tion and immediately receiving it back, on the treasurer giving the subscriber a receipt for so much on account of work to be done by the subscriber for the corporation; and this, although the charter provided that subscriptions might be paid for in work. The State was also a subscriber, and the transaction was challenged by the State as sufficient to release it from its obligation under its subscription; but it was held that, if done without actual fraud and affirmed by the State directors, the State would be bound by its subscription.1

§ 1223. Further as to the Manner of Payment. -As in any other case of payment, the payment of the deposit that is required may be made for the subscriber by a third person, even though acting officiously, if his act is ratified by the subscriber.2 It may be made in services, such as the corporation under its charter has power to receive and at a fair valuation.3

§ 1224. View that the Payment of Such a Deposit is not Necessary. Other courts take the view that, although the charter or governing statute provides that a certain percentage of the sum subscribed, or a certain round sum shall be paid by the subscriber at the time of the subscription, the non-payment of this installment or deposit does not render the subscription void; but

1 State v. Jefferson Turnpike Co., 3 Humph. (Tenn.) 305.

2 Mississippi &c. R. Co. v. Harris, 37 Miss. 13. Compare Ogdensburg &c. R. Co. v. Frost, 21 Barb. (N. Y.) 541.

8 Beach v. Smith, 30 N. Y. 116; affg. s. c. 28 Barb. (N. Y.) 254. In this case S. subscribed for $500 of stock in a railroad company, upon the understanding that the first 10 per cent. required by law to be paid in cash on subscribing, should be paid by his services in procuring subscriptions and right of way. He subsequently presented an account against the company for services, from which it appeared that, at the date of the subscription, the company

was indebted to him in an amoun greater than the cash payment required, in which account he applied and credited $50 for 10 per cent. upon his subscription, and $50 for the first call made thereon. The account was allowed by the company, and the balance paid to S. It was held that this was a sufficient compliance with the statute in respect to the payment of the first 10 per cent. and made the subscription obligatory upon S. As to payment of shares in property or services, see post, §1604, et seq.

4 Union Turnpike Co. v. Jenkins, 1 Caines (N. Y.), 381, 390; Abbott v. Aspinwall, 26 Barb. (N. Y.) 202; Chaffin v. Cummings, 37 Me. 76, 83; Chesley v. Pierce, 32 N. H. 402;

that subsequent payment will operate as a waiver of the condition, and the party making it will be considered as recognizing his original liability. In the view of these courts, the failure of the subscriber to pay upon his subscribing the sum required as a deposit by the terms of the governing statute and contract of subscription cannot be set up by him as a defense to an action for calls, since he can not be allowed thus to take advantage of his own wrong. "Even if the commissioners might have refused to receive the stock unless the payment had been made, yet, as they did not do it, the contract was, after the stock had been received without the payment, binding upon both sides." 2 As

Haynes v. Brown, 36 N. H. 545, 563; McEuen v. West London &c. Co., L.R. 6 Ch. 655; East Gloucestershire R .Co. v.Bartholomew, L.R. 3 Ex. 15; Purdey's case, 16 W. R. 660; Beach v. Smith, 28 Barb. (N. Y.) 254; Black River &c. R. Co. v. Clark, 25 N. Y. 208; Haywood Plank-road Co. v. Bryan, 6 Jones L. (N. C.) 82; Hall v. Selma &c. R. Co., 6 Ala. 741; Thorp v. Woodhull, 1 Sandf. Ch. (N. Y.) 411; Vicksburg &c. R. Co. v. McKean, 12 La. An. 638; Piscataqua Ferry Co. v. Jones, 39 N. H. 491; Smith v. Plankroad Co., 30 Ala. 650; Lake Ontario &c. Co. v. Mason, 16 N. Y. 451; Rensselaer &c. Co. v. Barton, 16 N. Y. 457, note; Spear v. Crawford, 14 Wend. (N. Y.) 20; s. c. 28 Am. Dec. 513; Minneapolis &c. R. Co. v. Bassett, 20 Minn. 535; s. c. 18 Am. Rep. 376; Henry v. Vermillion &c. R. Co., 17 Oh. 187; Vermont Central R. Co. v. Clayes, 21 Vt. 35; Mitchell v. Rome &c. R. Co., 17 Ga. 575, 591; Chamberlain v. Plainsville &c. R. Co., 15 Oh. St. 225; Ashtabula &c. R. Co. v. Smith, 15 Oh. St. 328; Illinois River R. Co. v. Zimmer, 20 Ill. 654.

1 Beach v. Smith, 28 Barb. (N. Y.) 254; Black River &c. R. Co. v. Clarke, 25 (N. Y.) 208; affg. s. c. 31 Barb. (N. Y.) 258; Haywood Plank Rd. Co. v. Bryan, 6 Jones L. (N. C.) 82; Hall

v. Selma &c. R. Co., 6 Ala. (N. s.) 741; Eastern Plank Rd. Co. v. Vaughn, 20 Barb. (N. Y.) 155; Ryder v. Alton &c. Co., 13 Ill. 516; Pittsburg &c. R. Co. v. Applegate, 21 W. Va. 172; Blair v. Rutherford, 31 Tex. 465; Mitchell v. Rome R. Co., 17 Ga. 574. Compare Magee v. Badger, 30 Barb. (N. Y.), 246; Fiser v. Miss. &c. R. Co., 32 Miss. 359; Barrington v. Miss. &c. R. Co., 32 Miss. 763; Klein v. Alton &c. R. R. Co., 13 Ill. 514. It has been held that if the subscriber is also one of the persons to whom the subscription is to be paid, its non-payment does not render it void.

Ryder

v. Alton &c. R. Co., 13 Ill. 521. It has been so held, although the charter recited that the commissioners should "receive no subscriptions to said stock, unless five per cent. thereof in cash shall be paid to them at the time of subscribing, and should they receive subscriptions to said stock without payment, they shall be personally liable to pay the same to said corporation when organized." This clause was held not a condition precedent to the organization of the company, but a mere personal liability imposed on the commissioners. Blair v. Rutherford, 31 Tex. 465.

2 Wight v. Shelby R. Co., 16 B. Monr. (Ky.) 4; s. c. 63 Am. Dec. 523.

already seen,' reasons of public policy have been invoked in support of the conclusion that the payment of such installment or deposit is a condition precedent. But there are reasons of public policy which operate quite as strongly the other way. A subscription will operate just as effectively to deceive the public into subscribing for other shares, or giving credit to the corporation, whether the statutory earnest-money is paid or not.

§ 1225. A Similar View in England. — The English courts have proceeded on a similar view. Thus, where the act of Parliament creating a company provided that the company should not issue any share under the authority of that act, nor should any share vest in the person accepting the same, until one-fifth of the amount of the share was paid up, it was held that the word issue referred to the issuing of certificates of shares, and the word vest to the vesting of shares, so as to be property and capable of transfer; but that the section did not make the payment of one-fifth a condition precedent to the liability, as a shareholder, of the person accepting the share.

§ 1226. Subscription Valid though Payment Made at a Subsequent Time. Where this theory prevails the payment need not be contemporaneous with the subscription; but if the subscriber pay the deposit before the subscription books are closed he will be held to the payment of the residue, though he did not pay the deposit at the time of subscribing. It has been reasoned that the commissioners appointed under an act of the legislature to take subscriptions for the purpose of organizing a corporation are public agents; that the statute is in the nature of a power of attorney to them; and that the authority thereby conferred includes the right to exercise the usual and appropriate means to accomplish the purpose of the agency. When, therefore, the statute in terms recited that the subscription should be bona fide, and required the commissioners to receive ten per

1 Ante, § 1217.

2 East Gloucestershire R. Co. . Bartholomew, L. R. 3 Ex. 15; Purdey's case, 16 W. R. 660; McEuen v. West London &c. Co., L. R. 6 Ch. 665.

4

3 Klein v. Alton &c. R. Co., 13 I. 514.

4 See ante, § 44.

cent. thereon in gold or silver, but designated no time for the payment of such deposit, it was held that the commissioners had discretion to allow a reasonable time.1 Where the charter of an incorporated company required the payment at the time of subscribing of a certain sum on each share by the subscriber, it was held that a payment subsequent to that time, made before the calls for installment, was an affirmance of the previous act of subscription and a sufficient compliance with the requirements of the charter." Where, under a similar charter, the subscriber failed to pay the deposit at the time of subscribing, but a judgment was afterwards rendered against him therefor, which he satisfied, it was held that he could not object to a suit brought for other assessments, that he did not pay the five per cent. in cash when he subscribed." "

§ 1227. Invalidity of Secret Agreement that the Check Shall not be Paid. - On grounds which we shall more fully consider hereafter, where a subscription is merely colorable, made to induce others to subscribe, and with a secret understanding between the subscriber and the agent or promoter who receives the subscription, that it shall not be enforced, the law, on grounds of public policy and to prevent fraud, holds the subscriber to his ostensible agreement and discharges the secret condition. When, therefore, the subscriber gave his check to the agent of the corporation for the sum of $1,000, being the amount of the deposit of ten percentum of his subscription required by the statute to be paid in cash, but with a secret understanding with the agent that he should neither be required to pay the check nor to pay for the shares, which agreement the agent had no authority to make, it was held that the company could maintain an action upon the check."

§ 1228. Subscription Void for Non-Payment of Deposit Made Good by Estoppel. The injustice and inconvenience of a rule

which allowed the subscriber to set up his own delinquency for the purpose of escaping the liability which he had assumed by his subscription, was such as drove some of the courts to a way out of the difficulty by another road, a thing which often happens in judicial proceedings. They have held that, although the subscription was originally void because of the failure to pay, at the time of making the subscription, the deposit required by the governing statute, yet the subscriber, who subsequently acted as a corporator, became thereby estopped from denying his liability to pay for his stock and from controverting the validity of his subscription, after thus exercising the rights and privileges conferred by it. Again, although the subscriber may not have paid at the time of his subscription the deposit of ten per cent. required by the governing statute to be paid at that time, yet where he subsequently paid that much and more,-e. g., forty per cent. of his subscription, it was held that it was thereby made valid. So also if the subscriber gives a note for his subscription, maturing at a future day, and the company disposes of the note before maturity to an innocent taker without notice, and he collects it from the maker after a litigation, this will validate the subscription under the same statute. The Supreme Court of Pennsylvania, which was one of the first courts to hold that the payment at the time of the subscription of the deposit required by the statute was a condition precedent to its validity, has finally fallen into line with the prevailing doctrine,5 so far as to hold that, while a subscription without the payment of the required deposit is provisional only and not binding before the articles of association are filed, so that the subscriber may withdraw before that time, yet if he suffers his name to remain subscribed to the articles until the articles are filed, his subscription becomes final, and he cannot afterwards withdraw nor set up his omission to pay the required deposit against his associates.

1 Clark v. Monongahela Nav. Co., 10 Watts (Pa.), 364; Erie &c. R. Co. v. Brown, 25 Pa. St. 156; Selma &c. R. Co. v. Tipton, 5 Ala. 787; s. c. 39 Am. Dec. 344, 356.

2 Black River &c. R. Co. v. Clarke, 25 N. Y. 208.

3 Ogdensburgh &c. R. Co. v. Wooley, 3 Abb. App. Dec. (N. Y.) 398; post, § 1657; Ante, 1220.

Ante, § 1217.
Ante, § 1224.

6 Garrett v. Dillsburg &c. R. Co., 78 Pa. St. 465.