Where neither the charter nor general law provides the form in which subscriptions shall be taken, any form which shows the intention of the party to become a stockholder is sufficient. A subscription in this form, "Phenix Warehousing Co. Daniel D. Badger, 250 shares," without stating the par value of the shares, has been held sufficient, because, as the subscription is made with reference to the charter, reference thereto fixes the amount, and the terms of the contract.1 the stock of the corporation, both at common law and under the provisions of the statute. While the subscription was not valid and binding before the complete formation of the corporation, because there was no party with whom the defendant could then contract, yet after the corporation was formed it accepted the subscription and recognized the defendant as a stockholder, and he recognized himself as such, and ratified and confirmed his subscription by payments thereon. He thus, within all the authorities, upon general principles, became a stockholder in the company, liable to pay the full amount of his subscription. Upton v. Tribilcock, 91 U. S. 65; Buffalo & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336. And there was a substantial compliance with the statute in relation to subscriptions. The articles of association of the corporation set forth that it was to build a railroad from Buffalo to the Pennsylvania State line. The road was built to a point twelve miles short of the State line, and was not built further. It did not appear that the company had taken any action which would disable it from building these twelve miles. It was held, that these facts did not relieve defendant from his subscription. After the commencement of this suit a mortgage on the railroad and its franchises was foreclosed, and the property sold to purchasers, and it was held that this did not furnish a defence to this action. Buffalo, &c. R. R. Co. v. Gifford, 87 N. Y. 294. The case, Lake Ont. Sh. R. Co. v. Curtiss, 80 N. Y. 219, was distinguished. 1 Phenix Warehousing Co. v. Badger, 6 Hun (N. Y.), 292; Buffalo, &c. R. R. Co. v. Dudley, 14 N. Y. 336; Dayton v. Borst, 31 id. 435; Lake Ontario, &c. R. R. VOL. I. 4 Co. v. Mason, 16 id. 451; Nulton v. Clayton, 54 Iowa, 525; Hawley v. Upton, 102 U. S. 314. In Spear v. Crawford, 14 Wend. (N. Y.) 20, the writing subscribed was in these words: "We, the subscribers, do hereby severally agree to take the shares by us subscribed in the Harlem Canal Company." A certain number of shares was set opposite the name of each subscriber. The question presented was, whether the mere agreement to take shares rendered the defendant liable to pay for them. The court held that it did. In Hartford & New Haven R. R. Co. v. Kennedy, 12 Conn. 500, the word "subscriber" was used in what was claimed to be the subscription to stock. It was held that the subscriber was liable to pay for the stock, without a promise to do so in so many words. The court said: "It is true, a promise to pay in precise terms does not appear to have been made. The defendant has not affixed his signature to an instrument which contains the words, 'I promise to pay,' but he has done an equivalent act. He has contracted with the plaintiff to become a member of the corporation, and to be interested in its stock." In Rensselaer & W. Plank Road Co. v. Barton, 16 N. Y. 460, the court said: "Whatever may be the form or language of a subscription to the stock of an incorporated company, any person who in any manner becomes a subscriber for, or engages to take any portion of, the stock of such company, thereby assumes to pay according to the conditions of the charter." See, also, Small v. Herkimer Manufacturing & Hydraulic Co., 2 N. Y. 335; Dayton v. Borst, 31 N. Y. 437; Hartford & New Haven R. R. Co. v. Croswell, 5 Hill (N. Y.), 384; Waukon & Mississippi R. R. Co. v. Dwyer, 49 Iowa, 121. SEC. 20. Effect of Subscription: Taking Stock at less than par. When the subscription is accepted by the corporation, the subscriber becomes a stockholder, although no certificate is issued to him, and thereupon becomes liable as, and entitled to all the privileges of, a member. Thus in a recent case the defendant, in 1871, was requested by R., the agent of an insurance company, to subscribe for its stock. In consequence of the inducements offered, he subscribed the paper and delivered it to the agent: "The Great Western Insurance Company. [$200.] Capital stock $500,000, with liberty to increase to $5,000,000. Stock non-assessable. Organized July 20th, 1857, under act of Legislature approved March 4th, 1857. Know all men by these presents, that for and in consideration of ten shares of the capital stock of the Great Western Insurance Company of Chicago, Ill., received by me, I am held and firmly bound, and agree to pay the Great Western Insurance Company of Chicago the sum of two hundred dollars in instalments, as follows: twenty-five per cent thereof upon receipt of stock-certificate, twenty-five per cent in three months from date hereof, twenty-five per cent six months from date hereof, twenty-five per cent nine months from date, with interest 10 per cent after due." At the time, he paid the agent $25. No certificate of stock was ever given to him, and he demanded none, and paid no assessments. The company became bankrupt. In an action by the assignee in bankruptcy against defendant as a stockholder, it was held that he was such, and liable for the amount of stock set forth in the paper signed by him.2 If neither the charter nor general law specifies the manner in which subscriptions shall be taken, and the power to accept subscriptions is vested in the company, an unconditional subscription to its stock made in any form, which is accepted by it, is valid; because in such cases the company has the power to accept 1 Hawley v. Upton, 102 U. S. 314. 2 Upton v. Tribilcock, 91 U. S. 45; Webster v. Upton, 91 id. 65. 8 Wellensburgh, &c. Plank Road Co. v. Young, 12 Md. 476. The doctrine of this case is not in conflict with that of the Michigan case cited below, because in this case there was no specific mode for taking the subscriptions provided by the charter, and no proof that the mode adopted was at variance with any law applicable to the subject; while in Carlisle v. Saginaw, &c. R. R. Co., 27 Mich. 315 (see also Schurtz v. Schoolcraft, &c. R. R. Co., 9 Mich. 269), the law provided that the company should, by its by-laws, designate a mode, and not having done so until after certain subscriptions had been made, it is clear that it could not vitalize such subscriptions by its subsequent compliance with the law, unless the subscriber had done some decisive act which estopped him from setting up such objection. subscriptions in any form, and if enough has been done by the subscribers to create an obligation to take and pay for the stock, when the company accepts the subscription it becomes mutually binding, however it was made.1 Thus it has been held that a corporation may recover upon a subscription to its stock procured by one. who acted as agent, although at the time he was not authorized to take such subscriptions, provided the company subsequently ratified his acts in that respect; and the bringing of an action to recover such subscription was held a sufficient ratification by them.2 A subscription to the stock of a railroad corporation creates a debt against the subscribers in favor of the corporation, from which he cannot relieve himself by assignment or transfer without the sanction of the proper officers; and not only does it create a debt in favor of the corporation, but it is also an undertaking with all the other subscribers; and even though fraudulent as between the parties, it is enforceable for the benefit of the other parties in interest,1 or of the creditors of the corporation. If stock has been subscribed for at its par value, but with an understanding with the corporation that a sum less than par shall be received in full therefor, and which is actually paid, the subscriber is liable to the creditors of the corporation for the difference between the sum paid and the par 1 In Mobile & Ohio R. R. Co. v. Yandel, 5 Sneed (Tenn.), 294, a subscription made at a meeting not authorized by the corporation, but which was afterwards transferred to its books, was held enforceable, because, by the acceptance of the subscription by it, the action at such meeting was ratified and adopted. South Bay Meadow Co. v. Gray, 30 Me. 547. In Parker v. Northern Central Michigan R. R. Co., 33 Mich. 23, it was held that subscriptions are only binding upon a subscriber when the corporation is also bound, that is, when the contract is mutual; and consequently that, as in that State, the statute creates no obligation on the corporation, except upon subscriptions regularly made, no others can be enforced unless they were made upon some actual consideration or agreement binding the company. 2 Walker v. Mobile & Ohio R. R. Co., 34 Miss. 245. But it seems that the commencement of an action for a subscription, or even a demand of payment, is not sufficient to evidence an acceptance • Graff v. Pittsburgh, &c. R. R. Co., ante. value of the stock. Thus in the case last cited, where the defendants subscribed and agreed to pay certain sums of money toward the increased capital stock of a corporation, with the understanding that they were to receive stock therefor at sixty-six and two-thirds cents upon the dollar, and this arrangement was carried out, and certificates for the stock delivered to them, it was held that the assignee in bankruptcy of the corporation might still collect the remaining one-third of the par value of the stock for the benefit of its creditors.2 And the creditors and stockholders of an insolvent corporation may unite in a suit in equity in behalf of themselves and other creditors and stockholders, to enforce the liability of holders of unpaid shares of the capital stock of such corporation; and where stockholders are indebted to the corporation on stock. subscriptions, the sum due may be reached by a creditor's bill; and where, by any dealings between the corporations and its stockholders, the capital stock, which is a fund for the payment of its debts, is wrongfully diverted, a creditor can reach it. The court of equity assists him, not in the exercise of its jurisdiction over trusts, but in the exercise of its auxiliary jurisdiction in behalf of creditors. If a stockholder is indebted to the corporation on account of his subscription to the stock, a court of equity will aid a creditor of the corporation to reach this fund by a proper decree,+ 1 Flinn v. Bagley, 7 Fed. Rep. 2 Hawley v. Upton, 102 U. S. 314; Sturgis v. Stetson, 1 Bissell (U. S. C. C.), 246; Parker v. North C. M. R. Co., 33 Mich. 24; Cutter v. Powell, 6 T. R. 324; Pittsburgh & C. R. R. Co. v. Stewart, 41 Penn. St. 54; Currie's Case, 3 De G. J. & S. 367; Carling's Case, L. R. 1 Ch. D. 115; De Ruvigne's Case, 5 id. 386; Anderson's Case, 7 id. 94; Foreman v. Bigelow, 18 N. B. R. (U. S.) 457; Upton v. Tribilcock, 91 U. S. 45; Chubb v. Upton, 95 id. 666; Pullman v. Upton, 96 id. 328; Hatch v. Dana, 101 id. 205. 3 Walser v. Seligman, 13 Fed. Rep.; Thompson's Liability of Stockholders, § 15. 4 In Ward v. Griswoldville Mfg. Co., 16 Conn. 593, the act incorporating a manufacturing company provided that the capital stock of the corporation should not exceed fifty thousand dollars; that a share of the stock should be one hundred dollars; that the directors might call in the subscriptions to the capital stock by instalments, in such proportions, and at such times and places as they should think proper; that the stock, property, and affairs of the corporation should be managed by the directors, who were required to be stockholders; and that they should have power to establish such rules and regulations as they should think expedient. The act also provided, in effect, that within three months not less than five thousand dollars of the capital stock should be actually paid, which should not be withdrawn so as to reduce the same below five thousand dollars. After the stockholders had paid in forty per cent on their subscriptions, the corporation became insolvent, having no visible property. On a bill in chancery, brought by certain creditors, for the benefit of all, against the stockholders, praying that they might be compelled to pay in the remaining sixty per cent (or so much thereof as should be necessary), to either compelling the directors to make or collect an assessment1 or compelling payment by its own processes.2 The portion of a subscription remaining unpaid is a part of the corporate capital, and subject to the claims of creditors; and this is so, notwithstanding a stipulation, in the contract of subscription, that it shall be payable only on the call of the company. Such a condition is operative as between stockholders, but cannot be permitted to defeat the rights of creditors.3 SEC. 21. Subscription does not necessarily make the Subscriber a Member of the Corporation. A person is not made a member by a mere subscription, especially when his subscription is conditional.1 His subscription may be treated as in the nature of an application to become a shareholder in, and member of, the corporation; and, upon the acceptance of his subscription by the corporation, he at once becomes so. The rule may be said to be, that, to make a per be applied in payment of the debts of the corporation, it was held, first, that the obligation which the stockholders assumed, by their subscription to the capital stock of the corporation, was to pay the sum of one hundred dollars on each share, in such instalments and at such times as should be required by the directors; second, that the amount of the shares subscribed, and not the sum actually paid in, constituted the capital stock of the corporation; third, that when further instalments became necessary to meet the debts of the corporation, it was the duty of the directors to cause them to be made, the discretionary power of the directors being modal only, relating to the time and manner of payment; fourth, that this duty might be enforced by a decree in chancery; and, consequently, that the relief sought should be granted. See also Adler v. Milwaukee Patent Brick Co., 13 Wis. 62; Ogilvie v. Knox Ins. Co., 22 How. (U. S.) 380; Marsh v. Burroughs, 1 Wood (U. S. C. C.), 463; Henry v. Vermillion, &c. R. R. Co., 17 Ohio, 187. 1 Briggs v. Penniman, 8 Cow. (N. Y.) 396; Hightower v. Thornton, 8 Ga. 493; Salmon v. Hamborough Co., 1 Cas. in Ch. 204. In Gibson v. Lewis, 11 Bankr. Reg. 247 (U. S. C. C.) the charter of a railroad company provided that, in default by any stockholder to pay an assessment on his stock after a prescribed notice, the stock, and any payments thereon, should be forfeited to the company. The company failing to pay the accrued interest on its mortgage bonds, the bondholders were about to institute proceedings against it to compel an assessment of the necessary and proper contributory payments on stock, which they alleged bad not been properly paid for. On a bill filed to restrain a distribution of the assets in bankruptcy of a firm holding such stock, until proof could be made of the expected assessments on the shares of the bankrupts as a debt in bankruptcy, it was held, that there should be primarily a decree compelling the company to make the necessary and proper assessments upon the stock, and to prevent the use of any fictitious certificates indicating that the stock had been fully paid for; that secondary relief should be to compel the making and allowance of proof in the bankruptcy proceedings of the amount previously ascertained as due for the assessment on the shares of the stock which were held by the bankrupts. 2 Briggs v. Penniman, ante; Slee v. Bloom, 19 Johns. (N. Y.) 484; Pettibone v. McGraw, 6 Mich. 441. |