assessment, must follow strictly the law of the State wherein the corporation exists, and the charter and by-laws of the corporation. If such sale is allowed only under regulations first made by the bylaws, and no such regulations have been made, there can be no valid sale. The fact that there is a provision in the articles of agreement of a private joint-stock company that, upon default by a shareholder of payment of assessments, his shares shall be forfeited, does not authorize the trustees, by a naked declaration, to make a forfeiture against which a court of equity cannot grant relief. In a proper case a redemption may be obtained on bill in equity.2

A subscriber for shares in a railroad company refused to pay the assessments; and the company, instead of declaring the shares forfeited, procured subscriptions from other persons to the full amount of the capital stock. It was held that this precluded the company from afterwards selling the shares and suing the subscriber for the difference between the assessment and the sum for which they were sold. This remedy being purely statutory, the provisions of the statute must be as strictly complied with as is required in the case of any other statutory remedy. Thus, where the statute provides that "the directors may order the treasurer to sell," they cannot authorize a committee or other officer to do so.5 Where a corporation has power to sell stock of a corporator for the payment of each call as it is made, and to hold the stockholder responsible for the deficiency, if the corporation fails to sell the stock as each successive defalcation occurs, and waits until all the calls are made, it thereby loses its remedy by sale.6

Under a statute authorizing the company to sell, and, in case of deficiency, to recover the deficiency by motion, it was held that they might proceed by motion, although for want of bidders they had not made the sale which they advertised.7

SEC. 78. Forfeited Stock may be reissued. Where stock has been forfeited to the company, or it otherwise comes into its ownership and possession on whatever ground, it is not merged and extin

1 Mitchell v. Vermont Copper Mining Co., 40 N. Y. Sup. Ct. 406.

2 Walker v. Ogden, 1 Biss. (U. S.

C. C.) 287.

5 York, &c. R. R. Co. v. Ritchie, 40 Me. 425.

6

Sparta v. Lebanon & Sparta Turnpike Co., 6 Humph. (Tenn.) 241. Compare

3 Athol, &c. R. R. Co. v. Inhabitants, Brockenbrough v. James River, &c. Co.,

&c., 110 Mass. 213.

4 Eastern Plank Road Co. v. Vaughan, 20 Barb. (N. Y.) 155.

1 Patt. & H. (Va.) 94.

7 Grays v. Turnpike Co., 4 Rand. (Va.) 578; Franklin Glass Co. v. White, 14 Mass. 286.

guished, but may be reissued by the corporation.1 Mr. Brice in his excellent treatise on “Ultra Vires" (p. 192), says, "It is often assumed that a forfeiture or a surrender is necessarily, in the absence of express controlling language, a destruction of the shares in question; and it is consequently urged, as an argument against the existence of such implied powers, that their exercise would be pro tanto a diminution of capital. But such reasoning is founded on a fallacy, or rather on a mistaken notion of what is involved in these powers. A forfeiture, and a fortiori a surrender, of shares, especially when it is by way of transfer to a nominee of the company, puts an end to the shareholder's future rights and liabilities.2 But it does not destroy the thing styled 'share' or 'interest' in the company: this still remains intact, as an actual entity, unless and until the company, by some further act, expressly destroys it. Cancellation of shares is no more a reduction of capital than is forfeiture of shares.'8

"It is perhaps even more generally laid down that cancellation. involves the diminution of capital. The objection is worth more than when applied to forfeiture, because ex vi termini a cancellation denotes the destruction of shares. But all that is meant by this is simply the destruction of the rights and liabilities of a particular shareholder, and, if necessary, of the pieces of paper or other documents representing the same. But the capital of the company is totally distinct from the rights of shareholders therein. The powers of the company with respect thereto remain unaltered, and immediately upon the cancellation of one member's interests, it may issue new shares of an equivalent amount. This seems the only rational conclusion; and it is supported by the dictum already cited, and by the provisions of the Companies Clauses Act, 1863, that new shares may be issued in lieu of cancelled shares." 5

SEC. 79. Collusive Forfeitures. Even in those jurisdictions where a forfeiture releases a stockholder from further liability, collusive forfeitures, made for the express purpose of releasing the subscriber from further liability, are held not to have that effect."

1 Currier v. Slate Co., 56 N. H. 262; Taylor v. Miami, &c. Co., 6 Ohio, 176; State v. Smith, 48 Vt. 266.

2 Usually his past liabilities remain intact. See the Companies Act, 1862, table A, arts. 17-19; the Companies Clauses Act, 1845, §§ 29-35.

3 Per GIFFARD, V. C., in Marshall v. Glamorgan Iron Co., L. R. 7 Eq. 129, 137.

4 Id.

6 26 & 27 Vict. c. 118, § 11.

Spackman v. Evans, L. R. 3 H. L. 171; Gower's Case, L. R. 6 Eq. 77; Stanhope's Case, L. R. 1 Ch. 161; Richmond's Case, 4 K. & J. 305; Thompson's Liabil ity of Stockholders, 223, § 194.

"If," says MURRAY, J.,1" the judge had found that this forfeiture was made by collusion and fraud between the directors of the company and the respondent, his liability would not cease.” In an English case, the directors of a company made an arrangement with a shareholder who wished to retire from the company, that on payment by him of a sum of money, his shares should be declared forfeited for non-payment of a call which had been made. The money was paid, and the shares were transferred to the company. Twelve years afterwards the company was wound up, and two years after that an application was made to place the shareholder on the list of contributories. It was held that the shareholder ought to be placed on the list, as the arrangement was not within the power of the directors, and was a fraud on the other shareholders.

SEC. 80. Status of Stockholder after Forfeiture. -In England 3 it is held that a shareholder whose shares have been forfeited remains liable to pay calls owing at the time of the forfeiture, but not for interest thereon. Thus, in the case last cited, the articles. of association of a company provided that if any member failed to pay any call due from him at the time appointed for payment thereof, he should be liable to pay interest for the same, at the rate of 25 per cent, from that time to the time of actual payment; and also that the forfeiture of any share should involve the extinction, at the time of the forfeiture, of all claims and demands against the company in respect of the share, and all other rights incident to the share; but any member whose share had been forfeited was, notwithstanding, to be liable to pay to the company all calls owing on such shares at the time of forfeiture. It was held that a member whose shares had been forfeited, was liable to pay calls owing at the time of forfeiture, but not any interest thereon. But in New York the forfeiture is held to release the subscriber from all liability past or present, either for calls or debts created by the corporation. Mr. THOMPSON,5 in speaking of the effect of arrangements between a corporation and a stockholder for the release of the latter, says: "The American courts have steadily annulled all arrangements between corporations and their stockholders whereby the latter were sought to be released from their liability to creditors.

161.

1 Mills v. Stewart, 41 N. Y. 386.

2 Re Agricultural Ins. Co., L. R. 1 Ch.

3 Blakeley's Ordnance Co., L. R. 5

Eq. 6.

4 Mills v. Stewart, ante.

5 Thompson on Liability of Stockholders, 234, § 201.

Thus, it has been held that a resolution by the directors of a corporation that no further calls should be made on account of stock subscribed was void, and a receiver of the corporation could proceed in equity to compel payment of what was due on account of such subscriptions to the capital stock. So, a resolution passed by the directors of an insurance company releasing the stockholders from the payment of balances remaining unpaid on their stock, in accordance with which the certificates of shares were stamped 'nonassessable,' was held void as against policy-holders who had insured in the company without knowledge of the existence of such an agreement.2 This being so, the mere fact that the word 'unassessable' is printed on the certificates of shares given to a member does not impair his obligation to pay the amount due on such shares, created by the acceptance and the holding of such certificate. At most, its legal effect is said to be a stipulation against liability from further assessment or taxation after the entire one hundred per cent of the subscription shall have been paid. Nor, under the Missouri statute of individual liability, will the delivery by a corporation to its shareholders of certificates of paid-up stock, when in fact only part of the par value has been paid, prevent a creditor of the corporation, who can show this fact, from having execution against the shareholder. So, in an English case, a resolution rescinding a contract of subscription after other subscribers have put their names on the books on the faith of it is void as to them; and, whatever may have been the reason which moved the subscriber to execute it, he remains a contributor." 5

SEC. 81. Forfeiture without Authority. Where a forfeiture is declared without authority, in other words where it is ultra vires, a court of equity will, upon the application of the stockholder, restore him to his rights as a stockholder, or upon the application of a creditor or other stockholder, restore him to the list of contributories.6

SEC. 82. Compromises with Stockholders. It is held in England and also in some of the courts of this country, that a solvent corporation may make compromises with its stockholders, to settle disputes arising relative to their subscriptions, and to secure an adjustment may release them from a part of their subscriptions in order to secure the residue, provided the compromise is made in good faith and without any sinister or collusive motives. In order to give validity to such a compromise, there must be either a bona fide dispute as to the liability of the subscriber, or he must be in such circumstances financially as to raise a reasonable doubt as to his ability to pay the entire subscription; and the release must not place the subscriber upon any better footing as to the stock retained by him than