 N. Y., 562 (1851) ; affirming Brower v. Cotheal, 10 Barb., 216 (1850): Hide v. 677 516.J INSPECTION OF CORPORATE BOOKS. [CH. XXX. are stockholders, with a view to canvassing their votes for an elec- tion. 1 Mandamus will not be granted to allow a stockholder to make a list of the stockholders where the object is to combine them in attacking a lease made by the corporation. 2 §516. Allegation and form of writ— The writ should run to the person or officer who has control of the records. 3 The stockholder may make the inspection through an agent, and may have the aid of an interpreter, attorney or expert. 4 The request to inspect the books, for refusal of which the mandamus is asked, must be alleged to have been made at a proper time and place, and of the proper person, and to have been refused. 5 The application should also state what information the applicant needs, and what books of the corporation he wishes to inspect. 6 " The order should be so drawn Holmes. 2 Molloy. 372. In the case of Stettaner v. New York, etc., ('.>., 6 Atl. Rep., 303 (X. J., 1880), where a st holder filed a bill in equity to compel corporate officers to allow himself ami his accountant to examine the corporate books, its business having 1 D closed and distribution of assets made, but a statement of its affairs refused, the court held that the bill would not lie. since no fraud or insufficient distribu- tion of asM'ts were alleged. Mandamus is the proper remedy. Swift v. State, 6 Atl. Rep., 856 I'd.. 1886), holds that mandamus will issue to the officers of a foreign corporation to exhibit its books then in the state and allow copies of records to be taken by a stockholder who int. nds to commence suit against a pledgee of his stock, the controversy turning on the question of the earnings and expeuses of the corporation. Man- damus to open the stock-ledger was de- nied in a case where the owner of four shares of stock alleged that little or no dividends were paid, and the stock was depreciating, no mismanagement being charged. A by-law authorizing inspec- tion of books of account does not au- thorize inspection of stock-ledger. Lyon V. American, etc., Co., 17 Atl. Rep., 01 (R. I., 1889). 1 Mandamus was granted in People y. Eadie, N. V. L. J., Dec. 30, 1891, to open the stock books to a stockholder who wished to ascertain who were stock- holders in order to confer with them for the purpose of changing the board at an approaching election. Mandamus was grant) it" a stockholder who wished to persuade other stockholders not to ap- peal a suit in which he was intere adversely to the corporation, the de- feated party, leg. v. Wilts. & Berks. Canal Nav.", 29 L. T.. 9 See, also, People v. Lake Shore & M. S. R. R, 11 Hun. 1 (1877). - Empire P. R'y Appeal, 19 Atl. Rep., uid note. See criticism on this case in N. Y. L. J., Oct. 13, 1890. 3 "The writ shall he directed to him who is to do the thing required to be done." A director may demand inspec- tion though hostile to the corporation. People 17. Throop, 12 Wend., 181 ( 1*34). 4 May ins] ect through his duly-author- ized agent State v. Bienville Oil Works . - I .a. Ann., 204 (1870). See, also, 519. s The stockholder must first apply to the proper corporate officer having au- thority to grant inspection. King v. Proprietors of the Wilts. & Berks. Canal Nav.. :; Ad. & EL, 477 (1835\ And must state to him the reason why he desires inspection. Id.; also King v. Clear. 4 Mam. & Cr., t>99 (1825); People v. Walker. 9 Mich.. 328 (1861> 6 Morgan's Case, L. R, 28 Ch. D., 620 i 1884). This ease also states that in Eng- land it is customary for many banking companies to insert in their constitu- te CH. XXX.] INSPECTION OF CORPORATE BOOKS. [§§ 517, 518. as not to inconvenience the transaction of business." ' Technical objections to the writ are not favored by the courts. Nevertheless the substantial allegations must be made. §517. Bight to inspect minutes of meetings of directors. — It would take a strong case to induce a court to issue a mandamus commanding the corporate officers to allow a stockholder to inspect the minutes of the meetings of the directors.- The success of the corporate enterprise depends frequently upon the secrecy of the plans of the directors. In connection with litigations the rule, of course, is different ; but, aside from this, it seems that a stockholder is not entitled as a matter of right to a mandamus to allow him to inspect the minutes of the directors' meetings. The same rule would seem to apply to miscellaneous questions asked of the direct- ors at stockholders' meetings. § 518. Statutes (jiving right of inspection.— The right to inspect corporate records is frequently given to stockholders by statutory provisions. Sometimes this statutory right extends only to the corporate transfer book. 3 Sometimes it includes all corporate rec- kons a provision forbidding the inspec- found very prejudicial to the sharehold- tion of customers' accounts by share- holders or creditors. Irrelevant parts of the books may be sealed up. Jones v. Andrews, 58 L. T. Rep., 601 (1888): Earp v. Lloyd. 3 K. & J.. 549 ; Napier v. Staples, 2 Moll., 570 : Hill v. Great W. R'y Co., 10 C. B. (N. S.), 148 ; Clifford charter ; and consequently and v. Taylor, 1 Taunt., 167; Gerard v. Penswick, 1 Swanst, 533; Dias v. Merle, 2 Paige, 494; Titus r. Cortelyou, 1 Barb., 444; People v. Pacific Co.. 50 Barb., 280; Pynchou v. Day (111.), 22 Re- porter, 234. But if such irrelevant mat- ter cannot be separated, the party must produce the whole. Carew v. "White, 5 Beav.. 172. 1 Duffy r. Mutual Brewing Co.. N. Y. L. J., Oct 3, 1892, p. 18, approving of text. 2 " It is highly proper that an inspec- tion of the books containing the pro- ceedings of the directors should be obtained on special occasions and for special purposes; . . . but the pro- posed daily and hourly inspection and publication of all their proceedings would be tantamount t j admitting the presence of strangers at all their meet- ings, and would probably ere long be ers. Queen v. Mariquita Mining Co., 1 Ell. & Ell., 289 (1858). " A private stock- holder of an incorporated company has no right to have access to the minutes of the proceedings of the directors un- less that right is expressly given by the of necessity he must remain ignorant of their action until they choose to make that action known " (dictum). Ala. & Fla. R. R Co. v. Ro%vley. 9 Fla., 508. 514 (1861). See, also, Lindley on Partn., (4th ed.). 809. 3 In New York, see 1 R S., ch. XVIII. title 4, § 1, applying to all cor- porations. Construed in Cotheal v. Brower, 5 N. Y, 562 (1851); People v. Pacific Mail Steamship Co., 50 Barb., 280 (1867) ; Kennedy r. Railroad Co.. 14 Abb. N. CL, 326; People v. Mott 1 How. Pr.. 247 : Kelsey v. Pfaudler, etc., Co., 3 N. Y. Supp.. 723 (1889); 1 R S., ch. XVIII. title 2, £ 45. for moneyed corpo- rations, applied in People v. Throop. 12 Wend.. 183 (1834): Laws 1842, ch. 165. for transfer agents in this state of for- eign corporations : construed in People v. Lake Shore & M. S. R, R Co., il Hun, 1 (1877); People ex ret. Field r. 079 §519.] INSPECTION OF CORPORATE BOOKS. [CH. XXX. ords. 1 Mandamus lies to enforce this right. 2 Frequently the charter itself states that the stockholder shall have certain rights of inspection. In England the Companies Act regulates specific- ally the stockholders' right of inspection, and provides for a com- mittee of investigation in behalf of the stockholders whenever an investigation is desired by them. 3 § 519. Orders to corporation to allow inspection — Subpana duces tecum — Bill of discovery. — An inspection of corporate records is often desired in connection with an action which is pending in the courts, and it has been the practice of the courts to grant applica- Northern Pacific R R Co., 50 N. Y. Super. Ct, 456 (1884); S. C, 18 Fed. Rep., 471 ; Kennedy v. Chicago, etc., R R, 14 Abb. N. C, 326 (1884) ; People v. IT. S., etc., Co., 20 Abb. N. C. 192; Peo- ple v. Peyton, id.. VM; In re Commer- ford v. Williams, etc., Co., X. Y. L. J., Oct 7, 1800; Laws of 1848, g 25, for manufacturing corporations. For New Jersey, see Revision of is??, p. l s: '-. Huylar v. ( iragin ( attle Co., 40 N. J. Eq., 392 (1885): S. C, 7 Atl. Rep., 531 1 1 Iud. R S. (188.1), g§ 8010, BOIL Con- necticut, see Pratt v. Meriden Co., 86 Conn., 36; Sykes' Case, 10 Beav., 162; Ervin v. Oregon R Co.. 22 Hun, 566; Cain v. Pullen, 34 La. Ann.. 511. A de- lay of one day in allowing the inspec- tion, owing to the absence of the per- son having charge of them, does not cause the penalty to attach. Kelsey a. Pfaudler, etc., Co., 41 Hun. 20 (1881 » Rev. Stat of Ohio 1 1886), g 8812 ; ( al- ifornia Civil Code, g§ 877, 878; Penal Code, 565 ; Rhode Island Pub. St, ch. L58, g 21, and ch. 158, § 24 (1882); Michi- gan Gen. St, $ 3173, for banks. See. also. Colorado Gen. St (1882), £ 240; Missouri R S. (1870), §§ 720, 701: Ver- mont R Laws (1880), §§ 8294, 8295; Mass.. 1860, ch. 68, § 10 ; Illinois & S. (1874), ch. 32. § 13. The pleadiug in a cause of action arising under a statute herein must clearly briny; the case within the statute. Lewis v. Brain- erd, 53 Vt, 510 (1881). That the officer had notice of plaintiff's stockholdership must be alleged. Williams r. College Corner & Richmond Gravel Road Co.. 45 Ind., 170 (1873). The purpose of the inspection need not be Btated to the officer. Lewis ix Brainerd. 53 Yt, 510 (1881). Cf. Queen v. Undertakers of the Grand Canal. 1 Ir. L. R, 337. The common-law right of inspection re- mains, although a special statutory right is also given. People v. Lake Shore & M. S. R. R Co.. BUprtL Under the statutes of New J< rsey the court will order the books of the company to be brought within the State on the pe- tition of the president and a ilirector. A person having a right to examine the books of the company may do so through an attorney. It is immaterial what tli" motive of the applicant may be. Mitchell v. Rubber, etc., Co., 24 Atl. Rep., 407 (X. J., 18S 2 See S 514, supra : > 25 and *> Vict, ch. 89, Table A, No. 78 and Xos. 60 and 86. In England, under a statute allowing a stockholder to in- spect the corporate rights of stockhold- er.-, etc., an injunction lies to restrain corporate officers from refusing this right. Holland v. Dickson, 58 L. T. Rep., 1888) Under the English statute a stockholder may inspect the transfer book and. take copies, even though he is acting in the interest of a rival com- pany. Mutter v. Eastern, etc., R'y, 59 L. T. Rep.. 117 (1888) ; also 36 W. R, 401. A stockholder suing to set aside a fraud- ulent contract may have inspection even of privileged matters between the com- pany and its attorney. Gourand v. Edisou, etc., Co., 59 L. T. Rep., 812 (1888). 6^0 CH. XXX.] INSPECTION OF CORPORATE BOOKS. [§ 519. tions for this purpose. 1 The order to allow an inspection may be made at any stage of the action. A stockholder has this right to aid him in suits with strangers, and his right herein is more extensive than the rights of the other party to the action. In fact, a person who 1 The evidence sought must be di- rectly material to the cause. Rex v. Newcastle, 2 Strange, 1223 (1737); Rex v. Babb, 3 Term R, 579 (1790) ; Mayer, etc., v. Graves, 8 T. R, 590 (1800), hold- ing that a stranger has no more right to have an inspection here than in a case where he sues a copartnership. See Central Nat. Bank v. White, 5 J. & S., 297 (1874). holding that in New York the inspection is proper if the evidence is material and cannot otherwise be ob- tained ; Clinch v. Financial Co., L. R, 2 Eq., 271 (1866), where a director was compelled to produce. In the federal courts an inspection will not be granted in order to frame a complaint. Paine v. Warren, 33 Fed. Rep., 357 (1888). In a bill alleging fraud on the part of the directors, whereby complainant, a stockholder, has been injured, he may obtain such inspection. Walburn v. Ingilby, 1 Myl. & K, 61 (1832) ; Stan- ton v. Chadwick, 3 Macn. & G., 575 (1851). See Bassford v. Blakesley, 6 Beav., 131. On a verified petition by a single shareholder stating that a mine owned by the company is being worked at a loss, an inspection of the company's books will be granted. West Devon, etc., Case, L R, 27 Ch. Div., 106. In a suit to hold the directors of a life insurance company personally re- sponsible for large losses alleged to have been caused by moneys improperly paid on policies, an inspection has been allowed, although plaintiff was said to have but a trifling interest in the com- pany and was desirous of injuring it, and had published prejudicial state- ments in regard to the matter. Will- iams v. Prince of Wales Ins. Co., 23 Beav., 338. Where a company was being wound up. an application on be- half of twenty -four out of eight hun- dred and fifty-six shareholders, who had associated themselves together for an investigation into the company's af- fairs, was allowed, with permission to employ an accountant to carry on the examination of the books. Joint-stock Discount Co.'s Case, 36 L. J., Eq., 150. See Emma Silver Mining Co. Case, L, R, 10 Ch. App., 194 ; People v. Lake Shore Road, 11 Hun, 1 (1877); 70 N. Y., 220; Ex parte Buchan, 36 L. J., Ch., 150 (1867). Not granted to fish out a de- fense. Birmingham Co. v. White, 1 Q. B., 282 (1841); Imperial Gas Co. v. Clarke, 7 Bing., 95 (1S30). See Hoyt v. Amer. Ex. Bank, 1 Duer, 652 (1853): Shoe and Leather Ass'n v. Bailey, 17 Jones & S. (N. Y.), 385 (1883). Nor to furnish materials to the other side for a new trial. Pratt v. Goswell, 9 C. P. (N. S.), 706 (1861). Nor to ascertain whether petitioner might better accept, with the other shareholders, what was offered her for her holding in an old company, which was being wound up. instead of proceeding jvith an arbitra- tion. Glamorganshire Banking Co., L. E., 28 Ch. Div., 620. Nor to estab- lish a justification in an action against the petitioner for libel, imputing insolv- ency to the company. Metropolitan Co. v. Hawkins, 4 H & N., 146 (1859). See Finlay v. Lindsay, 7 Irish C. L. 1 ; Collins v. Yates, 27 L. J, Exch.. 150 (1858); Opdyke v. Marble, 44 Barb., 64 (1864). Nor to examine all the books of the company for fifty years back, because petitioner alleges that he is dissatisfied with the management of the company and with the accounts, besides other grounds. Reg. v. Grand Canal. 1 Irish Law Rep.. 337 (1839). Nor where the petition does not specify the particular books asked for, nor the ob- ject of the petitioner in making the application to the officers and to the court. Reg. v. London and St. Cather- 681 § 519.] INSPECTION OF CORPORATE BOOKS. [on. XXX. is not a stockholder has no more right to an inspection of the cor- porate books than he has to inspect the books of a copartnership. This is the rule even though he is suing or being sued by a stock- holder. 1 If a stockholder, and sometimes a third person, is suing or being sued by a corporation, he is entitled to the usual right of a notice to produce documents, 2 or by an order, 3 or by compelling ine's Docks Co., 44 L. J.. Q. B.. 4 (1874). See Hunt v. Hewitt 7 Exch., 236 (1852 Pepper v. Chambers, 7 Exch.. 220 (1852 New England Iron Co. v. N. Y. Loan Co., 55 How. Pr.. 351 (1878); Central R. R. v. Twenty-third St. R, 53 How. Pr., 45 (1877); Comm'rs v. Lemley, B5 N. C, 341 (1881); Walker v. Granite Bank, 44 Barb., 39 (18G5). The court may direct the manner of the exami- nation. Williams v. Prince <>f Wal Ins. Co., 23 Beav., 888 (1857> An ap- peal may be taken from an order granting a party leave to inspect and examine the books of a corporation, the appellant Thompson ft Erie I.'. Co, 9 Abh. Pr. (N. s.i, 212 (1870); Lancashire Co. ft Greatorex, 14 L T. (N. s.>. 290 (1866); Cummer ft Kent, 88 Mich., 851 . Comm'rs ft Lemley, 85 N. C., 841 (1881). See Saxby ft Easterbrook, L R., 3 Exch., 207 (1872 : Bustros ft White, L l:.. l Q. a Div., 428 Clyde ft Rogers, 21 Hun, 145 (1881 : McCargo ftCrutcher, 27 Ala.. 171 Sage's Case, 70 N. Y.. 221. A- to the costs of an inspection, see Hill v. Philp, 7 Exch., 233 1852); Davey ft Pemb ton, 11 C R (N. S.), 629 (1862); Gardner r. Dangerfield, 5 Beav., Stockholders obtaining inspection may he ordered not to disclose the informa- tion received. In re Birmingham, eta, Co.. 36 L. J., Cb., I- : Williams v. Prince, etc., Co., 28 Beav., 840 (181 May examine through an attorney. Williams v. Prince, etc., Co.. 23 Beav., 338(1857). Professional accountant may be used. Bonnardet ft Taylor, 1 J. & 11.. 386 (1861); 1 GreenL on Ev., § 474. Inspection of stock-ledger allowed. People v. Pacific, etc., Co, 50 Barb., 280 (1864). Of discount book. Cock- burn ft Union Bank, 13 La. Ann.. 289 (1858) ; People r. Throop, 12 Wend., 183. Of by-laws. Harrison ft Williams, 3 B. & C, 162 (1824); Reg. tt Saddlers' Co., 10 W. l:.. 77 1 1861). See, also, Walburn r. [ngleby, 1 MyL & K.. 61 where the order was to a third person having charge of the books. "The courts of common law may also make an order for the inspection of writings in the on of on<- party to a suit in favor of the other." Greenleafe Ev., vol. I, 59. An article of the company tak- away the right of inspection does not previ nt a rule issuing requiring its allowance in pending litigation. Hall ,-. Connell, :: Younge & CoL, 7o7 (1M0). The rule applies to joint-stock com- paniea Woods v. De Figaniere, 1 Rob., 681. In tin- federal courts the right is statutory. r. S. 1,\ S.. g 724 1 Strangers have no more right to de- mand inspection of the books of a cor- poration during litigation in which the rporation is not interest- d than they have to demand a similar right of any other person. Mayor of Southampton r. Gravi -. - T. P.. 590 (1800), overruling i arlier cases. See, also. Opdyke « Mar- 1,1.'. u Barb., 64 (1864); Morgan v. Mor- gan, M AM,. Pr. N. S.,. 291 (1874). A corporation will not be compelled to open its records for the purposes of a litigation in which it is not a party. Henry ft Travelers' Ins. Co., 35 Fed. Rep., I'. (1888). 2 See Wait on Insolvent Corporations, 714, infra. a King ft Travannion, 2 Chitty, 366 (1818); Swansea Yale R'y Co. v. Budd, L. P.. 2 Eq. Caa. 271 (1866); Macintosh v. Flint, etc.. R. R, Co.. 1 R'y & Corp. L. J.. 3S4 (Mich., 1887), a stockholder's case. Where a stockholder files a hill to obtain an accounting, and charges 682 CH". XXX.] INSPECTION OF CORPORATE BOOKS. [§ 519. the corporate officers to swear to the pleading of the corporation, where the facts sought for are brought out by that pleading l or by a bill of discovery. 2 misappropriation, and makes a motion that he be allowed to examine the books, the court will wait until the cor- poration pleads or answers before grant- ing the motion. Banger v. Champion, etc., Co., 51 Fed. Rep.. 61 (1892). A cor- poration may appeal from an order for the examination of one of its officers. Sherman v. Beacon, etc., Co., 11 N. Y. Supp., 369 (1890). Under the statutory practice in Rhode Island the court may order the production of the record book of the corporation in court or for an inspection. Arnold v. Pawtuxet, etc., Co., 26 Atl. Rep., 55 (R. I., 1893). By examination before trial may ascertain whether defendants are proper defend- ants or whether they are a corporation. Sweeny v. Sturges, 24 Hun, 162. The affidavit to obtain the order must show that the information sought is essential. Imperial Gas Co. v. Clarke, 7 Bing., 95 ; Williams v. Savage, etc., Co., 3 Md. Ch., 418, 428 (1851). See Lindley on Partn.. 809. The officers may be orally ex- amined by the court with reference to where the books are. Lacharme v. Quartz Rock Mariposa Gold Min. Co., 1 Hurl. & Colt., 134 (1S62). They may be required to make affidavits. Ranger v. Great, etc., R. R. Co., 4 De G. & J., 74 (1859); lie Barton, 31 L. J., Q. B., 62 (1861). Such inspections may be through agents. Bonnardet v. Taylor, 1 J. & H, 383 (1861); Draper v. Manchester, etc., R. R. Co., 7 Jur. (N. S.), pt. 1, 86 (1861). But see In re West Devon; etc.. Mine, L. R., 27 Ch. D, 106 (1884); Bank of Utica v. Hilliard, 6 Cowen, 62. In an action against a corporation the plaintiff is entitled to inspect all the minutes and entries in the company's books having 1 Formerly in equity suits it was the practice to make as co-defendants with the corporation such officers as could answer under oath such matters as the complainant desired to know. See § 738, infra; Glasscott v. Copper, etc., Co., 11 Sim., 305 (1840); In re Barnet's, etc., Co., L. R, 2 Ch., 350 (1867) ; French v. First Nat'l Bank, 7 Ben., 488 (1874). This rule prevails because the corpora- tion itself cannot be convicted of per- jury. McKim v. Odom, 3 Bland Ch. (Md.), 407, 420 (1828); Wych v. Meal, 3 P. Wms., 311 (1734); Bevans v. Ding- man's, etc., 10 Pa. St., 174 (1849). The corporation itself may be compelled to answer fully. See Gamewell, etc., Co. v. Mayor, etc., 31 Fed. Rep., 312, citing cases. 2 A bill lies in equity to compel a cor- poration to discover, in aid of a suit at law, for damages for infringement of patent. Colgate v. Compagnie, etc., 23 Fed. Rep., 82 (1885). See, also, as to a bill of discovery, McComb r. Chicago, etc., R. R, 19 Blatch., 69 (1881); Costa Rica v. Erlanger, 1 Ch. D, 171 (187.")): Glasscott v. Copper, etc., Co., 11 Sim., 305 (1840) ; Moodalay v. Morton, 1 Bro. C. C, 469 (1785); Colgate v. Compagnie, etc., 23 Fed. Rep., 82 : Stettauer v. New York, etc., Co., 42 N. J. Eq., 46 (1886) ; French v. First Nat'l Bank, 7 Ben., 488 (1874). But a bill of discovery will not lie against one who is merely a witness. Fenton v. Hughes, 7 Ves., 288 (1802); Dummer v. Corporation, etc., 14 id., 245 (1807). As to the difference between a bill of discovery and other bills, see Mclntyre v. Trustees, etc., 6 Paige, 2o'.) (1837); Many v. Beekman, etc., Co., 9 Paige, 188 (1S41). Where discovery is sought from an officer he should be made a party defendant. Virginia, etc., Co. v. Hale, 9 S. Rep., 256 (Ala., 1891). A discovery will not be granted where there is no allegation that information is refused or that the party cannot ex- amine the hooks or that a mandamus was inadequate. Wolf et al. v. Under- wood et al., 11 S. Rep., 344 (Ala., 1892). 683 § 519.] INSPECTION OF CORPORATE BOOKS. [CH. XXX. A bill of discovery may be brought to discover the names of stockholders in order to enforce their statutory liability. 1 Some- times a subpoena duces tecum may be issued in behalf of a stock- holder or of a third person. 2 reference to the subject in litigation. Hill v. Great Western R Co., 10 C. R (N. S.), 148; Harrison r. Williams, 3 B. & C, 162; Burton & Saddlers' Co., 31 L. J., Q. B., 62 Sinclair v. Gray, 9 Fla., 71. See Hill v. Manchester Co., 5 B. & Ad., 866; Rex v. Buckingham, 8 B. & C, 375; Imperial Gas Co. v. Clarke, 7 Bing., 95. It includes the agent, solic- itor, counsel or expert of the party ask- ing the inspection. Hyde v. Holmes, 2 Moll., 372; Blair v. Maasey, L. R, 5 Irish Eq., 623; Joint-stock Discount Co. 'a Case, 36 L. J., Eq., 150; Bonnanl. t r. Taylor, 1 Johns. & H, 383; Attorney- General v. Whitwood, 40 L. J. (Ch. Div.), 598 : Lindsay v. Gladstone, L. R, 9 Eq., 132; Williams v. Prince of Wales Ins. Co., 23 Beav., 338; State r. Bienville Co., 28 La. Ann., 204; Ballin v. Ferst, 58 Ca.. 54G. But see Bartley r. Bartley, 1 Drew., 233; Summerfield v. Pritchard, 17 Beav., 9: Draper r. Manchester R R, 3 De G., F. & J., :.':{; West Devon Mine Case, L R, 27 Ch. Div., 106. And a shareholder who is also the solicitor of opposing litigants is nevertheless so en- titled. Reg. r. Wilts Co., 29 L, T. (N. S.i, !).".'; Kingsford v. Great Western R'y < V. 16 C. B. (N. S.), 761. But see Hutt's Case, 7 Dowl. Pr., 690; Herschiiekl v. Clark, 11 Exch., 712. See, also, notes supra. Manner of inspection must be gentlemanly. Williams v. Prince, etc., Co., 23 Beav., 338 (1857). The plaintiff may have inspection of corporate min- utes in a suit by a superintendent against the corporation. Hill v. Great, etc., R'y, 10 C. B. (N. S.), 148 (1861). Or in a suit by a claimant of office. In re Burton, etc., Co., 31 L J. (Q. B.\ 62 (1861). See, also. £ 711. infra. An order will not be granted for the purpose of fishing out a defense. Birmingham, Bristol & Thames Junction R'y Co. r. White, 1 Q. B., 282. See, also, Credit Co. v. Webster, 53 L T. Rep, 419 (1885). In New York the right of inspection by order is regulated by statute. Code of Civil Proa, §§ 803-S09. See Boorman v. Atlantic & Pacific R R Co., 78 N. Y„ 599 (1879; ; Ervin v. Oregon R'y & Nav. Co., 22 Hun, 566 (1880), holding that where the books are in use only sworn copies can be required; Johnson tt Con- sol. Silv. Min. Co.. 2 Abb. Pr. (N. S.), 413: Walker v. Granite Bank, 19 Abb, 111: Thompson r. Erie R'y Co., 9 Abb. (N. S.), 230; N. Y. Daily Reg., October 22, 1887; January 31, 1888; January 26, 1888. So, also, is the right to subpoena a corporation Code of Civil Proa, §§ 868, 869, 872, 873. See N. Y, etc., R R Co. v. Carhart, 86 Hun, 288 (1885); Richman r. Manhattan Co., 26 Hun. 433 (1882); ch. 536, L. 1880; Fenlon v. Dempsey, 50 Hun. 131 (1888 : Russell v. Manhattan R'y Co.. Daily Register, Dec. 31 People r. Mutual Gas, etc., Co., 71 N. Y.. 484 (1878); N. Y. Daily Reg., Dec. 17. iss7. The transfer-book may be thus examined. See Fenlon v. Denip- Bey, 50 Hun, 131 (1888). 1 Post v. Toledo, etc., R R, 144 Mass., 346 (18S - The right of a stockholder to compel a corporation to produce in court the corporate records has been the subject of some controversy. It has been held that a Bubpoena duces tecum will not always lie herein, but that an order to the corporation to allow an inspection is the proper remedy. La Farge v. La large Fire Ins. Co., 14 How. Pr., 26 (1857); Central Nat'l Bank v. White, 37 N. V. Super. Ct, 297 (1874X In Iowa a corporate servant who is required by a subpoena to produce the corporate books, which show that the corporation has violated the liquor laws, need not do so if the hooks are not in his posses- sion. But otherwise he is guilty of con- 684 CH. XXX.] INSPECTION OF CORPORATE BOOKS. [§ 519. Most of the states have statutes regulating this subject, and these statutes frequently displace the common-law procedure. tempt. United States Ex. Co. v. Hen- party. Johnson, etc., Co. v. North, etc., derson, 28 N. E. Rep., 426 (Iowa, 1886). Co., 48 Fed. Rep., 195 (1891). Stock ex- See, also, preceding notes. The presi- change books as evidence must be dent may be compelled by subpoena duces proved by the secretary. Terry v. Bir- tecum to produce drawings owned by mingham, etc., Bank, 9 S. Rep., 299 (Ala,, the company in a suit in which it is a 1891). 685 CHAPTER XXXI. LIENS OF THE CORPORATION ON STOCK FOR THE STOCKHOLDER'S DEBTS TO THE CORPORATION. 530-521. No lien at common law. 522 -524 A Men may be created by stat- ute, by charter, or possibly by by-law or contract — Notice of the lien. 525. What phrases in charters or stat- utes will or will not authorize the corporation to create or en- force a lien on stock. 526. The lien, when established, cov- ers all the stockholders' shares and dividends. § 527. The lien protects the corporation as to all the debts due to it from the shareholders. 528. Right of lien as against miscel- laneous parties. 529. The lien can be enforced for the benefit of the corporation only. 530. Methods of enforcing the lien. 531. The corporation may waive its lien. '. The lien a^ alected by transfers and notice. 533. The lien on national bank stock. §§ 520-521. Xo lien at common law. — Corporations, both in this country and in England, frequently possess and exercise a lien on a shareholders stock for debts due from that shareholder to the corporation. In this chapter it is proposed to consider the origin of the lien; the extent to which it may be exercised and enforced; the waiver of it by the corporation; and its effect generally upon the transfer of shares. It is clear that at common law a corporation has no lien upon the shares of its stockholders for debts due from them to the company. 1 Case, L. R,, 4 Chan., 20 (1868). See, also, Gibson, Assignee of Evans, tt Hud- son's Bay Company, Ms. Rep, Michael., 12 Geo L (1726); 7 Viner's Abridgment (2d London ed.), 125; Pinkett tt Wright, 2 Hare's Chan., 120 (1842); Byrne tt Union Bank of Louisiana, 9 Rob. (La.), 433 (1845); Hussey tt Mauuf. & Mech. Bank. 27 Mass., 415 (1830); Bryon tt Tarter, 22 La. Ann., 98 (1870). In New York the rule that there is no lien at common law is applied to banking cor- porations. Bank of Attica tt Manuf., eta. Bank, 20 N. Y., 501 (1839). And to corporations formed under the General Manufacturing Companies Act. Dris- coll r. West Bradley, etc., Manuf'g Co., 59 id, 9G (lb74). i Gemmel r. Davis, 23 Atl. Rep., 1032 (Md, 1892); Massachusetts Iron Co. v. Hooper, 61 Mass., 183 (1831); Bates v. New York Insurance Co., 3 Johns. Cas., 238 (1802); Steamship Dock Co. tt Her- on's Adm'x, 52 Pa. St., 280 (1866) ; Mer- chants' Bank tt Shouse, 102 id., 488 (1883) ; Fitzhugb tt Bank of Shepberds- ville, 3 Monroe, 126 (1825); Williams tt Lowe, 4 Neb., 382, 398 (1876); Dana tt Brown, 1 J. J. Marsh., 304 (1829) ; Heart tt State Bank, 2 Dev. Eq. (N. C), 111 (1831); Farmers', etc., Bank tt Wasson, 48 Iowa, 336 (1878) ; People tt Crockett, 9 Cal., 112(1858): Sargent tt Franklin Insurance Co., 25 Mass., 90 (1829); Neale v. Janney, 2 Cranch C. C, 188 (1819); McMumcb tt Pond Head Harbor Co., 9 U. C, Q. B., 333 (1852). Cf. Weston's 6S6 CH. XXXI.] LIEN OF THE COEPOEATION ON STOCK. [§ 522. The policy of the common law has always been to discountenance secret liens, inasmuch as thev hinder trade and restrict the safe and speedy transfer of property. It is upon this ground that the courts refuse to enforce a lien upon stock when such lien is not created by charter or by by-law. § 522. A lien may be created by statute, by charter , or possibly by by law or contract — Notice of the lien. — Such a lien as this in favor of the corporation may be created by statute, 1 by charter, 2 and the weight of authority holds that it may be created by by-law. With respect to the right of a corporation to enact a by-law creating such a lien, it. is held in many jurisdictions that such a by- law is valid and binding upon all persons who buy or transfer the shares. 3 There is nevertheless strong authority for the rule that such a by-law cannot create a lien on the stock so as to bind a bona fide purchaser, or other person into whose hands the shares may 1 Pittsburg, etc., R. R. Co. v. Clarke, 29 Pa. St., 146 (1857); First National Bank v. Hartford, etc., Ins. Co., 45 Conn., 22 (1877); Presbyterian Cong. v. Carlisle Bank, 5 Pa, St., 345 (1847); Rogers v. Huntington Bank, 12 Serg. & R, 77 (1824); National Bank v. Watson- town Bank, 105 U. S., 217 (1881). In New York a statute gives railway cor- porations which operate railroads in foreign countries a lien upon the stock for the amount of the unpaid calls. New York Sess. Laws, 1881, ch. 468. § 12. 2 Bradford Banking Co. r. Briggs, L. R, 31 Chan. Div., 19 (1885); S. C. 53 L. T. Rep. (N. S.), 846; reversing S. C, L. R., 29 Chan. Div., 149 (1885): Union Bank v. Laird, 2 Wheat., 390 (1817); Stebbins v. Phoenix Fire 'Ins. Co., 3 Paige, 350 (1832); Reese v. Bank of Commerce, 14 Md., 271 (1859) ; Brent v. Bank of Washington, 10 Peters, 596 (1836); German Security Bank v. Jeffer- son, 10 Bush (Ky.), 326 (1874); Arnold v. Suffolk Bank, 27 Barb., 424 (1857); Leggett v. Bank of Sing Sing, 24 N. Y., 283 (1863) ; Bank of Utica v. Smalley. 2 Cowen, 770 (1824); Farmers' Bank of Maryland v. Iglehart, 6 Gill, 50 (1847); Bohmer v. City Bank, 77 Va., 445 (1883) ; Hodges v. Planters' Bank, 7 Gill & J., 306 (1835); Sabin v. Bank of Woodstock. 21 Vt., 353 (1849) ; Cross v. Phenix Bank, 1 R. I, 39 (1840). 3 Knight v. Old National Bank, 3 Clif- ford, 429 (1871); McDowell v. Bank of Wilmington, 1 Harr. (Del.), 27 (1832); Bank of Holly Springs v. Pinson, 58 Miss., 421 (1880); St. Louis Perpetual Ins. Co. v. Goodfellow, 9 Mo., 149 (1845) ; Mechanics' Bank v. Merchants' Bank. 45 Mo., 513 (1870); Spurlock v. Pacific R. R Co., 61 Mo.. 319 (1875); In re Bach- man, 12 Nat. Bank. Reg., 223 (1875); People v. Crockett, 9 Cal., 112 (1858); Pendergast v. Bank of Stockton, 2 Saw- yer, 108 (1871); Lockwood v. Mechanics' National Bank, 9 R. I., 308 (1869) ; Cun- ningham v. Alabama, etc., Trust Co., 4 Ala. (N. S.), 652 (1843); Geyer v. West- ern Ins. Co., 3 Pittsb., 41 (1867); In re Dunkerson, 4 Biss., 227 (1868): Young v. Vough, 23 N. J. Eq., 326 (1873); Brent v. Bank of Washington, 10 Peters, 565, 615(1836); Child v. Hudson Bay Co., 2 P. Wms., 207 (1723) ; Planters', etc., Ins. Co. v. Selma Savings Bank, 63 Ala,, 585 (1879). Cf. Heart v. State Bank, 2 Dev. Eq. (N C), 111 (1831); Farmers', etc., Bank v. Wasson, 48 Iowa, 336, 340 (1878). In Tuttle v. Walton, 1 Ga., 43 (1846), it was said that as between the corpora- tors themselves such a by-law will be held valid. 687 § 522.] LIEN OF THE COBPOEATION ON STOCK. [CH. XXXI. come, to whom actual knowledge of the by-law cannot be im- puted. Such is the rule in New York, 1 Louisiana, 2 Massachusetts, 3 Ala- bama, 4 Pennsylvania, 5 California, 6 Mississippi 7 and, it seems, in some other states/ It is also the rule declared by the supreme court of the United States in cases that involve the right of the national banks to enact such by-laws. 9 Upon the whole it may be said that the question whether a cor- poration may, by by-law, create a lien in its own favor upon the shares of its stockholders for debts due by them to the corporation is not settled. The weight of authority in this country is against the validity of the by-law, and such would seem to be a result most in accord with a wise and broad public policy. i Driscoll v. West Bradley, etc., Co., 90 (1829), there is a somewhat decided 59 N. Y., 96 (1874) ; Bank of Attica v. Manufacturers' Bank, 20 id., 501 (1859); Rosenback v. Salt Spring National Bank, 53 Barb., 495 (1868) ; Conklin r. Second National Bank, id., 512 (1868); S. C, aff'd, 45 N. Y., 655 (1871). In the case last cited it was held that not even where the certificate of stock contained a provision that the stock was not trans- ferable until all the liabilities of the stockholder to the bank were paid did the bank acquire a lien upon the shares for the subsequent indebtedness of the share-owner. And all the New York decisions proceed upon the broad ground that the policy of the law is to protect a bona fide vendee of shares of stock against secret or equitable claims thereto. Cf. Leggett v. Bauk of Sing Sing, 24 N. Y„ 283 (1863) ; McCready v. Rumsey, 6 Duer, 574 (1857); Arnold r. Suffolk Bank, 52 Barb., 424 (1857). - Bryon v. Carter, 22 La. Ann., 98 (1870); Pitot v. Johnson, 33 id., 1286 (1881). Cf. New Orleans National Bank- ing Association r. Wiltz, 4 Woods, 43 (1881); S. C, 10 Fed. Rep., 230. 3 In Nesmith v. Washington Bank, 23 Mass., 324 (1828), the court doubted whether a by-law could under any cir- cumstances create a lien on the shares as against the creditors of the share- owner, but did not decide the point In Sargent v. Franklin Ins. Co., 25 Mass., ground taken against the validity of any by-law which tends to limit the free transfer of shares. In Plymouth Bank v. Bank of Norfolk, 27 Mass., 454 (1830), Chief Justice Shaw seems to doubt the validity of a by-law giving the bank a lien on its own stock. ♦Planters', etc.. Mutual Ins. Co. r. Selma Savings Bank,' 63 Ala, 585 (1879). 5 Steamship Dock Co. v. Heron's Adm'x, 52 Pa. St, 280 (1866); Mer- chants' Bank v. Shouse, 102 Pa. St, 488 (1881 6 Anglo-Californian Bank v. Grangers' Bank, 63 Cal, 359 (1883). " Bank of Holly Springs v. Pinson, 58 Miss., 421 (1880). 8 Carroll v. Mullanphy Savings Bank. 8 Ma App., 249 (1880); Evansville Na- tional Bank V. Metropolitan National Bank. 2 Biss., 527 (1871); Lee v. Citizens' National Bank, 2 Cin. Super. Ct, 298 (1872). Cf. Neale r. Janney, 2 Cranch C. C, 188 (1819). A lien of the corpora- tion on stock is prevented by a statu- tory provision that the company should not loan money on the security of its own stock. Nicollet National Bank v. City Bank, 35 N. W. Rep., 577 (Minn., 1887). 9 Bank r. Lanier, 11 Wall. 369 (1870); Bullard v. Bank, 18 id., 589 (1873). Vide § 533, infra. 688 CH. XXXI.] LIEN OF THE COEPOEATION ON STOCK. [§§ 523, 524. § 523. In Pennsylvania it is the statutory law that the transfer of shares of stock in a railway corporation can be made only upon payment of any indebtedness that may exist on the part of the shareholders who seek to transfer, unless the lien is waived by the corporation. 1 In New Hampshire liens upon shares are forbidden by statute. 2 "When a lien is expressly given to the corporation by its charter or by statute, all persons dealing with the corporation are affected by it and must take notice of it. 3 A statutory lien need not be set out in the certificate in order to give notice to the transferee. 4 And where the lien is not authorized by the charter or by statute, the mere declaration of its existence in the certificate will not avail against a honafide purchaser. 5 § 524. It is a salutary rule that a lien created by by-law can bind only those who take the stock with notice of the by-law. This is because by-laws do not of themselves impart or convey notice. So, 1 Pittsburgh, etc., R R. Co. v. Clarke, 29 Pa. St, 146 (1857) ; Rogers v. Hunt- ingdon Bank, 12 Serg. & R, 77 (1824). Cf. Everhart v. West Chester R R Co., 28 Pa. St, 339 (1857). 2 Hill v. Pine River Bank, 45 N. H, 300, 309 (1864). 3 Bishop v. Globe Company, 135 Mass., 132 (1883) ; Union Bank of Georgetown v. Laird, 2 Wheat, 390 (1817); Bohmer v. City Bank of Richmond, 77 Va., 445 (1883); Downer's Adm'r v. Zanesville Bank, Wright (Ohio), 477 (1833) ; Grant v. Mechanics' Bank, 15 Serg. & R, 140 (1826); St Louis Perpetual Life Insur- ance Co. v. Goodfellow, 9 Mo., 149 (1845); Bank of Utica v. Smalley, 2 Cowen, 770 (1824); Rogers v. Huntingdon Bank, 12 ■Serg. & R, 77 (1824); Sewall v. Lan- caster Bank, 17 id., 285 (1828). Cf. Steb- bins v. Phoenix, etc., Insurance Co., 3 Paige, 350 (1832). 4 McCready v. Rumsey, 6 Duer 594 (1857); Reese v. Bank of Com., 14 Md., 271 (1859) ; First Nat'l Bank v. Hartford, etc., Ins. Co., 45 Conn., 22 (1877). A lien on stock created by statute gives the corporation a prior right in the stock as against a subsequent pledgee and pur- chaser at the pledgee's sale, even though the certificate of stock gives no intima- tion of a lien. Hammond v. Hastings, (44) 689 134 U. S., 401 (1890). But where the by- law under which the lien is claimed di- rects that notice of the lien should be given in the certificate of stock, this provision must be regarded as meaning that the lien should not be asserted against a person not having notice by the certificate. And the issuance of certificates not containing this notice is a waiver of the lien contemplated by such by-law. Bank of Holly Springs v. Pinson, 58 Miss., 421 (1880). 5 Conklin v. Second National Bank, 45 N. Y., 655 (1871). But in Vansands v. Middlesex County Bank, 26 Conn., 144 (1857), it is held that a statement on the face of the certificate of stock that it is issued subject to all debts due from the owners to the corporation will bind a transferee as a qualification or restric- tion of the transferrer's title, and that, too, although no charter provision or by-law authorizes such a lien on the stock. So, also, 21 Pac. Rep., 852 (Cal., 1889). &Driscoll v. West Bradley, etc., Co., 59 N. Y., 96, 109 (1874); Bank of Holly Springs v. Pinson, 58 Miss., 421, 435 (1S80); Anglo - Californian Bank v. Grangers' Bank, 63 Cal., 359 (1883). See. also, People ex rel. Krohn v. Miller, Treas., 39 Hun, 557 (1886), con- § 525.] LIEN OF THE CORPORATION ON STOCK. [cil. XXXI. too. a by-law enacted subsequently to a transfer, although the ■ transfer has not been recorded on the corporate books, cannot affect the rights of the parties as to that transfer. 1 By-laws creating liens on stock have been, however, held valid and enforceable as against the assignees in bankruptcy or in insolvency. 2 A clause in a charter declaring that debts due from the stock holders must be paid before a transfer will be allowed is sufficient to create a lien on the stock without other action on the part of the corporation. 3 And so, also, a power conferred by the charter upon the directors to refuse a transfer so long as the shareholder who wishes to transfer is indebted to the corporation, when exer- cised by the corporate management, supports the lien. 4 A lien may be created by special agreement among the share- holders. 5 And even a mere usage of a corporation not to trans- fer shares while the owner is indebted to the corporation is suf- ficient to create a lien on stock, valid between the corporation and its shareholders, and one which will bind a shareholder who borrows money with knowledge of it. 6 §525. What phrases in charters or statutes u-ill or will not authorize Ike corporation to create or enforce a lien on stock. — The question sometimes arises whether or not the corporation, by the charter or the statute under which it acts, has authority to enact a by-law creating a lien upon its stock in favor of the corpo- ration for debts due it by the shareholders. It has been held that, where the directors are authorized to make "regulations'' as to cernins the validity and effect of by- ration lias a lien on it for debts due laws regulating the sale and transfer of to the corporation, a purchaser takes seats or membership in the commercial subject thereto. It is a contract lien, exchanges, and the enforcement of the Jennings v. Bank of CaL, 21 Pad Rfp.. liens created thereupon by such by-laws 852 (Cat, 1889). By consent of all, in favor of other members of the corpo- a lien given to the corporation for ration. debts due to it by the stockholders is People v. Crockett, 9 CaL, 112 (1858). valid and the method of foreclosing it '-' Morgan v. Bank of North America, may also be so prescribed. The statute 8 Serg. & R. 73 (1822); S. C, 11 Am. of limitations does not run against it Dec. 575; Vansands v. Middlesex Co. Reading, etc., Co. r. Reading, etc.. Bank, 26 Conn., 144 (1857); In re Bige- Works, 21 Atl. Rep., 170 (Pa., 1891). low. 1 Nat. Bank. Reg., 632, 667(1S68). 6 Wain's Assignees v. Bank of North s Farmers' Bank of Maryland Case, 2 America, 8 Serg. & R, 73. 88 (1822) ; S. Bland's Chan., 394(1830); Kenton Ins. C, 11 Am. Dec, 575. Cf. Vansands v. Co. v. Bowman, 1 S. W. Rep., 717 (Ky., Middlesex Co. Bank, 26 Conn., 144 1886). (1857). So in Bryon v. Carter, 22 La. * Arnold r. Suffolk Bank, 27 Barb, Ann., 98 (1870), it is held that a by-law 424 (1857). creating a lien, while it may be valid as 5 Vansands v. Middlesex County Bank, between the parties if it be brought to 26 Conn., 144 (1857). By inserting in their knowledge, is not binding on the the certificate of stock that the corpo- judgment creditors of the shareholders. 690 CH. XXXI.] LIEN OF THE CORPORATION ON STOCK. [§ 526. transfers, they may make a by-law creating a lien. 1 So various other phrases have been held sufficient to confer this power. 2 § 526. The lien, when established, covers all the stockholder's shares and dividends.— A valid lien in favor of the corporation, when regularly established, attaches to all the shares and dividends of the indebted stockholder. Thus, it attaches to all the shares the stockholder owns, although the debt be for calls due and unpaid upon only a part of them. 3 The lien attaches not only to the stock itself but to dividends declared on the stock. 4 It is accordinglv held that a corporation may lawfully retain dividends, and apply them to the payment of a debt due to it from the shareholder, since in an action by the shareholder to enforce payment of his dividends the corporation may plead the debt by way of set-off. 5 1 Cunningham v. Alabama, etc., Trust Co., 4 Ala. (N. S.), 652 (1843): Spurlock v. Pacific R R. Co., 61 Mo., 319 (1875); Pendergast v. Bank of Stockton, 2 Saw- yer, 108 (1871). Cf. Tuttle v. Walton, 1 Ga., 43 (1846). 2 Bryon v. Carter, 22 La, Ann., 98 (1870); Brent v. Bank of Wash., 10 Peters, 596, 611 et seq. (1836); Pender- gast v. Bank of Stockton, 2 Sawyer, 108 (Cat, 1871). Except when such power is expressly given to the directors it can only be exercised by vote of the stock- holders. Carroll v. Mullanphy Sav. Bank. 8 Mo. App., 249 (1880). A char- ter power given to the directors of a corporation "to make all by-laws not inconsistent with any existing law of the state for the management of its property, the regulation of its affairs and the transfer of its stock," has been held in Missouri to include the power in question. Mechanics' Bank v. Mech. Bank, 45 Mo., 513 (1870). But in New York the same language used in the general statute was held not to include it. Driscoll v. West Bradley, etc., Co., 59 N. Y., 96 (1874). See, also, Perpetual Ins. Co. v. Goodfellow, 9 Mo., 149 (1845) ; Vansands v. Middlesex Bank, 26 Conn., 144 (1857); Bank of Attica v. Manuf., etc., Bank, 20 N. Y, 501 (1859). For a discussion of this question as applied to natioual banks, see § 533. 3 Stebbins v. Phoenix Fire Ins. Co., 3 Paige, 350 (1832). Cf. Brent v. Bank of Washington, 2 Cranch G C, 517 (1824). In Virginia, however, it seems that there can be no lien on wholly paid up shares to secure the payment of an un- paid subscription to other shares. Shen- andoah Valley R. R. Co. v. Griffith, 76 Va„ 913 (1882). Cf Va. Code, 1887, §§ 1127, 1128, 1130; Petersburg Savings, etc., Co. v. Lumsden, 75 Va., 327 (1881). And in England a lien on stock for un- paid calls is a lien only on those partic- ular shares upon which the calls is made and not on other shares. Hubbersty v. Manchester, etc., R'y Co., L. R., 2 Q. B., 471 (1867). 4 Thus it attaches to the dividends even though only "shares and stock" be specifically named in the statute or charter as subject to the lien (Hague v. Dandeson, 2 Exch., 147 — 1848), and though, in the absence of express pro- vision, it is held that no such lien im- pliedly exists. Sargent v. Franklin Ins. Co., 25 Mass., 90 (1829) ; Bates v. N. Y. Ins. Co., 3 Johns. Cas., 238 (1802). So, in Hagar v. Union Nat'l Bank, 63 Me., 509 (1874), it was held that the terms of the act of 1864 which are inconsistent with the existence of a stock lien do not preclude a lien on dividends. » 5 Hagar v. Union National Bank, 63 Me., 509 (1874); Sargent v. Franklin Ins. Co., 25 Mass., 90 (1829); Bates v. New York Ins. Co., 3 Johns. Cas., 238 (1802). 691 § 527.] LIEN OF THE CORPORATION ON STOCK. [CH. XXXI. But dividends declared after the death of the stockholder are not subject to a lien for his debts. 1 The lien attaches to the shares even after a liquidation or dissolution of the company. 2 It attaches not only to valid stock, but to spurious stock obtained by forgery. 5 So also the lien attaches to trust stock for debts due from a trustee who holds stock in trust, but in his own name, and without any in- dication of the trust. 4 Where a cestui que trust owes the corpora- tion a debt, the lien attaches to his stock though held for him in the name of a trustee. 5 And stock standing on the corporate books in the name of a fictitious person is subject to a lien for the indebt- edness of the real owner. 6 § 527. The lien protects the corporation as to all the debts due to it from the shareholder. — It is a general rule that alien upon stock is a lien for all debts of the shareholder due to the corporation; 7 and it is not necessary that the debt be due and payable at the time when the lien is sought to be enforced. It covers debts which are not due as well as those that are due, and all indebtedness to the corporation, whether payable presently or at a future time. 8 Cf. Merchants' Bank r. Shouse, 102 Pa. St.. lsS (1883); S. C, 1G Rep., 442; Brent v. Bank of "Washington, 2 Cranch C. C, 517 (1824). See, also, § 545, infra. 1 Brent v. Bank of Washington, supra; Merchants' Bank v. Shouse, supra. 2 In re General Exchange Bank, L. P., C Chan., 818 (1871). *Mt Holly Paper Co.'s Appeal, 99 Pa St, 513 (1882). 4 Now London & Brazilian Bank v. Brocklebank, L. R, 21 Chan. Div., 302 (1882); Young v. Vough, 23 N. J. Eq., .°>25 (1873); Burns v. Lawrie's Trustees, 2 Scotch Ct of Sessions Cas. (2d series i, 1348 (1840); otherwise cited, 2 Dunlap, Bell & Murray, 1348. 6 Stebbins v. Phoenix Fire Ins. Co., 3 Paige, 350 (1832). 6 Stebbins v. Phoenix Fire Ins. Co., 3 Paige, 350 (1832), where the president of a corporation with fraudulent intent procured shares to be recorded in a ficti- tious name, and, having himself become indebted to the corporation, procured an assignment of the shares to another creditor, who sought to have the trans- fer recorded. Held, that the lien still attached for the debts of the original holder. 7 1'nion Bank of Georgetown v. Laird, 2 Wheat, 890(1817); Mobile Mutual Ins. Co. v. McCallum, 19 Ala., 558 (1873); Cunningham r. Ala, etc., Trust Co., 4 Ala. (N. S.), 652 (1843); Rogers v. Hunt- ingdon Bank, 12 Serg. & 11,11 (1824); !■:.■■ parte Stringer, L R, 9 Q. B. Div., 43G (1882); In re Peebles, 2 Hughes, 394 (Va.. 1875); Planters', etc., Mutual Ins. Co. v. Selma Savings Bank, G3 Ala., 585 (1879). s Pittsburg, etc., R R Co. v. Clarke, 29 Pa. St., 146 (1857); In re Bachman, 12 Nat Bank. Reg., 223 (1875); Down- er's Adm'r v. Zanesville Bank, Wright (Ohio), 477 (1833); Brent v. Bank of Washington, 10 Peters, 596(1836); Grant v. Mechanics' Bank, 15 Serg. & R, 140 (1826); Rogers v. Huntingdon Bank, 12 id, 77 (1824); Sewall v. Lancaster Bank, 17 id.. 285 (1828); McCready r. Rumsey, 6 Duer. 571 (1857); St. Louis Perpetual Insurance Co. v. < r< o 1 lei low, 9 Mo., 149 (1845); Cunningham v. Ala., etc., Trust Co., 4 Ala. (N. S), 652 (1843;; Hall v. United States Ins. Co., 5 Gill (Md.), 484 (1847): Leggett v. Bank of Sing Sing, 24 N. Y., 283 (1862) ; In re Stockton Mal- leable Iron Co., L R, 2 Chan. Div., 101 (1875). In Grant V. Mechanics' Bank, 692 OH. XXXI.] LIEN OF THE COKPORATION ON STOCK. [§ 527. The lien also will continue for the benefit of the corporation, al- though the debt be barred bv the statute of limitations. 1 The lien attaches whether the stockholder's debt to the corporation accrued before or after he became a stockholder. 2 It also secures debts for which the shareholder is liable only as surety, 3 and debts due from a partnership in which the stockholder is a partner. 4 So, also, it secures the corporation for unpaid calls upon the original subscrip- tion. 5 But the lien does not attach until a call is made. 6 supra, it was held that a bank organ- ized under the Pennsylvania law of March 21, 1814, might lawfully refuse to permit the transfer of the stock of a shareholder who was the drawer of a bill discounted by the bank, but not payable at the time the transfer was de- manded — both the shareholder and his indorser having, since the discount of the paper, become insolvent So, also, Downer's Adm'r v. Zanesville Bank, supra. But where the lien is expressly made a security for debts " actually due and payable," it will be held to cover only debts due and payable. Beese v. Bank of Commerce, 14 Md.. 271 (1859). Cf. Downer's Adm'r v. Zanesville Bank, supra. 1 Farmers' Bank of Md. v. Iglehart, 6 Gill (Md.), 50 (1847); Geyer v. Western Ins. Co., 3 Pittsb., 41 (1867); Brent v. Bank of Washington, 10 Peters, 596, 617 (1836). 2 Schmidt v. Hennepin, etc., Co., 35 Minn., 511 (1886). 3 McLean v. Lafayette Bank, 3 McL, 587(1846) ; Leggettn Bank of Sing Sing, 24 N. Y., 283 (1862); Union Bank of Georgetown v. Laird, 2 W T heat., 390 (1817); McDowell v. Bank of Wilming- ton, 1 Harr. (Del.), 27 (1832); Brent v. Bank of Washington, 10 Peters, 596, 615 (1836); St Louis Perpetual Ins. Co. r. Goodfellow, 9 Mo., 149 (1845). Cf. Miles v. New Zealand, etc., Co., 54 K T. Rep., 582 (1886); West Branch Bank v. Armstrong, 40 Pa. St., 278 (1861). A corporation, on discounting a bill or note, may take security from one of the parties, and also hold the shares of another party as security for the same loan. Union Bank v. Laird, sujwa. Cf. Conant v. Seneca Co. Bank, 1 Ohio St, 298 (1853) ; Helm v. Swiggert, 12 Ind., 194 (1859); Dunlop v. Dunlop, L. R., 21 Chan. Div., 583 (1882), holding that where the corporation has other security it is not obliged to resort to the lien. 4 In the Matter of Bigelow, 2 Benedict, 469 (N. Y., 1868); Geyer v. Western Ins. Co., 3 Pittsb., 41 (1867) ; Arnold v. Suffolk Bank, 27 Barb., 424 (1857) ; Planters', etc., Ins. Co. v. Selma Savings Bank, 63 Ala,, 585 (1879). »Spurlock v. Pacific R R Co., 61 Mo., 319 (1875); McCready v. Rumsey, 6 Duer, 574 (1857): Regina v. Wing, 33 Eng. L. & E., 80 (1855); Ex parte Lifc- tledale, L. R, 9 Chan., 257 (1874) ; Com- panies Clauses Consolidation Act 1845 (8 Vict, ch. 16, § 16); Shaw v. Row- ley, 5 Eng. R'y & Canal Cas.. 47 (1847); Ex parte Tooke, 6 id., 1 (1S49V Cf. Newry, etc., R'y Co. v. Edmunds, 2 Exch., 118 (1848); Ambergate, etc., R'y Co. v.' Mitchell, 4 id., 540(1849); Great North of Eng. R'y Co. v. Biddulph, 7 Mees. & W., 243 (1840); Pittsb., etc., R R Co. v. Clarke, 29 Pa. St. 146 (1857); Rogers r. Huntingdon Bank. 12 Serg. & R, 77 (1824) ; Petersburg Sav., etc., Co. v. Lumsden, 75 Va., 327 (1S81). Cf. Hall v. U. S. Ins. Co., 5 Gill (Md.), 6 A director transferring his shares is fixed and not by a mere general reso- before the call avoids the lien although lution. Re Cowley, etc,, Co., 61 K T. he knew the call was to be made. The Rep., 601 (1889). call is made when the date of payment 693 §§ 523, 520.] LIEN OF THE COEPOEATION ON STOCK. [(I'll. XXXE Whether the lien will avail to protect the corporation as to in- stalments on the stock not called seems not to be settled. "Whether it does or not will depend upon the wording of the provision au- thorizing the lien. Generally no such lien exists. 1 The lien also attaches to the stock of a depositor who has overdrawn his ac- count. 2 § 528. Right of lien as against miscellaneous parties. — The lien of a corporation on shares of stock as security for the payment of debts due to the corporation from the owner is a lien only as to the indebtedness of duly recorded shareholders. 3 There is no lien on the stock as to debts of an intervening unrecorded owner of the stock. 4 § 529. The lien can be enforced for flu benefit of the corporation only. — The right of a corporation to a lien on the stock of its shareholders as security for the payment of their debts to the cor- poration is a right to be enforced only by the corporation ami exclusively for its own benefit. Accordingly, it is held that the corporation cannot become the assignee of the claim of some third person against one of its shareholders in order to enforce payment of that claim for the benefit of the third person by a recourse to the corporate lien on the shareholder's stock. 5 Neither can the corporation be compelled, for the benefit of sureties as to a part of the shareholder's indebtedness, to apply the proceeds of the sale of the stock to the liquidation of that part of their claim which is secured.* The lien is for the benefit of the corporation, and it may 484, 4' 99 ' I s IT <, holding that instalments wise acquired, and the lien may attach not called in constituted no such in- thereto. dehtedness as was contemplated in the * Helm v. Swiggert, 12 Ind., 194 (1859). statutory provision for the lien. Such ■> White's Bank r. Toledo, etc., Ins. a construction "would he to render Co.. 12 Ohio St., GDI (1861). To the point its stock wholly untransferable until that this lien is one exclusively for the the par amount of it had been paid benefit of the corporation, see Bank of up, although the requisite instalments Utica v. Smalley, 2 Cow en. 770 (1834), for that purpose had never been called "Cross v. Phenix Bank, 1 R I., 39 in." (1840). But see Kuhns r. Westmore- ' Hall r. United States Ins. Co., 5 Gill land Bank. 2 Watts (Pa.), 136 {1888), (Mil.), 484 (1847), Cf. In re Bachman, where it is said that "the principle that 12 Nat. Bank. Reg., 223 (1875); Pitts- a surety is entitled to the benefit of all burg-h, etc., R R Co. V. Clarke, 29 Pa. the creditor's securities is of such uni- St, 146 (1857'. versal application that it would require 2 Reese v. Bank of Commerce, 14 Md., strong evidence of legislative intention 271 (1859). to make the present case an exception 3 Cf Z$ 526, 538. Where the legal title to it" Cf. also Klopp v. Lebanon Bank, to shares can only be acquired by a 46 Pa. St., 88 (1863); Petersburg Sav- transfer made in a prescribed mode, yet iugs Co. v. Lumsden, 75 Va, 327, 340 a complete equitable title may be other- (1881). 694 CH. XXXI.] LIEN OF THE CORPORATION ON STOCK. [§ 530. apply the proceeds of the sale of the stock in such a way as best to subserve its own interest. 1 § 530. Methods of enforcing the Ken.— When a corporation has a lien upon the stock of those of its shareholders who are indebted to it, it may refuse to allow a transfer of the stock until the debt is paid or secured to its satisfaction. This is the usual method of enforcing the lien. 2 And the corporation may insist upon its lien and hold the stock even against a bona fide purchaser. 3 It may, moreover, hold the whole amount of the shareholder's stock, al- though the amount of the debt be less than the value of the shares. It cannot be compelled to transfer so much of the stock as is in •excess of the amount of the debt. 4 But the corporation can en- force its lien against the transferee only by a refusal to allow the transfer or by a suit to foreclose. It cannot elect to make the transferee personally liable for the debt. The corporation may, however, proceed by an attachment of the stock. 5 So, also, upon non-payment of the debt, the corporation may make an application to a court of chancery and have the shares sold in the usual way, as in other cases of property held under a lien. 6 A decree authorizing the sale of stock for the payment of i Planters', etc., Ins. Co. v. Selma Sav. Bank, 63 Ala., 585 (1879); Mt. Holly Paper Co.'s Appeal, 99 Pa. St, 513 (1882) ; Anglo-Cal. Bank v. Grangers' Bank, 63 Cat, 359 (1883); Bishop v. Globe Co., 135 Mass., 132 (1883). 2 Reese v. Bank of Commerce, 14 Md., •271 (1859) ; Brent v. Bank of Washing- ton, 10 Peters, 596 (1836) ; First National Bank of Hartford v. Hartford, etc., Ins. Co., 45 Conn., 22 (1877); Vansands v. Middlesex County Bank, 26 Conn., 144 (1857); Farmers' Bank of Maryland v. Iglehart, 6 Gill (Md.), 50 (1847); Mc- Cready v. Rumsey, 6 Duer, 574 (1857) ; Tuttle v. Walton, 1 Ga., 43 (1846; ; Sewall v. Lancaster Bank, 17 Serg. & R., 285 (1828) ; Rogers v. Huntingdon Bank, 12 id., 77 (1824); Grant v. Mechanics' Bank, 15 id.. 140 (1826). Cf. Sabin v. Bank of Woodstock, 21 Vt., 353 (1849) ; West Branch Bank v. Armstrong, 40 Pa, St., 278 (1861). In Bishop v. Globe Co., 135 Mass., 132 (1883), the rule is declared that if by the law of the state under which a corporation is organized the corpora- tion has a lien on the stock of any share- holder for a debt due from him to the corporation that the lien is a good defense to an action in another state against the corporation by a person to whom the shareholder has transferred his stock, but in whose name, by reason of the lien, the corporation has refused to register the transfer. 3 Newbury v. Detroit, etc., R. R. Co., 17 Mich., 141 (1868) ; Titcomb v. Union, etc., Ins. Co., 8 Mass., 326 (1811); Rogers v. Huntingdon Bank, 12 Serg. & R., 77 (1824) ; Grant v. Mechanics' Bank, 15 id., 140 (1826); Sewall v. Lancaster Bank, 17 id., 285 (1828); West Branch Bank v. Armstrong, 40 Pa. St., 278 (1861); Mechanics' Bank v. Merchants' Bank, 45 Mo., 513 (1870); St. Louis Per- petual Life Ins. Co. v. Goodfellow, 9 id., 149 (1845); Tuttle v. Walton, 1 Ga, 43 (1846). 4 Sewall v. Lancaster Bank, 17 Serg. & R., 285 (1828); Pierson v. Bank of Washington, 3 Cranch C. C, 363 (1828). 5 Sabin v. Bank of Woodstock, 21 Vt, 353 (1849). 6 In re Morrison, 10 Nat'l Bank. Reg., 105 (1874) ; Farmers' Bank of Maryland's Case, 2 Bland's Chan. (Md.), 394 (1830) ; 695 § 531.] LIEN OF THE CORPORATION ON STOCK. [cn. XXXI. the debt need not give the shareholder the right of redemption. An absolute and valid title may pass to the purchaser immediately upon the sale. 1 A valid lien in favor of a bank upon shares of stock in the bank belonging to the estate of a deceased person will not yield to a prior claim against the estate in favor of the govern- ment. 2 But an unwarranted claim of lien by a corporation, and a consequent refusal to register a transfer until the debt as to which the lien is asserted is paid, is a conversion of the shares, and the transferrer may have his action against the corporation therefor. 5 In order, however, to put the corporation in the wrong for a re- fusal to transfer where it claims more than is due, the shareholder must tender what he admits to be due. 4 A corporation is liable in damages for selling the stock of a stockholder for non-payment of dues where such sale was irregular and illegal. 5 § 531. The corporation may waive its Urn. — A corporation which has a lien upon its stockholders' stock for debts due to it from them need not necessarily depend upon or insist upon its lien for the col- lection of the debt. It has two remedies — one to enforce the lien, the other to collect the debt as though there was no lien. 6 Hence Brent r. Bank of Washington, 10 Peters, 596 (1836). Under the California code a corporation may by suit foreclose a lien which it has on its stock. Mechanics', etc., Assoc, v. King, 23 Pac, Rep., 376 (Cat, 1890). 1 Reese v. Bank of Commerce. 11 Md., 271,284 (1859). In one case the lien was held to be equivalent to a pledge; and it was held that, after giving due notice to the delinquent shareholder, the cor- poration might sell at public auction without filing a bill to foreclose. Farm- ers' Bank of Maryland's Case, supra. In this case it is also held that, where the corporation neglects or refuses to sell the stock of a deceased shareholder who is in arrears, the administrator may file a bill and obtain an order of sale directed to the corporation. '-'Brent v. Bank of Washington, 10 Peters, 596 (1836). 3 Bank of America r. McNeil, 10 Bush, 54 (1873). Cf. Dickinson v. Central Na- tional Bank. 129 Mass.. 279 (1880); Case v. Bank, 100 U. S., 446 (1879); Skinner v. City of London Co., 53 L. T.. 191 (1885), holding, also, that only nominal dam- ages could be recovered where the terms of the transfer were secret 4 Pierson v. Bank of Washington, 3 Cranch C. C, 363 (1828). In German Security Bank v. Jefferson, 10 Bush, 326 (1874), it was held that, where the stock sold under the lien realized a sum in- sufficient to satisfy the corporate debt, the unpaid balance of the claim of tho corporation could not be paid until there had been a proportionate payment of the claims of other creditors of the shareholder out of his general assets. Cf. In re Peebles, 2 Hughes, 394 (1875). 5 The sale here was contrary to the requirements of the by-laws. The cor- poration bought the stock itself at such sale. The fact that a surplus realized at the sale was sent to the stockholder by check, and was received by him, did not l>ar his remedy, he being in igno- rance of the illegality. Allen v. Amer- ican Building, etc., Ass'n et ah, 52 N. W Rep., 144 (Minn., 1892). 6 A subscriber for stock cannot avoid liability to the corporation by setting up that the corporation has a lien on the stock therefor and may enforce it 696 CH. XXXI.] LIEN OF THE COEPOEATION ON STOCK. [§ 531. it is that the lien of a corporation on stock may be asserted and enforced, or in the discretion of the corporation it may be waived. 1 Where the corporation has other security it is not obliged to re- sort to the lien. 2 Cases may arise where the intervening rights of other creditors of the shareholder render it inequitable for the cor- poration to waive its lien on the stock, 3 but in general the right of the corporation to waive the lien at its option is absolute. Accordingly, where a note discounted for a shareholder was pro- tested for non-payment, it was held that the bank might waive its lien on the stockholder's shares in the bank and proceed directly against the indorser. 4 And the corporation, by waiving the lien, does not discharge a surety unless the surety has given the corpo- ration express notice not to waive the lien. 5 The corporation will not be held to have waived its lien upon the stock of its debtor merely because it has taken other or additional security for the debts; 6 nor because it assents to a general assignment by the share- holder for the benefit of creditors. 7 And the corporation may allow the transfer of a portion of a shareholder's stock without waivino- its lien on the rest. 8 But a waiver of the lien for a limited time is fatal, provided the stock is transferred during that time. 9 A waiver which will bind the corporation may, in the absence of something to qualify the power, be made by the cashier of a bank, acting by virtue of an express or implied authority, for the board Lankershim, etc., Co. v. Herberger, 23 s In re Bach man, 12 Nat. Bank. Reg., Pac. Rep., 134 (Cat, 1890). 223 (1875). 1 National Bank r. Watson town Bank, 4 Cross v. Phenix Bank, 1 R. I., 39 105 U. S., 217(1881); S. C, sub nom. (1840). Cecil National Bank v. Watsontown 5 Perrine v. Fireman's Ins. Co., 22 Ala., Bank, 21 Am. Law Reg. (N. S.), 545 575 (1853). Hodges v. Planters' Bank, 7 Gill & J., 6 Union Bank of Georgetown v. Laird, 306 (1835) ; Hall v. United States Ins. 2 Wheat, 390 (1817). Co., 5 Gill (Md.), 484 (1847) ; In re Hoy " Dobbins v. Walton, 37 Ga.. 614 (1868). Lake R'y Co., K R., 9 Chan., 257, 259 8 First National Bank of Hartford v. (1874). But see Conant v. Seneca Co. Hartford, etc., Insurance Co., 45 Conn., Bank, 1 Ohio St, 298, 301 (1853) ; In re 22 (1877). But cf. Presbyterian Congre- Bigelow, 1 Nat Bank. Reg., 667 (1868). gation v. Carlisle Bank, 5 Pa. St, 345 A waiver is the intentional relinquish- (1847). ment of a known right It is not to be 9 Thus, if within such time the stock inferred and imputed to a corporation is pledged for a debt, the right of the in the abseDce of proof of it, and a corporation, after the expiration of the mere failure to assert the lien is not time to acquire its charter lien, is subor- equivalent to a relinquishment or waiver dinate to the right of the pledgee until of it. First National Bank of Hartford the debt is paid or the pledge is re- v. Hartford, etc., Ins. Co., 45 Conn., 22, leased. Bank of America v. McNeil, 10 44 (1877). Bush (Ky.), 54 (1873). 2 Dunlop v. Dunlop, L R, 21 Ch. D., 583 (1882). 697 § 531.] LIEN OF THE CORPORATION ON STOCK. [CH. XXXI. of directors; 1 or the secretary of an insurance company; 2 or the general manager or properly-qualified general agent of the corpo- ration, especially if that is a general custom of the company. 3 Ac- cordingly, where one buys shares on the faith of a representation of the corporate officers that the stock is unincumbered, he is enti- tled to the shares free from any corporate lien. 4 And where the corporate officers allow a transfer to be regis- tered and a new certificate to be issued, there is a waiver of the corporate lien as to the debts of the transferrer. 5 It is held that a failure to recite the lien on the face of the cer- tificate is not a waiver of the lien, 6 and that a statement in the cer- tificate that the holder is entitled to a certain number of shares, transferable upon presentation and surrender thereof, is not a waiver of the lien, though there be no assertion of the lien, but is a mere indication of the manner in which the shares are to be transferred. 7 When the lien is given to the corporation by the charter or the articles of association, or by statute, there is con- structive notice to all persons dealing with the corporation that they must at their peril, without reference to what the certificate recites or fails to recite, inform themselves as to any debts to the corporation that may affect the shares they propose to buy. If there is a lien they are held to have known it, whether the certifi- cate declares it or not. As already explained, where the lien is created by a by-law it is something of which purchasers of the shares cannot be held to have had constructive notice. In such a case, if the certificate does not disclose the lien, and actual knowl- edge of it be shown, a bona fide purchaser would be protected. I'.ut the rule is otherwise where the lien is created by statute or the charter of the corporation. 8 i National Bank v. Watsontown Bank, R, 4 Exch., 387 (1869); In re Northern 105 U. S., 217 (1881). So, also, the re- Assam Tea Co., L. R, 10 Eq., 458 (1870). fusal of the cashier to permit a transfer So, also, a by-law requiring the consent is the act of the bank, for which it may of the board of directors to a transfer be charged. Case v. Bank, 100 U. S., by one indebted to the corporation is 440 (1879). held to be repealed where a custom of '-' Chambersburg Ins. Co. v. Smith, 11 disregarding it has been shown, it ap- Pa. St.. 120 (1849). Cf. Kenton In.-?. Co. pearing also that the secretary had been v. Bowman, 1 S. W. Rep., 717 (Ky., allowed to exercise his own discretion 1886), about such transfers without consulting » See Bishop v. Globe Company, 135 the directors. In such a case the con- Mass., 132 (1883); Young v. Vough. 23 sent of the secretary to the transfer is N. J. Eq., 325 (1873). a waiver of the lien. Chambersburg * Moore v. Bank of Commerce, 52 Ins. Co. r. Smith, 11 Pa, St, 120 (1849). Mo., 377 (1873). 6 See §523. 8 Hill v. Paine River Bank, 45 N. H., "See § 523. 300(1864); Higgs v. Assam Tea Co., L. 8 Bank of Holly Springs v. Pinson, 698 CH. XXXI.] LIEN OF THE CORPORATION ON STOCK. [§ 532. §532. The lien as affected hy transfers and notice. — Upon a transfer of stock the title thereto passes absolutely as between transferrer and transferee, even though the corporation, in the as- sertion of a lien upon the stock for the indebtedness of the trans- feree, refuses to register the transfer until a certain debt is paid or secured. 1 But of course the assignee or transferee, or whoever succeeds to the rights of the shareholder in the stock, takes it sub- ject to the lien of the corporation. 2 And when the stock is sold by the corporation to pay the debts of the transferrer, the trans- feree is entitled to the surplus, if any there be, which remains after the claim of the corporation is satisfied. 3 The corporation cannot, after it has been regularly notified of the transfer, assert a lien upon the stock to secure an indebtedness of the transferrer contracted subsequently to the notice. 4 A mere notice to the bank is, in such a case, sufficient to protect the trans- feree. It is immaterial that the transfer was not registered. 5 And in a case where the transfer was registered but no certificate had been issued, it was held that a pledgee was protected. 6 But where 58 Miss., 421 (1880); Anglo-Calif ornian Bank v. Grangers' Bank, 63 Cal., 359 (1883). See § 523. 1 National Bank r. Watsontown Bank, 105 U. S„ 217 (1881); Johnson v. Laflin, 103 id., 800 (1880) ; Fitzhugh v. Bank of Shepherdsville, 3 Mon. (Ky.). 126(1825); St. Louis Perpetual Life Ins. Co. v. Goodfellow, 9 Mo., 149 (1845): Commer- cial Bank of Buffalo v. Kortright, 22 Wend., 348 (1839); S. C, sub nom. Kort- right v. Buffalo Commercial Bank, 20 id., 91 (1838) ; Bank of Utica v. Smalley, 2 Cowen, 770 (1824); McNeil v. Tenth National Bank, 46 N. Y., 325 (1871); People ex rel. Krohn v. Miller, 39 Hun, 557, 563 (1886). Cf. Dunn v. Commercial Bank of Buffalo, 11 Barb., 580; Mer- chants' Bank v. Livingston, 74 N. Y., 223 (1878); Pittsburgh, etc., E. R. Co. v. Clarke. 29 Pa. St., 146 (1857); Sargent v. Essex Marine R'y Corp., 26 Mass., 202 (1829); Carroll v. Mullanphy Savings Bank, 8 Mo. App., 249 (1880). Corpora- tions having a statutory lien on stock for debts, nevertheless must allow trans- fer to one who takes subject to the cor- porate lien for part of the unpaid sub- scription. Herdegen v. Cotzhausen, 36 N. W. Rep., 385 (Wis., 1888). The lien attaches when a call is made and not when it becomes due. Queen v. London- derry, etc., R'y, 13 Q. B., 998 (1849). - Mobile Mutual Ins. Co. v. Cullom, 49 Ala., 558 (1873): New Orleans Na- tional Banking Association v. Wiltz, 4 Woods, 43 (1881); S. C, 10 Fed. Rep., 330. 3 Weston v. Bear River, etc., Mining Co., 5 Cal., 186 (1855) ; Tuttle v. Walton, 1 Ga. (1846); Foster v. Potter, 37 Mo., 325 (1866) ; West Branch Bank v. Arm- strong, 40 Pa. St., 278 (1861). 4 Conant v. Seneca County Bank, 1 Ohio St., 298 (1853); Nesmith r. Wash- ington Bank, 6 Pick., 324 (1828). The same rule applies where the stock is pledged. Bradford, etc., Co. v. Briggs, 56 L. T. Rep., 62 (1886). But where the shareholder transfers his stock, and sub- sequently, without notifying the corpo- ration of the transfer, borrows money from the corporation in regular course of business, the corporation may refuse to register the transfer and may insist upon the lien. Piatt v. Birmingham Axle Co., 41 Conn., 255 (1874). 5 Bank of America v. McNeil, 10 Bush, 54(1*7:!:. 6 Cecil National Bank v. Watsontown 699 § 532.] LIEN OF THE CORPORATION ON STOCK. [CH. XXXI. there is neither a register of the transfer nor notice of it served upon the corporation, the stock may properly be subjected to a cor- porate lien for the indebtedness of the transferrer incurred subse- quently to the transfer. 1 A pledgee who is duly registered on the corporate books as a shareholder, but to whom no certificate has been issued, is nevertheless protected against liens upon his shares for the indebtedness of the pledgor. 2 But a pledgee who neglects to notify the corporation that he holds the stock m pledge, or to take the proper steps to secure title to the stock in his own name, will not be protected against the lien of the corporation upon the stock to secure the payment of an indebtedness contracted to the bank by the pledgor in the meantime and subsequently to the pledge of the shares. 3 A corporate lien will not attach to stock for the debts of a legatee unless the legatee accept the shares. 4 AVhere one pays a debt as surety for ;i shareholder, he is entitled to be subrogated to the rights of the corporation by way of lien on the shareholder's stock."' And where the transferee pays the transferrer's debt to the corporation in order to obtain a registry of the transfer, he of course may have his action to recover back from his transferrer the amount so paid. 6 Hank, 21 Am. Law Reg. (N. S.). 546 (1881); S. C., sub ),<„». National Bank v. Watsontown Bank. 105 U. S., 817. 1 Piatt v. Birmingham Axle Co., 41 ('..mi., 855(1874). In England the rule lias been recently settled, after much contest, that a provision in the articles of association creating a paramount lien on shares in favor of the corporation gives the company priority over a mort- gagee of the shares, or over one whose claim is an equitable one, of whose charge upon the shares the company had notice before the specific liability of the shareholder toward the company has been incurred. Bradford Banking Co. v. Briggs, L. R, 31 Chan. Div., 19 (1885) ; S. C, 53 L. T. Rep. (N. S.). 846 ; reversing S. C, L. R, 29 Chan. Div., 149 (1885). See. also. Miles v. New Zealand Alford Estate Company, 54 L. J., Chan., 1035 (1885); S. C, Week. Notes (1885), page 142; S. C, 53 L. T. Rep. (N. S.), 219; Re Dunlop, 48 L. T. Rep. (N. S.), 89 (1883); Societe Generale de Paris v. Tramways Union Co., L. R, 14 Q. B. Div., 424 (1884); New London & Bra- zilian Bank v. Brocklebank, L R, 21 700 Chan. Div.. 302 (1882). In England, however, unrecorded transferees of stock have few if any rights as against the corporation ; and this is the reason for these decisions. Contra, Pitot v. Johnson. 33 La. Ann., 1286. See £ 377, infra. - National Bank v. Watsontown Bank, 105 U. S., 207 (1881). 'Piatt v. Birmingham Axle Co., 14 Conn.. 255. 264 (1N74); 21 Pac. Hop, 852 ( See, also, § 262, supra. :>>7. Interest-bearing stock. 533. To whom the corporation is to pav the dividend. 539. To whom the dividend belongs. 540. Dividends must be equal and without preferences. 541. A dividend when declared is a debt due absolutely to the shareholder. 542-543. It is a debt which may be collected by legal proceedings. 544. Right of the corporation to apply dividends to the payment of debts due to it by the share- holder. 545. The courts very rarely compel the directors to declare a divi- dend. 546. Dividends can be made only from profits — What are profits which may be used for divi- dends. 547. A stockholder may enjoin an illegal dividend. 548. Dividends which impair the capi- tal stock are illegal aud may be recovered back from the stockholders — Dividends on dissolution. 5 10. Proceedings to recover back such a dividend. 550. The liability herein of the corpo- rate officers. 551. Guarantee of dividends by con- tract § 534. Definition of a dividi nd and tin four kinds of dividends.— A dividend is a corporate profit set aside, declared and ordered by the proper corporate authorities to be paid to the stockholders on demand or at a fixed time. 1 Until the dividend is declared these corporate profits belong to the corporation, not to the shareholders, and are liable for corporate indebtedness. 2 A corporation may, in general, make four different kinds of divi- dends: namely, a dividend payable in cash, in stock, in bonds or scrip, or in property. Dividends are declared by the directors and not by the stock- holders. 3 A division of profits without the formality of declaring a dividend is equivalent to a dividend. 4 ILockhardt v. Van Alstyne. 31 Mich., neither tenants in common nor copart- 76 (1875) ; Chaffee v. Rutland R R Co.. ners of corporate property. 55 Vt, 110, 129 (1882); Hyatt v. Allen, 56 N. Y., 553 (1874). 2 Goodwin r. Hardy, 57 Me.. 143, 145 (1869); Rand v. Hubbell. 115 Mass., 461, 474 (1874); Minot u Paine, 99 id., 101 (1868); Hyatt v. Allen, supra; Mickles v. Rochester, etc., Bank. 11 Paige, 118 (1844), holding that stockholders are 3 See § 545, infra. «Rorke r. Thomas. 56 N. Y., 559 (1874) ; Reading, etc., Co. r. Reading, etc., Works. 21 Atl. Rep.. 170 (Pa., 1891); McKusick v. Seymour, etc., Co., 50 N. W. Rep., 1116 (Minn., 1892). Where a fixed per cent, is paid annually to stock- holders instead of dividends and charged 702 CII. XXXII.] DIVIDENDS. [§ 535. Numerous cases on the definition of the word "dividend " have arisen in connection with the taxation of corporations. 1 § 535. Scrip dividends, property dividends and bond dividends. — A scrip dividend is a dividend of certificates giving the holder cer- tain rights which are specified in the certificate itself. These divi- dends are usually declared when the company has profits which are not in the shape of money, but are in other forms of property, and the company wishes to anticipate the time when the property may be sold for cash, and the cash distributed by a money divi- dend. The certificate sometimes entitles the holder to a sum of money payable with interest at a certain time after date, or at the option of the company, or when the company shall have accumu- lated sufficient surplus to pay the certificates in full. Sometimes the certificates are certificates of indebtedness and are made con- vertible at the option of the holder into bonds or stocks; 2 and sometimes the certificate entitles the holder to exchange the cer- to them and the stock held in pledge for the same, such a payment to the life tenant does not create a valid lien on the stock as against the remainder- man. Reading, etc., Co. v. Reading, etc., Works, 21 Atl. Rep., 169 (Pa., 1891). 1 A tax upon the receipts of a railroad is not a tax upon dividends. Comm'rs, etc., v. Buckner, 48 Fed. Rep., 533 (1891). Profits applied to betterments are not " dividends earned " within the meaning of a statute imposing taxation. State v. Comptroller, 23 Atl. " Rep., 122 (N. J., 1891). Where all the shares are reduced in par value from $50 to $38 and the $12 difference is paid to the stockholders in cash, this is a reduction of capital stock and not a dividend and cannot be taxed as a dividend. Commonwealth v. Cen- tral T. Co., 22 Atl. Rep., 209 (Pa., 1891). Where a tax is levied on dividends the officers cannot defend on the ground that the dividend was illegal. Central Nat'l Bank v. United States, 137 U. S., 355 (1890). In Commonwealth v. Pitts- burg, etc., R'y, 74 Pa. St., 83 (1873), a lessor company having twelve per cent, divi- dends guarantied on its stock declared a stock dividend so that the guarantee should be seven per cent, on the stock thus increased. The court held that such a dividend did not subject the com- pany to a tax based on dividends. In Louisiana taxes are assessed on fran- chises, the value of which is ascertained from the earning capacity of the corpora- tion. Crescent City R. Co. v. City of New Orleans et al, 11 S. Rep., 681 (La., 1892); New Orleans, etc., Co. v. City of New Orleans et al, 11 id., 687 (La., 1892); New Orleans City, etc., Co. v. City of New Orleans et al, 11 id., 820 (La., 1892). 2 Chaffee v. Rutland R. R. Co., 55 Vt, 110 (1882) ; State v. Baltimore, etc., Co., 6 Gill (Md.), 363 (1848). In the case of Rogers v. New York, etc.. Land Co., 134 N. Y., 197 (1892), land had been sold to the company for a certain amount of preferred stock and also a certain amount of " land scrip," such scrip en- titling the holder to exchange them for land so conveyed at a price to be there- after determined. The company had the right to pay off the scrip and retire it. The company sold part of the land, and then proceeded to make a scrip dividend of the scrip so taken up by it A dissenting scripholder brought suit to undo the transaction on the ground that the scrip taken up by the company should be canceled. The court sustained his action, and held that from the orig- inal contract it was clear that the land 703 § 535.] DIVIDENDS. [cu. XXXII. tificate for lands of the corporation to an amount equivalent in value to the face value of the certificate ; or to receive from the corporation any other benefit or advantage which the corporation may lawfully confer. Sometimes the certificate so far partakes of the character of a certificate of stock as to entitle the holder to dividends. 1 Where the corporation, having a large surplus, issues was received as a trust fund to ulti- mately pay off the scrip. See, also, Rogers v. Phelps, 9 N. Y. Supp., 886. In the case of Brown v. Lehigh, etc., Co., 49 Pa. St, 270 (1865), a dividend of scrip had been declared, the scrip being as follows : «No. . scrip. Shares. "This is to certify that heirs or assigns, will be entitled, upon the surrender of this certificate, to shares in the capital stock of the Lehigh Coal and Navigation Company as soon as the present funded debt of the com- pany has been paid off, or adequate provision made for its discharge when due and payment demanded ; and will also be entitled to a pro rata share of any future distribution of scrip; but not to any cash dividend until this cer- tificate has been converted into stock, as above provided. " Or, this certificate may, at any time, at the option of the holder thereof, be converted into stock upon payment by said holder, either in cash or in the six p r cent, loans of the company, of the par value of said stock, and the sur- render of this certificate. - This certificate is transferable only at the office of the company. " Witness, etc." Several years after the issue, the mort- gage being paid off, the scripholders claimed that they were entitled to back dividends equal to past dividends paid on the stock. The court held, however, that the terms of the contract did not give any such right, and that dividends commenced only from the time the scrip was converted into stock. The holder of a certificate of indebt- edness convertible into stock cannot claim an interest in a stock dividend until he has converted the scrip into stock. Miller v. 111. Central R R, 24 Barb., 312 (1857); Brundage i\ Brundage, 63 Barb., 397 (1873); affirmed, 60 N. Y., 544 (1875), holding that assignable " in- terest certificates" representing earnings spent for improvements, and payable out of future earnings with dividends, or convertible into stock at the company's option, did not pass with a bequest of a life interest in certain shares of the stock. See, also, Butler V. Glen Cove, etc. Co., 18 Hun, 47 (1879). See § 283. Cf. Bailey r. Citizens' Gas Light Co., 27 N. J. Eq., 196 (1876). The court in this case, speaking of a dividend of interest- 1m aring securities, said : "That the com- pany bad no lawful authority for issu- ing the certificates cannot be doubted." i Bailey r. Railroad Co., 22 Wall., 604 (1874). Cf. Brundage r. Brundage, 60 N. Y.. 544 (1875} The character of the scrip in this case is shown by the resolution authorizing it, as follows : " Whereas, this company has hitherto expended of its earnings for the purpose of constructing and equipping its road, and in the purchase of real estate and other properties with a view to an in- crease of its traffic, moneys equal in amount to eighty per cent of the cap- ital stock of the company ; and whereas, the several stockholders of the company are entitled to evidence of such expend- iture, and to reimbursement of the same at some convenient future period : " Now, therefore, resolved, that a cer- tificate signed by the president and treasurer of this company be issued to the stockholders severally, declaring that such stockholder is entitled to 704 CH. XXXII.] DIVIDENDS. [§ 535. such certificates, they are held not to transfer the title to that sur- plus from the corporation to the holders of the certificates. 1 In general the issue of scrip dividends may be entirely lawful, and they are upheld by the courts; but when they are declared in fraud of the rights of third parties they may be set aside. 2 Scrip is practically the same thing as shares of stock, except that it has no voting power. It is issued sometimes because the com- pany cannot issue any more capital stock, the whole capital stock eighty per cent, of the capital stock held by him, payable ratably with the other certificates issued under this reso- lution, at the option of the company, out of its future earnings, with dividends thereon at the same rates and times as dividends shall be paid on the shares of the capital stock of the company, and that such certificates may be, at the op- tion of the company, convertible into stock of the company, whenever the company shall be authorized to increase its capital stock to an amount sufficient for such conversion." This was the famous scrip dividend made by the New York Central R. R. Co. under the man- agement of Commodore Vanderbilt. The form of the certificate was as fol- lows : 'the new york central railroad Company. "No. . Interest Certificate. "Under a resolution of the board of directors of this company, passed De- cember 19th, 1868, of which the above is a copy, the New York Central Railroad Company hereby certifies that A. B., being the holder of shares of the capital stock of said company, is entitled to dollars, payable ratably with the ether certificates issued under said reso- lution, at the pleasure of the company, out of its future earnings, with divi- dends thereon, at the same rates and times as dividends shall be paid upon the shares of the capital stock of said com- pany. " This certificate may be transferred on the books of the company on the sur- render of this certificate. "In witness whereof, the said com- pany has caused this certificate to be signed by its president and treasurer, this 19th day of December, 1868. " , President Treasurer." At the foot of each certificate there was a form of transfer in blank : " For a valuable consideration I, A. B., do hereby sell, assign and transfer all interest in the above certificate to C. D., and do hereby irrevocably appoint E. F. attorney, to execute a transfer thereof on the books of the railroad company therein mentioned." See Bailey v. Railroad, 22 WalL, 608. This dividend was declared although the company by its charter was limited to ten per cent, dividends. A dividend of sci-ip — i. e., a paper en- titling the holder to dividends equal to dividends thereafter declared on the cap- ital stock — is practically a stock divi- dend, except that the scrip cannot vote and provision is generally made for tak- ing it up in some manner. Such a div- idend was involved in Gordon's Ex'rs v. Richmond, etc.,'R. R., 78 Va., 501 (1884). 1 People v. Board of Assessors, 76 N. Y, 202 (1879); affirming S. C, 16 Hun, 196. In this case it was held that the issue of these certificates could not operate to relieve the corporation from their obli- gations to pay their tax upon the sur- plus, because the surplus remained in the hands of the company, and as such was liable to assessment and taxation. See, also, Bailey v. Railroad Co., 22 Wall.. 604 (1874). 2 While negotiations were pending be- tween two gas companies for their con- (45) 705 § 530.] DIVIDENDS. [CH. XXXII. being already out; sometimes to avoid taxes, and sometimes to in- crease the transferable shares without giving to the new shares a voting power. If the interest or dividends are payable only from the profits, the issue of the scrip is legal whenever a stock dividend would be legal, that is, whenever the property of the company is equal in value to the capital stock plus the scrip dividend. A property dividend is where property is divided instead of that property being sold for cash and the cash then used to pay a divi- dend. A property dividend occurs where a corporation sells all its property to another corporation and takes in payment thereof the stock and the bonds of the purchasing corporation and then makes a distribution of the same among its stockholders. Any one of its stockholders may object and insist on payment of his shares in cash. 1 This, however, is practically a dissolution of the company and a distribution of its assets, a subject which is considered else- where. 2 A dividend or distribution of the company's bonds among its stockholders is legal, if the capital stock is not thereby impaired and if corporate creditors existing at that time do not object. 3 In the absence of a special provision to the contrary, dividends will be presumed to be payable in cash, and in lawful or current money. 4 Bat where the dividend is paid in depreciated currency, a stockholder cannot insist that he shall be paid any more than what the depreciated currency is vrorth in regular currency. 5 § 536. Stock dividends. — A stock dividend, as the name imports, is a dividend of the stock of the corporation. Such a dividend is lawful when an amount of money or property equivalent in value solidation by oue company buying the cated ; but where the dividends to other stock of the other, upon a certain basis stockholders were paid in Confederate of capital and indebtedness, one of them currency, the back dividends paid after without the knowledge of the other the war to a northern stockholder are a passed a resolution declaring a scrip sum equal iu value to the Confederate dividend of ten per cent, on its capital currency when the dividends were de- stock, thus increasing its indebtedness clared. Keppel's Adm'r i\ Petersburg by that amount. The certificates were ac- R. R. Chase's Dec, 167 (1868); Scott v. cordingly issued ; but after the consoli- Central Railway, etc.. Co., of Georgia, dation, upon a bill filed for that pur- 52 Barb,, 45 (1868). In this case two of pose, the scrip was declared void. Bailey the three judges held that though the v. Citizens' Gas Light Co., 27 N. J. Eq., dividends were declared without speci- 196 (1876). fying how they should be paid, yet 1 See § 667, infra. where they were paid as a matter of 2 See S 548, infra. fact in depreciated Confederate cur- 3 See ch. XL VI, infra. reney. a northern stockholder could 4 Ehle v. Chittenango Bank. 34 N. Y., not. after the war, claim the same divi- 548(1862). dends payable in United States cur- • Back dividends may be recovered on rency. stock which has been illegally confis- 706 ;h. XXXII.] DIVIDENDS. 13 537. to the full par value of the stock distributed as a dividend has been accumulated and is permanently added to the capital stock of the corporation. Corporations frequently make a dividend of this character when improvements of the corporate property or exten- sions of the business have been made out of the profits earned. It is also made when the corporate plant has increased in value and it seems better to issue new stock to represent the excess of value than to sell the increase and declare a cash dividend. In this coun- try these dividends are frequently made and are constantly sus- tained by the courts. 1 The shareholders, having voted to declare such a dividend, may, at any time before the certificates are issued, reconsider the matter and revoke the dividend. 2 Preferred stock- holders are entitled to share in the distribution of stock by a stock dividend according to the terms of their preferred stock. 3 In some of the states a stock dividend is prohibited by statute or constitu- tional provision. 4 §537. Interest-hearing stock. — It has already been shown that a corporation may issue stock and make a contract with the sub- scriber that the company will pay interest upon the sums paid in by the subscriber. 5 Such a contract is legal, however, only 1 AVilliams v. Western Union Tele- graph Co.. 93 N. Y., 162, 188 et seq. (1883); City of Ohio v. Cleveland, etc., R R Co.. 6 Ohio St, 489 (1856); Howell v. Chicago, etc., R R Co., 51 Barb., 378 (1868); Clarkson v. Clarkson, 18 id.. 646 (1855); Simpson v. Moore, 30 id., 637 (1859) ; Gordon's Executor v. Richmond, etc., R R. Co., 78 Va., 501, 521 (1884) ; Minot v. Paine, 99 Mass., 101 (1868); Boston, etc., R R. Co. v. Commonwealth, 100 id., 399 (1868); Deland v. Williams, 101 id., 571 (1869); Rand v. Hubbell, 115 id., 401, 474 (1874); Gibbons r. Mahon, 4 Mackey, 130 (1885); Jones v. Morrison. 31 Minn., 140(1883); Earp's Appeal, 28 Pa. St., 368 (1857); Wiltbank's Appeal, 64 id., 256 (1870); Commonwealth v. Pittsburgh, etc., R R, Co., 74 id., 83 (1873) ; Brown r. Lehigh Coal & Nav. Co., 49 Pa. St, 270 (1865); Commonwealth v. Cleveland, etc., R. R., 29 id., 370 (1857) ; Parker v. Mason, 8 R I., 427 (1867); State v. Baltimore, etc.. R R Co., 6 Gill (Md.), 363 (1847). See Harris v. San Francisco, etc., 41 Cal, 393 (1871), hold- ing that one who is entitled to and re- ceives a stock dividend cannot claim also a part of the cash profits which are used for improvements, even though a contract calls for cash. See, also, § 51, supra, and ch. XXXIII, infra. In England a stock dividend has been de- clared to be ultra vires so far as dissent- ing stockholders are concerned. It cannot be forced upon a stockholder. Hoole v. Great Western R'y, L. R, 3 Ch., 262 (1867). In the case Re The Eastern, etc., Co., 68 L. T. Rep., 321 (1893), a stock dividend was involved, but its legality was not passed upon. It is discretionary with the directors as to whether they will declare a stock or a cash dividend. Howell v. Chicago, etc., R'y, 51 Barb. 378 (1868). 2 Terry v. Eagle Lock Co., supra. After cancellation there is no statutory liability on such stock. Hollingshead v. Woodward, 35 Hun, 410 (1885). 3 Gordon's Executors v. Richmond, etc., R R. Co., 78 Va„ 501 (1884). See, also. Phillips v. Eastern R. R Co., 138 Mass., 122 (1884). See, also, ch. XVI. 4 See g§ 51, 287, supra. 5 See ch. XVI, supra. 707 § 53.8.] DIVIDENDS. [oh. XXXIT. •when the interest is to be paid from the net profits of the enter- prise, and not from the capital stock. Unless net profits have been earned the stipulated interest cannot legally be paid. Con- sequently there is little difference between interest-bearing stock and preferred stock. §538. To whom the corporation is to pay the dividend. — The question as to whom a dividend shall be paid after it has been reg- ularly declared is one which sometimes involves the corporation in considerable difficulty. It is not always easy to decide which one of two or more claimants is entitled to the dividend. The general rule is that the corporation may pay the dividend to the person in whose name the stock stands registered upon the corporate stock book at the time the dividend is declared. 1 It may do so without inquiring whether he has transferred the stork. and without requiring the production of the certificate. 2 More- over, it is a well-settled rule that the corporation is protected in paying dividends to a recorded shareholder, although he may have transferred his shares, no notice of the transfer having been given to the company. 3 lint after notice of a transfer the corporation may pay the dividend to the transferee, although no registry has been made. 4 And between two claimants of the dividend, one 1 Brisbane v. Delaware, etc., R. R, Ca, 94 N. Y.. 204 (1883); affirming 25 Hun, 438 (1881); Jones v. Terre Baute, etc.. R. R. I V. '.".I Barb.. 858(1869); affirmed, 57 X. Y.. 196; Northrup v. N< wton, etc., Turnpike Co.. 3 Conn., 644 (1821X Cf. Manning v. Quicksilver Mining Co., 24 Hun. "CO (1881), in regard to the assign- ment of dividends. The guaranty ac- cumulations of an insurance company conducted l>oth on the mutual and stock principle belong to the stockholders and not to the policy-holders. Traders', etc., Ins. Co. v. Brown, 142 Mass., 403(1886). As to dividends on a tontine insurance policy, see Pierce v. Equitable Life As- surance Co.. 14.1 id., 5(5 (1887). As to a dividend by way of redeeming stoi'k in a building, association, see Appeal of Mechanics*, etc., Ass'n, 7 Atl. Rep.. 728 (Pa.. iss;>. 2 Brisbane v. Delaware, etc.. R. R. Co., 94 N. Y., 204 (1883), affirming 25 Hun, 438 ; Cleveland, etc. R. R. Co. v. Robbins, 35 Ohio St, 483 (1880). 3 Bank of Commerce's Appeal, 73 Pa. St.. 50 (1878), where a distribution of assets was made; Bell v. LalTerty. 1 Pa. Sup. Court. T.l (1881), where the assignee of a dividend without a certifi- cate obtained payment, and the court held the company not liable to an unre- corded pledgee : Bank of Utica v. Smal- ley, 2 Cowen, 770(1824); Smith & Amer- ican Coal Co.. 7 Lan&, 317 (1873); Jones & Cleveland, etc., R, R, Co. r. Robbins, 35 Ohio St, 483 (1S80), the corporation not having heen notified. 4 Id. The corporation is liable to a transferee for dividends declared after a registry has been requested and im- properly refused. Robinson v. National Bank. 05 N. Y., 687. In ( entral Neb., etc., Bank v. Wilder. 40 N. W. Rep., 369 (Neb., 1801), it was held that not only was the pledgee entitled to the divi- dends, but was entitled to them al- though the stock stood on the corporate books in the name of the pledgor, where the officers knew all about the pledge The corporation is liable to a pledgee to whom the stock has been transferred on '08 CH. XXXII.] DIVIDENDS. [§ 538. being the cestui que trust and the other a bona fide transferee, the corporation may interplead. 1 The right to dividends does not, however, depend upon the issue of the certificate, and the owner of shares may claim his dividends though no certificate has ever been issued by the corporation. 2 The corporation is protected if it pay dividends to the administra- tor without notice of a transfer by him. 3 With respect to the dividends on the stock of a married woman, the corporation must pay them to the husband or not, according to the law of the domicile of the corporation, and not according to the law of the domicile of the married woman. 4 The husband by collecting dividends on his wife's shares does not thereby reduce the stock to possession. 5 Even though the corporation closes its transfer-book several clays before a dividend is declared, nevertheless those are entitled to the dividend who apply for registry on or before the day of the declaration of the dividend. 6 If the holder of a certificate of stock has applied for transfer and been refused, he may sue for the dividend before bringing a suit in equity to obtain a transfer of his stock. 7 the books for dividends paid to the pledgor. The acceptance of part pay- ment, etc., by the pledgee from the pledgor does not waive his cause of action against the company. Boyd v. Conshohocken Worsted Mills, 24 Atl. Rep.. 287 (Pa., 1892). 1 Salisbury Mill v. Townsend, 109 Mass., 115(1871); Cross v. Eureka, etc., Co., 73 Cal., 302 (1887), a case between pledgor and pledgee. See, also, § 387. Cf. Stowe v. Reed, 25 N. E. Rep., 49 (Mass., 1890), where a corporate creditor sued the treasurer for distributing prop- erty among the stockholders. A corpo- ration cannot interplead as between stockholders for the purpose of deter- mining the ownership of stock, there having been no claim made upon it in regard to registry or in regard to divi- dends. It must be shown also that the company has not acted in a partisan manner as between the different claim- ants. Hinkley v. Pfister, 63 N. W. Rep., 21 (Wis.. 1892). 2 Ellis v. Proprietors of Essex Merri- mack Bridge, 19 Mass., 243 (1824). 3 Brisbane v. Delaware, etc., R R Co., 94 N. Y., 204 (1883). The heirs of a stockholder must, in order to entitle themselves to dividends, procure a trans- fer of their ancestor's shares into their own names on the corporate books where the certificates have been pledged and the company notified. State v. New Orleans, etc., R. R. Co., 30 La. Ann., 308 (1878). 4 Graham v. First Nat'l Bank of Nor- folk, 84 N. Y„ 393 (1881) ; affirming S. C, 20 Hun. 325. As to the rule in Califor- nia, see Dow v. Gould & Curry Silver Mining Co., 31 Cal., 629 (1867). 5 Burr v. Sherwood, 3 Bradf. (N. Y. Surrogate), 85 (1854). Cf. Harcum v. Hudnall, 14 Graft, 369, 882 (1858); Searing v. Searing, 9 Paige, 283 (1841). A receipt of dividends by the husband only reduces the dividends into posses- sion and not the stock. See § 319. 6 Jones v. Terre Haute, etc., R R Co., 57 N. Y, 196, 205 (1874); Robinson v. National Bank, supra. Frequently, how- ever, the charter or statutes provide otherwise. " Hill v. Atoka, etc., Co., 21 S. W. Rep. 508 (Mo., 1893). 709 § 539.] DIVIDENDS. [CH. XXXII. § 539. To whom the dividend belongs.— As between the vendor and vendee of shares of stock, it is a settled rule that the vendee is entitled to all the dividends on the stock which are declared after the sale of the stock. Even though the transfer has not been re- corded the transferee has a right to the dividends as against the transferrer. The law, moreover, refuses to investigate the question when the dividend was earned. In contemplation of law the net profits are earned at the instant the dividend is declared. This rule is just, inasmuch as the accrued profits and expected dividends enter into the value and price at which the stock is sold. 1 A transfer of stock passes, of course, all dividends declared sub- sequently to the transfer, although the dividend was earned before the transfer was made. 2 ijermain tt Lake Shore, etc.. RR Co.. 91 N. Y.,483; March tt Railroad Co., 4:: N. II.. 515, VMM 1862); Ryan r. Leaven- worth, .t-.. R R Co., 31 Kan.. 866, 408 (1879): Foot v. Worthington, 89 M .--.. 299 (1839); Jones v. Terre Haute, eta, R. R Co.. 57 N. V.. 196 (1874); Carrie tt White, 45 id., 822 (1871); Brundaj Brundage, 65 Barb., 397, W8 fi : af- firmed, 60 N. V.. 544; Goodwin tt Hardy, 57 Me., 148 (1869): Hill r Newicha- wanick Co.. 8 Hun, iv.i (1876 i affirmed, 71 N. Y.. 598 (1877); Bates ft McKinley, 31 L.J., Chan., 889 (1862); Kin- u I I let, :< Vt.. 385 | is:',! I; Abercrombie tt Riddle, B Md Ch., 820 (1850). Bee, also, eh. XXXIII Of. Kane a Bl If dend. a stockholder who sold part of his stock in the interim is entitled to the dividend on only such stock as he owned when the dividend was declared Coleman tt Columbia < Ml Co, 51 Pa St, 74(1866> "Where defendant pure! stork for the plaintiff and accounted therefor, but refused to account for divi- dend- i :eived while be held the stock, tlir defendant is guilty of conversion. Shanghn< id a, 1 State Rep Although the purchaser of stock is en- titled to a dividend declared after Cm contract of sale i-, made, even though the contract has not yet been carried nut. yet the purchasers cannot insist on the vendor's giving an order on the cor- 7 Johns. Ch., 90 (1828). a person who poration for such dividends. The vendee guaranties to another a dividend and is should collect without such order. He obliged to pay it himself cannot claim a subsequent dividend by way of reim- bursement Parks tt Automatic, etc., Co. (Super. CD. N. Y. Daily Reg., May 12, 1888. A dividend declared alter the certificates have been sold belongs to the transferee as against the transferrer. Gemmell tt Davis. 23 Atl. Rep.. 1032 (Md.. 1892), approving the text herein. "Where stock is sold at auction on Au- gust 1 and a deposit paid, the balance to be paid August 29. a dividend declared on August 24 belongs to the purchaser. Black tt Homersham, L. R.. 4 Ex. D.. 24 (IsTS'. Where a company purchases shares of its own stock and subse- quently uses it to declare a stock divi- rescinds the sale by insisting on such order. Phiutey tt Murray. 10 S. E. Rep., 858 Ga., 1889). An alleged vendee's suit for a dividend is res judicata a- to a suit to the stock. Bhepard tt stock- ham. 25 Pac. Rep- 559 Kan.. 1891). - Kane R Bloodgood. 7 Johns, Ch., 90 (1828), by Chancellor Kent; Goodwin r. Hardy. " Me.. 113 (1869); March v. Eastern R R Co.. 43 X. BL, 615 (1862); Phelps tt Farmers' & Mechanics' Bank, 26 ( 'onn.. 269 (1857); Brundage v. Brun- . 1 Thomp. & Q, 82 : afTd, 60 N. Y., 544 (1875); Jones v. Terre Haute, etc., R. R. Co.. 67 N. Y.. li)i; (1874); Currie v. White. 4.-) id.. 822 (1871). And a pur- chaser of stock at a tax sale, if the pro- 710 CH. XXXII.] DIVIDENDS. [§ 539. "When a dividend is made payable on a day subsequent to the day on which it is formally declared, it belongs to the stockholder who owns the shares on the day the dividend is declared, and not to the owner at the time it is payable. 1 Where stock is bought deliverable at the seller's option, the divi- dends declared between the day of the purchase and the delivery belong to the purchaser. 2 But a contract to sell on demand entitles the vendor to dividends declared before the demand is made. 3 But of course any agreement between vendor and vendee, modify- ing or changing this rule, will be upheld. It is a proper subject for a contract, and a valid contract may be made in reference to it. 4 A legatee of shares takes the stock as it was at the time of the testator's death. All dividends declared previous to that event go to the administrator. 5 ceedings are legal and regular, is enti- tled to a certificate and to dividends subsequently declared. Smith v. North- ampton Bank, 58 Mass., 1 (1849). i Wheeler v. Northwestern S. Co., 39 Fed. Rep.. 347 (1889) ; Wright v. Tuckett. 1 Johns. & H, 266 (1860) ; De Gendre v. Kent, L R., 4 Eq., 283 (1867) ; Hill v. Newiehawanick Co., 71 N. Y., 593 (1877) ; affirming S. C, 8 Hun, 459 ; 48 How. Prac. 427 (1874) ; Spear t\ Hart, 3 Rob- ertson, 420 (1865); Bright v. Lord, 51 Ind., 272 (1875), where an option had been given. Cf. Hopper v. Sage, 112 N. Y., 530 (1889) ; Manning v. Quicksilver Mining Co., 24 Hun, 360 (1881); Board- man v. Lake Shore, etc.. R. R, Co., 84 N. Y, 157, 178 (1881): Be. Kernochan, 104 N. Y, 618 (1887) ; Clive v. Clive, Kay (Eng. Chan.), 600 (1854). Contra. Bur- roughs v. North Carolina R. R. Co., 67 N. C, 376 (1872). The transfer of stock does not transfer past stock dividends which have been declared, even though the stock dividend has not been actually delivered. City of Ohio v. Cleveland, etc., R R., 6 Ohio St., 489 (1856). See, also, eh. XVI. Where a pledge of stock is renewed and a new note given, dividends accruing before the renewal go to the pledgor. Fairbank v. Merchants', etc., Bank, 22 N. E. Rep., 524 (111., 1889). 2 Currie v. White, 45 N. Y, 822 (1871); 71 Black v. Homersham, L. R, 4 Ex. D.. 24 (1878). Under a contract of a person to buy certain stock within a certain time if the other party desired to sell (a "put'"), the first person reserving all dividends "declared during the time." a dividend declared before but payable during the time of the option belongs to the seller. Hopper v. Sage, 112 N. Y.. 530 (1889). Contra, Harris v. Stevens, 7 N. H.. 454 (1835). 3 Bright v. Lord, 51 Ind., 272 (1875). 4 Brewster v. Lathrop, 15 Gal., 21 (1860); Hyatt v. Allen, 56 N. Y, 553 (1874); Union Screw Co. v. Amer., etc.. Co., 11 R. I., 569 (1877); affirmed. 13 R I., 673 (1880), in which it was held that where a contract between two corpora- tions for the purchase of the stock of one of them on a certain day was by agreement postponed to a later day, a dividend declared in the interval be- longed to the purchaser. Where the vendor of stock reserves "one-half of whatever price the same should be sold for, when sold, over and above that sum," he is not entitled to an account of dividends, or other income received by the vendee from or on account of the stock. Jones v. Kent, 80 N. Y., 585 (1880). 5 Brundage v. Brundage, 60 N. Y., 544 (1875); Re Kernochan, 104 N. Y., 618 1 § 340.] DIVIDENDS. [CH. XXXII. The question of whether a. dividend is apportionable is consid- ered elsewhere. 1 A person who claims to be the owner of stock cannot establish his rights in a court by suing the party in possession of the stock for the dividends declared and paid. 8 §540. Dividends must he equal and without preferences. — Divi- dends among stockholders of the same must be always pro rata, equal and without preference. If the company has issued preferred stock, the holders thereof constitute a class for them- selves, and shareholders of that class will be entitled, as a class, to dividends in preference to holders of the common stock. But as between shareholders of the same class there can be no discrimina- tion, and profits set aside for dividends must be evenly divided among the stockholders according t<» the amount of stock each one owns. 3 Accordingly there can be no lawful discrimination in the division of dividends, although the subscription price of part of the (1887), where it was payable after the testator's death. Qf. .Johnson o. Bridge- water Iron Mfg. Co., 14 Graj § 301. The profits and surplus fun a corporation whenever they may have accrued air. until separated from the capital by the declaring of a dividend, B part of the Stock itself, and will pass under that name in a transfer "r be- quest Phelpstt Farmers' & Mechanics' Bank. 20 Conn.. 269 (1857) Cf. Clapp v. Astor, 2 Edw. Chan.. :;?'.> (1834)l In i .id to the rights of a lite tenant of sto k as against a remainder-man, see chapter XXX II I. i Sec .-; 558, infra. sPeckham >: Van Wagenen, 88 N. Y.. 40 (1880), Conv( rsion li'-s for an unau- thorized sale of stock and also for divi- dends received thereon. Sbaughneeey v. Chase, 7 State Rep., 3upr. Ct 1887>. 'Luling r. Atlantic Mutual Ins. Co., 45 Barb., 510 (1865), where part were paid in gold ; Jones a Terre Haute, etc., R R Co.. 57 N. Y.. 196(1874); affirming 29 Barb., 353 (1859 ; Morgan >: Great Eastern R'y. l Bern. & M.. 560 (1863); Ryder v. Alton, etc., R R Co., 13 III., 516 (1851). a case of preferred stock; State v. Baltimore, etc., R R Co.. 6 Gill, 363 (1847), where some were paid in ; i and others wore offered part cash and pari stock ; Atlantic, etc., iph Co. o. Commonwealth, 8 Brewster (Pa.), where a tax was levied on the assumption of an equal dividend to all; Hale r. Republican River Bridge Co.. 8 Kan., ¥i where by mistake a stockholder got more land scrip than was his shai kaon's Adrn'ra v. Newark Plank-n 81 N. J. Law, ( v". < lhase >: Vanderbilt, 69 N. Y.. 807 (1875 Bolder of receipt under i nisation, entitling him to preferred stock in the new company, is entitled to dividends declared before he obtains the certificates. Ellsworth v. New York, etc., R R, 88 Hun. 7: afTM, 98 N. Y.. 648 See, alt a. Belfast. etc.. R'y Co (Irish Rep L, 112 (1866); Barriaon v. Mexican R'yCo., L. R, 19 Eq., 5), preferred Btook cases. As to preferred stock, see ch. XVI. Although dividends are guarantied to a certain date, and are paid, the stock is entitled to participate in all subsequent dividends. Parks v. Automatic, etc., r^.. 14 N. Y. St. Rep., 710 (1888). If a stockholder by accepting the benefits assents to a change in the privilegi a which pertain to his stock, he cannot afterwards object thereto. Compton R Chelsea, 13 N. Y. Supp., 722 (1891). 712 CH. XXXII.] DIVIDENDS. [§ 541. stock is due and unpaid; 1 or because the contract work has not been done ; 2 nor can there be a discrimination between the large and small stockholders of a company as to the manner of payment of dividends. 3 After paving a dividend to a part of the share- holders the corporation cannot refuse to pay the rest upon the ground that by so doing the capital stock will be impaired, 4 or that all the surplus earnings have been either paid out as dividends or invested in permanent improvements. 5 A bill in equity may be maintained by a stockholder to prevent an unequal or unfair distribution of the profits of the company, 8 and for an injunction to restrain a dividend when stock has been fraudulently overissued, until a true list of the holders of genuine stock can be obtained. 7 § 541. A dividend when declared is a debt due absolutely to the shareholder. — When a dividend out of the earnings of the company has been regularly declared and is due it becomes immediately the individual property of the shareholder. There is, eo instanti, a lOakbank Oil Co. v. Crum. L. R., 8 App., 65 (1882). Where a subscription for stock is paid up, the stockholder is entitled to his stock and past dividends, even though for thirty years he has slept upon his rights. Kobogurn v. Jackson Iron Co.. 43 N. W. Rep., 602 (Mich., 1889); Bedford County v. Nash- ville, etc., R R., 14 Lea (Tenia.), 525 (1884). 2 Although stock is issued to contract- ors before they are entitled to it, yet they are entitled to the dividends on such stock unless there was some agree- ment to the contrary. Central R. R., etc., v. Papot, 59 Ga., 342 (1877); S. C, sub nom. Southwestern R R v. Papot, 67 Ga., 675. 690 (1881). 3 Accordingly, where a dividend was declared, viz., to all stockholders own- ing less than fifty shares, cash, but to all of fifty shares and over, part cash and part in interest-bearing bonds of the corporation, the discrimination was held invalid and unlawful. State V. Baltimore, etc.. R R. Co., 6 Gill, 363 (1848) ; Jones v. Terre Haute, etc., R R Co., 57 N. Y., 196 (1874). So, also, where a part of the authorized capital stock remained untaken, and a resolution of the directors was carried into effect, by which the untaken portion of the stock was issued to those shareholders not in arrears upon shares previously taken, to the exclusion, as to the new shares, of those in arrears upon the original issue, it was held an invalid discrimina- tion and an unlawful imposition of a penalty upon those in arrears. Reese v. Bank of Montgomery County, 31 Pa. St., 78 (1855). 4 Stoddard v. Shetucket Foundry Co., 34 Conn., 542 (1868). The validity of a dividend cannot be called into question by a bank in a suit to collect taxes on such dividend. Central Nat'l Bank v. United States, 137 U. S., 355 (1890). 5 Beers v. Bridgeport Spring Co., 42 Conn., 17 (1875). fi Luling v. Atlantic Mutual Ins. Co., 45 Barb., 510 (1865). The minority may bring the officers to an accounting for an unfair distribution of the bonds, etc., owned by a construction company. Meyers v. Scott, 2 N. Y. Supp., 753 (1888). Or the stockholder may sue at law for an equal dividend. See § 542. 7 Underwood v. New York, etc.. R R Co., 17 How. Prac, 537 (1859), a case growing out of the Schuyler frauds in New York. ri3 § 541.] DIVIDENDS. [CH. XXXII. severance, for the use and benefit of the members of the corpora- tion, of so much of the accumulated earnings as are declared; and the dividend thereafter exists as a separate fund, distinct from the capital stock or surplus profits. It then becomes the absolute prop- erty of the stockholders. 1 Accord inirlv, whenever a dividend is regularlv declared and credited to a depositor it becomes his property, to which he is en- titled in preference to the creditors of the corporation. 2 If the funds to pay a dividend are placed by the corporation on deposit at a bank or elsewhere, the deposit is made and remains at the risk of the corporation and not of the shareholders, until a reasonable time after actual notice is given to the latter. 3 But it cannot be withdrawn and reclaimed either by the corporation or a receiver of the corporation, since the shareholders acquire, by virtue of the declaration of the dividend, a lien in equity upon the deposit. 4 And the shareholders' right to a dividend regularly declared, and to the fund set apart by the corporation to pay the dividend, is not affected by the subsequent insolvency of the corporation.' 1 But where no specific fund has been set aside, a shareholder not having claimed or received his dividend has, upon the insolvency of the corporation, merely a claim of debt against the corporation, and must come in and fare as the other creditors do. 6 A dividend is •Van Dyck v. McQuade, 86 X. V.. 88 (1881); Jermain v. Lake Shore, etc., R. R Co.. 91 id., 4S3 (1888); Eeppul'a Adm'r v. Petersburg R. R < '<>.. < '\> Dec, 167(1868); Kin- v. Paterson, etc., R R Co., 29 X. J. Law, 82, 504 (1860); Hill r. Newichawanick Co.. 71 New York Rep., 598 (1877), affirming S. ('.. 8 Hun, 459 (1876); Brundage r. Brun- dage, GO N. Y., 541 (1875), affirming S. C, 65 Barb., 397 (1873); Spear r. Hart. 3 Robertson. 420 (1865); Manning v. Quicksilver Co., 24 Hun. 360; Blood- good v. Kain, 7 Johns. Ch., 90; Beers a, Bridgeport Spring Co., 12 Conn., 17 (1875); Fawcett r. Laurie, 1 Drew. & Sm.. 192 (1860); Matter of Le Blanc, 14 Hun, 8 (1878). Upon the latter point compare People r. Merchants' and Me- chanics' Bank. 78 X. Y., 269 (1879). Dividends on life insurance policies when once declared cannot be varied by the company subsequently. Heusser v. Continental, etc., Ins. Co., 20 Fed. Rep., 222 (1884). Execution or garnishee process cannot be levied on stock held by an individual as trn~t' •. where the debl is his individual debt Nor can it be levied on the dividend from Bucta stock. So held where stock was owned by a city in trust for the citizens. Hitch* cock v. Galveston W. Co., 50 Fed. Rep., 2t;:: i^i. - Van Dyck v. McQuade, 86 N. Y., 38 (1881); Peckham v. Van Wegener, 88 X. V.. 10. A dividend declared and ordered deposited to the order of the stockholders and so held until the further order of the court is legal and the amount cannot be taxed as belong- ing to the bank. Pollard v. First Xat'l Bank. 28 Pac. Rep., 202 (Kan., 1881 . 3 King r. Paterson. etc., R R Co.. 29 X. J. Law, 82. 504(1860). * Matter of Le Blanc, 14 Hun, 8 (1878); aff'd, 75 N. Y, 598 ; Beers v. Bridgeport Spring Co., 42 Conn., 17 (1875). 5 Le Roy v. Globe Insurance Co., 2 Edw. Chan., 657 (1836). 6 Lowue v. American Fire Insurance 714 CII. XXXII. j DIVIDENDS. [§ 542. something distinct and separable from the fund upon which it is declared, and it may be the subject of assignment by a share- holder before it is received from or declared by the corporation. 1 So it is held that a dividend must be made payable within a reason- able time after it is declared, and when once declared cannot be be revoked. 2 But where the fact that a dividend has been voted by directors is not made public, or communicated to the stockhold- ers, and no fund is set apart for payment, the vote may be re- scinded. 3 Not only must the time of payment be reasonable, but a reasonable place of payment must be designated, and the entire transaction must be in good faith. 4 § 542. It is a debt which may be collected by legal proceedings. — The debt which the corporation owes its shareholders, when a divi- dend is declared and the day of payment arrives, is one which may be collected by the usual action at law. A suit to enforce the declaration of a dividend must be inequity; but when the divi- dend is not paid after it has been regularly declared, the share- holder's action is at law, and he may sue in assumpsit for the amount due him by the resolution declaring the dividend, 5 or he Co., 6 Paige, 482 (1837); Curry v. Wood- ward, 44 Ala., 305 (1870). i Marten v. Gibbon, 33 L. T. Rep., (N. S.), 561 (1875). Cf. Jermaiu v. Lake Shore, etc., R. R. Co., 91 N. Y., 483 (1883). Bargains in prospective divi- dends are transactions which, by rule 61 of the stock exchange, the committee will not recognize or enforce. The con- tract is, however, one which is not con- trary to law. and it is good between the parties. Marten v. Gibbon, supra. 2 Beers v. Bridgeport Spring Co., 42 Conn., 17 (1875), 3 Ford v. Easthampton, etc., Co., 32 N. *E. Rep., 1036 (Mass., 1893). 4 King v. Paterson, etc., R R. Co., 29 N. J. Law, 82 (1860). 5 Jackson's Adm'rs v. Newark Plank- road Co., 31 N. J. Law, 277 (1865); West Chester, etc., R R. Co. v. Jack- son, 77 Pa. St., 321 (1875); Coey v. Bel- fast, etc., R'y Co., Irish Rep., 2 C. L., 112 (1866); King v. Paterson, etc., R. R Co., 29 N. J. Law, 504 (1860); Stod- dard v. Shetucket Foundry Co.. 34 Conn., 542 (1868); Hall v. Rose Hill, etc., Co., 70 III, 673 (1873); City of Ohio v. Cleve- land, etc., R. R Co., 6 Ohio St., 489 (1856) ; Marine Bank of Baltimore v. Biays, 4 Har. & J., 338 (181S) : State v. Baltimore, etc., R. R. Co., 6 Gill, 363 (1847) ; Kane v. Bloodgood, 7 Johns. Chan., 90. 132 (1823); Jones v. Terre Haute, etc., R. R. Co.. 57 N. Y.. 196 (1874); Fawcett v. Lau- rie, 1 Drew. & Sm., 192, 202 (1860) ; Dal- ton v. Midland Counties R'y Co., 13 C. B., 474 (1853); Scott v. Central Railroad, etc., Co. of Georgia, 52 Barb., 45 (1868). See Beers v. Bridgeport Spring Co., 42 Conn., 17 (1875), sustaining a remedy in equity. But if a shareholder is not en- titled to share in the dividend according to the terms of the resolution declaring it, he cannot have his action of assump- sit. State v. Baltimore, etc., R. R. Co., 6 Gill, 363 (1848). In suing for a dividend the plaintiff must allege that the divi- dend has been declared. Hdl v. Atoka, etc., Co., 21 S. W. Rep., 508 (Mo., 1893). Where a dividend has been paid to all stockholders except one, he may collect his by a suit. Southwestern, etc., R'y v. Martin, 21 a W. Rep., 465 (Ark., 1893). 715 § 543.] DIVIDENDS. [CH. XXXII. may file a bill in equity for an accounting. 1 But mandamus is not a proper remedy in such a case. 2 § 543. A contract of directors to pay a dividend as a debt at fixed intervals, being in reality a preferred dividend, cannot be enforced either at law or in equity, except out of net profits lil e other dividends. 3 A demand is necessary before the action at law by the shareholder can be maintained. 4 It has been held, however, that the commencement of the suit constitutes in itself a sufficient demand." Under ordinary circum- stances interest is not recoverable upon dividends which have been declared, but which the shareholder has not claimed. The right to interest arises only apon a demand and a refusal to pay. 6 The statute of limitations begins to run only after demand. 7 iKeppel'a Adm'rs ft Petersburg R. R Co., Chase's Dec. 167(1868 This is the usual remedy where preferred stock- holders sue to have a dividend d< clan d See ch. XVI. 2 Van Norman ft G otral (ar, 1 to, Co., 41 Mich.. 166 (1870). Bui - e dicta in King ft Paterson, etc., EL R, 89 N. J. L., 504 (1861), and Le Roy tt Globe Ina Co., 2 Edw. ( li.. 667. sPainesville. etc., R R Co ft King 17 OhioSt, 684 dso, ch, XVI, supra. *Hagar n Union National Bank, 68 Ma, 509 (1874); Scott ft C< otral R R & Banking Co. of Ga, 52 Barb., 46(16 Stat.' ft Baltimore, i tc., R R I 'a, 6 Gill, 363(1847); King n Paterson, etc., R R Co., 29 N. .1. Law, 604 (1861 . A mere letter of inquiry has been held under this rule an insufficient demand Scott tt Central R R & Banking Co. of Ga., supra. A demand while the Bharee are under and subject t<> an attachment by the corporation is not such a demand as this rule contemplates. Bagaru Union National Bank, supra. 8 Robinson ft National Bank of New Berne, 95 N. Y.. 687 (1884 ; Kennel's Adm'rn Petersburg R R Co., CI Dec,, 167 (1868). Tins accords with the settled theory of the law as to demand in similar casea See East New York, etc., R R Co. tt Ehnoi., 5 Hun, 214 (1875); Delamater tt Miller 1 Cowen, 75 (1828 : Ev< ret! ft Coffin, 6 Wend., 693 1881); Walradt r Maynard, 3 Rub.. 684 (184 • trroll tt Cone, 40 Barb.. 220 (1862); Ayer ft Aver. 16 Pick.. I (181 • KeppePs Adm'r r. Petersburg l:. 1L < '. ... supra; Boardman ft Lake Shore, eta, RR Co, 84 N. Y.. 167, 187 (1881); Baltimore, eta, R R < '■■.. fl I iill, 3 I ri.il.. etc., R i: Co. ft Cowell, 28 Pa ink of nisville n day. 9 s. W! Rep., 168 iKy.. Ism; i. As l<> interest on pn ferred dividends, see ch. XVI. 7 The statute of limitations begins to run against a stockholder's suit to colli dividends only after a demand and re- fusal, or notice to a shareholder that bis right to dividends is denied. Phil., i I R R n Cowell, 28 Pa St.. I 1 ; Bank of Louisville ft Gray, 84 Kv.. 666 (1886). The BtatUte Of limitations does not begin to run against the collection' of a dividend until it is demanded. A charter provision of a new charter Into which the old company is merged, ap- plying a three-year Btatuteof limitations to dividends, does notaifect dividends on old stock which has not come into the rganization. Armant r. New Orleans, . R R, 7 S. Rep.. 35 (La., Ib89j; Kobogum tt Jackson Iron Ct>.. supra; Bedford Co, ft Nashville, etc., R R, si i pro. 716 OH. XXXII.] DIVIDENDS. [§ 544. The action at law for the payment of a dividend which has been declared should be against the corporation, and not against the corporate officers. 1 But where the treasurer of an incorpo- rated company withheld a dividend belonging to one of the stock- holders on the ground that he himself owned the stock, an action of assumpsit against him individually was sustained. 2 And in a case where a stockholder had been unjustly deprived of his stock- it was held that he could not sue an individual shareholder to re- cover a dividend which should have been paid to him, but that his action was properly against the corporation. 3 In actions on the part of shareholders to enforce the payment of dividends the valid- ity or legality of the dividend cannot be questioned by the cor- poration. 4 But when a corporation is sued for a dividend by two claimants therefor it may support a bill of interpleader between them. 8 § 544. Right of the corporation to apply dividends to tlie payment of debts due to it by the shareholder.— It is well settled that if, at the time a dividend becomes payable, the stockholder owes the corporation any debt, the dividend due that shareholder may be applied in liquidation of the indebtedness; and if the corporation is sued for the dividend it may set up the debt by way of set-off or counter-claim. 6 This, however, amounts to a corporate lien on the 1 French v. Fuller, 40 Mass.. 108 (1839) ; Me., 509 (1874) ; Phil., etc., R. R. v. Cow- Smith v. Poor, 40 Me., 415 (1855); S. C, ell, 28 Pa. St, 329 (1857) ; King v. Pater- 3 Ware. 148 (1858). son, etc., R'y Co.. 29 N. J. Law, 504 (1860) ; 2 Williams v. Fullerton, 20 Vt, 346 Sargent v. Franklin Ins. Co., 25 Mass., 90 (1848). (1829) ; Bates v. New York Ins. Co., 3 sPeckham v. Van Wagenen, 83 N. Y., Johns. Cas., 238 (1802). See, also, § 526, 40 (1880). supra. But a contrary rule prevails as 4 Stoddard v. Slietucket Foundry Co., to a deceased stockholder, upon a wind- 34 Conn., 542 (1868). ing up of the company and a distribu- 5 Salisbury Mills v. Townsend, 109 tion of its assets. See Merchants' Bank, Mass., 115 (1871). See, also. § 387. In etc., v. Shouse, 102 Pa. St., 488 (1883); England the rule was formerly other- Brent v. Bank of Washington, 2 Cranch wise. Dalton v. Midland R'y Co., 12 C. C, 517 (1824). See, also, contra, in C. B., 458 (1852). Where a corporation general, Ex parte Winsor, 3 Story C. C, is sued by a stockholder for a dividend 411 (1844). By agreement a dividend declared by the directors, and all the may be applied to an unpaid call. Ken- other stockholders have received their ton, etc., Co. v. McAlpin, 5 Fed. Rep., dividends and retained them, the com- 737 (1880). For a contract of a corpora- pany cannot be allowed to set up its de- tion to sell to its superintendent shares fense to the suit that the dividend has of its stock at his option, and to allow not been earned, and that its payment him to pay for the stock by the divi- would withdraw a part of the capital of dends, see Appeal of Goodwin, etc., Co., the company. Stoddard v. Shetucket 12 Atl. Rep, 736 (Pa., 1888). The only Foundry Co., supra. right that a corporation has to retain a 6 Hagar v. Union National Bank, 63 dividend from a stockholder who owea 717 § 545.] DIVIDENDS. [CH. XXXII. stock so far as dividends are concerned; and it is not upheld where the registered stockholder has sold and transferred his certificate of stock before the dividend is declared. § 545. The courts very rarely compel the directors to declare a dividend. — It is for the directors, and not the shareholders, to de- termine whether or not a dividend is to be declared. 1 When, therefore, the directors have exercised this discretion and refused to declare a dividend, there will be no interference by the courts with their decision, unless they are guilty of a wilful abuse of their discretionary powers or of bad faith or of a neglect of duty. It requires a very strong case to induce a court of equity to order the directors to declare a dividend, inasmuch as equity has no jurisdiction unless fraud or a breach of trust is involved. There have been many attempts to sustain such a suit, yet, although the court did not disclaim jurisdiction, it has quite uniformly re- fused to interfere. 2 it money is based on set-off. Oemmell v. Davis, 23 At!. Rep., 1032 (Md., 1892) This Bet-off is doI g 1 "ii a debl against the transferrer where the certificates were sold, although not transferred on the books, before the dividend was de- clared. Id. A pledgee of Btock, even though not recorded as a stockholder, is ent tl ■ 1 to dividends declared after the i ledge was made, as against a claim of the corporation against the pledgor as an offset. Id. i "The directors of a corporation, and they alone, have the power to declare a dividend of the earnings of the corpo- ration and to determine its amount." Hunter v. Roberta, etc., Co., IT X. W. Rep., 131 (Mich., 1890). See, also, the various cases in this and succeeding sections. 1 New York. etc.. R. R. r. Xickalls. 119 U. S., 296 (1886); rev'g 15 Fed Rep., .">:."">: Ely r. Sprague, Clarke's Chan. (N. Y.), 351 (1840); Williams v. Western Union Telegraph Co., 9*3 N. Y., 162 (1888) : Park r. Grant Locomotive Works, N. J. Eq., 114 (1885); Barnard u Ver- mont, etc., R R Co., 7 Allen, 512 (1863); Chaffee v. Rutland R R Co.. 55 Yt.. 110, 133 (1880); Smith v. Prattville Manufg Co., 29 Ala., 503 (1857); Barry v. Merchants' Exchange Co., 1 Saudf. Chan.. 280(1844); The King v. Bank of England, 2 Barn & Aid., 620 (1819), where the court refused to grant a mandamus for an examination of the accounts with a view to compelling a dividend The direct rs are bound to distribute as profits only bucIi part of the net inc., me as they think proper; and their judgment of what is proper is conclusive upon the stockholders. te r. Baltimore, etc., R R Co., fi Gill, 363 (1848). Cf. Dent a London, etc., Co., L. R., 16 Ch. D., 344 In Park r. Grant Locomotive Works, -I' 1 N. J. Eq., 114 (1885), the court said: "In ca where the power ofthedir t a corporation is without limitation and free from restraint, they are at liberty to exercise a very liberal discretion as to what disposition shall be made of the gains of the business of the corpora- tion. Their power over them is abso- lute so long as they act in the exercise of an honest judgment They may re- serve of them whatever their judgment approves as necessary or judicious for repairs and improvements, and to meet contingencies, both present and pro- spective." In the above case, however, a contract that all the net profits should be divided annually varied these rules. The court refused to order a dividend. 18 OH. XXXII.] DIVIDENDS. [§ 545. Accordingly the directors may, in the fair exercise of their dis- cretion, invest profits to extend and develop the business, and a reasonable use of the profits to provide additional facilities for the In State of Louisiana v. Bank of Louis- iana, 6 La., 745 (1834). the court refused to order a bank to declare a dividend although it had profits on hand of about one-tenth of its capital. The court said : "If the board honestly err in these mat- ters, we are not ready to say the courts possess the power to rectify its mis- takes." The remedy is in the elections. Courts will not order a dividend to be declared unless the directors "refuse to declare a dividend when the corpora- tion has a surplus of net profits which it can, without detriment to its business, divide among its stock holders, and when a refusal to do so would amount to such an abuse of discretion as would consti- tute a fraud or breach of that good faith which they are bound to exercise towards the stockholders." A dividend will not be ordered when the profits are invested in the plant and in long- time notes. Hunter v. Roberts, etc., Co., 47 N. W. Rep, 131 (Mich., 1890). In the case of Smith v. Prattville, etc., Co., 29 Ala., 503 (1857). the court refused to or- der a dividend inasmuch as the charter expressly vested discretion as to that matter in the board of directors. Where large dividends are made by a manufacturing company it is entirely within the fair and honest discretion of the directors whether the remain- ing profits shall be passed to surplus or used for dividends. McNab v. Mc- Nab, etc., Co., 62 Hun, 18 (1891). The fact that a manufacturing company extended its business so as to include iron pipe as well as brass, and loaned money, which loans, however, the pres- ident was willing to take up, and had owned government bonds, is not suffi- cient to entitle a stockholder who has acquiesced therein to demand that all profits be paid out in dividends. Id. Although the road was leased and the floating debt was only $1,000 and the bonded debt, §70,000, was due in seven- teen years, and the other expenses only $6,000, while the company had $36,000 on hand aud the regular rental for its road coming in, yet the court refused to order a dividend in Karnes v. Roches- ter, etc., R. R., 4 Abb. Pr. (TJ. S.), 107 (1867), the court holding also that a de- mand must first be made and that the di- rectors, instead of the company, are the proper parties defendant. See ch. XVI. In the case of Barnard v. Vermont, etc., R. R, 89 Mass., 512 (1863), there was a contract to pay dividends, and it was upon this contract that the court based its right to pass upon the ability of the company to declare a dividend. The court refused to order a dividend. In Richardson v. Vermont, etc., R, R.,44 Vt., 613 (1S72), the court decreed the payment of what was substantially a dividend to the stockholders, but stated that an accounting must first be had to ascertain whether there was available for that purpose " a fund adequate, not only for the payment of the claims of the plaintiffs in the cause, but for the payment of all stockholders having like claims; and there must be a surplus fund over and above what is requisite for the payment of the current expenses of the business, for discharging its duties to creditors, and over and above what reasonable prudence would re- quire to be kept in the treasury to meet the accidents, risks and contingencies incident to the business of operating the railroad." In the case of Dent v. London Tramways Co., L. R, 16 Ch. D., 344 (1880), the court compelled the company to pay a dividend on the preferred stock, where there were profits avail- able, but the common stockholders pro- posed to use all the profits for long neglected repairs, the real reason being that there were profits sufficient for a dividend on the preferred but not on 719 § 515.] DIVIDENDS. [CH. XXXII. business cannot be objected to or enjoined by a minority of the stockholders. 1 Profits may also be set aside for the payment of indebtedness, though it is not yet due. 2 The free exercise of the directors' di - cretion cannot be interfered with by the contracts of promoters or original incorporators as to the disposition of corporate profil Nevertheless the discretion of the directors in the matter of de- claring or refusing to declare a dividend is not absolute; and where there is a clear abuse of power in refusing to declare the dividend, a court of equity will, at the instance of any shareholder, compel tin- proper authorities to declare and pay the dividend. 4 Laches on the both the common and preferred The jects contemplated by the articles «.f court said that profits meant the «« ear- association, and the expenditure isnot plus in receipts, after paying expenses um bleinrei itotheamount and restoring the capital to the position of their capital, a court of equity ought it was in on the first of January in thai verj » Idom to interfere with them.*' year." Where a bill in equity, filed f<>r > Karnes u I B. R- Co.. the purpose of obtaining an ai unting 4Abb.Prac. N. 8.), and the declaration of a dividend, it of the promoters and does not clearly make out theexistei eliminary subscribers to the stock of of a surplus which the directors ought the pi panyaa t.. the divia- to distribute, the suit will fail. A dis- ion and disposition of the nel profits t covery will not b I where there does not bind the company unless it has is no allegation that information?* re- expi • to such agreement fused or that the party cannot examine Coyol Co. v. Ruble, B Oreg M 984 thel kg, or that a mandamus was in- d vv -" But ii -ly ratified by the adequate. Wolf ei al n Dhderwi mpany it is binding. Richardson o. et aJL, 11 a Bep., 844 (Ala., 188 Vermont, eta, R. B., 44 Vt, 818 181 i Where a corporation having a large where an agreement to pay annual in- surplus proposed, with the concurrence h n st to the stockholders out of the net of a majority of tli" shareholders, to profits was considered employ the surplus En extending the * Where for seven j stockholder business, although Buch extension was who owned a majority of the stock opposed by a minority of the Bharehold- elected himself and two of hisdumn era, it appearing that the proposed en- as din mpany, and caused largement of the corporate enterprise the board to vote a large salary to him- was clearly infra vires, it was held, on s.it be pr - dent and manager, and I a bill brought by the dissenting minor- leased to the company his 1 1 ! erty at a ity for an injunction against the pro- large rental, the salary and rental posed use of the surplus, and praying a illegal and void. Where the compt distribution of it anion.; the Bharehold- had failed to pay it- dividends by n ers, that the facts wore not such as to son of Buch acts, a court of equity, u| on require the interposition of the court the suit of another stockholder, order 1 on behalf of the minority. Pratt « the president to account, and appointed Pratt, 33 Conn.. 446 (1866), the court a receiver of the company and direct d saying: "On a question of this sort that its affairs bewound up. Miner tt much must necessarily be left to the Belle Isle Ice Co., 68 N. W. Rep., 218 discretion of the managing directors; (Mich., 1899). Where a town lot corpo- and so long as they keep within the ob- ration consisted of but three stockhold- 720 OH. XXXII.] DIVIDENDS. [§ 546. part of the shareholders in failing to commence their suit to com- pel the payment of a dividend until the corporation becomes insolvent is fatal. 1 And the court will also consider that the ag- grieved shareholders may, if a majority, refuse to re-elect the directors at the next election, or may sell their shares. 2 §546. Dividends can he made only from profits — What are -profits which may he used for dividends. — A dividend can law- fully be made only out of profits. The payment of it must leave the capital stock of the company intact and unimpaired, or the dividend itself will be held fraudulent and void. 3 In view of the rule that dividends can be made only from profits, it becomes important to ascertain what part of the income of a corporation constitutes "profits" which maybe used for a divi- dend. This question has caused the courts considerable difficulty. There have been various definitions, explanations and different states of facts involved in the cases which have come before the courts. A general idea of what constitutes profits available for dividends can be obtained only by a study of the cases themselves. 4 ers, and two of them control the com- pany and refuse to declare dividends although there is a large surplus in the treasury, and although the corpo- ration is free from debts, and further sales are being made, and cash being paid in on account of them, the court ordered a dividend to be declared paid of all the cash on hand, and even inti- mated that a division of the property itself might be ordered by way of a dividend, the two stockholders in con- trol having been guilty of fraud in the management. Fougeray v. Cord et ah, 24 Atl. Rep., 499 (N. J., 1892). In this case the directors had voted to them- selves large salaries and had restored the same upon the order of the court The court ordered a distribution of the money by way of dividends. Brown v. Buffalo, etc., R R Co., 27 Hun, 342 (1882). See, also, Park v. Grant Locomotive Works, 40 N. J. Eq., 114 (1885). In this case there was a contract that the net profits should be divided annually. Scott v. Eagle Fire Ins. Co., 7 Paige, 198 (1838); Pratt v. Pratt, 33 Conn., 446 (1866); Beers v. Bridgeport Spring Co., 42 id., 17 (1875). Upon a sale of all the property of the corporation the direct- ors may be compelled to declare a divi- dend. Cramer v. Bird, 6 Eq., 143 (1868). A stockholder cannot sue for profits until a dividend is declared. Bevcridge v. New York, etc., R R Co., 112 N. Y., 1 (1889). 1 Scott v. Eagle Fire Ins. Co., supra. 2 Barry v. Merchants' Exchange Co., 1 Sandf. Chan., 280 (1844). 3 Lockhardt v. Van Alstyne, 31 Mich., 76 (1875) ; Hughes v. Vermont Copper Mining Co., 72 N. Y, 207, 210 (1878). See, also, ch. XVI, and cases in notes to this section. See, also, as to what constitutes a payment of dividends out of capital, 3 R'y & Corp. L. J., 409, re- viewing recent English decisions. For a valuable note on this subject by Judge Thompson, see 36 Cent L. J., 455. 4 "Net earnings are, properly, the gross receipts, less the expenses of oper- ating the road to earn such receipts. Interest on debts is paid out of what thus remains ; that is, out of net earn- ings. Many other liabilities are paid out of the net earnings. When all lia- bilities are paid, either out of the gross receipts or out of net earnings, the re- mainder is the profit of the sharehold- ers, to go towards dividends, which in (46) 721 § 546.] DIVIDENDS. [CH. XXXIL There are some general principles connected with this subject which have been established by the adjudications. It is not neces- sarv for a railroad or other corporation to use its profits to pay its funded or bonded debt instead of using those profits for a divi- dend. Such bonded debt is practically though not theoretically that way are paid out of the net earn- ings." St John v. Erie R' yCo., 10 Blatch., 271, 279 (1872); S. C, aff'd, 22 Wall., 136 (1874); Warren v. King, 108 U. S.. 389 (1882); Van Dyck b McQuade, 86 N. Y., 38, 47 (1881). "Popularly speak- ing, the net receipts of a business are its profits." Eyster v. Centennial Board of Finance, 54 U. S., Ml ( 1 ^T<- '. -Sur- plus earnings" are said to be the moneys available for dividends. William- R Western Union Telegraph Co., 98 N. Y., 162, 191 (1883). "Net earnings " is a term synonymous with "net income," and also "net income" as nsed in the statute under consideration, Phillips ?•. Eastern R. R Co.. 188 Mass.. 182 (1884> In Belfast, etr., R R Co. r. Belfast. 77 Me., -1 15 (1*83), it is said that the term " net earnings" does not imply that the company is wholly out of debt The profits mean "the clear pains of any business venture, after deducting tbe capital invested in the business, the ex- penses incurred in its conduct, and the a sustained in its prosecution." Bills receivable are counted as part of the assets or net profits, but are not to be considered as the basis of a dividend unless they can be sold without mate- rial loss. Park v. Grant Locomotive Works, 40 N. J. Eq., 114 (1885). In the following cases the term "net profits," or an equivalent phrase, is defined : Colt- ness Iron Co. v. Black. 51 L. J. (Q. B. Div.), 626 (1881); New York, etc, R R Co. v. Nickols. 119 U. S., 296 (1886). In Richardson v. Buhl. 43 N. W. Rep., 1102, hut iMich., 1889), the court approved of the following statement: "That the first thing to be done by any manufact- urer, who would ascertain his net earn- ings during the preceding year, is to take a careful inventory of what he has left including his plant aud machinery. and then make just and full allowances for all losses and shrinkages of every kind that he has suffered in his prop- erty during the year, and for all ex- penses of every kind, ordinary or ex- traordinary, that have occurred during the year: and. having made 6uch inven- tory, and deducted such losses and shrinkage of every kind, his net earn- ings will be the difference between all his investments in his business aud all his ex; f every kind on the other hand, and this new inventory, with the iuctions properly made, and all that lie has received of every kind on the Other hand; and if Ids books are prop- erly kept and proper deductions made, these ii. t earnings will finally appear on the balance sheet to the credit of the profit and loss account." Tn Grata B Id, 4 B Men.. 11 1848), it is held that capital paid in on stock which is afterwards forfeited does not thereby become profits and liable to be distrib- uted as a dividend. Money paid in as capital must remain and be treated and expended as capital, whether the st that represents it is forfeited or npt To distribute such money as profits is to squander and dissipate the capital stock. "Gross earnings'' include earnings of the railroad through a transfer com- pany operated by it Dardanelle, etc, R'y n Shinn. 12 S. W, Rep, 183 (Ark., "The assets, resources and funds of the corporation must consist of cash on hand and other property, and, if such assets exceed the liabilities, a dividend can be lawfully declared; in other words, a profit exists." Hubbard B Weare, 44 N. W. Rep, 914 (Iowa. 1890): Miller B Bradish, 69 Iowa, 278. See. also, McDougall r. Jersey, etc.. Co.. 2 Hem. ft 1£, 528 (1864); Phillips B Past ern R R, 138 Mass.. 122 (1884). CH. XXXII.] DIVIDENDS. [§ 546. a part of the capital of the company. 1 But it is necessary to pay the interest on such bonded debt before any dividend is declared. 3 The floating debt should be paid or funded before a dividend is declared. 3 But outstanding and disputed claims need not be first paid. 4 'A company has power to and does raise its capital both by stock and by borrowing. " They expend that money in executing the works, and the works having been executed, the capital of the company remains in the shape of the station houses, the permanent way, the warehouses and everything else which requires expenditure of capital. The shareholders . . . are not to be told that all those things are to be paid for before they are to have any dividend out of the income." Mills v. Northern R'y, L. R, 5 Ch., 621 (1870). For a learned and very satisfactory discussion of when net earnings are to be retained for the purpose of accumulating a fund to pay a corporate debt not yet due, see Hazeltine v. Belfast, etc., R R Co., 10 Atl. Rep., 328 (Me., 1887). All interest must be paid out of profits and should not be charged to construction account. The court said also that a sinking fund, should also be provided and an annual contribution made to it out of the prof- its. Gratz v. Redd, 4 B. Monroe, 178, 188 (Ky., 1843). 2 Gratz v. Redd, supra. A dividend cannot properly be based on a statement which includes accrued interest with no allowance for interest on liabilities ; out- standing accounts with no allowance for bad debts ; and expense for perfect- ing a machine, it not being a success. Hubbard v. Weare, 44 N. W. Rep., 914 (Iowa, 1890). Whether the interest on debentures can be legally charged upon the capital account of the company, the revenue available for dividend being thereby increased, was not decided in Bloxam v. Metropolitan R'y Co., 3 Ch., 337, 344, 350 (1868). but a preliminary injunc- tion against the dividend was granted. 3 The funded debt need not be paid before dividends are declared, but "any debts which have been incurred and which are due from the directors or the company, either for steam-engines, for rails, for completing stations, or the like, which ought to have been and would have been paid at the time, had the de- fendants possessed the necessary funds for that purpose, those are so many de- ductions from the profits, which, in my opinion, are not ascertained till the whole of them are paid." Corry v. Lon- donderry, etc., R'y, 29 Beav., 263, 273 (1860). However in the case of StevenB V. South Devon R'y, 9 Hare, 313 (1851), a stockholder failed in his suit to enjoin dividends until the floating debt was paid. The court said: " I am of opinion that the court ought not, upon this ground, to interfere by injunction. . . . I think, also, that the question upon this third point is one of internal man- agement, with which the court cannot interfere." Net earnings are the gross receipts less the expenses of operating the road to earn such receipts; also less the interest on the bonded, funded, per- manent or standing debt ; also floating debts " which it is not wise and prudent to place in the form of a funded debt or to postpone for later payment;" also an annual contribution to a sinking fund to pay the funded debt when the condition of the company renders it expedient, as where the company will at some future time earn only its oper- ating expenses. As to whether the floating debt should be paid and a con- tribution be made to a sinking fund " depends upon the financial resources and abilities of the corporation and the prospects of its road." The cost of con- struction may be charged to the capital stock account Belfast, etc., R R v. Belfast, 77 Me., 445 (1885). 4 The court will not enjoin a dividend 723 § 546.] DIVIDENDS. [CH. XXXII. A proper sum must first be expended or set aside for repairs and reconstruction to replace depreciation due to wear and tear. 1 But in the case of a mining company or a company whose produce when once used can never be replaced, it is not necessary to set aside funds for the purpose of purchasing a new mine. 2 where the company shows that it has the necessary profits, even though there are outstanding claims on illegally issued stock. Carpenter v. N. Y. & N. H. R R, 5 Ahb. Pr., 277 (1857). Where the company denies that the complain- ant is a stockholder, a preliminary in- junction falls. Blatchford v. Id., id., 376. Directors are not liable to replace dividends declared (by reason of a stat- ute makiug them so liable if the divi- dends are not "from the surplus profits"), although dividends were declared while the company, being engaged in mining, assumed a mortgage debt in buying ad- ditional property, a sinking fund being begun to meet that liability gradually, and although the money to pay the divi- dend was borrowed, money to that amount having been put into improve- ments, and although losses due to an injunction against using a stream of water were not at once charged up to operating expense. Excelsior, etc., Co, v. Pierce, 27 Pac, Rep., 44 (Cat, 18911 1 In the case Davison v. Gillies, L. R. 16 Ch. D, 347, note (1879), the court, at the instance of a stockholder, enjoined the declaration of a dividend on the ground that the street railway tracks of the company had become woru out, and needed very expensive repairs, for which no provision had been made by the company, and that this capital so used up must be restored before a divi- dend was declared. The by-laws pro- hibited dividends except from the cap- ital stock. The court said: "A tramway company lay down a new tramway. Of course the ordinary wear and bear of the rails and sleepers, and so on, causes a sum of money to be required from year to year in repairs. It may or may not be desirable to do the repairs all at once ; but if at the end of the first year the line of tramway is still in so good a state of repair that it requires nothing to be laid out on it for repairs in that year, still, before you can ascer- tain the net profits a sum of money ought to be set aside, as representing the amount in which the wear and tear of the line has, I may say, so far de- preciated it in value as that sum will be required for the next year or next two years. ... I should think no commercial man would doubt that this is the right course — that he must not calculate net profits until he has pro- vided for all the ordinary repairs and wear and tear occasioned by his busi- ness. . . . That being so, it appears to me that you can have no net profits unless this sum has been set aside. When you come to the next year, or the third or fourth year, what happens is this : as the line gets older the amount required for repairs increases. If you had done what you ought to have done, that is, set aside every year the sum necessary to make good the wear and tear in that year, then in the following years you would have a fund sufficient to meet the extra cost." See, also, as to construction account. Mackintosh v. Flint, etc., R R, 34 Fed. Rep., 583. - A company owning a mine, lease or patent may declare dividends out of its net proceeds, although the necessary result is that that much is permanently taken away from the substance of the estate. Excelsior, etc., Co. v. Pierce, 27 Pac Sep., 44 (Gal, 18M). In the case Lambert r. Neuchatel Asphalte Co., 51 L. J. (Ch.), 882 (1882), a stockholder sought to enjoin a dividend on the ground that the beds of asphalte belong- ing to the company were being con- sumed by the company, and that funds sufficient to replace this consumption 724 CH. XXXII.] DIVIDENDS. [§ 540. In estimating the profits for a year for the purpose of declaring a dividend, it is not correct to take into account the increase or decrease in the value of the assets of the company prior to that year. The fact that in a year prior to the declaration of the divi- should be set aside before any dividend said that the company must come to a was declared. Otherwise the capital would gradually be entirely used up. The court refused the injunction, inas- much as the by-laws of the company gave absolute discretion to the stock- holders to determine the net profits. No creditors' rights were involved in the case. A very full and careful discussion of the right to declare dividends out of a mining property is to be found in Lee v. Neuchatel Asphalte Company, 61 L. T. Rep., 11 (18S9). In that case, how- ever, the mines were at the time of the litigation more valuable than at the time when the company was formed, and it is to be noticed that the rules laid down expressly assumed that enough property existed to pay all creditors after declaring the dividend. The court said, per Lindley, J. : " It is obvious with respect to such property, as with respect to various other properties of a like kind, mines and quarries, and so on, every ton of stuff which you get out of that which you have bought with your capital may, from one point of view, be considered as embodying and containing a small portion of your capital, and that if you sell it and divide the proceeds you di- vide some portion of that which you have spent your capital in acquiring. It may be represented that this is a re- turn of capital. All I can say is, if that is a return of capital it appears to me not to be such a return of capital as is prohibited by law. . . . "As I pointed out in the course of the argument, and I repeat now, suppose a company is formed to start a daily newspaper ; supposing it sinks £250,000 befoi-e the receipts from sales and ad- vertisements equal the current expenses, and supposing it then goes on, is it to be stop, or that ir. cannot divide profits un- til it has replaced its £250,000, which has been sunk in building up a prop- erty which, if put up for sale, would, perhaps, not yield £10,000? That is a business matter left to business men. If they think their prospects of success are considerable, so long as they pay their creditors there }s no reason why they should not go on and divide profits, so far as I can see, although ever shil- ling of the capital may be lost. It may be a perfectly flourishing concern, and the contrary view I think is to be traced to this, that there is a sort of notion that the company is debtor to capital. In an accountant's point of view it is quite right, in order to see how you stand, to put down company debtor to capital. But the company do not owe the capi- tal. "What it means is simply this: that if you want to find out how you stand, whether you have lost your money or not, you must bring your capital into account somehow or an- other. . . . " If a company is formed to acquire and work a property of a wasting nat- ure, for example, a mine, a quarry or a patent, the capital expended in acquir- ing the property may be regarded as sunk and gone, and if the company re- tains assets sufficient to pay its debts, it appears to me that there is nothing whatever in the act to prevent any ex- cess of money obtained by working the property over the cost of working it from being divided amongst the share- holders; and this, in my opinion, is true, although some portion of the property itself is sold, and in some sense the capi- tal is thereby diminished. . . . " But it is, I think, a misapprehension to say that dividing the surplus after payment of expenses of the produce of 725 § 546.] DIVIDENDS. [CH. XXXII. dend some portion of the capital of an incorporated company has been lost and not made good affords no ground for restraining the payment of a dividend out of profits subsequently earned. 1 A div- idend may be declared although the company has not yet completed its works.- In the case of railroads the cost of additional rolling stock and improvements may be charged to capital account and need not be paid before a dividend is declared. 3 Insurance companies cannot declare dividends out of unearned premiums. 3 Banks cannot declare dividends out of interest not yet received. 4 The question of what constitutes profits applica- your wasting properly is a return of capital in any such sense as to be for- bidden by the act" The court held consequently that the stockholder's suit to enjoin the dividend must faiL i Hence where in 1882 f350,Onn was charged off for bad debts, but this was offset by credit for $:;.-)0,000 for increase in the value of land owned by the com- pany, ibis transaction was not to be considered in 1885 in ascertaining the profits of 1885. It is immaterial whether the alleged increase in the value of the land was correct or not. Bolton v. The Natal Land, etc., Co., 85 L T. Rep., 786 (1891). Though the capital stock has been impaired in time past, it has been held that dividends may be declared out of profits subsequently earned without Betting them aside to restore the lost capital. Healey on Companies Law and Practice, 183. See, also, cases in last note. Where a bank sells its busi- ness for a certain sum, and subsequently buys back a portion of it for another sum, it may declare the dividend of the surplus that remains after deducting from the first-mentiond sum the second- mentioned sum, and also the capital stock. Lubbock tx British Bank, etc., 67 LT, Rep., 74(1892). 2 In Browne v. Monmouthshire R'y, 18 Bea v., 82 (1851), the court refused to enjoin a company from declaring a dividend, the only ground of complaint being that the company had not yet completed its works. 8 Rolling stock may be carried to cap- ital account instead of being charged to operating expense. Mills v. Northern K'y. L R, 5 Ch. App.. 821 (1870). For a definition of "net earnings" as used in the federal Btatutes in regard to the government's claims on the Pacific Railroads, see Union Pacific R. R n United states. 99 U. S„ 402 (1878); United Btai entral Pac R. EL, id, 149; United States tx Kansas Pac ELR, id, 466; United States tx Sioux City y the gradual inoreasa of traffic, the better discharge of busi- ness, and the public accommodation," in arriving at the net earnings, un- der the Thurman act, relative to the Pacilic railroads, no such deductions are to be made. United States tx Central Pac. K. R, 138 U.S., 84(1891). 'Unearned premiums received by an insurance company, on which the risks are still running, are not surplus profits out of which dividends can legally be made, there not being a sufficient sur- plus on hand in excess of the capital stock to meet the probable losses on risks not yet terminated. Do Peyster r. American Fire Ins. Co., 6 Paige, 486 (18137). See, also, Scott tx Eagle Fire Ins. Co., 7 id., 198 (1838); Lexington, etc., Ius. Co. tx Page, 17 B. Mon., 412 (1856). • 1 •' Money earned as interest, however well secured, or certain to be eventually paid, cannot in fact be distributed as 26 OH. XXXII.] DIVIDENDS. [§ 546. ble to dividends arises often in connection with preferred stock. 1 Profits earned and invested in times of prosperity may properly be paid out as dividends subsequently and at a time when no divi- dends have been earned. 2 When the company has used profits for improvements, it may lawfully borrow an equivalent sum of money for the purpose of a dividend. 3 And it may properly borrow money to pay a dividend if, upon a fair estimate of its assets and liabilities, it has assets in excess of its liabilities and capital stock equal to the amount of the proposed dividend. 4 The subsequent insolvency of the corporation does not invalidate a dividend declared when there were net profits. 5 And even though the business is a hazard- ous one, money need not be set aside for possible disasters. 6 Upon a reduction of the capital stock the surplus funds over and above the full amount of the capital stock as reduced may be di- vided among the stockholders, the only restriction being that such a distribution must leave the reduced capital stock entire and unim- paired. A stockholder may insist upon a division of such a surplus. 7 dividends to stockholders, and does not constitute surplus profits." People v. San Francisco Sav. Union, 72 Cal., 199 (1887). In Iowa it has been held that where a bank with a capital of $106,860 ; assets of $156,904; liabilities of $56,065, declares and pays a dividend of ten per cent, i. e., $10,686, the corporate cred- itors could not compel the stockholders to return the dividend. Miller v. Brad- ish, 69 Iowa, 278 (1886). i See ch. XVI. 2 Mills v. Northern Railway of Buenos Ayres Co., L. R, 5 Ch., 621 (1870) ; Hoole v. Great Western R'y Co., L. R, 3 Ch., 262 (1807) ; Beers v. Bridgeport Spring Co., 42 Conn., 17 (1875); In re Mercan- tile Trading Co., L. R, 4 Ch., 475 (1869). 3 Mills v. Northern Railway of Buenos Ayres Co., L. R, 5 Chan., 621 (1870); Stringer's Case, L. R, 4 Ch., 475, 492 (1869). * Stringer's Case, I* R, 4 Ch., 475 (1869). See, also, § 539, supra, " A com- pany is quite as competent to declare dividends out of property which is in- vested for the time being in buildings, or anything else, as it is out of cash in hand, and it is not at all necessary that a company, any more than an individual, should have cash at the bank on which he can draw in order to declare divi- dends." Municipal, etc., Co., Limited, v. Pollingtoh, 63 L. T. Rep., 238 (1890). s Reid v. Eaton Iron Mfg. Co., 40 Ga., 98 (1869) ; Le Roy v. Globe Ins. Co., 2 Edw. Cb., 657 (1836). In deciding whether a dividend was rightfully made the transaction must be viewed from the stand-point of that time and not in the light of subsequent events. Notes or overdrafts by persons then consid- ered abundantly good, included among the corporate assets when the dividend was declared and paid, should not be regarded as losses sustained by the corporation because they afterwards proved to be unavailable. Main v. Mills, 6 Biss., 98 (1874). Cf. Flitcroft's Case, L. R, 21 Ch. D., 519 (1882), where the directors figured in what they knew were bad debts. 6 A balance sheet sustaining a divi- dend is upheld where the business is extra hazardous, such as blockade run- ning, and such dividend need not be re- funded even though the blockade run- nel's are lost and other assets turn out to be worthless. In re Mercantile Co., Ld., 4 Ch. App., 475 (1869). " Seeley v. New York National Ex- change Bank, 8 Daly, 400(1877); S. C, 727 § 517.] DIVIDENDS. [cn. XXXII. The question of dividends where one road is consolidated with an- other is considered elsewhere. 1 §547. A stockholder may enjoin an illegal dividend.— A court of equity will, upon the application of a stockholder, enjoin an at- tempt to distribute in dividends any part of the capital stock. 2 But the courts will not lightly review the decision of the board of di- rectors in regard to whether the necessary profits actually exist. 3 If the dividend has been declared but not paid, all the stock- holders must be joined as parties. 4 The court will not interfere, however, if neither the stockholders nor the corporate creditors can be injured by the dividend. 8 The courts of one state will not enjoin a corporation created by another state from declaring a div- idend unless a fraud is being perpetrated on citizens of the first- mentioned state. 6 A corporate creditor has no standing in court to enjoin a dividend, even though it will impair the capital stock. 7 Thompson Nat'l Bank Caa, 804; afFd, holders as parties lie cannot enjoin the 78 N. Y.. GO Strong >: Brooklyn town R R Co., 93 N. V.. 426, 486 (1883); Parker v. Mason, 8 R. I.. 427 ism - 548; Eyster o. Cen- tennial, eta, 84 U. S., 500. i Seech. XVI. * Macdougall r. Jersey Imperial 11 Co.. 2 Bern. & M.. 528 (1864); Bloxam v. Metropolitan K'y Co.. L, R.. 3 Ch., Salisbury ?\ Metropolitan K'y Co., 38 I.. J., Ch., 'J I'.' (1869); «'arlisle v. Southeastern K'y Co., l Macn. ft Q., 689 (1850); War-1 r. Sittingbourne, etc.. K'y Co.. L, R.. 9 Chan., 488 (1874); Davison r. Cillies. L. K.. 16 Oh. U. 847, n. (1870) See, also, cases in preceding section. * Where the directors declare a divi- dend after a proper investigation of the financial position of the company, the court will not lightly interfere with the payment thereof; but where they de- clare it without proper investigation or professional assistance and it is called in question, the burden of proof is upon them to show that it is to bo fairly paid out of net profits. In re County M. Ins. Co, L K.. <"> Ch.. 104 (1870); Hoole v. Great Western B'y Co.. L. B., B Ch., 262. 4 A stockholder may file a hill in be- half of himself and other stockholders to enjoin the declaration of dividends where there are no net profits, hut where he has not joined all the stock- payment of a dividend already declared, n though the time of payment has not yet arrived. Ffewcett R Laurie, 1 Dr. & sm„ 192 (I860). To same effect, Carlisle v. Southeastern K'y. 1 Macn. & See Browne v. Mon- mouthshire K'y ft Canal Co., 13 Beav, 1861 | Coatee * Nottingham Wa« works Co., 66 id., B6 (18! » "Equity would not interfere with a dividend unless it appeared that some- body in particular was hurt or liable to be injured. It would not interfere after all danger had passed, and for the sake of vindicating general principli In the case of Chaffee r. Rutland R. R., 66 Vt.. 110. 188 (1882) the court stated and acted upon the principle of law stated above. « Howell v. Chicago, etc.. R. R Co., 51 Barb., 378 (1868). In Massachusetts no equitable relief can be granted against a foreign corporation, winch has neither officers nor place of business in that state, to compel the company to declare and pay dividends according to the stipulations of their certificates of pre- ferred stock. Williston v. Michigan - uthern, etc.. R. R. Co., 95 Mass., 400 (1866); Berford v. X. Y.. etc. Co., 4 N. V. Supp, 836 (Super. Ct, 1889). "Mills v. Northern B'y, L. R, 5 Ch., 621 (1H70). See, also. ch. XLV. 728 CII. XXXII.] DIVIDENDS. [§ 548. § 548. Dividends which impair the capital stock are illegal, and may be recovered back from the stockholders — Dividends on dissolu- tion. — As already shown, a dividend can be lawfully declared only when sufficient net profits have been earned to pay that dividend. Accordingly, a dividend paid wholly or partly from the capital stock is illegal, and subjects the corporation and the shareholders who are parties to it to serious liability. It is the well-determined doctrine of the courts of this country that the capital stock is a trust fund to be preserved for the benefit of corporate creditors. 1 Hence the rule has been firmlv established that, where dividends are paid in whole or in part out of the capital stock, corporate creditors, being such when the dividend was declared, or becoming such at any subsequent time, may, to the extent of their claims, compel the shareholders to whom the dividend has been paid to re- fund whatever portion of the dividend was taken out of the capital stock. 2 In this country shareholders are bound to take notice of the true character and condition of the capital stock, and they can- not escape liability by reason of their ignorance. 1 See § 199, supra; Goodwin v. Mc- Gehee, 15 Ala., 232, 247, holding that a corporation cannot give away its effec:s to the prejudice of creditors ; and any arrangement made by it with its stock- holders to defeat the claims of creditors will be held void both in law and in equity, and that a stockholder cannot buy up claims against the company as an offset to his subscription. 2 Curran v. State of Arkansas, 15 How., 304 (1853); Kailroad Company v. How- ard, 7 Wall., 392 (1868) ; Osgood v. Lay- tin, 48 Barb., 463 (1867); affirmed, 3 Keyes, 521 ; Johnson u Laflin, 5 Dill., 65, 86, note (1878) ; Hastings v. Drew, 76 N. Y., 919 (1879) ; Sagory v. Dubois. 3 Sand. Ch., 466 (1846); Wood v. Dum- mer, 3 Mason, 308 (1824) ; Gratz v. Redd, 4 B. Mon., 178 (1843) ; Bank of St. Marys v. St John, 25 Ala., 566 (1854); Bartlett v. Drew, 57 N. Y., 587 (1874); Heman v. Britton, 88 Mo., 549 (1886); Story's Equity Juris. (13th ed., 1886), § 1252. A stockholder who receives an illegal divi- dend is liable for it even though he has paid it over to another person to whom the stock belonged. Finn v. Brown. 142 U.S., 56 (1891). Where the stockholders distribute the assets among themselves a creditor may follow the assets. Pan- handle, etc, Bank v. Stevenson, 16 S. W. Rep., 23 (Tex., 1890). The shareholders of a corporation have, in Louisiana, no right to appropriate any part of its assets to pay large salaries to themselves as officers of the company, until all creditors who are not stockholders have been paid. Cochran v. Ocean Dry Dock Co., 30 La. Ann., 1365 (1878). In Lexing- ton Life, etc., Ins. Co. v. Page, 17 B. Mon., 412 (1856), it is held that the action to recover the dividend in such a case may be maintained by the company or its assigns where the dividend had been paid by mistake. See, also, in general, Skrainka v. Allen, 7 Mo. App., 434 (1879) ; Ward v. Sittingbourne, etc., R. R. Co., L. R, 9 Ch., 488 (1874) ; Clapp v. Peter- son, 104 111., 26, holding that the prop- erty so withdrawn was liable for the creditor's whole debt and not merely for a pro rata share thereof. If a fixed per cent, is drawn out by stockholders in- stead of a dividend and this per cent, exceeds the profits, a stockholder, upon the insolvency of the corporation, must pay back the excess received by him. Reading, etc.. Co. v. Reading, etc.. Works, 21 Atl. Rep., 170 (Pa., 1891). 729 § 548.] DIVIDENDS. [CH. XXXII. If a dividend has been paid out of the capital stock the stock- holders are conclusively presumed to have known it, and are liable to an action for a repayment. They cannot claim to hold the posi- tion of innocent or bona fide holders. 1 A stockholder may by bill in equity compel a return of the divi- dend paid out of the capital stock. 2 A stockholder who receives dividends wrongfully declared cannot then, as a corporate creditor, hold other stockholders liable on a statutory liability for wrong- fully declaring dividends. 3 In Massachusetts at an early day it was held that an action at law would not lie to reach dividends paid out of the capital stock. 4 A corporate creditor may compel stockholders to refund the amount received by them on a distribution of the corporate assets upon dissolution or a sale of all the assets of the company, to the extent that his claim has not been paid after he has exhausted his remedy against the corporation itself. 5 But aside from this it is leo-al for the stockholders to dhpose of the assets. 6 Creditors may reach shares of stock that the corporation which becomes insolvent lias distributed without a divi- dend. McKusick v. Seymour, etc., Co., 50 N. W. Rep., L116(Minn., 1892). i A stockholder must turn back illegal dividends, although be knew nothing of the illegality. Finn v. Brown, 1 12 I - . r>6 (1891); In re Denham & Co., L. R., 25 Ch. D.. 752(1883) -Holmes v. Newcastle, etc., Co., US L J., Ch., 888(1875). 'J Thompson v. Bemis, etc., Co., 127 Mass., 595(1879). y thorn as dividends at the time the company was insolvent; ami in such an action the creditors of the cor- poration are proper parties defendant for the purpose of restraining them from proceeding individually against the shareholders separately to recover the unlaw ful dividends. Osgood v. Lay- tin, S Keyes, 521 (1867). See, also, Lex- ington Life, etc., Ins. Co. v. 1 'a ;j;e, 17 B. Mon., 812 (1866), holding that an assignee of the coin] any for the benefit of the company might sue. But a re- ceiver's suit cannot in such a case be brought for the benefit of the stock- holders. Butterworth r. O'Brien. 89 Barb., 10'.} (1863). Cf. McLean V. East- man, 21 Hun. 812 (1880). 1 A treasurer cannot interplead be- tween the stockholders ami a corporate creditor who is seeking to reach bonds received by the corporation in payment for its property. Stone v. Reed, 25 X. K. Rep., 1!) (Mass.. 1890). 2 A receiver of the corporation is the proper party to sue to recover back any dividends which were paid from the capital stock. Corporate creditors can- not sue for these after the receiver goes in. It is doubtful whether the corpora- tion itself could complain of such divi- receiver does not carry this cause of action. Minnesota, etc, Co. r. Langdon, If, X. W. Rep., 810 (Minn.. lsOO). IWood r. Dummer, 3 Mason. 808 (1824); Bartlett v. Drew, 67 X. Y.. 887 (1874). In the case last cited — a lead- ing authority in New York — it is held that the creditor is not required to bring his suit on behalf of other creditors who may choose to come in, but may sue alone and for his own benefit exclu- sively, and that he need not make all the stockholders parties, hut may pur- sue one, any or all as he may elect, upon the theory that with the equities between the stockholders themselves he has nothing to do unle>s he choose to intervene to settle them. Brewer r. Michigan Salt. etc.. Jis Mich.. 351 (is*.-,. See. also, Pacific R. R. Co. v. Cutting. Jr., 27 Fed. Rep.. 638 (188G); Williams v. Boice, 88 N. J. Eq., 864 (1884). * First National Bank of Hannibal »\ Smith. 6 Fed. Rep.. 215 (1879), followed in Dormitzer r. Illinois, etc., Bridge Co., (iFed. Rep.. 217 (1881), Where all the assets have been distributed, an action against the stock holders to recover back damages for a tort committed by the corporation must include the corpora- tion as a co-defendant Swan, etc., Co. r. Frank, 39 Fed. Rep., 456 (1889). 5 Bartlett r. Drew, supra, 6 Hurl but r. Tayler.62 Wis.. 607 (1885). 732 Oil. XXXII.] DIVIDENDS. [§ 550. limitations runs in favor of shareholders who receive such divi- dends in good faith and without actual notice from the time they are declared as against the corporation and its creditors. 1 § 550. The liability herein of the corporate officers. — The liability of the corporate officers as to dividends paid out of the capital stock is not definitely determined. That they are liable for the amount of any such dividend that they themselves receive as share- holders cannot, however, be questioned. 2 Some cases go to the full extent of holding the directors liable absolutely for all dividends paid out of capital stock. But the bet- ter rule is that when the directors declare a dividend in good faith and without negligence, thev are not to be held liable merely be- caue the dividend turns out to have impaired the capital stock. 5 1 Lexington Life, etc., Ins. Co. v. Page, 17 B. Mon., 412, 446 (1856). See, also, Mam- moth Copperapolis, etc., Co., 50 L. J. (Ch.), 11 (1880) ; Dudley v. Price's Adm'r, 10 B. Monroe, 84 (Ky., 1849). 2 Main v. Mills, 6 Biss., 98, and the note (1874), where a dividend paid to the presi- dent, but not legitimately earned, was recovered from the president of a bank by the assigneejn bankruptcy ; Ranee's Case, L R, 6 Ch., 104 (1870), which was the case of a marine insurance company, where the directors declared a bonus on the shares of stock without making out a profit and loss account, and it was held that a director who had received such bonus on a balance sheet thus carelessly drawn up should, in consequence of his neglect of duty, repay the amount to the liquidator. It was the gross neglect of the directors which militated so strongly against them, and both the lord justices declared the court would not have so held had there been bona fides and regularity in the declaration of the bonus. In re Denham & Co., L. R., 25 Ch. D., 752 (1883). Here it was held that an innocent director was not personally responsible for the fraudu- lent reports and balance sheets and the dividends paid under them, and that — having regard to the extraordinary pow- ers vested by the articles in the chair- man, and to the fact that the books had been kept and audited by duly author- ized officers, and that the director sought to be charged had no reason to suspect any misconduct — he was not liable to repay any of the dividends so received by him, although they were in fact paid out of the capital. 3 Excelsior Petroleum Co. v. Lacey, 63 N. Y., 422 (1875). In Stringer's Case, L. R, 4 Ch., 475 (1869), it was held, in accordance with this view, that where the action of a board of directors in making a dividend was bona fide, they are not liable for errors of judgment in preparing a balance sheet showing the assets of the concern. In this case it appears that the directors included among the corporate assets a debt due the company by the government of the Confederate States ; some cotton owned by the company but stored within the limits of tbe Confederacy ; and certain merchant ships engaged in running the blockade, all which were estimated at their full value. These assets being subsequently destroyed and lost to the company, its bankruptcy followed. Os- good v. Laytin, 3 Keyes (N. Y.), 521, was an action by a receiver to recover divi- dends improperly declared. The court said : " Ignorance of facts that it was the duty of the managers to know — not to know which was gross igno- rance — cannot excuse the managers and impart any virtue or validity to acts otherwise clearly illegal, and which were a palpable fraud upon the cred- itors." But the directors of a bank 733 § 550.] DIVIDENDS. [CH. XXXII. Where the directors negligently or wilfully and knowingly declare and pay a dividend out of the capital stock, they are personally liable to refund that dividend. 1 Frequently also, when a dividend are not liable for dividends declared in good faith, even though it subsequently turns out that debts to the bank which they considered good were found to be bad. Witters v. Sowles, 31 Fed. Rep., 1 0887). However, the court in Re Ox- ford, etc., Society, 55 L. T. Rep.. 598 (188C), say it is settled that "directors who improperly pay dividends out of capital are liable to repay such divi- dends personally upon the company being wound up ; " that the company or a creditor or a liquidator may enforce it; that the acquiescence of the stock- holders does not affect creditors ; that the statute of limitations does not apply ; and that the innocent intent of the di- rectors is no defense. 1 In order to ascertain profits the di- rectors should have a revaluation. If they employ persons whom they reason- ably believe to be competent and adopt their conclusions they are not liable for mistakes. Where, however, the direct- ors take no active, intelligent, guiding part in the affairs of the company, and really did nothing except as BUggi by the secretary, and do not examine the accounts at all, and cause the stock- holders to declare dividends on a state- ment which omits large liabilities so that dividends are really paid out of the capital stock, such directors are person- ally liable to corporate creditors for such dividends. The secretary also is liable, he being the active manager of the com- pany. The six-years statute of limita- tions, however, applies, and only those dividends which have been declared within six years must be repaid. Inter- est, however, will be allowed. Munici- pal, etc.. Co., Limited, v. Pollington, 68 L T. Rep., 238 (1890); In re National Funds, eta, Co., L. R., 10 Ch. D., lis (1878); Gratz v. Redd, 4 B. Mou., 178. 194 (1843); Hill tt Frazier, 33 Pa. St, 820 (1868); In re Alexander Palace Co., 1. R, 21 Chan. Div., 149 (1882); Salisbury v. Metropolitan R'y Co., 23 L. T. (N. S.), 839 (1870), where the suit was by a non- participating stockholder ; Flitcroft's Case, L. R, 21 Ch. D., 519 (18S2); Evans r. Coventry, 8 De G., M. & G, 835 (1867 : Tarquand v. Marshall, L. R, 4 Chan.. 376 (18G9), denying this remedy to the stockholders as a body. In Burnes r. Pennell. 2 House of Lords Cases, 497, 581 (1849), Lord Brougham said : "lb to be understood as going with those who view with the greatest severity the conduct of railway directors in declar- ing dividends which can only be paid out of capital, because I consider that that is of itself a most vicious and fraudulent course of conduct It is telling the world that their profits are large when it may be that their profit- are nil, or that their losses are lai with no profits. It is a false aid fraud- ulent representation by act and deed. much to be reprobated ; and 1 go to the full length of what my noble and learned friend has laid down, that it would be a jusl ground, if a course of conduct of this sort were pur.-ued, coupled with such circumstances as clearly to show a fraudulent intent, for proceedings of a graver nature again-t these parties, ' The payment of a divi- dend out of the capital stock is ultra rircs. and incapable of ratification by the shareholders. Accordingly, where the directors mislead the shareholders by representing in the reports and bal- ance sheets as good debts which tin y know to be bad. and thus knowingly pay dividends which in fact impair the capital stock, it is not a defense that the shareholders, relying in good faith upon the representations and reports of the directors, pass resolutions declaring the dividends at regular meet'ngs of the corporation; and an action will lie on behalf <>f creditors to compel the direct 84 CH- XXXII.] DIVIDENDS. [§ 550. is paid out of the capital stock, the directors are made liable there- for by statute without reference to any fraud or fraudulent intent on their part. 1 Under certain circumstances, in the absence of actual fraud, the directors who have been compelled to pay the claims of corporate creditors may in turn recover what they have paid in an action against the shareholders. 2 But a director from whom a recovery is had under the Pennsylvania statute, 3 as a wrong-doer, has no right of subrogation as against the corporation. 4 And claims against directors who are made liable by statute in these cases may, in the absence of actual fraud on their part, be barred by laches. 5 ors to refund. In such an action the directors cannot set off any money due from the company to them, nor have they recourse to the shareholders who took the dividends bona fide. In re Exchange Banking Co., L. R, 21 Chan. Div., 519 (1882); In re County Marine Ins. Co., L. R, 6 Chan., 104 (1870). See, also, Scott v. Eagle Fire Ins. Co., 7 Paige, 198 (1838). In Kentucky it is doubted whether directors are liable to creditors, the courts of that state seem- ing to incline to hold them liable only to the corporation or the stockholders. Lexington, etc., R R Co. v. Bridges, 7 B. Mon., 556, 559 (1847). 1 In Massachusetts officers of a cor- poration can be charged, under the stat- ute in force upon the subject in that state (Stat 1862, ch. 218, § 3 ; Stat. 1870, ch. 224, §§ 40, 42), with corporate debts after a judgment against the corpora- tion, and after a demand and return upon the execution. Chamberlin v. Huguenot Manufacturing Co., 118 Mass., 532, 536 (1875); Priest v. Essex Manu- facturing Co., 115 id., 380 (1874). So, in New Jersey, directors are similarly liable by statute. Rev. of N. J. (1877), p. 178; Williams r. Boice, 38 N. J. Eq., 364 (1885). And in New York. 1 Rev. Stat, ch. XVIII, tit 2, art. 1, §§ 1, 10. Dividing the property is equivalent to declarations of dividend so far as the directors are concerned. Rorke v. Thomas, 56 N. Y., 559 (1874). In Mas- sachusetts the liability of the directors has been held to be enforceable by cor- porate creditors onty. Smith v. Hurd, 12 Mete, 371 (1847), and the cases supra. 2 Salisbury v. Metropolitan R'y Co., 22 L. T. (N. S.), 839 (1870); In re Alex- andra Palace Co., L. R., 21 Chan. Div., 149 ( 1 882). Cf. § 548, supra. A director who with knowledge of the insolvency of the company loans money to the cor- poration for the purpose of declaring a dividend is not entitled, upon an assign- ment of the corporate effects, to repay- ment of any part of the loan so made until the claims of stockholders are satis- fied. Kisterbock's Appeal, 51 Pa, St, 483. s Act of 7th April, 1849, §9. * Hill v. Frazier, 22 Pa. St., 320 (1853). In this case it was held that, in the creditor's suit against the director, the corporation itself is not a necessary co- defendant 5 In re Mammoth Copperopolis of Utah, 50 L. J., Chan.. 11 (1880). The acquiescence of stockholders does not bind creditors, and the statute of limita- tions does not apply. Re Oxford, etc., Society, supra. That the statute of lim- itations does not apply, see, also, Flit- eroft's Case, L. R, 21 Ch. D, 519 (1882). The statute of limitations does not com- mence to run against an officer of the corporation who has paid dividends to himself out of the capital stock, until the fraud is discovered. Main v. Mills. 6 Biss., 98 (1874), Where the directors paid out dividends from the organiza- tion of the company in 1868 until 1878, and were then stopped at the instance 735 § 551.] DIVIDENDS. [CH. XXXII. § 551. Guaranty of dividends uy contract — A guaranty of divi- dends is often made by the corporation itself that issues the stock. The stock is then called guarantied or preferred stock. This class of stock is fully considered elsewhere. 1 A guaranty of dividends frequently is made by a third person. Such a guaranty is often made when one person sells stock to an- other and guaranties that the corporation will pay certain divi- dends thereon. It often arises also where one company buys out another or leases the property of another corporation and guaran- ties dividends on the stock or the interest on the bonds of the lat- ter. This subject, also, is considered elsewhere. 2 of the board of trade, and the company udiced by the delay. Masonic, etc., Co. was wound up in 1886, and in 1890 the v. Sharpe, 65 L. T. Rep., 76 (1891); af- receiver brought suit to hold the di- firmed, 65 id., 806. rectors liable, it was held that there was l See ch. XVL not such delay as to bar the remedy, 2 See ch. XLVL since the defendants had not been prej- 736 CHAPTER XXXIII. LIFE ESTATES AND REMAINDERS IN SHARES OF STOCK. § 552. The subject. 553. The three rules in regard to stock or extraordinary cash divi- dends. 554. The American or Pennsylvania rule. 555. The Massachusetts rule. § 556-57. The English rule. 558. The apportionment of dividends. 559. The right to subscribe for new shares as between life tenant and remainder-man. 560. Miscellaneous questions herein. § 552. The subject. — Where shares of stock are held by an estate and the income of the estate is to go to a life tenant for life and the remainder to another party, the question of whether the life tenant or the remainder-man is entitled to a stock dividend or extraordinary cash dividend is a perplexing one. The stock divi- dend or extraordinary cash dividend may represent profits which were earned or accumulated before the life tenancy began. Im that case it is clear that in justice the remainder-man should receive it. If, however, it was earned after the life tenancy began, it is clear that the life tenant should have it. If it was earned partly before and partly after the life tenancy began, then it is apparent that in justice some apportionment should be made if possible. The courts, however, differ widely in laying down rules on this subject. These differences form the subject of this chapter. § 553. The three rules in regard to stock or extraordinary cash dividends. — When a stock or extraordinary cash dividend is declared upon shares held in trust, or owned in such a way that one person has an estate therein for life and another person the remainder over, there at once arises a contest between life tenant and remainder-man. Their interests necessarily conflict, because, if such dividend is held to be income, it belongs to the tenant for life ; whereas if it is held to be a part of the corpus, or principal, it inures to the benefit of the remainder-man's estate. There are three well-defined rules upon this subject, which may be denomi- nated respectively the American or Pennsylvania, the Massachu- setts, and the English rule. They lead to essentially contrary con- clusions and will be considered in order. §554. The American or Pennsylvania rule. — This rule, inas- much as it obtains in nearly every state in the Union, may well be called the American rule. It proceeds upon the theory that, the (47) 737 § 555.] LIFE ESTATES AND REMAINDERS IN STOCK. [CH. XXXIII. court, in disposing of stock or property dividends, as between life tenant and remainder -man, may properly inquire as to the time when the fund out of which the extraordinary dividend is to be paid was earned or accumulated. If it is found to have accrued or been earned before the life estate arose, it is held to be princi- pal, and, without reference to the time when it is declared or made payable, to belong to the corpus of the estate, and not to go to the life tenant. But when it is found that the fund out of which the dividend is paid accrued or was earned, not before but after the life estate arose, then it is held that the dividend is income, and belongs to the tenant for life. 1 This salutary rule prevails not only in Pennsylvania, where it seems to have first been clearly declared, but also in many other jurisdictions. 2 §555. The, Massachusetts rule. — This rule, which prevails in Massachusetts, Georgia and Rhode Island, is sometimes called "the rule in Minot's Case." It regards cash dividends, whether large or small, as income, and stock dividends, whenever earned and i Earp's Appeal, 28 Pa. St, 368 (1857) : Wiltbank's Appeal, 64 Pa, St.. 256 (1870). See, also, the following later Pennsylva- nia cases in point: Moss' Appeal, 83 Pa. St., 264 (1877); Biddle's Appeal, 90 id., 278 (1882); S. C. 3 Am. Prob. Rep., 442; Vinton's Appeal, 99 Pa. St.. 484 (1882): S. C, 8 Am. Prob. Rep., 281; In re Thompson's Estate, 11 Week Notes Cas.. 482 (1882> Cf. Roberts' Ap- peal, 92 Pa. St, 407 (1880); Thompson's Appeal, 89 id.. 36 (1879). A scrip divi- dend converted into stock belongs to the life tenant Philadelphia, eta. Co.'s Appeal, 16 Atl. Rep., 734 (Pa., 1889). A large dividend in cash, owing to a sale of part of the property of an unincor- porated association is income, and goes to the life tenant Appeal of Merchants' Fund Assoc. 20 Atl. Rep, 527 (Pa.. 1890). Money received by the corporation from new stock issued to obtain funds to re- place profits which had been used for improvements is capital and not in- come, and, does not go to the life tenant. Smith's Appeal. 21 Atl. Rep, 438 (Pa., 1891). Where the company in which the trustee holds stock gives to its stock- holders the option to subscribe to the stock of another company, the premium at which the trustee sells this option is principal and not income. 7h re Thomp- son's Estate, 20 Atl. Rep, 653 (Pa., 1893). -Connecticut: A stock dividend based upon the profits actually invested in the business is not income or dividends such as pass to the life tenant. Spooner v. Phillips et al,2i Atl. Rep., 524 (Conn.. 1892). In Connecticut it is held that where an estate is merged into a corpo- ration, the life tenant of the real estate cannot claim that a part of the capital stock represents past increase of valup and that she is entitled absolutely to that part of the stock. Hotchkiae r. Brain- erd, etc., Co.. 19 Atl. Rep., 521 (Conn.. 1889). Kentucky: As between a life benefi- ciary in corporate stock and the remain- der-man, a stock dividend will he treated as income if it in fact represents a profit A privilege given by a corpo- ration to its stockholders to take addi- tional stock at par is appurtenant to the old stock, and does not belong to the life beneficiary. Aire r. Hite, 20 S. W. Rep. 878 (Ky.. 1892); S. C. below, 2 R'y & Corp. L. J., 568. Alaine: For the rule in Maine, see Richardson v. Richardson, 75 Me., 570 (1884). A stock dividend of a company purchased by au issue of its bonds be- 38 CH. XXXIII.] LIFE ESTATES AND REMAINDERS IN STOCK. [§ 555. however declared, as capital; and the rule, accordingly, is a simple one. Cash dividends belong to the tenant for life and stock divi- dends to the corpus} There is little doubt, however, that this rule works great hardship and injustice in many cases. The court in deciding whether the distribution is a stock or a cash dividend may consider the actual and substantial character of the transaction, and not its nominal character merelv. 2 longs not to the life estate but to the body of the estate. Gilkey v. Paine, 14 Atl. Rep., 205 (Me., 1888). New Hampshire: Lord v. Brooks, 52 N. H., 72 (1872); Wheeler v. Perry, 18 N. H., 307 (1846); Pierce v. Burroughs, 58 N. H., 302 (1878). New Jersey: Van Doren v. Olden, 19 N. J. Eq., 176 (1868) ; Ashurst v. Field's Adm'r, 26 id, 1 (1875). New York: Riggs v. Cragg, 89 N. Y., 479 (1882); In re Kernochan, 104 N. Y., 618 (1887) ; Riggs v. Cragg, 26 Hun, 89 (1881); Clarkson v. Clarkson, 18 Barb., 646 (1855) ; Simpson v. Moore, 30 Barb., 637 (1859) ; Estate of Woodruff, 1 Tucker (New York Surrogate Ct), 58 (1865), and Goldsmith v. Swift, 25 Hun, 201 (1881). Cf. Cragg v. Riggs, 5 Redf., 82 (1880); Scovil v. Roosevelt. 5 id., 121 (1881). Profits upon the sale of stock are princi- pal and not income in New York. Whit- ney v. Phcenix, 4 Redf., 180 (1880). In Hyatt v. Allen, 56 N. Y, 553, 557 (1874), the court of appeals intimated plainly its disapproval of the rule prevailing in England upon this subject Farwell v. TweddJe, 10 Abb. N. C, 94 ; Estate of Prime, N. Y. L. J., March 6, 1891, re- viewing the authorities. A dividend arising from the sale of part of the as- sets of the company belong to the re- mainder-man. In re Curtis, N. Y. L. J., January 24, 1890. Money received from stock upon the winding up of the corpo- ration belongs to the remainder-man. In re Skillman's Estate, 9 N. Y. Supp., 469 (1890). Where the capital is reduced and returned to the stockholders with a surplus, the surplus goes to the life ten- ant. In re Warren's Estate, 11 N. Y. Supp., 787 (1890). South Carolina: Profits and income existing when the trust is created are corpus, but subsequent profits and in- come are income. Cobb v. Fant, 14 S. E. Rep., 959 (S. C, 1892). For articles on "Right to dividends as between life tenant and remainder-man," American Law Review, February, 1S92, and 24 Am. Rep., 169. Concerning the ques- tion as to the rights of the life tenant and remainder-man where trustees buy securities at a premium or sell them at a premium, see Scovil v. Roosevelt, 5 Redf., 121 ; Townsend v. U. S. Trust Co.. 3 id., 220; Ducios v. Benner, 5 N. Y. Supp., 73d; Farwell v. Tweddle, 10 Abb. N. C, 94; Whittemore v. Peekman, 2 Dem., 275; Appeal of Hele, 19 Atl. Rep.. 362. See note in 18 Abb. N. C, 185. 1 Minot v. Paine, 99 Mass., 101 (186S). In this case the principle is thus stated ; " A simple rule is to regard cash divi- dends, however large, as income, and stock dividends, however made, as capi- tal." In subsequent cases this rule has been affirmed and elaborated. Daland v. Williams, 101 Mass., 571 (1869) ; Le- land v. Hayden, 102 id., 542 (1869); Heard v. Eldridge, 109 id.. 258 (1872): Rand v. Hubbell, 115 id.. 461 (1874); Gifford v. Thompson, 115 id., 478 (1874); Hemeuway v. Hemenway, 134 id., 446 (1883) ; New England Trust Co. v. Eaton, 140 Mass., 532 (1886). See, also, Har- vard College v. Amory, 9 Pick., 446 (1830); Balch v. Hallet, 10 Gray, 402 (1858) ; Atkins v. Albree, 94 Mass., 359 (1866). 2 Thus, in Daland v. Williams, 101 Mass., 571 (1869), where the directors, having voted to increase the capital stock by three thousand shares, declared 739 § 555.] LIFE ESTATES AND REMAINDERS IN STOCK. [CH. XXXIII. The supreme court of the United States has held that a life ten- ant of stock does not take a stock dividend declared during the life tenancy. 1 In Ehode Island the courts have adopted a rule somewhat like "the rule in Minot's Case," without the modification ingrafted upon it by the subsequent decisions of the Massachusetts courts. It is a rule which in general prefers the remainder-man to the life tenant. 2 a rash dividend of forty per cent, and authorized the treasurer to receive that dividend in payment for two thousand eight hundred of the shares, the remain- ing two hundred shares to be sold, the court held that the transaction was virt- ually a stock dividend, and that the shares must go to the remainder-man's fund. Of. Rand r. Hubbell. 115 Mass., 461 (1874). In Leland v. Hay den, 102 Mass, 643 (1869), where it appeared that the company had invested its surplus earnings in its own stock, and subse- quently declared a dividend of that stock, the life tenant was held abso- lutely entitled to it The life tenant takes the dividend where it is in cash, although the cash is derived from in- creased sturk which is offered to the old stockholders for subscription, the profits having boon used for improvements, This is not a stock dividend. Davis a Jackson, 35 N. K. Rep, 31 (Mam, 1890) also, Balch n Ballett, 10 Gray, 403 (1858); Reed >: Head, 8 AJlen, 174 (18 Harvard College V. Amory. 9 Pick.. 1 Hi (1880); Gifford v. Thompson, 115 Mass., 478 (1874): Hemenway n Hemenway, 184 Mass., 446 (1888) In New England Trust Co. v. Eaton, 140 Mass 1886) it was held, in an elaborate opinion by 1 1 vens, J., that the gain or loss arising from the sale of stock held in trust is the gaiu or loss of the cor]»is. and that the sum received constitutes a new principal. Accordingly, a trustee who has invested in honds at a premium may retain annu- ally from the income payable to the life tenant such sums as will restore to the fund at its maturity what was taken therefrom at the time of the invest- ment See. also, the dissenting opinion of Mr. Justice Holmes in this case; and cf. Bowker v. Pierce, 130 Mass.. 262 ; Dodd r. Winship, 133 id.. 359 (1882); Wright v. White. 136 id., 470 (1884); Parsons v. Winslow, 16 id., 361 (1830); Lovell r. Minot, 20 Pick., 116 (1838). The court will take into consid- eration, in determining the question as between life tenant and remainder-man, the whole character of the transaction, and the nature and source of the prop- erty distributed, with due regard to all the facts preceding, attending and re- sulting from the declaration of the divi- dend. In Heard r. Eldridge, 109 v 258 (1879) it is said: '-The suggestion that the intention of the directors shall determine the question whether the divi- dend is capital or income cannot be cor- rect . . . It is more Bafe to look at the character of the property and the transaction. " See three interesting and valuable littls pamphlets, by a layman, wherein the merits of the question are fully and learnedly discussed, published by Q. P. Putnam's Sons, New York, and entitled respectively "Common Sense versus Judicial Legislation," "Stock Dividends, the Rule in Minot's Case Restated, with Variations by the Su- preme Judicial Court of Massachu- -.*' and " A Third Chapter on the Rule in Minot's Case." See 6 Am. Law Rev., 720 (July, 1871); Perry on Trusts (3d ed.), gj 544, 545, and the notes. In Georgia the code is construed so as to follow the Massachusetts rule. Millan v. Guerrard, 67 Ga., 284 (1881); Code of Georgia, g v '(Ubbons R Mahon, 132 U. &, 549 (1890). 2 Parker v. Mason, 8 R L, 427 (1867): 740 CII. XXXIII. J LIFE ESTATES AND REMAINDERS IN STOCK. [§§ 556,557. §§ 556-557. The English rule. — In England an ordinary, regu- lar, usual cash dividend or stock or property dividend belongs to the life tenant, while an extraordinary cash or stock or property dividend belongs to the corpus of the trust. 1 This rule was estab- lished in 1799 in England. 2 Busbee v. Freeman, 11 R. I., 149(1875); Petition of Brown, 14 R. I., 371 (1884). A stock dividend is capital and not in- come. Greene v. Smith, 19 Atl. Rep., 1081 (R. I., 1890). 1 The courts, perhaps uniformly, in- sist upon this distinction. Extraordi- nary dividends may be either of cash or stock, and appear under a variety of names, such as " participations," " dis- tributions," or, more commonly, '• bo- nuses." See Witts v. Steere, 13 Vesej", 363 (1807) ; Norris v. Harrison, 2 Madd., 268(1817); Hooper v. Rossiter, McClel- and, 527 (1824) ; Bates v. MacKinley, 31 Beav., 280 (1862). To the point that regular dividends, though increased in amount, go as income to the owner of the life estate, see Barclay v. Waine- wright, 14 Vesey, 66 (1807); Price v. Anderson, 15 Sim., 473 (1847). To the point that " extra " or unusual divi- dends, whether of cash or shares, go to augment the principal of the trust fund, see Irving v. Houstoun, 4 Paton's H. of L. Cases, 521, 1803 (a stock dividend); Hooper v. Rossiter, McCleland. 527, 1824 (a stock dividend) ; In re Barton's Trust, L. R., 5 Eq., 238, 1868 (a stock dividend); Paris v. Paris, 10 Vesey, 185, 1804 (a cash dividend) ; Clayton v. Gresham, 10 Vesey, 288, 1804 (a cash dividend); Witts v. Steere, 13 Vesey, 363, 1807 (a cash dividend) ; Price v. Anderson, 15 Sim., 473, 1847 (a cash dividend); Bates v. MacKinley, 31 Beav., 280.. 1862 (a cash dividend). Cf. Gill v. Burley, 22 Beav., 619 (1856) ; Straker v. Wilson, L. R., 6 Chan., 503 (1871). 2 Brander v. Brander, 4 Vesey, 800 (1799); Paris V. Paris, 10 Vesey, 185 (1804); Irving v. Houstoun, 4 Paton's H. of L., 521 (1803); Preston v. Milville, 16 Sim., 163 (1848); Barclay v. Waine- wright, 14 Vesey, 66 (1807) ; Murray v. Glassee, 17 Jur., 816 (1852) ; Johnson v. Johnson, 15 Jur., 714 (1850); Witts v. Steere, 13 Vesey, 363 (1807); In re Bar- ton's Trust, L. R., 5 Eq., 238 (1868); Plumbe v. Neild, 6 Jur. (N. S.). 529 (1860); Hollis v. Allen, 12 Jur. (N. S.), 638 (1866) ; Hooper v. Rossiter, 13 Price, 774 (1824) ; Bates v. MacKinley, 31 Beav., 280 (1862). See, also, In re Hopkin's Trust, L R, 18 Eq., 696 (1874); Schole- field v. Red fern, 32 L. J., Chan., 627 (1863): Hartley v. Allen, 4 Jur. (N. S.), 500; Lock v. Venables, 27 Beav., 598 (1859), holding to the effect that a spe- cific bequest of " the dividends, interest and proceeds " of shares will not pass a bonus on the shares. In Alcock v. Sloper, 2 Mylne & K., 699 (1833), the "income of the testator's long annui- ties" was given to the life tenant. Wilday v. Sandys, L. R., 7 Eq.. 455 (1869). In Lane v. Lough ran, 7 Vict. L. R., Eq., 19 (1881% it was held that the premium on a lease of part of a trust estate belonged to the tenant for life and not to the corpus. An executor may plainly transfer the stock to pay the decedent's debts, although it is be- queathed for life with remainder over. Franklin v. Bank of England. 1 Russ., 575 (1826). In Clive v. Clive, Kay (Eng. Chan.), 600 (1854), by the terms of the deed of settlement the net profits of the concern were to be divided ratably to such an amount as should be declared at the semi-annual meetings, and were to be paid within twenty-one days thereafter ; and it was provided that a shareholder was not to receive any divi- dend after the period at which he ceased to be a proprietor of shares, but the dividends on such shares were to con- tinue in suspense until some other per- son should become proprietor of them. When a shareholder died sixty-nine 741 § 557.] LIFE ESTATES AND REMAINDERS IN STOCK. [CH. XXXIII. There are, however, recent cases in England to the effect that extraordinary cash dividends may be decreed to belong to the life tenant. 1 There, of course, is no question that ordinary cash divi- dends belong to the life tenant. 2 This rule applies even though it may be shown that the dividend in question was earned, wholly or in part, before the commencement of the life estate. 3 AVhere it is shown that dividends have been fraudulently re- tained in prejudice of the rights of the life tenant, and subsequently a bonus is paid upon the shares, it belongs, as income deferred, to the tenant for life, even though it be called a bonus. 4 days after a half-yearly meeting at an J belonged to the life tenant, although which a dividend had been declared, it was used by the trustee to pay up the but before notice had been given that stock in full, and also to purchase new such dividend was payable, having by Bharee which be. immediately sold, but his will bequeathed the interest and an- the excess for which he sold the stock nual income arising from all his shares ataprofitbelongBtotheremainder-maa to one f«>r life, and then in remainder ' cash dividend of profits which to others, it was held that this dividend have been earned since the last pr< ced- belon i l to the legatee for lif<\ and ing dividend, such last preceding divi- nott ,,,l ( iteofthe dend having been made in a regular tor. Sse, also, Title to Dividends, 19 \m. Law Rev.. 571 (1886); Bo ,-. Blakeney, S Brown's Chan., (1788 i /.' Willoughby, 68 Law Times Rep., I Perry on Trusts, 544, 545. Mr. Moak's note, 81 Rep., 828, 888; Browne >: Collins, L R., 12 Eq., 588 (1871), is to the effect that and reasonable time previously, belongs to a life tenant < . and not to the remainder-man. Barclay a Waine- btj it V( -.. 86 (1807); Norris v. Harrison, 2 Madd., 208 (1817); Clivo r. Clive, Kay, 600 (1854); Murray H.G1 17 Jur., Ml ; l'i ston d Melville, 16 sim.. 163 (1848); Cuming n, Boawell, profits of a partnership accrued and 2 Jur. tf. &), 1006 (1866> Of. Wa earned before, bul nol ride death <>f the I tator, belong to the porpns of the eel tte, and thai profits accruing afteT his death i to the tenant for life as income. 8 also the recenl and impoi tanl rei iew of the whole robjed in Bouche a. Sproule, 57 T, T.. 845 (II. of L., 188 reversing the court below, Bouche t". Sproule, 29 Ch, a, 685 188 ' in the case of Bugden v. Alsbur L. T. Rep., 576 1 1890), the court held that the life tenant was entitled to an extraordinary dividend payable in. cash. The divid. mkI was called a bonus, but was nothing more nor less than a lai dividend, being a division of accumu- lated profits. In the case of Ellis r. Bar- Beld, 64 L T. Rep., 626 (1891), the court held that B large dividend was income indium, 11 Leigh (Va.), 595 (1841 ; u Anderson, 15 sim.. -17:) (11 Witt r. Ste» re, 18 id., A- will after, in England a diff< rule prevails if the cash dividend isn from long-accumulated pro! r. MacKinley, 81 Beav., 280 : Jones V. Ogle, L. R, 8 Chan., 192 187S 'Maclaren v. Stainton, I-. R>, 11 Eq., 882; 8. I «;.. F. A J., 202 (1S01); reversing s. G, 27 Beav., 460 (18 Edmondson '-. Crosthwaite, 84 Beav., 80 (1864); Dale a Hayes, 10 L. J.. Chan.. 24 1 . T. (N. s.. 12; 10 \Y. R., 299, Cf. Lean v. 1 ■ L T. (N. s. . 305; S.C., 28 W. R., 184; Lam- bert v. Lambert, 2!) L. T. (1874 3.1 ,22W.R*859; In re Tink- ler, 45 L. J. (Chan. Div.), 185. 742 CH. XXXIII.] LIFE ESTATES AND EEMAINDEKS IN STOCK. [§ 558. In all cases, however, the intent of the grantor or testator is the pole-star, and will be carried out by the courts. 1 § 558. The apportionment of dividends. — When a life tenant dies before the date at which a dividend is declared, the question arises whether the dividend declared next after his death ought or ought not to be apportioned between the reversioner or remainder-man and the estate of the life tenant for the period of time partially covered by the life estate. It is, in general, the rule in such a case that the dividend is not apportionable, but belongs entirely to the corpus of the trust fund. 2 But where a tenant for life dies after the dividend is declared, but before the dividend becomes due, his estate will be entitled to the whole of that dividend. 3 In England, however, under the statute known as the Apportionment Act of 1870, dividends are apportionable in these cases between the estate of the life tenant and the corpus; * and in this country at common i/n re Bouch, L. R„ 29 Chan. Div., 635 (1885); In re Hopkin's Trusts, L. R, 18 Eq., 696 (1874) ; Joues v. Ogle, L. R., 14 Eq., 419 (1872); Re Box's Trusts, 9 L. T. (N. S.), 372 (1863). Cf. Read v. Head, 6 Allen, 174 (1863); Clarkson v. Clarkson. 18 Barb., 646 (1855) ; Millen v. Guerrard, 67 Ga., 284 (1881); Thomson's Appeal, 89 Pa. St.. 36 (1879). 2 Pearly v. Smith, 3 Atk., 260 (1745); Sherrard v. Sherrard, id., 502 (1747): Wilson v. Harman, 2 Vesey, Sen., 672 (1755); Hartley v. Allen, 4 Jur. (N. S.), 500 (1858); In re Maxwell's Trusts, 1 Hem. & M., 610 (1863); Scholefield v. Redfern, 2 Drew. & Sm., 173 (1863); Foote, Appellant, 22 Pick., 299 (1839); Granger v. Bassett, 98 Mass., 462 (1868^; Clapp v. Astor, 2 Edw. Chan., 379 (1834). Of. Hyatt v. Allen, 56 N. Y., 553 (1874); Brundage v. Brundage, 60 id.. 544, 551 (1875) ; Perry on Trusts, § 556 ; 1 Williams on Executors, § 836, note m. But in Massachusetts it has been held that sometimes dividends declared after the life tenant's death will, neverthe- less, go to his estate. Thus, a life ten- ancy in stock for the support of the tes- tator's widow and children was held to entitle the widow's estate to a dividend declared after her death, but for a period which expired before that event. Gray, 274 (1859). See, also, Ellis v. Pro- prietors of Essex Merrimack Bridge, 2 Pick., 243 (1824): Gifford v. Thompson, 115 Mass., 478 (1874). Cf. King v. Follett, 3 Vt, 385 (1831), in which the residuary legatee claimed from the legatee of cer- tain stock the share of dividends earned in the life-time of his testator, but de- clared after his death ; the court hold- ing that a sale or gift of stock carries with it all dividends declared after it takes effect, whether earned before or not. » Wright v. Tuckett, 1 J. & H, 266 (1860); Paton v. Sheppard, 10 Sim., 186 (1839). « 33 and 34 Vict., ch. 35. § 2 ; Pollock r. Pollock, L. R., 18 Eq., 329 (1874), qualifying or explaining Whitehead v. Whitehead, L. R, 16 Eq., 528 (1873); Beavan v. Beavan, 53 L. T. Rep., 245 (1885). Cf. Capron v. Capron, L. R, 17 Eq„ 288 (1874); and see Banner v. Lowe. 13 Ves., 135 (1806); Hay v. Palmer, 2 P. Wins., 501 (1727). The statute ap- plies only to dividends upon the stock of corporations, strictly speaking, and not to those upon the shares in private trading corporations. Jones v. Ogle, L. R.. 8 Chan., 192 (1872). And does not apply to stock dividends. Hartley v. Allen, 4 Jur. (N. S.), 500 (1858). Johnson v. Bridgewater Mfg. Co., 14 743 §§ 559, 560.] LIFE ESTATES AND liEMAINDEES IN STOCK. [CII. XXXIII. law, in one or two jurisdictions, there is a tendency to hold that dividends are apportionable. 1 § 559. The right to subscribe for new shares as between life tenant and remainderman. — The right to subscribe for new shares at par upon an increase of the capital stock, which is an incident of the own- ership of the stock, does not belon- as a privilege to the life tenant, but such an increment must be treated as capital, and be added to the trust fund for the benefit of the remainder-man. This is equally the rule whether the trustee subscribes for the new stock for the benefit of the trust or sells the right to subscribe for a valuable consideration. In either event the increase goes to the corpus. 2 The subsequent in- come, however, of such increase belongs, during the continuance of the life tenancy, to the life tenant as income; the new shares are part of the corpus, and the life tenant, being entitled to the income from the corpus, takes the income from the accretions thereto. 1 ' § 560. Miscellaneous (jiostions In rein.- - The life tenant must pas- calls which are made' and taxes levied 'In Ex parte Rutledge, 1 Harp Eq. (S. ('.). 65(1824); S. G, 14 Am. I' . 696, a dividend was apportioned be- tween life tenant ami remainder-man. This is regarded a leading case in favor of apportionment In P< nnsylvania the interest on municipal bonds ami on the bonds of private corporations is apportionable; but guer< whether or nut the interest on government bonds would be. Wilson's Appeal, 108 Pa St.. 344 (1885), overruling Earp's Will. 1 Par- son's Eq. Caa, •'>">•;. But in Massachu- setts the statute of apportionment is held not to apply t-> dn idends upon the stock of corporations Granger v. Bas- s i t. 98 Mass., 862, 460 (1868), construing (Jen. StatofMasa, ch. 97, §24, In New York an apportionment is provided for by Laws of 1875, ch. 542. Bee Gold- smith v. Swift, X.'.") Hun. -Jul | lss] (. -' \tkins r. Albree, hi Masai 859 1866); Brinley v. Grou, 50 Conn.. 66(1882); Bid- die's Appeal, mi Pa Si., 278 1 1882); Moss 1 Appeal, 83 Pa St, 264 (1877); Vinton's Appeal, 99 Pa. St .1 ; Goldsmith v. Swift, 25 Hun,- 201 (1881): Sanders u. during the continuance of Bromley. 55 P. T. . N. s.i. Chan. Div, 145 ii vs »'". Profit upon the sale of stock is corpus, and not income for the life ten- ant Whitney v. Phoenix, 1 Redf. (N. V. sur. . 180 L880> Of. Leitb a. Wells. 48 N. IST., 58' ; Ei inenuav r. llemen- way, L84 Blasa, 446 (1883); New Eng- land Trust Co. v. Eaton, 140 ftlasa, 582 (1886 : S I '.. I Am. Prob. Rep.. 368. Sometimi s certificates of new stock are not stock dividends Chicago, etc., R P. I a >: Page, I Bisa, 461 (1864> In Londesborough v. Somerville, 19 Beav., 395 1854), where consols were sold just before a dividend day and the proceeds -led in realty, a tenant for life was held entitled to be jaid. as income on the consols, the diiference between the price obtained and the value exclusive of the next dividend. See, also, in gen- era! 5 . supra. *M08S' Appeal, 88 Pa St., 264 (1877); Biddle's Appeal. 99 Pa. St., 278 (1882). and the cases generally cited in the pre- ceding note; In re Bromley, 55 L. T. (N. s.i. Chan. Div., 145(1886). ' Re Box's Trusts, 9 L. T. (N. S.), 372 5 Webb v. Town of Burlington, 88 Vt, 188(1856); Citizens" .Mutual Ins. Co. r. Lott, 45 Ala., 185 (1871). Of. Nat Al- bany Exchange Bank Blatch., 478(1880). v. Wells, 18 741 CH. XXXIII.] LIFE ESTATES AND REMAINDERS IN STOCK. [§ ; J r »°- his estate upon shares held in trust for his benefit. And where stock to produce a fixed income is bequeathed for life, a subsequent increase in the earnings from that stock inures to the benefit of the life tenant. 1 But the enhanced price for which stock sells by reason of dividends earned but not declared belongs entirely to the re- mainder. 2 A life tenant is not entitled to have the stock transferred to him on the corporate books. 3 But the corporation, if it had no- tice of the trust, may be held liable for transferring shares in preju- dice of the rights of the life tenant. 4 And an administrator who permits an irregular transfer in fraud of the life tenant's rights makes himself personally liable. 5 A dividend declared before but payable after the testator's death belongs to the estate. 6 A claim of the company against the life tenant for dividends paid cannot be enforced against the remainder-man's interest. 7 (1863) ; Day v. Day, 1 Dr. & Sni., 261. la case of a life estate, followed by a life estate, followed by a remainder to the nominees of the first life tenant, the estate of the first life tenant is liable for calls made after the remainder com- mences. Hobbs v. Wayet, 57 L. T. Rep., 225 (1887). If a call becomes due the day after the testator dies it is the duty of the executor to pay it from the gen- eral fund. Emery v. Wason, 107 Mass., 507 (1871). i Russell v. Loring, 3 Allen, 121 (1861). But when a fixed income is bequeathed and the income fails or falls short, the principal must be resorted to. Bonham v. Bonham, 33 N. J. Eq., 476 ; Haydel v. Hurck, 72 Mo., 253. The opposite rule, however, prevails in New York. Delaney v. Van Aulen, 84 N. Y., 16 (1881) ; reversing S. C, 21 Hun, 274. Cf. Craw- ford v. Dox, 5 Hun, 507 (1875). See, also, §304. 2 Scholefield v. Redfern, 32 L. J., Chan., 627 (1863) ; Abercrombie v. Riddle, 3 Md. Chan., 320(1850) ; Van Blarcom v. Daget, 31 N. J. Eq., 783 (1879). Cf. Londes- borough v. Somerville, 19 Beav., 295 (1854; ; Matter of Stutzer, 26 Hun, 481 (1882) ; Re Accounting of Gerry, 103 N. Y, 445. 3 Collier v. Collier, 3 Ohio St., 369 (1854). Cf. State v. Robinson. 57 Md, 4S6 (1881). If the corporation transfer the stock to the life tenant, even by orders of the court, but issues a certifi- cate not stating the facts of life ten- ancy, and tells a purchaser of the cer- tificate that it is all right, the corpora- tion is liable to the remainder-man. Caulkins v. Memphis, etc., Co., 4 S. W. Rep., 287 (Tenn., 1887). See, also, Lind- ley on Partnership, p. 1079, etc. 4 Stewart v. Fireman's Ins. Co., 53 Md., 564 (1S80). s Keeney v. Globe Mill Co., 39 Conn., 145 (1872). See, also, Ames v. William- son, 17 West Va., 673 (1881). 6 De Gendre v. Kent, L. R, 4 Eq., 283 (1867). Cf. Browne v. Collins, L. R.. 12 Eq., 586, 594; Locke v. Venables. 27 Beav., 598 (1859). See, also, Cogswell v. Cogswell, 2 Edw. Chan., 231 (1834); Abercrombie v. Riddle, 3 Md. Chan., 320 (1850) ; Wright v. Tuckett. 1 Johns. & Hem., 266 (1860); Furley v. Hydes, 42 L. J., Ch., 626. 7 Where a fixed per cent, is paid an- nually to stockholders instead of divi- dends and charged to them and the stock held in pledge for the same, such a payment to the life tenant does not create a valid lien on the stock as against the remainder-man. Reading, etc., Co. v. Reading, etc., Works. 21 Atl. Rep., 169 (Pa., 1891). 745 CHAPTER XXXIV. TAXATION OF SHARES OF STOCK AND OF CORPORATIONS. § 561. The four methods of taxing cor- porate interests. A. TAXATION OF SHARES OF STOCK. 562. Relation of stockholders to the first three methods of taxation. 563. Tax on shares of stock as dis- tinguished from the other methods. C64. Tax on stockholders residing in the state creating the corpora- tion. 565. Tax on resident stockholders in a non-resident or foreign cor- poration. 566. Tax on Don-resident stockhol in resident or domestic corpo- ration — Mode of collecting. 567. Double taxation. 568. Exemptions from taxation as af- fecting tax on shares of stock. B. TAXATION OF NATIONAL BANK STOCK 589. 571. 57a General ml Place in which shares in national bank stuck may be taxed. The tax must not he greater than that imposed on other "mon- eyed capital." The baid; may bring suit to re- strain illegal tax on its stock- holders. C OTHER METHODS OF TAXING CORPO- RA'I !■ 572a. < General principles. 1 semptions from taxation. 572c Taxation of foreign corpora- tions. ition must not interfere with interstat i commerce. §561. The four methods of taxing corporate interests. — There are, in general, four methods of taxing corporate interests. These arc. first, by 8 tax on the franchise; second, on the capital stock; third, on the real estate and personal property of the corporation; fourth, by a tax on the shares of stock in the hands of the stock- holders. 1 There is another mode of taxation which is sometimes adopted — a tax on corporate dividends ; but since this is generally construed to be only a mot hod of valuing the franchise or capital stock, it can hardly be called a fifth method of taxing corporate interests. 2 It is entirely within the discretion of the legislature to say which one of these four methods of taxation shall be adopted, where the matter is not regulated by the state constitution. Not only this, hut it is also within the discretion of the legislature to tax the cor- poration in two or more of these ways — to levy a double tax on the corporate interests, and even to levy a treble or quadruple tax thereon. 1 Redfield on Railways vol. II (3d ed.), p. 453; Ottawa Glass Co. v. McCal< III.. 556 (1ST6); Louisville, etc., RRCo. B. Stat". 6 Heisk. CTenu.), 063, 793. 2 See g 572a. 746 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§§ 562, 563. A. TAXATION OF SHARES OF STOCK. § 562. Relation of stockholders to the first three methods of taxation. — The stockholders in a corporation have very little to do directly with any of the first three modes of taxing corporate interests. The tax is levied directly against the corporation, and is paid by the corporate officers out of the treasury of the corpo- ration. If the tax is unauthorized or illegal, or improperly as- sessed, or is based on too high a valuation, it is ordinarily the duty of the corporate officers to rectify or oppose such tax. The stockholders have nothing to do with the ordinary transaction of corporate business, of which this forms a part. Where, however, the corporate officers refuse, upon request of one or more stock- holders, to oppose or decline to pay an unauthorized tax levied in any one of the three methods mentioned above, the stockholder himself may bring a suit in a court of equity, in behalf of and for the protection of the corporate interests, to enjoin the payment and collection of such unauthorized tax. 1 § 563. Tax on shares of stoclz as distinguished from the other methods. — A tax on shares of stock is clearly different from a tax upon the franchise, the corporate property or the capital stock. Especially is it important to distinguish a tax on shares of stock from a tax on the capital stock. 2 The latter is always taxed against 1 Dodge v. Woolsey, 18 How.. 331 (1855); State Bank of Ohio v. Knoop, 16 id., 369(1853); Wilmington R R. Co. v. Reed, 13 Wall., 264 (1871); Delaware R. R. Tax, 18 id., 206 (1873;; Greenwood v. Freight Co., 105 U. S., 13 (1881) ; Paine v. Wright, 6 McClain, 395 (1855) ; Foote v. Linck, 5 McClain, 616 (1853), holding also that the corporation is a necessary party, and that if the complainant is a non-resident he may bring the suit in the United States circuit court ; Daven- port v. Dows, 18 Wall., 626 (1873), also holding that the corporation is a nec- essary party defendant; Bailey v. At- lantic, etc., R. R Co., 5 Dill., 22 (1874); Parmley v. Railroad Cos., 5 Dill., 13, 25 (1874). But the stockholder must allege actual tender of the amount of tax con- ceded to be due. Allegation of readi- ness to pay is insufficient. Huntington v. Palmer, 8 Fed. Rep., 449 (1881). See, also. Trask v. Maguire, 18 Wall., 391 (1873); Wood v. Draper, 24 Barb., 187 (1857) ; London v. City of Wilmington, 78 N. C, 190 (1878); § 494. The case of State v. Flavell, 24 N. J. L., 370 (1854), denies this right. A stockholder's in- junction against a tax in corporate prop- erty falls when the property is subse- quently sold under execution. Secor v. Singleton, 35 Fed. Rep., 376 (1888). The general character of such a suit as this comes under the principles of law set forth in Part IV, infra. 2 In the case of Porter v. Rockford. R. I, etc.. R. R. Co., 76 111., 561 (1875), the court clearly recognized this dis- tinction, and said : " The legal property of the shareholder is quite distinct from that of the corporation, although the shares of stock have no value save that which they derive from the corporate property and franchise, and a tax levied upon the property of the one is not, in a legal sense, levied upon the property of the other." See, also, Bradley v. Bauder, 36 Ohio St., 28 (1880). Cf. Dela- 747 § 563.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. the corporation, is paid by the corporation, and is based on a val- uation which does not necessarily depend on the value of the shares of stock. A tax on the shares of stock is generally levied directly against the stockholders themselves at their place of residence, is based on the market value of the stock, and is entirely distinct from the location, interests, property or taxes of the corporation itself. There are, however, some instances of taxation herein which are on the border-line between the two. Thus, a statute expressly laying a tax on the shares of stock, but requiring the corporation to pay that tax from the corporate funds, has been held to be a tax noc on the shares of stock but on the capital stock. In other jurisdictions it has been held to be a tax on the shares of stock. Taxes on shares of stock in national banks are frequently so levied and collected and are held to be upon the shares of stock and not on the capital stock. 1 A tax laid on shares owned by non-residents ware R R Tax. 18 Wall., 206, 830 value of the capital stock is estimated (1873); Farrington v. Tennessee, 95 I , S., 079. where the distinction is clearly drawn; Quincy Bridge Co. r. Adams Co., 88 111., 615 (1878). In the case of NorthWard National Bank r. City of Newark, 39 N. J. L., 880 (1877), the '•ourt said : "The moneyed capital of a bank is an entirely different thing from apital stork. The former is the property of the corporation. It may consist of cash or bills discounted, or be in part invested in real cstad' or in the securities of federal government In whatever form it is invested, it is owned by the bank as a corporate entity and not by the stockholders. The Btock or shares represent the interests of the shareholders, which entitle them to par- ticipate in the net profits of the bank in the employment of its capital, and is a distinct and independent interest or property in the shareholders, held by them like other property." The case of Porter r. Rockford, etc.. R R Co.. supra, holds also that a tax on the "capital stock" means the property of the corporation and not the aggregate of the shares of stock. See, also, State v. Hamilton, 5 Ind., 310 (1854 . where the word "stock" was construed to mean the tangible property of the cor- poration. But see Trask r. Maguire, 18 Wall., 391 (1873). And even though the by the aggregate value of the shares, it is still a tax on the capital stock. New ( >., etc., R R Co. v. Board of Assess- or-. 82 La. Ann.. 19 (1S80 . See. also, State Bank of Va v. City of Richmond, 79 Va., 113. So, also, where the fran- chise is valued, in that manner f<>r tax- ation. Commonwealth v. Hamilton Mfg. Co., 94 Ma-.. 298 (1866); Att'y- Cen. /•. Bay State Min. CO., '.".I Mass.. 1868 Hamilton Co. V. Massachu- . ii Wall., 882 (1867), holds that a t.i\ on the excess of the market value of the stock over the value of the corpo- rate realty and machinery is a fran- chise tax. In Indiana it is held that a tax on the shares of stock is the proper mode of taxation unless the statute provides otherwise. Whitney v. City of Madison. 23 Ind., 831 (1864), Cf. Wright r. Stelz. 27 Ind., 338 U8G6). Tbe mere tact that the corporation is com- pelled to pay the tax does not prevent its being consider) d a tax on the shares. National Bank r. Commonwealth, 9 Wall., 353, 360 (1SC9), per Miller, J. Stockholders are liable for taxes levied on a distillery win re the statute lev i< s the tax on "persons interested in the use of the distillery." United States v. Walters. 46 Fed. Rep., 509 (1891). 1 See § 570, infra. 748 err. xxxiv.] taxation op stock and corporations. [§ 504. of the state which creates the corporation and which levies the tax is a tax on the shares of stock and not on the capital stock, even though the corporation is required to pay it and to collect the same from the owners of those shares. § 564. Tax on stockholders residing in the state creating the corporation. — The right of the state to tax resident stockholders of a resident corporation on their shares of stock is undoubted, and has been unquestioned except where double taxation would result therefrom and is prohibited; or where a constitutional pro- vision restricts this mode of taxation. 1 Generally such a tax on resident stockholders is levied on them, not in the municipality where the corporation is, but in the cities, counties or towns where the stockholders respectively reside. This is always the rule if the statute is silent, and is the rule unless the statute expressly provides otherwise. 2 Controversies sometimes arise as to the power of a municipality to tax stockholders living in the state, but not in the municipality which levies a tax on their shares of stock, the corporation itself being located within that municipality. The law plainly is that such a tax is unauthorized, illegal and not collectible unless the municipality is authorized by statute to levy the tax. 3 A mere 1 In Illinois, under the act of 1872 taxing railroad corporations, resident stockholders in domestic corporations are not taxed. Porter v. Rockford, etc., E. R. Co., 76 111., 561 (1875). In Iowa stock is taxed under section 813 of the code. See Cook v. City of Burlington, 59 Iowa, 251 (1882); Henkle v. Town of Keota, 27 N. W. Rep., 250 (1886). Cf. National State Bank v. Young, 25 Iowa, 311. In Iowa, where deductions for debts are allowed to persons taxed on their " credits," no deduction is allowed from the tax on shares of stock. They are not " credits." Bridgman v. City of Keokuk, 33 N. W. Rep., 355 (Iowa, 1887). As to the valuation of the shares of stock, see St. Charles, etc., R. R. Co. v. Assessors, 31 La. Ann., 852 (1879). If the corporation owns shares of its own stock it is taxable the same as (hough owned by another. Richmond, etc.", R R Co. v. Alamance Co., 84 N. C, 504 (1881). 2 City of Evansville v. Hall, 14 Ind., 27 (1859). A pledgor is the proper per- son to be assessed on stock which has been pledged. Tucker v. Aiken, 7 N. H., 113 (1834). A pledgee of stock is not subject to a tax levied on the shares of stock held by him. Waltham Bank v. Waltham, 51 Mass., 334 (1845). In Mas- sachusetts shares held by executors or administrators are taxed in the town of which the deceased was an inhabitant at the time of his death, and shares held by trustees are taxed in the towns in which the cestuis que trust respect- ively reside. Revere v. Boston, 123 Mass., 375 (1877). As to the legal rem- edy in Massachusetts for an unjust val- uation of stock for taxation, see Boston Mfg. Co. v. Commonwealth, 12 N. E. Rep., 362 (Mass., 1887). As to taxation of stock under the Vermont law, see Willard v. Pike, 9 Atl. Rep., 907 (Vt, 1887). 3 Stetson v. City of Bangor, 56 Me.. 274 (1868), the court saying: "Munici- palities can tax shares of stock only when authorized so to do by some law of the state. They are the creatures of 749 § 565.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. general authority to the municipality to tax all property within its boundaries will authorize a tax by it of shares of stock owned by persons living within it. 1 But such authority does not sustain a tax on stockholders residing out of the municipality, although within the state. The location of such shares of stock, as property for purposes of taxation, is not where the corporation is located, but where the stockholder lives. 2 The statutes of the state may change this situs of the stock so as to render it taxable where the corporation is; but unless there is a statute to that effect such a tax by a municipality is unauthorized and void. §565. Tax on resident stockholders in a non-resident or foreign corporation. — It is undoubtedly within the constitutional power of the legislature of a state to enact a statute that persons residing in that state, who are stockholders in a corporation created by an- other state, shall be taxed on their shares of stock at their resi- dence within the former state.' This principle of law is based on the fact that shares of stock are personal property; that they are distinct from the corporate property, franchises and capital stock; that they follow t lie domicile of their owner like other personal property, and that consequently he may be taxed therefor wherever he may reside. It accordingly is a question of policy and expedi- encv with a state whether or not it will tax its citiz ins who are state law, and derive their powers in this respect solely from state enact- ments." Griffith n Watson, 19 Kan., 23 (1877) ; City of Evansville r. Hall. 14 Ind.. 27 (1859); Conwell v. Town of Con- nersville, 15 Ind.. 150 (I860). Such a tax may be levied under a general power of the municipality to tax prop- erty. Gordon's Ex'rs r. Mayor, etc*, 5 Gill (Md.), 231 (1847). Cf. Richmond t\ Daniels, 14 Graft, 385; Augusta n Na- tional Bank, 37 Ga., 620 (18GS\. Markoe r. Hartranft, 6 Am. L. l; p N. 8 (1867), holds that in Pennsylvania such a tax is unconstitutional, and that a tax must be levied where the stockholder resides. See, also, Craft v. Tuttle, 27 Ind., 332 (1866). 1 But a municipality can levy a tax only when specially authorized so to do, and can tax only such property as the statute permits it to tax. Cooley on Taxation (2d ed.\ 678. Hence power to a municipality to levy a tax for watch- men purposes will not authorize a tax on shares of stock Bank of Georgia v. Savaunah. Dudley (Ga.), 130 (18! g iWorthington v. Sebastian, 25 Ohio St, 1 (1874): Bradley v. Bander, 86 Ohio St, 28 (1880X holding it valid, although the corporation is taxed in the Btate where it exisK To same e(T> <-t. Seward r. City of Rising Sun, 79 Ind, 851 (1881); Dyer r. Oeborn, 11 R. I.. 821 (1876); McKeen v. County of Northampton, 49 Pa. St. 519 (1865); Pwipht r. Boston, 18 Allen, 816(1866); Whiteeell «. Same, id., 526; Great Barrington r. County Com'xa, 88 Mass., 572 (1835); Worth n Com'ra, 82 N. <'.. 420 S. C, 90 N. C. 409 (1884). In Illinois, also, I dent stockholders in foreign corpora- tions are taxed on their shares of stork. Porter n Rockford. etc.. R. R. Co.. 70 I1L, 561 ll875); Cooley on Taxation (2d ed.l 57. 221; Holton r. Bangor. 23 Me.. 264; Smith n Exeter, 37 N. H., 566 (1859). rso CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 565. stockholders in foreign corporations. A few of the states 1 levy such taxes. But New York pursues the more broad and liberal policy that shares of stock should not be taxed where the corpora- tion is already taxed; that the state which furnishes facilities to the corporation for the earning of dividends should have the sole ben- efit of taxes on such corporate interests ; that a tax on resident stockholders in non-resident corporations would generally result 1 State v. Hannibal & St. J. R. R. Co., 37 Mo., 265 (18GG) ; Ogden v. City of St. Joseph, 3 S. W. Rep., 25 (Mo.. 1887); Sturges v. Carter, 114 U. S., 511 (1884), upholding such a tax in Ohio ; Newark City Bank v. Assessor, 30 N. J. L., 1 (1862). See, also, Webb v. Burlington, 28 Vfc, 188 (1856). See Pa. Act of April 29, 1844; Lycoming County v. Gamble, 47 Pa. St., 106 (1864). See, also, In re Short's Estate, 16 Pa. St., 63 (1851), where a decedent who died a resident of Pennsylvania left a fortune in stocks of non-resident corporations. The stocks were held subject to a collateral inher- itance tax. In 1879, however, Pennsyl- vania adopted in large part the system of taxation that prevails in New York for the taxation of corporations. See Hunter's Appeal, 10 Atl. Rep., 429 (Pa., 1887). By the still later statute of 1885, manufacturing corporations are spe- cially favored in the way of taxation. MacKellar, etc., Co. v. Commonwealth, 10 Atl. Rep., 780 (Pa., 18S7). In New Jersey now there is no tax on shares of stock except in banks. See Newark B. Co. v. Newark, 121 IT. S., 163 (1887). Shares of stock owned by residents in foreign corporations are not taxable if a tax is paid by the corporation itself. State v. Ramsey, 24 Atl. Rep., 415 (N. J, 1892). In Texas shares of stock are not taxed where the capital or property of the corporation is taxed. Gillespie v. Gaston, 4 S. W. Rep., 248 (Tex., 1887). California made a wise resolution when, in 1881, it repealed § 3640 of its political code taxing shares of etock, and added the following (§ 3608) to the code: " Shares of stock in corporations possess no intrinsic value over and above the actual value of the property of the cor- poration which they stand for and repre- sent, and the assessment and taxation of such shares and also of the corporate property would be double taxation. Therefore all property belonging to cor- porations shall be assessed and taxed : but no assessment shall be made of shares of stock, nor shall any holder thereof be taxed therefor." Sustained and applied in Burke v. Badlam, 57 Cal., 502 ; Spring Valley W. W. v. Schottler. 62 Cal., 69, 118 (1882). But the tempta- tion to tax stockholders in non-resident corporations was yielded to. See San Francisco v. Fry, 63 Cal., 470 (1883); Same v. Flood, 64 Cal, 504 (1884). As to Ohio, see R. S. 1886, §§ 2737, 2739, 2744. construed in Jones v. Davis, 35 Ohio St., 474 (1880). See, also, Worth v. Com'rs of Ashe County, 90 N. C, 409 (1884); Seward v. City of Rising Sun, 79 Ind., 351. As to taxation of shares of stock in foreign corporations under the Mich- igan statutes, see Graham v. St. Josef h, 35 N. W. Rep., 808 (1888). Shares cf stock may be taxed although the corpo- ration is also taxed. The corporation may be compelled to pay the tax on the shares of stock by deducting it from dividends. South, etc., R R. Co. v. Mor- row, 11 S. W. Rep., 348(Tenn., 1889). In Ohio resident stockholders in foreign corporations may be taxed on their stock. Lee v. Sturges, 19 N. E. Rep., 560 (Ohio, 1S89). Under the Connecti- cut statutes shares of stock owned by residents in foreign express companies are taxed even though such companies are not incorporated. Lockport v. Weston, 23 Atl. Rep., 9 (Conn., 1891). 751 g 566.] TAXATION OF STOCK AND CORPOEATIONS. [CH. XXXIV in a double taxation of stockholders not residing in the state cre- atine the corporation; and that interstate comity, interests and financial investments are promoted best by taxing corporations directly, and not levying a tax on either resident stockholders in non-resident corporations or resident stockholders in resident cor- porations where the corporation itself is subject to taxation. 1 The injustice of a tax on resident stockholders in foreign corporations is at once apparent when it is considered that the state creating the corporation nearly always taxes the corporation itself or all its stockholders, resident and non-resident; and that if stockholders residing elsewhere are taxed again where they reside, they are taxed both in the state of the corporation, directly or indirectly, and also directly in the state where they reside. Xo reduction need be allowed in the latter state for taxes levied upon the corporation in another state. 2 §566. Tax on non-resident stockholders in resident or 'domestic corporation— Mode of collecting.— When it is determined by a state that it prefers to levy a tax on shares of stock rather than on the franchises, capital stock or tangible property of the corporation, or to levy a tax on both, there is no doubt as to its right to tax the stockholders residing within the state. Bat more difficulty il R S. of N. Y., ch. XIII. title 1, § 7 (p. 982, Ttli od. \ provides as follows: "The owner or holder of stock in any incorporated company liable to taxation on it- capital shall not be taxed as an individual for aunh stock." See, also. People '•• See. also. Smith r. Exeter. 87 N. H.. 556 (1859), and Jersey City Gas Light Co. v. Jersey City. 46 N. J. L, 194 (1884). « See §§ 566, 567. :52 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 500. occurs as to the right of the state- to tax non-resident stockholders in corporations created by the state. This right has been strenu- ously denied on the ground that shares of stock are not located at the domicile of the corporation, but follow the domicile of the stockholder. It is the well-established rule, however, that although shares of stock have at common law no situs except the domicile of the shareholder, yet that a statute enacted by the state creating the corporation may give to the shares of stock a situs at the location of the corporation ; that such a statute may thus determine the situs of shares of non-resident stockholders without chanpino; the situs of shares of resident stockholders; and that consequently, under a statute expressly authorizing such a tax, non-resident stockholders in a resident corporation may be taxed thereon in the place where the corporation has its domicile. 1 The method of enforcing the 1 In the case of Ottawa Glass Co. v. McCaleb, 81 111., 556 (1876), the court said that the legislature might "re- quire the taxes to be paid by the corpo- ration, and collected by them of the shareholder, by deducting the amount from his dividends or otherwise/' State v. Mayhew, 2 Gill (Md.), 48? (1845). where the corporation was to pay the tax from dividends if declared, and from profits if no dividends were de- clared ; St Albans v. National Car Co., 57 Vt, 68 (1884), holding that the stat- ute giving shares of stock a situs at the location of the corporation may be passed after the incorporation, and that mandamus lies to compel the corpora- tion to pay the tax. In the case of Tap- pan v. Merchants' Nat'l Bank, 19 Wall., 490, 499 (1873), the court said: "Per- sonal property, in the absence of any law to the contrary, follows the person of the owner, and has its situs at his domicile. But, for the purpose of tax- ation, it may be separated from him, and he may be taxed on its account at the place where it is actually located. See, also, Whitney i\ Ragsdale, 38 Ind., 107 (1870); Tallman v. Butler Co., 12 Iowa, 531 (1861): Faxton v. McCarter. id., 527 (1861); Mayor, etc., of Baltimore v. Baltimore, etc., R'y Co., 57 Md., 31 (1881). The last case holds that stock (48) 7 in street railways in Maryland may be taxed, although by statute stock in steam railways cannot be. Cf. City of Richmond v. Daniel, 14 Gratt. (Va.), 3?5 (185S); also the case of Oliver v. Wash- ington Mills, 93 Mass., 268 (1865), which holds such a tax to be unconstitutional. The common-law rule is well expressed in Union Bank v. State, 9 Yerg. (Tenn.X 490 (1836), where the court say: "The power to tax non-resident stockholders is denied, and we think correctly; from its very nature it must be a tax in per- sonam and not in rem. Stock is in the nature of a chose in action and can have no locality ; it must, therefore, of neces- sity follow the person of the owner. . . . Bank stock is not a thing in it- self capable of being taxed on account of its locality, and any tax imposed upon it must be in the nature of a tax upon income, and of necessity confined to the person of the owner; and if he be a non-resident he is beyond the ju- risdiction of the state, and not subject to her laws." See, also, Minot i\ Rail- road Co., 18 Wall.. 276; Davenport v. Miss., etc., R. R, 12 Iowa, 539 (1861); Howell v. Cassopolis, 35 Mich., 471 (1877). In Bradley v. Bauder, 36 Ohio St.. 28 (1880), the court said "that shares of stock may be separated from the per- son of the owner by statute, and given 53 § 566.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. payment of this tax may be by compelling the corporation to pay it and giving it a lien therefor on the stock, or authorizing it to de- duct the tax from the non-resident stockholders' dividends; or, if the statute is silent as to the mode of collection, a tax warrant or an attachment and execution therefor may be levied on the shares of stock. 1 In New York, where neither resident nor non-resident a situs of their own, was held in Tap- pan v. Merchants" Nat'l Bank. 19 Wall, 490. But when not 60 separated, that this situs follows and adheres to the domicile of the owner, is supported by a great weight of authority." See State Tax on Foreign-held Bonds, 15 Wall., 300 (1872). See, also, Jenkins o. I harles- ton. 5 S. C, 898 (1874). In Nat'l Com. Bank 7-. Mobile. 62 Ala., 284 (1878), the court well say: "It maybe made the duty of a bank to pay for it- share- holders the tax legally asa ss« 1 against their respective shares, whether the stockholders reside in the state of Ala- bama or not. Contestations upon these points have been made tunc and again, s imetiraes by th" banks and sometimes by the shareholders to avoid this liabil- ity. But it is established by repeated adjudications, and ought to be consid- ered definitely Bettled." And in First Nat'l Bank v. Smith, 85 [11., 44 0872), the court say : " The separation of the situs of persona] property from the domicile of tin- owner tor the purposes of taxa- tion is familiar doctrine of the courts of this country, and I by this court in various cases. . . . The act of congress itself contemplates a severance of the situs of such shares from the person of their owner by pro- viding that they should not be t except in the state where the hank is established. But, apart from this, it is really much more reasonable to lix the Situs of shares at the place where the hank is located, and where it must con- tinue to do its business or wind. up its affairs, than to separate by legislation tangible personal property from the person of its owner." In the case of St Louis Nat'l Bank v. Papin. 4 Dill., 29 (1876), the following statute was sus- tained : " The taxes assessed on shares of stock embraced in such list shall be paid by the corporations respectively, and they may recover from the owners of such shares the amount so paid by them, or deduct the same from the divi- dends accruing on such shares; and the amount so paid shall be a lien on such shares respectively, and shall be paid before a transfer thereof can be made.'' And again, in American Coal Co. v County Comm'rs, 58 Md. the court say: "The state may Live the shales of stock held by individual stock- holders a special or particular situs for purposes of taxation, and may provide special modes for the collection of the tax levied thereon." But where the tllte merely made the hank the agent to pay the tax and to deduct it from the dividends, the bank is not liable if there have been no dividends. Hershire n Firsl Natl Bank, 86 Iowa. 272. Non- resident stockholders in Virginia hanks are taxed. Stockholders r. Board of Supervisors, L3S 1'. !:• p., 407 (Va. f 1891). Concerning the situs of stock, s a:i article in 45 All.. L. J.. ! 1 In Farrington r. Tennessee. 95 I". 8., 679. 687 1877), the court say: "The bank may be required to pay the tax out of its corporate funds or be author- ized to deduct the amount paid for each Stockholder out of his dividend." And, in general, under the act of congress allowing taxation of shares of stock in national hanks, a situs is given by stat- ute to the shares so as to locate them where the hank is located, even though the shareholders be non-resident But collections can-not be enforced against the corporation unless the statute spe- cially authorizes it. First Nat'l Bank r. Fancher, 48 N. Y., 524 (1872). Collec- 54 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 507. stockholders in either foreign or domestic corporations, excepting banking corporations, are taxed on their shares of stock, these inter- state complications, hardships and jealousies do not arise. 1 § 567. Double taxation.— The most objectionable feature of a tax levied on shares of stock is that almost inevitably it operates to impose a double tax on a part or all the stockholders. 2 Such a tion by execution, see Gordon's Ex'rs v. Mayor, etc., 5 Gill (Mel.), 231 (1847) ; Weld v. City of Bangor, 59 Me., 416. But a levy of execution on stock can only exist when the statute allows stock to be so taken. Barnes v. Hall, 55 Vt., 420 (1883). Or under a tax warrant. McNeal v. Mechanics', etc., Ass'n (N. J.. 1885). But if the stockholder pays the tax, even under protest, he cannot re- cover back the money paid. Sowles v. Soule, 7 Atl. Rep., 715 (Vt, 1887). See, also, g 480. In the case of State v. Thomas, 20 N. J. L., 181 (1857). the court refused to compel the corpora- tion to pay the tax on stock of non- residents, and said : " It has been de- cided by this court that the bonds and stocks of corporations in this state held by non-residents are not liable to taxa- tion, though they are clearly within the letter of the act." A state may collect a non-resident stockholder's tax from the corporation and give it a lien there for on his stock. North Ward Nat'l Bank v. City of Newark, 39 N. J. L., 380 (1877); but see Raleigh, etc., R. R. Co. v. Connor, 87 N. C, 414. A tax collector cannot levy on and sell stock under the Jaw relative to attachments. Kennedy v. Mary, etc., R'y, 9 S. Rep, 608 (Ala., 1891). The statute may provide for the sale of stock at the place where the cor- poration exists, in case the taxes upon such stock are not paid. A purchaser of the outstanding certificates after the assessment has been made takes subject to the tax and tax seizure. Parker v. Sun Ins. Co., 8 S. Rep., 618 (La.. 1890). It is clear, where shares of stock are sold under a tax warrant, that tiie cor- poration is not obliged to oppose the eale. McNeal v. Mechanics' Building, etc., Ass'n, 12 Am. & Eng. Corp. Cas., 131 (N. J., 1885). Cooley on Taxation (2d ed.), 433, clearly upholds the rule that the state may levy a tax on shares of stock and compel the corporation to pay it, citing Maltby v. Reading R. R Co., 52 Pa. St., 140 (1866): Haight v. Railroad Co., 6 Wall.. 15 (1867); National Bank v. Commonwealth, 9 Wall , 353 (1869); United States v. Railroad Co.. 17 Wall., 322 (1872); Minot v. Railroad Co.. 18 Wall., 206 (1873); Ottawa, etc.. v. McCaleb,81 111., 556(1876): New Orleans v. Saving, etc., Co., 31 La. Ann., 826 (1879): Baltimore v. City Passenger R. Co.. 57 Md., 31 (1881); St. Albans v. Na- tional Car Co., 57 Vt, 68 (1884): Ameri- can Coal Co. v. Allegany County. 59 Md., 185 (1882); Barney r. State, 42 Md., 480 (1875); McVeagh r. Chicago. 49 111.. 31S- (18G8); First Nat'l Bank v. Fancher. 48 N. Y.. 524 (1872); Leonberger v. Rowse, 43 Mo., 67 (1868); Relfe v. Life Ins. Co., 11 Mo. App., 374 (1882). 1 See § 565, note. - In Ohio such double taxation is ad- vocated and recommended. In Frazer r. Seibern. 16 Ohio St., 614 (1866). the court said that an equitable system of taxation "is best attained in case of a corporation or joint-stock company by taxing the stockholders, the persons who own the property, upon the full value of their shares therein, including, of course, their interest in the franchise or privilege, and in all tangible prop- erty owned by the company; and by taxing the corporation also upon the value of such tangible property. The stockholder is thus taxed, as all other individuals who own tangible and in- tangible property are sometimes una- voidably taxed, once upon all he is worth, and a second time upon that part of his property which is tangible." r55 § 567.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. double tax exists where either the corporate realty or personalty or franchise or capital is taxed, and a tax is also levied on the shares of stock without any deduction for the former taxation. 1 There has been some controversy as to the right of a state to levy a double tax on property. Sometimes the state constitution pro- hibits such taxation. 2 But aside from constitutional restrictions it unquestionably is within the power of the state to levy, not only a double tax, but even a treble or quadruple tax, if it so chooses. 3 The injustice of such taxation, however, generally prevents its oc- currence. The courts also do their utmost to prevent double tax- ation, and will construe a taxation statute so as to avoid such a result, and sometimes even in opposition to the plain words of the statute itself. 4 1 This is practically the result. In the case of Farrington v. Tennessee, 95 U. S.. 679, 6S7 (1877), however, the court says in a dictum: "The Capita) Btock ami the shares may both he taxed, and it is not double taxation." See, also, New Orleans tt Houston, ll'.i V. S.. 865, L>77 (1886) Cf. Ryan v. Com'ro, 80 Kan., 185(1883). -County Com'rs v. Farmers' Nat'l Bank, -is Md., 117 (1877), the constitu- tion saying that each person shall pay a tax "according to his actual worth in real or personal property." See, also. City of San Francisco v. Mackey, 01 Fed. Rep., 589 (1884); Burke v. Badlam, 57 Cal.. 594 (1881), relative to the Cali- fornia constitution, art. XII, £ 1, that "all property shall be taxed in propor- tion to its value." 'Salem Iron, etc.. Co. v. Danvers, 10 Mass.. 514 (1818), where corporate realty was tax>.l although the shares of stock were also taxed. See, also. Belo v. Com'rs of Forsyth, 83 N. C. 415 (1880)i In the remarkable case of Toll Bridge Co. v. Osborn, 33 Conn.. 7 (1» b.vms that the realty, capital stock and shai-es of stock of a corporation were taxed, and that the chief stockholder, a railroad, was taxed on its capital Btock and shares of stock, making four or five taxations of the same property. Evidently corporations were not popu- lar in Connecticut iu 18G8, except for taxation purposes. Cf. Jones, etc., Co. v. Commonwealth, 69 Pa, St.. 187. S also, Cook r. City of Burlington, 59 Iowa, 351 (1883); State r. Branin, 38 N". J. I . IM 1 1 s.~,e> ; Saineu BentJey, id.. 583; city of Memphis v. Ensley, 8 Bax. . 558 (1878); Prov.. etc.. R R. I '«•. r. Wright. 2 R. L.459, 464 (1858), holding that a tax on the stock does uot raise a presumption that a municipality is thereby prevented from taxing the cor- porate realty. See, also, Hannibal, etc.. R R Co. r. Shacklett, 80 Ma, 550, '^ (I860). Although by the charter a tax is levied on the capital Btock, a tax may also be levied on the shares of stock. State v. Home Ins. Co., 19 S. W. Rep., 1043 (Tenn,, 1893) A tax on the bonds which arc issued by a corporation does net constitute double taxation although there is also a tax on the franchises of the corporation. Commonwealth v. New York, etc.. R Co. 34 Atl. Rep., 609 (Pa, 1893); Where the stock is not taxable if the tangible property is taxed, the stock may nevertheless be taxed for such part of its value as the capital stock exceeds iu value the tangible property. Hyland ft Central Iron, etc., Co., 28 N. R Rep.. 308 (Ind., 1891). * Thus, in Illinois, in cases where the capital stock is taxed by the state, the shares of stock are held to be free from taxation. Republic Life Ins. Co. v. Pol- lak, 75 111., 393 (1874). See, also, County 736 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 56S. § 568. Exemptions from taxation as affecting tax on shares of stock. — An exemption of shares of stock is a contract protected by that provision of the constitution of the United States which, prevents a state from passing a law which will impair the validity of contracts. 1 This provision has frequently been construed and applied in cases involving the taxation of the corporate franchises, capital stock or tangible property. Aside from questions of this nature there are two classes of cases of exemptions from taxation which affect the taxation of shares of stock. The first class in- volves the question whether an exemption of the corporate prop- erty, franchises or capital stock from taxation exempts also the shares of stock from any tax; the second, whether an exemption of the shares of stock from taxation exempts the corporate prop- erty, franchises and capital stock. As regards the former exemp- tion, the effect thereof depends largely on the words used in the statute or charter granting the exemption. The question has given rise to a difference of opinions. In the federal courts, Kew Jersey, of Lackawanna v. First Nat'l Bank. 94 Pa. St., 321 (1880), holding that under the act of March 31, 1870, releasing cor- porations from all other taxes if they pay a one per cent, tax on the par value of the stock, the corporate realty can- not be taxed after such one per cent has been paid. State v. Hannibal & St. J. R. R. Co., 37 Mo., 265 (1866) ; Jersey City, etc,, Co. v. Jersey City, 46 N. J. L., 194 (1884); Cheshire, etc., Telephone Co. ?>. State. 63 N. H., 167 (1884); Valle v. Zeigler, 84 Mo., 214 (1884); Tax Cases, 12 G. & J. (Md.), 117 (1841) ; Prov. Inst, for Sav. r. Gardiner, 4 R. L, 484 (1857); Me- chanics' Bank v. Thomas, 26 N. J. L, 181 (1857) ; American Bank v. Mumford, id., 478 (1857) ; State v. Tunis, 23 N. J. L., 546 (1852); Smith V. Burley, 9 N. H., 423 (1838); Frazer v. Siebern, 16 Ohio St., 614(1866): Savings Bank v. Nashua, 46 N. H., 389 (1866), the court saying : " It is a fundamental principle in taxation that the same property shall not be sub- ject to a double tax. payable by the same party, either directly or indirectly ; and where it is once decided that any kind or class of property is liable to be taxed under one provision of the statutes, it has been held to follow as a legal con- clusion that the legislature could not have intended the same property would be subject to another tax, though there may be general errors in the law which would seem to imply that it was to be taxed a second time." In Michigan where shares of stock in savings banks are taxed, a reduction being allowed for realty, which is taxed separately, the courts held that no other tax can be. levied against the corporation. Lena- wee, etc., Bank r. City of Adrian, 33 N. W. Rep, 304 (Mich., 1887). The Ken- tucky tax statutes are so construed that a corporation need not pay a tax on its property in addition to the tax on the stock. Louisville, etc., Co. v. Barbour, 9 S. W. Rep., 516 (Ky., 1888); Com. v. St. Bernard Coal Co., id., 709. The Penn- sylvania acts are construed so as to pre- vent double taxation. Penn. Co., etc., v. Com., 15 Atl. Rep., 456 (Pa., 1888). Harrington v. Tennessee, 95 U. S., 679 (1877). See, also, § 497. An ex- emption of the stock of a railroad com- pany does not exempt stock issued for constructing branch roads of that com- pany, such construction being subse- quent to a constitutional provision pro- hibiting exemptions. Chicago, etc., R R Co. v. Guffey, 120 U. S., 569. 751 ;s.] TAXATION OF STOCK AND CORPORATIONS. [CIT. XXXIV. Indiana and Kentucky, it has been decided that an exemption of the corporation from taxation on one or more of the first three methods of taxation exempts by implication the shares of stock. 1 But in Tennessee, Xorth Carolina and Maryland a contrary rule prevails. 2 As regards the second class of exemptions, it seems to be estab- lished by the great weight of authority that an exemption of the shares of stock from taxation exempts also, by implication, the cor- porate franchises, capital stock and tangible property from any 'State r. Branin, 23 N. J. L., 484 (1852); Same 0. Bentley, id., 532; John- son v. Commonwealth, 7 Dana (K\.\ 888(1838); Kin- v. City of Madison, 17 Ind., 48 (1881), holding that an exemp- tion of the capital stock exempts Bhares of sto.k. Gordon '•. Appeal Tax Court, 3 How., 133(4845), held that an exemp- tion prohibiting any "further tax or burden upon them," tin- banks, ex- empted the Bhares of Btock Again, where tin- charter provided that "the capita! stock of sai.l company Bhall be forever exempt from taxation, the Bhares of stock cannot be taxed . . . Bach share is a part of the whole, ami, as the whole is exempl from taxation, it fallows that each part 0T -hare nm-t also he exempt." Stale of Tenn. 0. Whitworth, 83 Fed. Rep., 7:. (1884). And the purchaser ami successor of a railroad, taking by statute all its rights ami privileges, is also exempt in same manner, hi., si ; aflPd, 117 I". S . 189 1 1886). An exemption .>f the corpora- tion exempts it from a tax upon the Bhares of shareholders, which the com- pany is required t<> pay irrespective of any dividends or prolit.s payable to the shareholder, Bince this is substantially a tax on the corporation itself. New Orleans r. Houston. Ill* 1". s. 365 1881) I v. United States v. Railroad Co.. 17 Wall., 823. An exemption of Bhai stock from taxation is waived by the ac- ceptance of subsequent statutes impos- ing a tax. Hannibal A: St. J. R. R. Co. p. Shacklett, 80 Mo., 550 (1860) ; Cooley on Taxation (3d ed.). 212. -'Union Bank t\ State, 9 Yerg. (Teuo.). 490 (1836). holding that an exemption of the capital stock did not exempt shares of stock. To same efh t the exemption has been granted must he resolved in favor of the state." Citing Prov. Bank a Billings, I Pet, 514(1830); Wilmington R R Ca r. Reid, 18 Wall.. Oi'.l: FhiLft Wilming- ton R RCo. r. State. 10 How., 876(1850> But a clear exemption of the shares of Stock i- a contract which is protected by the United states constitution. State v. Baltimore & O. R R Co., 48 Md., 49 (1877). A charter provision, howev. r. that a certain tax shall be paid by the GH. XXXIV. J TAXATION OF STOCK AND CORPORATIONS. [§ 569. tax. 1 Exemptions, however, have no effect and are of no avail be- yond the boundaries of the state granting them; and accordingly a non-resident stockholder, who is taxed on his stock in the state where he resides, cannot defeat that tax by reason of exemptions enjoyed within the state creating the corporation. 2 B. TAXATION OF NATIONAL BANK STOCK. §569. General rules. — It is one of the established principles of constitutional law in this country that the instruments of o-ov- eminent by the United States shall not be taxed by anv state, and also that those of a state shall not be taxed by the United States. Accordingly, the bonds issued by the United States gov- ernment cannot be taxed by any state. 3 So, also, when the old United States bank was in existence, it was held that neither the bank nor its capital stock could be taxed by a state. But it was corporation does not prevent a subse- quent change in that tax. Delaware Railroad Tax, 18 Wall., 206 (1873). And an exemption by the state has been held not to exempt the shares from taxation by a municipality. Gordon's Ex'rs v. Mayor, etc., 5 Gill (Md.), 231 (1847). 1 In the case of Tennessee v. Bank of Com., 53 Fed. Rep.. 735 (1892), it is held that a provision imposing a tax on each share of stock " which shall be in lieu of all other taxes" exempts the property of the company as well as the stock from further taxation. Scotland Co. v. Mo., Iowa, etc., Ry Co., 65 Mo., 123 (1877), the court saying: "It is clear that a tax on the property represented by the stock is substantially a tax on the stock.'' See, also, County Com'rs v. Annapolis, etc., R. R. Co.. 47 Md., 592 (1877), where the court say : " It is set- tled by repeated decisions of this court, which we are not disposed to disturb, that the exemption of the shares of the capital stock operates as an exemption of the property of the corporation, or so much of it as the corporation is fairly authorized to hold for the proper exer- cise of its franchises : and this upon the principle I hat the shares of the stock in the hands of the shareholders represent the property held by the corporation ; " Bank of Cape Fear v. Edwards, 5 Ired. Law (N. C), 516 (1845), where the char- ter said : "The said bank shall not be liable to any further tax ; " Mayor, etc., of Baltimore v. Baltimore & O. R. R Co., 6 Gill (Md.), 288 (1848); Tax Cases, 12 G. & J. (Md.), 117 (1841); Gordon's Ex'rs v. Mayor, etc., of Baltimore, 5 Gill (Md.), 231 (1847). In the case, however, of Wilmington & W. R, R. Co. v. Reid, 64 N. C. 226 (1870), it was held that an exemption of shares of stock does not exempt the corporate franchise from taxation. Raleigh, etc., R. R v. Reid, id.. 155 (1870). And in State v. Petvvay, 2 Jones' Eq. (N. C), 396 (1856), it was held that a charter provision that the shares of stock should be taxed a cer- tain amount did not prevent a tax on dividends. 2 Appeal Tax Court v. Patterson, 50 Md., 354 (1878); Same v. Gill, id., 377. See, also, Railroad Co. v. Pennsylvania, 15 Wall., 300 (1872). 3 Cooley on Taxation (2d ed.), 84. 85. Formerly government bonds were called stock both in England and in this coun- try. The use of the term, however, has become practically obsolete. See Bank of Commerce v. New York, 2 Black, 620 (1862): Weston v. City, eta, of Charles- ton, 2 Peters, 449 (1829), 759 569.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. also held that, inasmuch as the interest of the stockholders in tho bank was different from the franchises, property, capital stock and the United States bonds held by the bank, such interest of the shareholder could be taxed by a state, and that such taxation would be constitutional and legal. 1 The same rules apply to the present national banks. A state tax on the capital stock of the bank is illegal and void. 2 But a tax on its real estate or on its shares of stock is upheld as legal and enforceable. 3 This is the law, al- though a large part or all of the bank's capital stock is invested in 1 McCulIoch v. State of Maryland, 4 Wheat, 316, 436 (1819); Bulow v. City of Charleston, 1 Nott & McCord (S. C.\ 527 (1819). See. also, Berne}' v. Tax Collector, 2 Bailey (S. C). 654 1831 ; Na- tional Bank v. Commonwealth, 9 Wall., 853(18H9), per Miller, J. 2 Bank of Omaha v. Douglas County. 3 Dill., 29S (1873); Collins v. Chica Biss., 472; Salt Lake, etc., Bank v. Gold- ing, 2 Utah, 1 (187»;,; Mayor, etc. of Macon v. First Nat'l Bank, .v.i Ga., 648 (1877); Bradley r. Illinois, 6 Ara. I.. Reg. (N. S.), 400 ; Bank of Commerce v. N. Y. City, 2 Black, 620, reversing Peo- ple v. Com'rs of Assessments, 23 X. Y., 192; S. C, 32 Barb., 509, and declaring unconstitutional the New Fork Btatutes under which the national hanks were taxed. New York has been i xceedingly unfortunate in its efforts to tax national hanks. After the decision in Bank of Commerce v. X. V. City, supra, came Bank Tax Case, l' Wall., 200 (1864), de- claring unconstitutional the New York statute of 29th April. 1868, for the taxa- tion of national hanks, the tax still be- ing on the capital stock. Xext came Van Allen V. The Assessors, 3 Wall., 573 (1865) (reversin- City of Utica r. Churchill, 33 N. Y., 101. See, also, First National Bank v. Fancher, 48 N. Y., 524 1872\ declaring unconstitutional the New York statute of 9th March. 18G5. taxing the shareholders in national hanks, because the act did not prescribe expressly that the tax should be no greater than the tax on other shares of stock, and because taxes in New York on other corporations were not on shares of stock but on the capital stock. New York then passed the act of 23d April, . 1866, which was sustained in People v. Com'rs. 4 Wall., 214 (1866). Still later came the case of People v. Weaver. 100 U. S.. 539 (1879 . reversing 67 N. Y., 516, overruling People r. Dolan, 36 N. Y., 59, and declaring void the New York tax <>f national hank stock, for the rea- son that the New York court of appeals construed the New York taxation stat- ute to allow persons taxed on ordinary uritii s a deduction lor debts, while a similar deduction was not allowed to Stockholders in hanks Btate or national. Supervisors o. Stanley. 105 U. S., 305 (1881) [see People n Dolan, 36 N. y.. .v.i. 1867], practically modified the preced- ing case, however, by holding that a stockholder who owed no debts could not complain, and that those who did owe debts were entitled not to a re- lease from the tax alto-ether, hut only to the extent of what the state ought to have allowed as a deduction. The last case in New York was decided by Judge Wallace in November, 1886. states can- not tax national bank currency. Qorno «■ Creene, 52 Miss., 450. Cf. Ruflin r. Board of Com'rs, 69 X. C, 498; Lily v. Com'rs, 69 N. C. 300; Board of Com'rs v. Elston, 32 IncL, 27(1869. 3 Austin a. Boston, 96 Mass., 359 867); First Nat'l Bank v. Douglas County, 5 Dill.. 330 (1871), upholding the Nebraska statute herein of 27th of February, 1873; Stetson v. City of Bangor, 56 Me., 274 (18GS). 760 OH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 570. United States bonds. 1 The authority of a state to tax shares of stock in national banks is expressly conferred by the statutes of the United States which create and regulate these banks. 2 The only questions of importance that are still unsettled turn upon the meaning and application of that statute; and, accordingly, the law- is stated most clearly when it is connected with the various pro- visions of these statutes. § 570. Place in which shares of national hank stock may he taxed. — The Revised Statutes of the United States expressly declare that non-resident stockholders in a national bank are to be taxed at the place where the bank is located. 3 Under this statute a non- resident of the state within which the bank is situated can be taxed on his stock only where the bank is located. 4 The state where he resides cannot also tax him on such stock. As regards residents of the state within which the bank is located, the state itself deter- mines where the tax is to be levied. 5 If the state statute requires 1 Van Allen v. Assessors, 3 Wall., 573 (1865) ; People v. Com'rs, 4 Wall., 244 (18G6). See, also, Home Ins. Co. v. New York, 119 U. S., 129 (1886V In taxing the stock no reduction is allowed for bonds held by the corporation. Home Ins. Co. v. Board, etc., 8 S. Rep., 481 (La., 1890); Parker v. Sun Ins. Co., id., 618. 2 R. S. U. S., § 5219 (taken from act of 3d June, 1864, as amended by act of February 10, 1868). The case of People v. Weaver, 100 U. S., 539, 543 (1879), says that the effect of the act of con- gress, as regards the taxation of na- tional banks, is that congress says to the states : " You may tax the real es- tate of the banks as other real estate is taxed, and you may tax the shares of the bank as the personal property of the owner to the same extent you tax other moneyed capital invested in your state. It was conceived that by this qualifica- tion of the power of taxation equality would be secured and injustice pre- vented." Wasson v. First Nat'l Bank, 8 N. E. Rep., 97 (Ind., 1886). New shares cannot be taxed until the increase has been approved by the comptroller of the currency. Charleston v. People's Nat'l Bank, 5 S. C, 103. 3 Such was the effect of the amend- ment of 1866. Previous to that time there was controversy herein as to the meaning of the act of 1863. See Aus- tin v. Boston, 96 Mass., 359 (1867). 4 See Mclver v. Robinson, 53 Ala., 456 ; Weaver v. Weaver, 75 N. Y, 30 ; Kyle v. Fayetteville, 75 N. C, 445: National Bank v. Commonwealth, 9 Wall., 353; Lionberger v. Rowse, 9 Wall., 468. 5 Austin v. Aldermen, 7 Wall., 694 (1886). The tax may be levied on resi- dent stockholders in the city, county or town where they reside. Austin v. Bos- ton, 96 Mass., 359 (1867). And the cash- ier of the bank may be required by stat- ute to send to the clerks of the various towns the names of such stockholders as reside in those towns. Waite v. Dow- ley, 94 U. S., 527 (1876). As to the tax- ation of national bank stock in Iowa, see First Nat'l Bank of Albia et ah v. City Council of Albia, 52 N. W. Rep., 334 (la., 1892). As to the assessment of bank stock in West Virginia, see Bank of Bramwell v. County Court of Mercer County, 15 S. E. Rep., 78 (W. Va., 1892). Concerning the taxation of natioual bank stock in Nevada, see First Nat'l Bank, etc., v. Kreig, 32 Pac. Rep., 641 (Nev., 1893). National bank stock in Delaware may be taxed by the state. First Nat'l Bank v. Herbert, 44 Fed. Rep., 158 (1890). 761 § 571.] TAXATION OF STOCK AND CORPORATIONS. [ell. XXXIV. that the whole tax shall be paid in the city, county or town where the bank is located, even though some of the stockholders reside in other counties or cities, the statute must be obeyed. 1 Generally, however, the statute requires that stockholders residing in the state shall be taxed at their place of residence on stock owned by them in a national bank within that state. 2 If the statute is silent herein, then the state statutes regulating the taxation of stockholders in other corporations are to apply to stockholders in national banks situated within the state. The statute may require the bank to re- tain from dividends the tax on the shares of stock, such tax being determined by the amount of dividends. 3 The collection of a tax on national bank stock may be enforced by the same procedure through which taxes on other personal property are collected. 4 £ . r>71. The tax must not be greater than that imposed on other '-moneyed capital." — The most difficult, unsettled and litigated questions connected with the taxation of shares of stock in national banks arise from the meaning and application of that provision of the statutes of the United States requiring that the taxation of na- tional bank shares of stock shall not be at a higher rate than the i National Bank v. Commonwealth, 9 Wall., 853(1869); Tappan r. Merchants' Nafl Bank, 19 Wall., 490 (1878); Pror. Inst v. City of Boston, 101 Mass., 575 (1869); McLaughlin u.Chadwell, 7 Brisk. (TcinA 889 (1872). Craft V. TutH.'. 27 Ind., 882 (1866), holds that if a munici- pality l>as no power to tax Shares in state banks, it cannot tax national bank shares. - ( lapp r. City of Burlington, 42 Vt, 579 (1870). See Trustees of Eminence v. Deposil Bank, 12 Bush, 588 [If Farmers' Nat'lBank u. Cook, 32 N. J. L., 847 (1867> Cf. State v. Hart. 81 N. J. L., 434 (1S66); State r. Height, 31 N. J. L., 899 (1866)— objectionable and un- fortunate decisions in all respects. The decision in Tenth Ward Nafl Hank r. City of Newark. 89 N. J. I... 880 (1877), however, placed New Jersey among the st.it.'s which levy the tax in the most approved manner, residents being taxed where they reside, non-residents being taxed at the domicile of the corporation. See, also, Kyle v. Mayor, etc., 75 N. C, 445(1870); Buell r Com'rs of Fayette- ville, 79 N. C. 007 (1878); Austin r. City of Boston, 96 Mass., 339 (18U7); First Nafl Hank /•. Smith. 65 111.. It (1872 : Baker v. Firs! Nat'l Bank, 67 111.. 297 i is:;',); Clapp <\ ( iiy of Burlington, -10 \"t.. '■;'.» 11870); Howdl r. Caasopolk Mich., 171(187" I f. Mintzer r. County of Montgomi ry, M Pa, St.. 189 (1 For taxation <>t national hank Btock under the Alabama act, ■ e Maguire n rd of Revenue, 71 Ala.. 401 (1882), » Central Nat'l Bank v. United states, r. s. 855 (1890). Cf. First Nafl Bank v. Richmond, 89 Fed Rep., 309: id., S77. The taxation of the capital stock <>f ;i national bank against the hank in solido is invalid. It may l>e col- d from the hank hut should be ..I against the stockholders. De- ductions should also be allowed when allowed on other similar property. First Nafl Bank r. Fisher, 26 Pac, Rep., 482 (Kan.. 1891), * Palmer v. McMahon. 188 C. S., 660 (1890). A tax on national hank stock to be collected in the first instance from the hank cannot be collected from the receiver of the hank, the hank being in- solvent City of Boston v. Beal, 51 Fed. Rep., 306(1892). 762 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 571. taxation of other " moneyed capital " within the state. The words ' ; moneyed capital" have been construed to mean " not only bonds, stocks and money loaned, but all credits and demands of every character in favor of the tax-payer." l This has been the subject of much controversy, however; and the latest decisions go very far in upholding the tax, if substantial justice has been done. 2 The method of taxing shares of stock need not correspond to that followed in taxing other corporations in the state. 3 The ma- .1 Wasson v. First Nat'l Bank, 8 N. E. Rep., 87 ^Ind., 1886); Boyer v. Boyer, 113 U. S., 689 (1884). Shares of stock in banks are other moneyed capital, but shares of stock in other corporations are not necessarily so. " Moneyed capi- tal " means money put out by way of loan, discount, etc., or invested in stocks of banks, etc., which put out money by way of loan, discount, etc. Trust companies ai - e different from banks herein. Mercantile Bank v. New York, 121 IT. S., 138 (1887), affirming 28 Fed. Rep., 776. A tax on national bank stock is legal although stock in state and sav- ings banks is not taxed directly, but the corporation itself is taxed in another way. Richards v. Town, etc., 31 Fed. Rep., 505 (1887). See, also, Hepburn v. School Directors, 23 Wall., 480 (1874). Other moneyed capital means capital employed in banking or loaning, and not in business. Talbott v. Silver Bow Co., 139 U. S, 438 (1891). 2 People v. Commissioners, 4 Wall., 256 ; Adams v. Nashville, 95 U. S., 19 (1877). A recent case in New York — In re McMahon, 102 N Y., 176 (1886) — holds that shares of stock in railroads, man- ufacturing and other corporations are not " moneyed capital " in the sense in which these terms are used in the act of congress. See, also. First National Bank v. Waters, 19 Blatch., 242. Prov. Inst. v. City of Boston, 101 Mass., 575 (1869), holds that the comparison is to be made with other moneyed capital in the same town or city where the tax is levied. See, also, People v. Moore, Idaho, 504 (1873). Subject to this rule the shares of national banks may be as- sessed at their value even above par - . Hepburn v. School Directors, supra (1874) ; People v. Commissioners, etc., 94 U. S., 415 (1876); S. C, 67 N. Y, 516 (1876); affirming 8 Hun, 536; St. Louis Nat'l Bank v. Papin, 4 Dill., 29 (1876), the court saying, also, that the assessors may ascertain that value by including " all reserve funds, profits, earnings and other values " when the intent of the statute is to base the tax " upon an in- quiry, inter alia, into the actual value of the property of the banks so far as this imparts or confers a value upon the shares." Stockholder cannot en- join the tax unless he first pays such part of it as he admits is legal. Rosen- burg v. Weekes, 4 S. W. Rep., 899 (Texas, 1887). The stock is listed against the stockholder, not against the bank. Miller v. First, etc., Bank, 21 N. E. Rep., 860 (Ohio, 1889). The statute may au- thorize taxation for years past. State v. Simmons, 12 S. Rep., 477 (Miss., 1893). 3 Davenport Bank v. Davenport. 123 U. S., 83 (1887). "There is no reason to suppose that congress cared at all about the mode the states might adopt for the collection of their taxes. A tax imposed on the capital or property of a corporation falls as effectually on the capital of the shareholder represented by his shares as does a tax upon the shares directly ; and although, in legal discrimination, a tax upon the former is not a tax upon the latter, practically and substantially taxation of the capi- tal of the corporation is taxation of the capital of the shareholder." Tax on national bank stock upheld, though all other stock except bank stock is ex- 63 § 571.] TAXATION OF STOCK AND COEPORATIONS. [CH. XXXIV. terial point is that national bank stock must not, as a result, be taxed higher than other moneyed investments. If this rule is observed, it is of little consequence whether the tax on national bank stock is levied and assessed in the same way as other corpo- rations are taxed. If the state laws allow a deduction to a person taxed on bonds, notes and similar property for debts due from him to others, a similar deduction must be allowed to stockholders taxed on their shares in a national bank. 1 If the statute does not allow the same empt, the tax being on capital stock. Mercantile Nat'l Bank tt New York, 28 Fed. Rep, 770-783 (1886), Wallace, J.; affirmed, 121 U. S., 138. The mode of collection need not be the same. The state may compel the bank to pay the tax. National l'.;mk r. Commonwealth, 9 Wall., 853, 363 (1869), per Miller, J. But if the assessment is illegal, in that no notice and opportunity is given to the shareholder to appear and resist the tax, it cannot be enforced. Albany ( Sty Nat'l Bank v. Maher, 20 Blatcb., 841 (1882). In general cf. Van Allen tt Assessors, 3 Wall., 578; Bradley v.- Peo- ple, 4 Wall., 459 (1S66); Hubbard tt Johnson County. 2:! Iowa, bin (1 People v. Assessors, 29 How. Pi. (1865); Wright tt Stelz, 27 Ind., 338 (1866), overruling Whitney tt Madison, 23 Ind., 231, on certain points; Cooley on Taxation (2d ed.), 390. Contra, Peo- ple v. Bradley. 89 111., 180 (1866)i See, also, Frazier tt Siebern, 16 Ohio St.. 614; Smith tt First Nat'l Bank. 17 Mich., 479; Van Slyke r. State. 2:; Wis., 656; Boy- noil tt State. 25 Wis.. 112. Where a state and also a local tax are levied on shares of stock in a state bank, and the local tax is declared illegal, the same local tax is illegal as regards shares in national banks. City Nat'l Bank v. Paducah, 2 Flippin, 61 (187? . » EvansvilleBank tt Britton. 105 U. S., 322 (1881), affirming 8 Fed. Rep., 867. But a deduction to individuals for United States bonds held by them will not invalidate a tax on the national bank stock without a deduction for bonds held by the bank. Bressler tt Wayne County, 41 N. W. Rep.. 356 (Neb., 1889); People tt Commissioners, 4 Wall., 244 (1866). In the recent case of Waason tt First Nat'l Bank, 8 N. E. Pep.. 97 i Ind., 1886), the court held that the deduction allowed to others is fatal to a tax on national bank shares with- out that deduction only when it is " ma- terial and serious;" and that that de- pends on the proportion of mom capital which is allowed the deduction to that moneyed capital which is not allowed it. If material, the national bank share tax is to be allowed a simi- lar deduction. National bank stock can- not be taxed at a higher valuation on its actual value than other moneyed property is valued at. Deductions al- lowed to other moneyed capital must also be allowed on national bank Btock. Whitbeck v. Mercantile, etc., Bank, 127 B., 193 (1888). Where a tax on stock is not illegal except in that the as essors have pro- ceeded in a wrong manner, the court will not enjoin its collection unless the plaintiff stockholders pay in such a tax as would have been legal. Frazer tt Seibern, 16 Ohio St. 614 (1866); Cum- mings tt Merchants' Nat'l Bank, 101 U. S., 153 (1879); Supervisors v. Stanley, 105 U. S., 305 (1881); S. C, sub nom. Stanley tt Supervisors, 121 U. S., 535 (1887), holding that the stockholder can- not recover back the excess of tax where he has not attempted to have the tax remedied ; Hills tt Exchange Bank. 105 TJ. S., 319 (1881); reversing National Albany Excnan.ee Bank v. Wells, 18 Blatcb., 478 (1880) ; 5 Fed. Rep, 24a In 764 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 571. to the latter, and the courts of the state refuse to allow the deduc- tion, then the tax is illegal. Such was the result of a tax in New York on national bank stock. 1 consequence of this escape of the stock- holders from taxation, a special statute was passed levying a back tax. See N. Y. Laws, 1883, ch. 341. Such a statute is constitutional. See McVeigh v. Loomis, 49 111., 318 (1868). The legisla- ture may cure any defects in the levy of taxes in past years, provided such defects could have been so modified before the levy was made. Williams v. Supervi- sors of Albany, 122 U. S., 154 (1887), sus- taining ch. 345. Laws of 1883. Cf. City Nat'l Bank v. Paducah, 2 Flippin, 61 (1877). And a deduction to other mon- eyed corporations for their real estate must be allowed in taxing national bank shares. Pollard v. State, 65 Ala., 528 (1880); overruling Mclver v. Robinson, 53 Ala., 456, and Sumbre County v. Na- tional Bank, 62 Ala., 464. In general see, also, Ruggles v. City of Fond du Lac, 53 Wis., 436 (1881); Miller v. Heil- bron, 58 Cal., 133 (1881); St. Louis Nat'l Bank v. Papin, 4 Dill., 29 (1876) ; Covington, etc., Bank v. Covington, 21 Fed. Rep., 484 (1884). Deduction for debts, if allowed to persons taxed, gen- erally must be allowed national bank stockholders who are taxed on their stock. McAden v. Commisioners, etc., 2 S. E. Rep., 670 (N. C, 1887). Deduc- tions are to be allowed the national bank stockholder for debts due from him to others where the state statute permits its citizens to deduct their debts from the valuation of their personal property. Richards v. Town, etc.. 31 Fed. Rep, 505 (1887) ; Peavey v. Town, etc., 9 Atl. Rep., 722 (N. H., 1887). As regards deductions for surplus funds which are already taxed, see Strafford Nat'l Bank v. Dover, 58 N. H., 316 (1S78). Cf. North Ward, etc., Bank v. City of Newark, 39 N. J. L., 380 (1877); First Nat'l Bank v. Peterborough, 56 N. H., 38 (1875). As regards its realty, see Com'rs of Rice County v. Citizens' Nat'l Bank, 23 Minn., 280 (1877). In Indiana the national bank stockholder may recover back such part of the tax as should have been deducted by reason of his indebted- ness. City of Indianapolis v. Vajen, 12 N. E. Rep., 311 (Ind., 1887); Exchange Nat'l Bank v. Miller, 19 Fed. Rep., 372 (1884). i People r. Weaver, 100 U. S., 539 (1879). The New York court held that " the effect of the state law is to permit a citizen of New York, who has mon- eyed capital invested otherwise than in banks, to deduct from that capital the sum of all his debts, leaving the re- mainder alone subject to taxation, while he whose money is invested in shares of bank stock can make no such deduc- tion." The supreme court of the United States declared the tax on the national bank shares to be invalid. But the case of Supervisors v. Stanley, 105 U. S., 305, 315 (1881), holds that the tax is not void absolutely. Deduction allowed to individuals for national and state secu- rities, but not allowed on national bank stock, invalidates a tax on the latter. Whitney Nat'l Bank v. Parker, 41 Fed. Rep, 402 (1890). If the stockholder owed no debts he is not injured; and even if he owes debts he cannot defeat the tax altogether, but is allowed a sim- ilar deduction. No discrimination, al- though the state taxes banks and nothing else. Gorge's Appeal, 79 Pa. St., 149 (1875). No discrimination, though a de- duction for debts is allowed to those whose property consists of debts due them ; but no deduction otherwise. First Nat'l Bank v. St Joseph, 46 Mich., 526 (1881). The exemption of all capital which is wholly invested in mining is not a discrimination. Board of Com'rs v. Davis, 12 Pac. Rep., 688 (Mont, 1887). Exemption of savings banks, municipal bonds and shares of stock in all foreign and domestic corporations other than 765 § 571.] TAXATION OF STOCK AND CORPORATIONS. [ciI. XXXIV. A refusal to allow a deduction to stockholders in national banks similar to a deduction allowed on a tax levied on other "moneyed capital " was held to be a discrimination in contravention of the statute. Special exemptions, however, of certain stocks or other forms of "moneyed capital" do not require that a similar exemp- tion should be made on national bank stock. 1 Again, the national bank act cannot be evaded by an unfair as- sessment of the shares in national banks as compared with the assessment of other monej'ed capital. It is a well-known fact and an understood matter in nearly all localities that no kinds of prop- erty are valued at their actual selling worth in making the valua- tion for taxation purposes. Consequently, if other moneyed cap- ital is valued in the assessment rolls at a certain proportion of the actual value, and national bank stock at a higher proportion, the tax is illegal and cannot be collected. 2 banks from taxation does not invalidate tax on shares of stock in natioml banks. Mercantile Bank v. New York, 121 U. S., 138(1887); Newark, etc.. Co. r. Newark, 121 U. S., 163(1887); Bank of Redemp- tion v. Boston. 125 id., 60 No dis- crimination exists in taxation of national bank stock in territory where the shares of stock incorporations paying tax their property or capital stock are ernpted from taxation. Comity of Silver Bow 17. Davis. 12 Par. Rep., 688 (Mont., 1887). In Nebraska the owner of na- tional bank stock, in listing his shares for taxation, is not entitled to deduct his bona fide indel te: Maher, 19 Blatch., 17.". 1 1882). See, also. City of Richmond V. Scott. 48 Ind., 568 (1874 : Mercantile Nat'l Bank r. City of New York, 28 Fed. Rep.. 770. 785(11 -'Pelton v. National Bank, 101 U. S., 143 (1879), the court saying that "any system of assessment of taxes which exacts from the owner of the shares of a national bank a larger sum in propor- tion to their actual value than it does from the owner of other moneyed cap- ital valued in like manner does tax them at a greater rate within the mean- ing of the act of congress." Where, however, the assessors assess ordinary securities at three-fifths of their actual value, and assess bank stock at its full actual value, and such method of un- equal assessments is contrary to the constitution of the state, the court will relieve the stockholders only upon pay- ment by them of such a tax as would have been legal. Cumminga v. Mer- chants" National Bank of Toledo, 101 U. S., 153 (1879 ; Supervisors v. Stanley. 766 CH. XXXIV.] TAXATION OB' STOCK AND CORPORATIONS. [§ S72. § 572. The hank may Iring suit to restrain illegal tax on its stockholders.— -There has been some doubt as to whether a national bank could bring suit to restrain an illegal tax on its stockholders. Ordinarily a corporation cannot do so. Each stockholder must protect his own interests. But where, as in the case of national banks, the tax is paid by the bank itself and collected by it from its stockholders, if the latter refuse to pay the bank or recognize its payment as legal, many suits would result. Accordingly, in order to avoid a multiplicity of suits, it is now well established that the bank itself may file a bill in equity to prevent and enjoin the collection of an illegal tax on its stockholders. 1 105 U. S., 305 (1881). When the na- tional hank stock is assessed too low, the fact that another bank is assessed still lower will not invalidate the tax against the former. People v. Assess- ors, etc., 2 Hun, 583 (1874). In the re- cent case of First National Bank of Toledo v. Treasurer, 25 Fed. Eep., 749 (1885). where ordinary moneyed capital was assessed at six-tenths of its actual value, while shares in national banks were assessed at a higher proportion of the real value, the collection thei-eof was enjoined upon the complainant paying the tax admitted to be due. As to the pleadings, see National Bank v. Kimball, 103 U. S., 732 (1880). Lower valuation of other property has been held to be immaterial. Wagoner v. Loomis. 37 Ohio St.. 571 (1881). As re- gards taxation of national banks, a cus- tom of assessing property at fifty per cent, of its value is not proved by a few example?. Engelke v. Schlender, 12 S. W. Rep.. 999 (Tex., 1890). If, as a mat- ter of fact, personal property and capi- tal of individuals escape taxation and little effort is made to tax such capital, then a tax on national bank stock can- not be enforced. If such stock is as- sessed at two-thirds of its actual value, and other personal property at one-half their value, the assessment is illegal. First Nat'l Bank r. Lindsay, 45 Fed. Rep, G19 (1891). i City Nat'l Bank v. City of Paducah, 2 Flippin, 61 (1877), where the court say : " The bank is so far the trustee of the stockholders and the custodian of the dividends, that it is entitled to maintain the bill. It might be subjected to great annoyance by stockholders who denied the legality of the tax, and gave the bank notice that it would pay at the peril of being sued by them. It is cer- tainly no hardship to permit the whole question to be litigated in a single ac- tion." This case holds also that an in- junction against the collection of the illegal tax will be granted. In general see, also, Albany City Nat"! Bank v. Maher. 20 Blatch., 341 (1882): North Ward Nat" 1 Bank v. Newark, 40 N. J. L, 558 (1878). Cf. Dows v. City of Chicago, 11 Wall., 108 (1870); Tappan v. Mer- chants' Nat'l Bank, 19 Wall., 490 (1873); Pelton v. National Bank, 101 U. S.. 143 (1879); Cummingsr. National Bank, 101 U. S., 153. Contra, First Nat'l Bank of Hannibal v. Meredith, 44 Mo., 500 (1879). See, also, Union Nat'l Bank v. Chicago, 3 Biss., 82 (1871). As to the rule in New York, see People v. Wall Street Bank, 39 Hun, 525 ; People v. Coleman, 41 Hun, 344. The same rule does not ap- ply to a corporation which brings suit to prevent the levy upon and sale of a non-resident stockholder's stocks for non-payment of his tax. Waseca Co. Bank v. McKenna, 32 Minn.. 4C8 (1884). The case of Farmers' Nat'l Bank v. Cook, 32 N. J. L. 347 (18G7), denies the right of the bank to bring the action, and says: "The corporation is not the agent of the stockholders for any such purpose." A national bank may file a 767 § 572a,] TAXATION OF STOCK AND CORPORATIONS. [cH. XXXIV. C. OTHER METHODS OF TAXING CORPORATIONS. § 572a. General principles.— A state may tax corporations. The rate of taxation may be greater or less than or equal to the rate at which individuals are taxed. 1 The method of assessing taxes upon corporations varies in the different states. 2 Where a company is really located in a city and docs all its busi- ness there, but its articles of incorporation state its principal place of business as being in an adjacent town, the sole object being to evade taxation, the court will hold that for taxation purposes its principal place of business is in such city. 3 Where the capital stock is invested in patent rights it cannot be taxed by the state. 4 A state may compel corporations to pay taxes for years past. 5 bill to restrain the imposition of a tax located, see also Matter of McLean; on stock, the hank having to pay the Lough v. Outerbridge, G6 Him. 139 tax. Whitney Nat'l Bank v. Parker, 41 (1892) It must be the principal place Fed. Rep., 402 (1890). But the injunc- or places of business f or the purposes of tion against collection of the tax is taxation and service of process ; ami in granted only as to tJ xcess of tax. Id New York under Bomewhat similar The bank cannot ftlea bill in th ■ federal court unless the tax involved is ovdt $2,000. Sioux Fall- Xat'l Bank 0. Swcii- soli, 48 Fed. Rep., 621 (189S i It is constitutional to tax corpora- tions without taxing individuals Singi r Manuf. Co. v. Wright, :'■:: Fed. Rep., 121 (1887); State R R Tax Cases, 92 U. S., statutes it is held that the certificate is conclusive a- to thia Western Trans- tion I ■•. '•. Schea, 19 N. Y.. W8, A domestic corporation will not be al- lowed to deny that it has a pla< business in the state. Chapman n Doray, 26 Pac, Rep., 605(081., 18 *<■ Commonwealth tx Westinghouse, o7.->. Cf. The Railroad Tax Cases, 13 Co., 24 AtL Rep., 1107 (Pa., 1892). Where Fed. Rep., 722(1882); Santa Clara Co. u the Btock is issued in payment for the Railroad, is i,i.. 885; & < '.. 11 s U. S.. 390 exclusive right to use certain patented (1885). Concerning the general problem articles within certain territory, it is not of how corporations should be taxed, invested in patent rights so astobt see Cook on The Corporation Problem, empt from taxation by reason of the acts pp. 102-105. of con i Commonwealth v. Central, -see r.u t Vll. infra. eta, Tel Co., 22 At I. hep.. 841 (Pa., » Milwaukee, eta, Ca v. City of Mil- 1891); Id. r. Brush, etc., Co, id., 844 waukee, 58 N. W Rep., B89 (Wis., 189S s An attempt of the Btal i to make a Where the actual place of business of a railroad corporation pay $1,250,000 back corporation is at one place, but its nom- taxes not levied under an alleged mi. - inal place of business is fixed elsewhere taken view of the law by former state in order to evade taxation, the actual officials, failed in Commonwealth v. place of business is the place where the Penn. I 0., 28 All. Rep., 549 (Pa., i company will be taxed under the Mich- Where the charter provides for "a tax igan statutes. Detroit, etc., Co, '•- Foard not exceeding twenty-live cents per an- of Assessors, 51 N. W. Rep., i>TS (Mich., num per share on each share of the cap- 1892), distinguishing the New York ital stock whenever the annual profits cases. In regard to a corporation being thereof shall exceed six per cent," the taxed in another place in the state from legislature may compel the company to the place where its principal office is pay such tax and to pay it for twenty-five 763 •CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 572a. A tax on the capital stock based upon the amount of dividend declared cannot be evaded by distributing profits without declar- ing a dividend. But a stock dividend does not come within the tax statute. 1 A corporation claiming that it is taxed too much cannot enjoin collection unless it offers to pay the amount it ad- mits to be due. 2 "Where taxes are based on the aggregate value of all the shares of stock, unissued stock should not be considered even though ten per cent, has been paid thereon. 3 In ascertaining the actual value of capital stock for taxation the price at which the stock is selling is not taken as the actual value, where the market value is due to speculation and market influ- ences. 4 Bonds of domestic corporations held by non-residents are years past, during which time the com- pany had evaded payment. State v. Seaboard, etc., R. R, 52 Fed. Rep., 450 (1892). See, also, § 572. A tax on a gas company on gross receipts and on divi- dends by way of license for the right to act as a corporation is not a tax upon the property or corporate franchises, but is a license fee. Jersey City G. L. Co. v. United G., etc., Co., 46 Fed. Rep., 264 (1891). Generally, the statutes pre- scribe that a corporation shall be taxed where its principal office or place of business is located. People v. McLean, 17 Hun, 204 (1879) ; Pelton v. Northern Trans. Co., 37 Ohio St., 450 (1882) ; Balti- more v. Baltimore City Pass. R'y Co., 57 Md., 31 (1881); Western Transporta- tion Co. v. Stevens, 19 N. Y., 408 (1859); Glaize v. South Carolina R. R., 1 Strobh., 70 (1846), holding that a corporation may have a special or constructive res- idence extending to the territorial limits of the jurisdiction which granted its charter for purposes of taxation. 1 Lehigh, etc., Co. v. Commonwealth, 55 Pa. St., 448 (1867) ; Commonwealth v. Pittsburg, etc., R'y, 74 Pa. St., 83 (1873). See State of Ohio v. Franklin Bank, 10 Ohio, 91 (1840) ; People v. Home Ins. Co., 92 N. Y., 328 (1883). Where the divi- dends declared during the year were partly earned during prior years, the latter portion are not taxable under the Pennsylvania statute taxing the capital stock according to the dividends. Com- monwealth v. Brush, etc., Co., 22 Atl. Rep., 844 (Pa., 1891). Where all the shares are reduced in par value from $50 to $38 and the $12 difference is paid to the stockhold- ers in cash, this is a reduction of capital stock and not a dividend, and cannot be taxed as a dividend. Commonwealth v. Central T. Co., 22 Atl. Rep., 209 (Pa., 1891). A tax upon the receipts of a railroad is not a tax upon dividends. Com'rs, etc., v. Buckner, 48 Fed. Rep., 533 (1891). A dividend declared and ordered depos- ited to the order of the stockholders and so held until the further order of the court is legal, and the amount can- not be taxed as belonging to the bank. Pollard v. First National Bank, 28 Pac. Rep., 202 (Kan., 1891). Profits applied to betterments are not "dividends earned" within the meaning of a stat- ute imposing taxation. State v. Comp- troller, 23 Atl. Rep, 122 (N. J., 1891). 2 Smith v. Rude, etc., Co., 30 N. E. Rep, 947 (Ind., 1892). See, also, § 572. 3 Boston, etc., Co. v. Commonwealth, 31 N. E. Rep., 696 (Mass., 1892). The whole capital stock may be taxed under a city charter, although only a part of it has been paid in. Shelby, etc., Co. v. Board, etc., 16 S. W. Rep., 460 (Ky., 1891). 4 Commonwealth v. Phil., etc., R. R, 22 Atl. Rep., 235 (Pa., 1891). In Louisi- ana the corporation may sue to reduce or annul taxation of the shares of stock. The value of the stock may be ascer- tained from various sources, including that of the stock for which it has been (49) 769 572&.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. not taxable by the states creating the corporations. 1 A rail- road cannot be taxed to aid in paying a municipal subscription to its construction. 2 The franchise to build and operate a street railway is subject to taxation. A license fee may be imposed on the railway, although, under its franchise, it is also bound to pay other taxes annually. 3 The taxation of unincorporated associations is considered elsewhere. 4 Where a railroad company of one state is consolidated with companies of other states the consolidated company is considered, for the purposes of taxation, to be a corpo- ration of each state to the extent that its property is in that state. It is taxed in the state on the capital stock of the company which it absorbed. 5 § 5725. Exemptions from taxation,— A state, if not restricted by its constitution, may exempt the property of a corporation from exchanged. Planters', etc., Co. tt As- sessor, 6 S. Rep., 809 (La., 1889). 1 Railroad Co. tt Jackson, 7 Wall., 202 (1868); State tax on Foreign-held Bonds, 15 Wall., 300 (1872) ; Davenport v. Mis- sissippi & Missouri R R Co., 12 Iowa, 539 (1861); Commonwealth tt Chesa- peake & Ohio R R Co., 27 Gratt, 344 (1876) ; People v. Eastman, 25 Cal, 603 (1864), where the same principle was applied between counties in the same state. Contra, Multby v. Reading & Columbia R R Co., 52 Pa. St., 140 (1866). As to the rule where part of the capital stock is used out of the state, see Commonwealth v. Standard Oil Co., 101 Pa. St., 119 (1882); State Treasurer tt Auditor-General, 46 Mich., 224 (1881); People tt Equitable, etc., Co., 96 0*. S, 387 (1884). A statute making the corpo- ration liable for taxes on bonds which it neglects to withhold, and the interest is paid on such bonds, is constitutional. Commonwealth tt Delaware, etc., Canal Co., 24 Atl. Rep., 599 (Pa., 1892). The Pennsylvania system of taxing against corporations all bonds issued by them and owned by citizens of the state, and compelling the corporation to pay the tax and deduct it from the interest on the bonds, is constitutional. Bell's Gap R R. tt Pennsylvania, 134 U. S., 232 (1890). 2 Louisville, etc., R R tt Common- wealth, 12 S. W. Rep.. 1064 (Ky., 1890). 770 3 New Orleans, etc., Co. tt New Orleans, 143 U. S., 192 (1892). * See ch. XXIX. » Ohio & Mississippi R. R. Co. tt Weber, 96 111., 443 (1880); Chicago & N. W. R'y Co. tt Auditor-General, 53 Mich., 79 (1884); Railroad Co. tt Vance, 96 U. S., 450 (1877). In this case a rail- road corporation of Indiana which had been recognized by an act of the Illinois legislature as a corporation of that state was held for taxes upon the capital and franchises of a road leased by it in Illi- nois and assessed to the lessor company, but charged to the lessee company and to be collected from it Quincy R. R. Bridge Co. v. County of Adams, 88 111., 615 (1878), where a bridge company orig- inally incorporated by two states and consolidated by articles which were con- firmed by the legislature of one of them (Illinois) was held to be a corporation of that state for purposes of taxation. Qucere, whether the formation of an interstate railroad corporation by the consolidation of separate corporations in two states creates a new corporation. An incorporating fee cannot be imposed on the whole consolidated capital. Peo- ple tt New York, etc., R R, 129 N. Y., 474 (1892). The state may constitution- ally charge a large fee as a condition of granting a charter. Edwards tt Denver, eta, R R, 21 Pac. Rep., 1011 (Colo., 1889). CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 5725. taxation. Such an exemption constitutes a contract between the state and the corporation, which cannot be repealed or changed by subsequent legislation, unless the right to alter or repeal it has been reserved by the state. 1 1 An exemption from state taxation is a contract between the state and the corporation which cannot be impaired by a subsequent legislative enactment. Such exemption, however, will not be extended to branch lines thereafter con- structed. Wilmington, etc., R. R. v. Als- brook, 146 U. 8., 279 (1892); Tomlinson v. Branch, 15 Wall., 460 (1872); Home of the Friendless v. Rowse, 8 Wall., 430 (I860); Wilmington R. R v. Reid, 13 Wall., 264(1871); Mobile & Ohio R, R. Co. v. Moseley, 52 Miss., 127 (1876) ; Jef- ferson Bank v. Skelley, 1 Black, 436 (1861), where the charter provided for the payment of six per cent, of the bank's profits in lieu of taxes; Living- ston Co. v. Hannibal & St. J. R. R. Co., 60 Mo., 516 (1875), where, however, an exemption from county taxes was held not to include a school tax which origi- nated after the charter was granted ; Hannibal & St Joseph R. R. Co. v. St Joseph, 39 Mo., 476 (1867), holding that an exemption from county taxation will not prevent taxation by a city. A contract between the state and a rail- road, that the latter shall pay a certain tax and no more, is not repealable by the state. State v. Morris, etc., R. R., 7 Atl. Rep., 872 (N. J, 1886). Though a charter may be repealable, yet an amendment giving an exemption from taxation may be irrepealable, since the latter may be a contract and not a fran- chise. Ibid. A bonus to the state on increase of capital stock cannot apply to previous charters having charter right to increase. Commonwealth v. Erie, etc., Co., 107 Pa. St., 112 (1884); Rail- road Companies v. Gaines, 97 TJ. S., 698 (1878). holding that a new corporation invested with the powers and privileges of, and subject to the obligations of the charter of, another corporation, does not take an exemption from taxation. To same effect, Railroad Co. v. Commis- sioners, 103 U. S., 1 (1880); Dauphin & Lafayette R'y Co. v. Kennedy, 74 Ala., 583 (1883). But see East Tennessee, V. & G. R. Co. v. Pickerd, 24 Fed. Rep., 614 (1885); The Delaware Railroad Tax, 18 Wall., 206 (1873) ; Dartmouth College v. Woodward, 4 Wheat., 518 (1819); Providence Bank v. Billings, 4 Pet., 514 (1830); The Binghamton Bridge, 3 Wall., 51 (1865); Humphreys v. Pegues, 16 Wall., 244 (1872); Pacific R. R. v. Maguire, 20 Wall., 36 (1873) ; North Mo. R. R. Co. v. Maguire, 20 Wall., 46 (1873); People v. Soldiers' Home, etc., 95 111., 561 (1880); University v. People, 99 U. S, 309 (1878), holding void a statute limiting a general exemption previously conferred to property in immediate use by a corporation; Farrington v. Ten- nessee, 95 U. S, 679 (1877) ; Railway Co. v. Philadelphia, 101 TJ. S., 528 (1879) ; Hoge v. Railway Co., 99 U. S., 348 (1878) ; Dodge v. Woolsey, 18 How., 331 (1855), holding that the adoption of a new constitution declaring that corpo- rate property shall be taxed will not be allowed to impair the contract ; Mobile & Spring Hill R. R. Co. v. Kennerly, 74 Ala., 566 (1883) ; City of Richmond v. Richmond & Danville R. R. Co., 21 Gratt., 604 (1872), holding, also, that an exemption of corporate property in a city from taxation, which conflicts with the charter of the city previously granted, is not unconstitutional if the city has remaining ample means of tax- ation to meet its needs ; Commonwealth v. Fayette R R. Co., 55 Pa. St, 452 (1867). holding that, where power to alter or repeal the exemption is re- served, the exercise of the power is no impairment of the contract; State v. Miller, 30 N. J. L, 368 (1863), holding that the repeal may be made by a gen- eral law ; State v. Commissioners of 771 § 5725.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. Where a corporation whose property is exempt from taxation is merged into or consolidated with another, the question of whether the exemption from taxation passes with its property to the lessee, Taxation, 37 N. J. L„ 240 (1874), hold- ing that, where a general exemption from taxation is granted to a corpora- tion without reserving the power to alter or repeal it, and there is a provis- ion for a special mode of assessing its property, it may consent to another mode of assessment without surrender- ing or altering its exemption from gen- eral taxation ; East Tennessee, V. & G. R Co. v. Pickerd, 24 Fed. Rep, 614 (1885); Temple Grove Seminary v. Cramer, 98 N. Y., 121 (1885), holding that an incorporated academy does not waive or forfeit its exemption from tax- ation by reason of having leased its building for a boarding-house during vacations; ElizabethtowD & P. R R v. Elizabethtown, 12 Bush (Ky.), 233 (1876), holding that an exemption of railroad property from taxation pre- cludes any imposition of taxes by the state, whether for state or local pur- poses. In Mott v. Penn. R R Co., 30 Pa. St, 9 (1858), a sale of a railroad and canal by the state on terms exempting the vendee from future taxes was en- joined. The exemption was held to be unconstitutional. County Com'rs v. Woodstock Iron Co., 82 Ala., 151 (1886), holding that an exemption of private corporations from taxation made by a general law was not a contract, but only a legislative bounty, subject to be re- pealed. The act by which the exemption from taxation is made must be clear and un- equivocal ; the intent to confer the im- munity must be beyond reasonable doubt. Ohio, etc., Trust Co. r. Debolt, 16 How., 416 (1853); The Delaware Kail- road Tax, 18 Wall., 206 (1873); North Missouri R. R Co. v. Maguire, 20 Wall., 46 (1873); Mobile & Spring Hill R R Co. v. Kennedy, 74 Ala., 566 (1883), hold- ing that a reasonable doubt is to be con- strued against the exemption ; Dauphin & Lafayette R'y Co. v. Kennedy, 74 Ala, 583 (1883); City of Richmond v. Richmond & Danville R R Co., 21 Gratt, 604 (1872). An exemption of a corporation from taxation upon pay- ment of a fixed annual- tax on the cap- ital stock is not voidable. State v. But- ler, 8 & W. Rep., 586 (Tenn., 1888). A particular mode of taxation may be changed under the reserved right to amend the charter. Detroit St R'ys v. Guthard, 51 Mich., 180 (1883). See, also, Bank of Republic v. County of Hamil- ton, 21 111., 53 (1858); Mayor, etc., v. Twenty, etc., R R. Co., 113 N. Y., 311 (18*'.» . A specific rate of taxation pre- scribed in the charter raises no implica- tion of a legislative contract to impose no further burdens by way of taxation. Iron City Bank v. City of Pittsburgh, 37 Pa St, 340 (I860). A constitutional pro- hibition as to exemptions from taxation does not apply to railroad corporations, they being guast-publia Yazoo, etc., R R v. Board, etc., 37 Fed. Rep., 24 (1888). A charter exemption from all taxation upon payment of a certain tax is legaL Franklin, etc.. v. Deposit Bank, 9 S. W. Rep., 212 (Ky., 1888). An ex- emption from taxation which is a gift may be repealed. Philadelphia v. Con- tributors, etc., 19 Atl. Rep., 490 (Pa., 1890). An exemption from taxation may be repealed under the reserved right to amend, etc. Wagner, etc., In- stitute Appeal, 19 Atl. Rep., 297 (Pa., 1890). An exemption from all other taxation is an exemption from local as well as state taxation. People v. Cole- man. 101 N. Y, 542 (1890). A railroad may give up its exemption from state taxation and still retain its exemption from county taxation. State v. Hanni- bal, etc., R"R. 11 S. W. Rep., 746 (Ma, 1889). A railroad that is divided by the legislature with the consent of the stockholders does not lose its exemp- 772 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 5725. vendee or consolidated company is a question whic'i turns largely on the words granting the exemption. 1 Where a consolidation is effected after the adoption of constitu- tional provisions prohibiting the legislature from exempting the tions. Louisville, etc., R. R. v. Common- tion Problem, pp. 105-107. A company wealth, 12 S. W. Rep., 1064 (Ky., 1890). An exemption from taxation is not a franchise. Hence quo tcarranto does not lie to oust the corporation from such exemption. International, etc., R'y v. State, 12 S. W. Rep, 685 (Tex., 1889). The decision of the state court that an exemption does not apply to certain property is not an impairment of a con- tract. St. Paul, etc., Ry. v. Todd County, 142 U. S., 282 (1892). Where a contract of exemption from taxation between a state and a water-works company is de- clared unconstitutional by the highest court of the state, there is no impair- ment of the contract by subsequent leg- islation which assumes the old contract to have been invalid. New Orleans v. N. O., etc., Works, 142 U. S., 79 (1891). In the case of Citizens' Bank v. Board of Assessors, 54 Fed. Rep., 73 (1893), an exemption from taxation was held to apply to extensions of the original char- ter. Although tbe charter provides that the real and personal property of the company shall be taxed the same as that of individuals this does not exempt the capital stock from taxation. State v. Simmons, 12 S. Rep, 477 (Miss., 1893). An exemption from taxation does not pass to a company that buys out the company which is exempt. Common- wealth v. Nashville, etc., Co., 20 S. W. Rep, 383 (Ky., 1892). An exemption from local taxation is not an exemption from state taxation. Wilkesbarre, etc., Bank v. Wilkesbarre, 24 Atl. Rep., Ill (Pa., 1892). An exemption from taxation does not apply to assessments for im- provements. Illinois Cent. R. R v. Mat- toon, 30 N. E. Rep. 773 (111., 1892). Con- cerning exemptions from taxation and the Dartmouth College case in connec- tion therewith, see Cook on the Corpora- te generate and sell electric power is not a manufacturing company as regards taxation. Commonwealth v. Northern, etc., Co., 22 Atl. Rep., 839 (Pa., 1891); Commonwealth v. Brush, etc., Co., id., 844. Exemption of manufacturing cor- porations from taxation construed to exempt merely such of their property as was invested in manufacturing. Ap- peal of Commonwealth, 18 Atl. Rep, 133 (Pa., 1889) ; Commonwealth v. Ma- honing, etc., Co., id., 135. Where subsequently to the incorporation of a company a general act reserves to the legislature the right to amend or repeal any and all charters, the legisla- ture may repeal any amendments to the charter, so far as such amendments are passed after the general act, where the amendments do not expressly waive the legislative right of amendment or re- peal. Amendment should be worded " saving, whenever that power was ex- erted, all rights previously nested." An exemption from taxation may be re- pealed under the reserved power. (Ap- proving Tomlinson v. Jessup, 15 Wall., 454, and Railroad v. Maine, 96 U. S., 499.) Creditors stand upon the same footing in this respect. Louisville Water Co. v. Clark, 143 U. S., 1 (1892). 1 An exemption from taxation per- tains to the franchise as a corporation, and does not pass with the sale of the franchise to operate the road. Chesa- peake & Ohio R'y Co. v. Miller, 114 U. S., 176 (1885); Memphis R R Co. v. Com'rs, 112 U. S., 609 (1884); Tomlin- son v. Branch, 15 Wall., 460 (1872); Branch v. Charleston, 92 U. S., 677 (1875); Central R R. Co. v. Georgia, 92 U. S., 665 (1875), reversing S. C, 54 Ga., 401 ; Chesapeake & O. R. R Co. v. Vir- ginia, 94 U. S., 718 (1876); The Delaware Railroad Tax, 18 Wall., 206 (1873). See, 773 § 5726.] TAXATION OF STOCK AN'D COEPOEA.TI021S. [cii. XXXIY. property of corporations from taxation, the consolidated company is looked upon as a new corporation, which is not entitled to ex- emptions from taxation possessed by , the companies of which it is composed. 1 If the franchises and property of a corporation be transferred by a sale in foreclosure, an exemption from taxation does not accom- pany the transfer. The exemption is a personal privilege and not a franchise. 2 A statute exempting the property of a corporation from being taxed does not prevent the taxation of land held by it merely for convenience and not necessary to its operation. 3 In also, cases in preceding note. Where by statute "all rights" of a railway are to pass to another, an exemption from taxation passes. Atlantic, etc., R. R v. Allen, IB Fla., 637 (1876> It certainly will not be extended to the property of other corporations consolidated with it. Philadelphia, W. & B. R R Co. r. Main- land, 10 How., 376 (1850); Chesapeake & O. R R Co. r. Virginia, 94 IT. S., 718 (1876); The Delaware Railroad Tax, 18 Wall., 206 (1873). See, also. Wait on In- solvent Corporations, 381. An exemption of a corporation may not exempt ;ilso its timber lands. County of Todd v. St Paul, etc., R'y, 36 N. W. Rep, 109 (Minn., 1888). An exemption of railroad lauds from taxation may pass to the grantee rail- roads thereof and of the franchisee. In re County of Stevens, 81 N. W. Rep.. 942 (Minn., 1887). Consolidation in Missouri destroys exemption from taxation. Keo- kuk, etc., K. II. v. County Court, etc.. 41 Fed. Rep., 305 (1890). A consolidated company under the Missouri statutes relative to railroads meeting at the state line is a now corporation, and the old one is dissolved. An exemption from taxation of the old corporation is thereby lo>t. State v. Keokuk, etc., R R, 12 S. W. Rep, 290 (Mo., 1889). Al- though an exemption from taxation is to pass to a consolidated company, yet this is a gratuity to the new company and may be repealed. Wilmington, etc., R R r. Alsbrook, 14 S. E. Rep, 653 (N. C, 1892). i Memphis & Little Rock R R Co. v. Berry, 112 U. S., 609 (1834); St Louis. Iron Mt & S. R R Co. v. Berry. 113 U. S., 46") (1885); Chesapeake & Ohio R R Co. v. Miller, 114 U. S, 176 (1885). Where the legislature ceded to a com- pany to be formed "all the right, interest and privileges of whatever kind " of a defunct railroad company, it was held that an exemption from taxation con- ferred on the old company was not vested in the new one. Railroad Co. v. Georgia, 98 U. EL, 359 (1878). In this case the restriction upon granting ex- emptions was in a statute instead of a constitutional nrovision. 2 Morgan v. Louisiana, 93 TJ. S, 217 (1876); Louisville & N. R. R Co. v. Pal- mer, 109 U. S.. 224 (1883): Wilson t\ Gaines, 108 U. S., 417 (lssin, where the transfer was under proceedings to en- force a statutory lien of a state; Ar- kansas Midland R R Co. v. Berry. 14 Ark., 17 (1884). See. also. 180 U. S. 687, and cases supra. Where the exemp- tion isastoall the property of a railroad its franchise is included. Wflmingt in R R v. Reid, 13 Wall., 364 (1871 > ;! state v. Commissioners, etc, 88 N. J. Law, 510 (1852); State V. Collectors. eta, 85 N. J. Law, 315 (1855). In these cases lands owned by a railroad and occupied by dwellings for employees, car and locomotive works, coal mines, etc., were held to be subject to taxa- tion. See, also, Toll-bridge Co. v. Os- born, 35 Conn., 7 ( ISCiSi, where lands held for wharves by a bridge company by authority of law were held taxable as real estate — a provision in its char- ter that all its property should be consid- 771 GH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 572c. general, an exemption from taxation by the state is not an exemp- tion also from municipal taxation for local purposes, 1 nor from assessments for improvements. 2 § 572c. Taxation of foreign corporations. — Any state may tax foreign corporations doing business within its borders. 3 ered personal property and be divided into shares being construed to relate to the property of the stockholders as rep- resented by the shares ; In re Swigert, 119 111., 83 (1S86), holding that a railroad exemption did not exempt its elevator. i Elizabethtown & P. R. R. v. Eliza- bethtown, 12 Bush (Ky.), 233 (1876); Roosevelt Hospital i\ Mayor of New- York, 84 N. Y., 108 (1881), where real es- tate exempted from state taxation was held to be subject to assessment by a city for the construction of a sewer. Cf. Applegate v. Ernst, 3 Bush (Ky), •648 (1868), where a tax by a county upon a railroad to obtain money to pay a county subscription for the purpose of completing the road was held to be un- lawful. See, also, p. 771, n. 1, supra. 2 New Jersey, etc., R R. v. Jersey City, 42 N. J. L., 97 (1880). 3 Liverpool Ins. Co. v. Massachusetts, 10 Wall., 66 (1870) ; S. C, Oliver v. Liv- erpool, etc., Co., 100 Mass., 531 (1868). Goods in New York for sale ; also many on deposit in New York ; also other property in the state, form the proper basis for taxation of such part of the capital stock of foreign corporations as is employed in the state. Taxation for such part of the capital stock as sales in New York bear to all the sales is un- just ; since many sales may be by sample. People v. Wemple, 133 N. Y, 323 (1892). A tax on foreign manufacturing corpo- rations to the extent of the business which they do in the state is constitu- tional and enforceable. People ex rel. S. Cotton Oil Co. v. Wemple, 131 N. Y, 64 (1892). The New York statute taxing foreign corporations doing business in the state on the same basis as domestic corporations is constitutional. Horn Silver, etc., Co. v. New York, 143 U. S., 305 (1892). The New York tax upon the business of all foreign and domestic corporations doing business in the state is a tax on the right to be a corporation and to do business, and is not a tax upon the franchise, even though the tax is measured by the dividends de- clared. The tax is legal although the corporation owns United States bonds. Home Ins. Co. v. New York, 134 U. S., 594 (1890). Where foreign corporations are required to report stock, bonds, etc , owned by residents for taxation, it need report only such as its books disclose and is not to be held liable further. Commonwealth v. N. Y, etc., R. R, 22 Atl. Rep., 236 (Pa., 1891). Cf. Common- wealth v. American B. T. Co., 18 Atl. Rep., 122 (1889). Foreign corporations doing business in New Jersey are sub- ject to taxation. State v. Berry, 19 Atl. Rep., 665 (N. J, 1890). Where a parent corporation of Massachusetts owns stock in a branch corporation of New York and collects royalties, etc., from the lat- ter, the parent corporation is not sub- ject to taxation in New York. People v. American Bell T. Co., 117 N. Y, 241 (1889). Debts due to a foreign corpo- ration from residents cannot be taxed in Louisiana. Barber, etc., Co. v. New Orleans, 6 S. Rep., 794 (La., 1889). The New York statute levying a tax on for- eign corporations doing business in the state, the tax being upon "the amount of capital stock employed within the state," is legal, and a New Jersey corpo- ration is liable to taxation for maintain- ing a sales agency and office and bank account in New York city, even though its factories, books of account, etc., are in other states. Southern Cotton Oil Co. v. Wemple, 44 Fed. Rep., 24 (1890). The Pennsylvania statute imposing a quarter of a mill license tax on the capi- tal stock of foreign corporations having 775 § 572c] TAXATION OF STOCK AND CORPORATIONS. [cH. XXXIV. A state may impose on foreign insurance companies a tax equal to the tax levied by the state creating the foreign corporation on corporations foreign to the latter state. 1 Where a railroad corpo- ration is incorporated by the United States, a state cannot tax its franchises ; it may tax the tangible property, but not the franchise. 2 Where an assessment of taxes against a railroad company has been affirmed by the supreme court, mandamus may be used "to compel payment of them if there is no other adequate remedy. 3 The tax an office in the state, and prohibiting such offices unless the tax is paid, the act applying to all foreign corporations except insurance companies, is constitu- tional. A state may exclude or impose conditions upon foreign corporations unless they are engaged in interstate or foreign commerce, or are employed by the government Pembina Min. Co. v. Pennsylvania, 125 U. S., 181 (1888); Blackstone Manuf. Co. v. Blackstone, 13 Gray, 488 (1859); State v. Lathrop, 10 La Ann., 402 (1855); State v. Fosdick, 21 La. Ann., 434(1869); Tatem r. Wright, 23 N. J. L, 429 (1852); State v. Western Union Tel. Co., 73 Me., 518 (1882); Com- monwealth v. Western Union Tel. Co., 98 Pa. St., 105 (1881); Norfolk, etc.,R R V. Commonwealth. 114 id., 256 (1886); Commonwealth v. Milton, 12 B. M.. 312, 218 (1851); Boston Loan Co. v. Boston, 137 Mass., 332 (1884); Singer Manuf. Co. u County Comm'rs, 189 Mass., 266 (1885); Att'y-Geu. v. Hay State, etc., Co., 99 Mass., 148 (1868); Commonwealth v. Texas & Pac. R. R Co., 98 Pa. St, 90 (1881), holding, however, that a" corpo- ration created by the United States con- gress is not a foreign corporation within the revenue act of Pennsylvania ; Commonwealth ?•. Gloucester, etc., Ferry Co., 98 id.. 105 (1881); People v. Equitable Trust Co., 96 N. Y, 387 (1884 >. holding that a tax may be imposed upon the business done by a foreign corporation in New York, but not upon its property in other states, nor upon its franchise. For the New York act which applies to foreign corporations, s.?e Par- ker Mills v. Commissioners, etc.. 28 N. Y., 242 (1861); People v. Horn, etc, 77 Co., 105 id., 76 (1887). They are to be taxed where their principal offices in the state are situated. People, etc., v. McLean, 17 Hun, 204 (1879). A corpo- ration chartered by the federal govern- ment is not such a foreign corporation as is obliged to pay a license fee under the Pennsylvania statutes. Common- wealth «. Texas, etc., R R Co., 98 Pa. St., 90 (1881). Unless a statute other- wise provides, a lien upon corporate property for state taxes attaches in preference to pre-existing judgment - or decrees: it has been held that a sale under a judgment or decree will not avoid such a lien. Osterburg v. Union Trust Co., 93 U. S.. 424 (1876). In New York it is held that the rolling stock of a railroad is subject to seizure and Bale for taxes. Randall r. Elwell, 52 N. Y.. 521 (1873). But not so in Kentucky. Eliaabetbtown & P. R R v. Elizabeth- town. 12 Bush, 233 (1876). 'Home Ins. Co. r. Swigert, 104 111., 653 (1882); Phila. Fire Ass'n v. New York, 119 U. S.. 11" (1886). 2 California v. Pacific R. R Co., 127 U. S., 1, 40 (1888). A county ordinance requiring a railroad chartered by the United States to take out a license is void. San Benito, etc., v. Southern P. R R Co., 19 Pac. Rep, — (Cal., 1888). 3 Person v. Warren R R Co., 32 N. J. L, 441 (1868); Silverthorn u Warren R R Co., 33 N. J. L, 173 (1868). And the party making return to an alterna- tive 7nct7idamus must show that he has complied with the order to the extent of his ability: want of funds is not a sufficient return where it is the result of the voluntary act of the party. 6 CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. [§ 572d. lien on a railroad may by delay be rendered subordinate to a mort- gage. 1 § 572c?. Taxation must not interfere with interstate commerce. — ■ A state cannot tax corporations so as to interfere with interstate commerce. The Pennsylvania license fee which all foreign corpo- rations keeping an office in the state are required to pay, with a few exceptions, is unconstitutional as regards a foreign railroad corporation which owns a railroad in the state, such railroad being part of an interstate system of railroads. 2 But a state may levy a tax on the capital stock of a foreign sleeping-car company which runs its cars through the state, the tax being on such part of the capital stock as the number of miles over which its cars run in the state bears to the whole number of miles over which its cars run in all the states. 3 A tax on interstate telegraph messages is unconstitutional. 4 A state cannot prohibit the agents of foreign express companies from doing business in the state except upon obtaining a license. Such a law is an interference with interstate commerce. 5 A tax may be levied based on the gross receipts, and if the road is but partly in the state on a proportion of the gross receipts determined by a mode prescribed by statute. 6 A state may tax a railroad on busi- ness that passes out of the state into another state and back into the first state again. 7 Various other decisions on taxation in its bearings upon interstate commerce are given in the notes below. 8 i Cooper v. Corbin, 105 111., 224 (1883); 6 Maine v. Grand Trunk, etc., R'y, 142 Parsons v. East, etc., Co., 108 111., 380 U. S., 217 (1891). (1884). 7 Lehigh Val. R R v. Penn, 145 U. S.,. 1 2 Norfolk, etc., R R. v. Penn, 136 U. S., 192 (1892). 114 (1890). 8 A tax on sleeping-car companies may 3 Pullman's Car Co. v. Penn, 141 U. S., be illegal as interfering with interstate 18 (1891), the court holding that a tax commerce. State v. Woodruff, etc., Co., on the capital stock on account of the 15 N. E. Rep., 514 (Ind., 1888). A state property owned is a tax on the property tax on interstate railroad earnings i» itself. A similar decision was made unconstitutional. Fargo v. Michigan, concerning a tax on the capital stock of 121 U. S., 230 (1887) ; Phila., etc., Co. v. a foreign telegraph company, the cap- Pennsylvania, 122 U. S., 326 (1887) ; Dela- ital stock being valued at the aggregate ware, etc., Co. v. Commonwealth, 17 Ath value of all its shares of stock, and the Rep., 175 (Pa., 1888) ; Northern, etc., R'y proportion of its lines within the state Co. v. Raymond, 40 N. W. Rep., 538 to those outside of it being the basis of (Dak., 1888). A state may tax a foreign taxation. Massachusetts v. Western U. telegraph company on such a propor- Tel. Co., 141 U. S., 40 (1890). tion of its capital stock as its lines in 4 Western U. T. Co. v. Alabama, 132 the state bear to all of its lines ; but the U. S., 472 (1889). state cannot enjoin the operation of the 5 Crutcher v. Kentucky, 141 U. S., 47 telegraph until the tax is paid. Western, (1891). etc., Tel. Co. v. Massachusetts, 125 U. S., 777 § 572^.] TAXATION OF STOCK AND CORPORATIONS. [CH. XXXIV. There has been a large number of decisions by the supreme court of the United States on this subject, and the efforts of various states to tax interstate commerce directly or indirectly are being con- stantly overthrown by that court. 530 (1888); Erie R'y Co. v. New Jersey, 31 N. J. L., 531 (1864), holding that a state tax upon foreign corporations transporting passengers and freight through the state graduated by the number of passengers and weight of the goods is in violation of that clause of the United States constitution giving congress the right to regulate commerce between the states ; Indiana v. Ameri- can Express Co., 7 Biss., 227 (1876), where a tax upon transportation through a state was held to be an inter- ference with interstate commerce and unconstitutional. So held, also, of a tax upon locomotives, cars, etc., of " a foreign railroad company in Minot v. Philadelphia, Wilmington & B. R R Co., 2 Abb. (U. S. C. C.\ 323 (1870). As to an interstate bridge, see Anderson v. C. B., etc., R R, 117 111., 26 (1886). Pull- man cars operated wholly within the state may be taxed as a privilege. Gib- son County v. Pullman, etc., Co., 42 Fed. Rep., 572 (1890). A foreign corporation's rolling stock used in interstate com- merce is not taxable by the state. Bain v. Richmond, etc., R R, 11 S. E. Rep., 311 (N. C, 1890). Interstate express com- panies may be taxed on the business which they do within the state. Pacific Ex. Co. « Seibert, 44 Fed. Rep., 810 (1890). As to telegraph companies, see, also, Western Union Tel. Co. v. Lieb, 76 III.. 172 (1875); Western Union TeL Co. v. Mayer, 28 Ohio St, 521 (1876). 778 CHAPTER XXXV. FORMS OF ACTIONS AND MEASURE OF DAMAGES WHERE A STOCK- HOLDER HAS BEEN DEPRIVED OF HIS STOCK § 573, Pleading and practice in actions relative to stock, Assumpsit. Trespass on the case. 576. Trover. 577. Detinue and replevin. 578. Money had and received. Bill in equity. Pleading under the codes. 581. Measure of damages, (a) The first rule. 574, 575, 579, 580, § 582, 583, 585. (b) The second rule. (c) The third rule. 584. Interest, dividends and accre- tions. Nominal damages. 586. Damages for failure to complete a purchase of stock or for fraud inducing a purchase of stock. 587. In actions between stock-brokers and their customers. § 573. Pleading and practice in actions relative to stock. — When an owner of stock who is out of possession brings an action for its recovery, or for the recovery of the certificate, or for damages for the detention or conversion of either the stock or the certificate, it is important to determine what action will lie, in what court the action is to be prosecuted, and what is the measure of damages. Similar questions arise when suits are brought for breach of con- tract to subscribe for stock, or of contracts to sell and convey stock. There are certain well-settled rules as to the form of the action in these cases which are deduced from the older common- law pleading and practice. These rules, even in the code states, where forms of action are little regarded, and where the old actions have been abolished in name, are still at least partially applicable. Some knowledge, therefore, of the procedure at common law in stock cases is necessary. §574. Assuntysit. — An action of assumpsit, or indebitatus as- sumpsit at common law, lies against a corporation for unjustly re- fusing to register a transfer, or for refusing to issue a certificate to one entitled to it. 1 So, also, assumpsit lies for breach of contract 1 The King v. Bank of England, Doug., 534 (1780); Kortnght v. Buffalo Com- mercial Bank, 20 Wend., 90 (1838); Ar- nold v. Suffolk Bank, 27 Barb., 424 (1857); Wyman v. American Powder Co., 8 Cush., 168 (1851); Sargent v. Franklin Ins. Co., 8 Pick., 90 (1829); Hayden v. Middlesex Turnpike Co., 10 Mass., 397 (1813); Pinkertou v. Man- chester, etc., R R. Co., 42 N. H., 424 (1861); Hill v. Pine River Bank, 45 id., 300 (1864). Cf. Foster v. Essex Bank, 17 Mass., 479.(1821); Eastern R. R. Co. v. Benedict, 10 Gray, 212 (1857). As- sumpsit does not lie against a corpora- tion for refusal to register a transfer of stock. Action on the case is the remedy. Telford, etc., Co. v. Gerhab, 13 Atl. Rep., 90 (Pa, 1888). 779 §§ 575, 576.] actions and measure of damages. [CH. XXXV. to return borrowed bank stock on demand. 1 But mandamus is not a proper remedy in these cases, and it will not lie to compel a cor- poration to transfer. 2 The form of a complaint or declaration in an action by a pledgor against a pledgee for the conversion of the stock held in pledge may be in tort or in assumpsit, but not in both. 3 A corporation may sue in assumpsit its treasurer who has illegally issued excessive stock and converted the proceeds to his own use. 4 § 575. Trespass on the case. — An action of trespass, or an action of trespass on the case, may also be brought against the corpora- tion for a denial to a stockholder of a certificate of stock, 5 and an action on the case lies for a conversion of shares of stock. 6 § 576. Trover. — It is a very generally-accepted rule that trover will lie for the conversion of shares of stock. 7 This is the favorite 1 McKenney v. Haines, 63 Me., 74 (1873). 2See§390. 3 Stevens v. Hurlbut Bank, 31 Conn., 146 (1862 . 4 Rutland R. R v. Haven, 19 Atl. Rep. ?*;<» (Vt., 1890). ■'• Hank of Ireland v. Trustee of Evans' Charities, 5 H of L Cas., 389 (1855); The King v. Bank o§ England, Doug., 534 (1780) ; Davis v. Bank of England, 2 Bing., 393 (1824); Coles v. Bank of Eng- land. 10 Ad. & Ellis. 437 (1839); Gray r. Portland Bank, 3 Mass., 864, 381 (1807); North American Building Association r. Sutton. 35 Pa. St, 463 (1860); Web- ster v. Grand Trunk R'y Co., 3 Lower Can. Jur., 148 (1859); S. C, 2 id.. 891 (construing the judicature act, 12 Vict, eta. 38, § 87); Protection Life Ins. Co. v. Osgood. 93 111., 69 (1879); Baker v. Wasson, 53 Texas, 150 (1880); Smith v. Poor, 40 Me., 415 (1855); Catchpole t\ Amhergate, etc., R'y Co., 1 Ellis & B., Ill (1852); Daly v. Thompson, Sec'y, etc., of the Anti-Dry -Rot Co., 10 Mees. & W., 309 (1842). C/. Swan v. North British Australasian Co., 7 Hurl. & N., 603 (1862); Kortright v. Buffalo Com- mercial Bank, 20 Wend., 90 (1838). Tort with a count in contract for re- fusal to transfer. Bond v. Mount Hope Iron Co., 99 Mass., 505 (1868). e Daggett v. Davis, 53 Mich., 35 (1884) ; Ayres v. French. 41 Conn., 142 (1874); Bank of America v. McNeil, 10 Bush. 64; Parsons i\ Martin, 11 Gray. Ill (1858 : Boylan v. Iluguet 8 Nev.. 345 (1873); Nabring v. Bank of Mobile, 58 Ala., 204 (1877). A complaint which, after statiug that shares of stock had been pledged to defendant avers that "defendant, in consideration of the premises, then and there undertook and promised plaintiff" to hold the stock only as pledgee, but that in viola- tion of its promise, defendant sold and converted the stock to its own use, without giving plaintiff notice of the sale, and in which plaintiff seeks to re- cover as damages the full value of the shares alleged to have been converted, though informal, is good as a complaint in case. Sharpe v. National Bank, 7 S. Rep., 106 (Ala., 1888). This case dis- cussed also the difference between as- sumpsit and in case in such an action. t Payne v. Elliot 54 Cat, 339 (1880) ; Kuhn v. McAllister. 1 Utah. 273 (1875); S. C, 96 U. S, 87 (1877) ; Bank of Amer- ica v. McNeil, 10 Bush, 54; Boylan v. Huguet 8 Nev., 345 (1873); Nabring v. Bank of Mobile, 58 Ala. 204 (1877); Mor- ton v. Preston, 18 Mich., 60 (1869); Jarvis v. Rogers, 15 Mass., 389 (1810) — a case where trover was held to lie for the value of Mississippi scrip, represent- ing one hundred and fifty thousand 780 <3H. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§ 576. remedy when the shareholder has been unjustly deprived of his stock; and it is nowhere denied, except in Pennsylvania, 1 that this form of action is proper. But even there, for the conversion of a certificate of stock, trover will lie.'-' For the maintenance of the ac- tion of trover there must be title in the plaintiff to the subject of the action, and an actual conversion by the defendant. If either of these elements is wanting the action will not lie. Thus, trover will not lie for the conversion of a certificate where the title to the shares is divested. 3 acres of land; Anderson v. Nicholas, 28 N. Y.. 600 (1864) ; Freeman v. Harwood, 49 Me., 195 (1859); Ayres v. French, 41 •Conn., 142 (1874); Connor v. Hillier, 11 Rich. Law, 193 (1857) ; Sturges v. Keith, 57 111., 451 (1870); Budd v. Multnomah Street R. R. Co., 12 Oregon, 271 (1885) ; S. C, 22 Am. & Eng. R. R Cas., 27 <1885). Of. Atkins v. Gamble, 42 Cal, 86, 100 (1871); Maryland Fire Ins. Co. v. Dalrymple, 25 Md., 242, 267 (1866). Trover and arrest lie for conversion of certificates of stock. Barry v. Calder, 48 Hun, 449 (1888). The action for con- version lies, even though the plaintiff uses the term "shares of stock" and " certificates of stock " interchangeably. •Godfrey v. Pell, 49 N. Y. Sup. Ct., 226 {1883). A party whose stock has been •converted may sue for damages instead of following the stock. Moore v. Baker, 30 N. E. Rep., 629 (Ind., 1892). For the allegations in an action for the con- version of a bond, see Saratoga, etc., Co. v. Hazard, 55 Hun, 251 (1889) ; aff'd, 121 N. Y., 677. Where defendant purchased stock for the plaintiff and accounted therefor, but refused to account for div- idends received while he held the stock, the defendant is guilty of conversion. Shaughnessy v. Chase, 7 N. Y. State Rep., 293. There are many cases in the lower courts of New York on this sub- ject. As to refusal to return pledge after payment is a conversion, see Rob- erts v. Berdell, 52 N. Y., 644 ; S. C, 15 Abb. Pr. (N. S.). 177. As to arrest for conversion, replevin thereby being waived, see Chappel v. Skinner, 6 How. Pr., 338 ; Person v. Civer, 29 How. Pr., 432 ; rev'g 28 id., 139 ; Niver v. Niver, 43 Barb, 411; 19 Abb. Pr., 14; 29 How. Pr., 6 ; Dubois v. Thompson, 1 Daly, 309 ; 25 How. Pr., 417 ; Causland v. Davis, 4 Bosw., 619; Schoeppel v. Corning, 6 N. Y., 107. Conversion of railway shares in a foreign country. Northern R'y v. Carpentier, 13 How. Pr. Rep., 222. In the case Butts v. Burnett, 6 Abb. Pr. (N. S.), 302 (1869), involving the arrest of a broker who had sold the pledge before the note was due, the court said : " It is very questionable, I think, whether a demand after default in payment of the debt for which property is pledged as security will render a refusal to deliver the pledged property a tortious conver- sion of it. No doubt the pledgor can re- deem upon a tender of the debt, or he may recover the difference between the value of the pledge and the debt. But to lay the foundation for an action for conversion, I am of opinion that an offer and demand must be made on the day, and is not sufficient if made after the day on which the debt has become payable." 1 Sewall v. Lancaster Bank, 17 Serg. & R, 285 (1828); Neiler v. Kelley, 69 Pa. St., 403 (1871). 2Biddle v. Bayard, 13 Pa. St., 150 (1850). Cf. Aull v. Colket, 2 Week. Notes Cas., 322 (1875). So in Michi- gan. Daggett v. Davis, 53 Mich., 35 (1884). 3 Broadbent v. Farley, 12 C. B. (N. S.), 214 (1862). Trover does not lie against a person to whom stock is given to sell and use the proceeds to start in busi- ness. Borland v. Stokes, 14 Atl. Rep., 781 § 576.] ACTIONS AND MEASURE OF DAMAGES. [CH. XXXV. And, upon the other hand, withholding possession of a certificate of stock cannot amount to a conversion of the stock itself so long as the certificate is not indorsed ; but it may amount to a technical conversion of the certificate. 1 It is well established that a refusal of a corporation to register a transfer in the name of one entitled to the stock is a conversion of the shares. 2 And likewise a failure or refusal by the corporation to issue a certificate to an original subscriber when by the terms of the contract of subscription it ous'ht to be issued mav be treated as a conversion. 3 So, also, a fail- ure to deliver stock according to a contract for delivery, 4 or to re- turn borrowed stock on demand, or at the time when by agree- ment it ought to be returned ; 5 and an unauthorized sale of stock by a pledgee in violation of the terms of the contract of bailment, 6 61 (Pa., 1888). Where several sharehold- ers mutually agree to contribute a num- ber of shares each, to be sold for the benefit of the corporation, one of them cannot, after the rest have contributed their proportion, refuse to allow his shares to be sold as agreed ; and if the corporation takes them under the agree- ment and sells them he cannot have an action of trover. Conrad v. La Rue, 52 Mich., 83 (1883). In trover for a certifi- cate of stock, the acceptance by the plaintiff of the certificate ends the suit and nothing further can be recovered. Collins tt Lowry, 47 N. W. Rep., 612 (Wis., 1890). 1 Daggett v. Davis, 53 Mich., 35 (1884). Cf. Morton tt Preston, 18 id., 60 (1869). Where an administrator sells stock pledged to the deceased in his life-time as security for a loan of money and re- ceives the proceeds and properly ac- counts to the estate, this is not a con- version of the shares, and the pledgor cannot have an action of trover. If any action lies it is for money had and re- ceived. Von Schmidt r. Bourn, 50 Cal., 016 (1875). For an example of an insuf- ficient complaint in trover for shares, in that there was no sufficient averment of a conversion or of facts from which a conversion might be inferred, see Ed- wards tt Sonoma Valley Bank, 59 Cal., 136 (1881); and see, also, Cumnock tt Inst for Sav., 7 N. E. Rep., 869 (Mass., 1886). 2 Allen n American Building, etc., Ass'n, et al, 52 N. W. Rep., 144 (Minn., 1892); North America Building Assoc. tt Sutton, 35 Pa. St., 463 (1860) ; West Branch, etc., Canal Co.'s Appeal, 81* Pa. St.. 19 (1870); Baltimore City, etc., R'y Co. n Sewell, 35 Md., 238 (1871); McMurrich tt Boud Head Harbour Co., 9 Upp. Can. (Q. B.), 333 (1858), • ( See § 60. 4 Huntington, etc., Coal Co. v. Eng- lish. 86 Pa. St, 247 (1878) ; North v. Phil- lips. 89 id.. 250 (1879); Noonan v. Usley, IT Wis., 314 (1863); Pinkerton r. Man- chester, etc., R R. Co., 42 N. H., 424 (1861). ■ McKenney tt Haines, 63 Me., 74 (1873); Fosdick v. Greene 27 Ohio St., 484 (1875); Forrest tt ElweB, 4 Ves., 492 (1799). Whore a person loans stock to another to borrow money upon, conver- sion does not lie for a failure to return tli>' stock. Barrowcliffe tt Cummins, 66 Hun, 1 (1892). Where bonds are loaned to use temporarily upon an agreement to return them when called for, and the member of the firm to whom they are delivered uses them for his own pur- poses, he converts them. Birdsall tt Davenport, 43 Hun, 552 (1887). 'Maryland Fire Ins. Co. tt Dalrym- ple, 25 Md.. 242, 267 (1866); Freeman r. Harwood, 49 Me., 195 (1859) ; Fisher v. Brown. 104 Mass., 259 (1870). For re- fusal of pledgee to return property, the action of pledgor may be in tort or cou- 782 CH. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§§ 577, 578. or by a broker in violation of his contract, 1 are examples of con- version of stock. In a late case in Oregon it is said that any inter- ference subversive of the right of the owner of stock to enjoy and control it is a conversion. 2 In Xew York a transferee may try his right to registr}' in an action for dividends, 3 but not after com- mencing an action for conversion. 4 Where there are conflicting interests in and contending claimants for the same stock, the cor- poration is not liable for conversion at the suit of one of them in tort, because it may refuse to transfer, pending the contest between the claimants. 5 Trover will not lie by a trustee on stock which stands in the name of the cestui que trust against a person taking title from a co-trustee. A suit in equity is the proper remedy. 6 § 577. Detinue and replevin. — The common-law action of detinue will lie for the recovery of a certificate of stock unlawfully de- tained. 7 In this action the judgment is conditional, either to re- store the thing detained, or pay the value and damages for the detention. The more modern action of replevin or its equivalent will doubtless lie for the recovery of a certificate, as for any other tangible personal property. § 578. Money had and received. — A pledgor whose stock has been wrongfully sold by the pledgee, in violation of the contract of bailment, may have an action against the pledgee for money had and received. 8 tract International Bank v. Monteath, 6 Onondaga, eta, Co. v. Price, 87 N. Y., 39 N. Y., 297. Conversion lies for an 542 (1882) ; S. C, in a court of equity, as unauthorized sale of stock and also for White v. Price, 39 Hun, 395 (1886) ; 108 dividends received thereon. Shaugh- N. Y., 661 (1888). nessy v. Chase, 7 N. Y. State Rep., 293 " Williams v. Peel, etc., Co., 55 L. T. (Supr. Ct, 1887). Rep., 689 (1886) ; Williams v. Archer, 5 iSee cb, XXV, supra; Sadler v. Lee, C. B., 318 (1847); S. C, 5 Railway & 6 Beav., 324 (1843). Canal Cas., 289, where it was held that 2 Budd v. Multnomah St R'y Co., 12 detinue lay to recover two hundred and Oregon, 271 (1885). fifty scrip certificates ; Peters v. Hey- 3 Robinson v. National Bank of New wood, Cro. Jac, 682 (21 Jac. 1, 1624), Berne, 95 N. Y, 637 (1884). where detinue was allowed for a bond 4 Hughes v. Vermont Copper Mining detained. As to replevin in cepit for Co., 72 N. Y., 207 (1878). bonds wrongfully received in pledge 5 National Bank of New London v. from a pledgee, see Thompson v. St Lake Shore, etc., R. R Co., 21 Ohio St, Nicholas Nat'l Bank, 113 N. Y, 325. 221,232 (1871). See, also, § 387, supra. 8 Von Schmidt v. Bourn, 50 Cal.. 616 In trover the goods ought to be set out (1875) ; Marsh v. Keating, 1 Bing. N. C, with some degree of certainty of de- 198 (1834). Cf. Jones v. Brinley, 1 East, scription; but the same certainty is not 1(1800); The King r. Churchwardens, required as in detinue and replevin, etc., of the Parish of St. John Madder- damages being recovered in trover, the market, 6 id., 182 (1805). In an old case very articles in detinue and replevin, a contrary rule is laid down. Nightin- Neiler v. Kelley, 69 Pa. St, 403 (1871). gal v. Devisme, 5 Burr., 2589 (1770). 783 §§ 579, 580.] ACTIONS AND measure of damages. [ch. xxxv. § 579. Bill in equity. — A bill in equity may be maintained by a bona fide purchaser of stock against the corporation to compel a transfer of the stock upon the corporate books. 1 A bill in. equity may be filed also to relieve a stockholder from an unauthorized forfeiture; 2 to rescind a subscription obtained by fraud; 3 to com- pel a specific performance of an agreement to sell stock; 4 to rem- edy a purchase, sale or transfer of stock induced by fraud ; s and to redeem stock held in pledge." A preliminary injunction against transferring stock is also frequently granted. 7 A bill in equity is the proper remedy to obtain possession of shares of stock. 8 §580. Pleading under the codes. — In general, a pleading under the code is not a safe pleading, unless it conforms substantially to the rules of pleading at common law. Some verbiage may be omitted, but the relief granted by the various common-law actions cannot be obtained even under the codo without the necessary averments entitling the plaintiff to that relief. The crucial test under the oode is whether the facts alleged are sufficient to entitle the plaintiff to relief. It is the allegation of the facts, and not the method of alleging them, that constitutes a sufficient pleading under the cod, In a suit for profits received by defend- ant as agent for plaintiff in buying and selling Btock, the value of the stock need not he alleged with any particular defi- niteness. Herrlich v. McDonald, 33 Pac Rep., 398 ' !aL, 1890), Where ■ corpora- tion repudiates a pledge of stock made by its treasurer, it cannot Bue the pledgee for the money received by the pledgee upon a sale of the Btock by the latter. Holden v. Metropolitan, etc., Hank. 33 N. El Rep., Mass., 1890). i See § 891, supra. *See § 184, supra. • ">, 156, supra. • See § 388, supra, 366, supra. *- 1 See § 176, supra. ■* *Heck r. Bulkley, 1 S. W. Rep., 613 O' 1 nil.. 1886), holding, also, that a viola- tion of the injunction is a bar to dam- ages upon a dissolution of it The pre- liminary injunction, being an equitable remedy, is not granted if only legal re- lief is sought by the action. See Mo- Benry v. Jewetl 90 X. V.. 68 (1888> A principal who is suing an agent to ob- tain shares of stock may enjoin the agent from transferring the same pen- dente lite. I bedworth v. Edwards, 8 Where a proposed con- solidation i-, attacked by a stockholder, a preliminary injunction, granted so as not to render useless the whole suit in it i- successful, will not be dis- turbed l>\ t lie court of appeals. Young r. Rondout, etc, Co., 139 N. Y., 67 (1891} 8 This rule of law has frequently been applied in actions by a pledgor to ob- tain from a pledgee the stock which has been pledged. The rule itself is well established. White v. Price, 39 Hun, 394 : Ins .\. Y, 661 ; Hasbrouck r. Vandevoort, 4 Band. Rep, 74; Bryson n Raynor, ?•"> Md. 434; Conynghara's Appeal. ~u Pa. St.. 471; Koous >\ First Nafl Bank, 89 Ind, 'Brisbane v. Delaware, etc., R R I 94 N. Y., 204 (1888); Purrall v. Bush- wick R R Co., 75 id., 311 (1878). Cf. Tackerson ex Chapin, 63 X. Y. Super. Ct, 16 L885) In Nevada there is a statutory action of claim and delivery. Bercich v. Marye, 9 Nev., 313 (1874). See Webster v. Grand Trunk R'y of Canada, S Lower Can. Jur., 148 (18 781 (MI. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§581. § 581. The measure of damages — (a) The first rule. — Great dif- ficulty has been experienced in determining what shall be the measure of damages for the conversion of stock. As the manner and conditions of the conversion vary, so also will the measure of damages vary from nominal damages to the highest value of the stock with dividends and interest, and also any special dam- ages which the plaintiff can establish. In general, the courts incline to the rule that the true measure of damages is the value of the stock at the time of the conversion, 1 or a reasonable time S. C, 2 id., 291, for a construction of that provision of the judicature act [12 Vict, ch. 38, § 87] which governs ac- tions of this nature in the Canadian provinces. In Kuhn v. McAllister, 1 Utah, 275 (1875), it is held that the language used in the pleadings in these actions is not material, or that the lan- guage is that of one form of action or another or of no form, but that the question is whether the facts entitle the plaintiff to recover. A declaration in an action for the wrongful conversion of the shares of the capital stock of a corporation is sufficient for the pur- poses of pleading if it states the ulti- mate facts to be proven. The circum- stances which tend to prove those facts may be used for the purpose of evi- dence, but they have no place in the pleadings. McAllister v. Kuhn, 96 U. S.. 87 (1877); affirming Kuhn v. McAllis- ter, 1 Utah, 275 (1875). As to a mis- joinder of causes of action under the California code, where the plaintiff sues to recover certain stock, see Johnson v. Kirby, 65 Cat, 482 (1884). Upon the question of what is, in New York, a sufficient pleading in an action to com- pel deliver of stock, see Burrall v. Bush- wick R. R Co., 75 N. Y., 211 (1878). See, also, Chitty on Pleadings, vol. 2, p. 618; Lowell on Transfers, § 11. 1 In re Bahia & San Francisco R'y Co.. 3 Q. B., 584 (1868) ; Williams r. Archer, 5 Rail. & Canal Cas., 289 (1847) ; S. G. 5 C. B., 318; 17 L. J. (C. P.), 82; Tem- pest v. Kilner, 3 C. B., 249 (184S) ; Shaw v. Holland, 15 Mees. & W., 136 (1846) ; Pott v. Flather, 5 Rail. & Canal Cas., (50) 85 (1847); Davidson v. Tulloch, 6 Jur. (N. S.>, 543 (1860); Wells v. Abernethy. 5 Conn., 222 (1824); O'Meara v. North : American Mining Co., 2 Nev., 112 (1866) ; Baker v. Drake, 53 N. Y. 211 (1873); S. C, 66 N. Y, 518 (1876); Colt v. Owens, 90 N. Y, 368 (1882); Gruman v. Smith, 81 id., 25 (1880) ; Ormsby v. Ver- mont Copper Mining Co., 56 id., 623 (1874); Pinkerton v. Manchester, etc., R. R Co., 42 N. H., 424 (1861); McKen- ney v. Haines, 63 Me., 74 (1873) ; Sturges v. Keith, 57 III, 451 (1870); Noonan v. Usley, 17 Wis., 314 (1863) ; Bull v. Doug- las, 4 Munf. (Va.), 303 (1814); Enders v. Board of Public Works, 1 Graft. 364 (1845); White v. Salisbury. 33 Mo., 150 (1862); Connor v. Hillier, 11 Rich. Law, 193 (1857): Nabring v. Bank of Mobile,. 58 Ala., 204 (1877); Eastern R. R Co. v. Benedict, 10 Gray, 212 (1857); Boylan v. Huguet, 8 Nev., 345 (1873);. Bercich. v. Marye, 9 id., 312 (1874); Sargent v.. Franklin Ins. Co., 8 Pick., 90 (1829) ,: Fisher v. Brown, 104 Mass., 259 (1870); Wyman v. American Powder Co., 8 Cush., 168 (1857); North v. Phillips, 89 Pa. St., 250 (1879); Huntington, etc.. Coal Co. v. English, 86 id., 247 (1878); Neiler v. Kelley, 69 id., 403 (1871) ; Ran- dall v. Albany City National Bank, 1 N. Y. State Rep., 592 (Sept., 1886) ; Doug- las v. Merceles, 25 N. J. Eq., 144 (1874). See, also, Eicholz v. Fox. 12 Phila., 382 (1878); Larrabee v. Badger, 45 111., 440 (1867); Barned v. Hamilton, 2 Rail. & Canal Cas., 624 (1841); Blyth v. Carpen- ter, L. R, 2 Eq., 501 (1866). Cf. Moody v. Caulk, 14 Fla, 50 (1872); Kent r. Ginter, 23 Ind., 1 (1864); Orange, etc., 785 § 5S1.J ACTIONS AND MEASURE OF P AM AGES. [cn. XXXV after. 1 By the term the value of the stock is usually to be under- stood the market value. 2 The fact that the shares of stock have no known market value will not prevent recovery w T here the actual value is ascertainable in an action to recover damages. The value may be shown by showing the value of the property and business of the corporation. 3 The question of what was the market value R. R Co. t. Fulvey, 17 Gratt, 366 capacity, the good-will, etc., etc., is the (1867) ; Jefferson v. Hale, 31 Ark., 286 (1876) ; Third National Bank v. Boyd, 44 Md., 47 (1875); Thomas V. Sternheimer, 29 id., 268 (1868). i Colt v. Owens, 90 N. Y., 368 (1882) ; Douglas v. Merceles, 25 N. J. Eq., 144 (1874) ; Brewster v. Van Liew, 8 N. E. Rep., 842 (111., 1886); Budd v. Mult- nomah St. R'y Co., 15 Pac. Rep., 65 (Oreg., 1887). Upon what is reasonable time herein in transactions on the stock exchanges, see Stewart v. Cauty, 8 Mees. & W., 160 (1841) ; Field v. Leleau, 6 Hurl. & N., 617. 2 By the " market value of stock '' is meant the actual price at which it is commonly sold. That price may be fixed by sales of the stock in market at or about a given time. If no sales can be shown on the precise day, recourse may be bad to sales before or after the day, and for that inquiry a reasonable range in point of time is allowable. Douglas v. Merceles, 25 N. J. Eq., 114 (1874). Cf. Stewart v. Cauty, 8 Mees. & W., 160 (1841); Sturges v. Keith, 57 III., 451 (1870); Seymour v. Ives, 46 Conn., 109 (1878). The measure of dam- ages for non-delivery of stock at a cer- tain date is presumptively the par value. The defendant is obliged to prove differ- ently if this price is incorrect Appeal of Harris, 12 Atl. Rep., 748 (Pa., 1888). If there is no market value of stock, proof of a few sales is competent Brown v. Lawton, 6 N. Y. Supp., 137 (1889). 3 " In actions for conversion of per- sonal property, such as these shares are, the damages are not limited to the mar- ket value of the stock. Its actual value to be determined under all the circum- stances, such as the dividend-making measure of damages." Freon v. Car- riage Co.. 42 Ohio St, 30, 38 (1884). In Hitchcock v. McElrath, 14 Pac. Rep.. 305 (Cal., 1887), the court allowed evi- dence to be given showing the market value of all the property of the corpora- tion, there being no other method of ascertaining the value of the stock. See, also, McGuffey v. Humes, 1 S. W. Rep., 506 (Tenn., 1886). The value of stock may be shown by showing the value of the property of the corpora- tion, the amount of capital stock and the amount of debts. It may be shown, also, by proving how much could be borrowed on the stock at the place where the company's headquarters were. Smith v. Traders' Nat'l Bank, 17 S. W. Rep., 779 (Tex., 1891). In the case of Riker v. Campbell (U. S. C. C, S. D. of N. Y. ; see Mss.), Judge Wallace held that the value of stock might be shown by proving the value of the corporate property. See, also, Simkius v. Law, 4 N. Y., 179. "Where a vendor of stock in a corporation which has a franchise. but nothing else, is entitled to two thou- sand shares of full-paid stock at a later date, according to the contract of sale, his measure of damages for failure of the vendee to deliver the two thousand shares i9 nominal damages where there was no market or actual value for the stock. Barnes v. Brown, 130 N. Y, 372 (1892). The value of stock may be shown by the value of its assets where there is no known market value. Redding r. Godwin, 46 N. W. Rep., 563 (Minn., 1890). The president and managing agent renders his corporation liable for a bonus of stock in another corporation which he gives secretly and corruptly to the agent of the latter corporation in 786 CH. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§ 581. at the time of the conversion is generally a question for the jury; 1 and it may be shown by tables of prices current published in the newspapers or otherwise at the time of the conversion, and these may be read in evidence. 2 A conversion arises at the time when the stockholder, being en- titled to the immediate possession or delivery of the stock or the certificate, makes a demand for it which is refused. Accordingly in this class of cases the measure of damages is the value of stock on the day of the demand and refusal. 3 order to get a contract for the former corporation. Grand Rapids, etc., Co. v. Cincinnati, etc., Co., 45 Fed. Rep., 671 (1891), holding the former corporation liable for the par value of the stock, inasmuch as it was the original issue of that stock. Not the nominal but the true value of the shares is what the plaintiff is entitled to recover. Bull v. Douglas, 4 Munf. (Va.), 303 (1814); En- ders v. Board of Public Works, 1 Gratt, 364 (1845). Where a railroad is sold to be paid for in bonds, a failure to deliver the bonds enables the vendor to recover their par value from the vendee. Texas, etc., R'y v. Gentry, 8 S. W. Rep., 98 (Tex., 1888). 1 1 Sedgwick on Damages (7th ed.), 585, and cases cited ; Dos Passos on Stock-brokers. 801. See Cameron v. Durkheim, 55 N. Y., 425 (1874) ; Fowler v. New York Gold Exchange Bank, 67 id., 138 (1876) ; Harris v. Tumbridge, 83 id., 92 (1880), and notes supra. Where there is no evidence that the stock is worthless, the question of value should be submitted to the jury ; the rule of damages in a case for fraud as to repre- sentations as to the value of the stock being the difference between the par value of the stock as represented, and what it was in fact worth. Maxted v. Fowler, 53 N. W. Rep., 921 (Mich., 1892). 2Cliquot's Champagne, 3 Wall.. 114 (1865) : S. P., Whelan v. Lynch, 60 N. Y, 469 (1875). A price current or market report is admissible in certain cases to prove the fluctuations and value of stock. Seligman v. Rogers, 21 S. W. Rep., 94 (Mo., 1893). 3 So when stock held as collateral is improperly sold by the pledgee, the value on the day when the pledgor pays his debt and demands his stock is to be taken. Fisher v. Brown, 104 Mass., 259 (1870). In Freeman v. Harwood, 49 Me., 195 (1859), shares of stock standing in the name of the defendant as collateral security for a debt which had been paid were sold for non-payment of an assess- ment and bought by defendant. It was held that the defendant was liable in trover for the value of the shares at the time of the sale, with interest, and all dividends received thereon, deducting; the amount of the assessment and the expenses of the sale. In Sturges v. Keith, 57 111., 451 (1870). it is held that where the demand and refusal consti- tute the conversion, or afford presump- tive evidence of it, the date of such de- mand and refusal is the proper time for estimating the value. Again, where the corporation wrongfully refuses to regis- ter a transfer and to issue a certificate the measure of damages is the value of the stock on the day when the transfer was demanded and refused. Wyman v. American Powder Co., 8 Cush., 168 (1851); Eastern R. R. Co. v. Benedict, 10 Gray, 212 (1857); West Branch, etc.. Canal Company's Appeal, 81* Pa. St., 19 (1870); Baltimore City, etc., R. R Co. v. Sewell, 35 Md., 238 (1871); McMur- rich v. Bond Head Harbour Co., 9 Up. Can. (Q. B.), 333 (1852), where it is said that while the rule as announced above is the proper one, yet, when the jury allows a larger sum, the question of the measure of damages not having been 787 § 582.] ACTIONS AND MEASURE OF DAMAGES. [CH. XXXV. "Where the pledgee of stock wrongfully sells it the injured party- may recover the highest market price between the time of notice of sale and a reasonable time within which he might have bought the stock elsewhere. 1 The Xew York court of appeals after many variations has set- tled on the rule that "in the absence of special circumstances in an action for conversion of personal property as well as one for failure to deliver it in performance of a contract where considera- tion has been received, the value of the property at the time of such conversion or default, with interest, is the measure of com- pensation." 2 §582. (6) The second rule. — In another line of cases the true measure of damages in these actions is said to be the value of the stock on the day of the trial. 3 In an English case it is said that pressed at the argument, the court will not reduce the verdict So, also, where there is a failure to return borrowed stock on demand, or according to the terms of the bailment, the value on the day of demand, or on the day when the 6tock ought by contract to have been returned, is the measure of damages. McKenney v. Haines, 63 Me., 74(1873); Fosdickr. Greene, 27 Ohio St, 484 (1875) j S. C, 22 Am. Rep.. 328; McArthur v. Seaforth, 2 Taunt.. 257; Day v. Per- kins, 2 Sandf. Chan., 359. Of. Cortel- you v. Lansing, 2 ( laines' Caa in Error, 200(1805) : West v. Wentworth, 3 ( Jowen, 82; Clark v. Pinney, ", id.. 681 ; Wilson v. Matthews, 24 Barb., 295; 2 Sedgwick on Damages (7th ed.), 141, 365, n. In an old case where borrowed stock was not returned the plaintiff was allowed to recover the value at the time of the transfer to the borrower, no account beiug taken of an increase in value. Forrest v. Elwes, 4 Ves.. 492 (1799). See, also, McKenney v. Haines, 63 Me., 74 (1873). Upon a failure to deliver stock according to contract or on demand, the value at the time of the demand is the value to be taken. Noonan v. Ilsley, 17 Wis., 314 (1863); Pinkerton v. Manches- ter, etc., R R Co., 42 N. H., 424 (1861) ; North v. Phillips, 89 Pa. St., 250 (1879); Huntington, etc., Coal Co. v. English, 86 id., 247 (1878). Cf. Pott v. Flather, 5 Rail. & Canal Cas., 85 (1847); Barne.l v. Hamilton, 2 id., 624 (1841); Shaw v. Holland, 4 id., 150 (1846); S. C, 15 Mees. & W., 136; Tempest ?;. Kilner, 2 C. B., 300; S. C, 3 id., 249; Gainsford v. Carroll, 2 I3arn. & C, 624. Williams v. Peel, etc., Co., 55 L. T. Rep. 689 (1886), holds that suit for damages for wrongful detention lies against a party who has wrongfully obtained possession of stock, and that the measure of damages, where the defendant afterwards abandons his claim, is the intervening fall in the value of the stock. Bankers of trustees wrong- fully sold out stock, and applied the proceeds to their own purposes. The measure of their liability is the amount paid in replacing the stock. Sadler v. Lee, 6 Beav., 324 (1843). As to damages in cases of trust, see Story's Eq. (13th ed.), §3 1263, 1264. 1 Wright v. Bank of Metropolis, 110 N. Y., 237 (1888); Galigher v. Jones, 129 U. S., 193 (1889), the court saying in the latter decision that the measure of dam- ages is "the highest intermediate value of the stock between the time of its conversion and a reasonable time after the owner has received notice of it to enable him to replace the stock." 2 Barnes v. Brown, 130 N. Y., 372 (1892). 3 Owen v. Routh, It C. B., 327(1854); Shepherd v. Johnson, 2 East, 211; Ber- 788 CH. XXXV.] ACTIONS AND MEASDRE OF DAMAGES. [§ 583. this is a sound rule in the ordinary cases of conversion of stock, but that in cases of failure to deliver stock the true measure of damages is the value when the demand is made and refused. 1 This second rule has found little favor, and there is believed to be no sound reason for its adoption. § 583. (c) The third rule. — It has been held in still another class of decisions that the measure of damages for the conversion of stock is the highest market value of the stock between the date of the conversion and the day of the trial. This is the rule in Cali- fornia in some cases. 2 So, also, in South Carolina, 3 Georgia ; 4 and it was formerly the rule in New York 5 and Pennsylvania. 6 The cich v. Marye, 9 Nev., 312 (1874). Cf. Williams v. Archer, 5 C. B., 318 (1847): S. Q, 5 Rail. & Canal Cas., 289 ; 17 L. J. (C. P.), 82 ; and see Wilson v. Little, 2 N. Y., 443, 450 (1849), wherein there is a quere as to whether this may not be the better rule. In Fowle v. Ward, 113 Mass., 548; S. C, 18 Am. Rep., 534 (1873), it is held that the measure of damages is the value of the stock upon the day when the bill in equity is filed, it being an equitable action by a pledgor against a pledgee. The measure of damages in England is the price at which the defendant sold the securities if already sold, and if not sold then the amount of depreciation in value since plaintiff demanded them, together with intervening dividends. Simmons v. Joint, etc., Co., 62 L. T. Rep., 427 (1890). iShaw v. Holland, 15 Mees. & W., 136, 145 (1846) ; S. C, 4 Rail. & Canal Cas., 150 ; 15 L. J., Exch., 87. 2 Code of California, § 3336, is as fol- lows: "The detriment caused by the wrongful conversion of personal prop- erty is presumed to be : 1. The value of the property at the time of the conver- sion, with interest from that time ; or, where the action has been prosecuted with reasonable diligence, the highest market value of the property at any time between the conversion and the verdict, without interest, at the option of the injured party." This is held to apply to the conversion of the shares of stock. Fro mm v. Sierra Nevada Silver Mining Co., 61 Cal., 629 (1882) ; Dent v. Holbrook, 54 id., 145 (1880). Cf. Thomp- son v. Toland, 48 Cal., 99 (1874). The courts have held that this section of the code applies to the conversion of shares of -stock, but they have not worked out a very consistent rule on the subject. In Douglass v. Craft, 9 Cal., 562 (1867), the "highest value" rule is adopted, but in later cases the court seems to incline toward the mod- ern New York rule. Harner v. Hatha- way, 33 Cal., 117; Page v. Fowler, 39 id., 412 ; Dent v. Holbrook, 54 id., 145 (1880); Tully v. Tranor, 53 id., 274; Thompson v. Toland, 48 id., 99 (1874); Fromm v. Sierra Nevada Silver Mining Co., 61 Cal, 629(1882). 3 Kid v. Mitchell, 1 Nott & McCord, 334 (1818). 4 Central R. R. & Banking Co. v. At- lantic, etc., R. R Co., 50 Ga., 444 (1873). 5 Markham v. Jaudon, 41 N. Y, 235 (1869); Romaine v. Van Allen, 26 id., 309 (1863). In an action to recover damages for the unlawful conversion of a quantity of grain the rule in New York was held to be the highest price up to the time of the trial is the proper measure of damages. Lordell v. Stoweli, 51 N. Y, 70 (1872). To same effect, Kent v. Ginter, 23 Ind., 1 (1864). See 1 Sedgwick on Damages (7th ed.), 578, and note (a). Cf. Burt v. Dutcher, 34 N. Y, 493 (1866) ; Scott v. Rogers, 31 id., 676 (1864) ; Devlin v. Pike. 5 Daly (N. Y), C. P., 85. For the modern rule in New York see § 581, supra. 6 Bank of Montgomery v. Reese, 26 789 § 534.] ACTIONS AND MEASURE OF DAMAC3S. [CH. XXXV. courts of the two latter states have, however, in later cases wholly receded from this position ; and in both the rule is now established in such actions that the measure of damages is not the highest price of the stock, but the value at the date of the conversion. 1 §584. Interests, dividends and special damages. — It is settled law that, in addition to the value of the stock at the date of con- version, the plaintiff may recover legal interest upon such valua- tion from the date of the conversion to the day of the trial. It follows as of course that, if the plaintiff has been damaged in an ascertained sum, he may, in an action for damages, recover not only that sum, but interest thereon for the time during which he has been wrongfully deprived of his stock. 2 In addition to interest Pa. St, 143 (1856); Musgrave tt Becken- dorff, 53 id., 310 (1866); Reitenbaugh tt Ludwick, 31 id.. 131, 141 (1858). In Pennsylvania where one was account- able for stock as trustee, and converted it, lie was held chargeable with the high- est market value. Reitenbaugh tt Lud- wick, 31 Pa. St., 131 (1858); North v. Phillips, 89 Pa. St., 250 (1879). Cf. Bates v. Wiles, 1 Handy (Ohio), 532 (1855). It is now held in Pennsylvania that where a corporation, through inno- cent mistake, permits a transfer on its books of shares of stock under a forged power of attorney, the owner's measure of damages is the value of the stock at the time of the transfer, with interest from the date of the verdict, and not the highest price reached by the stock between the date of the conversion and the time of bringing suit, with the divi- dends since declare • See Fowler v. New York Gold Exchange Bank, 67 N. Y., 138(1878 1 Daggett v. Da vies, 53 Mich.. 35 (1884), by Cooky, < . J. - See cli. XX. supl 'Redding v. Godwin. 46 N. W. Rep., 563 (Minn., is9(k In an action for dam- ages for fraud inducing the plaintiff to purchase stock, the measure of dam is "not the difference between the con- tract price and the reasonable market value if the property had been worth the price paid for it: nor if the stock were worthless, could the plaintiff have recovered the value it would have had if the property had been equal to .the representations. What the plaintiff might have gained is not the question. but what he had lost by being deceived into the purchase." The defendant "was bound to make good the loss sustained, such as the moneys plaintiff had paid out and interest, and any other outlay legitimately attributable to defendant's fraudulent conduct : but this liability did not include the expected fruits of an unrealized speculation." Smith v. Bol- les, 132 U. S., 125 (1889). The measure of damages in an action by a vendee for fraud in the sale of stock is the differ- ence between the selling price and the real value at the time of the sale. i v. Berret, 23 Atl. Rep, 1004 (Pa.. 1892), In an action for damages for de- ceit inducing the plaintiff to purchase stock the measure of damages is "a sum of money equal to the difference be- D th" value of the property as it was in fact and the value as it would have been it the representations had been true." In this kind of action no tender of the stock is necessary or proper. Testimony as to the value of the property of the corporation and of a sale of Btock by a witness is admissible. Yad r. Reynolds, 118 X. V.. 297 (II As to the measure of damages where worthless stock is sold for land and fraud- ulent misrepresentations are made and the company fails, see Titus v. Poole. 1 1 N. Y. Sup;,.. 678 391> Where one has been induced by fraudulent misrepre- ttions to buy or subscribe for shares of stock, the measure of damages in an action against the vendor is the differ- ence between ihe value of the stock as represented and the actual value Miller r. Barber, or, x. Y., 558, 568 (1878); Hub- bell r. Meigs. 50 id., 480, -491 (1872) The measure of damages in an action for de- ceit against directors who issued a false prospectus inducing subscription is the difference between the subscription price and the real value of the stock ; and evi- dence that the stock subsequently proved to be worthless is admissible. Peek v. Deny, 59 L. T. Rep., 78 (1888). And where one with intent to cheat and defraud induces another, by false and fraudulent representations, to pur- chase shares for value which he knows 792 I CH. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§ 587. § 587. Damages in actions between stocli-brolcers and their cus- tomers. — Tliis subject is considered elsewhere. 1 to be worthless, he is liable for the dam- his instance. Hubbell v. Meigs, supra. ages sustained, whether the purchase ■ See §§ 460, 461, supra. was made from him or from another at 793 CHAPTER XXXVI. STOCKHOLDERS' MEETINGS - CALLS, TIME PLACE AND CLASSES OF MEETINGS. § 588. Introductory. 589. The place of meeting of stock- holders must be within the state creating the corporation. 590-591. First meeting under a special charter. 592. Meetings of directors — Place — Notice — Action without meet- ing — Quorum. 593. By whom and when meetings are to be called — Mandam us— Fraud in the call. 594. When the stock holders are en- titled to notice of corporate meetings. § 595. 596, 597, The essential elements of a notice of a meeting are time, place and business. Service of the notice. Notice must be served a reason- able time before the meeting. The division of meetings into ordinary and extraordinary. Waiver of notice. Notice is presumed to have been regularly t;iven. 601. Adjourned meetings. 598. 599. 800. § 583. Introductory. —The stockholders of a corporation consti- tute the origin, existence and continuance of the corporation it- self. They elect its officers, control its general policy, and within the charter limits may prolong or dissolve its existence at their pleasure. All these vital powers of the stockholders can be exer- cised by them only in corporate meetings, duly convened and prop- erly organized for the transaction of business. Accordingly, the method of calling together a corporate meeting, the time and place of that meeting, the notice to be given to the stockholders and the various incidents relative to a proper convening of the members of the corporation, are of great importance. They constitute the sub- ject of this chapter. § 589. The place of meeting of stockholders must be within tin state creating the corporation. — The first and most general rule as to the place where stockholders may hold corporate meetings is that the place of meeting should be within the boundaries of the state which created the corporation. Through its agents, of course, the corporation may make contracts, carry on business, sue and be sued and buy and sell property in another state. 1 But there is a difference of opinion as to the effect of business transacted at a stockholders' meeting held beyond the borders of the state creating the corporation. Upon the one hand, it is held that all the acts and proceedings of such a meeting are wholly in i See chs. 13 and 41. 794 CH. XXXVI.] STOCKHOLDERS MEETINGS — CALLS. [§ 589. valid and void ; that the corporation is not bound thereby, and that the meeting is as though it had never been. 1 But it is the sounder view to regard the votes and proceedings at such a meeting as voidable rather than void. The corporation itself cannot allege that such proceedings are void. It is estopped from so doing. 2 So, also, are the stockholders who participate in the meeting. 3 As to the creditors of the corporation the author- 1 Directors elected at a stockholders' meeting held out of the state and to which all did not agree are not directors. The old board holds over. Hodgson v. Duluth, etc., R R, 49 N. W. Rep., 197 (Minn., 1891); Miller v. Ewer, 27 Me., 509 (1847), where a mortgage executed by the authority of directors who were elected at the organization meeting of corporators held outside of the state which granted the charter was declared void. Cited and followed in Freeman v. Machias Water, etc., 38 Me., 343 (1854). where a forfeiture of stock was declared illegal ; Ormsby v. Vermont Copper, etc., 56 N. Y., 623 (1874), where it was held that a forfeiture of stock by authority of a by-law adopted by stockholders of a Vermont corporation at a meeting held in New York was not valid. Mitchell v. Vt. Copper Co., 40 N. Y. Super. Ct., 406 (1876); aff'd, 67 N. Y, 280 ; Smith v. Silver Valley Mining Co., 64 Md., 85 (1885), the organization being held out of the state ; Camp v. Byrne, 41 Mo., 525 (1867), to the same effect; Mitchell v. Same, 40 Super. Ct., 406 (1876). In the case Copp v. Lamb, 12 Me., 312 (1835), thirty years' user was held to have cured any defect. A Vir- ginia corporation cannot be organized by an organization meeting in New York, Nor can the charter be assigned by a blank assignment after an organization in Virginia. The assignment must be of the stock. The corporation is neither de facto nor de jure. Suits against it fail. Welch v. Old Dominion, etc., Ry., NT. Y L. J., June 12, 1890. 2 Heath v. Silverthorn Lead Mining, etc., Co., 39 Wis.. 146 (1875), holding that the corporation may be estopped to deny the validity of acts done outside the state when the rights of third parties in- tervene, even though that meeting was "the organization meeting. The legisla- ture may validate the acts passed at such a meeting. Graham v. Boston, Hart- ford & Erie R R Co., 118 U. S., 161, 178 (1886) ; affirming S. C, 14 Fed. Rep., 753 (1883). Cf. Grenada Co. v. Brogden, 112 U. S., 261 (1884), and the various cases of municipal subscriptions, ch. VI, § 94, n. 3 A bona fide holder of a note given by a stockholder in payment of his sub- scription may enforce it even though the organization and all other meetings of the company were held out of the state. Camp v. Byrne, 41 Mo., 525 (1867). In the case of Ohio & M. R. R v. Mc- Pherson, 35 Mo.. 13 (1864), the charter declared the directors to be the corpora- tion. They met out of the state and or- ganized and made a call on subscrip- tions. The court upheld the call. But the mere neglect on the part of a share- holder who did not attend a meeting of this kind, or a mere failure to take af- firmative action for a period of time short of that prescribed by the statute of limitations, will not deprive that shareholder of his right to attack the proceedings as irregular and in fraud of his rights. Ormsby v. Vermont Copper Mining Co., 56 N. Y, 623 (1874). Direct- ors elected at a stockholders' meeting held out of the state and to which all did not agree are not directors. The old board holds over. Hodgson v. Du- luth, etc., R R., 49 N. W. Rep., 197 (Minn., 1891). By-laws enacted by a board of directors of a Texan corpora- tion at a meeting of stockholders held 95 §§ 590-592.] stockholders' meetings — calls. [CH. XXXVI. ities differ. 1 If the corporation has been incorporated in two or more states, it is lawful to hold meetings of the stockholders in either state. 2 And proceedings at a meeting in an} 7 one of the states are valid in respect to the property of the corporation in all of them without the necessity of the repetition of the meeting in any other of those states. 3 §§590-591. First meeting under a special charter. — Where an act incorporates three specified persons and their "associates," those three alone organize the company and are entitled to sub- scribe the capital stock or to allow others to subscribe. 4 Statutory provisions as to notice of the first meeting are direct- ory. They need not be observed if the stockholders acquiesce.' AVhere several persons, their associates and successors, are de- clared to be a corporation, one of them with new parties may meet, organize, adopt by-laws, etc., without the capital being first sub- scribed and without the others if they do not object. 6 As to an over-subscription for stock the rules that govern the subject are considered elsewhere. 7 § 592. Directors' meetings. — The various questions connected with directors' meetings, the place where such meetings may be in Paris are void and a stockholder may in a foreign jurisdiction, provided all disregard them, although lie was repre- the shareholders give their consent to sented by proxy at the meeting The such meeting or ratify its action." Id., directors are not even defacto. Franco- Texas Land Co. v. Laigle, 69 Texas, 339 (1S83). A special chart, r must be ac- cepted before the corporation exists, and such acceptance cannot be at a meeting held out of the state. Bence a bill by a stockholder to Bet aside a forfeiture of hi.- stock was dismissed by the court. Smith v. Silver, etc.. Co., 20 AtL Rep, 1032 (Md., 1883). A stockholders' meet- ingout of the state is " irregular if not void." Mack r. De Bardelaben, etc., Co., 8 S. Rep., 150 (Ala., 1890). A stockhold- ers' meeting held outside of the state cannot be attacked by those who par- ticipate in it or receive the benefits of it. A statute against holding elections out of the state does not prevent stock- holders' meetings for other purp Handley v. Stutz, 139 U. S., 417 (1891). An increase of capital stock which is voted at a stockholders' meeting held out of the state is valid if all the stock- holders assent " No valid objection can be made to a stockholders' meeting held ■11 Fed Rep, 531 (1890). 1 Where a meeting of stockholders Other than the first organization meet- ing is held out of the state and directors are elected, the acts of those directors cannot lie attacked by corporate credit- ors "ii tii" ground that the election was .1. Wright r. Lee. 51 N. W. Rep., 706 (S. I).. 1892> For cases to the con- trary see notes supra. * Graham tt Boston, Hartford & Erie !:. K. I .... 11- V. S., 161 (1886): Coving- ton, etc., Bridge Co. o. Mayer, 31 Ohio si.. 817 L877> See, also, Ohio, etc., R'y v. People. 1 28 III., 467 (1888); and eh. 53, infra. 3 Same cas 4 Lech mere Bank v. Boynton, 65 Mass., 1853) See. also. p. 313, note: also; p 797, note 6. 5 Braintree, etc., v. Braiutree, 16 N. E. Rep, 420 [Mass., 1881> BMcGinty r. Athol, etc., Co., 29 N. E Rep.. 510 (Mass., 18 '• See g?; 57, 58, supra. T'.h; CH. XXXVI.] STOCKHOLDERS MEETINGS — CALLS. [§ 593. held, the notice that is required, the question of whether the di- rectors may act without meeting, and the requirements as to a quorum, are discussed elsewhere. 1 § 593. By whom meetings are to be called — Mandam us — Fraud in the call. — Where the time and place of a meeting and the business to be transacted at that meeting are not fixed by charter or other- wise, so that the stockholders are bound to take notice of them, it is necessary that the meeting be called by a properly-authorized corporate authority. 2 In the absence of any special authority to any particular person to call meetings, it has been held that the general agent of the cor- es ' O 3 poration may make the call, 3 but that the secretary cannot. 4 The board of directors may always call a meeting of the stockholders. 3 Statutory provisions as to who shall call the meeting, whether it be the first and organization meeting, or a subsequent one, may be waived by unanimous consent of the incorporators or stockholders. 6 1 See § 713a. infra. 2 Evans v. Osgood, 18 Me., 213 (1841), holding that, where a proprietors' meet- ing could be called " by a petition signed by twelve of them at least," it was not a legal call if eleven signed, al- though they owned twelve shares ; Con- gregational Soc. of Bethany v. Sperry, 10 Conn., 200 (1834) ; State of Nevada v. Pettineli, 10 Nev., 141 (1875), where the by-laws of a corporation provided that meetings of the stockholders should be called by the trustees, and it was held that any other mode of calling, such as by the president, was insufficient. Angell & Ames on Corp., § 491, to effect that "want of authority may be waived by the presence and consent of all who have a right to vote." Johnston v. Jones, 23 R J. Eq.. 216 (1872). Here the charter provided for annual elec- tions, but no by-laws had been made fixing the time. The authority to call an election being in the directors, it was held not sufficient for a majority of" these to sign the notice without stating that it was given by order of the board, and without designating themselves as directors. See, also, Stevens v. Eden Meeting-house Soc, 12 Vt, 688 (1839), holding that notices of meetings could not be proved by parol where there was a by-law requiring the clerk to post written notice. sStebbins v. Merritt, 64 Mass., 27 (1852). 4 The secretary and a person holding proxies on stock owned by the state cannot call a meeting to elect officers ; nor can a statute order an election in a brief time. Cassell i: Lexington, etc., Co., 9 S. W. Rep., 503 (Ky., 1888); id., 701. 5 Cassell v. Lexington, etc., Co., supra. The board of directors may fix the time if tbe charter or by-laws do not. Com- monwealth v. Smith, 45 Pa. St., 59 (1S63). 6 See § 234. notes, supra, also § 599, infra. Although the charter prescribes that the commissioners who receive the subscriptions shall call the first meeting by publishing a notice, yet this call may be waived and the stockholders may meet and organize without a call, if all assent. Judah v. American, etc., Ins. Co., 4 Ind., 333 (1853); Chamberlain v. Painesville, etc., R R Co., 15 Ohio St., 225 (1864). where the statute provided that, as soon as ten p?r ceutum on the capital stock should be subscribed, the persons named in the certificate of in- corporation, or any three of them, might give notice of an election of di- rectors. It was held simply directory, 797 § 593.] STOCKHOLDERS. MEETINGS CALLS. [CH. XXXVI. If, upon the organization of a corporation, a majority of the sub- scribers refuse to proceed in calling a meeting, the minority may call it, and bind the corporation. 1 Where the statute requires due notice to be given, it need not be given by any particular person nor in any particular form. 2 A charter provision or by-law authorizing the calling of a meeting in a certain way does not necessarily prevent the meeting being called in a different way, but unless waived the rule is otherwise where the charter or by-law is peremptory. 3 Although the time of a meeting is fixed by charter, nevertheless the meeting may be held at a subsequent time and be valid. 4 The officers or agents of a corporation whose duty it is to call meetings may, in case they neglect or refuse to issue the call, be compelled and not indispensable to an election, that the notice be so given. In New- comb v. Reed, 94 Mass., 362 (1866), the court declared the purpose of such stat- utes to be to avoid such difficulty as would arise where two parties should attempt to organize separately under the same charter. It was there held that persons elected officers at a meet- ing held in variance with such statu- tory direction were directors neverthe- less, and were subject to the statute liability for corporate debts. Where three persons are appointed to make a call, and one of them calls the meeting of incorporation, the other two making no objection, the organization of the company at the meeting so called is valid. Walworth v. Brackett, 9* Mas-... 98 (1867); Hardeuburgh v. Farmers', etc.. 3 N. J. Eq., 68. holding that if the call for the meeting to elect the first directors be signed by the commission- ers authorized to make the call individ- ually, and not by virtue of a formal order of the commissioners, or if their names be signed to such a call by the secretary without objection by them, these irregularities will not affect the validity of the proceedings at the meet- ing. Although the charter runs to cer- tain persons and associates and assigns, they need not have associates or assigns. Hughes «, Parker, 20 N. H.. 58 (1849). 1 Busey v. Hooper, 35 Md., 15 (187 IX 2 West, etc., Cong. r. Ottesen, 49 N. W. Rep., 24 (Wis., 1891). 3 Where a by-law provides that special meetings may be called by the presi- dent, or in his absence by the secretary, on application made by ten members in writing, the directors may call a special meeting without such an application. Citizens 1 Mutual Fire Ins. Co. i\ Sort- well, 90 Mass., 817 (1864> But where a by-law authorizes the trustees to call a meeting, a meeting called by the presi- dent is irregular. State of Nevada u Pettineli, 10 N.v.. Ill (1875> When the by-laws require a call to bo posted in writing, a call by parol is insufficient. Stevens v. Eden Meeting-house Society, 1 9 Vt., 688 (1839). The manner of mak- ing the call may be prescribed by by- law ; and when so prescribed, provided the by-law is reasonable, calls made in that way are valid, even though the charter said that three stockholders might call a meeting. Taylor v. Gris- wold. 14 N. J. L.. 222 (1834* * People v. CummingB, 72 N. Y., 433 (1878) ; Hughes v. Parker, 20 N. H., 58. Failure to hold an election at the pre- scribed statutory time does not prevent an election at any later time. Beardsley f. Johnson. 1 N. Y. Supp., 608 (1888). Elections need not be held on the day fixed by the by-laws. They may be held at any subsequent tima Beards- ley v. Johnson, 121 N. Y, 224 (1890). 798 CH. XXXVI.] STOCKHOLDERS' MEETINGS — CALLS. [§ 593. by mandamus to call a meeting at the instance of a shareholder who is injured by reason of their failure. 1 Courts have no power to call corporate meetings except by mandamus? If there is any fraud in the calling of the meeting, the proceed- ings of the meeting may be attacked in the courts. The fraud may consist in concealing the notice, 3 or in changing the time of the meeting, 4 or in the unreasonable time in which it is called, 5 or in misstating the business. 6 1 People v. Cummings, 72 N. Y., 433 (1878); State of Nevada v. Wright, 10 Nev., 167 (1875); People v. Board of Governors of Albany Hospital, 61 Barb., 397(1871); McNeely v. Woodruff, 13 N. J. Law, 352 (1833) ; Regina v. Aldman, etc., Insurance Society, 6 Eng." L. & Eq., 365 (1851). The court will not order the directors to call a meeting for business other than an election when they or a certain proportion of the stockholders may call it MacDougall v. Gardiner, L. R, 10 Ch. App., 606 (1875). In Gould- ing v. Clark, 34 N. H., 148 (1856), it is held that, where there is no officer com- petent to call a meeting, there is no way of convening except by a reorganization of the company or a published notice given under the statutes. All the stock- holders of course could convene and thereby waive notice. See § 599. The proper officer may be commanded by mandamus to send out notices of the annual election. People v. Hart. UN. Y. Supp., 671 (1890) ; id., 673. Mandam us lies to compel a meeting.of vestrymen. People v. Winans, 9 N. Y. Supp., 249 (1890). Where those who have the right to call a meeting of the shareholders refuse to exercise that right, for the ex- press purpose of preventing the share- holders from duly assembling, the court will, if necessary, interfere to protect the shareholders against an abuse of power on the part of those intrusted with the management of the affairs of the company. Foss v. Harbottle, 2 Ha., 461 ; Isle of Wight Rail. Co. v. Tahour- din, 25 Ch. D., 320. Mandamus lies to compel annual election of entire body of directors or trustees. Com. v. Keim, 38 Leg. Int., 32 : The People v. Town of Fairbury, 51 111., 149. Dictum that man- damus lies to compel election. In re Union Ins. Co., 22 Wend, 591 (1840). 2 The fact that foreclosure proceed- ings are pending and a receiver is in possession does not give the court juris- diction to call a stockholders' meeting to hold an election. Taylor v. Phil., etc., R R, 7 Fed. Rep., 381 (1881). 3 See § 596, infra. 4 In a stockholder's suit to enjoin a consolidation the court will consider the legality of an election, the time of hold- ing which was illegally changed by the board of directors. Nathan v. Tomp- kins, 82 Ala., 437 (1886). 5 Where directors give notice that a meeting will be held on a day when they know that a large number of share- holders will not be in a position to vote, the court will interfere and restrain such an abuse of power./ Cannon v. Trask, 20 Eq., 669. 6 If directors convene a meeting to pass resolutions favorable to themselves on questions in which the interests of the directors are opposed to those of the shareholders, by a circular which is misleading, and which contains state- ments calculated to obtain proxies in their favor without giving the share- holders the information necessary to enable them to form a just judgment as to who are the proper persons to whom to intrust their votes, the court will grant an injunction to restrain the holding of the meeting or to restrain the direct- ors from laying such resolutions before the meeting. Jackson v. Munster Bank, 13 L R, Ir., 118. 799 § 594.] STOCKHOLDERS MEETINGS — CALLS. [CH. XXXVI. § 594. When the stockholders are entitled to notice of corporate meetings.— If the time and place at which a corporate meeting is to be held and the business to be transacted are distinctly fixed in the charter or by a by-law, this is of itself sufficient notice to all the stockholders, and no further call or notice of that meeting is necessary unless the by-laws require it, 1 But a by-law which fixes the day of meeting without also fixing the hour is insufficient as a notice of the meeting. 2 It is a general and settled rule of law that notice, in some way or other, must be given to every person enti- tled to be present at a corporate meeting. 3 When, therefore, no sufficient notice is given by charter or statute or by-law, each stockholder is entitled to an express notice of every corporate meeting. 4 No usage can operate to excuse a failure to give such a notice.* These rules are based on the necessity of protecting the rights of stockholders, and especially of the minority. i Warner v. Mower. 11 Vt, 385. 393 (1839): State v. Bonnell, 35 Ohio St, 10, 15(1878). * The fact that one of the hy-laws of the corporation fixes the day upon which the annual meeting of the corpo- ration shall be held is not of itself a sufficient notice of the hour and place at which the meeting is to be held. There must be an express notice of tie' hour and place of meeting. < Jtherwise, unless all the stockholders are present and consent, either in person or by proxy, the meeting cannot legally be held. San Buenaventura Commercial, etc., Co. r. Vassault, 50 Cal., 534 (1875> Though the by-laws of a corporation fix the date of the annual meeting, that of itself will not be notice of the meeting. Notice must be given of the place of the meeting; and a provision of the charter for the calling of all meetings is a man- datory provision, applicable alike to general and special meetings. United States r. MeKelder, 8 Rep., 778 (Sup Ct. Disk of Col., 1879). 3 "To support the validity of corpo- rate acts, each member must be actually summoned." Angell & Ames on Corp., § 492. A member who is expelled at a meeting of which he had no notice may cause the proceedings to be set aside. Medical, etc., Soc. v. Weatherly, 75 Ala.. 348 (1883). "Due notice of the time and place of a corporate meeting is by tlie English law, essential to its validity, or its power to do any act which shall bind the corporation." Dillon on Munic. Corp, § 200. •stow r. Wyse. 7 Conn., 214 (1828). the court saying, in a dictum: "If no particular mode of notifying the stock- holders bi provid d, either in the char- ted or in any by-law, yet personal notice might be given; and this, in such case, would be indispensable." Wiggiu r. Freewill Baptist Church, 49 Mass., 801 (1844), a dictum; Jackson v. Hampden. 20 Me.. :J7 (1841); Rex v. Langhorn. 4 Ad. & El., 538 (1830); S. C, Nev. & M. 203 i Smyth v. Darley, 2 H. of L ('as., 788 (1849), the last four cases being municipal corporation cases. See, also. Stebbins v. Merritt. 64 Mass., 27 (!' where a meeting called by a general agent in the absence of a statute or by- law was upheld though one member was mentally incapable of receiving no- tice. *Wiggin a Freewill Baptist Church. 49 Mass., 301 (1844); The King V. Hill. 4 Barn. & C. 426 (1825), where an ancient custom of calling a meeting for an election of burgesses by ringing a bell was held to be no sufficient no- tice. SIM) OH. XXXVI.] STOCKHOLDERS MEETINGS — CALLS. [§ 595. § 595. The essential elements of a notice of a meeting are time, place and business. — The contents of the notice depend upon the character of the meeting. There are three matters concerning every corporate meeting of which the members are entitled to no- tice, namely: the time, the place and the business proposed to be transacted. Some or all of these may be known to him by virtue of a charter provision or a by-law or a statute. But if any one of them is not known in that way, the stockholders are entitled to an actual notice thereof. Accordingly, it is the rale that, in the ab- sence of other valid notice, the call must specify the time and place of meeting and the business to be considered. The precise hour at which the meeting is to be held must be stated in the no- tice. 1 In general, the notice need not specify the business to be consid- ered where the meeting is one prescribed by charter, or where the business is prescribed by charter or statute or by-law ; and no un- usual business is to be transacted. 2 But if the meeting is to be held at a time not provided by the charter, or if unusual business is to be transacted, the call must specify particularly the time and it seems also the unusual business. 3 Thus, at a meeting called to 1 San Buenaventura Commercial, etc., Co. v. Vassault, 50 Cal., 534 (1875). , 2 Notice need not be given of special business to be transacted at the regular annual meeting of the stockholders. Chicago, etc., R'y v. Union Pac. R'y> 47 Fed. Rep., 15 (1891); Sampson v. Bow- doinham Steam-mill Co., 36 Me., 78 (1854), holding that the notice of the annual meeting need not specify that the officers are to be elected, even though the by-laws require the notice to state the business. Warner v. Mower, 11 Vt, 385 (1839), where a provision of the by- laws relating to notices was considered as not affecting those for stated meet- ings, and holding that a notice of a stated annual meeting need not specify the business to be transacted, there being nothing in the by-laws limiting or specifying the business. It is be- lieved, however, that the rights of stockholders will be best preserved by requiring notice to be given of any ex- traordinary business that may come •before an annual meeting. 3 In re Bridport Old Brewery Co., L. R, 2 Ch., 191 (1866) ; In re Silkstone Fall Colliery Co., L. R, 1 Ch. D., 38 (1875). Cf. Wright's Case, L. R, 12 Eq., 335, n., 345 n. (1868) ; Tuttle v. Michigan Air Line, etc., 35 Mich., 247 (1877), hold- ing that at common law all notices of meetings for special or exceptional pur- poses were required to state the object of the call. Citing Ang. & A., § 492. A meeting to organize and elect direct- ors is invalid where no notice of the business is given. In re London, etc., Co., L. R, 31 Ch. D., 223 (1885); Shelby R. R, etc., v. Louisville, etc., R R., 12 Bush (Ky.), 62 (1876), in which a sale of a railroad was set aside because au- thorized at a meeting of stockholders called by a notice not sufficient in point of time and defective in not stating the object of the meeting. Zabriskie v. Cleveland, etc., R R Co., 23 How., 381, 400 (1859), holding that though the no- tice was insufficient, yet one who was represented by proxy cannot object, es- pecially where he delayed a long time in complaining. A notice of a meeting of a benevolent society called to dis- (51) 801 § 596.] STOCKHOLDERS MEETINGS — CALLS. [CH. XXXVI. alter the by-laws and transact other business, an election cannot lawfully be held. 1 Nor can an assessment be levied at a special raeetino- when the stockholders were not dulv notified that that matter would come up for consideration. 2 At a special meeting which has been called for a particular purpose, only the business specified in the call can lawfully be transacted. 3 The transaction, however, of business other than that for which the meeting was called will not invalidate the entire proceedings at that meeting. There is only an invalidity pro tanto.* The notice of the business to be transacted must " be a fair no- tice, intelligible to the minds of ordinarv men. . . . The court does not scrutinize these notices with a view to excessive criticism to find out defects, but it looks at them fairly." 5 §596. Service of the notice. — If the particular form of the no- tice or the manner in which it shall be served is prescribed by charter or by-law or by statute, the notice must be given in that manner, unless notice is waived by unanimous consent; otherwise, all the proceedings of the meeting are invalid. 6 In the absence of solve must state the object of the meet- ing. St Mary's, etc., Ass'n v. Lynch. 9 Atl. Rep., 98 (N. H., 1887). A resolution passed at an extraordinary meeting, upon a matter for the consideration of which it was not avowedly called, or which was not specified in the notice convening the meeting, is altogether in- operative. Imp. Bank of China v. Bank of Hindustan, L R, 6 Eq., 91 ; Anglo- California Gold Mining Co. v. Lewis, 6 H. & N., 174; Stearic Acid Co., 9 Jur. (N. S.), 1066. Notice of a meeting to consider the giving of a mortgage is sufficient to enable the meeting to au- thorize a mortgage. Evans v. Boston, etc., Co. et al, 31 N. E. Rep., 698 (Mass., 1892). One and the same meeting may be both ordinary and extraordinary ; ordinary for the purpose of transacting the usual business of the company, and extraordinary for the transaction of some particular business of which spe- cial notice may have been given. See Cutbill v. Kingdom, 1 Ex., 494; Gra- ham v. Van Diemen's Land Co., 1 H. & N., 541. 1 People's Insurance Co. r. Westcott, 80 Mass.. 440 (1860). Nor an amotion made. Rex v. Town of Liverpool, 2 Burr., 723 (1759) ; Rex v. Doncaster, id., 738. 2 Atlantic Delaine Co. v. Mason, 5 R I., 463 (1858). 3 Warner r. Mower, 11 Vt. 385 (1839). * In re British Sugar Refining Co., 3 Kay & J., 408, 413 (1857) ; In re Irriga- tion Co. of France. L R, 6 Ch., 176 (1871). But it is held that at a special meeting, all the members being present and consenting, business other than that specified in the call may lawfully be transacted. The King v. Theodorick, 8 East. 543 (1807). 8 Henderson v. Bank of Australasia, 62 L T. Rep.. 869 (1890); South School District v. Blakeslee, 13 Conn., 227 (1839). A notice that in case certain things hap- pen a meeting will be held is not good. It is conditional and not absolute. Alex- ander «. Simpson, 61 L T. Rep., 708 (1889). 6 Shelby R R Co. V. Louisville, etc., R R Co., 12 Bush, 62 (1876). where there was no such publication as was required by statute and there was no waiver. Tuttle r. Michigan Air Line, etc. R R, 35 Mich.. 247 (1877), where a consolidated company sued a subscriber to stock in one of the old companies and 802 CII. XXXVI.] STOCKHOLDERS MEETINGS — CALLS. [§ 596. an express provision as to the manner of making a call it is the common-law rule that each member of the corporation is entitled to notice, either personal or by writing, which he receives. 1 The physical or mental incapacity of one of the stockholders will not excuse a failure to give him notice of a meeting, but it is very clear that the meeting may lawfully convene and transact business, al- though one of the members is incapable, by reason of imbecility, of receiving the notice. 2 The absence of a stockholder from home does not excuse a failure to leave the notice. 3 And where one of the stockholders dies after notice of a meeting but before the meet- ing convenes, and no administrator is appointed in time to act at that meeting, there is on this account no ground to impeach the regularity of the meeting. 4 A pledgee of shares is not entitled to a notice of corporate meetings if the pledgor receives notice, 5 since the pledgor is entitled to vote upon the stock until his interest has been closed out bv a sale or foreclosure. 6 Where stock is owned by a firm, notice to one of the firm is sufficient. 7 If the notice is fraudulently concealed from the owner of a majority of the stock, he defeated the action by showing that the statutory notice of the proposed consolidation had not been given. Reilly v. Oglebay, 25 W. Va., 36 (1884), where a notice by the secretary, when the stat- ute required it to be given by the board of directors or by stockholders holding one-tenth of the capital, was held in- sufficient although it was shown that he had the authority from stockholders holding the required amount of stock ; Stevens v. Eden Meeting-house Society, 12 Vt, 688 (1839), holding that where a by-law required notice to be posted, parol proof of such posting was incom- petent unless the written notice was shown to have been lost; Swansea Dock Co. v. Levien, 20 L. J., Exch., 447 (1851), where a notice was held bad because the statute declared it should be printed in a newspaper circulating in the dis- trict of the principal place of business, while in this case there was no proof that the paper selected ever circulated there. Hence the removal of directors at such a meeting was illegal. Id. As to waiver, see >; 599. infra. 1 Notice to non-residents by letter was upheld in Stebbins v. Merritt 84 Mass., 27 (1852). For dicta to the effect that the notice must be personal, see Tuttle v. Michigan Air Line R. R. Co., 35 Mich., 247 (1877); Stow v. Wyse, 7 Conn., 214 (1828). See, also, § 592, supra, as to the kind of notice required of directors' meetings. See, also, § 594, supra, and notes. 2 Stebbins v. Merritt, 64 Mass., 27 (1852). 3 Jackson v. Hampden, 20 Me., 37 (1841). In Porter v. Robinson, 30 Hun, 209 (1883), it is held that notice need not be given to a member of a board of school trustees, the board being a body corporate, who is absent from the state and cannot attend the meeting, and that a failure to notify such a member will not render the proceedings at the meeting irregular or invalid. Members of English joint-stock companies resid- ing abroad are not entitled to any notice of corporate meetings. Ex parte Union Hill Company, 22 L. T. Rep., 400 (1870). * Freeman's National Bank v. Smith, 13 Blatch., 220 (1875). 5 McDaniels v. Flower Brook Mfg Co., 22 Vt, 274 (1850). 6 See §§612, 468. " Kenton, etc.. Co. v. McAlpin, 5 Fed. Rep., 737, 747 (1880). 803 §§ 597-599.] STOCKHOLDERS MEETINGS — CALLS. [CH. XXXVI. even where the notice is published in accordance with the statute, the election will be set aside. 1 .^ 597. Notice must be served a reasonable time before the meet- ing — The notice must be served upon the stockholders a reason- able or customary time before the day of the meeting. 2 Where by statute it is provided that thirty days' notice shall be given of cer- tain corporate meetings, that length of time applies to notices of other meetings of the same corporation. 3 § 598. The division of meetings into ordinary and extraordi- nary. — Corporate meetings of stockholders are frequently divided, both by the judges and the text-writers, into two classes — the first being special or extraordinary, and the second being ordinary, reg- ular, stated or general. By reason of this attempt at clarification much confusion has been introduced into the law without any cor- responding advantage. The terms employed to distinguish the various kinds of meetings are used in different senses by different writers, so that it is difficult to define them in such a way as to avoid confusion. § 599. Waiver of notice. — The stockholder may, in general, waive his right to have a notice of a corporate meeting duly served upon him. 4 1 Where in addition to irregularities the notice of the election at a def< day, which is published in accordance with the charter, is concealed from the leading stockholder, the court will Bet the election aside. Johnston v. Jones, ■■■; X. J. Eq.. 816(1872). 2 In the Matter of the Long Island R. R Co, 19 Wend., 37 (18:37). Cf. Covert v. Rogers, 38 Midi., 303, where a similar rule is declared as to notice to directors of their meetings. The legislature can- not unreasonably shorten the time of the next inciting. Cassell v. Lexingl in, etc., Co., 9 S. W. Rep., 502 (Ky., 1888); id., 701. A reorganization under the English statute will not be sustained as against American stockholders, where the entire business of the English com- pany is to own and work American mines, and the by-laws of the company provide for a longer notice than is spec- ified in the English statute. The notice of the meeting to reorganize not having reached the American stockholders in time to attend the meeting, the Ameri- can courts will not sustain the reorgani- zation. Brown r. Republican, etc, Mines, ■ ■]. K. -p.. 7 .Col., 1893). 'Shelby k. k. Co. ft Louisville, etc., k. k. Co, 12 Bush, n ■ 4 The acts of a meeting are valid, though held without notice, if all are present or subsequently ratify aud ap- prove of the action. Stutz i\ Handley, 41 Eed. Rep., 531 (1890), affirmed as to this point, but reversed as to others, in Handley ft Stutz, 139 U. S , 417 (1891). A party accepting the benefit of a con- tract for a long time cannot repudiate it on the ground that the calls for the meetings of the executive committee and of the stockholders which authorized the contract were insufficient, nor can he set up in such a case that the direct- or.-, had not authorized the contract Union Pac. R*y v. Chicago, etc., R y, 51 Rep., 809 (1892). Objections to the regularity of the notice which was given are waived if all are present at the meet- ing and do not object to such irregular- ity. Stebbins ft Merritt, G4 Mass., 27 804 en. xxxvi.] STOCKHOLDERS MEETINGS CALLS. [§ 599. Greater difficulty has been encountered where by statute or by charter the notice must be published or must be given a specified length of time before the meeting is held. This question arises often in regard to the first and organization meeting of the com- pany, or in regard to a meeting to increase the capital stock, or to issue bonds, or to give a mortgage, or to effect a consolidation. The rule, however, is now well established that such statutory notice is for the benefit of the stockholders themselves, and if they are willing and do waive it, the meeting and all the proceed- ings are as valid as they would be had the full statutory notice been given. 1 (1852); Richardson v. Vermont, etc., 44 Vt, 613 (1872), holding that objections to the proceedings of a meeting called J— a notice which did not state what its ob- ject was had been waived by a ratifica- tion at a later meeting; Jones v. Milton & Rushville Turnpike, 7 Ind., 547 (1856), where the stockholders not notified ap- peared and voted by proxy ; Kenton Furnace v. McAlpine, 5 Fed. Rep., 737 (1880). See, also, § 606, infra. Where several persons, their associates and suc- cessors, are declared to be a corporation, one of them with new parties may meet, organize, adopt by-laws, etc., without the capital being first subscribed and without the others, if they do not ob- ject. McGinty v. Athol. etc., Co., 29 N. E. Rep., 510 (Mass., 1892). Notice may be waived. People v. Twaddell, 18 Hun, 427 (1879). 1 Although the statutes of Montana require that a mortgage may be given only after a stockholders' meeting con- vened by publication of notice, etc., has voted it, yet all the stockholders, by vot- ing therefor, waive the required notice and no one can complain. The mort- gage is valid. Campbell v. Argenta, etc., Co., 51 Fed. Rep., 1 (1892). Al- though the constitution provides that there shall be sixty days' notice of the meeting to authorize the issue of bonds, yet where all the stockholders assemble and authorize the issue without any notice and the bonds pass into bo7ia fide hands they may be enforced. The ab- sence of a nominal stockholder whose stock is really owned by one of those present is immaterial. Wood v. Corry, etc., Co., 44 Fed. Rep., 146 (1890). A constitutional provision in regard to notice being given of a meeting for in- creasing the stock or bonds of a corpo- ration is for the benefit of the stock- holders and may be waived by them or the omission of it may be ratified by them. Nelson et ah v. Hubbard, 11 S. Rep., 428 (Ala., 1892). The voluntary dissolution of a company under the statute, but without the ten days' notice required by the statute, is not such a dissolution as to prevent creditors from attaching the property of the company as though no dissolution had been had. Cleveland, etc., Co. v. Taylor, etc., Co., 54 Fed. Rep., 82 (1893). But the dissolu- tion cannot be enjoined by creditors in the absence of fraud. Id., 85. To same effect, Appeal of Columbia Nafl Bank. 16 Weekly Notes Cas. (Pa.), 357 ; Hard- ware Co. v. Phalen. 128 Pa. St, 110; Kenton Furnace Co. v. McAlpine. 5 Fed. Rep., 737 (1880). where no notice was given, although prescribed by the char- ter and by-laws. It was held to have been w; ived by the presence of all the stockholders at the meeting and their participation in its action ; In re British Sugar Ref. Co., 3 Kay & J.. 408 (1857). where it was adjudged that a share- holder who had received a circular no- tice of the meeting and was present could not question the legality of the meeting on the ground that the charter required, in addition to the circular, 805 599.] STOCKHOLDERS MEETINGS —CALLS. [CH. XXXVI. Thus participation as an officer in issuing the call is a waiver by him of informalities as to that call; 1 and recognition of an agent appointed at a certain meeting, by dealing and offering to deal with him as the agent of the company, is a waiver of the right to notice of that meeting. 2 One stockholder cannot avail himself of the neglect of the corporate officers to give due notice to another stockholder who does not himself complain. 3 But the waiver of all publication in a newspaper, which was not made. A person who takes part in a meeting cannot object that it was held on five days' notice instead of fourteen as required by the charter. Bucksport, etc., R. R ft Buck, 68 Me., 81 (1878); Chamberlain r. Painesville, etc., R. R, 15 Ohio St., 225. A failure to give the statutory notice of the fust meeting is immaterial where all but one stockholder was present and lie after- wards ratified all that was done Bab- bitt ft East, etc., Co. (N. .T.. 1876), Stew. Dig., p. 208, § 13. T<> same effect, § 284, note, supra, and § 598; ale $8, A stockholder who knows of and approves of a proposed sale of a railroad by a stockholders' vote as allowed by statute cannot have the sale set aside on the ground that he was not notified of nor preseid at the meeting voting sach Bale, buthe must be paid the value of his stock. Young ft Toledo, etc, EL EC, 18 N. W. Rep, 632 (Mich, 1889). The con- stitutional provision that bonds or stock shall not be increased except in a cer- tain way does not apply to an original issue of bonds. Union, eta, < !a ft South- ern, etc.. Co., 51 Fed. Etep., B40 (1892). Directors elected at a meeting called on thirteen days' notice instead of fourteen as required by statute may make calls where their election lias been confirmed by a subsequent auuual general meet- ing. Briton, etc., Ass'n ft Jones, 61 L. T. Rep., 384 (1889); People v. Peck. 11 Wend., 604 (1884), holding that a fail- ure to comply with a statutory require- ment regarding notice will not affect the proceedings of a meeting of a re- ligious corporation where there is no claim that every voter was not present. or that evil resulted from the omission, and no fraud was involved. If all par- ties attended, they thereby admitted no- tice. See, also, Stebbins v. Merritt, 84 Mass.. '27 (1852); The King v. Chet- wynd, 7 Barn. & C, 695 (1828), where the election of a burgess at a meeting of which no notice was given was held valid, because it appeared that all the members of the electing body were present; The King v. Theodorick, 8 East, 548 (1807). Cf. United States o MoKelden. 6 Rep., 778 (1879), where it was held that, although the date for the annual meeting is fixed by a by-law, the notice by publication provided for by the charter is necessary. See. also. In the Matter of Long Island R. R. Co.. 19 Wend., 87 (1887), in which it was said in a dictum that a notice regulated by statute "of course cannot be modi- fied or dispensed with." 'Bucksport, etc.. R R Co. ft Puck, 68 Me., 81 (1878); Schenectady, etc. Plank-road Co. ft Thatcher, n N. V., n >0 (1854). Bryant ft Goodnow, 22 Mass., 228 1 1 82 - thenectady, etc., Plank-road Co. r. Thatcher, 11 N. Y„ 102 (1854> In this case the court said : " The court rejected the offer of the defendant to prove that no notice had been given of the first election of directors. I think this was properly rejected, on the ground that the defendant could not avail himself of a neglect to give notice to any other stockholder. The defendant himself was present at that meeting and voted, and was elected a director. He has not suffered by an omission to serve notice, ami he is not in a situation to object as 806 •CH. XXXVI.] stockholders' meetings — calls. [§§ 600, 601. the stockholders is essential in order to validate an election held at a meeting not properly called. 1 § 600. Notice is presumed to have been regularly given. — It is a presumption of law that proper and valid notice of a corporate meeting has been duly given to every stockholder, and that the meeting itself was regularly and lawfully held. The burden of proof is therefore upon him who alleges want of notice or insuf- ficiency of notice, or attacks the regularity and validity of the pro- ceedings. 2 § 601. Adjourned meetings.— An adjourned meeting is but a con- tinuation of the meeting which has been adjourned; and when that meeting was regularly called and convened and duly adjourned, the shareholders may, at the adjourned meeting, consider and de- termine any corporate business that might lawfully have been transacted at the original meeting. 3 to others." A stockholders' meeting held without notice or call cannot be objected to by those who participate or receive the benefits of it. Handley v. Stutz, 139 U. a, 417 (1891). A stock- holder who takes part cannot object that another stockholder had no notice. Be Union Hill, etc., Co., 22 L. T. Rep., 400 (1870) ; In re British, etc., Co., S Kay & J., 408 (1857). A party who did not attend the meeting cannot object that the inspectors were not sworn. In the Matter of the Election of Directors of the Mohawk & Hudson R. R. Co., 19 Wend., 135 (1835). 1 State of Nevada v. Pettineli, 10 Nev., 141 (1875). 2 McDaniels v. Flower Brook Manuf. Co., 22 Vt, 274 (1850) ; Porter v. Robin- son, 30 Hun, 209 (1883); Sargent v. Webster, 54 Mass., 497 (1847); South School, etc., v. Blakeslie, 13 Conn., 227, 235 (1839) ; Lane v. Brainerd, 30 Conn., 565 (1862) ; Pitts v. Temple, 2 Mass., 538 (1807) ; Wells v. Rodgers, 27 N. W. Rep., 671 (Mich., 1886), holding that notice is presumed, and the burden of proof in attacking the legality of the meeting is on the plaintiff. See, also, § 606, infra. All the stockholders are presumed to have had notice of a meeting that has been held. Beardsley v. Johnson, 121 N. Y.. 224 (1890). Cf. Wiggin v. Free- will, etc., Church, 49 Mass., 301, 312 (1844). 3 Granger v. Grubb, 7 Phila., 350 (1870) ; Farrar v. Perley, 7 Me., 404(1831); Scad- ding v. Lorans, 3 H. of L. Cas., 418 (1851). Cf. People v. Batchelor, 22 N. Y„ 128 (1860), where the New York city board of aldermen appointed a day for the election of a city officer. At a subse- quent stated meeting this resolution was rescinded, and then an election was thereupon held. Held, that the election was void, as some members were absent from the former meeting and had no notice of the election. A board of alder- men cannot elect an assessor and then at an adjourned meeting reconsider and elect some one else. State v. Phillips, 10 Atl. Rep., 447 (Me., 1887). See, also, Hardenburgh v. Farmers', etc., Bank, 3 N. J. Eq., 68 (1834), where the stock- holders at the first meeting proceeded to an election in spite of an adjournment by the commissioners and the election was upheld. A meeting adjourned for want of a quorum may at the adjourned meeting proceed to business, if a quorum is present ; and no notice of the ad- journed meeting is necessary where the charter or by-laws provided for such adjournment. Smith v. Law, 21 N. Y., 296 (1860), involving a meeting of the board of directors. 807 § 601.] STOCKHOLDERS MEETINGS CALLS. [CH. XXXVI. Bat where there is an absence of good faith, and an adjourned meeting is held in such a way as to prevent certain of the stock- holders from knowing of it, the proceedings are invalid. 1 Where the original meeting was duly called and convened, the stockholders are not entitled to any other notice of the adjourned meeting than that which is implied in the adjournment. 2 But nothing can, with- out notice, be transacted at an adjourned meeting except the un- finished business of the first meeting. 3 1 State v. Bonnell, 35 Ohio St, 10 (1878). Where an election is held, after many adjournments, and a minority are pres- ent and elect directors, who repudiate a contract which exists with the holder of a majority of the stock, the latter being ignorant of the intent to elect of- ficers, equity will enjoin the repudiation of the contract New York, eta, Co. v. Parrott 36 Fed. Rep., 462 (1888). 2 Smith v. Law, supra; Warner v. Mower, 11 Vt, 385 (1839). Cf. United States v. McKelden, 8 Rep, 778 (1879), where it was held that the proceedings of an original meeting being invalid by reason of insufficient notice, the ad- journed meetings were invalid also, they being merely continuations of the original. To same effect Wiggin v. Freewill, etc., Church, 49 Mass., 301 (1844). 3 R v. Grimshaw, 10 Q. B., 747. 808 CHAPTER XXXVII. ELECTIONS AND OTHER CORPORATE MEETINGS. $ 602. Scope of the subject. 603. Elections are to be by the stock- holders and may be compelled by mandamus. 604. The meeting must be held at the prescribed hour, which must be reasonable. 605. Inspectors of election — Conduct- ing and closing elections. 606. Conducting and closing meetings generally — Irregularities and informalities. 607. The quorum — A majority of the stockholders attending a meet- ing may transact business. 608. The majority of votes cast shall elect. 609. Is every share of stock entitled to oiie vote? 609a. Cumulative voting. 610. Proxies. 611. The transfer book as evidence of a right to vote. 612. The right of trustees, pledgees, administrators, etc., to vote. 613. The corporation cannot vote upon shares of its own stock. 614. Injunction against elections and against voting particular stock. § 615. Issuing stock in order to carry an election. 616. Where one corporation owns a majority of the stock of a rival company may it vote the stock and control the latter company? 617. Illegal or fraudulent elections — The remedy of quo warranto and mandamus. 618. Illegal or fraudulent elections — The remedy by bill in equity and injunction. 619. Illegal or fraudulent elections — Statutory remedy by petition to a court of equity. 620. Who may complain of an illegal election — A new election is not granted if the result will be the same. 621. Restrictions on the right to vote. 622. Combinations and contracts as to elections — Voting trusts and pooling agreements. 623. Who may be a director or corpo- rate officer? 624. Acceptance and resignation of office and failure to elect offi- cers — Removal of directors. 625-627. Stockholders can act only at corporate meetings. § 602. Scope of the subject— The business which the stockholders ofa corporation in meeting assembled have the power to transact is not extensive, but it is of great importance. It elects the di- rectors, passes upon amendments to the charter, checks any ultra vires acts, determines whether any increase of the capital stock shall be made, makes the by-laws, and dissolves or continues the corporation. These constitute the chief functions of a stockholders' meeting. They are extraordinary in their character, and although they are exercised at long intervals are of vital importance. This chapter treats of the business which may be transacted at stock- holders' meetings and of the methods of its transaction. § 603. Elections are to be by the stockholders and may be com- pelled by mandamus. — At common law the directors of a corpora- tion are to be elected by the stockholders in corporate meeting 809 004.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. assembled. 1 Generally this is declared to be the law by charter or statutory provisions. The president, vice-president, secretary, treas- urer and agents of the corporation are usually elected or appointed, not by the°stockholders, but by the directors. All these matters, however, are generally regulated by the charter or a statute. At common law mandamus lies to compel an election of corpo- rate officers. 2 All corporations for profit have power to elect a board of di- rectors. 3 The legislature may amend the charter so as to increase the number of directors; 4 but it cannot deprive the members of the corporation of the privilege of electing its directors. 5 Although the corporation is not a going concern, nevertheless it may have an election of directors. 8 § 604. The meeting must be held at the prescribed hour, which mitst be reasonable. — The particular time at which corporate meet- ings shall be held is often prescribed in the charter or a statute or 1 Stockholders cannot flu vacancies in (1863); Bank v. Richardson, 1 Me., 79; the board of directors at a special meet- Greenville, etc., R R Co. i». Johnson, 8 ing, when elections can only be at an- Baxt., 332 ; Fall River Iron Works r. nual meetings. Moses v. Tompkins, 84 Old Colony R R. Co., 5 Allen, 281 Ala., 618 (1888). The by-laws, bowever, may and generally do give thi^ power to the directors. And see dictum in In re Union Ins. Co.. 22 Wend., 591 (1840). ! See § 593, supra 5 The legislature cannot arbitrarily name and appoint trustees <>f an educa- tional corporation, the charter provid- ing that vacancies shall be filled by the remaining trustees. Sheriff n Lowndes, 16 ML 857 (1860). It cannot give to A hank may have directors though the city of Louisville the power to elect the statute does not provide for them All private corporations may have di- rectors. Hurlbut v. Marshall, 62 Wis., 590(1885). "The power inheres in the corporation to hold an election," where the charter or statutes are silent Wrighl V. Commonwealth, 109 Pa. St.. 560 (1885). "The power of electing both officers and members is an incident to the trustees of the University of Louis- ville, an educational corporation. City of Louisville v. President etc., 15 B. Monr., 642 (1855). It cannot vest the government of an incorporated acad- emy in a new board of trustees. Norris r. Trustees, etc., 7 Gill & J., 7 (1834). Under the reserved power to amend or repeal a charter, the legislature may every corporation. It is not necessary amend the charter of an agricultural that such a power should be expressly conferred by the charter."' Common- wealth v. Gill, 3 Whart (Pa. >. 328, JIT (1837). 4 Mower r. Staples. 32 Minn.. 284 (1884). See, also, Gray r. Coffin, 9 Cush., 192 (1852) ; Child v. Coffin, 17 Mass., 64 (1820) ; Langley v. Little, 26 Me., 162 (1846); Payson v. Withers, 5 Biss., 269 (1873); Joy r. Jackson, etc., Co., 11 Mich., 155 college which has private stockholders, but to which the state contributes funds, so that instead of the state hav- ing four directors out of eleven, the state shall have seven out of twelve. Jackson tt Walsh, 23 Atl. Rep., 778 (Md., 1892). e Beardsley v. Johnson, 121 N. Y., 224 (1890). 810 CH. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§ 605. in the by-laws of the corporation. When not so prescribed it is fixed by the officers who call together the corporate meeting. But, in whatever way it is decided upon, the meeting must be convened at the time decided upon or within a reasonable time thereafter. 1 Accordingly, if the meeting is convened before the hour at which it is called and business is transacted, the proceedings will be in- valid.- In general, a court of equity will restrain the directors from fixing the time for an annual meeting at a date when many members are in the country, the purpose being to prevent them from exercising their right to vote. 3 Frequently the particular office or place for meeting within the state is specified in the charter or by-laws of the corporation. In that event a meeting held at a different place will be irregular, and the proceedings at such a meeting void and ineffectual. 4 § 605. Inspectors of election — Conducting and closing elections. Ordinarily a chairman and inspectors of election are elected or ap- pointed by the stockholders. The presiding officer at a stockhold- 1 Where a meeting was held by a mi- nority of the stockholders several hours after the time fixed in the notice, and an adjournment made until the follow- ing day, at which adjourned meeting, without the knowledge of the other members, an election was held, the election was unfair and invalid. State of Ohio v. Bonnell, 35 Ohio St., 10 (1878). But a delay of an hour and five minutes after the time specified in the notice is not, as a matter of law, an unreasonable delay which will vitiate the proceed- ings. South School District v. Blakes- lee, 13 Conn., 227. 235 (1839). 2 So, where a meeting was called for 12 o'clock, but was called to order and organized fifteen minutes before 12, it was held to be a surprise and a fraud upon such of the stockholders as were not actually present at that hour, and that in consequence the proceedings were irregular and void. People v. Albany, etc., R. R. Co., 55 Barb., 344 (1869). Where commissioners, after calling a meeting of subscribers, ordered the election postponed, but the sub- scribers nevertheless refused to postpone and proceed with the election, the elec- tion is not void, unless, in the opinion of the court, a postponement was clearly necessary. Hardenburgh v. Farmers' & Merchants' Bank, 3 N. J. Eq., 68 (1834). Quere, in this case, whether the election might not have been avoided if any considerable number of the shareholders were deprived of their election franchise by the failure to post- pone. See, also, § 605. 3 Cannon v. Trask, L. R, 20 Eq., 669 (1875). A majority of the board of di- rectors cannot shorten their term of of- fice by merely changing the time of the annual meeting of the stockholders in violation of the stockholders' by-laws. Nathan v. Tompkins, 82 Ala., 437 (1886). 4 Where the customary place of meet- ing of a corporation is abandoned and a new place fixed upon in a regular and lawful manner, a meeting at the old place is irregular, and the proceedings at such a meeting are invalid. Miller v. English, 21 N. J. Law, 317 (1848). The meeting must be held at the usual place. American Primitive Society v. Pilling, 24 N. J. Law, 653 (1855). Cf. McDaniels v. Flower Brook Manuf. Co., 22 Vfc, 274 (1850), holding that a meet- ing at a residence is good, if all assent, even though the statute requires the meetings to be at the counting room of the company. 811 § 606.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. ers' meeting need not be a stockholder, 1 and he need not be elected with any particular formality. 2 The inspectors of election need not be stockholders. 3 If inspect- ors are provided for by the charter, and they do not act or are enjoined from acting, the stockholders may appoint others to take their place. 4 The duties of the inspector are ministerial and not judicial. Their discretion and powers of investigation are very limited. 5 A requirement that the election shall be by ballot does not in- validate an election by show of hand if no one objects. 6 Where no time is specified by law during which the polls must be kept open it rests within the sound discretion of the inspectors to say when the polls shall close. 7 So also it is held that holding the polls open after the hour specified in the notice for them to close will not, where the inspectors exercise a reasonable discre- tion, invalidate an election. 3 i §606. Conducting and closing meetings generally — Irregulari- ties and informalities. — The form or mode of conducting an elec- tion is in general not material, provided it violates no positive provision of the charter or of a statute regulating it, is orderly and in good faith, and is conducted by authorized or proper per- sons. 1 ' And as a general rule of law, where, in the election of cor- 1 stebbins v. Merritt, 64 Mass., 27 (18 - Acquiescence in a person's assuming to act as chairman of a stockholders' meeting validates his acting as such. In re Argus Printing Co., 48 N. W. Rep., 347 (N. D., 1891). 3 People v. Albany, etc., R R, 55 Barb., 344, 373 (1869). Although an in- spector is required by by-law to be a stockholder, yet the election of one who is not a stockholder is voidable and not void. Id. An inspector may be a can- didate for directorship. Ex parte Will- cocks, 7 Cowen, 402 (1827). 4 People v. Albany, etc., R R Co., 55 Barb., 344, 357 (1869). See, also, Matter of Wheeler, 2 Abb. Prac. (N. S), 361 (1866). The failure of the inspectors so appointed to take the prescribed oath will not invalidate the election. Re Mo- hawk, etc., R R, 19 Wend., 135 (1838); Re Chenango, etc.. Ins. Co., id., 635 (1839). Where by statute an election is to have "inspectors" one inspector is insufficient Matter of Lighthall, etc., Co., 47 Hun. 258 (1888); but see N. Y. L J., June 29, 1889. 5 See § 611. infra; Re Mohawk, etc., R R. supra. The office of the inspect- ors is ministerial rather than judicial. Commonwealth v. Woelper, 3 Serg. & R, 29 (Pa., 1817). Inspectors at elections having once accepted a vote and de- clared the result cannot then reject it and declare a different result. Hartt r. Harvey, 32 Barb., 55 (1860). 6 Wardens of Christ Church v. Pope, 74 Mass., 140 (1857). ' In the Matter of the Chenango County Ins. Co., 19 Wend., 634 (1839). 8 In the Matter, etc., of the Mohawk & Hudson R. R Co., 19 Wend., 135 (1838). An election is not vitiated by the fact that the polls are kept open after the designated hour and votes received. Rudolph v. Southern, etc., League, 23 Abb. N. C, 199 (1889); People v. Albany, etc., R R. 55 Barb., 344, 356, 360 (1869). 9 Fox ?\ Allensville, etc., Turnpike Co., 46 Ind, 31 (1874). 812 €H. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 606. porate officers, no particular mode of proceeding is prescribed by Jaw, if the wishes of the corporators have been fairly expressed, and the election was conducted in good faith, it will not be set aside on account of any informality in the manner of conducting it. 1 It is a general rule that, in the transaction of the ordinary busi- ness of a corporation, no particular formalities are necessarily to be observed. The motions, however, must be put in an intelligible way and then voted upon. 2 The parliamentary usages are the same as in other bodies, and mere irregularities in the manner of conducting the business are immaterial if the sense of the meeting has been fairly expressed. 1 After the meeting is organized the majority cannot withdraw and organize another meeting. 4 Although the chairman refuses to poll the vote, but declares the ; Philips v. Wickham, 1 Paige, 590 (1829). 2 A motion must be plainly and clearly made, separate from a rambling speech, before the chairman can b? held to be wrong in rejecting it Henderson v. Bank of Australasia, 62 L. T. Eep., 869 (1890). A general understanding or as- sent or want of dissent is not equivalent to a question being put and voted upon. The statement by a minister of what salary he wished and the failure of members to object is not a sufficient expression of the meeting. Landers v. Frank, etc., Church, 114 N. Y„ 626 (1889). 3 Philips r. Wickham, 1 Paige, 590 (1829); Matter of Wheeler, 2 Abb. Pr. (N. S.), 361 (1866); Downing v. Potts, 23 N. J. Law, 66 (1851), in which it was held that non-compliance with a statute requiring a list of stockholders entitled to vote to be made out ten days before an election will not of itself make void an election, such provision being only directory. A motion may be put by the chairman, although it has neither been made nor seconded. In re Hor- bury, etc., Co., L R, 11 Ch. D., 109 (1879). Although the meeting has voted down two motions to make calls it may then pass another motion for a larger one. In re British, etc., Co., 3 Kay & J., 408 (1857). In England, by statute, any five stockholders may demand a poll. Phoenix, etc., Co., 48 L. T. Rep., 260(1883); Hurrell & Hyde on Direct- ors and Officers, 78. Even if on a poll demanded by five members each share has one vote, yet until such poll is de- manded voting is by show of hands. In re Horbury, etc., Co., L R, 11 Ch. D„ 109 (1879). In general, see, also, Gorham v. Campbell, 2 Cal., 135 (1852); Harden- burgh v. Farmers', etc., Bank, 3 N. J. Eq., 68 (1834); People v. Peck, 11 Wend., 604 (1834). See, also, § 605, supra. In State of Nevada v. Pettiueli. 10 Nev., 141 (1875), the court held that an election was illegal where there was no presid- ing officer and no inspectors. Although the notice of a special stockholders' meeting states that the resolution will be presented and passed upon, to give to each share one vote, provided such share has been held by the party f jr six months prior to an election, an amend- ment proposed at the meeting striking out the latter part of the resolution must be considered and put to vote by the chairman. Henderson v. Bank of Australasia, 63 L. T. Rep., 597 (1890). 4 Their acts are void ; but if the statute requires a majority in interest of the stock to elect, the election is invalid. In re Argus, etc.. Co., 48 N. W. Rep., 347 (N. D., 1891). 813 § GOT.] ELECTIONS CORPORATE MEETING. [CH. XXXVII. meeting adjourned, the courts will not necessarily interfere. 1 If any fraud, surprise or deceit has been practiced in conducting the meeting a different rule prevails. 3 The right to object to an in- formality may be waived, and a failure upon the part of those mem- bers not present to protest promptly, upon learning of the infor- mality, is a waiver. 3 The presumption is that all proceedings were regular and lawful. 4 § 607. The quorum — A majority of the stockholders attending a meeting may transact business. — The right of the majority to rule in the management of the affairs of a private corporation is fully established. 5 They may control the company's business, prescribe 1 The courts will not interfere al- though the chairman of the meeting refused to poll the vote on a motion to adjourn, hut declared the meeting ad- journed on a viva voce vote and left In regard to the right to be heard the court said the court would not sustain a hill "for the purpose of enahling oue particular member of the company to have an opportunity of expressing his opinions viva voce at a meeting of the shareholders." MaeDougall r. Gardiner, LR. 1 Ch. D.. 1 * Johnson r Jones, 28 N.J. Eq.. 816 (1872); People >\ Albany, etc.. R R 55 Barb 844 1 1669 : State of Nevada v. Pettineli, lONev., 141 (1875 ; Common- wealth v. Woelper, 3 Berg. & R. 89 (1817 . Bee, also, §§ 804, 805, supra, and § 596. tte o. I.ehre. 7 Rich. Law, 884 825 1854); In re Mohawk, etc., R R. 10 Wend.. 185 E B The King n Tre- venen. 8 Barn, it Aid.. S89 (II Shareholders who receive re ports of what takes place at meetings, and who do not object to what is heing done, will he considered as acquiescing therein if what i- done might have been validly sanctioned by them if present : but not if what is done is altogether illegal, and beyond the power of even all the share- holders. See Pho nix Life Assur. Co.'s Case, 2 J. & H.. 441 : Irvine v. Union Bank of Australia, 8 App ('as.. 866. Compare Evans v. Smallcombe. L. R, 3 H. L.. 249; Spackman v. Evans, id.. 171 ; Houldswortb v. Evans, id.. 263; Phos- phate of Lime Co. r. Greene, L. R. 7 (.'. P.. 4:?. 4 Blanchard n Dow. 32 Me.. 551 M where it was presumed that the election by ballot: Ashtabula, etc., R R Co. v. Smith. 16 Ohio St - 1864 where it was presumed that the requi- site amount of stock was sul>seril>ed be- fore the election took plao B also, 00, supra. The corporate min- gned after the meeting has lw?en held, afiles a Baugh, 8 Q. B.. - ithampton. etc., Co, <: Richards, I ftf.6 (Jr.. 448 - Lindley on Partn., 661. Concerning the mode of proving the corporate minutes, see ?' 714. infra. A ratification by the stockholders of directors' acts cannot be made by a general resolution ratify- ing "all of the acts of the officers." Farmers 1 L ft T. Co v. San Diego, etc., St R'y Co.. 45 Fed Rep, 518(1*- 1 tarfee a < >ld Colony, etc.. R R Co., ^7 M 1862 : City of Covington ft c.vington. eta, Bridge Co., 10 Bus! 76 (1878 : Bast Tennessee, eta. R. B >: Gammon, 6 Sneed (Tenn>X 667 (1868); McBrile v. Porter, 17 Iowa. 808(1864 : Eaulds v. Yates, 67 01,416 (1870); Leor. Union Pacific R R Co.. 19 Eed. Rep 9. c. n id.. 278 Barnes r. Brown. 80 N. Y.. 527 1880); Clifford p. N. u Ji rsey R R Co.. 10 M J. Eq.. 171 : Dudley v. Kentucky High School, 9 Bush (Ky. . 576 1878) See. also. Liv- ingstone v. Lynch. 4 Johns. Ch., 578 ■ 1820 . in which < hancellor Kent clearly states that the right of the majority to 814 CII. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§607. its general policy, make themselves its agents, and take reasonable compensation for their services. 1 The minority, however, have a right to be heard ; and it is the duty of the majority to give a due consideration to their arguments and wishes concerning the man- agement of the corporate business. 2 The question has arisen whether a meeting can be held and busi- ness transacted when a majority in interest of the stockholders are not present. But the law is clear that those stockholders who at- tend a duly-called stockholders' meeting mav transact the business of that meeting, although a majority in interest or in number of the stockholders are not present. 3 < »f those who attend the stockholders' meeting a maioritv rule. Their acts are as valid as though they constituted a majority of all rule is one of the chief differences be- tween a corporation and a partnership. The majority rule at common law. Commonwealth v. Nickerson. 10 Phil., 55 (1875); New Orleans, etc.. R. R Co. v. Harris. 27 Miss.. 517, 537 (1854). A major- ity of the stockholders control the policy of the corporation, and regulate and gov- ern the lawful exercise of its franchise and husiness, even though the manage- ment may not seem to be wise. The ma- jority rule. Wheeler v. Pullman, etc.. Co.. 32 N. E. Rep., 420 (111., 1892). Where a statute requires a three-fourths vote in value for a reorganization of a company, the stock not voted is not counted to make up the three-fourths, even though the trustees who represent the stock refuse to assent or dissent. Re The Neath, etc.. Co., 66 L. T. Rep.. 40 (1€ Where stockholders in an apartment- house corporation are entitled to rent apartments at a rental to be fixed by a majority vote of the stockholders, an increased rental so voted is legal. The by-laws providing for such a vote over- ride a general statement in a prospectus to the contrary, the stockholders know- ing of the by-law. Compton v. Chelsea. 128 N. Y.. 537 -1891). 1 Meeker v. Winthrop Iroo Co.. 17 Fed. Rep.. 48 (1883) : S. C. sub aom. Winthrop Iron Co. v. Meeker. 109 U. S, ISO (1883). See. also, £ 662. infra. 2 But see MacDougall v. Gardiner, supra. 3 Granger r. Grubb, 7 Phil.. 350 il870 . Craig v. First, etc., Church, 88 Pa. St.. 42 1 V 7 V . where the principle is eluci- dated that this is the rule for a meeting composed of an indefinite number of persons, like stockholders, but that where a definite number is involved, as in a board of directors, then a majority must be present; Brown v. Pacific Mail. etc., 5 Blatch., 525 (1867); Field r. Field. 9 Wend., 394 (1832); Gowens Appeal, 10 Week. Notes of Cas., 85 (Pa., 1880); Madison Ave., etc., Church v. Baptist Ch., etc.. 5 Rob. (N. Y.), 649 (1867); Ev- erett v. Smith, 22 Minn., 53. As to the rule concerning directors, see § 592. supra. It has been held that one per- son cannot constitute a quorum; that at least two members are necessary to make a corporate meeting. Sharpe v. Dawes, 46 L J. (Q. BA 104 (1876). In this case one stockholder ■' met," did all necessary business, and then voted him- self a vote of thanks. In the case of In re Sanitary, etc., Co., W. N., 1877. p. 223, where one stockholder having also proxies of the remaining three stockholders held a meeting. " voted himself into the chair, proposed a reso- lution to wind up voluntarily, declared the resolution passed and appointed a liquidator." the court reluctantly fol- lowed the preceding case and declared the " meeting " invalid. 815 § 608.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. the stockholders, or constituted a majority at a meeting in which a majority of the stockholders were present. 1 The presumption always is that a legal majority voted for any act or proceeding that appears to have been passed. 2 Two important limitations and exceptions to these principles are to be borne carefully in mind. First, the majority cannot bind the minority to submit to an act by the corporation where such act is beyond the express and im- plied powers of the corporation as given to it by its charter. Such an act is ultra vires. A large amount of litigation has arisen from the attempt of the majority to carry out ultra vires acts. The minority may object, and even a single stockholder may have the ultra vires act enjoined or set aside. 3 The second exception arises where the legislature amends the charter of the corporation, and the majority of the stockholders attempt to accept that amendment and act upon it. In such a case, if the amendment materially changes the scope and purpose of the enterprise, the minority may object and may prevent the acceptance of the amendment. 4 The question of how far the majority rule when that majority are interested in a contract which the corporation has made, and which is being passed upon by a stockholders' meeting, is consid- ered elsewhere. 5 § G08. The majority of votes cast shall elect. — It is the well-settled rule in corporations having a capital stock divided into shares that a majority of the votes cast at any election shall elect. 6 And this majority, moreover, need not be an actual numerical majority of all the votes which all the stockholders have, but only a majority of the votes cast. 7 Accordingly, a majority of the votes cast will elect, even though a majority of the shares of stock are not voted at all, and even though the owners arc present at the meeting and refuse to vote. 8 1 Columbia, etc., Co. v. Meier, 39 Mo., 7 See § 607, supra; Craig v. First Pres. 53 (I860), and same cases as in the pre- Church, 88 Pa. St., 42 (1878); In re Union ceding note ;Gowen's Appeal, 10 Weekly Ins. Co.. 22 Wend., 591 (1840), holding Notes Cas., 85 (1881). also that a plurality elects. Atamuuic- 2 Citizens' Mutual, etc., Ins. Co. v. ipal corporation meeting only those Sortwell, 90 Mass., 217 (1864). who vote are counted. Persons not vot- 3 This subject is fully treated in Part ing at all are not oounted. Smith r. IV, infra. Proctor, 130 N. Y., 319 (1891). In regard 4 See chapter XXVIII, supra. to voting in church elections in New * See chapter XXXIX, infra, York, see People v. Keese, 27 Hun, 483 6 People v. Albany, etc., R. R Co., 55 (1882). Barb., 344. 368 (1869); State v. Fagan, 42 a Appeal of Gowen, 10 Weekly Notes Conn., 32 (1875), a municipal corporation of Cases, 84 (1881). where the supreme case. See, also, § 607, supra. court held that " those who voluntarily 816 CH. XXXVII.] ELECTIONS — CORPORATE MEKTIXGS. [§ 609. Although less than the full number of directors to be elected receive a majority or plurality, yet those receiving such majority or plurality are elected, and another ballot or election may be had to elect the remainder. 1 § 609. Is evert/ share of stock entitled to one vote? — At common law, in public or municipal corporations, each qualified elector has one vote, and only one. This was a natural rule, since each duly-qualified citizen voted as a citizen and not as the holder of stock. But the same rule should not apply to private corporations. Stockholders are interested not equally, but in proportion to the number of shares held by them. Naturally and reasonably each share should be entitled to one vote. It must be conceded, how- ever, that the decisions are otherwise; and it seems that at common absent themselves from a meeting duly called for an election must recognize the validity of the election regularly made by those who do attend." The question was whether an election held by a meeting of railroad stockholders at which a majority of all votes was not cast could be considered valid. State v. Green, 37 Ohio St.. 227 (18811. This was a case of election of clerk by a city council ; and it was held that, all being present and engaged in holding the election, half the members may not de- feat an election by refusing to vote and then objecting because a quorum had not voted. Commonwealth v. Wicker- sham. 6G Pa. St., 134 (1870), was the elec- tion of a county school superintendent, which %vas required to be " viva voce I y a majority of the whole number of di- rectors present." A person receiving exactly half that number could not be declared elected although one director refused to vote on the last ballot. " He remained, and being present was entitled to be counted." "The legal intendment [of his action] was that he voted for neither or for the minority candidate." But, under a by-law requiring a major- ity of the stock to be present, it has been held that the majority must be a major- ity of the whole stock, and not merely of the stock subscribed for. Ellsworth, etc., Co. v. Faunce, 79 Me., 440 (1887). If the statute requires a majority of the directors to elect a director or president, one who is present but does not vote must be counted. People v. Conklin, 7 Hun, 188. See, also, § 713a, infra, on this point Stockholders may vote for less than the whole number of directors to be elected. Vandenburgh v. Broadway R'y Co., 29 Hun, 349 (1883). But where a meeting was called to elect three di- rectors and a majority of the stockhold- ers voted for five directors, only a small minority voting for three, the latter votes were held the only valid ones, and: the three voted for were declared elected. State v. Thompson, 27 Mo., 365. 369 (1858). Where twenty-three directors ai'e to be elected, a vote electing twenty-two is effectual to elect those twenty-two. In re Union Ins. Co., 22 Wend., 591 (1840). A new election may be held to elect the remaining ore. Id. This case holds also that a plurality is sufficient to elect. 1 In re Union Ins. Co., supra. Less than the full board may be elected. The old board goes out, however, and none of them hold over. People v. Fleming, 13 N. Y. Supp., 715 (1891). Where five candidates receive a plural- ity and three others receive a less num- ber, but the latter are a tie, the board being seven, the five are duly elected and may act as a board, even though no second ballot is taken to vote off the tie. Wright v. Commonwealth, 109 Pa. St, 560 (1S85). See, also, § 620. (52) 817 § 609a.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. law each stockholder had but one vote, irrespective of the number of shares held by him. 1 Where the statutes are silent on the sub- ject, a by-law may give to each shareholder one vote for each share up to ten, and may fix the proportion of votes which he may cast in excess of that number. 2 Generally the charter or statutes prescribe that each share of stock shall be entitled to one vote. 3 And a statutory or charter provision to this effect applies not only to elections, but also to all other questions that may come before the stockholders' meetings. 4 § 609a. Cumulative voting.— In the constitutions of several of the states there are provisions for enabling a minority in interest of the stockholders to elect a minority of the directors. This is effected by what is known as a system of cumulative voting. By it each shareholder is entitled to as many votes for directors as equal the number of shares he owns multiplied by the number of directors to be elected. Thus, if there are six directors to be elected, a stock- holder who owns one hundred shares may poll six hundred votes; and these votes he may give entirely to one or two or more of the six candidates, as he may see fit. In this way any minority of the stockholders exceeding one-sixth part, acting together, may elect one member of a board of six directors, and thus secure a repre- sentation in that body. A larger minority might secure the elec- tion of two members of such a board, the possibility of increasing the minority representation increasing as the minority increases, without it ever becoming possible for a minority upon a full vote to secure more than its equitable proportion of the representation. The larger the number of directors the smaller would be the mi- nority which would be able to elect one member of the board; and 'Taylor v. Griswohl, 14 X. J. Law, stock in excess of ten shaves. Det- 222 (1834X declaring that a by-law to the wiler v. Commonwealth. 18 Atl. Rep., contrary is void. At common law stock- 990 (Pa., 1890). See § 621, infra. holders voted by show of hands, and a *Detwiler v. Commonwealth, 18 Pa. large stockholder had no greater vote St., 990 (Pa.. 1890). than a small one. In re Horbury, etc., 3 Hays v. Commonwealth, S2 Pa. St.. Co., L. R. 11 Ch. D., 109 (1879). Stock- 518(1876). Where by statute two-thirds holders each have one vote; not even a of the stockholders are authorized to do special provision in the articles filed an act, this is construed to mean two- under a general act can change this thirds of the stock — at least long ac- rule. Commonwealth v. Nickerson, 10 quiescence therein has that effect Phil., 55 (1873). For an interesting Fredericks v. Pennsylvania Canal Co., statement of the origin of the practice 109 Pa. St, 50 (1885). of giving each stockholder one vote 4 Re Rochester, etc., Co., 40 Hun, 172 only, and of the gradual changes made (1886), construing a statute which is in the rule, see Harvard Law Review, applicable to all New York corpora- November, 1888, p. 156. A by-law may tions. limit the votes of a person who holds 818 OH. XXXVII. J ELECTIONS CORPORATE MEETINGS. [§ 609a. the larger the minority the greater the representation possible to be secured.' Constitutional or statutory provisions which are de- signed to secure such a minority representation are found in Cali- fornia, Pennsylvania. Illinois, West Virginia, Missouri, Nebraska, Michigan and Kansas.' 2 These provisions, if designed to be retro- active, have been held unconstitutional and void. They can onlv apply to corporations chartered after their enactment. So far as they concern corporations chartered before the adoption of such a constitutional provision they impair the obligation of the contract between the corporation, the stockholders and the state, and in- fringe the vested rights of the stockholders. 3 It is a serious ques- 1 Cumulative voting given by the con- stitution is an absolute right, and does not require notice of the intent to so vote, nor any by-laws to give it efficacy. By this provision, "if there are six di- rectors to be elected, the single share- v. Baumgardner, 13 N. E. Rep.. 279 holder has six votes ; and. contrary to the old rule, he may cast these six votes for a single one of the candidates, or he may distribute them to two or more of such candidates as he may think proper. He may cast two ballots for each of three of the proposed directors — three for two, or two for one, and one each for four others ; or finally he may cast one vote for each of the six candidates." Pierce v. Commonwealth, 10-1 Pa St, 150 (1883). 2 A statutory provision to the same effect prevails in Michigan. The Cali- fornia provision is construed in Wright v. Central Cal., etc., Co., 67 CaL 532 (1885), holding that this constitutional right as to voting could not be changed by a resolution of the directors. The Pennsylvania provision is construed in Wright v. Commonwealth, 109 Pa. St, 560 (1885), holding that part of the di- rectors so elected by a plurality and de- clared elected may act although the remaining directors are not elected by reason of the vote as to them being a tie. See, also, Commonwealth v. Lintsman, 6 Pitts. L. J. (X. S.t. 125. The Ohio statute prescribing that "each share shall en- title the owner to as many votes as there are directors to be elected " does not authorize cumulative voting. State (Ohio. 1887 . Where cumulative voting prevails and the statutes require three directors to be residents, and all the votes are cumulated on non-residents excepting thirty-two which are cast for three residents, the three residents are elected and the remaining directors are those of the non-residents who received the highest number of votes. Horton v. Wilder, 29 Pac. Rep., 566 (Kan., 1892) As to the other states that provide for cumulative voting, see Part VII. infra. In Wrighfs Case, supra, the court said that this provision conferred "upon the individual stockholder, entitled to vote at an election, the right to cast all the votes which his stock represents, multi- plied by the number of directors to be elected, for a single candidate, should he think proper so to do, . . . or by dis- tributing them, upon the same principle, among as many candidates for directors as he shall think fit" 3 State v. Greer. 78 Mo., 188 (1883); Hays v. Commonwealth, 82 Pa. St.. 518 : Bakers Appeal, 109 Pa. St.. 461 (1885). See, also, on this subject ch. XXVIII. supra. Upon the question of the constitutionality of statutes providing for minority representation or cumula- tive voting in the election of public offi- cers, a matter germane to the present sub- ject, see People v. Kenney, 96 X. Y., 294 : People v. Crissey, 91 id., 616 (1883) ; State v. Constantiue, 42 Ohio St.. 437. In Michigan it has been decided that a statute providing for the cumula- 819 610.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. tion, however, whether such a statute or constitutional provision could not be applied to existing as well as future corporations, where the power to amend the charter has been reserved by the legislature. 1 The plan of cumulative voting is growing in popularity, and is fitted to protect the minority from the frauds of directors who are elected wholly by the majority.-' 'dO. Proxies. — At common law a stockholder has no right to cast his vote by proxy. 3 This rule was evolved from the analogous tive plan of voting in public elections is unconstitutional. Maynard ft Board, etc., 47 N. W. Rep.. 756 (Mich., 1890). *See § 501, supra. In West Virginia it is held that where the legislature has the right to amend or repeal a chart' i . the statute giving the right to cumulate the votes applies to a corporation al- ready existing as well as later corpora- tions. Cross ft West Va., etc., R'y. 12 s. EL Rep.. 1071 (W. V.,.. 1891) -Mr. Simon Sterns, in the Cyclope- dia of Political Science, Political Econ- omy and United States Hi tory (vol. III. p. 526), says: "The severest blow, however, which could be dealt to cor- porate mismanagement would be the rigorous introduction of minority repre- sentation in boards <>f direction, which would make secrecy of management as against the interest of shareholders sub- stantially impossible, and would pre- vent the possibility of the recurrence of some of the worst abusi - which charac- terise their administration. Suppose twenty directors were to be elected, the reform would consist in allowing each Bection of one-twentieth of the stock- holding-in tercet to elect one director by accumulating their votes upon a single name, or by distributing their votes for one or more, as they may see fit This is the cumulative plan. Another is the preferential or list plan, in allowing each twentieth part of the constituency to elect one director by preferences indi- cated on a ballot in the order of the names as printed. When the first name has a quota sufficient to elect him — i. e., one-twentieth of the votes cast — the bal- lot is counted for the second name, and so forth. The result of this s\ stem of minority representation would be to make of the board of directors a re- duced photograph of the whole constit- uent body, and make it impossible to capture an organization like a railway from the actual owners thereof. Any one of the numerous plans suggested for securing minority representation, if applied to corporate management, would successfully accomplish that result The objection which has been urged to mi- nority repp n in public repre- tive bodies has no validity to eor- ite elections, as in corporations neither localities nor persons are sup- posed to be represented, but pecuniary interests only. It would better secure fair representation than does the Eng- lish system of diminished value of votes in proportion to stockholders' interest — one vote for every share up to ten, an additional vote for every five others beyond the first ten, and one vote for every ten beyond one hundred shares: or the classification plan, by which only B few directors of the whole retire each year. Minority representation would give permanency in management, and prevent the swamping of the interest of the smaller shareholders." » Taylor r Griswold, 14 N. J. Law, , ; Philips ft Wiekham, 1 Paige, 590 (1829) ; Brown ft Commonwealth, :S Grant (I where the char- ter allowed only those present to vote; Craig r. First Presbyterian Church, 88 Pa. St, 42 (1878); Commonwealth ft Bringhurst, 103 id., 134 (1883); People 820 OH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 610. rule governing municipal corporations, which requires all votes to be given in person. The right to vote by proxy is often given by the charter itself. Even if not so given the right may be created by by-law. 1 The ordinary proxy, being intended to be for an election merely, does not enable the proxy to vote to dissolve the corporation or to sell the entire corporate business and property, or to vote upon other important business, unless the proxy itself in general or special terms gives the proxy the power to vote on such questions. - The sale of proxies is forbidden by statute in Xew York. 3 Directors may be enjoined from using the funds of the company to obtain proxies for themselves or their nominees. 4 "Where a will directs that of the three executors two shall give v. Twaddell, 18 Hun, 427, 430 (1879) ; Case of the Dean and Chapter of Femes, Davies, 116, 129 (1608); Attorney-Gen- eral v. Scott, 1 Yesey, 413 (1749); Har- ben v. Phillips, L. R., 23 Ch. D., 14, 22. 36 (1882). Where the statute allows citi- zens to vote by proxy, an alien is not within its terms, and cannot do so. In re Barker, 6 Wend., 509 (1830). i People v. Crossley, 69 111., 195 (1873) ; Philips v. Wickham, 1 Paige, 590, 598 (1829); State v. Tudor, 5 Day (Conn.), 329 (1812); 2 Kent's Commentaries, 294, 295. A contrary rule is laid down in New Jersey. Taylor v. Griswold, 14 N. J. Law, 222 (1834). Where the char- ter authorizes voting by proxy at elec- tions for directors and also empowers directors to make by-laws not incon- sistent with the laws of the common- wealth, a by-law adopted by the board of directors allowing voting by proxy at all stock elections was held valid. Wilson v. Academy of Music, 43 Leg. Int., 86. A by-law may allow voting by proxy. Detwiler v. Commonwealth, 18 Atl. Rep., 990 (Pa., 1890). Where the statute gives a right to vote by proxy, a by-law to the effect that only a stock- holder can act as proxy is illegal and void. Matter of Lighthall, etc., Co.. 47 Hun, 258 (1888). A corporation as a stockholder may of course give a proxy where proxies are allowed. In re In- diana, etc., Co., L. R, 26 Ch. D, 70(1884) 2 Abbot v. American Hard Rubber Co., 33 Barb., 578, 584 (1861); Cumberland Coal Co. v. Sherman, 30 Barb., 553, 577 (1859); Matter of Wheeler, 2 Abb. Pr. (X. S.), 361 (1866), where the proxy, be- ing authorized to vote for increasing the stock, voted also to issue the new stock in exchange for the stock of an- other company. Marie V. Garrison, 13 Abb. N. C, 210, 235 (1883). Where di- rectors are authorized by charter to vote by proxy, tho proxy cannot author- ize a borrowing of money — an ultra vires and void act in England. Brown v. Byers, 16 M. & W.. 252 (1847). A proxy to vote is not a proxy to demand a poll. In re Haven, etc., Co., L. R.. 30 Ch. D., 151 (1881); Reg. v. Gov. Stock Co., L. R.. 3 Q. B. D., 442 (1878). See, also, Decatur, etc.. Co. v. Xeal. 12 S. Rep., 780 (1893). A proxy for an election does" not extend to an election four months later, the first election not hav- ing been held, the proxy being by a di- rector, the directors being authorized to vote by proxy. Howard v. Hull, 5 R'y & Corp. L. J.. 255 (Eng., 18S8). 3 See Part VII. infra. It is illegal for a stockholder to sell his right to vote. Hafer v. New York, etc., R. R., 14 Week. L. Bui., 68 (1885). 4 Studdert v. Grosvenor, 55 L. T. Rep., 171 (1^86). 821 § 610.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. proxies to the third on stock owned by the estate, a court of equity will compel the two to give the proxies although the third intends to use the proxy to continue himself as president, and the manage- ment of the company is alleged to be fraudulent and ruinous. 1 A proxy should be in writing, but it need not be in any particu- lar form; it need not be acknowledged or proved, but it must be in such a shape as reasonably to satisfy the inspectors of election of its genuineness and validity. 2 And to this end the corporate otficers may insist upon reasonable evidence of the regularity and genuineness of the proxy before allowing it to be voted. 3 Where certificates of proxies are destroyed after use, parol evi- dence is admissible to prove their former existence and sufficiency/ A member who signs a form of proxy in blank, and hands it over to another to be used in the ordinary way, impliedly author- izes that other to fill up the blank with his own name. 5 A proxy is always revocable. Even when by its terms it is made "irrevocable," the law allows the stockholder to revoke it. Fre- quently an attempt is made to permanently unite the voting power of several stockholders and thus control the corporation by giving irrevocable proxies to specified persons. But the law allows the stockholder to revoke the proxy at any time. 6 iTIiis case was affirmed on an even division of the court Lafferty v. Laf- ferty, 26 Ail. Rep., 388 (Pa., 1898); Tunis r. Hustonville, etc., R R, 84 All. Rep., 88 (Pa., is'.'.. tained in Mouaseaux V. Urquhart, 19 La, Ann.. 18S I In Matter of St Lawrence, etc., Co., gupra. Bui the inspectors have no right to refuse a vote bj proxy <>r to assume -In the Matter of Election of St Law- a judicial power to try its genuineness rence Steamboal Co., -11 N.J. Law, 529 if it is apparently executed by the stock- (1882); In re [ndian, etc., Co., L R», 26 holder and is regular in form. Blatter Ch. D., 70 (1884). See the formofproxy of Cecil, 86 Bow. Pr., 177 1869} Neither in Marie v. Garrison, 18 A1>1>. N. ('., the stockholder nor hi> proxy can be 210,234 (1883). Proxies ueed Dot be compelled by a by-law to take an oath acknowledged, proved or witnessed, that the former is the owner of the Matt, r ol Cecil, 86 Bow. Pr., 477 (1869). A proxy Deed not state the day upon which the flection is to be held. In re Townsend, 18 N. Y. Supp., 906 (1892) \ proxy is good although the date when it is gn en is left blank and lias not been filled in. In Matter of St Lawn uce, Co., supra. Where one gave a proxy to vote at an annual election, it was held prima facie evidence that In* was a stockholder just l>efore such elec- tion. Barger v. McCul lough, 2 Denio, 119, 122 (is Hi. A proxy winch had been exercised and voted upon for many years without renewal was sus- stock. People v. Tibbits, 4 Coweu, 358 (1*25); People r. Kip, 4 Cowen, 382 (1822). The by-laws may require the proxies to be witn< ssed. Barben v. Phil- lips, L R, 28 Ch. I).. 14 (188 4 Hay wood A: Pittsborough Plank road (\>. r. Bryan, 6 Jones' L (N. C), 82 ■ parte Dace, L R. 13 Ch. D.,429; Ex parte Lancaster, K R, 5 Ch. D., 911. As to whether a blank proxy may be filled in by the agent, see auoere in Re White r. N. Y.. etc., Soc. 45 Hun, 580 (1887), citing cases. *• Woodruff r. Dubuque, etc., R. R Co., 822 CH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§611. § 611. The transfer look as evidence of a right to vote. — The question who is entitled to vote upon a particular share of stock is. as a general rule, answered by a reference to the corporate transfer book. He who is there registered as the owner of the stock is en- titled to vote upon it. 1 It is not necessar}' that the owner of stock produce his certificate or even have a certificate in order to vote. 2 30 Fed. Rep., 01 (1887). In this case the stock certificates were turned over to trustees to transfer to themselves, with power to vote, hold or sell the same. "Trust" certificates were issued. The court held that at any time previous to an actual sale by the trustees a certifi- cate-holder might revoke his interest in the " trust " and demand back his part of the stock. To same effect and on very similar facts, see Griffith v. Jewett, 15 Weekly Law Bull., 419; Vanderbilt v. Bennett. 2 R'y & Corp. L. J., 409 (Pa., 1887). Such irrevocable proxies are not necessarily void as against public policy. Brown v. Pacific Mail Steamship Co., 5 Blatch., 525 (1867). It simply is revo- cable. A proxy given for a valuable consideration may nevertheless be re- voked if it is about to be used for a fraudulent purpose. Reed v. Bank of Newburgh, 6 Paige, 337 (1837). An agreement not to revoke a power which from its nature or by law is revocable is not binding. People v. Nash. Ill N. Y., 310, 315 (1888). A written con- tract not to vote by proxy, entered into by certain shareholders mutually for the purpose of preventing the board of directors from consummating a pro- posed sale of the franchises of the cor- poration, has been held a pernicious and unlawful compact. Fisher v. Bush. 35 Hun, 641 (1885). An irrevocable proxy is prohibited by statute in New York. It may be revoked even though coupled with an interest, in this case being to a pledgee. Matter of Germicide Co.. 65 Hun, 600 (1892). A proxy for five years given so as to unite enough stock to control the corporation, the holder of the proxy agreeing that the person giv- ing the proxy shall have an office at a salary of $2,500 a year, is void. At the instance of the latter person a court of equity will enjoin voting thereunder. Coue's Ex'rs v. Russell, 21 Atl. Rep, 847 (N. J., 1891). 1 •• The general rule is that, as between the corporation and the person offering to vote, the right follows the legal title, of which the certificates and stock books are the prima facie evidence. By-laws may establish a different rule, and there may be special circumstances to change the equities as to individuals or even as to the corporation." Commonwealth v. Dalzell, 25 Atl. Rep., 535 (Pa.); Ex parte Willcocks, 7 Cowen, 402 (1827), stating, however, that in certain cases, like that of stock held for the corpora- tion itself, a different rule prevails; State v. Ferris, 42 Conn., 560, 568 (1875), sustaining a vote by a bankrupt, the court saying : " The party who appears to be the owner by the books of the corporation has the right to be treated as a stockholder and to vote on what- ever stock stands in his name : " Hoppin v. Buffum, 9 R. I., 513 (1870). the court saying : " In a case of a dispute as to a right to vote, the books of the corpora- tion are the prima facie evidence : at any rate, the corporation cannot be re- quired to decide a disputed right. . . . Upon any other rule it could never be known who were entitled to vote until the courts had decided the dispute." Allen v. Hill. 16 Cat, 113 (1860); In re St. Lawrence, etc., Co., 44 N. J. L, 529 (1882). See, also, next section for vari- ous cases on the conclusiveness of the transfer book. 2 Beckett v. Houston, 32 Ind., 39:? (1869). 823 § 611.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. Neither will indebtedness for the subscription price prevent the stockholder from voting. 1 So, also, it is immaterial that the person in whose name the stock is registered is merely the nominal holder, and that another person really owns the stock. 2 A subscriber upon a condition not yet performed may vote upon the question whether that condition shall or shall not be performed. 3 And stock issued for construction, the work not having been performed, may never- theless be voted. 4 Persons who are not stockholders on the day an election is held cannot vote though they were stockholders on the day the election should have been held. 5 The corporation may be com- pelled to register transfers made merely for the purpose of increas- ing the voting power of the stock, there being a limit to the num- ber of votes one stockholder may cast. 8 The holders of stock issued by a stock dividend are entitled to vote. 7 Where the corporation keeps a stock certificate book but no transfer book, a transfer on the back of a certificate, which is then canceled and pasted back in the certificate book, and a new certifi- cate issued to the transferee, is a sufficient transfer to constitute a transferee a stockholder. 8 If the stock book is lost the directors 1 Birmingham, etc., lfy Co. v. Locke. 1 Q. B., 256 (1841); Savage v. Ball. 17 N. J. Eq., 142 (1864); People ,-. Albany, etc., R R. 55 Barb., -I I. 386 (.1869): Downing v. Potts, 2:5 N. J. Law. (in (1851). So held iu this case, even though the subscriber had paid nothing on his stock. -'State of Nevada v. Leete, 16 Nev., 242 (1881), where a man put stock in the name of his son in order to qualify him to serve as a director. ■J Greenville, etc., R R Co. r. Cole- man, 5 Rich. Law (S. C), 118, 135 (1851> •Savage V. Ball, 17 N. J. Eq.. 142 (1864). Where a sale of bonds having a voting power is made subject to the ratification of another party, the vendor has the right to vote such bonds until the sale is so ratified. State d. McDan- iel, 22 Ohio St.. 354 (1872). The regis- tered stockholder may vote even though he has transferred his certificates to an- other. In re Argus, etc., Co., 48 N. W. Rep., 347 (N. D„ 1891). 5 Johnston v. Jones, 23 N. J. Eq. ; 216, 228 (1872). 6 In re Stran ton Iron & Steel Co., L. R, 16 Eq., 559 (1873 . Moffatt v. Far- quhar, L R., 7 Ch. !>.. 591 (1878). See, ako, ?' HIS But where valuable privi- leges oilier than voting attach to stock. a nominal transfer to obtain these privi- leges will not be sustained as regards them. Appeal of the Academy of Music, 108 Pa St.. r.U) (1885), where free ad- mission to a theatre was given to stock- bolders. i Bailej v. Railroad Co., 22 Wall.. 604, i 8*3 4). But the rule is otherwise as regards the holders of a scrip dividend. hi., where the scrip was redeemable \>\ the company in cash or convertible into stock. Mli' may vote at elections, and an as- signment by the corporation on the di- rection of officers elected by such a transferee is valid. Such a transfer is valid also, although a by-law provided that before selling his stock a stock- holder must offer it to other stockhold- ers for purchase. American Nat'i Bank v. Oriental Mills, 23 Atl. Rep., 795 (R I., 1891). 824 en. xxxvu.J ELECTIONS — CORPORATE MEETINGS. [§011. may substitute a new one, filled out as accurately as is possible. 1 Where the transfer book differs from the stock ledger the former governs. 2 A by-law authorizing the administration of an oath to examine the stockholders as to their title is illegal and void where the charter regulates the right to vote. 3 There are some exceptions, however, to the rule that the trans- fer book is conclusive on the question of who is entitled to vote. Thus, the inspectors of election may inquire whether the stock which is about to be voted belongs to the corporation, and if it does they may reject the vote. 4 So, also, they may allow an ad- ministrator to vote, although the stock stands in the name of the deceased person. 5 In some courts this rule is carried still further, and it is held that the inspectors of election may allow the pledgor to vote, although the stock stands in the name of the pledgee on the books of the company; 6 and it has also been held that the purchaser of certifi- cates of stock may vote thereon, although the stock stands on the books of the company in the name of the vendor. 7 i Re Schoharie, etc., R R, 12 Abb. Pr. (N. S.), 394 2 Downing v. Potts, 23 N. J. L., 66 (1851). 3 People v. Kip, 4 Cowen, 382, note (1822). *See § 613, infra. 5 See § 612, infra. » See § 612, infra. 7 In the case Allen v. Hill, 16 Cal., 113 (1860), the court said: " It would seem, upon principle, that the real owner of stock should be entitled to represent it at the meetings of the corporation, and that the mere fact that he does not ap- pear as owner upon the books of the company should not exclude him from the privilege of doing so." In Illinois it is held that the corporation must al- low the real owner of the stock to vote, whether he be the registered owner or not, where the corporation has no by- law requiring a registry of transfers, and the vendee produces his certificate of stock duly transferred on the back. People v. Devin, 17 111., 84 (1855). In a stockholder's vote ratifying the acts of directors, a stockholder has no right to vote stock which he has transferred to others, even though it still stands in his name on the books. Graves v. Mono, etc., Co., 22 Pac. Rep., 665 (Cal., 1889). Where, however, the unregistered transferee did not challenge the right of his transferrer to vote and did not claim the right to vote, but attacked the election afterwards by quo ic-arranto, his suit failed. People v. Robinson, 64 Cal, 373 (1883). State v. Smith, 15 Ore., 98, 118 (1887), contains a dictum that the purchaser of a certificate of stock cannot vote on the stock until it has been transferred into his name. Wliere both the legal and equitable owners of stock agree as to how stock shall be voted, other stockholders cannot com- plain that the vote was not cast in ac- cordance with law. State V. Ferris. 42 Conn., 560 (1875), where a bankrupt voted stock still standing in his name. State v. Pettineli, 10 Nev., 141 (1875). In this last case the registered holder had transferred the certificate but ob- tained it again and exhibited it at the meeting. If a vote is not challenged an objection to it afterwards may not meet with much favor. In the Matter of Long Island R. R.. 19 Wend., 37. 44 (1837). See, also, § 620, infra. 825 § 612.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVIL In New York, by statute, the corporate transfer book is made conclusive upon the question Avho may vote. 1 There are various other statutory provisions in New York regulating voting. 2 § 612. The rigid of trustees, pledgees, administrators, etc., to V0 ( 6t — it is the general rule that a person holding stock as trustee is entitled to vote upon the stock, not only where he is duly regis- tered as a stockholder in that capacity, but also where he is regis- tered absolutely as a stockholder upon the books of the corpora- tion. 3 If the trustee, however, is disqualified from being trustee of the stock, as in the case of a trust company tbat represents con- flicting interests, the courts will enjoin it from voting. 4 1 Yandenburu'h r. Broadway Railway Co., 29 Hun. 848, 355 I L883 ; In the Mat- ter of the Long Island R. R. Co.. 19 Wend., 37 (1837); In the Matter of the Mohawk & Hudson R R Co.. id, 135 (1838). A registered stockholder is en- titled to vote although he has assigned his certificate of Btock, Schoharie Val- ley R R 12 Abb. Pr. X. M 394 (1872). 2 See § 619. infra. Strong v. Smith, 15 Bun, ... J78X holding that the trans- fer book is conclusive upon the inspect- ors, but that the court has power to go bark of the entries therein and inquire whither, as for instance in this case, a transfer of share- was an absolute sale or a pledge, and thus whether the trans- ferrer or transferee has the right to vote them, citing Ex parte Holmes, 5 Cow., Matter of Long Island R R. Co., supra; and Bee N. V. L. J., June 29. Although only stockholders who still own their stock are allowed to vote, a person who has given an option on his stock is nevertheless entitled to vote on it. In re Newcombe, I s N. V. Supp., 16 (1891). In New York, when for any reason the corporation fails to hold an election at the stated time as provided in the charter or by-laws, and the elec- tion is held subsequently, only those stockholders are entitled to vote who were qualified electors at the time when the election ought to have been held Vandenburgh V. Broadway R R Co., 29 Hun. 348 (1883); People u. Tibbets, 4 Cowan, 358 (1825). 3 Widow Conant v. Millaudon, 5 La Ann., 542 (1850); Wilson v. Proprietors of Central Bridge, 9 R I., 590 (1870); Hoppin v. Buffum, 9 id.. 513 (1870), the court sayiug : " If the trust was of such a nature that the trustee has the con- trol and management of the property, and is to exercise his discretion con- cerning it, he is the proper person to represent and vote upon it And the corporation cannot be required to ex- amine into the nature of the trust with a ?iew to decide as to the right to vote." In re Barker, 6 Wend., 509 (1831); In the Matter of the Mohawk & Hudson R R Co., 19 id.. 135 (1838); In the Mat- ter of the North Bhore States Island 3 Barb.. 556 (1872). holding, also, that the administrator of the trustee may vote the stock; Pender n Lush- ington, L R., G Ch. D., 70 (1877). If the trustees disagree as to how the stock shall be voted the courts have power to direct them. Wauneker v. Hitchcock, 38 Fed Rep., 383(1889). 4 A trust company has no power to hold as trustee and vote the majority of the stock of a great railroad system, especially where it is also the trustee in a trust deed of the company. Clarke r. Central R R, etc., 60 Fed. Rep., 338 (1892), the court saying: "There are many situations in which stock may be so placed that it becomes inequitable or illegal for it to be voted. The law places the voting power of pledged stock in the pledgor or mortgagor, even where there is no express stipulation to tint 826 CH. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§ 612. In California the real owner of stock may vote on it, although it stands on the books of the company in the name of a " dummy" as "trustee." x A pledgor of stock is entitled to vote upon it in all cases where the stock continues to stand on the books of the company in the name of such pledgor. 2 And even where the pledgee has caused the stock to be transferred into his own name, as by law he is al- lowed to do, 3 it has been held that the pledgor may demand the right to vote at elections, and that upon proof of the facts, the in- spectors of election must allow the pledgor to vote the stock. 4 It must be conceded, however, that the established rule is to the contrary. 5 Nevertheless the pledgor may control the vote on his effect And where the pledgor or mort- gagor is disqualified to vote the stock the disqualification extends as well to the pledgee or trustee." 1 Under the California statute stock placed by the secretary in the name of a "dummy,*' as trustee, cannot be voted by such dummy, the real owners of the stock not having assented thereto, even though for business reasons they did not wish to have the stock issued to themselves. Stewart v. Mahoney Min. Co., 54 Cal., 149 (1880). To same effect, Ex parte Holmes, 5 Cowen, 426 (1826). See, also, American Nat'l Bank v. Orien- tal Mills, 23 Atl. Rep., 795 (R. I., 1891), holding that the beneficial owners are entitled to say how the vote shall be cast In this case the stock had been surrendered and new certificates issued, but no transfer book was kept. "-In re Barker, 6 Wend., 509 (1831); Ex parte Willcocks, 7 Cowen, 402 (1827) ; Matter of Cecil, 36 How. Prac, 477 (1869) ; Schofield r. Union Bank, 2 Cr. C. C, 115 (1815): Matter of Election of St. Lawrence, etc., Co., 44 N. J. L., 529, 540 (1882), a dictum. Although the pledgor of stock votes the stock in favor of a lease of the corporate property on such terms that no dividends on the stock are possible, yet in the absence of fraud the pledgee is bound. Gibson v. Richmond, etc., R R, 37 Fed. Ren., 743 (1889). - See § 466. 4 In Oregon it is held that at common 827 law the real owner of stock is entitled to vote it even though it stands on the corporate books in the name of his pledgee. It is denied that the transfer book is binding upon the inspectors of election, and the decisions to that effect in New York are stated to be based on tlie New York statutory law. State v. Smith, 15 Oreg., 98 (1887). See, also, Allen v. Hill, 16 Cal., 119 (1860), to sub- stantially the same effect 5 The pledgor and pledgee of stock may agree between themselves as to who should vote the stock. If there is no agreement, the right to vote should follow the legal title; in other words, the title as it appears on the corporate books. Even under a statute authoriz- ing inspectors of election, upon a chal- lenge, to determine whether the party who appears to be the owner is really the owner, the pledgee is entitled to vote the stock standing in his name where there is no agreement to the con- trary. Commonwealth v. Dalzell, 25 Atl. Rep., 535 (Pa.). A pledgee into whose name the stock has been trans- ferred may vote it. He is a " boun fide " stockholder as required by the statute. The pledgor cannot appear at the meet- ing and vote the stock. In re Argus Printing Co., 48 N. W. Rep.. 347 (N. D.. 1891), It is not a conversion for one who holds stock as pledgee to attend corporate meetings and vote upon the stock. Heath r. Silverthorn Lead Min- ing, etc., Co., 39 Wis., 146 (1S75). § 612.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. stock if he desires so to do. In many of the states there are stat- utes which give to the pledgor the right to vote the stock. 1 And even where' there is no statute to protect the pledgor's right to vote the courts will intervene. 2 By a bill in equity the pledgor may compel the pledgee to give him a proxy to vote the stock. 3 But in order to invoke the extraordinary powers of a court of equity in this respect, the pledgor must show that the interests of the company have been or will be prejudiced, or that the value of the stock has been or will be impaired, and that the intervention of the court is necessary to protect the pledgor's rights. 4 An administrator or executor may vote on the stock of the de- ceased stockholder, even though such stock has not been trans- ferred to the executor or administrator on the books of the com- pany. 5 A partner may vote upon stock belonging to the firm and ' So in New York, see Part VII, infra. Also Strong v. Smith, 15 Hun, 222 (18T8). Concerning a similar statute in Rhode Island, see Sayles V. Brown, 40 Fed. Rep., 8 (1889). Under the Colorado statutes an owner who has pledged his stock may represent the stock at all meetings of the stockholders and vote accord- ingly. Miller et <>/. v. .Murray, 30 Pac. Rep., 46 (Col., 1892). 2Scholfield v. Union Bank, 2 Cr. C. C, 115(1815); State v. Smith. 15 Oreg.. 98 (1887). where the pledgor obtained an in- junction against the pledgee voting the stock and the pledgor was allowed by the inspectors to vote. 3 Vowell v. Thompson, 3 Cranch, C. C, 428 (1829) ; Hoppin v. Buffura, 9 R I., 513 (18T0), holding that although the pledgor may by a bill in equity compel the pledgee, in whose name the stock stands, to make a retransfer or to give a proxy to the pledgor, yet where the pledgor for many years allows the pledgee to vote the stock and claims the right at an election only after the bal- lots are cast and are being counted, the court will not set the election aside. vk stands in the name of the deceased stockholder. In re Cape, etc., Co., 16 Atl. Rep., 191 (N. J., 1888); In the Mat- ter of the North Shore Staten Island Ferry Co., 03 Barb., 556 (1872). holding that an administrator may vote upon stock standing in the name of the de- ceased person, even though the latter held the stock as trustee. Stock held jointly by three executors cannot be voted unless they all agree upon the vote. Tunis v. Hestonville, etc., R R, 24 Atl. Rep., 88 (1892). In a proceeding to dissolve a corporation the adminis- trator is the proper representative of 828 GH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 012. registered in the partnership name. 1 Where stock is entered in the corporate books in the name of a person as an officer of an- other corporation, the successor in office of that person may vote the stock without a transfer on the corporate books. 2 Where a corporation is authorized to hold stock in another corporation it is entitled to vote such stock. 3 When a municipal corporation is a stockholder in a private corporation it is entitled to vote upon its stock in the same way as any other stockholder. 4 The fact that the government or a single person owns all the stock of a company does not put an end to 'the corporate existence. 5 Where joint owners of stock disagree as to its vote, the vote is to be rejected. 6 A corporation as a stockholder may vote its stock by an agent. 7 A receiver who is in possession of shares of stock generally votes such stock without his right to do so being questioned. Some- times the courts upon appointing a receiver of stock expressly au- thorize him to vote the stock and sometimes direct him how to vote it. 8 stock owned by the estate. Wolfe v. Underwood, 12 S. Rep., 234 (Ala., 1893). The administrator and not the heirs at law have the right to vote. Schoharie Valley R. R. Case, 12 Abb. Pr. (N. S.), 394 (1872). 1 Kenton Furnace Railroad and Mfg. Co. v. McAlpin, 5 Fed. Rep., 737 (1880). In California he may vote such stock where the stock belongs to the firm but is registered in the name of the other partner who is dead. Allen v. Hill, 16 Cal., 113 (1860). 2 Farmers', etc., Co. v. Chicago, etc., R'y Co., 27 Fed. Rep., 146, 156 (1886); Mousseaux v. Urquhart, 19 La. Ann., 482 (1867). Contra, In the Matter of the Mohawk & Hudson R. R Co., 19 Wend., 135, 146 (1838), holding that the word "cashier" attached to a stockholder's name does not authorize a succeeding cashier to vote the stock. s Davis v. U. S., etc., Co., 25 Atl. Rep., 982 (Md., 1893). Cf. § 616. 4 See § 99, supra. Where stock in a railroad is owned by a part of a county, that part becomes a municipality for the purpose of owning and voting the stock. Hancock v, Louisville, etc., R. R, 145 U. S., 409 (1892). 5 The United States government, though the owner of all the stock of a canal company, may continue as a stockholder and keep up the corporate existence by allowing the directors to retain one share each as a qualification share. United States v. Louisville, etc.. Canal Co., 4 Dill., 601 (1873). See, also, § 709, infra. 6 Re Pioneer Paper Co., 36 How. Pr., Ill (1865). 'State v. Rohlffs, 19 Atl. Rep., 1099 (N. J., 1890). 8 A court may appoint a receiver to hold an election, etc., where the entire interests in the corporation, including the stock, belong to parties who have been defrauded. King v. Barnes, 51 Hun, 550 (1889); aff'd, 113 N. Y., 655. See, also, dictum in Wanneker v. Hitch- cock, 38 Fed. Rep., 383 (1889), where the trustees of stock disagreed as to voting ; People v. Albany, etc.. R. R.. 55 Barb, 344, 371 (1869), where a receiver's vote was set aside, fraud being involved and the appointment being invalid ; Ameri- can Inv. Co. v. Yost, 25 Abb. N. C, 274 (1890). where a receiver of stock was in- structed how to vote, the action being to enforce an agreement to place stock 829 §§ 613, G14.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. § 613. The corporation cannot vote upon shares of its own stock. Shares of stock owned by the corporation itself cannot be voted either directly by the corporate officers or indirectly by a trustee of the corporation. This is the established rule, whether the stock is registered in the name of the corporation or not. 1 Where the directors, just before the election, issue or sell stock owned by the corporation, the purpose of such issue or sale being to control the election, the courts will interfere at the instance of other stockholders where an actual fraud is involved.-' § 614. Injunction against elections and against voting particular stock.— A court of equity has power to enjoin the holding of an election by a corporation during the pendency of a suit. 3 in the hands of trustees until the dehts of the company and chief stockholder were paid. 1 Ex parte Holmes, 5 Cowen. 420 (1826); McNeely v. Woodruff, 13 N. J. Law, 352 (1833); American Railway Frog Co. v. Haven, 101 Mass., 398 (1869); State v. Smith, 48 Vt. 266 (1876); Mons- seaux v. Urquhart, 19 La. Ann.. 482 (1867); United States v. Columbian Ins. Co., 2 Cranch, C. C, 266 (1821); New England Mutual, etc., Ins. Co. v. Phillips, 141 Mass.. 535 (1880), where in- come bonds entitled to vote were held to have lost that right when they were paid; Brewster v. Hartley. 37 CaL, 15 (1869), where the company had pledged its stock. If all the stockholders con- sent the stock owned by the corpora- tion may be voted. Farwell v. Hough- ton, etc., Works, 8 Fed. Rep., 66 (1881). Where a mortgage can be given only upon the vote of the stockholders, stock owned by the corporation cannot be voted, but the pledgee of such stock from the corporation was allowed to vote. Vail v. Hamilton, 85 N. Y., 453 (1881). Directors elected by votes upon stock owned by the corporation are ille- gally elected. Ex parte Desdoity, 1 Wend., 98 (1828). *See § 615, infra, on this subject 3 In the case of Walker r. Devereaux, 4 Paige, 229, 247 (1883), Chancellor Wal- worth said : " This court unquestionably has the power to prevent their election by an injunction operating upon the commissioners, restraining them from acting as inspectors of the election." In Haight v. Day, 1 John., 18 (1814), Chancellor Kent dissolved the injunc- tion but did not question the power of the court to grant it. High on Injunc- tions, sec. 1230. says : " While the pro- priety of equitable interference by injunction with the election of officers of private corporations has been fre- quently criticised, and with no incon- siderable show of injustice, the jurisdic- tion itself, although sparingly exercised, is too firmly established to be readily shaken without the intervention of leg- islative authority. The jurisdiction is, however, almost entirely of American growth, the English authorities afford- ing few instances of its exercise." A court of equity has jurisdiction on a bill in equity to enjoin an election, although the statute provides for a summary rem- edy by application to the court where the relief asked for by the bill involves also the transfer of stock. Archer v. American, etc., Co., 24 Atl. Rep., 508 (X. J., 1892> The court may enjoin the company from receiving any votes at an election unless the votes of the plaintiff are received. Brown r. Pacific Mail, etc., Co.. 5 Blatch., 525 (1867). In the latter case Judge Blatchford said : "As to the character of the injunction asked for, it is laid down in Judge Red- field's Treatise on the Law of Railways (vol. 2, sec. 221), that 'it has been com- mon to produce a positive effect through 830 CH. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§ 614. -A court of equity may also enjoin the voting of particular stock. In order to obtain such an injunction, however, the complainant must show that the defendant intends to vote the stock; that he has no equitable right to do so; that the effect of the vote will be to control the election; and that irreparable and permanent injury will come to the corporation or to the stockholders unless the in- junction is granted. 1 an injunction out of chancery by means of a prohibitory order,' and that a man- datory order is. in courts of equity, seldom denied unless the remedy at law is perfectly adequate." In this case Judge Blatchford enjoined the election inspectors from holding any election until the further order of the court, un- less certain persons should first be per- mitted to vote certain stock ; and also enjoined certain persons from voting any stock until after certain other per- sons had been afforded an opportunity to vote their stock. In the case of Shel- merdine v. Welsh. 47 Legal Intell., 26 (Phil. Com. PL, January, 1890), the court did not deny its power to enjoin the election, but said : " The case is not suf- ficiently clear to warrant a preliminary injunction that would prevent an elec- tion on the day named in the charter, and might cause the irreparable injury which such remedies are given to pre- vent." If the election is held in viola- tion of an injunction, this fact will be considered in quo warranto proceedings. People v. Albany, etc., R. R, 55 Barb. 344, 384 (1869). The injunction generally runs against the inspectors, president, directors, officers, agents, servants, etc. Campbell v. Poultney, 6 Gill & J. (Md.), 44 (1834). It has been held that an in- junction permanently forbidding the holding of any election whatever is an interference with the management of corporate affairs, to which the courts will decline to be a party; and such an injunction would, if granted, be void. People v. Albany, etc., R R Co., 55 Barb., 344 (1869), holding that while an injunction forbidding inspectors to hold an election at all or to receive and count the votes thereof is entirely void, since a court of equity has no power to re- strain permanently an officer of a cor- poration from performing the ordinary duties of his office, yet they may be en- joined from holding an election until the further order of the court or from receiving the votes of certain stock- holders until the votes of others are de- posited. But an injunction may be granted staying an election. Scholfield v. Union B., 2 Cr. (C. C), 115 (1815), where the inspectors denied the right of pledgors to vote. 1 Reed v. Jones. 6 "Wis., 680 (1858), hold- ing that a preliminary injunction against a stockholder voting his stock cannot be granted on the ground that he had no title to the land which he conveyed in payment of the stock. The stock liad not been canceled by the company, and no action was pending to cancel it McHenry v. Jewett, 90 N. Y., 58 (18S2), where the preliminary injunction was denied, inasmuch as the complaint showed no equitable cause of action. Where the owner of a majority of the stock has been fraudulently deprived of her stock by her pledgee, who has thereby deprived her of the control and claims the stock as his own, the court will enjoin him from voting the stock and will appoint a receiver of such stock pendente lite. Aver v. Seymour. 5 N. Y. Supp, 650 (Com. PI., 1889). An injunc- tion against a stockholders voting cer- tain stock is not an injunction to "sus- pend the general and ordinary business of a corporation." Reed v. Jones. 6 Wis., 608 (1858). An election is not such busi- ness. Id. 831 § 614.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. Thus an injunction has been granted where there was a conspir- acy to obtain on the eve of the election an injunction against the complainants from voting their stock; 1 also where the directors propose to postpone the election in order to prolong their term of office; 2 also where a stockholder has transferred part of his stock in order to increase the voting power of the stock, the charter lim- iting the number of votes one stockholder may cast; 3 also where a majority of stock is owned by a competing company which has ac- quired control for the purpose of diverting business to itself; 4 also where " trustees," who are mere agents, refuse to transfer the stock to their principals or to give proxies. 5 Where the owner of a majority of the stock sells it, the purchase price being only paid in part, and retains the stock in his name until the full price is paid, he cannot be compelled to deliver the stock or to refrain from ousting the vendee from the presidency of the corporation where the vendee fails to meet the other payments, even though the vendee has proceeded to improve the property/' Equity has jurisdiction to compel the transfer of stock as be- tween parties. Hence where stock is issued in payment for prop- erty, and the party to whom the certificate is issued refuses to divide it among the owners of the property, as provided by contract, a court of equity may compel the division and may enjoin any elec- tion of the corporation until such division is made. 7 The general rule is that one stockholder has nothing to do with the motive of another stockholder. The injunction must be based i Brown v. Pacific Mail, etc., 5 Blatch., which comes in February, but which the 525 (1867', in which the allegation was directors by by-law have changed to that the defendants contemplated, October, thereby endeavoring to extend through improper means, to obtain an their term. Elkins V. Camden, etc., R injunction preventing plaintiffs, who R, 86 N. J. Eq., 467 (1883). See, also, were large stockholders in a corpora- Camden, etc., R R. v. Elkins, 37 id., 271 tion, from voting at an approaching (1883). election, and that defendants were im- 3 Webb v. Ridgely, 38 Md., 364 (1873), properly obtaining proxies from other where stock had been colorably trans- stockholders in order to control the elec- ferred without consideration for the tion for their private purposes. The purpose of controlling an election, there complainant alleged that defendants in- being a provision in the charter prohib- tended to obtain control for the benefit iting a single stockholder from voting of rival companies and intended fraud- on more than twenty shares. See, also, ulently to prevent the complainants § 621. from voting. The court enjoined de- 4 See §616. fendants from participating in any elec- 5 See § 622. tion unless plaintiffs' votes were received 6 Stockton u. Russell, 54 Fed. Rep., 224 thereat, and from restraining plaintiffs (.1892). in their right to vote. 7 Archer v. American, etc., Co., 24 AtL 2 A stockholder may enjoin directors Rep., 508 (N. J., 1892> from postnouiug an annual election 832 OH. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§614. on damage reasonably certain to ensue. 1 Accordingly, an injunc- tion will not be granted upon the ground that the stockholders against whom the injunction is sought are likely to obtain control of the affairs of the company, and that then they will probably misuse their power. 2 The form of the injunction order varies, of •course, with the circumstances of the case. The federal courts have sanctioned a form, which, while drastic in its terms, is effect- ive in reaching the desired result, and is none too severe when the difficulties are considered. 3 Where a party is enjoined from voting the court will enjoin his 'proxy from voting. 4 The proxy may be enjoined although his principal is not made a party and is not served. 5 But stockholders who are not made parties will not be enjoined. 6 The injunction against certain per- sons votiug certain stock does not prevent the election from tak- ing place. On the contrary, the election goes on and is valid, even though it happen that what would have been a minority of the votes, had not the injunction issued, becomes, by reason thereof, a majority, and elects. 7 Where the injunction is applied for at a time so near the election that the opposition will have no reason- able opportunity to be heard, the court may refuse the application on that ground. 8 The practice of serving an injunction after the meeting has assembled is not looked upon with favor by the courts. 9 Where an injunction has been obtained on false affida- vits and bill to control an election, and the proceedings in court 1 Ryder v. Alton, etc., R. R. Co., 13 it at an ensuing election, which was to III, 516 (1851), where a suhscriber failed be held within three days from the in his defense against a subscription by date of the filing of the bill, the court attacking the policy of the majority in held that inasmuch as the probable control. effect of the injunction would be to 2 Camden, etc., R R. Co. v. Elkins, 37 change the result of the election, and N. J. Eq., 273 (1883). Cf. Brown v. Pa- the consequent control of the affairs cific Mail, etc., Co., supra. of the company, without allowing the 3 See the form of injunction granted shareholders sought to be restrained to in Brown v. Pacific, etc., Co., 5 Blatch., be heard in their own defense, the in- 525. Approved in People v. Albany, junction ought to be denied. Hilles v. etc., R. R, 55 Barb., 344, 383 (1869). Parish, 14 N. J. Eq, 380 (1862). It ap- * Clarke v. Central R. R, etc., 50 Fed. pears, however, that counsel stipulated Rep., 338 (1892). for a new election in case the complain- 5 Brown v. Pacific Mail, etc., Co., 5 ant succeeded and the court so ordered. Blatch., 525 (1867). 9 "The practice of procuring an in- 6 id. junction and serving it, after the meet- 7 Brown v. Pacific Mail Steamship Co. ing had assembled, is not to be com- (1867), supra. mended, and should only be tolerated 8 Where a bill was filed to restrain in cases where the right thereto is certain shareholders from selling or as- clearly established." In re Rochester, signing their stock, or from voting upon etc., Co., 40 Hun, 172 (1886) 3 (53) 833 §§ 615, 616.] ELECTIONS CORPORATE MEETINGS. [CH. XiXYIL are discontinued immediately after the election, the court will summarily vacate and set aside the election by reason of the abuse of the process of the court and the fraud on the rights of the stockholders. 1 An appeal from an injunction against voting cer- tain stock will be dismissed where the parties may. under a stat- ute, apply to the court to review the election on affidavits. 2 §615. Issuing stock in order to carry an election. — Where the directors cause treasury stock to be sold to themselves at less than its real value and for the purpose of carrying an election, the court will set the transfer aside as fraudulent. 3 In a proper case the court will enjoin the issue of the new stock. 4 But an election is valid although it is carried by treasury stock of the corporation, which is sold by the directors just before the election in order to carry the election, so long as the sale is not attacked and set aside for fraud. 5 "Where the stock is not treas- ury stock, but is new increased capital stock, all the existing stock- holders have a right to subscribe for their proportion of the new stock, and may protect that right by injunction. fi § 616. Where one corporation owns a majority of the stock of a viral company, may it vote the stock and control the latter company? It has been decided in several cases that where one corporation owns a majority of the stock of a rival company, the temptation to manage the latter company for the benefit of the former com- pany will be so great that a minority stockholder of the latter c niipany may enjoin the former company from voting the stock. 7 1 Putnam r. Sweet, 1 Chandler (Wis.), even though the charge was made that 286, 334 (1849). the complainant was interested in rival 'Where an injunction against post- companies and was exercising control poning an election is granted, and the in their behalf. Fraser v. "VYhalley, 2 election is held, and the next day an Hem. & M., 10 (1864). appeal is taken from the injunction or- 8 State r. Smith. 4 s * \'t.. 266 (1876*. In der. the appeal will be dismissed, inas- the case of Taylor r. Miami, etc., Co., 6 much as the parties have the remedy Ohio, 176. 828 (1888), a hill by a stock- under the statute of applying to the holder to compel a person to take back court to review the election. Camden, from the corporation certain stock etc., R R r. Elkins, 37 N. J. Eq., 273 which he had purchased of it just be- (1883). fore the election, and had voted at the 3 Hilles v. Parish, 14 N. J. Eq., 380 election and then immediately sold (1862). See, also, p. 838, note. again to the corporation, failed. The 4 The court will enjoin the board of vote on these shares, however, did not directors from issuing new stock on the affect the result verge of an election and for the sole '§886, supra. purpose of carrying that election where "In Memphis, etc.. R R n "Woods, 88 the directors really represent a minority Ala., 630 (1889). it was held that where of the stock and where the power one railroad company has acquired a to issue the new stock is very doubt- majority of the stock of another rail- ful. Sucli an injunction was granted road company, and has elected the board 834 CH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 616. The same principle of law was stated and applied in a lower court in New York. 1 A contrary conclusion was reached in New Jer- sey. 2 A federal court has held that where a corporation is organ- ized to own and vote the stock of two competing railroads, the courts will enjoin the voting of the stock, the combination itself being forbidden by law. 3 It has been held in Ohio that one railroad corporation has no power to acquire the bonds of another railroad of directors, and oppressed and de- frauded such latter company by buying unnecessary rolling-stock, making un- necessary repairs at exorbitant charges, unduly apportioning the earnings as between the two roads, and in other ways increasing its own profits at the expense of the latter company, a mi- nority stockholder in such latter com- pany may enjoin the former company from voting such stock at an election. A request to the company to bring the action was first made by the stock- holder who brought the suit. A trans- portation company owning a majority of the stock of an ice company may be enjoined from voting the stock, if the former company intends to purchase ice from the latter company, but otherwise no such injunction will issue. Ameri- can, etc., Co. v. Linn, 7 S. Rep., 191 (Ala.. 1890). A stockholder in one mining and manufacturing company may en- join another rival company from voting the majority of stock in the former company, such majority being owned by the latter company. Mack v. De Bardelaben, etc., Co., 8 S. Rep., 150 (Ala., 1890). Where an electric light com- pany purchases a majority of the stock of a competing electric light company in the same city, and elects the board of directors, and fraudulently uses its power to make the latter subservient to and as a feeder to the former, and in- tends to destroy the latter, the court, at the instance of a minority stockholder of the latter, will appoint a receiver of the company ; but the proof of such intent must be clear. The fact that the direct- ors so elected are stockholders in the controlling company is not sufficient. Davis v. U. S., etc., Co. of Baltimore City. 25 Atl. Rep., 982 (Md., 1893). It is illegal for an Ohio corporation to pur- chase a majority of the stock of a Ten- nessee corporation for the purpose of controlling the latter, even though they are engaged in a similar business, the object being to form a monopoly. Hence the purchasing company cannot enforce the contract as to certain things which were to be done by the vendor of the stock. Buckeye, etc., Co. v. Harvey, 20 S. W. Rep., 427 (Tenn., 1892). See, also, 8 S. E. Rep., 630 (Ga., 1889). 1 In the case also of Milbank v. N. Y.. etc., R, R, 64 How. Pr., 20 (188*2), the court, at the instance of a minority stockholder, enjoined another railroad company from voting a majority of the stock in his company, although fraud and partiality in the management for the benefit of the majority stockholder was a fear of the future instead of a fact in the past. The court said : " It is against public policy to have or per- mit one corporation to embarrass and control another and perhaps competing corporation in the management of its affairs, as may be done if it is permitted to purchase and vote upon the stock." 2 A stockholder will not be enjoined from voting on the ground that he is not a bona fide stockholder but that his stock was paid for by rival companies and that he intends to control the com- pany for the advantage of those com- panies. Camden, etc., R R v. Elkius, 37 N. J. Eq., 273 (1883). 3 Clarke v. Central R R, etc., 50 Fed. Rep., 338 (1892). 835 § 617.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. corporation in order to control the elections of the latter, such bonds having a voting power. 1 The reasonable rule would seem to be that, where one company having no power to purchase. the stock of another rival company 2 illegally purchases a controlling interest in such stock, or where one' company having legally purchased the majority of the stock of a rival company has managed the latter company fraudulently in its own interest, a court of equity will enjoin it from voting the stock at the next election. But if the purchase of the stock was leeal and there has as yet been no fraud in the management, such an injunction will not be granted. § 617. Illegal or fraudulent elections — The remedy of quo war- ranto and mandamus.— There are various ways in which an illegal or fraudulent election of directors or managers of an incorporated company can be investigated and remedied. The natural and proper remedy in all cases is the old remedy of quo warranto to test the title to office. In England quo warranto does not lie to test the legality of the election of officers of a private corporation, but in this country a contrary rule prevails.' An information in the nature of a quo warranto is not allowed of course, but is a sub- ject for the exercise of a sound discretion. 4 Mandamus, instead of quo warranto, lies when the title de jure has been adjudicated. 5 In West Virginia mandamus is held to be the proper remedy to place a de jure director in the place of the de facto director, and service on the latter may be by publication, 6 and mandamus lies at the instance of a corporation to compel illegally-elected directors to turn over the books to the legally-elected directors. 7 « State v. McDauiel, 22 Ohio St, 354, People v. Albany, etc., R R Co., 55 3C8 (187-2). Barb., 844, 85 1 (1869). For a clear state- 2 See §S 315-317. meat of the nature of an information 8 Commonwealth V. Arrison, 15 S. & in the nature of a quo warranto filed by R, 127 (1827), a case of church trustees ; a claimant for an office in the name of Commonwealth v. Graham, 64 Pa. St., the attorney-general, see State v. Mayor. 339 (1870), the same; People v. Tibbits, etc., 10 Atl. Rep., 377 (N. J., 1887). See, 4 Cow., 358 (1825), an insurance com- also, § 713, infra, concerning de facto pany ; State v. Ferris, 45 Mo., 183 (1869), officers. college trustees ; Creek v. State, 77 Ind., * State v. Lehre, 7 Rich. Law (S. C), 180 (1881), church trustees; State v. 234(1811. Kupersforte, 44 Mo., 154 (1869), an in- 5 State v. Mayor, etc., 19 Atl. Rep., 780 Burance company; State v. McDauiel, (N. J., 1890). 22 Ohio St., 354 (1872), directors of a "Cross v. West Va., etc., R'y, 12 S. E. railroad; Commonwealth v. Smith, 45 Rep,, 1071 (W. Va., 1891). Compares. C, Pa. St., 59 (1863) ; High on Extraordi- id., 765, and People v. N. Y., etc., Asy- nary Remedies, § 653, etc.; Sbortt on lum, 122 N. Y., 190(1890). Informations, etc., 129 (Eng., 1887); T American Railway Frog Co. v. Haven, Commonwealth v. Gill, 3 Whart. (Pa.), 101 Mass., 398 (1869). ^ , a^ ft, Lv *i^"| 228 (1837), giving the pleadings herein ^ ^ .",''- CH. XXXVII. J ELECTIONS CORPORATE MEKTIXGS. [§ 618. §618. Illegal or fraudulent elections — The remedy by oill in equity and injunction, — A court of equity has no inherent power or jurisdiction to entertain a bill for the purpose of reviewing a corporate election and ousting the parties who claim to have been elected. 1 But where there has been a palpable fraud practiced in the elec- tion and usurpers are about to take possession of the property in violation of all justice, a court of equity will enjoin them from doing so. 2 1 The title of de facto officers to their office cannot be tested by an injunction or bill in equity. Quo warranto or a proceeding under the statute is neces- sary. People v. Albany, etc., R. R. Co., 57 N. Y., 161, 171. No injunction against officers acting as such on ground of illegal election. Quo warranto lies. Hartt v. Harvey, 32 Barb., 55 (1860). Equity has no power except as inci- dental to other relief to review an elec- tion. Perry v. Tuscaloosa, etc., Co., 9 S. Rep, 217 (Ala., 1891); Hullman v. Honcomp, 5 Ohio St., 237 (1855) ; New England, etc., Co. v. Phillips, 141 Mass., 535 (1886), where an injunction was sought to restrain persons from acting as directors who had been illegally elected. Allen, J. : "This course is open to the objection that suits to remove or to institute corporation officers do not belong to the original jurisdiction of chancery; and that the right to be such officer cannot, in general, and in the ab- sence of special legislation allowing this remedy, be tested by means of an in- junction." Pom. Eq., I, §171; id., Ill, § 1345. See, also, to same effect, Owen v. Whitaker, 20 N. J. Eq.. 122 (1869), where the legality of the first election was the only thing involved ; Hughes v. Parker, 20 N. H., 58 (1849); Johnston v. Jones, 23 N. J. Eq., 216 (1872) : Mickles v. Rochester City Bank, 11 Paige, 118 (1844); Mechanics' National Bank of Newark v. Burnet Mfg. Co., 32 N. J. Eq., 236 (1880), where a third person suing the corporation sought to have its an- swer stricken out because the officers were not duly elected ; Fadness v. Braun- borg, 41 N. W. Rep, 84 (Wis., 1889), a religious corporation case ; Wandsworth, etc.. Co. v. Wright, 18 W. R, 728 (1870). where fraud was charged on the part of the inspectors ; Davidson v. Grange, 4 Grant's Ch. (Up. Can.), 377 (1854), where the court refused an injunction, but said in a dictum that the election might be set aside on account of fraudulent voting of shares subscribed for by " dum- mies" to get control of the election on promise that subscriptions would after- wards be canceled. Where by reason of an injunction against voting certain stock the meeting is not held at the time specified in the notice, but later in the day a minority meet and adjourn to the next day and conceal such adjournment from the majority and elect directors, the court will oust them from offica State v. Bonnell, 35 Ohio St, 10 (1878). Self-constituted directors without a reg- ular organized meeting have not a good title to their office, and where subse- quently the incorporators elected other directors, the latter may cause to be stayed an action brought in the name of the company by the self-constituted directors. John Morley, etc., Co. v. Bar- ras. 64 L. T. Rep, 856(1891) 2 Where the owners of the whole stock sell it and part of them resign and place the representatives of the vendee in pos- session, and those who remain in the board do so at his request, but transfer to him their certificates of stock, and thou subsequently, when the time for the annual meeting has gone by, they publish a notice of a meeting and con- ceal the notice from him and elect a 837 § 619.] ELECTIONS — COEPOEATE MEETINGS. [CH. XXXVII. The de facto directors may enjoin the claimants to office from attempting to take forcible possession or exercising the duties of the office. 1 So also if the validity of a corporate election arises in- cidentally in connection with a suit in equity the court will pass upon the election. This may occur where a bill is filed to enjoin a forfeiture of stock- or a consolidation of corporations. 3 A court of equity may appoint a master to hold an election of a corporation when by reason of fraud, violence or unlawful conduct on the part of some stockholder a fair election cannot otherwise be held. 4 119. Illegal or fraudulent i h ctions — Statutory r< medy uy peti- tion to a court of equity. — In consequence of the delays and diffi- culties attending the remedy of q ranto, statutes have been enacted in many of the states which give courts of equitv the power to review corporate elections at the instance of the parties aggrieved. 5 Such a statute is found in Xew York, New Jen I and attempt to take possession, a court of equity will enjoin them. John- ston r. Jones, 23 N. J. Eq.. 811 372 Equity is not obliged " to leave the cor- poration and its lawful directors to the remedy at law, always taking at months, and in the meantime suffer the to be O] and perhaps ruined by the depredatory because they claim > directors de facto or dejure" Id. In the case Clarke R Ceutral, etc., Co. B (Ga., : itap] hat the board of directors having been illegally elected, " the voting power or k was enjoined, a new election :. and the i inted n not for the purpose . the properties to the claims of cr but to protect and to pre- serve them until they could be turned over to a legally elected board of direct- ors, t trustees, who would have the right under the law to take and operate the railroad in the interest of all erned The court further directed that, when this new election should have taken p! I new board of directors might apply to the court to have the property returned to the control of the properly constituted offici rs of the cor- poration.'* Where a corporation has an authorized capital of $5,000, but only are directed by the stockholders to be issued, it is illegal and fraudulent to issue the remaining authorized capital without giving the existing stockholders a prior right to subscribe to such in- creased capital pro rata. Directors elected by reason of such illegal would be enjoined from acting, where are about to change the whole policy of the company. Humboldt, etc., ens et at. 59 N. W. Rep., 568 - . Hun. 181 (18 an injunction suit brought by a stockholder to prevent the corporate officers from forfeiting stock, the court will pass upon the legality of an election of directors, but of course will not and cannot remove them. Moses t\ Tomp- kins. ... 613 Co. ft M L. R, 1 A pp., 39. Where the directors are about to make an illegal consolidation and a holder files a bill to enjoin it, the court will pass also upon the legality of the election of the de facto directors. Nathan ft Tompkins, Bfi Ala.. 437 1 1 4 Tunis ft Hestonville, etc.. R. 1: At!. Rep.. 88 (Pa., 1892} See, also, § 612. « See Part VIL 838 CH. XXXVII.] ELECTIONS — COEPOEATE MEETINGS. [§ C19. California and other states. 1 By these statutes the court, sitting as a court of chancery, is empowered to review corporate elections, and to grant such relief as the particular circumstances and justice of the case seem to require. 2 Such a statute has proven to be one of the wisest and best that a legislature ever enacted in regard to corporations. It furnishes a speedy, simple, just and effective remedy for all complaints, and is free from useless technicalities and expense. Various decisions under these statutes are given in the notes below. 3 ild. Barb., 344, 363 (1869). Where the place 2 Brewster v. Hartley, 37 Cal., 15 of an election is rilled by one party with (1869); "Wright v. Central California Colony Water Co., 67 Cal., 532 (1885 ; In the Matter, etc.. St. Lawrence, et . Co., 44 N. J. L.. 529 (1882), a case where proxies were illegally rejected. For va- rious cases in New York, showing the wide powers exercised by the court un- der this statute, see Ex parte Holmes, 5 Cowen, 426 (1826) ; The Schoharie Valley R. R Case. 12 Abb. Prac. (N. S.), 394 (1872): JJeDesdoity, 1 Wend.; 98; V"an- denburgh v. Broadway R R Co., 29 Hun, 348; Strong v. Smith, 15 Hun, 222 (1878); Ex parte WOlcocfes, 7 Cow., 402 (1S27) : Mickles v. Rochester City Bank, 11 Paige. US : In the Matter of the Long Island R. R. Co.. 19 Wend.. 37. In this case an election was set aside because the directors had illegally de- clared certain shares forfeited for non- payment of instalments, and refused to record an assignment thereof so as to entitle the assignee to vote. Lnder these statutes an election may be de- clared void by reason of the conspiracy, frauds or trickery of a part of the stock- holders. People r. Albany, etc., R. R. Co.. 55 Barb.. 344 (1869). 3 The statute authorizing a court of chancery to review elections and order new ones does not authorize the courts to issue a mandamus to the inspectors of election in regard to counting votes by proxy and amending the return. People v. Simonson, 61 Hun, 33S (1891> '•Surprise and fraud upon part of the electors is ground for avoiding an elec- tion.*' People n Albany, etc.. R. R, 55 roughs as proxies brought there for purposes of intimidation and for voting on viva voce votes and for crowding out the regular voters. Id., p. 379. In this case under the New York statute, in an equitable suit brought by the state, the court appointed a receiver and issued an injunction pending the suit, and finally declared elected persons who would have received the most votes of all votes that had been legally cast although there had been two elections held at the same time by the two parties at differ- ent places in the same town. Under the New York statute making the trans- fer book conclusively binding upon the inspectors of election, the inspectors cannot exclude the vote of the registered stockholder although he holds the stock merely as pledgee ; but under the New York statute allowing the courts to summarily review t u e election, the court has power to go back of the trans- fer book and set the election aside where the statute gave the pledgor the right to vote. Strong v. Smith. 15 Hun, 222 (1878). " Where no allegation of fraud or deceit is made, the court cannot inter- fere under the power vested in it by the Revised Statutes to nullify or set aside the will of the shareholders as expressed bv their votes." In rt AVellman, etc.. a Ciancimino, etc., Co.. N. Y. L J.. May, 13, 1890, per Lawrence, J. The statu- tory power of the court to inquire into the legality of corporate elections does not apply to the ••appointment"' of a director by the board to fill a vacancy 839 620.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. § 620. Who may complain of an illegal election — A new election is not granted if the result will he the same.— Only a, shareholder whose rights have been infringed and who is equitably entitled to complain may institute the proceedings. Accordingly, a trans- feree of one of the shareholders who participated in the fraud will not be heard to impeach the result of that fraud. 1 And in general the plaintiff, a relator seeking to set aside a corporate elec- tion, is barred of relief if he himself was guilty of misconduct or neglect, or if it appears that he has subsequently acquiesced -with knowledge of the facts. 2 It is a principle of law also that the legality of an election will not be inquired into upon the ground that illegal votes were cast, unless those votes were challenged at the election at the time when they were cast. 3 An election will not be set aside if it be shown that after throw- ing out the invalid votes the officers declared elected would still have, according to the return, a valid majority of the votes cast; 4 due to a resignation. Wickersham v. Brittan, 28 Pac. Hop., 798 (Cal., 1892). Nor does such a statute enable the di- rector so " appointed " to settle the ques- tion of the legality of the election by applying to the court. Wickeraham v. Murphy, 28 Pac. Rep., 793 (Cal.. 1892). Nor does it apply to the legality of an election of the president by the direct- ore. In re Caguey, N. Y. L. J., Sept 16, 1891. Although tlir inspectors admitted votes on insufficient evidence, yet if ad- ditional and sufficient evidence is pre- sented to the court the election will stand. Widow Conant v. Millaudon, 5 La. Ann., 512 (1850). The corporation itself may apply under the statute for an order to the effect that the persons declared elected were legally elected. Matter of Pioneer Paper Co., 36 How. Pr , 111 (1805). In attacking the valid- ity of a vote the burden of proof is on him who attacks it. In re Indian, etc., Co., L. R, 26 Ch. D., 70(1884). flatter of the Application of the Syracuse, etc., R R Co., 91 N. Y., 1 (1883). 2 Wiltz v. Peters, 4 La. Ann.. 339 (18491, where a commissioner of elec- tion attacked the legality of votes which he himself had admitted as commis- sioner. 3 In the Matter of the Chenango, etc., Ins. Co., 19 Wend., 685 (1839), wherein the court said : -'It is quite clear, gen- erally speaking, that an illegal vote not challenged will not invalidate an elec- tion, nor will even be inquired into." See, also, The Schoharie Valley R R. I lase, 12 Ahh. Prac. (X. S.), 394 (1872). A stockholder who attends the election and votes and does not object to others \<'ting. although he knows that they are doing so in violation of a by-law, cannot himself afterwards object to th^ legality of the election. State v. Lehre, 7 Rich. Law (S. C), 234 (1S54). See, also, People r. Robinson, 64 Cal., 883); In re Long I., etc., R R, 19 Wend., :'>:, 41 ^837). * People v. Tuthill, 31 N. Y., 550 (1864); Ex }>-t< Murphy, 7 Cowen, 153(1827); In the Matter of the Chenango, etc., Ins. Co., 19 Wend., 635 (1839) ; State v. Lehre, 7 Rich. (Law), 234. 325(1854): McNeeley r. Woodruff, 13 N. J. Law, 352 (1833); First Paiish in Sudbury v. Stearns, 38 Mass.. 148 (1838); Trustees of the School District r. Gibbs, 56 Mass., 39 (1848); Wardens of Christ Church v. Pope, 74 Mass., 140 (1857). The court will not consider the legality or illegality of votes, where those votes will not change the result whatever the decision might 840 CH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 620. and a new election will not be ordered if after rejecting all the illegal votes, and after admitting the legal votes which were re- jected, it still appears that the directors returned as elected had a majority of the votes. 1 The court may, in the exercise of its equity powers, declare a candidate elected who received only a minority of the votes act- ually cast, when such candidate plainly received a majority of all votes cast. 2 Where quo warranto proceedings are pur- the legal be. Widow Conant v. Millaudon, 5 La. Ann., 542 (1850). Where the officers de- clared elected received a majority of the original stock as well as a majority of the alleged illegal increased stock, they will not be ousted. Byers v. Rol- lins, 13 Colo., 22(1SS9). Where after re- jecting all votes illegally cast by proxy there is still a majority for the persons who were declared elected, the court will not disturb the election. Craig v. First Pres. Church, 88 Pa. St., 42 (1878). • McNeeley v. Woodruff, 13 N. J. L., 352 (1833); Ex parte Desdoity, 1 Wend., 98 (1828). change the result of the election, the election would not be set aside. Hence where of two thousand three hundred and ninety-two votes for certain candi- dates seven hundred and ninety-nine were illegal, and there were illegally re- jected one thousand eight bundled and ninety-four votes for the defeated can- didate, who received forty-six votes, the court ordered a new election. In the case In re Long I. R. R, 19 Wend., 37, where the votes illegally rejected would have elected other persons, the court set the election aside, and did not declare elected those who would have been 2 Where the whole number of votes is elected if the rejected votes had been five hundred and ninety -three, and there were present five hundred and thirty- seven, and the candidates declared not elected received three hundred votes, one hundred and fifty of which were counted, there being one thousand seven hundred votes not represented, and eleven thousand that were disqualified under the statute. The court may de- clare part of the directors illegally illegally rejected by the inspectors, the elected, and order a new election as to court under the New Jersey statute de- clared those candidates elected and did not order a new election. Matter of Election of St. Lawrence, etc., Co., 44 N. J. L, 529 (1882) ; Monsseaux v. TJrqu- hart, 19 La. Ann., 482 (1867); Ex parte Desdoity, 1 Wend., 98 (1828); Vanden- burgh v. Broadway R'y Co., 29 Hun, 348 (1883); Downing v. Potts, 23 N. J. Law, 66, 84 (1851), where an election was set aside and a new one ordered because votes were illegally rejected on one side and illegally accepted on the other, which changed the result, but two directors who were on both tickets and received all the votes cast wei-e held elected. The court said that unless the legal votes rejected and the illegal votes received were sufficient to them, without affecting the title of the others to their offices. People v. Flem- ing, 59 Hun, 518 (1891). In the case Monsseaux v. Urquhart, 19 La. Ann.. 482 (1867). the court ousted a director and declared elected another person in his stead. Where the presiding officer illegally rejects certain votes, declares certain persons elected and adjourns the meeting, and the dissatisfied party con- tinue the meeting and hold another election, the court will consider merely the question as to who received a ma- jority of the votes which were legally offered to be cast. State r. Smith, 15 Oreg., 98 (1887). A court will not force upon the company directors who are technically entitled to be declared elected, certain proxies being irregularly 841 § 621.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. sued, the court can only oust the party who is in office. It cannot declare another person elected. 1 § 621. Restrictions on the right to vote. — It is legal for a corpo- ration upon issuing preferred stock or increased capital stock to impose a condition that such stock shall not have any right to vote. 2 It is legal also for the corporation with the assent of all stockhold- ers to give to bonds a voting power. 3 There is no rule of public policy which forbids a corporation and its stockholders from mak- ing any contract they please in regard to restrictions on the voting policj\ If the agreement is made by unanimous consent it is legal. Such restrictions, however, generally are and always should be printed on the certificates of stock so that a purchaser shall take with full notice. Thus, a by-law passed at the time of the or- ganization of the company may limit the number of votes which a single stockholder may cast. 4 All this is a mere matter of private contract. , executed, but will order a new election. Ohio St.. :!."U (1872), the bondholders on Harben v. Phillips. L. R, 23 Ch. D.. 14. A statute repealing the statutory rem- edy in chancery to review elections operates retrospectively as well as pro- spectively, in re N. Y., etc., Co., 28 Hun, 615 (1881). A late case holdH that, if the illegally-rejected votes would have given the defeated candidate a majority of all the stock, the court will declare him elected, and will oust the one that was declared elected. /// re Cape, etc., Co., 16 Atl. Rep, 191 (N. J., 1888). 1 State v. McDaniel, 22 Ohio St.. :;:>4 (1872), where a number of legal votes were rejected which would have sufficed to elect certain directors who without such votes had only a minority of the votes cast. The court held that persous cannot be declared elected and inducted into office upon a quo warranto in- formation; People v. Phillips, 1 Deuio, 3S8 (1845), making the same ruling as to a church corporation. 2 It is legal upon the issue of pre- ferred stock to provide that it shall not vote at corporate elections. Such a pro- vision will be upheld. Miller v. Ratter- man, 24 N. E. Rep., 496 (Ohio, 1890). See, also, ch. XVI, supr-a. 3 In the case of State v. McDaniel, 22 a reorganization were given by con- tract the power to vote, and the court upheld such contract right. In the case of Phillips v. Eastern R. EL, 138 Mass., ** I !. the court passed upon a stat- utory scheme in which the creditors of a railroad company, by the terms of a mortgage, chose two-thirds of the di- rectors and the stockholders chose one- third until the debt was reduced to a cer- tain figure. 4 A by-law may provide that stock- holders shall have one vote for each share held by them up to ten shares, and may tix the proportion which their votes shall bear to their shares above that number. Detwiler i: Common- wealth, 18 Atl. Rep., 990 (Pa., 1890). A by-law restricting the right of members of a church to vote as authorized by statute is void. People v. Phillips, 1 Denio, 388 (1845). By-law restricting the right of electors in a town to vote is not good. Rex v. Spencer, 3 Burr., 1827 (1766); Rex v. Head, 4 Burr., 2515, 2521 (1770). See, also, § 700a, infra; People v. Kip, 4 Cowen, 382, note (1822), holding that a corporation has no power, by a by-law, to demand an oath of a stock- holder in order to test his qualifications as a voter. Where the charter author- 842 en. xxxvii.j ELECTIONS CORPORATE MEETINGS. [§ 622. Where the charter limits the number of votes which one stock- holder may cast, the provision cannot be evaded by transfers to various persons. The courts will enjoin the voting of the stock. 1 A statute prohibiting- a stockholder from voting " whose liability is past due and unpaid " refers to a subscription liability and not to a commercial liability. 2 § 622. Combinations and contracts as to elections — Voting trusts and pooling agreements. — Stockholders owning a majority of the stock have a right to combine and secure the election of the board of directors. 3 But a contract in regard to elections in private cor- porations is not legal if it provides that a lucrative corporate posi- tion shall be given to one or more of the parties to the contract. Thus an agreement of a large stockholder holding a majority of azes the depositors and stockholders to elect new members, the directors can- not by by-law exclude the former from elections and give a vote to stockhold- ers only. Commonwealth v. Gill, 3 Whart. (Pa.), 228 (1837). 1 Mack v. De Bardelaben, etc., Co., 8 S. Rep., 150 (Ala., 1890). Where stock has been transferred in order to give it a vote, the transferrer having already all the stock that the charter allows one stockholder to vote, the transfer being merely nominal and for voting pur- poses only, an injunction will issue against its being voted. Campbell v. Poultney, 6 G. & J., 94 (1834) ; Webb v. Ridgely, 38 Md., 364 (1873). Although the charter limits each person to one hundred votes, yet a person voting a hundred votes in his own name may vote another hundred as proxy for his wife, if it is bona fide her property. Widow Conant v. MillaudoD, 5 La. Ann., 542 (1850). In England a contrary rule prevails. It is not illegal to transfer or procure shares before a meeting so as to multiply votes at it; nor can votes so obtained be disregarded. They may be cast. Pender v. Lushington, L. R, 6 Ch. D., 70 (1877); Stanton Iron and Steel Co., L. R, 10 Eq., 559 ; Cannon v. Trask, 20 Eq., 669 ; Moffatt v. Farquhar. L. R, 7 Ch. D., 591 (1878); and see Northwest Transportation Co. v. Beatty, L. R, 12 App. Cas., 589. A statute which confines the right to vote to stockhold- ers who are citizens of the state by which the corporation is chartered can- not be evaded by colorable transfers of shares to residents of the state merely for the purpose of having them voted upon. State v. Hunton, 28 Vt., 594 (1856). Such a statute would now, how- ever, probably be held to be unconstitu- tional. See g 813, relative to statutes prohibiting citizens of other states from being trustees. 2 United States v. Berry, 36 Fed Rep., 246 (1888). 3 Havemeyer v. Havemeyer, 43 N. Y. Super. Ct., 506, 513 (1878) ; affirmed, 86 N. Y., 618 (1881); Faulds v. Yates, 57 111., 416 (1870), where it was held that per- sons holding the majority of stock in a corporation could lawfully agree among themselves to vote as a unit to control an election ; and that their agreement that their votes should be cast as should be decided by the majority of their own votes was not void as being against public policy. "There is. if I may say so, no obligation on a shareholder of a company to give his vote merely with a view to what other persons may con- sider the interests of the company at large. lie has a right, if he thinks fit, to give his vote from motives or prompt- ings of what he considers his own indi- vidual interest." Pender v. Lushington, L. R, 6 Ch. D., 70 (1877). 843 § 622.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. the stock that upon the purchase and absorption of plaintiff's busi- ness by the corporation the plaintiff should be engaged for a term of years as vice-president and general manager of the corporation at a specified salary is contrary to public policy and is void. 1 A sale by a stockholder of his vote is illegal. 2 Closely connected i West v. Camden, 135 U. S., 507 (1890). A contract made by a stockholder for a consideration to vote for a particular person for manager of the company, and in the event of his election to vote for an iucrease of the salary attaching t<> that position, is illegal and cannot be enforced. Woodruff v. Wentwortlv. 133 An agreement of per- sons holding a majority of the stock, they beiup directors also, that a person purchasing stock from them shall be general manager and may at the end of two years sell the stock back to them at a stated price, is contrary to public policy and void. The vendors need not repurchase The arrangement is unfair to the corporation. Wilbur v. Stoepel. 46 N. W. Rep.. 734 (Mich., 1890). A proxy for five years given so as to unite enough stock to control the corporation, the holder of the proxy agreeing that the n giving the proxy shall have an office at a salary of $2,500 a year, is void. At the instance of the latter per- son a court of equity will enjoin voting thereunder. Cone's Ex'rs r. Russell, 21 Atl. Rep.. 847 (N. J.. 1891). Where a stockholder in a railroad company is in- duced to take part, in the formation of a land company, and is to receive a cer- tain sum of money when a depot is lo- cated on such land, he cannot enforce the agreement It is practically a sale of his vote. Fuller v. Dame. 35 M 1836). A contract of the vendor of bank stock that he would make the vendee the cashier is illegal and void. Noel v. Drake. 28 Kan., 265 (1882 . An agreement to vote in a particular way. in consideration of some personal bene- fit, is illegal : for a vote ought to be an impartial and honest exercise of judg- ment. Elliott r. Richardson, L. R, 5 C. P.. 744. See, also, Moffatt v. Farquhar- son. 2 Bro. C. C, 338 ; Card r. Hope, 2 B. & Cr.. 661. Compare Bolton v. Mad- den, L. R, 9 Q. B., 55, where an agree- ment between two subscribers to a char- ity to vote for each other's nomiuees was held not to be illegal. Directors have no power to contract with an out- sider that he shall, upon purchasing cer- tain stock, be made a director in the company. Seymour v. Detroit Copper, etc.. Mills. 56 Mich.. 117 (1885). But a sale of stock with an agreement that the vendee should be elected superin- tendent may be rescinded if the latter part of the agreement is not carried out. Id. Although a contract of cer- tain stockholders to vote together is legal, yet a conspiracy to obtain an il injunction against others voting will not be countenanced by the court People v. Albany, etc., R R Co.. 55 Barb.. 344, 368 (1869). A contract by which a shareholder in a corporation agrees to secure to the purchaser of his stock a corporate office at a state.] salary. and in case of his removal to repurchase the stock, is void as against public pol- icy and as a fraud on other stockhold- ers, unless it is proved that the transac- tion is not for the private benefit of the vendor, or that it was consented to by the other stockholders, Guernsey n Cook. 120 Mass., 501 (1876); Noyes v. Marsh. 128 Mass., 286 (1877), Where the agreement was to keep the vendor in a professorship the court will not aid the parties. The agreement is against public policy. Jones v. Scudder, 2 Cin. Sup. Ct,178 (1872 . -' Ilafer r. X. Y, etc., R R, 14 Week. Law Bull., 68. See, also, Yale Law- Journal, vol. 1, p. 7. 844 CH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 'J22. with this principle of law is the question whether a director or stockholder may vote his stock in favor of a sale to or a purchase from another corporation in which such director or stockholder is interested as a stockholder. The general rule is that a contract between two corporations having certain stockholders or directors in common will be sustained by the courts if the contract is fair towards the minority stockholders. If it is not fair the courts will . set it aside upon the complaint of the minority stockholders. 1 A contract, however, by which the directors who own a majority of the stock sell such stock and agree to substitute the vendees as directors of the company, is legal. 2 The vendor of stock may of course agree to vote as the vendee wishes. 3 Fie>trictions on the right to vote stock, like restrictions on the right to sell stock, are not favored by the courts. These two classes ofrestrictions are so closely allied that it is best to consider them together. They both are due generally to a desire to so tie up the stock or the voting power that the control will be permanently ob- tained and retained thereby. It is an old problem in corporation law how to compel parties to live up to their agreement in regard to holding their stock and voting with other parties to the contract in order to keep the control of the corporation. Various devices have been tried, the object being to place the stock in such a posi- tion that no one of the parties can break his agreement to act with the others. "Irrevocable" proxies to vote upon the stock have been given by all the parties to a designated person, who acted as their a^ent. ' But the courts decided that these proxies were not irrevocable, but might be revoked at any time. 4 Another plan was to place the stock of the various parties in the hands of trustees with power to transfer the stock to themselves, 1 See eh. XXXIX, the court stating that such a contract is 2 A contract to sell one's stock in a unfair towards the minority stockhold- corporation. and to resign a directorship ers. See, also, contra, Jacobs v. Miller, and the presidency, and having done so 15 Alb. L. J., 188 >T7). to endeavor to induce other directors to 3 An agreement by a vendor of stock, resign, in order that the purchasers of which is to be delivered after an ei the stock may come in and take their tion. that he will vote as the vendee de- places and so control the management sires, is legal. Mobley v. Morgan. 6 Atl. of the company, there being no evidence Rep., 694 (Pa., 1886). One corporation of fraud, has been held a contract not contracting with another may agi void as against public policy. Barnes V. that the latter shall hold and vote the Brown, 80 N. Y., 527 1880 . Specific stock of and in the former. Tonawanda, performance will not be granted of an etc., R R. Co. v. N. Y., etc.. R R Co.. 42 agreement of the vendors of stock .that Hun, 490 (1886). This is but a mode of they will resign as directors and substi- issuing the stock, tute the vendee's representatives instead. Si c § 010, supra. Fremont v. Stone, 42 Barb.. 169 (1864). 845 § 622.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. and to hold and vote the same. Trustees' certificates were then issued by the trustees to the various parties, specifying the amount of stock so deposited by them and their interest in the pool. But this plan failed. The courts held that any holder of a trustee's certificate might at any time demand back his part of the stock.' Toting- trusts of this kind are resorted to in forming " trusts," the combinations in trade. All the stock of various competing corporations are placed in the hands of trustees, who issue trustee certificates therefor. Such voting trusts as those are declared ille- gal because the monopolistic combination that is sought is illegal. i Woodruff v. Dubuque, etc., R R, 30 Co. v. Chicago, etc., R'y, 27 Fed. Rep., Fed. Rep., 91 (1887); Hafer v. New York, etc., R R Co. (Ohio), 14 Week. Law Bui., 68 (Cincinnati Sup. Ct, 1885). See Griffith v. Jewett (Ohio), 15 Week. Law Bui., 419 (Cincinnati Sup. Ct, 1886) ; Vanderbilt v. Bennett, 2 Ry & Corp. L J., 409 (Pa., 1887); Starbuck r. Mercantile, etc., Co., 24 Atl. Rep., 32 (Conn., 1891). See, also, an excellent article and careful re- view of the cases by Professor Baldwin in 1 Yale Law J., 1 (1891). A trust of stock for the benefit of both the bond- holders and the stockholders cannot be broken up by one of the stockholders only. Shelmerdine r. Welsh, 47 I Intell., 26 (Phil. Com. PI., Jan., 1890). Although many stockholders transfer their stock to a trustee to hold and vote it for three years, and agree not to sell until they have offered to sell to each other, yet any one may sell to an out- sider, and the latter may demand back his stock from the trustee. Moses v. Scott, 4 S. Rep, 742 (Ala., 1888). The trustees are not purchasers and owners of the stock. People r. North River S. Ref. Co., 121 N. Y, 582 (1890). An out- side stockholder cannot object to other stockholders uniting their interests in a "trust," and thereby obtaining control of the corporation. Zimmeimann v. Jewett, 19 Abb. N. C, 459 (Ohio, 1886). But he can object when the purpose of the " trust " is to work out some scheme which is illegal in itself. Hafer v. New York, etc., R R Co., 14 Week. Law Bull., 68 (Ohio, 1886). A "trust" of 6tock was involved in Farmers' L & T. 146 (1886), where Hugh J. Jewett, president of the Erie railway, held as trustee the stock of the Chicago & At- lantic Railroad, the western connection of the former company. The court did not pass on the permanency of the trust. An agreement of the holder of a majority of the stock that he will re- tain control is no defense by the corpo- ration to an action by the receiver of such stockholder to transfer the stock on the corporate books. Weller v. Pace Tobacco Co.. 35 N. Y. Week. Dig., 531 A contract to combine to con- trol the majority of the stock of a rail- road company may be violated by a party to it, although by its terms it is irrevocable. Clarke v. Central R R, etc., 50 Fed. Rep., 338 (1892). Where stock is placed' in a trustee's hands, and a trustee's certificate is taken therefor, a pledge of the trustee's certificate is not a pledge of the stock sufficient to cut olT subsequent attachments of the stock. Bidstrup t\ Thompson, 45 Fed. Rep., 4.")2 (1891 ». Where stock is deposited with a trustee for purposes of reorganization, and transferable certificates are issued therefor by the trustee, a claimant of stock which another person has depos- ited, and for which such other person has the trustee's certificate, cannot com- pel the trustee to deliver up the stock until the trustee's certificate is returned, ' even though the party holding it is a party defendant Beau v. American L & T. Co., 122 N. Y, 622 (1890). S46 CH. XXXVII.] ELECTIONS — CORPOEATE MEETINGS [§ 622. Hence the decisions concerning the "trusts" are not applicable to the questions now under consideration. 1 Another device was tried. The parties contracted together not to sell their stock for a specified time, and agreed that if they did they would sell together or to a purchaser who would be agreeable to the old stockholders. But this plan also did not succeed. If it prohibited any sale whatsoever, and did not limit the time during which the agreement was to last, it was void as an illegal restraint of trade. 2 Moreover it constituted no check on the parties. At any time any one of the parties might sell his stock. The only remedy of the other parties against him then was a doubtful, diffi- cult, protracted and expensive suit for damages. 3 Another plan was to restrict by a b} T -law of the corporation the right to transfer stock. But such by-laws are illegal. 4 Still another plan was tried. An unincorporated joint-stock as- sociation was formed to carry on the business. A provision was inserted in the articles of association of the company restricting the right of a shareholder to sell his stock. This provision was upheld by the courts. The purchaser of a certificate of stock, who sold in violation of the agreement, received no right to vote or par- ticipate in the company. He merely was entitled to the dividends on his stock. 5 But this device is not open to corporations. Their charters are generally obtained by filing a certificate in accordance with a general law. A special provision inserted in the certificate, limiting the right to transfer stock, would be ineffectual and void. All these various devices have proved to be impracticable. It is legal, however, for stockholders to agree to place their stock in the hands of a trustee for a reasonable time, or until the debts of the company and of one of the parties are paid. 6 Such an i See ch. XXIX, concerning " Trusts." 4 See § 332, supra. 2 Fisher v. Bush, 35 Hun (N. Y.), 641 5 Harper r. Raymond, 3 Bosw. (N. Y), (1885). 29 (1858). See, Kingman v. Spurr. 3 In the case Havemeyer v. Have- 7 Pick., 234 (1828). See, also, Taft v. meyer, 43 N. Y. Super. Ct, 506 (1878); Harrison, 10 Hare, 489 (1853 . as to lia- afFd, 86 N. Y, 618, it was held that an bility after an offer to sell to the corn- agreement of several stockholders not pany. to sell their own stock except in con- 6 An agreement by which various nection with that of the other parties to owners of stock place their stock in the the contract was not in restraint of hands of one person as trustee or agent trade and was not contrary to public to hold for a certain period of time, tin- policy, as restricting the right of aliena- parties agreeing not to sell their stock tion, but the measure of damages for without having first offered to sell it to breach of such a contract is only the the rest of their associates at a price not actual loss suffered by a decline in the above the then current market value, value of the stock by reason of the and in case of their declining to take it, breach. without next offering it to the trustee. 847 22.] ELECTIONS — CORrOKATE MEETINGS. [on. n.wn. agreement has to be supported, however, by something more than the mere agreement of the parties. 1 It is legal for parties to agree that certain persons shall be directors for a certain length of time. 2 It is legal for the stockholders to deposit their stock with a depositary, to be transferred to such depositary and voted by him as directed by a committee of the stockholders, such committee being named, the object of the deposit being to effect an adjust- ment of differences between the common and preferred stock- holdei Where, in order to prevent the foreclosure and sale of a rail- road, a r lorganiz ttion agreement is entered into by the creditors and stockholders, whereby the claims of the creditors and the vot- ing power of tin- stockholders are vested in trus . the voting power to be exercised by the trustees until certain debts were hut any ouo of the parties to be at lib- erty to withdraw at any time on those terms, is not "contrary to public policy, or any wise open to objection.' 1 Brown v. Pacific Mail a I <•.. 5 Blatch., " (1867). See, also, Griffith h. Jewett, 16 Week I.. BnlL, 418. \ contract whereby stockholders of a corporation to deposit their certificates of b w ith a trust i months, f"r the purpose "f preventing any disp tion of the stock during that time, is un- enforceable ana Mini, as contrary to the statute law of the state and against pub- lic policy. Williams r. Hontgorn Hun, 11(1 1 Fisher r. Bush, 85 Hun, 641 1 18811 "There is no consideration wh between the trustees and the subscribers ; none is claimed <>r mentioned in the reement itself, and as between the subscribers there is also none. The mere fact that several or a majority have signed does not furnish a support- ing consideration. No one subscriber acquired under tl sment any in- ter' -t in any other one Btock, or any un- divided interest in the whole of the ■k represented by the subscribera No real and special consideration i-- claimed, and without this the agreement cannot be supported.' 1 Vanderbilt >: Bennett, 2 B'y ft Corp. L J., 409 (Pa., But ■ receiver will not he appointed <>n account of a breach <>f the contract Baumgarten v. Nichols, N. Y. L. J., May 10, 1881. An agreement to elect ■ cer- tain person president is waived if be participates in electing others. Ameri- can, etc. T. Co. r. Toledo, etc., R'y, 17 i.i Rep., B48 lsyo). 3 Tie- agreement did not pr ev e nt any stockholder from demanding hack bis stock whenever he saw fit. The court held that this \\a> not B u voting trust," and that it was men a venient method by which distant and widely-eepai sharehol u mabled, indin to participate in the control an- act Contra. Bartholemew v.] l Ohio director. If he owns stock he is quali- st.. :i7 (1852 . Bed, even though he does not appear as a 'State v. Ferris, 12 Conn., 560 (18"! stockholder on the corporate books, and » A stockholder may have purchased viceversa. The inspectors cannot re- stock with a view of becoming a di- ject votes on the ground that the candi- rector, or have obtained it by gift, or he date is not qualified Matter of Elec- may hold it upon a trust, and bequali- tion of St. Lawn nee, etc.. Ca, 44 X. J. Red to be a director. He Ls qualified P. 529 Under the statutes of unless the "title was put in him color- North Dakota an unregistered holder of ably, with a vie w i.. qualify him to he a stock is not qualified to be elected a di- director for some dishonest purpose, in rector. In re Argus, etc., Co., 43 N. W. furtherance of some fraudulent scheme Rep., "-IT (X. P.. 1891 . touching the organization or control of r People a. Albany, etc., R. R.. 55 the company, or to carry into effect Barb, 844, 878 1869). some fraudulent arrangement with the "The election of a person not quali- COmpany." Matter of Kir, tion of St. Bed does not make him even a de facto Lawrence, etc Co., 44 N. PL, 529 (1882). director. Tfl re Newcombe, 18 N. Y. A person is qualified who buys stock in Supp., 16 (1891> Where cumulative his own name with his wife's money voting prevails, and the statutes require and transfers the certificate to her. but three directors to be residents, and all afterwards and before registry keeps votes cast are cumulated on non-resi- the stock for himself. Id. If the di- dents excepting thirty-two which are rector has sufficient stock registered in cast for three residents, the three resi- his name, it is immaterial that he does dents are elected, and tbe remaining not own it Pulbrook v. Richmond, directors are those of the non-residents 830 CH. XXXVII.] ELECTIONS — CORPORATE MEETINGS. [§ 623. as to elect a candidate who receives a minority of all the votes cast. 1 Where a person not eligible to the office is declared elected and no stockholder objects or takes legal proceedings to test the right to the office, and such person is allowed to perform the duties' of his office, he becomes an officer de facto. As such his acts cannot be objected to on the ground that he was not a legally elected di- rector. Neither corporate creditors, nor the corporation, nor the stockholders, nor the director himself are allowed to raise this ob- jection in that manner. The remedy is to oust him by quo war- ranto or to enjoin him as a usurper. But after he is allowed to who received the highest number of votes. Horton v. Wilder, 29 Pac. Rep., 566 (Kan., 1892). Where directors must be stockholders qualified to vote, a stock- holder not qualified to vote by reason of not owning his stock for thirty days before the election is not qualified to be a director. His election does not make him even a de facto director. In re Newcombe, supra. Where an election is " conceived in fraud and conducted cou- trary to law," the call being insufficient, the notice concealed, the instigators having sold and transferred their cer- tificates of stock, the purpose of the election being to steal the control from one who really owned all the stock, and two of the alleged new directors not being stockholders as required by law, there are no directors de facto, even though they take possession and drive away the contractor who is building the road. Johnston v. Jones, 23 N. J. Eq., 216 (1872). In Barber's Case, L. R, 5 Ch. D., 963 (1877), arising under similar facts, the court said : " Mr. Barber was not qualified to be elected a director, and his election was absolutely null and void. . '. . If he had acted as a di- rector, there might have been an estop- pel." The board of directors cannot, even under a by-law authorizing them to fill vacancies, oust a director on the ground that he was ineligible when elected, and then proceed to fill his place. Detwiler v. Commonwealth, 18 Atl. Rep., 990 (Pa., 1890). A director who is not a stockholder cannot Bign a statutory notice of a meeting to increase the capital stock. Matter of Wheeler, 2 Abb. Pr. (N. S.), 361 (1866). It formerlj was held in England that the election of one not a shareholder as a director in a corporation in which it is required that the directors be owners of a cer- tain amount of stock is valid ; and such a person, upon acceptance of the direct- orship, is bound to take and pay for the required number of shares. But the later decisions have established a con- trary rule. See g 52. The election of a disqualified person as director is void- able, not void. People v. Albany, R R. 55 Barb., 344, 373 (1869). 'Where the person declared electa | received a minority of the votes, he will be ousted even though the other candi- date was not qualified to act as a di- rector. "Votes cast for a candidal.' who is disqualified for the otfic • will no! be thrown away, so as to make tin- elec- tion fall on a candidate having a mi- nority of votes, unless the electors casting such votes had knowledge of the fact on which the disqualification of the candidate for whom they voted rested, and also knew that the latter was, for that reason, disabled by law from holding the office." Matter of Election of St. Lawrence, etc., Co., 44 N.J. L, 529 (1883), citing casea S also, People v. Clute, 50 N. Y., 451. 851 § 623.] ELECTIONS CORPORATE MEETINGS. [CH. XXXVII. become a de facto director his title to office cannot be attacked col- laterally nor can his acts be repudiated on that ground. 1 Where the charter requires the director to be a stockholder he must continue to hold stock during his terra of office If he sells all his stock in the company he thereby becomes disqualified and ceases, ipso facto, to be a director. 2 He may, however, remain as i Although a director is not qualified according to the by-laws, yet if he is elected and permitted to act, his elec- tion is valid so far as his acts as director affect third persons. Despatch Line, etc.. v. Bellamy, etc., Co., 12 N. H., 205 (1841). See, also. § 713, infra. The fact that a contract of a Pennsylvania com- pany is made by its president and man- agers, who are non-residents and nol residents as required by statute, d not enable the other party to the con- tract to raise that objection. Delaware, etc., Canal Co. v. Penn. Coal Co., 21 Pa St, 181 (1858). The eligibility of a di- rector who has acted with the consent of all cannot be questioned on an ap- plication to have the company dis- solved under the statute In n Santa, etc., Co.. 4 N. V. Supp, 178 (1889> Al- though the statutes require the directors to be residents of the state, nevertheless even though the directors are non-resi- dents the incorporation is valid and In- corporation is not dissolved, nor arc the stockholders liable as partners. Dem- arest r. Flack. 128 N. Y.. 205 (1891). The qualification of a director cannot be questioned by a creditor who is seeking to enforce a statutory liability of offi- cers. Wallace v. Walsh. 125 N. Y.. 28 (1890). One who assumes the duties of a director cannot say that he never was a director. McDowall r. Sheehan, 129 X. Y.. 200 (1891). The disqualified di- rector is bound : he is liable as a director for breach of trust. Western Bank V. Baird. 11 Cas< s in Ct of Sesa, 8d seri 96, 121; Easterly r. Barber. 65 X. Y.. 252 (1875). ('/. Craw r. Easterly, 54 N. Y., 679 (1873). The principle of law that the acts of an ineligible but de facto officer may bind the corporation 85 arises often in municipal corporation cases. State v. Farrier, 47 N. J. L., 38:5 (1885) : aff'd, 48 id., 613. Although the directors are not qualified, nevertheless the company cannot repudiate stock is- sued to a contractor in payment for work, where such work has been re- ceived, such contract being authorized by the disqualified directors. The com- pany cannot accept the subscription, and at the same time repudiate the con tract mode of payment Re The Staf- fordshire, etc.. Co.. 66 L. T. Rep., 413 (1892). Directors may act as such be- fore they acquire qualification shares. Re International, etc., Co., 66 L. T. Rep.. 253 (181 - Where the statutes require the di- rector to be a stockholder it follows "that as soon as a director parts with all beneficial interest in. and control over, the Stock which he is required to hold, aud causes the officers of the cor- poration to have knowledge of such fact by a request that a prop r trans!, r be made on the books of th* company. he no longer possesses the qualifica- tions winch the Btatute declares to be essential." and hence he ceases ipso facto to be a director and is no longer liable on a director's statutory liability. "The Btatute executing itself operated to divest him of title to the office." ( Jhemical Xat'l Bank r.Colwell, 132 X. Y.. 250 (1892) Contra, Nathan v. Tomp- kins, 82 Ala.. 437 (1887), holding that he may be removed, but does not cease to be a director by the mere act of selling his stock. To same effect, Atlas Natl Bank r. F. B. Gardner Co., 6 Biss., 537 (1879). Where a trustee sells and delivers all his stock, he ceases to be an officer de jure, the statute requir- CII. XXXVII. J ELECTIONS — CORPORATE MEETINGS. [§ 624. a de facto director and bind the company by his acts, if allowed to continue in his position. 1 The director does not become disquali- fied by reason of his pledging his stock. 2 The secretary, treasurer or other officer of a corporation need not be a resident or citizen unless the statute requires it. 3 A corporation may pass a by-law prescribing the qualifications of its directors, and may prescribe that a person who is an attor- ney against it in a suit shall not be a director. 4 § 624. Acceptance and resignation of office and failure to elect officers — Removal of directors. — An acceptance of the office by one who is elected director is necessary to constitute him a di- rector. Some direct and positive act of acceptance is necessary/' A director may resign, and no formal acceptance or entry thereof on the minute-book of the corporation is necessary to effect the resignation. 6 ing him to be a stockholder ; and where the whole board of directors have sold their stock their acts as a board of di- rectors are not binding on the corpora- tion. Orr, etc., Co. v. Reno Water Co., 30 Pac. Rep., 695 (Nev., 1882). " Can a director part with his qualification shares?" See on this subject, 8 R'y & Corp. L. J., 99. A person may purchase stock although such stock constitute the qualification shares of the vendor as a director. Kern v. Day, 12 S. Rep., 6 (La., 1893). A motion declaring the of- fice vacant and electing another person before the director has really sold his stock is void. Craw v. Easterly, 54 N. Y., 679 (1873). 1 A director who sells his stock ceases to be a dejure director. If he continues to and is permitted to act he is a di- rector de facto. Beardsley v. Johnson, 121 N. Y., 224 (1890). scumming v. Prescott, 2 Y. & C, Exch., 488 (1837). This was held in a case where the qualification shares were to be held by the directors in their own right. Pulbrook v. Richmond Consoli- dated Mining Co., 9 Ch. D., 610. 3Kerchner v. Gettys, 18 S. C, 521 (1882); McCall v. Byram Manuf. Co., 6 Conn., 428 (1827). But in Matthews r. Trustees, 2 Brews., 541 (1868), the court enjoined the company from compelling 85 its resident treasurer to turn over funds to a newly-elected non-resident treas- urer. 4 Cross v. West Virginia, etc., Co., 16 S. E. Rep., 587 (W. Va., 1892). 5 Oshorne, etc.. Co. v. Croome, 14 Hun. 164(1878): affd, 77 N. Y, 629; Cameron v. Seaman, 69 N. Y, 396 (1877). An "honorary director" who sits with the hoard, makes up a quorum aud accepts pay is subject to the disabilities and lia- bilities of a director as to being inter- ested in contracts with the company. There is no sucli thing in law as an " honorary director." Ex jxirte Stears, 29 L. J. (Ch.), 43 (1859). Holding over may also arise from acting as a director. Sanborn v. Lefferts, 58 N. V.. 179 1 18 It is a question for the jury whether a person accepted a directorship. The mere fact that as an advisor he met with the directors and made motion.- is not conclusive if he declined to accept Blake v. Bayley, 82 Mass., 531 11860*. Acceptance is presumed. Lockwood v. Mechanics', etc., Bank, 9 R I., 308 1 1><09 But may he disproved even though the person attended directors' meeth Blake v. Bayley, 82 Mass., 531 (1860 . "Movins v. Lee. 30 Fed. Rep., :0l : Smith v. Danzig, 64 How. Pr., 820 (18C Chandler v. Hoag, 2 Hun. 613 (1874 ; affd, 66 N. Y., 624 ; Blake v. Wheeler - 3 § 624.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. A director may resign by an oral statement to that effect, and his resignation may be accepted in the same manner by the presi- dent, 1 °But a mere statement of a director that he will have noth- ing more to do with the office is not a sufficient resignation. 2 A resignation may be effectual even though it is not accepted, but it has-been doubted whether all the directors can resign, thereby leaving the corporation helpless. 3 A director whose resignation has been accepted cannot after- wards vote at a meeting as a director. 4 The fact of the resigna- tion need not be published or made known to corporate creditors. 5 The resignation of a director must be presented to a meeting of the stockholders in order to be effective, unless the by-laws allow the directors to accept it. It is not sufficient to present the resig- nation to a meeting of the board of directors. Hence, although a resignation is sent in in the middle of the year, and is not accepted until the stockholders' meeting later in the year, the director con- tinues to be such until such acceptance. 6 Such is the law as laid down in England, but in America the practice is different. The insolvency of a director does not vacate his office. 7 A director dors not lose his seat by absence. 9 But the by-laws may provide otherwise. 9 Hud, 496 (1879); affd. 80 N. Y„ 128. \ nation to take effect on the termi- natioo of the term for which a director is elected is effectual, and he does not hold over thoogh do successor is elected Van Amburgh v. Baker, 81 N. Y., 40 (1880). A resignation releases a director if laid before the board of directors, and it is effective though not accepted, where ii has been duly presented. Maitland's Case, 1 l'e C, M. & G., 769 (1833). Even though an officer resigns for the purpose of preventing service upon the company, yet if the resignation is accepted, service cannot be made upon him. Sturgi9 v. Orescent, etc., Co.. 10 N. Y. Supp., 470 (1890). A director may resign after the company and officers have been enjoined from interfering with the corporate as- sets, and may then pursue his remedies as a corporate creditor. Mexican, eta, Co. v. Mexican, etc., Co. '7 Fed. Rep., 351 (1891). 'Briggsv. Spauldiug, 141 U. s.. 188, 150 (1891). - A mere statement by one director to another that he would have no more to do with the office is not a resignation. Kindberg v. Mudgett, 84 N. Y. Week. Kg., 829 (1886} A statement by a di- rector to the secretary and treasurer at the time of transferring all his shares that he severed all connection with the company is not a resignation, so far as corporate creditors' rights are concerned. Chemical Nat'l Bank v. Colwell, '.) N. Y. Supp.. 2s«j iisyo): Id.. 2*8; reversed on other grounds, 182 N. Y.. 85ft Applica- tion to sue maybe made to the president though he claims to have resigned. Aver ill v. Barber, 6 N. Y. Supp.. 255 (1889). 8 Carnaghan r. Exporters', etc., Co., 11 N. Y. Supp., 172 (1890). * Wickersham n Chittenden, 28 Pac. Rep.. 788 (Cal., 1892). s Bruce n Piatt, 80 N. Y., 379 (1880). B Municipal, etc., Co.. Limited, v. Pol- lington, 63 L. T. Rep., 238 (1890). ' Atlas National Bank v. Gardner, 8 Biss.. 537 (1879). 8 Phelps v. Lyle, 10 A. & E, 113 (1839). '•' Wilson v. Wilson, 6 Scott, 540 (1838), 854 CH. XXXVII.] ELECTIONS CORPORATE MEETINGS. [§ 024. A director continues to be such until his successor is elected, even though he never attends meetings and is never consulted. 1 A reduction in the number of trustees may be valid although the statutory certificate is not filed, so far as corporate creditors are concerned. 2 The stockholders have no power to remove directors before the expiration of their term of office unless the charter or by-laws ex- pressly give that power. 3 Nor can they remove the president. 4 A failure to elect officers at the stated time does not work a dissolution of the corporation. The old directors continue in office until their successors are duly elected. 5 And even when the failure to elect has extended over a period of several years, and there are by reason thereof no directors in office, the old directors having wholly abandoned their trust, the stockholders may at any time in a lawful manner proceed to the election of a new board of direct- ors. 8 But if the majority fail or refuse to hold an election and the corporate property is thereby endangered, a court of equity may appoint a receiver to take charge of it, 7 and will in a proper case authorize a winding up. 8 A director is an "officer" of the corporation in the usual mean- ing: of that term. 9 holding that an absconding director be- comes " unable to act " within the mean- ing of the by-laws. Sturges v. Vander- bilt, 73 N. Y., 884; 11 Hun, 136. 1 First National Bank v. Lamon, 130 N. Y., 366 (1891). * Wallace v. Walsh, 125 N. Y., 26 (1890). 3 See § 711, infra. Concerning the advisability of allowing stockholders to remove directors at any time, see Cook on the Corporation Problem, pp. 87, 88. A director cannot be excluded from his duties as such nor can his election be declared invalid merely because of what he may contemplate doing as a director. Ohio, etc.. Co. v. State, 32 N. E. Rep., 933 (Ohio, 1892). * Id. A contract between a company and a person that he shall be the man- aging director for ten years does not prevent the corporation from dismissing him. Bainbridge v. Smith, 60 L. T. Rep., 879 (1889). 5 State v. Bonnell, 35 Ohio St, 10, 17 (1878), in which an election of directors being held invalid, those previously in office were restored to office as being entitled to hold until their successors were qualified. Huguenot Bank v. Studwell. 6 Daly, 13 (1875). reversed on other grounds, 74 N. Y., 621 ; and see § 631. Hold-over directors may hold meetings, fill vacancies in the board and vote to sell property the same as though regular elections had been held. Kent County, etc.. Soc. v. Houseman, 46 N. W. Rep.. 15 (Mich., 1890). 6 People V. Twaddell, 18 Hun. 427 (1879). In Redly v. Oglebay. 25 West Va., 36, 43 (1884), it is held that where there is no board of directors the share- holders themselves may lawfully assume and perform, pending a regular election. the duties which ordinarily belong to a board of directors. See ch. XXXVI. ' Lawrence v. Greenwich Fire Ins. Co., 1 Paige, 587 (1829). 8 Brown V. Union Ins. Co.. 3 La Ann.. 177, 182 (1848), in which the neglect for nearly ten years to appoint officers being to the injury of creditors, the court ap- pointed a manager to wind up the affairs of the company. 9 A director is an officer under a stat- 855 §§625-027.] ELECTIONS — CORPORATE MEETINGS. [CH. XXXVII. §§ 625-627. Stockholders can act only at corporate meetings. — Stockholders can hold elections and transact the other business which they as a body are qualified to transact only at a corporate meeting duly called and convened. Consequently, all votes taken elsewhere than at such a meeting, and all separate consents, either oral or in writing, whereby the stockholders assume to bind the company, are invalid and void. 1 ute making officers liable for debts in certain cases. Brand v. Godwin. 8 N. Y. Supp., 339 (1890). The president and directors are "officers" within the meaning of a criminal statute. Com- monwealth v. "Wvni.m. 49 Mass., 247 (1844). So, also, of the treasurer. Com- monwealth v. Tuckerman, 7f> id., 173 (1857). In certain cases an "-officer" is construed to mean merely an agent and not a director. So held in regard to ap- pointing a receiver of a foreign corpo- ration. Moral] r. Alvas, etc., Co. N. V. Law Jour.. 1 tec 5, 1891. ' Commonwealth v. Cullen, 18 Pa. St.. 138 I 1850); Finley Shoe, etc., < '<>. a. Kurtz, ::i Mich., 89 (1876); Peir New Oilcans Building ('"., !» La., :'•'■'?. 404 (1886); Livingston a. Lynch, 4 Johna Ch., •".::!. '.'.'7 (1890); Torrey n Baker, B8 Mass., ]■:<> (1881); Ex j>arte Johnson. 31 Eug. L. & Eq., 480 (1854 j B56 Short v. Unan^st. 8 Watts & S. (Pa.), 45 (1S41). Cf. Graham v. Boston. Hart- ford & Erie R. R Co., 118 U. S., 161 (1886); Granger r. Grubb, 7 Phila., 850 For the rule relative to direct- or-.' meetings 592, supra. A lease authorized upon a two-thirds vote of the stockholders '-,1111114 !><• effected by two-thirds consenting thereto in writ- ing without a meeting. Reifl r. West- Co., 49 N. V. Baper. Ct, •in (1888). The separate assent of stock- holders to an act is not valid. Their ;.. I- must l"' iii meeting assembled. Duke '•. Markham, 10 S. E. 1: p., 1017 iN. c. 1890) An actual meeting of the stockholders is not necessary if all con- sent, even though the Btatutes require a A subsequent creditor cannot complain. ( East, etc., II It, 52 Fed Rep., 581 (1892) CHAPTER XXXVIII. DISSOLUTION, FORFEITURE AND IRREGULAR INCORPORATION. 628. Methods of dissolution. 629-30. Dissolution by the stockhold- ers — A court of equity has no power to dissolve a corpora- tion — Statutory dissolution. 631. Acts which do not constitute dis- solution. 632. Only the attorney-general can in- stitute a suit to forfeit a char- ter. 633. Forfeiture for misuser. 634. Forfeiture for non-user. 635. Forfeiture for ultra vires acts and for usurpation of franchises — Quo warranto and injunction at the instance of the state. § 636. State may waive forfeiture. 637. Who may set up forfeiture, dis- solution or non-legal incorpo- ration. 638. Lapse of charter by failure to comply with conditions — Ef- fect of failure to complete road within a specified time. 639. Repeals of charters — Right of stockholders to object. 640. Acceptance of charter. 641. The assets upon dissolution. 642. The liabilities upon dissolution, consolidation or sale. § 628. Methods of dissolution.— The dissolution of a corporation may be brought about by reason of (1) the forfeiture of its fran- chises by the adjudication of a court; 1 (2) the loss of its charter by a charter provision to that effect, in case the corporation fails to do certain things within a certain time; 2 (3) the repeal of its char- ter under the reserved power of the state; 3 (4) the voluntary sur- render of the franchises by the stockholders; or (5) the expiration of the time limited for its existence in the charter. 4 Upon dissolu- i See §g 632-637, infra. 2 See § 638, infra. 3 This subject is considered in § G39, infra. 4 "The dissolution of corporations is or may be effected by expirations of their charters, by failure of any essential part of the corporate organizations that can- not be restored, by dissolution and sur- render of their franchises with the con- sent of the state, by legislative enact- and turnpikes are limited by the consti- tution to thirty years. "The evident intent of this section was to prevent the perpetuation of corporate power and corporate wealth so as to place it prac- tically beyond the reach of the people or the legislature." It does not apply to a county fair corporation. Kent County, etc., Soc. v. Houseman, 46 N. W. Rep., 15 (Mich., 1890). Where a special char- ter is granted and nothing is prescribed ment within constitutional authority, by as to the duration of the corporation, forfeiture of their franchises and judg- the charter is perpetual. State v. Ladies, ment of dissolution declared in regular etc., 12 S. W. Rep., 293 (Ma, 1889 . A judicial proceedings, or by other lawful corporation without limit of time in its means." Swan, etc., Co. v. Frank, 148 charter as to duration is perpetual U. S., 603, 611 (1893). In Michigan all Snell v. Chicago. 24 N. E Rep., 582 < 111., charters except those of railroads, canals 1890). 857 § 629.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. tion by any one of these methods the stockholders have certain rights in the corporate assets. § 629. Dissolution uy the stockholders — A court of equity has no power to dissolve a corporation — Statutory dissolution. — It is an unquestioned rule that all the stockholders, by unanimous consent, may effect a dissolution of the corporation by the surrender of the corporate franchises. 1 Greater difficulty is found in determining whether a majority of the stockholders may dissolve a corporation. It has been held that the majority in interest of the stockholders of a corporation may dissolve it by a voluntary surrender of its franchises, even though a minority of the stockholders are opposed to the dissolution. - Such, undoubtedly, is the case where the corporation is insolvent or is doing a failing business, and is manifestly unable to accom- plish the purposes of its organization. But where such is not the case, and where the term during which the corporation was to exist has not expired ; 3 or where the dissolution is desired in order to obtain a new charter for a different object ; ' or where the disso- lution is merely a device to effect a consolidation which otherwise would be ultra vtres, 5 — it has been held that the majority cannot i Mobile & Ohio R R Co. v. State. 29 Y.. 599, 606 (1880), citing cases, and in Ala., 573, 586 (1857); Savage v. Walshe, 26 id.. 610 (1855); Attorney-General r. Clergy Society, 10 Rich. Eq., 604 (1* Chesapeake & Ohio Canal Co. v. Haiti- more & Ohio R R Co., 4 Gill & J., 1. 121 (18:52); Mclntyre Poor School v. Zanesville Canal, etc., Co., 9 Ohio, 203 (1839): La Grange, etc., R R Co. v. Rainey, 7 Coldw. (Tenn.), 420 (1870); Slee v. Bloom. 19 Johns.. 456 (18 Webster v. Turner, 12 Hun, 264 (1871 ; Houston v. Jefferson College, 63 Pa. St., 428 (1869); Denike v. New York, etc., Co., 80 N. Y.. 599, 606 (1880). Although a stockholder has sued in the federal court to wind up a Connecticut corpo- ration, nevertheless it seems that such corporation may dissolve voluntarily. Kessler v. Continental, etc., Co., 42 Fed. Rep., 258 (1890). 'Tread well v. Salisbury Manuf. Co.. 7 Gray, 393 (1756); Hancock v. Holbrook, 9 Fed. Rep, S58 (1881) (reversed on an- other point, 112 U. S, 229): Wilson v. Proprietors of Central Bridge, 9 R. I., 590 (1*70). Compare, however, dictum in Denike v. New York, etc., Co., 80 N. Mobile, etc., Co. r. State, 29 Ala., 573, 586 (1857), citing New Orleans, etc., Co. v. Harris. 27 .Mi-.. :>7 7 (1854); Ward eiety, eta, 28 Eng. Ch. (1 Collier). 370 (1844); Angell & Ames on Corp., ? 772; Barry v. Broach, 4 S. Rep., 117 (Mi—.. 1888), where the business was a losing oin'. That tlic majority may not dis- solve, see Zabriskie v. Hackensack, i fcc., R R Co., 18 N. J. Eq., 168 I 1867); Mow- rey t\ Indianapolis, etc., R R C Biss., 78 (1866); Lauman r. Lebanon, etc, 30 Pa. St., 42 (ISoS), and cases in following n< 3 Kean n Johnson, 9 N. J. Eq., 401 (l s ~>:i). See, also, Van Schmidt v. Hun- tington, 1 Cal., 25 (1850). Dissolution of a solvent corporation before its charter time has elapsed cannot be had except by unanimous consent of the stockhold- ers. Barton v. Enterprise, etc., Ass'u, 16 N. E. Rep., 486 (Ind, 1888). * Ward v. Society of Attornies, 1 Coll., 370 (1844). 5 Black v. Delaware, etc., Canal Co., 22 N. J. Eq., 403 (1871). See, also. B 667, infra. 858 CU. XXXVIII.] DISSOLUTION, FORFEITCKE, ETC. [§ 629. dissolve the corporation in opposition to the wishes of the minority. 1 Stockholders owning only a minority of the stock cannot, at com- mon law, compel a dissolution before the expiration of the time limited in the charter for the existence of the corporation. 2 The directors of a corporation cannot dissolve it. 3 A court of equity has, in the absence of statutory power, no jurisdiction over corporations for the purpose of decreeing their dissolution and the distribution of their assets anions' the indi- vidual corporators at the suit of one or more of the stockholders. 4 1 Polar Star Lodge v. Polar Star Lodge, 16 La. Ann., 53 (1861); Currien v. Santini, id., 27. See, also, dictum in Mobile, etc., R R Co. v. State, 29 Ala., 573 (1857), and n. 1, supra. 2 Denike v. New York, etc., Co., 80 N. Y., 599 (1880) (citing cases): Folger v. Columbian Ins. Co., 99 Mass., 267 (1868); Pratt v. Jewett, 9 Gray, 34 (1857) where dissolution was denied, although the business was a losing one and the single person holding a majority of the stock was mismanaging the business; Croft v. Lumpkin, etc., Min. Co., 61 Ga., 465 (1878), where the corporation was solvent, but made no effort to transact business or proceed ; Waterbury v. Mer- chants', etc., Co., 50 Barb., 157 (1867), holding that misconduct of the corpo- rate officers is no cause for dissolution at the suit of the minority. To same effect, Belmont v. Erie R'y Co., 52 id., 637 (1869). A stockholder has no right to bring an action for the dissolution of the corporation. Byrne v. New York, etc., Co., 16 Week. Dig., 139 (1882). 3 Lake Ontario, etc., Bank v. Onon- daga Bank, 7 Hun, 549 (1876); Jones v. Bank of Leadville, 17 Pac. Rep., 272 (Col., 1888); Ward v. Sea Insurance Co., 7 Paige, 294 (1838) ; Abbot v. American Hard Rubber Co.. 33 Barb., 578 (1861). Cf. Bank of Switzerland v. Bank of Turkey, 5 L. T. (N. S.), 549 (1862), where the directors repaid sums advanced to an abortive company. * United States T. Co. v. N. Y., etc., R R., 101 N. Y., 478 (1886); Verplanck v. Mercantile, etc., Co., 1 Edw. Ch., 84 (1831); Hardon v. Newton, 14 Blatch., 376 (1878) ; Fountain Ferry, etc., Co. v. Jewell, 8B. Monr., 140* (1848); Ferris v. Strong. 3 Edw. Ch., 127 (1837). See, also, Strong v. McCagg, 55 Wis., 624 (1882) ; Latimer v. Eddy, 46 Barb., 61 (1864). But the court will appoint a receiver to preserve the corporate assets where the majority do not elect officers. Law- rence v. Greenwich Fire Ins. Co., 1 Paige, 587 (1829). Any person may be appointed receiver. See § 864, infra. Where, upon voluntary dissolution, the stockholders appoint two of their num- ber to administer the assets, the court will not displace them and appoint a re- ceiver. Follett v. Field, 30 La. Ann., 161 (1878). A single stockholder in an insolvent corporation cannot have it dissolved in a court of equity. Merry- man v. Carroll, etc., Co., 4 R'y & Corp. L. J., 12 (1888). A corporation cannot be dissolved except by judicial sentence or sovereign power. A court of equity has no inherent power to decree dissolu- tion. A member cannot sue for his part of the assets until a dissolution is had. Magee v. Genesea Acad., 17 N. Y. St. Rep., 221 (1888). A stockholder can- not have the corporation wound up in equity. Hinckley v. Pfister, 53 N. W. Rep., 21 (Wis.. 1892). Where for seven years a stockholder who owned a ma- jority of the stock elected himself and two of his dummies as directors of the company, and caused the board to vote a large salary to himself as president and manager, and had leased to the company his property at a large rental, the salary and rental are illegal and void. Where the company had failed 859 § 629.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. In manv of the states there are statutes regulating the dissolu- tion of a corporation. These statutes generally specify what par- ties may bring suit for dissolution, on what grounds dissolution will be decreed, and what proceedings must be taken to obtain the decree. Such a statutory dissolution is hardly a voluntary dissolu- tion, and yet it approaches that kind of dissolution more nearly than anv other. 1 to pay its dividends by reason of such acts, a court of equity upon the suit of another stockholder ordered the presi- dent to account, and appointed a re- ceiver of the company and directed that its affairs be wound up. Miner ft Belie Isle Ice Co., 53 N. W. Rep., 818 (Ifich,, 1892). "The power to declare a for- feiture of corporate franchisee was originally in England vested in the courts of law, and was exercised in a proceeding brought by the attorney- general in the name of the sovereign. The court of chancery never assumed jurisdiction in such cases until it was conferred by act <>f parliament. It de- clined until the power was conferred by 6tatute to sequestrate corporate ]>r< »f>- orty through the medium of a receiver or to dissolve corporate bodies, or to re- strain the usurpation of corporate pow- ers.'' Decker ft Gardner, 124 N. Y.. 334 (1890). In the absence of statutory au- thority, a court of equity has no juris- diction to dissolve a corporation. "Wheeler v. Pullman, etc., Co.. 32 N. EL Rep., 420 (111., 18 l Thus, in New York, elaborate provis- ion is made. The majority of the di- rectors may apply for dissolution. See g§ 8419, eta, Code of C. P. As also may a creditor or stockholder, s'; 17*4, etc id. Under the New York Btatute the court will order the dissolution of a cor- poration where a majority of the di- rectors and stockholders wish it, where the interests are discordant and a disso- lution will be beneficial. Matter of Im- porters', etc., Exchange. 132 N. Y.. 212 (1892). Under the old statute, part of the stockholders might compel a dissolu- tion where there had been a failure to elect officers. Ward v. Sea Ins. Co., 7 Paige, 294 (1838). Where a majority of the directors and stockholders apply for dissolution the court will presume that it should be granted. In re Niagara Ins. Co.. 1 Paige, - 828> In general see, also. In re Pyrolusite, etc.. Co., 29 Hun, 429 (1883); In re Boynton, etc., Co., 34 Hun, 369 (1884). In West Virginia one- third in interest of the stockholders may apply to the court for a dissolution. Bee Hurst ft Coe, 3 S. E. Rep.. 564 (1887* ( orp. .rate creditors cannot before judg- ment, apply for dissolution of corpora- tion. Cole n Knickerbocker, etc.. Ins. Co.. 88 Hun 380); affd, 91 N. Y., 641. Where the statute provides that two-thirds of the stockholders may cause the corporation to be wound up, their right to do so is absolute and can- not be controlled by the court Wat- kins v. National Bank, 32 Pac. Rep., 914 (Kan., 1888). The voluntary dissolution of a company under the statute, but without ten days' notice required by the statute, is not such a dissolution as to prevent creditors from attaching the property of the company as though no dissolution had been had. Cleveland, etc, Co. n Taylor, etc.. Co., 54 Fed. Rep., 82 (1*93). But the dissolution cannot be enjoined by creditors in the absence of fraud. Id.. 85. Statutes usually con- tain a provision that the corporate exist- ence shall be continued for a fixed time, pending the proceedings for dissolution, so that suits may be brought by and against the corporation for the purpose of closing the business and disposing of the assets. Stetson r. City Bank of New Orleans. 12 Ohio St.. "T [1861); McGoon tt Scales, 9 Wall., 23 (1869); Mariners' b60 CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 629. The courts of one state cannot dissolve a corporation created by another state, 1 but may appoint a receiver of the corporate assets within the jurisdiction. 2 Bank v. Sewall, 50 Me., 220 (1861); Muscatine Turn Verein v. Funck, 18 Iowa, 469 (1865): Thornton v. Marginal Freight R'y Co., 123 Mass., 32 (1877); Folger v. Chase, 18 Pick., 63 (1836); Crease v. Babcock, 10 Mete., 525, 567 (1846); Re Independent Ins. Co., 1 Holmes, 103; Franklin Bank v. Cooper, 36 Me., 179 (1853); Nevitt v. Bank of Port Gibson, 14 Miss., 513 (1846). The life of the corporation is frequently ex- tended by these statutes for three years. Herron v. Vance, 17 Ind. 595 (1861); Foster v. Essex Bank, 16 Mass., 245 (1819) ; Blake v. Portsmouth, etc., R R Co., 39 N. H., 435 (1859); Van Glahn v. De Rosset, 81 N. C, 467 (1879) ; Michi- gan State Bank v. Gardner. 15 Gray. 362 (1860). Sometimes five years. Tuska- loosa. etc., Association v. Green, 48 Ala., 346 (1872). Cf. Lincoln, etc., Bank v. Richardson, 1 Me., 79 (1820). Under statutes in some of the states an in- formation in the nature of quo icar- ranto may be filed at the relation of a shareholder against an illegally-existing corporation to compel a dissolution. Albert v. State, 65 Ind.. 413 (1879). Under the National Banking Act, see Kennedy v. Gibson, 8 Wall.. 498 (1869); Bank of Bethel v. Pahquique Bank, 14 Wall., 383 (1870); Bank v. Kennedy, 17 Wall., 19 (1872) ; In re Piatt, Receiver, 1 Ben., 534 (1867). A resolution of two- thirds of the stockholders in a national bank to go into liquidation does not dissolve the corporation. Merchants' Natl Bank v. Gaslin, 43 N. W. Rep., 483 (Minn., 1889). Under the English act it has been held that the majority cannot insist upon dissolution, though the business is a losing one. In re Suburban Hotel Co., L. R, 2 Ch., 737 (1867). But the court may grant it under such circum- stances even to a few stockholders. Re Factage Parisien. 34 L. J., Ch., 140 (1865). In determining whether to order a wind- ing up the court will not consider pos- sible future profits. In re European, etc., Society, L. R, 9 Eq., 122 (1869). For an application to have a winding up because business had not been com- menced within a year, see In re Tumac- acori, L, R, 17 Eq., 534 (1874). If the corporation has sold its property and ceased business the court will order a distribution of the assets. Cramer v. Bird, L. R, 6 Eq., 143 (1868). The mere fact that the company is losing money is not sufficient to have a winding up. In re Joint-stock Coal Co., L R, 8 Eq.. 146 (1869). The court has a judicial dis- cretion, and will not ordinarily order a winding up at the instance of one stock- holder in opposition to all the others. In re London Suburban Bank, L R, 6 Ch.. 6il (1871). But if the company is insolvent or is doing a ruinous business with no prospect of a change the court will order a winding up on the petition of a minority. Re Great Northern, etc., Min. Co.. 17 W. R., 462 (1869). A court has no jurisdiction to wind up a corpo- ration where a company was never in- corporated, one of the requisite incorpo- rators not having signed the articles of incorporation. Re National, etc., Co.. 64 L T. Rep.. 512 (1891) ; aff'g id.. 229. See, also, in general, under this winding-up act, Re Factage Parisien, 34 L J., Ch.. 140(1865); In re Exmouth Dorks Co.. L R, 17 Eq., 181 (1873': In re Sander- son's Patents Association. L R. 12 Eq.. 188(1871); In re Bradford Navigation Co., L. R, 10 Eq., 331 (1870) ; Princess of Reuss v. Bos, L. R., 5 H. of L., 176 (1871); In re Commercial Bank of India, i Baker (1863). v. Backus, 32 111., 79. 110 zgeech. LL 861 § 630.] DISSOLUTION, FOBFEirUREj KTC. [CH. XXXVIII. Where a dissolution is being obtained or has been obtained by fraud and an inequitable overbearing of the rights of an innocent stockholder, 1 a court of equity will, at the instance of the latter, enjoin or set aside the dissolution. 2 § 630. There has been some doubt whether a voluntary dissolu- tion by all or a majority of the stockholders is completed by a mere vote of the stockholders, or whether a decree of a court is needed and is sufficient; or whether a legislative acceptance and confirmation of the dissolution is essential. The better opinion is that ili«' resolution of the stockholders to dissolve will effect a dis- solution only after the legislature has accepted it and ordained it, or a court duly authorized by sUtute to accept a voluntary disso- lution has entered a decree to that effect. 3 L R, 6 Eq., ~>17 (1868); Tit re London up and when not under the Engli>li India Rubber Co, I. R, 1 Chan., itute, see Healey's Companies Law (I860); In re Pen-y-Van Colliery Co., and Practice, pp. 448, etc. L R, 6 Chan. Div., 177 (1877); /» re > People P. Hektograph Co., 10 Abh. United Service Co., L l:.. 7 Eq., 76 N. C. N. Y.),358(18 (1868); Re German Date Cor., Ltd, 46 *In re Beaujoktis Wine Co., L R. B I, T. Rep V 8 827 Ct of A.pp, 1882), Chan., 15(1876); 1» re London & Mer- holding that where a company was or- cantile Discount Co., L R. l Eq., 277 ganized and chartered to • 865). to 8tupart v. Arrowsmith, 8 8m. manufacture and sale of g Is under a a G., 176 i bUl filed by a share- certain patent, when in fact there was bolderon behalf of himself and others no patentBUch as was referred to, and to Bel aside a dissolution, after tin an application for Buch a patent was re- years' acquiescence, no fraud or imposi- fused, held, that the Bubstratum upon tion being alleged, was dismissed with which the company was based or main costa C/.Kenl a. Jackson, 2 De G„ M. objecl tor which it was formed not be- & «... 19 1852 ; Bailey's appeal, 98 Pa. ing in existence, the company must be St, '• where certain Btock- di^s.-iv.-d ,,n petition of a shareholder, holders procured the dissolution of a cor- notwithstanding it was profitably en- poration by fraud They were held to gagedinthe manufacture and sale of be trust t mcUeficio for the bona fide the commodity without any patent, and stockholders, and as such liable to ac- notwithstanding a very large majority count to them for the assets of the com- of the company desired to have the pany. company continue in businesa To 'Portland Dry Dock, etc.. Co. u. same effect, under Bomewhat similar Trustees of Portland, 12 B. Mon., 77 circumstances, Z& The Havana Gold (1851 . La Grange & Memphis R R Mining Co., 4G L T. Rep., 322 (Ct. of Co. r. Rainey, 7 Coldw. iTeuu.), 420 App.. 1882). Lender of money to ben- (1870) ; Harris v. Muskingum Mfg. Co., 4 efit building society cannot petition to Blackf. (Ind.), 267 (1836); Town v. Bank, wind it up. Ex parte Williamson, L, etc, Raisin. 2 Doug. (Mich.), 580 (1847); R, 5 Cli., 809 (1869) Mortgage bond- Currier nSantim, 16 La. Ann., 37 (1861); holders cannot institute winding-up Norris V. Mayor of Smith ville, 1 Swan proceedings under the English act. In (Tenn.). 164 (1851 1 : Bradt v. Benedict. 17 re Uruguay, etc., R'j Co., L R. 11 Ch. N. Y.. 93, 99 (1858): Boston Class Co. v. D., 372 (1879). For many cases relative Langdon. 24 Pick., 49 (1884); Wilson r. to where a court will order a winding Proprietors of Central Bridge, 9 R 1., 862 CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 631. §631. Acts which do not constitute dissolution. — There are cer- tain acts and facts which do not in themselves constitute a disso- lution. A dissolution is not effected by a failure to elect officers; l nor by a sale or assignment of all the corporate property ; 2 nor by 590 (1870); Penobscot Boom Corp. v. Lamson, 16 Me., 224 (1839) ; Enfield Toll Bridge Co. v. Conn. River Co., 7 Conn., 28, 45 (1828); Mamma v. Potomac, etc., 8 Peters, 281. 287. A mere resolution of the stockholders is ineffectual. New York, etc., Works v. Smith, 4 Duer, 362 (1855) ; Powell v. Oregonian R'y Co.. 38 Fed. Rep., 187 (1889). A notice of the resolution sent to the governor is inef- fectual. Merchants' Bank v. Heard, 37 Ga., 401 (1867); Revere v. Boston, etc., Co., 15 Pick., 351 (1834). By a statute the acceptance may be made by a proc- lamation. Campbell v. Miss. Union Bank, 7 Miss.. 625, 681 (1842). The judg- ment of a court of law in such a case is ineffectual. Chesapeake, etc., Co. v. Baltimore, etc., R. R Co., 4 Gill & J., 1, 107 (1832). In England the surrender at common law was to the king, and had to be accepted by him in order to work a dissolution. The King v. Amery, 2 Term Rep, 515, 531 (1788); The King v. Gray, 8 Mod. Rep., 358 (1825). Cf. Bruce v. Piatt, 80 N. Y., 379 (1880). Vol- untary dissolution need not be accepted by the state. Merchants', etc., Line v. Wagoner, 71 Ala.. 581 (1882). The case of Webster v. Turner, 12 Hun, 264(1877), can be upheld only in connection with § 631, infra. See, also, cases in notes supra, to effect that a court cannot de- cree a dissolution at the instance of stockholders. Many states now have statutes expressly giving to courts such authority. i Rose v. Turnpike Co., 3 Watts (Penn.), 46(1834); Lehigh Bridge Co. v. Lehigh Coal & Navigation Co., 4 Rawle (Penn.), 8, 23 (1832); Commonwealth v. Cullen, 13 Pa. St., 133 (1850); Hoboken Build- ing, etc., Association v. Martin, 13 N. J. Eq., 427 (1861); Evarts v. Killingworth Mfg. Co., 20 Conn., 447 (1850); Nashville Bank v. Petway, 3 Humph. (Tenn.), 522 (1842); Boston Glass Mfg- Co. v. Lang- don, 24 Pick., 40 (1834 ; Russell v. Mc- Lellan, 14 id.. 63 (1833); Cahill v. Kala- mazoo, etc., Ins. Co., 2 Doug. (Mich.), 124, 140 (1845); Harris v. Mississippi Valley, etc., R. R. Co., 51 Mich., 602 (1875); People v. Runkle, 9 Johns., 147 (1812); Philips v. Wickbam, 1 Paige, 590 (1829); Slee v. Bloom. 5 Johns. Chan., 366 (1821); S. C, 19 Johns., 456 (1822); St. Louis, etc., Loan Association v. Au- gustin, 2 Mo. App., 123(1876): Knowlton V. Ackley, 8 Cush., 93 (1851); President & Trustees, etc., v. Thompson, 20 id., 197 (1858); People v. Wren, 5 111., 269 (1843) Nor will a resignation of all the officers dissolve the corporation. Muscatine Turn Verein v. Funck, 18 Iowa, 4C9 (1865); Evarts r. Killingworth Mfg. Co.. 20 Conn., 447 (1850). The corporate rights and franchises are, in such a case, merely dormant until other officers are elected. Philips r. Wickham, 1 Paige, 590 (1829). Cf. Lea v. American At- lantic, etc., Caual Co., 3 Abb. Prae, (N. S.), 1 (1867). 2 Barclay v. Talniau. 4 Ed\y. Chan.. 123 (1842); De Camp v. Aylward, 52 ind., 46S (1876); Bichwalri v. Commercial Hotel Co., 100 111., 439 (1883); Rollins v. Clay. 3:3 Me., 132 (1851): Kansas City Hotel v. Sauer, 65 Ma, - 0; Troy, etc., R. R Co. v. Kerr. 17 Barb., 581 (1854), where a railroad corporation had leased the entire property to another corporation; State v. Merchant, 37 Ohio St.. 251 (1881);Smith y. Gower, 2 Duvall, 17 (1805). To same effect. Stat > V. B 5 [red. Law (N. C). 297 Bruffett v. civat Western R h\ Co., 25 III.. 353 (1861). The statutes may cause dissolu- tion by the company's .^<>iu-_c out <>f busi- ness and sellingall the property. People v. De Grauw, 62 Hun, 221 (1891> 863 § 031.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. the fact that one person owns all the shares of stock; ' nor by a cessation of all corporate business and acts; 2 nor by the death of its stockholders; 3 nor by insolvency; 4 nor. in all cases, bv a con- solidation with another corporation under statutory authority. 8 "Nor is it dissolved by the appointment of a receiver, 6 or the fore- closure of a mortgage, 7 nor by failure to file reports. 8 The fact that there are less stockholders than the charter requires does not in- validate the acts of the corporation. 9 For certain purposes, how- ever, such as rendering stockholders liable on their statutory liability, 10 or relieving directors from a penal liability, 11 dissolution is held to arise by some of these acts. 1 See g 709. 2 Attorney-General v. Bank of Niag- ara, Hopkins' Chan. (N. V. . 103 (182 Baptist Meeting-] se v. Webb, 66 Me., 39* (1877); Rollins <\ < Hay, 88 Ma, 182 (1851); Harris r. NYsl.ir. 84 Ala., 398 (1854); Kansas city Botel Co. v. Saner, 65 Ma, 879, 888 (1877); Nimmons r. Tappan, 2 Sweeney (N. Y . 652 (1870); Mickles n Rochester City Bank, 11 • Paige, lis (1844); State >: Barron N. ll.. 870 (1878); Be Jackson Marine Ins. Co., l Sandf. Chan. (N. Y.), 659 (1847); Weal n Carolina, el •. «',,.. 81 Ark., 178 1878 ; Bach.. >-. Horticultural Soc, 10 Lea T< im.i 186 (1882 . Bran- don Iron Co. v. Gleason, 84 Vt, (1832); Atlanta r. Cat'', eta, Co.. 71 Ga,, 106 (iss;{). Dissolution may exist by cessation, etc., so far as the rever- sion of property given to the corpora- tion is concerned. Stone V. Framing- ton, 109 Mass.. 80S (1872). A cessation of business with the understanding that the company is dissolved, the property having I □ transferred to the stock- holders, does not work a dissolution. Suits may be instituted against the company. Carnaghan r. Exporters*, eta, Co., 11 N. Y. Supp.. 172 (1890> A fore- closure sale of all the property and frauehises of a corporation will close out and foreclose the whole interest of the stockholders therein. Va table v. New York, etc. R R Co.. 96 N. Y, 49 (1884); Thornton v. Wabash R'y Co.. 81 id, 462, 187 (1880> See, also, Sullivan '•. Portland & Kennebec R U. Co.. m i . 8., 800 (1876) As to reorganizations, see ch. LI I. infra. Bo I n Class Mfg. Co. r. Langdon, 84 Pick., (9, 58(1834 : Russell a McL I- lan. It Pick., 89 I : Mosebyu Burrow, 52 Tex., 896 (1880) ; Valley Bank & Savings Institution >•. Sewing Society, 88 Kan.. 42:; Such is the case though a receiver has appointed. State >: Merchant, :i7 Ohio St.. 851 (1881); National H.nk v. Insurance Co.. 104 U. S. :>i (1881); Kin- caid r. Dwinelle, 59 X. V., :.i^ (1875) 5 Se-. ch. I.HI, infra. •The appointment <»f a receiver does lissolve a corporation. Nothing but the expiration of the charter or the judgment of a court can do that Bar- selman v. Japanese, eta, Ca, 27 N. E. Rep, B18 ilml.. 1891) ' Smith r. Glower, 'J Duv. (Ky.>. 17 (1865); Whit.-. ,tc.. i.\ u. ,-. White, eta, R R, 50 N. II.. .-.'i L870) 6 Failure to file a report does not work a forfeiture of charter, star n. Browns- town, etc., Cv.. S2 N. E, Rep., 31G dud.. 1881 ■ Welch v. Importers', etc., Bank. 122 N. Y. 177 ( 1890). >o See Slee a Bloom, 19 Johns.. £56 .". and g 819, supra ( /'. Bradt r. Benedict, 17 N. Y.. 98 <\s:,$). ^Losee v. Bullard, 79 N. Y., 404 (1880). 864 CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§§ 632, G33. § 632. Only the attorney-general can. institute a suit to forfeit a corporate charter. — Such unquestionably is the law. It is for the state alone to withdraw the charter which the state has given. A stockholder cannot institute the suit ; l nor a corporate creditor ; 2 nor can the municipal authorities by reason of a change of route by a railroad ; 3 nor can a person who is overcharged on a turnpike bring suit to forfeit the company's charter. 4 The state cannot even au- thorize the secretary of state to forfeit a charter. 5 The corpora- tion is entitled to its day in court. § 633. Forfeiture for misuser — Acts which constitute a misuser. The law is clear that, if a corporation misuses its powers, the state may by a suit withdraw the charter which it has given. Great difficulty, however, arises in determining what constitutes a mis- user. A clear idea can be obtained only by a study of the cases themselves. 6 i North v. State, 8 N. E. Eep., 159 comply with the .statute. People r. Buffalo, etc. Co., 131 N. Y., 140(1892) It has been held to be a misuser to tile a false certificate that the capital stock lias been paid up. 865 § 634.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. § 634. Non-user as a cause for forfeiture. — Non-user of its fran- chise is a cause for forfeiture where a corporation is possessed not Eastern, etc., Co. v. Regina, 22 Eng. L. & Eq., 328 (1853); or to establish a branch bank where the cbarter author- izes only a principal banking place, People v. Oakland Co. Bank, 1 Doug. (Mich.), 282 (1844) ; or to keep its books and place of business out of the state, State v. Milwaukee, etc., R'y Co., 45 Wis.. 590 (1878); or for an insurance company to take risks which it cannot pay if required, Ward v. Farwell, 07 III.. 593 (1881); or for taking " grave-yard " insurance, State v. Central, etc.. Assoc, 29 Ohio St.. 399 (1876), the person receiv- ing the insurance having no insurable interest in the person insured; or for not keeping tracks in a condition re- quired by the charter, State v. Madison, etc., R'y Co., 40 N. W. Rep., 1-7 .Wis., 1888); or for a canal company to allow the canal to become out of repair. state v. Penn.. etc., '-':: Ohio St.. 121 (1872 for a ferry company to be guilty of the same neglect, state r. Council BlutTs. etc.. Co., 11 Neb., 854 (1881); or for til- ing false and fraudulent articles of as- sociation. State V. Bailey. 16 Ind.. 46 (1861). holding, also, that mere insolv- ency \g n, i cause for forfeiture; or for accepting subscriptions' by persons who are notoriously insolvent, Holman v. State, 105 Ind.. 569 1885 ; Jersey City Qaa < '". v. Dwight, 89 N. J. Bq., 848 (1878); or for a failure of a river im- provement company to make an im- provement as commanded by a statute. People '". Improvement Co., 103 111.. 491 (1882); or for a hank to loan to its allow its road to be out of re- pair. Washington, eta, T. Co. v. State. 19 Bid., 889 (1862); Coon b. Plymouth, etc., < <>.. 82 Mich., 21* . 1875); Darnell r. State, 8 & W. Rep., 865 (Ark., 1887 ; r. Bawtucket, etc., Corp'n, 8 R. I.. ; 865), where the company neglected a part of it- read which it had si .Id to a municipality. Not every neglect is fatal. The question is for the jury. People v. Istock T. Co.. 11 \'t.. 481 (1889)i It is cause for forfeiture of its charier if a railroad company does not keep tracks in a condition required by its charter. State r. Madison K"y Co., 10 N. \Y. Rep., Wis.. 1888> And it is no defense to forfeiture for neglect that the road has been sold on an execution sale. Com- monwealth >: Tenth, etc I M iss . 509 (1850). Nm- is it a defense that the Btat ■ has authorised a competing line. Turnpike Co 0. State. 3 Wall., 819 1 1 In the case of State r, l.-sex Bank. 8 Vt, 489 1 1886), the court refused to de- cree a forfeiture, since the public were not injured, though the corporation was clearly guilty of misuser. If a pas com- pany is ordered by a municipality under a statutory power to reduce the price of ,u;as. it may defend against forfeiture for non-compliance by asserting that the see, CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 634. only of its franchise to be a corporation, buu also other franchises, such as a right of way, which the public are interested in having kept in active use. 1 municipality was fraudulently induced to act. State v. Cincinnati, etc., Co., 18 Ohio St., 262 (1868). If a company has incorporated under a general act, but for a purpose not authorized by it, a suit for forfeiture lies. State v. Beck, 81 Ind., 501 (1882), where a turnpike company incorporated to purchase turn- pikes, a purpose not authorized by the statute. The state may create causes for the forfeiture of insurance compa- nies' charters. Chicago, etc., Ins. Co. v. Needles, 113 U. S., 574 (1885). Where the state sues to forfeit the charter of a railroad company which has leased its road, the latter cannot institute a suit to test the validity of that lease. Ogdens- burgh, etc., R. R. Co. v. Vermont, etc., R. R. Co., 4 Hun, 712 (1875). If quo warranto is brought for not making re- ports the corporation may offer to make the reports. State v. Barron, 57 N. H., 498 (1876). By statute, forfeiture may be decreed where the court decides that a continuance of business by an insur- ance company will be hazardous to the community. Ward v. Farwell, 97 111., 593 (1881). The legislature cannot amend a charter by forfeiting the charter if specie payments are not made within a specilied time. State v. Tombeckbee Bank, 2 Stew. (Ala.), 30 (1829). It can- 1 Non-user is good ground for the for- feiture of franchises. People v. Broad- way R. R., 126 N. Y., 29 (1891). A suit for forfeiture lies where a railroad com- pany takes up part of its track. State v. West, etc., R'y Co., 34 Wis., 197 (1879) ; S. C, 36 id., 166 (1874). Or where a railroad company constructs but part of its road, has no station or freight- houses and no passenger coaches, but engages only in getting out coal from beds owned by those interested in the company. State v. Railway Co., 40 Ohio St, 504 (1884). But the suit does not lie on the ground that the company does not intend to complete its road. State v. Kingan, 51 Ind., 142 (1875) ; State v. Beck, 81 id., 501 (1882). No forfeiture is decreed because a railroad company discontinues passenger trains over a branch line which is run at a loss by reason of horse-car competition. Com- monwealth v. Fitchburg R R Co.. 7^ Mass., 180 (1858). The lessee of a rail- road is a proper party to a suit to forfeit franchises for non-user. Peo- ple v. Albany, etc., R R. Co.. 77 N. Y., 232 (1879); State v. Minn., etc., Ry Co., 30 N. W. Rep., 810 (Minn., 1886). An assignment of all corporate assets to others, thereby rendering the corporation incapable of continuing business, is cause for forfeiture. State v. Real Estate Bank, 5 Ark, 595 1843). A bank which ceases to do business and to file statements, and which makes im- proper loans to its directors, is liable to forfeiture of charter. State v. Seneca Co. Bank. 5 Ohio St, 171 (1856) It i- not a non-user for a county fair corpora- tion to rent its grounds. Kent County, etc., Soc. v. Houseman, 46 X. W. Rep., 15 (Mich., 1890). Where the statute pre- scribes that non-user for a year shall lie cause for forfeiture, a non-user for a few days is insufficient. People '•. At- lantic, etc., R R, 125 X. Y., 513 (1891 . A railroad which is leased to another company without statutory provisions to do so is subject to forfeiture at the in- stance of the state. State '■. Atchu eta, RR Co., 38 X. W. Rep., 43 (Neb,, 1888). As to a failure of a railroad cor- poration to complete it> road, .- iiifni. The abandonment of the right of way by the railroad is no ground for an action of trespass by the former owner to recover it. Logan u Vernon, etc., R R, 9" End., " '.). 867 § 634.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. But a more difficult question arises where a corporation, exercis- ing no franchise except that of being a corporation, is guilty of not provide that charters shall be for- feited for non-payment of corporate obligations, so far as corporations ex- isting before the statute are concerned. Aurora, etc., Co. v. Holthouse, 7 Ind., 59 (1855). But it may prescribe that the charter be repealed unless within cer- t tin time the company do certain things — here make good its capital. Lothrop v. Stedman, 42 Conn., 583 (1875). And may force the dissolution of in- solvent insurance corporations or cor- porations whose continuance of busi- n >ss will be dangerous to the public. Ward v. Farwell, 97 111., 593 (1881); Chicago Life Ins. Co. v. Auditor, 101 III., 82 (1881). So also as to banks. The remedy "for a violation of duty may be altered and changed by I lative provisions if tin' power of ac- complishing the same objects by any means is within the legitimate scope of legislative authority." Commonwealth r. Farmers', etc., Bank. 21 Pick., 542 (1839), Quo warranto does not lie against a corporation for ultra vin 8 acts, such as issuing watered stock or purchasing its own stock. "Acts in ■a of power may undoubtedly be tarried so far as to amount t<> a mis- user of the franchise to be a corpora- tion and a ground for its forfeiture." The courts refuse to define what ultra roes arts will and what will not sus- tain quo warranto proceeding. They must be acts which "so derauge or de- stroy the business of the corporation that it no longer fulfills the end for which it was created."' State v. Minn., etc., Co., 41 N. W. Rep., 1020 (Minn., 1889). The following acts and facts do not constitute a misuser. There is no mis- user of franchises by a corporation where the objectionable act was by a cashier in direct violation of orders given to him by the directors. State v. Commercial Bank, 6 Sm. & M. (Miss.), 218 (1846); or where a railroad or turn- pike company has constructed its road over land without obtaining the right of way, State v. Kile, etc., Co., 38 Ind., 71 (1871); People v. Hillsdale, etc., T. Co., 2 Johns., 190 (1807) ; or where the company deviates slightly from its route, fails to file a map of the route, and neglects to elect new directors, Harris v. Mississippi, etc.. R R Co., 51 Miss., 602 (1875) ; or fails to file a state- ment of ite condition as required by statute, the object of such filing having ceased, People v. Improvement Co., supra; or where the public are com- pelled to open a draw-bridge for them- selves, Commonwealth v. Bried, 21 )l;i-.. 160(1827); or where a bank has ued its assets to trustees to pay its debts, State v. Commercial Bauk, 13 Sm. A: M.. 5G9 (1850); or for the insolv- ency <>f a bank, it having since then be- come solvent. People '•. Bank of Niagara, w., 198 1826); People n Washing- ton, etc., Bank. 6 Cow.. 312 (1826) (but the contrary has been held as regards a suspension of specie payments and a subsequent resumption, Commercial Bank r. State, 6 Sm. & M. (Miss.), 599 (1846); Planters' Bank u state, 7 id., 163— 1846); or where a bridge company gives reduced rates to constant patrons, ami gives free passage in payment for land and fails to fde required state- ments. Commonwealth V. Alleghany, etc., Co.. 20 Pa. St., 185 (1852); or that the corporation has incorporated also in another state. Commonwealth v. Pitts- burg, etc.. R R Co.. 58 Pa St, 26(1868); or that required statements are not filed, state v. Barron, 58 N. 11.. 370 (1 Though a corporation take more inter- est than allowed by charter it may re- cover. The only penalty is such as the usury law prescribes. (J rand G. Bank r. Archer, 16 Miss.. 151 (1847). For a vigorous and interesting but futile ef- fort to oust a going railroad company 868 CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 635. a non-user. The weight of authority holds that quo loarranto will lie. 1 § 635. Forfeiture for ultra vires acts and usurpation of fran- chises — Quo warranto and injunction at the instance of the state. — Frequently a corporation does acts which its charter does not authorize it to do, or which its charter or a statute expressly prohibits it from doing. The question then arises, What is the rem- edy of the state? The right of a stockholder, or the corporation itself, or a person contracting with the corporation, to object to such acts is discussed elsewhere. 2 But may the state object? Un- doubtedly it may. It seems that the state has four remedies. Its legislature may repeal the charter of the corporation under the re- from its franchises for all kinds of misfeasances, malfeasances and non- feasances, see International, etc., R'y v. State, 12 S. W. Rep., 685 (Tex., 1889) ; and for a successful case in the same line, see East, etc., R R v. State, 12 S. W. Rep., 690 (Tex., 1889). It is not for the state to institute an action to dissolve and wind up a mutual benefit and building corporation merely because some of the members are dissatisfied. People v. Lowe, 117 N. Y, 175, 190 (1889). No quo warranto lies for using an abbreviated corporate name. People v. Bogart, 45 Cal., 73 (1872). The aver- ments of misuser must be definite and certain. Danville, etc., P. Co. v. State. 16 Ind., 456 (1861). And the misuser must be wilful. State v. Columbia, etc., Co., 2 Sneed (Tenn.), 254 (1854); Baltimore v. Connellsville, etc., R'y Co., 6 Phil., 190 (1866). Concerning the pleadings in quo warranto, see People v. Stanford, 19 Pac. Rep., 693 (Cal., 1888). An information in the nature of quo warranto to forfeit the charter of a temperance enterprise is not definite enough in its charges when it charges a perversion of funds. People v. Dash- away, 24 Pac. Rep., 277 (Cal., 1890), con- taining also a discussion on the plead- ings and practice. i The state may forfeit a charter for wilful non-user, although the corpora- tion is a private one. People v. Milk Exchange, 133 N. Y., 565 (1892). See Attorney-General V. Simonton, 7s N. ( '.. 57 (1878), holding that the suit will not lie, although only five shares of stock were subscribed for and no other act done by the corporation. State v. Societe, etc., 9 Mo. App., 114 (1880), holding the same, though the company was dormant But the case of State v. Pipher, 28 Kan., 128 (1882), forfeited the charter of an agricultural college for non-user for nineteen years. And see dicta in Terrell v. Taylor, 4 Cranch, 43, 51 (1815); State v. Commercial Bank, 13 Sm. & M., 569 (1850). In New York by statute such a suit will lie. Code of C. P., § 1798. See, also, In re Jackson, etc., Ins. Co., 4 Sand. Ch., 559 (1847). Where a corporation has abandoned its authorized business and engaged in another it will be wound up. This is different from a case where the directors have mereby and incident- ally committed ultra vires acts. Re Crown, etc., Bank, 62 L. T. Rep, 823 (1890). An abandonment by a corpora- tion of part of the purposes of its incor- poration is no cause for dissolution. Norwegian Titanic Iron Co.. 3"i B 223 (1865), where, its purpose being to purchase English and Norway mines, it sold the English mines. By the terms of a new constitution all corporations which have failed to organize befoi adoption may 1"- deemed to have for- feited their franchises thereby. Chin- ch clamanch, etc., ( '<<. v. Commonwealth, 100 Pa St.. 488 (188S . 2 Set Part IV. 869 § 635.] DISSOLUTION, FORFEITURE, ETC. [CH. rxxvin. served right of the state to repeal; 1 or the state may institute a suit at law to forfeit the charter for misuser of powers ; or such suit may be only to oust the corporation from the exercise of the usurped powers ; or, according to some authorities, the suit may be in equity for an injunction restraining the corporation from committing the ultra vires acts. It seems that the judgment in an ordinary quo warranto suit herein may be either a forfeiture of all the corporate franchises and of its charter, or may be a forfeiture only of the rierht to continue to do the illegal acts, and that it is in the discre- tion of the court to say which decree shall be made. 2 The nature of scire facias, quo warranto and information in the nature of a quo warranto is explained in the notes below. :! i See § 639, infra. 2 State v. People's, etc., Assoc., 42 Ohio St, 579 (1885), where only a discontinu- ance of the acts complained of was or- dered; People v. Improvement Co., 108 111., 491 (1882), where a complete forfeit- ure of chart']-, eta, was decreed. See, also, People v. Utica Ins. Co., 15 Johns., 357 1 1818), where an insurance company bad engaged in banking contrary to statute In Stat- v. Buildin ■.. 85 Ohio St.. 258 i s T'.' . the court -aid thai where the corporation is guilty of an offense which by Btatute is cause for forfeiture of us franchise as a corpora- tion, the court will decre that forfeit- ure; bul where the cause of forfeiture is outside of those prescribed in the stat- utes, then the court may decree either a forfeiture of the franchise to be a corpo- ration or an ouster from the powers and nets illegally assumed or done. 'Professor Dwight explained these as follows : "Scire facias is resorted to where there is original defect in the charter, as if. ft ;/.. a grant obtained by fraud. It may be used also in the case where the charter was valid but the powers of a corporation have been abused. The dis- tinction taken in England is this: that a scire facias may be resorted to where a ' corporation in full possession of its powers abuses them, while a quo warranto is applicable where a corpora- tion, from a detect in its constitution, such as a loss of part of its members which are integral to its existence, be- comes an imperfect body, but nevertl less continues to act as a corporation. See Grant on Corpora.. "Writ of quo warranto. This is au ancient writ, employed by the king linst any one who claims or usurps an office or franchise, or who. having had a right to the franchise, neglects to exercise it. to inquire by what warrant he still claims to exercise it. The theory of the writ is, there is an unlawful en- croachment upon the royal prerogative, and. being a dilatory proceeding and bnical, it is not now so much em- ployed as the snec lin.^ remedy. •• Information in the nature of a quo warranto. This is in form a criminal proceeding. There were two proceed- ings in the criminal law for the convic- tion of criminals. One is termed an En- formation and the other an indictment. They differ in this respect, that while an indictment is found by a grand jury, an information is simply the allegation of an officer who files it. In this case the attorney-general proceeds on twofold ground, both to punish the usurper and t i prevent the unlawful exercise of its franchises. In the case of a corpora- tion the main object is to interfere with the exercise of the franchise. The in- quiry is the same as in the writ of quo warranto; that is. by what warrant the franchise is exercised. The reason why 870 OH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC.. [§ 635. Quo warranto or an information in the nature thereof is the proper remedy where the corporation has not been legally incor- porated. 1 it is more resorted to is that it is easy v. Moore, 19 Ala., 514 (1851). When the and simple of application. information has for its object to oust " Under the New York code the pro- the defendants from acting as a corpo- •ceeding is simply an action brought by ration, and to test the fact of their m- the attorney-general, governed by the corporation, it must be filed against in- same general rules as an action at com- dividuals. When the object is to effect mon law. If judgment goes against the a dissolution of a corporation which has corporation it is liable to be dissolved This proceeding in England was insti- tuted in the great criminal court, the king's or queens bench, and in New York in the supreme court only, which represents the queen's bench." In the case of State v. Merchants', etc., Trust Co., 8 Humph. (Tenn.), 235 (1847). the court said : " By the common law the forfeiture of a charter can be en- forced in a court of law only ; and the proceeding to repeal it is by a scire facias or an information in the nature of a writ of quo ivarranto. A scire facias is the proper remedy where there is a legal existing body capable of act- ing, but which had been guilty of an abuse of the power intrusted to it ; a quo ivarranto where there is a body corporate de facto, which takes upon itself to act as a body corporate, but from some defect in its constitution it cannot legally exercise the power it affects to use." Citing 8 Wheat, 483-4. In Pennsylvania, where the state filed an information to declare ultra vires a contract between a canal company and a coal company, whereby one-half of the canal facilities were monopolized by the latter, the court held that the in- formation was a proper remedy, and that the court in its judgment in favor of the state might order the corporation to discontinue the unauthorized act and had an actual existence, or to oust such corporation of some franchise which it has unlawfully exercised, the informa- tion must be filed against the corpora- tion. People v. Rensselaer, etc., R. R, 15 Wend., 113 (1836). Although the state proves the case, yet the court will not adjudge a forfeiture unless justice requires it State v. Essex Bank, 8 Yt.. 489 (1836). Pleadings in quo ivarranto. People v. Stanford, 19 Pac. Rep., 693 (Cal., 1888). iThe state may forfeit a charter where the statute required five persons to sign and acknowledge the articles, but only four out of the five actually did acknowledge them. People v. Montecito, etc., Co., 32 Pac. Rep., 236 (Cal., 1893). In quo warranto proceed- ings on the ground that the company was not properly incorporated, the cor- poration itself is a necessary party de- fendant. Id. Under the statutes of Alabama in reference to watered stock quo 7carranto lies where si. 000,000 of stock is issued for the possibility of pat- ents to be thereafter granted. In such quo warranto proceedii kholders need not be made parties. State r. Webb, 12 S. Rep., 377 (Ala., 1893> In an action by the state to forfeit a rail- road charter the state must prove not only that a cause of forfeiture did exist but that it still continues to exist Bfore- that the judgment need not oust the over Borne public interest must be in- corporation from its charter and fran- volved in obtaininRtte forfeiture. Feo- chises. Commonwealth v. Delaware, pie r. Ulster, eta, 1, 1,. 138 N. 5 .. .» etc Canal Co., 43 Pa St. 295 (1SW). (1891). A charter of the company will For the ancient learning as to the scire be forfeited at the instance of the state facias in forfeiting charters, see State whereaome of the partus who are al- 871 § 635.] DISSOLUTION, FORFEITURE, ETC. [CII. XXXVIII. Quo warranto lies against foreign corporations doing business illegally in the state. 1 The state by quo warranto may oust a railroad from discrimina- tions in favor of oil shipped in tank cars. 2 An exemption from taxation is not a franchise. Hence, quo warranto does not lie to oust the corporation from such exemp- tion. 3 Although quo warranto can be only for acts committed within live years in Ohio, yet it serves to oust a company from exercising a power which it has not exercised continuously for twenty years.* It is very doubtful whether the state may file a bill in equity to enjoin a corporation from committing an ultra vires act. The remedy of the Btate is quo warranto. In England a bill has been I to join in the corporation « 1 i < 1 aot so join, but their names wore ins withoul their sanction or authority. Such parties are ool liable as stockhold- ers, L.i Banque d'Hochelaga '■. Murray, 68 I.. T. Rep., 68 1 1890 . In a »•<"•- rmitn proceeding to declare void -'in .ill- '.■■! charter 1 1 1 • - corporation i- a essary party defendant People ft Flint, 28 I'm-. Rep., 196 (Gal., Ifi Lfter the attorney-general institutes guo war- ranto proceedings, and much testimony is taken, and then the proceeding is dis- continued and the company ; to expend money and make conti the attorney-general will not !«• rill t" institute new proc linga In re Equity Gas-Light <'.>.. i<» n. v. Snpp., 801 (1880), In '/»" warranto, charging defendants with usurping ■ public fran- chise to operate a ferry, where they at- tempted i" defend on the ground that they had a legal right t.> use the ferry, tin- burden was on them t.> show a valid title. Gunterman ft People, 88 N. EL Rep, 1067 III.'. Where an incorpora- tion is f( R3, "Hi' nf which is illegal, the charter will be forfeited, the objects not being clearly separable People ft Chicago Gas T. Co., 88 N. EL Rep., 798 II!.. 1889). The issuing of transferable certificates of stock is not assuming the functions of a corpora- tion. Rice '•. Rockefeller, 56 Hun, 617 d- 1 ."". \ suit instituted by the Btate to forfeit a charter cannot be removed to the federal COUrt <>n the ground that a. contract exists between the itaon and the state, and that BUCh contract will be violated. Commonwealth of Ky. a Louisville Bridge Rep., 841 (1890), The curt may forfeit charter "f a railn poration for illegally leasing its road, and • Dot merely enjoin the continuation of the lease. East Line, etc. R R. ft State. \v. i;,|,. 690 (Tex., 1889). \ cor- poration in. 1 for an illegal pur- ii as baying a majority or all of itock in each nf four comp 'ting corporations, and thereby creating a monopoly, is Bubje t u< having its char- ter forfeited at the instance of tl> torney-general. people e. Chicago I \ E Rep., 798 III.. 18 'state ft Western, etc - .. ! A N. EL Rep., 808 (Ohio, 189 a Fidelity, I '.... U N. W. Rep, 108 Minn., I Quo warranto against a foreign corpo- ration illegally doing business in the state must be against the corporationaa smh and not merely against its .>t ; and agents. State n Bowerby, 18 N. W« Rep, 688 Minn., 18* - State n ( 'incinnati. eta, R R. 23 N. r. I.vp.. 928 "hi... iv, ■ International, etc., R'y ft State, 12 S. \v. ft p.. 685 Tex., 188 •State ft Standard Oil Co.. 80 N. & R P.. 879 (Ohio, 188 Q CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 635. sustained to restrain a railroad corporation from engaging in the coal business. 1 It lies to enjoin a corporation, the same as an in- dividual, from creating a public nuisance. 2 In Wisconsin it is held that the attorney-general may enjoin railroad companies from taking greater rates than are prescribed by statute ; 3 and in many of the states such a bill will lie by statute. 4 The decided weight of authority, however, is that the remedy of the state is by quo warranto and not by a bill in equity for an injunction. 5 1 Attorney-General v. Great Northern R'y Co., 1 Dr. & Sm., 154 (1860). But the attorney-general cannot enjoin a corporate act merely because it is ultra vires. Some injury to the public must be inYolTed. Attorney-general's suit at instance of a manufacturer to enjoin one railroad from leasing rolling-stock to another failed. Attorney-General v. Great Eastern R'y Co., L. R„ 11 Ch. D., 449 (1879). A court of equity cannot compel a corporation to cease collecting tolls, although it has not improved the stream as required by its charter. Pix- ley v. Roanoke, etc., Co., 75 Va., 320 (1881). In Attorney-General v. Mid. Kent R'y Co., L. R, 3 Ch., 100 (1867), a mandatory injunction requiring the defendant to construct a bridge was granted. 2 Attorney -General v. Jamaica, etc., Corp., 133 Mass., 361 (1882). 3 Attorney-General v. Railroad Cos.. 35 Wis., 523, 553 (1874), reviewing many cases; but cf. Strong v. McCagg, 55 Wis., 624. A lease by a domestic rail- road company of its railroad to a for- eign railroad corporation is illegal, es- pecially where it is expressly prohibited by statute. The court will enjoin the lease upon the application of the at- torney-general where the effect of the lease would be to create a combination in the transportation of coal and to de- stroy competition in production and sale. Stockton, Att'y-Gen'l, v. Central R. Co. of N. J. et al, 24 Atl. Rep.. 964 (N. J., 1892). A telegraph company has no power to sell and assign its lines un- less such power is expressly given to it. 8 The franchise is personal. United States v. Western U. Tel. Co.. 50 Fed. Rep., 28 (1892), holding also that the government may file a bill in equity to set aside an illegal telegraph consolidation and need not resort to mandamus. All of the cor- porations were state corporations in this case. 4 State v. Merchants', etc., Co., 8 Humph. (Tenn.), 254 (1874). where an insurance company was restrained from banking. So, also, in New York Bank Com'rs v. Bank of Buffalo, 6 Paige, 496 (1837); Brinckerhoff v. Bostwick, 88 N. Y., 52 (1882), explaining the difference between this class of cases and cases whei'e other parties are complainants. Concerning the power of the state to ob- ject to an ultra vires act of a private corporation by any proceeding other than quo icarranto, see People v. Bal- lard, 134 N. Y, 269 (1892), a carefully considered case. 5 Attorney-General v. Utica Ins. Co., 2 John. Ch., 371 (1817); Attorney-Gen- eral v. Bank of Niagara, Hopk. Ch., 354 (1825). But see People v. Ballard, supra. In Attorney-General v. Tudor Ice Co., 104 Mass., 239 (1870), an injunction re- straining an ice company from import- ing teas was denied. Where a railroad leases its line in violation of a f< >ns! ii u- tional provision prohibiting the consoli- dation of parallel lines it is subject to forfeiture. So, also, where it issues "watered stock'' in violation of tin- constitution. State r. Atchison, l,\ K. 88 N. W. Rep., 48 [Neb., 1888 A state creating a corporation has no visitorial power over it — i. c, power to 73 § 636.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. § 636. The state may waive its right to forfeit a charter. — Vari- ous acts have been held to constitute such a waiver. " "When a leg- islature has full power to create corporations, its act recognizing as valid a de facto corporation, whether private or municipal, oper- ates to cure all defects in steps leading up to the organization, and makes a de jure out of what before was only a de facto corpora- tion." There must, however, be a de facto organization upon which tli is recognition may act. 1 Numerous instances of acts of the leg- islature which constitute a waiver are set forth in detail in the notes below. 2 correct corporate abuses — except "(1) where municipal, charitable, religious or eleemosynary corporations, public in their nature, bad abused their fran- chises, perverted the purpose of their organization or misappropriated their funds; and as they, from the nature of their corporate functions, were more or less under government supervision, the attorney-general proceeded against them to obtain correction of the abuse; or (2) where private corporations, char- tered for private and limited purposes, had exceeded their powers and were restrained or enjoined in the same man- ner from the further violation of the limitation to which their powers were subject" Hence the United States as the creator of the Union Pacific Rail- road cannot exercise visitorial power <>vrr it iii respect to frauds in its man- agement United States ft Union Pa- cific R K. Co., 98 U. S., 569, 617 (1878) Cf. Attorney-General r Wilson, l Cr. & Ph., 1 (1840), holding that the court had jurisdiction over charitable corpora- tions, and that when the trustees of them abused their trust the court would take notice of such abuse by reason of its \ isitorial powers. Also, on this point, Attorney-General ft Foundling Hospital, 4 Bra Ch. Rep, 165 (1793). For plead- ings in quo warranto proceedings by the state to oust a corporation from usurped Francises and to forfeit a rail- road charter, see People ft Staudford, 18 Pac. Rep, 85 (Cal, 1888), holding also that the statute of limitations is no bar. But see the Pennsylvania cases in g 315, 8 supra, where the state enjoined an ille- gal purchase of stock by a corporation. 'Comanche County v. Lewis, 188 U.S.. 198 (18 -' A legislative recognition of a char- ter cures any unconstitutionality in the statute creating it Snell r. Chicago, 2 1 N. K. Rep., 582 (111., 1890) The exten- sion of time to complete railroads applies so as to prevent forfeiture for non- completion within the original time. state r. Bergen, eta, R'y, 20 Atl. Rep., 762 (N. •!.. 1890) Although suit is brought to forfeit a street railway fran- chise for using electric power without authority, the legislature may cure the defect of power. To forfeit for not commencing work within a year the pleading must allege when the work was commenced. People r. Los An- geteaeta, R'y, 27 Paa Rep., 67:5 (Cal.. 1891) An amendment to a charter is a waiver of any forfeiture thereof due to not commencing business within the prescribed time. Farnswortb ft Lime Rock R. R.. 92 Atl. Rep., :S7:J (Me., 1891). Although the act requires the certifi- cate of incorporation to specify the termini, and the certificate merely say^ the termini are in a certain city, yet if the legislature subsequently by special act recognizes the company, the legality of its existence cannot be questioned. Koch ft North, etc.. R'y, 89 Atl. Rep.. 4(1:'. Aid., 1893) In this case the organ- ization was under the general railroad law. Under such a charter the route and its termini are to be determined by the mayor and city council 'under 7-1 I if. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§63; § 637. Who may allege that forfeiture or non-incorporation or dissolution exists. — It has already been shown that no one but the their general power of control and reg- ulation of the streets." A waiver may be express or by stat- utes recognizing its continued existence, In re New York El. R R Co., 70 N. Y., 327, 338 (1877); People v. Manhattan Co., 9 Wend., 352, 380 (1832) ; or requir- ing it to make alterations on its road, Att'y-Gen'l v. Petersburg, etc., R. R Co., 6 Ired. L, (N. G), 470 (1846); or au- thorizing a transfer of its property and franchises to another corporation, Chesapeake, etc., Canal Co. r. Balti- more, etc.. R R Co.. 4 G. & J. (Md), 1, 127 (1*32); or requiring a bank to re- sume specie payments by a certain date, Commercial Bank v. State, 6 Sm. & M. (Miss.). 599. 622 (1846). But waiver as to terminus is not a waiver of an abandonment of part of the road, nor of a defect as to the width of the turn- pike. People v. Fishkill. etc.. Co.. 27 Barb., 445 -"' Waiver may arise by a statue extending the corporate powers, People V. Ottawa, etc.. Co.. 115 111., 281 (1885); Central, etc.. R. R Co. r. Twenty, etc.. R. R. Co., 51 How. Pr.. 168, 186 (1877) ; or by authorizing a change of route. State v. Fourth, etc., Co.. 15 N. H.. 162 1844); or by expressly waiv- ing the cause for forfeiture, Lumpkin v. Jones, 1 Ga., 27 (1846). Legislature mav expressly waive forfeiture arising by suspension of specie payments. Atehafalaya Bank v. Dawson. 13 La.. 497 (1829). May waive by extending the time for completion. La Gn etc., R R. Co. v. Rainey, 7 Coldw. (Tenn.l 420 (1870). Amending charter, etc., is a waiver. White's, etc, Co. v. Davidson County, 3 Tenn. Ch., :'.'."'. (1877'. An act reviving a corporation i- a waiver, even though the act was fraudulently passed. In re Mechanics 1 Soc, 31 La. Ann.. 627 The waiver protects the turnpike corpora- tion from an indictment for obstructing the road. State v. GodwinsvUle, eto Co., 44 N. J. L., 496 (1882). But the waiver must have been clearly in- tended. People v. Kingston, etc., Co., 2:i Wend., 193 (1840). The appointment of a corporate officer by the governor and senate is not a waiver. Peopl • v. Phoenix Bank, 24 Wend., 431 (1840). Long delay in bringing the quo war- ranto may be a waiver. People r. Will- iamsburgh, etc.. Co. 47 N. Y.. 586 (1872 : People v. Oakland, etc., Bank, 1 Doug. (Mich.), 282. Dictum, that the state may waive. Briggs v. Cape Cod, etc., Co., 137 Mass.. 71 (1884), citing cases. Special act amending charter waives defects in the articles of association as filed. Basshor v. Dressel, 34 Md., 503 (1871). Amendment to charter waives right of forfeiture for fraud, non-user and misuser. People v. Ottawa, etc., Co., 115 111., 281 (1886). An amendment of the charter is a waiver. Att"y-Gen'l v. Petersburgh. etc., R. R Co.. 6 Ired. L. 456(1846); Charles River Bridge Co. v. Warren Bridge, 24 Mass., 344 I I The waiver may be express. State v. Bank of Charleston. 2 McMullan, 439 (1843); Enfield Bridge Co v. I '.urn., etc., Co., 7 Conn., 2s 1828); Kanawha, etc., Co. v. Kanawha, etc., Co., 7 Blateh., 391 (1^7o. Where the incorporation had l^een irregular, the recognition of a cor- poration by the legislature is equivalent to a charter. McAuley v. Columbus, etc., R'y, B8 111.. 31- 1876); Cowell v. Colorado, etc., Co., 3 CoL, BS Mead r. N. Y.. etc., R R, 45 Conn., 199 (1877); Kanawha, eta, I '••. V. Kanawha. eta, Ca, 7 Blateh., 891 - St Louis R R v. N. W.. eta, R'y, 3 Ma Ap] \tlantie. eta, R R '•. St. Louis, 66 Ma, n s. W. ! :T.\.. 1889). Contra, where charters must be granted by general lawa \ ill.-, etc., R R '". BuperviB CaL, 854 - But see Brent v. - B75 § 037.] DISSOLUTION, FOKFEITUKE, ETC. [CII. XXXVIII. state can institute a suit to declare a forfeiture. 1 Also, that no one can institute a suit in equity to dissolve a corporation. 2 The ques- tion now arises whether the state or any person, either as plaintiff or defendant, may allege forfeiture or dissolution or non-incorpo- ration where there have been no quo warranto proceedings instituted and prosecuted by the state to judgment. With a few exceptions such an allegation is not allowed. A creditor of a supposed corpo- ration cannot ordinarily hold the stockholders liable as partners although they did not legally incorporate. 3 It is true, also, in cer- tain cases where a stockholder is made liable to corporate creditors upon the dissolution of the corporation, a dissolution is held to exist where the corporation is hopelessly insolvent. 4 And it is the law that where a railroad corporation attempts to acquire a right of way, the persons whose property will be affected thereby may oppose the acquisition of the right of way by showing that the company is not legally incorporated. 8 Bat aside from these excep- tions no one is allowed to assert that the corporation is dissolved, or its franchise forfeited, or its incorporation illegal, until after such a result has been decreed by a court in a proceeding instituted for that purpose by the state. Thus, a stockholder sued on his subscription cannot, unless his subscription was made previous to the incorporation, set up that the company was not legally incor- porated. 6 The corporation is called a de facto corporation, and only the state is allowed to question its existence. There are many instances where attempts have been made to avoid this rule of law by set- ting up that the charter has been rendered forfeitable at the in- stance of the state, but they have uniformly failed. 7 i§ 632, supra. corporation seeks to take under powei 2 §629, supra of eminent domain cannot set up that 3 See ch. XIII, supra. tlieai tides of incorporation had not been *See g 631, supra. filed with the secretary of state as re- sin re Brooklyn, etc., R'y Ca, 72 N. Y., quired by the incorporating statute. 245 N". Y. Cable Co. r. Portland, etc, Co. v. Bobb, 10 S. W. Rep., Mayor, etc., 104 X. Y.. 1 (1887). In con- 794 (Ky„ 1889) A railroad charter is demnation pro lings the incorpora- not good so far as the right to condemn ti<>n may 1»- attacked as not being de land is concerned, where the terminus facto. It- -A- jure existence cannot be is stated to be on the state line in a cer- so attacked Brown r. Calumet, etc., tain county. Atlantic, etc., R. R. v. Sul- R'y, 18 N. E, Rep., 288 (111.. 1888). An livant, 5 Ohio St.. 876 (18K adjacent owner cannot enjoin a street 6 §§ 188-186, supra. Concerning the railway company on the ground that its question of who can complain of inis- charter is invalid, unless his property takes, irregularities and illegalities in rights are affected. Nichols v. Ann the corporation, see ch. I, supra. Arbor, etc.. St R'y. 49 N. W. Rep., 538 -Thus, a person sued for tolls cannot (Mich., 1891). A person whose land a set up that the corporation has not ren- 876 ■CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 637. So, also, a party contracting with a corporation cannot defeat dered required statements, and hence its charter is forfeitable. Kellogg v. Union Co., 12 Conn., 7 (1837). Nor that the charter was never legally vested or lias been violated. Dyer v. Walker, 40 Pa. St., 157 (1861). Where two railroad companies claim a right of way, one cannot allege that the other's charter is forfeitable. Central, etc., R. R Co. v. Twenty-third, etc., R R Co., 54 How. Pr.. 168, 185 (1877). A religious corpo- ration suing for its real estate cannot be met by a plea of dissolution, there haviug been no decree. Baptist House v. Webb, 66 Me., 398 (1S77). A corpora- tion suing for personal property is not defeated by a plea that it was not legally organized or is dissolved by non-user. Penobscot, etc., Corp. v. Lamson, 16 Me., 224 (1839). A grantee of a corpora- tion's right to overflow land is not de- prived of his right by dormancy and non-user of its franchises by the corpo- ration. Heard v. Talbot, 73 Mass., 113 (1856). Attachment lies against the land of a foreign corporation though a re- ceiver of it exists in the state creating it Moseby v. Burrow, 52 Texas, 396 (1880). One corporation cannot enjoin a competing corporation from proceed- ing on the ground that the latter has subjected its charter to forfeiture by misuser or non-user. Elizabethtown G. L. Co. v. Green, 18 Atl. Rep., 844 (N. J., 1889). A county cannot seize a turn- pike, although the company is guilty of misuser or non-user. A judgment of forfeiture is first necessary. Moore v. Sehoppert, 22 W. Va, 282 (1883). A city seeking to lay out a road on a right of way cannot claim that the railroad com- pany's right is forfeited by non-user. New Jersey R R Co. v. Long Branch Com'rs, 39 N. J. L, 28 US76). The cor- poration cannot avoid a tax on the ground that it has ceased business. Bank of IT. S. v. Commonwealth. 17 Pa. St., 400 (1851). A grantor of land to a corporation cannot reclaim it on the ground of a dissolution, there having been no decree of dissolution. Bohan- nan v. Binns, 31 Miss., 355 (1856). ' Serv- ice on a corporation cannot be made by service on a stockholder on the ground that it has forfeited its charter by non- user. Bache v. Nashville, etc.. Soc, 1<> Lea (Tenn.), 436 (1882). A suit by the corporation on a bond is not to be met by a plea of forfeiture for non-u- r. West v. Carolina, etc.. Ins. Co., 31 Ark.. 476 (1876). Nor its suit on a note by the plea that it has abandoned its fran- chises. John v. Farmers', etc.. Bank. 2 Blackf., 367 (1830); East Tenn., etc., Co. v. Gaskell, 2 Lea (Tenn.), 742 (1879); President, etc., v. Hamilton, 34 Ind., 506 (1870). The forfeiture can exist only after a decree to that effect. Chesa- peake, etc., Co. v. Baltimore, etc., R R Co., 4 Gill & J. (Md.), 1 (1832). An agent sued for conversion of funds can- not allege that the corporation is guilty of a non-user of its franchises. Eliza- beth, etc., Acad. v. Lindsey, 6 Ired. L (N. C), 476 (1846). A railroad suing on a note cannot be defeated by the defense that it has forfeited its charter, there being no adjudication to that effect. Toledo, etc., R R v. Johnson, 49 Mich., 148 (1882). A squatter on corporate land cannot dispute the corporate title by al- leging that it was not legally incorpo- rated or organized. Only the state can object. East, etc., Church v. Froislie, 35 N. W. Rep., 260 (Minn., 1887). In a suit b}- a toll road to recover a penalty for refusal to pay toll, the validity of the company's organization and the condi- tion of the road cannot be brought into the controversy by way of defense. Canal St., etc., Co. v. Paas. 54 N. W. Ri p., 907 (Mich.. 1893). But a turnpike com- pany cannot recover fares for the part of its road which is constructed beyond its chartered limits. Pontiac, etc., Co. v. Hilton, 36 N. W. Rep., 739 (Mich.. 1888). Statutory provisions as to notice of the first meeting are directory. They need ^77 § <»37.j DISSOLUTION', FORFEITURE, ETC [CH. XXXVIII. his obligation by showing that the corporation was never legally incorporated. 1 not be observed if the stockholders ac- quiesce. Braintree, etc., v. Braintree, 16 N. E. Rep., 420 (Mass.. 1881). But the failure of a railroad to cause to be paid in a certain amount of its capital stock before incorporation may defeat munic- ipal bonds which are given to it Farn- ham v. Benedict, 107 N. Y., 159 (1887). Indorser sued by the corporation cannot claim that it has rendered its charter liable to forfeiture by suspension of specie payments. Atchafalaya Bank v. Dawson, 13 La.. 497 (1839). Corporation cannot defeat its taxes by alleging fail- ure to comply with conditions subse- quent in its charter. Baltimore, etc., K. R v. Marehall Co., 3 W. Va., 319 (1869). Though the provision in the Kentucky statutes requiring publication of the charter is not complied with, yet the corporation is valid and complete, ex- cept that the state may proceed to annul the charter. No other party can raise the objection. Stutz r. Bandley, 11 Fed Rep., 531 (1890); Walton v. Riley,86 Ky.. 413, 421; overruling Beinig v. Manu- facturing Co., 81 Ky.. BOO. Runnings blockade is not a forfeiture per ae. Im- porting, etc., Co. v. Locke, 60 Ala.. 882 (1878) i Commercial Bank r. Pfeiffer, 108 N. Y., 242 i 1888). The maker of a note to a bank cannot question its incorpora- tion. Exchange National Bank t\ Hast- ings, 49 N. W. Rep., 228 (Neb., 1801); Columbia Electric Co. V. Dixon, 49 N. W. Rep., 244 (Minn., 1891). An of- ficer cannot defend against an action to make him account, by setting up that the company was fraudulently or- ganized. Haacke v. Knights, etc., Club, 25 Atl. Rep, 422 (Md., 1892). In the case of Perine v. Grand Lodge, etc., 50 N. W. Rep., 1022 (Minn.. 1892k where an insurance policy was sued upon, the court held that it was immaterial that the defendant was not incorporated, in- asmuch as it had held itself out as a 8 corporation. Bou. etc., Co. v. Standard, etc., Ins. Co., 12 S. E. Rep., 771 (W. Va„ 1891). "Where a corporation sues for the price of articles sold, the defendant cannot set up that the plaintiff sold the articles before its capital stock was fully paid up as required by statute. Chasis, etc., Co. v. Baston, etc., Co., 28 N. E. Rep., 300 (Mass., 1891); McCord. etc.. Co. v. Glen, 21 Pac. Rep., 500 (Utah, 1889). In a suit by a bona fide indorsee of a note from a corporation as indorser, the maker cannot set up that the com- pany was not properly incorporated. Brickley V. Edwards, 30 N. E. Rep., 708 (Ind„ 1892). The defendant cannot al- lege that the corporation was for an illegal purpose that of running block- ades—the charter not showing that fact. Importing, eftx, ( !a v. Lock, 50 Ala.. B82 (1873). Where the suit is on a bond, a stockholder cannot sue to have the corporation declared a copartner- ship by reason of irregular incorpora- tion. Baker v. Backus, 82 111., 79(186 Nor can the maker of a note to a corpo- ration defeat it by Bhowing that the corporation was not duly incorporated. Butchers', etc., Bank v, McDonald, 130 Mass., 264 (1881); Jones r. Bank of Ten- n, . - B. Monr. (Ky.). 122 (1847); l ,, nardaville Bank aWillard. 25 N.Y., 574 (1862 ; Nutting 0. Hill. 71 (ia.. 557 (1888 : Irvine v. Lumberman's Bank. 2 W. & S. (Pa ,204 (1841); Congrega- tional Soc. r. Berry. 6 N. II.. 164(1881 Massey <•• Bldg. Ass'n, 22 Kan., 624 (1879); Vatert* Lewis, 86 Ind,, 288 1871); Smith t\ Miss., etc., R. R Co.. 14 Miss., 179 (1846), where the maker of the note claimed that the corporation was fraud- ulently and illegally organized : Stude- baker, etc., Co. n Montgomery, 74 Mo., 101(1881); Stoutimore r. Clark, 70 Ma, 471 (187.->i ; Blake r. Ilolley, 14 Ind.. 383 (1860); Jones r. Cincinnati, etc., Co., 14 Ind.. SO (I860), holding also that the cor- poration need not prove even a de facto 78 cir. xxxviii.] DISSOLUTION, FORFEITURE, ETC. [§ 637. A person who gives a bond to a corporation is not allowed to defeat the bond by alleging that the corporation was not duly incorporated ; l nor can the corporation defeat its bonds by alleging its want of lawful incorporation. 2 A person who mortgages land to a supposed corporation cannot defeat a foreclosure of the mort- gage by alleging that the mortgagee is not a corporation ; 3 nor can existence. To saTiie effect, Montgomery R. R. Co. v. Hurst, 9 Ala., 513 (1846). Cf. White v. Campbell, 5 Humph. (Tenn.), 38 (1844), where the remarkable decision was made that, if the corpora- tion had been dissolved at the time the note was given, the maker was not liable and could have a mortgage which he gave as security set aside. A de facto corporation, as indorsee of a note, may enforce it. Wilcox v. Toledo, etc., R. R. Co., 43 Mich., 584 (1880). A corporation cannot be defeated in an action on a contract by the fact that twenty-four instead of twenty-five persons signed the articles of incorporation. Buffalo, etc., R'y Co. v. N. Y., etc., R. R. Co., 23 Alb. L. J.. 134 (N. Y., 1886). Proof of organization in fact and user meets a plea of nvl tiel corporation by the maker of a note to the corporation. Mitchell v. Deeds, 49 111., 416 (1867); Smelser v. Wayne, etc., T. Co., 82 Ind., 417 (1882). But see Williams v. Bank of Michigan. 7 Wend., 540 (1831). The corporation it- self, when sued upon notes which it lias made, cannot set up any informality in its incorporation. Kelley v. Newbury- port, etc., R. R. Co.. 141 Mass., 496 (1886) ; Empire Mfg. Co. v. Stuart, 46 Mich.. 182 (1881), where the corporation re-incorpo- rated in order to cure the irregularity. Estoppel as to corporate existence seems to mean that the corporation is obliged to prove only a de facto existence, and heed not prove the details of incorpora- tion. Leouanlsville Bank o. Willard, 25 N.Y., 574 (1862). A person taking water from an irrigation company under con- tract cannot defeud against an action thereon by alleging that the company was not incorporated. Fresno, etc.. < '<>. v. Warner, 14 Pac. Ren.. 37 (CaL, 1887). In a suit by a corporation on a note, the execution of the note to the corporation is prima facie proof of its incorpora- tion. A de facto corporation may en- force a note given to it. Hudson v. Green, etc., 113 111., 618 (18s:» i; 5 S. Rep., 247 (Fla„ 1888); 21 N. E. Rep., 12 (111., 1889). That the corporation may ratify and pnforce contracts entered into in its behalf by its promoters before incorporation, see § 705, etc., infra. 1 McFarland v. Triton Ins. Co., 4 Denio, 392 (1847) ; City of St Louis v. Shields, 62 Mo., 247 (1876): Loaners" Bank v. Jacoby, 10 Hun, 143 (1877); Commis- sioners, etc., v. Bolles, 94 U. S., 104(1876) ; Henriijues ?•. Dutch West India Co.. 2 Ld. Raym., 1532 (1729), where a foreign corporation sued, and the general issue was not pleaded. 2 Independent, etc.. Aid v. Paine, 14 N. E. Rep., 42 (111.. 1887); Blackburn v. Selma, etc., R. R. Co., 2 Flipp, 525 1 ^79) ; Racine, etc.. R R. v. Farmers', etc., Co., 49 111., 331. 346 (1S68); Liter v. Ozokerite Min. Co.. 27 Pac. Rep., 690 (Utah, 188 Aller v. Town of Cameron, 3 Dill.. 198 (1874). where a municipality set up this defense: Empire, etc., Mfg. Co. r. Stuart, 46 Mich., 182 1882), a promissory n< case. A corporation cannot defend against its contracts by alleging that it never published its articles of associa- tion as required by Btatute. Wo <1 >: Wiley, etc., Co., 18 At!. Rep, 187 Conn., 1888), A corporation is liable for a t i 6V( D thougb it failed t<» tile its articli s of association with the secretary <<( state as required by statute. Walton <-. Rilej . ■ W. hvp.. 806 Ky.. 18ft Bar. Hank r. Collins. Conn., i iv : ,,, sav. Bank Ford, id : and Basenritt. r 79 § 637.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. In like manner the corporation itself is not allowed to defeat its contracts by such a plea, 1 But in suits where the party is not es- topped from denying the incorporation of the other party, such a denial may of course be made. 2 The mere fact that a person contracts with a party and desig- nates the latter as a " company " will not estop the former from denying the incorporation of the latter. This is the law, and is reasonable, since many copartnerships do business and make con- and the defendant alleges that it is doing all its business outside of the state incorporating it. Newburg, etc., Co. v. Weare, 27 Ohio St., 343 (1875). See, also, §§ 237-239, supra. Or where a foreign corporation sues the sheriff for trespass. Persse, etc., Works v. Willett, 1 Rob. (N. Y.), 131 (1863). Or where the company sues for tolls. Sin- clair v. Wayne, etc., T. Co., 82 Ind., 417 (1882). A de facto corporation exists where the company might have incor- porated under the statutes and has acted as a corporation. Methodist, etc., Church v. Pickett, 19 N. Y., 482 (1859). But a person who agreed to and did convey property to a company to be in- corporated may subsequently repudiate the corporation and his conveyance as against his associates who shared in the stock received therefor. Doyle v. Mizner, 42 Mich., 332 (1879). The case of Boyce v. Trustees, etc., 40 Md., 359 (1876), allowed a corporation to deny its existence as against a director who sued it for moneys advanced to it Welland Canal Co. v. Hathaway, 8 Wend., 480 (1832), allowed a contractor to deny the existence of a corporation which sued to recover back money which had been overpaid to him. A corporation receiv- ing the stock of another corporation in consideration of certain agreements as to renting machines belonging to said latter company cannot, when enjoined from violating that agreement, set up that the latter company was not prop- erly organized. Automatic, etc., Co. v. North American, etc., Co., 45 Fed Rep., 1 (1891). Although there are less stock- holders and less directors than the stat- ute or charter require, yet the acts of these are sufficient to sustain obligations incurred by the corporation with third persons. Welch v. Importers', etc., Bank, 122 N. Y., 177 (1890). It is no defense to a proceeding by a religious corporation to collect a legacy to allege that there were irregularities in its incorporation, and that there has been a non-user of its franchises. Matter of Congregational Church, etc., 131 N. Y., 1 (1892). In order to constitute a de facto corporation "there must at least be an organization under some existing charter or law. And such organization must be in good faith." Welch v. Old Dominion, etc., R'y, 56 Hun, 650 (1890). Where an at- torney sues for his services the supposed corporation may set up that it is not a de facto nor de jure corporation. Id. The California code provides that the existence of a de facto corporation shall not be called in question in private suits. Lakeside, etc., Co. v. Crane, 22 Pac. Rep., 76 (Cal., 1889) ; Golden, etc., Co. v. Joshua, etc.. Works, 23 Pac. Rep., 45 (Cal., 1890). 1 Dooley v. Cheshire Glass Co., 81 Mass., 494 (1860); Callender v. Painesville, etc., R R., 10 Ohio St., 516 (I860). See, also, Bommer v. American, etc., Co., 81 N. Y., 468 (1880), where the corporation sought to escape royalties by alleging that it incorporated after the contract by it to pay them was made. A corporation sued for work done cannot set up that it was not regularly incorporated. Mer- rick v. Reynolds, etc., Co., 101 Mass., 381 (1869). 2 Carey v. Cincinnati, etc., R R, 5 Iowa, 357 (1857), and the principles and cases supra. See, also, § 638, infra. 882 CH. XXXVIII.] DISSOLUTION, FOKFEITUKE, ETC. [§ 638. tracts under the name of " company." ' Such, also, is the rule where a supposed incorporation is not even a de facto corporation. 2 But where the party contracted with is a de facto corporation, then the rules given above apply. It is true, also, that a company which is supposed to be incorporated, but is not, may after incorporation ratify and enforce contracts made in its behalf. 3 §638. Lapse of charter oy failure to comply with conditions — Effect of failure to complete road within a specified time. — Fre- quently a charter of a railroad corporation requires it to complete its road or a certain number of miles of road within a certain time, and the charter expressly declares that for failure to comply with this requisite the corporate powers and existence shall cease. There is a strong line of decisions to the effect that such a provision as this forfeits the charter absolutely upon non-compliance, and that no decree of a court is necessary to effectuate that forfeiture. 4 iSee§§233, 234, supra. 2 Id. 3 See § 705, etc., infra. 4 See Brooklyn, etc., Co. v. City, 78 N. Y., 524 (1879); In re Brooklyn," etc., R R Co., 72 N. Y., 245 (1878); id., 75 N. Y, 335 (1878); Commonwealth v. Ly- kens, etc., Co., 110 Pa St, 391 (1885); Farnham v. Benedigt, 107 N. Y, 159 (1887). Cf. Re Kings County El. R'y Co., 105 N. Y., 97 (1887), rev'g 41 Hun, 415; People v. Nat'l Sav. Bank, 11 N. E. Rep., 170 (111., 1887); aff'd, 22 id., 283 (1889). A new state constitution may forfeit all charters previously existing, but which have not been used by the incorporators. Chincleclamonche Lum- ber, etc., Co. v. Commonwealth, 100 Pa. St, 438 (1882), holding also that a con- stitutional provision that charters un- der which no organization has been made and business has been commenced shall lapse forthwith is constitutional and self-enforcing. In the case of Put- nam v. Ruch, 54 Fed. Rep., 216 (1893), the court in a dictum, said that the re- peal of a charter by a constitutional enactment may be self-executing, but that in the case before the court the judgment of the court was necessary. Where by its charter a street railroad is to be commenced within three years and completed within ten, but it does 883 not even open books for subscriptions until nearly twenty years have elapsed, the corporation never came into exist- ence, and an abutting property owner may enjoin the laying of tracks. Bona- parte v. Bait, etc., R. R, 23 Atl. Rep.. 784 (Md., 1892). Contra, N. Y, etc., R. R v. N. Y, N. H., etc., R R, 52 Conn.. 274, 284 (1884). Cf. State v. Bull, 16 Conn., 179. In Texas the statute is self- executing, the words used being the same as in the New York*statute. But the property rights survive for the ben- efit of creditors and stockholders. Sul- phur Springs, etc., Co. v. St Louis, etc., Co., 22 S. W. Rep., 107 (Tex., 1893). A provision that unless certain roads should be completed within a certain time, "its corporate existence and its powers shall cease, so far as it relates to that portion of said road then unfin- ished," is self-executing. Mayor, etc.. of City of Houston v. Houston, etc., Co., 19 S. W. Rep., 786 (Tex., 1892). A sub- scriber, sued on his subscription for stock, may defeat the suit by showing that by statute the charter was to be void if no work was commenced with'in two years, and that such two years have elapsed and no work has been done. By waters v. Paris, etc., R'y, US. W. Rep, 856 (Tex., 1889). Under the Vir- ginia law requiring organization within § 638.] DISSOLUTION, FORFEITURE, ETC. [ch. XXWIU. But this drastic and dangerous construction of charters does not commend itself to law and justice. It adds one more to the perils which are attached to all great corporate enterprises. Even in New York, where the above doctrine seems to have had its origin, the courts are inclined to limit its application. The New York courts have recently held that a provision in a charter, that unless certain things are done within a certain time the company should " forfeit the rights acquired," does not work a forfeiture ipso facto} It is good cause for forfeiture of a charter by judicial decree where a railroad company does not complete its road or does not complete it within a prescribed time. 2 And such a forfeiture at the instance of the state by reason of the failure of the corpora- two years or else the charter is void, the charter becomes void, •• without le- gal proceedings of any kind, from mere operation of law." Welch v. Old Do- minion, etc., Co., 10 X. Y. Supp., 171 (1890); Silliman v. Fredericksburg, etc., R. R., 27 Gratt. (Va.), 119(1876). A pro- vision m the general statutes to the ef- fect that the powers of a corporation shall cease if it does not organize within one year does not apply to a special charter the terms of which indicate that organization might be after one year. People v. Bowen, :!'» Barb., 24 (1859): affirmed on oth the court reviewed the conflicting de- cisions on the question whether a cor- porate charter could be made by the legislature to lapse and cease ipao facto aud without judicial action. 'Consequently this is no defense to condemnation proceedings. In re Brook- lyn, etc., R. R, 125 N. Y.. 484 (1891). A provision that if the road is not com- pleted within a certain time "the char- ter shall be forfeited " is not self-execut- ing. Galveston, etc.. R'y v. State. 17 S. W. Hep. 07 (Tex.. 1891). This princi- ple is not applicahle where the statute merely limits the term of existence of the corporation. Elizabeth G. L. Co. t\ Green, 18 Atl. Rep, 844 (X. J., 1889). 2 The failure of a railroad corporation to complete its line as laid down in the charter is ordinarily good cause for for- feiture of its charter, but the state may waive it. People v. Ulster, etc., R R., 128 X. Y., 240 (1891). See, also. X. Y.. etc., R R t\ N. Y. & N. H., etc., R R. ntpra. A railroad may construct its line long subsequently to the date of its charter, there being no limit in its charter as to time of construction. W, -tern, etc., R R's Appeal, 104 Pa. St., 899 (1888); Union Canal Co. v. Young, 1 Whart. iPa.\ 410 (ISM). Fail- ure to commence work within a time specified in the Charter, and a penalty that therefor the company should be dissolved, does not effect dissolution. A judgment is necessary. I 'ay v. Og- densburg. eta, R R Co., 107 X. Y., 139 If the time limited for the com- pletion of the road has expired, tin.- i- a use to eminent domain proceedings. Morris, etc., R R Co. v. Central, etc., R. R. 31 X. J. L., 205 (1865). Cf. % 637, tupra. The state may forfeit the char- ter where the road is not constructed within the time fixed by the charter and amendments; also where it aban- dons a part of its lines. Stater. Xon- cannah, etc., Co.. 17 S. W. Rep., 128 (Tenn.. 1875). "Where a railroad com- pany mortgages such part of its road as is completed, and the mortgage is fore- closed, the purchasers are not bound to go on and complete the road. Failure on their part to complete it is no de- fense to an action on a subscription. Chartiers R'y v. Hodgens, 85 Pa. St.. 501 (1877). 884 CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 63S. tion to complete its enterprise as required by charter has often been decreed. 1 But forfeture ipso facto is a doctrine of modern date. It is contrary to reason, justice and the weight of authority. 2 1 People v. Kingston, etc., T. Co., 23 Wend., 193 (1840), where the road was not constructed as required ; Thompson v. People, 23 Wend., 537 (1840). revers- ing 21 id., 235, holding that an imma- terial omission is not fatal ; People v. National Sav. Bank, 11 N. E. Rep., 170 (111., 1887), forfeiting for failure to com- plete subscriptions as required by char- ter; Eastern, etc., Co. v. Regina, 22 Eng. L. & Eq., 328 (1853). for failure to pay in capital stock as required by charter ; People v. City Bank, 7 Col., 226 (1883), to same effect. See People v. Jackson, etc., P. Co., 9 Mich., 285 (1861), for a case of the construction of a road in sections. And where the charter prescribes that a certain number of miles shall be completed within a certain time, but does not prescribe that the effect of non-compliance shall be a forfeiture, then the only way of forfeiting the charter is by a suit and a decree of a court. Hughes v. Northern Pac. R'y Co., 18 Fed. Rep., 106 (1883); Arthur v. Commercial Bank, 17 Miss., 394, 430 (1848). The fact that a corporation commences business in another state within a year suffices for a charter pro- vision that it must commence business within a year. Re Capital, etc., Ins. Co., 47 L. T. Rep., 123 (1882) ; The Peo- ple v. Kankakee Improvement Co., 103 111., 491 (1882). In this case the charter required the proposed improvements to be completed within eight years as far east as the state line. The company completed as far east as Kankakee City and claimed the right to exercise the option of making or not making further improvements between that point aud the state line. The court say: "The non-compliance with the requirements was per se a misuser, and a cause of forfeiture of the franchise as for condi- tion broken ; " and " we can see here but one entire franchise for the improve- ment of these streams, and that this ob- ligation to make the improvements above Kankakee City was a condition annexed to this entire franchise. . . . We think the non-compliance with the requirement in question was a cause of forfeiture of the entire franchise." Briggs v. Cape Cod Land Co., 137 Mass., 71 (1884). In this case the charter of a corporation required it to deposit with the state treasurer within four months from its date the sum of $200,000 as se- curity for certain purposes, among others for the payment of damages for taking land, and the corporation did not deposit the $200,000 in cash but in bonds of the United States of the par value of $200,000, and of the market value of $230,000. Held, a sufficient compliance, as the object of the provision was to provide security to various interests. Also held that the question whether a corporation has ceased to exist for non- compliance with charter provisions could only be judicially determined in a suit to which the commonwealth was a party. The corporation itself, when sued for taxes, cannot set up this de- fense. Baltimore, etc., R. R. v. Mar- shall Co.. 3 W. Va., 319 (1869). Where a charter, by its terms, is to be void un- less the capital stock is subscribed within two years and business com- menced, a failure to secure the whole subscription within that time renders the charter void though business was commenced. Qtto warranto lies. Peo- ple v. Nat'l Sav. Bank, 11 N. E. Rep.. 170 (111., 1887). An owner of land which a railroad has taken cannot reclaim pos- session by reason of the failure of the company to complete its road within the time limited by charter. Cincin- 2 See § 637, and notes. 885 § 639.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. § 639. Repeals of charters — Right of stockholders to object.— The repeal by the state of a charter before the expiration of the time it was to exist, or the repeal at any time where the charter is per- petual, is an unconstitutional breach of the contract between the state and the cor) (oration and the stockholders. 1 Where, however, the right of repeal is reserved by the legislature, then such reserva- tion becomes a part of the contract, and the repeal of the charter rests in the discretion of the legislature. 2 Upon a repeal the cor- nati, etc., R R v. Clifford, IB N. E. Rep., 524 (Ind., 1833); Bravard >-. Cin- cinnati, eta, R R, 17 N. E. Rep.. 188 (Ind., 1888). The bondholders of the company take the rUk of tins forfeiture of the charter for non-compliance with conditions Billimantx Fredericksburg; etc., R I:.. t. (Va.), 110 (1 where, however, the corporate officers were endeavoring to enforce fraudulent bonda Borne <>r the English railway arts are plainly not obligatory bui only enabling; ami it h held that the evident intention of parliament was to permit the companies to complete their lin far as possible or desirable before the limit of time Bet, and to abandon the re- maining portion. York ft North Mill. l:\ <■.,. ,-. Queen, I Ellis ft BL,« reversing same L, p. 178 Western R'y « !a v. Queen, id., 9\ ag same case, id., £ I linburgh, etc., R') I 'o, r. Philip \,i.. in II. ol I.. . 51 1. B Scot- tish N. r R'3 « ... '• Stewart, 8 id 41 1 1859 8 • also, R ham Canal, 8 W. BL, 7 1 - bj Lord M insfield ; Bakemore n < Ham< u Bhire Canal, l MyL ft K.. ; Lord Eldon; Queen n Eastern Counties R'y Ca, 10 \.l. ft II.. •". n l ancashire, eta, R'y Co., 1 El .v BL, 228 I 188 l Gn enw 1 a Freight Ca, 108 ' 18 (1881). " A grant of corporate privi- - for a specified period cannot be ri Burned by the Btate within such period, [f the charter in- without limitation as to time it is forever irrepealabli ft Northeast 1.'. R tx Casey, 28 1' ill., legislature cannot for- f'-it a charter. Forfeiture can be de- creed only by the Courta It is not a leg- islative function unless reserved Allen v. Buchanan, 9 Phil. (Pa.), 283 (U Cougros may repeal a charter granted by a territory. Mormon Church t\ United Btates, 188 U. s.. l fl800> A for- feiture of land by the government for non-compliance with the terms of the errant may l>e by legislative enactment Farnsworth v. Minn.. < t- - ., R. p.. :•. ader a i I povi et I tl at the pleasure of the legislature the courts raniMt question the becesaity nor the ith s motiv< b leading to ■ repeal ■ I 108 U. s.. 18 (1881) ; Lothrop n. Stedman, 18 Blatch., Binking Fund Caeca, 99 U. S .. : North..!. i:. l:. . Miller, 10 Barb., i etc. R i: i Pa Bt BOS; Miners 1 Bank v. United sta* nan, •■. Pennington, l Paige, 108; i 88 Pick, 884,844. If the power of repeal arises only upon an abuse of franchise the court may revie* the question whether i was an abuse. Erie & Northeast R 1; supra; Mayor, etc, of Baltimore v. Pittsburgh >v Connefiaville R R Ca, l Abb. U. S. Rep., 9 (1 Hence the legislature cannot forfeit a charter merely because the corporation n incorporated elsewhere and has brought suits in the f< d< ral courts. ( iommonwealth v. Pittsburgh, etc.. R R. 68 r.i. Bt, 88 (1888 - . in Flint etc., Plank-road Ca u Woodhull, 85 Mich.. 89 ncry i: Mi r- 888 « :i. xxxviii.] DISSOLUTION, FORFEITURE, ETC. [§ 640. porate property becomes a trust fund, to be applied first to the payment of the debts of the corporation, and the balance to be distributed among the stockholders. 1 § 640. Acceptance of a charter hy the corporation arises from merely acting under it, and a want of formal acceptance is no de- fense to actions on its contracts.— It is an old principle of law that individuals cannot be compelled by the state to accept a charter to act as a private corporation. Accordingly an acceptance of the charter by them is necessary to the actual existence of the corpo- ration. But there is no rigid rule of law requiring them to indi- cate such acceptance in a formal manner. Any acts which prove an intent on the part of the corporators to proceed under the charter is a sufficient acceptance of it. It has been frequently held that an acceptance may be shown by proof that corporate meetings and elections have been held and other corporate acts entered into. Mere user of the right to act as a corporation is sufficient.' 2 rill, 18 Mich., 338 (1869) : State v. Noyes, 47 Me., 189 ; Canal Co. v. Railroad Co., 4 Gill & J.. 122 ; Regents v. Williams, 9 Gill & J., 365; Cooley's Con. Lim., 106 ; Mayor, etc., v. Twenty, etc., 113 N. Y, 311. Under this reserved power the state gin Bridge v. Bragg, 11 N. H., 102 (1840) : Bank of Manchester v. Allen, 11 Vt., 302 (1839); Tallediga Ins. Co. v. Landers, 43 Ala., 115, 136 (1869); Trustees, etc., v. Gibbs, 56 Mass., 39 (1848); Gleaves v. Brick, etc.; Co., 1 Sneed (Tenn.), 491 may authorize one corporation 1 to build (1853); Perkins v. Sanders, 56 Miss., 733 its road on a route which a prior corpo ration has designated but not acquired. Re Cable R'y, 40 Hun. 1 (1886). A gen- eral statute or constitutional provision reserving the right to repeal, alter or amend charters enters into all charters (1879); Mutual, etc., Ins. Co. v. Stokes, 9 Phil., 80(1872); Penobscot Boom Corp. v. Lamson, 16 Me., 224 (1839); Sampson v. Bowdoinham, etc., Corp., 36 Me., 78 (1853); Lincoln, etc., v. Richardson, 1 id , 79 (1820) ; Bow v. Allenstown, 34 N. granted subsequent thereto as much as H., 351, 372 (1857) ; Jameson v. People if actually inserted in such charters. Re Lee's Bank of Buffalo, 21 N. Y.. 9 (1860) ; Commissioners, etc., v. Holyoke Water-power Co., 104 Mass., 446 (1870) ; Delaware R R. Co. v. Tharp, 5 Hair. (Del.), 454. The repeal of a general in- corporating act and the enactment of a new one does not repeal charters which 16 111., 257 (1855); City of Covington v. Covington, etc., Co., 10 Bush (Ky.), 69 (1873); People v. Farnham, 35 111., 562 (1864); Middlesex, etc., v. Davis, 44 Mass., 133 (1841); Commonwealth v. Bakeman, 105 Mass., 53 (1870) ; Palfrey v. Paulding, 7 La. Ann., 363 (1852) ; Trott r. Warren, 11 Me., 227 (1834). Building have already been taken out under the a part of the road is an acceptance of a old act. Freehold, etc., Assoc, v. Brown, 29 N. J. Eq., 121 (1878); United, etc., Assoc. V. Benshimol, 130 Mass., • 325 (1881). Contra, Wilson v. Tessou, 12 Ind., 285 (1859). i See § 641. 2 Acceptance of a charter is sufficiently shown by user under it. Demarest v. Flack, 128 N. Y, 205 (1891); Androscog- 887 special charter. St Joseph, etc., R R v. Shambaugh, 17 S. W. Rep., 581 (Mo., 1891). Acceptance is sufficient where the grantees afterwards apply for an amendment to the charter. Farnsworth v. Lime Rock R R, 22 Atl. Rep., 373 (Me., 1891); and see cases in g§ 183-86. supra, holding that a subscriber cannot defeat an action to collect his subscrip- § 611.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII. §611. The assets upon dissolution. — Upon the dissolution of a corporation all its property, both personal and real, is to be used to pay the debts of the corporation, and after the debts are paid tion by alleging informalities in organi- zation. Formerly it was customary at the first meeting of the corporation to pass a formal vote accepting the char- ter. This, however, is not necessary. The fact of holding the meeting is a sufficient acceptance. See same ca> also City Of Atlanta v. Grate < ity. etc, Gas Co., 71 Ga.. 106 (1883), where a char- ter granted in 1808 was not acted on until 1877. It was held that the appli- cation for a charter constituted an ac- ceptance in advance McKay v. Beard, 30 s. c. 156 (1888), holding that an ceptance existed thongh no meeting at all for organization was held, but the c irporation pi I to business I i gnn >: McAllister, 2 DeL Ch., 176 (1856 . holding that irregularities in organiza- tion are immaterial ; Russell v. McLellan, ;?l Mass., 63 (1888), where no notice was ■n of the first m< eting, and a stock- holder Bued for a dissolution of the com- pany as a copartnership The best evi- dence possible of the acceptance should b • given. Hudson v. < larraan, n Me., 84 Where subscription books are opened and then abandoned, and t> □ irs later are secrt tlj re-op ned and subscriptions taken without giving the statutory notice to the i ml »1 i. • that they may subscribe, the charter is forf< it ible. ite r. Bull, 16 Conn.. 179 (1844 also, where a new charter is granted t<> au existing corporation, and it contra- il - to act, the jury are t.. say whether t ie corporation continued under the old charter or accepted the new one, Ham- mond r. Straus, 58 Md.. 1 1 1879] \- uds tin' acceptance of a charl amendment l>y simply acting under it. State r. Sibley, 85 Mum.. Smut-all r. Sun, I tC., In-. C... |n Mo., M ; King r. Hughes, 3 K & c. > x 1828 . a municipal corporation cas Bangor, etc., U. R. Co a Smith, i: Me., 34 (1839); Lyons r. Orange, etc., K R Co.. 32 Md.. 18 (1869); Wetumpka, etc., R R Co. v. Bingham, 5 Ala.. 657 (1843), and many cases in ch. XXVIII, supra. Failure to organize uuder a special charter until after a constitu- tional amendment prohibiting special charters, i> fatal to it State a Dawson, 16Ind.,40 (1861} Acceptance must be in toto or d I at all. Rex v. Westw ni. & a, 781 (1825), A person not i"- compt Ued to ad as a a rporator in a private corporation, r.llis r. Mar- shall. 2 :■ Hence hie ceptance must be proved by user at in r. Collins, 17 Me., MO (1840), Organizing <>nt of the may not b legal, yet 't BufBces for an of the charter. Heath >: Silverthorn, etc., i I Wia, 146 I 1875) a Bpccial charter must be ao- i ■■ the corporation • lists, and Buch acceptance c innot be at a ting held onl of the Btate. H< d bill by a stockholder to Ie a for- feiture of hi- stock w is dismissed bj the COUrt Smith r. Si . ( •,>.. -jo Atl. Rep., 1082 (Md., 186 » ptance of a new charter is n<>t necessarily an abandonment of theold one. Johnston r. Crav 816 (1858); \\ fork r. Union Hank. 8 Cold not implied by accept- ing th>- benefits but performing none <>t the burdens im| is where a toll r.ad was established over a highway. Welsh >: Plumas Co.. '2'J Par. Rep, 720 (CaL, 1892)i Acceptance must be within a reasonable time alter ten years' de- lay befoi izing, the state may ob- ject by an information in the natun ijim warranto. State t\ Bull, 10 Conn., 179(1844). SsS CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ 641. the remainder is to be distributed among the stockholders. 1 For- merly it was held that the real estate of the corporation upon disso- lution reverted to the grantor, its personal property to the state or sovereign, and the debts due to it and from it were forgiven and extinguished. 2 But a contrary rule now prevails. i Krebs v. Carlisle Bank, 2 Wall. (C. C), 33 (1850) ; Heath v. Barmore, 50 N. Y, 302 (1872) ; Burrall v. Bushwick R. R. Co., 75 N. Y., 211 (1878): James v. Woodruff, 10 Paige, 541 (1844) ; Froth- iugharn v. Barney, 6 Hun, 366 (1876) ; Wood v. Dummer, 3 Mason, 308, 322 (1824). Cf. In re Hodges Distillery Co., L. R, 6 Chan., 51 (1870); Nathan v. Whitlock, 9 Paige, 152 (1841); Curran v. State of Arkansas, 15 How., 304, 307 (1853) ; Hastings v. Drew, 76 N. Y., 9 (1879); affirming S. C, 50 How. Prac, 254 (1887). The same rule prevails where the charter is repealed by the legisla- ture. Lothrop v. Stedman, 13 Blatch., 134 (1875); McLaren v. Pennington, 1 Paige, 102 (1828), by statute ; Detroit v. Detroit & Howell Plank-road Co., 43 Mich., 140 (1880); County of San Mateo v. Southern Pacific R. R Co., 8 Sawyer, 238, per Field, J., holding that "the property of the corporation acquired in the exercise of its functions is held independently of such reserved power, and the state can only exercise over it the control which it exercises over the property of individuals engaged in sim- ilar business" (p. 279). Ill N. Y., 1. The legislature cannot repeal a charter granted by the constitution of the state. New Orleans v. Houston, 119 U. S., 265 (1886). 2Hightower v. Thornton, 8 Ga., 486 (1850); Life Association of America v. Fassett, 102 111., 315 (1883): Commercial Bank v. Lockwood, 2 Harr. (Del.), 8 (1835); State v. Rives, 5 Ired. Law A corporation cannot deed land i fter its charter has expired. Bfarysville, etc., Co. v. Bfunson, 24 Pac Rep, ht; (Kan., 1890). A deed duly authorized is K«>od though executed after the corporation is consolidated with another. Edison, etc., ( <>. r. n ,.\\ i [aven, i l J;'y & Corp L. J., 4 (1888). 1 Where a legislature, under it served right "t repeal, repeals a sti railroad charter, the right to use the Btreeta and operate the road d vert to the state, but passes as property to the receiver for the benefit of the on ditora and stockholders of the corpo- ration People r. i i "I'.i i. n. Ill N. V.. 1 (1888)l in Pennsylvania the franchise of the right of way of a railroad vests, upon its dissolution, in the Mat", and the state may grant it to another rail- road. Erie, etc., R R < la o, ■ Pa St.. 287 (1856). Bee, also, Plitt v. .. 18 Pa St.. 486 (18621 In Ohio it ins that the right ofwaj reverts to tl wni r of tin' fee. New York, el R. R Co. v. Parmalee, 1 Ohio G G Rep., 839 (1885). Bee, also, as to the rule in New York. Beard u City of Brooklyn, 60 N. V.. 942 1875 ; People r. White, 11 Barb., 26 (1851 ; Booki r a fJtica & M. I. R, «'o.. ]•> Wend., 871 (1884> There is no reversion of the right of way on the dissolution of the company after fifty year- havis i>. Memphis, etc, R R G S. Rep., 140 (Ala, 1889). A lot- tery grant cannot be repealed, when mortgaged by the corporation, until the mortgage is paid Gregory's Ex. v. Trustees, 8 M< tc k I (1859} C/.. in general, Turnpike Co. n Illinois. 96 1 - ' 3Ti V e the stockhold- ers of an old plank-road company are still operating the road but under an- : The state may grant an un- raflway franchise to au- other company. Henderson r. Central, . tc, B'y, 8] Fed R p, No revei ter a here the railroad tak( it. 56 N. V.. (1874 dso, in general, Norton v. WalikilL . t&, i:. i;. ( .... 12 Bow. Pi (1871 5 In 1. (N. C.\ 1844 ; Bopkins r. Whiteside* 1 I h a.l, 81 1858 . w i ■ re a turnpike com- pany is authorized to collect tolls only for fifteen years, the road is free after that date. People n . 18 Pac !:• p.. 806 (CaL, 1886 tion u hose charter ex] in forty yean may nevertheless make a contract for nine hundred and ninety- nine years Union Pac R'y o. Chicago, \i\. :.i Fed Rep, icoll >: Railroad 12 N. V.. 121. < Miner v. N. 5 . R R., 138 N. S..U CH. XXXVIII.] DISSOLUTION, forfeiture:, etc. [§ 641. poration having no stockholders the common-law rules of reverter and appropriation apply. 1 Upon dissolution the stockholders are entitled to an immediate settlement of the corporate debts and a distribution of the residue. 2 They are not obliged to accept the stock of another corporation as payment upon a final distribution, but may demand that the distribution be in cash. 3 The company by unanimous consent may distribute the assets without a dissolu- tion provided all creditors are paid. 4 When corporate assets are placed in the hands of a corporate officer or other person for distribution, a stockholder may file a bill in equity for his part, but in such a suit the corporation is a necessary party. 5 The remedy in such a case is not at law. 6 The Y., 242 (1890) ; Davis v. Memphis, etc., R. R, 6 S. Rep., 140 ; Bailey v. Piatt, etc., Co., 21 Pac. Rep., 35. Taft, J., reached a contrary conclusion in City of Detroit v. Detroit Street R'y, 56 Fed. Rep., $67 (1893), and held that a city ordiuance granting street rights to a company for a longer period than the duration of the corporation was void. Dissolution does not terminate a lease to a corporation. People v. Nat'l Trust Co., 82 N. Y., 284 (1880). 1 Upon the dissolution of a public or charitable corporation its property goes to the state and former owners, subject to the trust that the property shall still be used for similar purposes if those purposes be legal. Mormon Church v. United States, 136 U. S., 1 (1890). Upon the dissolution of an eleemosynary cor- poration having no stockholders or creditors, the title to its land reverts to the donor. Danville Seminary v. Mott, 28 N. E. Rep., 54 (111., 1891). A private corporation — a normal college — can- not by act of the legislature be converted into a public corporation and the prop- erty vested in the state. Bakewell v. Board of Education, 33 N. E. Rep., 186 (111., 1893). In California, on the dissolu- tion of a corporation for literary pur- poses, its land goes to the stp te. People v. Pres., etc., 38 Cal., 166 (1869). Upon dis- solution of a mutual insurance com- pany having no stockholders, its assets, after the payment of its liabilities, be- long to the stale. Titcomb v. Kennebec, etc., Co., 9 Atl. Rep., 732 (Me., 1887). But where an insurance company is organized both on the stock and mutual plau, upon a dissolution of the stock part of the organization the guaranty accumulations belong to the stockhold- ers. Traders', etc., Ins. Co. v. Brown, 8 N. E. Rep., 134 (Mass., 1886). Land re- verts to the former owner. Mott v. Dan- ville Sem., 21 N. E. Rep., 927 (111., 1889). Distribution of funds of incorporated association. Aston v. Dashaway, 22 Pac. Rep., 660; affirmed in 23 id., 1091, 1890. As to unincorporated associations, see ch. XXIX, sujira. 2 Frothinghara v. Barney, 6 Hun, 3G6 (1876). s See § 667, infra. 4 Rorke v. Thomas, 56 N. Y, 559 (1874). Although the state is prosecuting a suit to forfeit the charter for entering into a combination, yet a sale of part of the corporate property to a stockholder pending the suit is legal and the re- ceiver cannot follow the property. A writ of prohibition will issue against him. Haveme3 T er v. Superior Court, 24 Pac. Rep., 121 (Cal., 1890). 5 Young v. Moses, 53 Ga., 628 (1875). For the remedies and procedures when the directors on dissolution have di- fi Brown v. Adams, 5 Biss.. 181 (1870). Rep., 638 (1886); Hodsdon v. Copeland, Cf. Pacific R R Co. v. Cutting, 27 Fed. 16 Me., 314 (1839). 891 § 641.] DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIIL stockholders may insist on the statute of limitations as a bar to the claim of corporate creditors upon the assets. 1 The right the stockholders in the assets upon a dissolution depend upon the law of the country creating the corporation. 2 And these rights cannot be taken from the stockholders by an act repealing the charter. 3 It has been held that assets ought to be distributed in proportion as the subscriptions to the stock have been paid. 4 Debts due from the stockholder to the corporation are in any event to be deducted from his Interest in the assets. 5 And an as- signment or transfer of stock by a stockholder after the dissolu- tion of the corporation is merely an e suitable assignment of Ins interest in the assets of the concern as it may appear upon the settlement.' 1 vided the assets fraudulently, see Hor- Der r. Carter, n Fed. Rep., 863 I The minority may bring the officers to ;m accounting for an unfair distribution of the bonds, eta, owned by a construc- tion company. Meyers v. Scott, 2 N. Y. Supp., 758 (1888> The corporation may file a l>ill to distribute a specific fund only, and m ed not in that l • i 1 1 have a general distribution of all in funds. Pacific R l:. a Cutting, 81 Fed. Rep., 1886). If the directors, who by statute are made trustees t" wind op the corporation upon dissolution, delay in eo doing, tli.' court will appoint a n ceiver. Blatter of Pontius, 88 Hun, 288 1882). Although the charter is forfeited :it the instance of the \ the .h- rectors are trustees to w ind up the com- pany under the statute, unless a receiver i- appointed ;it tin' instance <>t ;i cred- itoror stockholder. BaVemeyei u. Su- perior Court, 34 Pac Rep., LSI (CaL, L890), Although the fund upon dissolu- tion is small and the number of stock- holders large, yet the directors cannot avoid their dut] as to the distribution of the fund l>> turning it over t<> ;i court to administer. In n « Centennial Board of Finance, 18 Fed Rep.,85 .It the directors are by Btatute authorized t.> administer the assets upon dissolution, but fail to do bo, the court will appoint a receiver. />'. Pontius, supra. » Johnston r. Talley, 60 Qa.,540 (1878 t )n a bill to wind up an insolvent cor- poration the stockholder may prove that some claims against the company not legally contracted. Crutch- a. Mutual. I S v7. Rep, 1 Hamilton a Accessory Transit 80 Carl... M 'Lothrop tx Stedman, 18 Blatch., 184 -. Scinde, l;\ < ... 58 I. T. i:. p., 1 i : fa re l.. i:. 6 Ch., 51 ' <)i winding up, stockholders who have advanced on the subscription price more than the calls required, under an a • of repayment with interest^ are entitled (•> repaj ment i dividend is mada So held where full- paid >t.».-k was issued for property, but other stock t".>r cash was not fully paid up Bzchai 9 LT. I This is the rule by statute in New York upon the voluntary dissolu- tion of a corporation. '•'< Rev, Stat .Will. art. ,i mi. - r. Woodruff, 10 Paige, 541 (1844); Nathan v. Whitlock, Paige, 841); Purton u New I Means, K. 1 La. Aim.. 1988 1848 'James v. Woodruff, i<» Paige, 541 (1844); S G affirmed, 2 Denio, ■>: l (1845 : Sewall r. Chamberlain, 18 Gray, SOX 892 I CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETC. [§ G42. A person who conveys property to the corporation in payment for stock may contract that upon dissolution he shall receive back that property. 1 § 642. The liabilities upon dissolution, consolidation or sale. — As already seen, the old rule tnat upon dissolution all debts by or to the corporation are rendered unenforceable is no longer the law. 2 An important question arises in this connection where one cor- poration sells out all its property to another corporation leaving some of the debts of the former corporation unpaid. The rights and remedies of the creditors in such a case are fully considered elsewhere. 3 So also it frequently becomes important to know whether a consolidated company is liable for the debts of the con- stituent companies, 4 and whether a purchaser at a foreclosure sale is liable for the debts of the foreclosed corporation. 5 The question of liability where the corporation is a mere "dummy" is considered elsewhere. 6 Another interesting and difficult question is whether a person or corporation which owns all the stock of another corporation is ever liable for the debts of the latter on the ground that the latter is a mere "dummy" for the former. This subject also is considered elsewhere. 7 At common law upon dissolution of a corporation all suits by or against it abate. 5 Suit does not lie against a corporation which has been dissolved. 9 1 Fish v. Nebraska, etc., Co., 25 Fed. action for tort abates upon the expira- Rep., 795 (1885). tion of the corporate charter. Grafton 2 See preceding section. But a judg- v. Union Ferry Co., 13 N. Y. Supp., 878 nient declaring a corporation illegal, (1891). Corporate suits end when the void and the association dissolved puts charter expires. Logan v. Western, etc., an end to a contract by it to pay cer- R. R., 13 S. E. Rep., 516 (Ga., 1891). An tain parties its bonds and stock if they action against a corporation may be would build its road. Vinal v. Conti- continued against those who administer nental, etc., Co., 32 Fed. Rep., 345 (1887). its assets where the corporation is dis- 3 See ch. XL, infra. solved pending the suit Hepworth v. 4 See ch. LIII. Union Ferry Co.. 62 Hun, 258 (1891). * Seech. LII. 9 Dobson v. Simonton, 86 N. C, 492 6 See §£ 6 and 663a, infra. (1882). The legislature may provide for 7 See Id. suits against corporations after dissolu- 8 McCulloch v. Norwood, 58 N. Y., 562 ; tion, thus changing the common-law In re Norwood, 32 Hun, 196 (1884) ; Gree- rule. Stetson v. City Bank, etc., 2 Ohio ley v. Smith, 3 Story. C. C, 657 (1845); St., 167 (1853); Foster v. Essex Bank, 16 Saltmarsh v. Planters', etc., Bank, 17 Mass., 244 (1819). A corporation may be Ala., 761 (1850); Merrill v. Suffolk Bank, sued as such for a tort committed by it 31 Me., 57 (1849); Ingraham v. Terry, 11 after its charter has expired. Miller v. Humph. (Tenn.), 572 (1851) ; Life Asso- Nevvberg, etc., Co., 8 S. E. Rep., 600 ciation v. Fassett, 102 111., 315 (1882) ; (W. Va., 1888). No action after dissolu- Platt v. Ashman, 32 Hun, 230 (1884). An tion. Gold v. Clyne, 58 Hun, 419 (1S90). 893 § 642.] DISSOLUTION, FORFEITURE} ETC. [CH. XXXVIII. A contract made by the officers after the charter has been for- feited does not bind the stockholders. 1 A director who is a creditor of the corporation may share pro- portionately with other creditors in the assets. 2 Where a company owing debts allows a foreclosure of a mortgage and buys in the property and holds it secretly in the name of a trustee, an execution may be levied on it by a judgment creditor of the company. 3 Where an attorney brings suit in the name of a corporation that has been dissolved before the action he is liable for costs if beaten. Attleboro Nat'l Bank v. Wendell, 64 Hun, 208 (1892). After dissolution has been decreed it is too late for a corporate creditor to bring an ac- tion to hold the directors liable for declaring dividends out of the capital stock, no fraud in obtaining the dissolu- tion being alleged. Coxon v. Gorst, 64 L, T. Rep., 444 (1891). Upon dissolution, the directors becoming trustees by stat- ute, the statute of limitations begins to run against claims against the secretary. Landis v. Saxton, 16 S. W. Rep., 912 (Mo., 1891). 1 Wilson v. Terson, 12 Ind., 285 (1859). 2 Thompson n Huron Lumber Co., 30 Pac. Rep., 741 (Wash., 1892). 3 State r. McBride, 15 S. W. Rep., 72 (Ma, 1891). 894 MW LIBRARY y OP I W.TFORNU I -AN',} , KS UC SOUTHERN REGIOM/ii LjBHARy FACILIT i AA 000 697 010