son a shareholder in a corporation where he has subscribed for the stock, it is not necessary that he should have received a certificate, or paid for the stock. A corporation may, in the absence of any statutory provision to the contrary, give credit for its stock, as well as for any other property sold by it. Certificates only constitute proof of property, which may exist without them. When the corporation has agreed that a person shall be entitled to a certain number of shares in its capital, to be paid for in a manner agreed upon, and that person has agreed to take and pay for them accordingly, he becomes their owner by a valid contract made upon a valuable consideration.1

SEC. 22. Conditions in Charter. If the charter contains any condition precedent, unless such condition is complied with by the subscriber he does not become a shareholder, even though the corporation has accepted his subscription. Thus there are a class of cases in which it is held that a corporation, whose charter and bylaws require each subscriber to its capital stock to pay a given percentage of his subscription in cash at the time of subscribing, cannot enforce payment of a subscription where the required cash payment has not been made. But even under such a provision it is held that such payment may be made by check upon a bank in which the subscriber has funds to meet it, unless the bank, for cause and in good faith, refuses to pay it. So, where payment has been made by note, which has been negotiated by the corporation, and paid by the subscriber at maturity, the transaction, upon the payment of the note, is treated as a payment in cash.5 But this doctrine is not believed to be sound, and statutes providing that "each subscriber shall at the time of subscribing pay five dollars on each share for which he may subscribe," are believed to be directory rather than

1 Chaffin v. Cummings, 37 Me. 83. See also Spear v. Crawford, 14 Wend. (N. Y.) 20; Chester Glass Co. v. Dewey, 16 Mass. 94; Re South Mountain Mining Co., 7 Sawyer (U. S. C. C.), 30; Mitchell v. Beckman (Cal.); Schaeffer v. Missouri Ins. Co., 46 Mo. 248; Beckett v. Hous. ton, 32 Ind. 393.

2 Pearce v. M. & I. R. Co., 21 How. (U. S.) 441; Black R. &. U. R. R. Co. v. Clark, 25 N. Y. 208; Crocker v. Crane, 21 Wend. (N. Y) 211; Beach v. Smith, 30 N. Y. 116; Hibernia Turnpike Co. v.

Henderson, 8 S. & R. (Penn.) 217; Jenkins v. Union Turnpike Co., 1 Cai. Cas. (N. Y.) 86; Highland Turnpike Co. v. McKean, 11 Johns. (N. Y.) 98; Sturgis v. Stetson, 1 Biss. (U. S. C. C.) 246; Fosdick v. Sturgis, id. 255; State Insurance Co. v. Redmond, 13 Fed. Rep. 541; People v. Chambers, 42 Cal. 201.

3 People v. Stockton, &c. R. R. Co., 45 Cal. 306.

Comins v. Coe, 117 Mass. 45.

5 Ogdensburg, &c. R. R. Co. v. Wooley, 3 Abb. App. Dec. (N. Y.) 398.

mandatory, and not in the nature of a condition precedent;1 and a subscriber who fails to comply with this requirement cannot avail himself of his laches in that respect to avoid his subscription.2 Of course, where conditions are imposed by contract, they may be waived by either party; and where neither the charter nor general law either expressly or impliedly provides the manner in which subscriptions shall be paid, the proper officers may receive payment therefor in any species of property.3

Thus, in an early Vermont case, by section four of the statute incorporating the Vermont Central R. R. Co., certain persons named are constituted commissioners for receiving subscriptions to the capital stock of the company; and it was enacted as follows: "And every person, at the time of subscribing, shall pay to the commissioners five dollars on each share for which he may subscribe, and each subscriber shall be a member of said company;" and it was further enacted, that when one thousand shares should be subscribed, the commissioners might issue a notice for the stockholders to meet and elect directors. The defendant, after some other shares, but less than one thousand, had been subscribed for, subscribed for fifty shares, and, instead of paying to the commissioners, in money, five dollars upon each share at the time of subscribing, he gave them his promissory note for that amount, being two hundred and fifty dollars, which was made payable to "The Commissioners of the Vermont Central R. R. Co." on demand, for value received. This note was received from the commissioners by the corporation upon its organization. And it was held that the note was given upon sufficient consideration, and that it was a valid note in the hands of the corporation, and that an action might be sustained upon the note in the name of the corporation. It was also held that the provision in the charter, that each subscriber should be a member of the company, and the fact that others had subscribed for stock previous to the defendant's subscription, were sufficient to show that the corporation was in esse at the time of making the

1 East Gloucestershire R. R. Co. v. Bartholomew, L. R. 3 Exchq. 15; McEwen v. West London, &c. R. R. Co., L. R. 6 Ch. 665; Chaffin v. Cummings, 37 Me. 76; Piscataqua Ferry Co. v. Jones, 39 N. H. 491; Haynes v. Brown, 36 id. 545; Chesley v. Pierce, 32 id. 402; Black River R. R. Co. v. Clarke, 25 N. Y. 208; Hall v. Selma, &c. R. R. Co., 6 Ala. 741;

Smith v. Plank Road Co., 30 id. 650;
Beach v. Smith, 28 Barb. (N. Y.) 254.

2 Lake Ontario, &c. R. R. Co. v. Mason, 16 N. Y. 451.

3 East N. Y., &c. R. R. Co. v. Lighthall, 6 Robt. (N. Y.) 407.

4 Vermont Central R. R. Co. v. Cloyes, 21 Vt. 30; 1 Am. R. R. Cas. 226.

note, and so capable of taking the promise through their agents, the commissioners, notwithstanding their right to organize was made to depend upon certain conditions, which were not fully complied with until after the note was executed. We do not think," says BENNETT, J., "that the simple fact that the commissioners accepted the note of the defendant in lieu of money, or, as the case finds, in settlement of the sum which was to have been paid upon the making of the subscription, can have the effect to give the defendant the right to repudiate his contract, or render it void for want of consideration. The corporation having accepted this note as so much cash, could not certainly deny to the defendant the rights and privileges of a corporator."

Where

SEC. 23. Subscriber cannot be released by Corporation. a person has actually subscribed for stock in a corporation, he cannot withdraw therefrom without the consent of all the stockholders; therefore the erasure of his name from the subscription-book does not release him from his contract. And it is generally held, in this country, that the corporation cannot, to the detriment of either creditors or other stockholders, release either a stockholder or subscriber from the liability which his contract imposes.2 In the case last cited, the court says: "It has been settled by numerous decisions that the directors of a company are incompetent to release an original subscriber to its capital stock, or to make any arrangement with him by which the company, its creditors, or the State shall lose any of the benefits of his subscription. Every such arrangement is regarded in equity not merely as ultra vires, but as a fraud upon the other stockholders, upon the public, and upon the creditors of the company." There are dicta to be found in some of the cases to the effect that a release will be good if bond fide and upon a good consideration, or if the corporation is not indebted; but neither the bona fides of the transaction, nor the fact that the corporation is not 1 Johnson v. Wabash, &c. R. R. Co., 16 v. Bruce, 17 N. Y. 507. But the great Ind. 389. weight of authority is the other way, and 2 Burke v. Smith, 16 Wall. (U. S.) for the reasons stated in the text neces390.

See also to the same effect Mann v. Cooke, 20 Conn. 178. In re Bachman, 12 Bankr. Reg. 223; Bedford R. R. Co. v. Bowser, 48 Peun. St. 29; Mann v. Currie, 2 Barb. (N. Y.) 294; Osgood v. King, 42 Iowa. In some cases an exception has been made to this rule. Cooper v. Frederick, 9 Ala. 738; City Bank of Columbus

sarily must be, or the most important principle relating to the status of corporations is overthrown. Putnam v. New Albany, 4 Biss. (U. S. C. C.) 365 ; Slee v. Bloom, 19 Johns. (N. Y.) 456; Melvin v. Lamar Ins. Co., 80 Ill. 446; Hughes v. Antietam &c. Co., 34 Md. 316.

4 Firkel v. Joliet Opera House, 79 Ill. 334; Melvin v. Lamar Ins. Co., 80 Ill. 459.

indebted, can give to such an act any validity, in view of the fact that the officers of the company, except it is expressly conferred by statute, have no power to enter into any such arrangement. The principle upon which this doctrine rests, is, that the capital of a corporation paid in, or agreed to be paid in, is a fund held in trust by the corporation for its creditors and stockholders, which cannot be squandered or given away by the trustees; and this fund can be reached in a court of equity by the creditors of the corporation; 2 and the directors cannot release a subscriber from his engagement when his liability as such has once been fixed; 3 and to surrender a subscription is not within the general powers of directors. Where the board have assumed to allow a subscriber (even under a contract prior to his subscription) to surrender his stock, and have a return of the assessments already paid by him, this operates as a fraud on other stockholders, and any one of them may, by bill in equity, have the money so withdrawn refunded, and the subscriber thus released declared liable on his subscription, the same as other subscribers.4

SEC. 24. Contract is several. Such contracts are several, although many persons sign the same contract, and an action can only be maintained against each signer upon the contract made by him.5

1 Upton v. Tribilcock, 91 U. S. 45; Sanger v. Upton, 91 id. 45; Webster v. Upton, 91 id. 65; Van Cott v. Van Brunt, 2 Abb. (N. Y.) N. C. 283; Marsh v. Burroughs, 1 Wood (U. S. C. C.), 463; Bassett v. St. Albans, &c. Co., 47 Vt. 313; Schenck v. Andrews, 57 N. Y. 133; Schaeffer v. Missouri, &c. Ins. Co., 46 Mo. 248; Currier v. Lebanon Slate Co., 56 N. H. 262. The directors of a corporation stand in confidential relations to its creditors, toward whom they are bound to act with perfect fairness. They are at least quasi trustees for the creditors; and where the corporation is insolvent, good faith forbids that the directors should use their position to save themselves or one of their number at the expense of other creditors. Where the board of directors of an insolvent corporation confessed a judgment against the corporation in favor of one of their number, who was also the president of the corporation and principal stockholder, with a view of giving him priority of lien over another creditor who

was about to obtain a judgment in a judicial proceeding, held, that such preference could not be upheld, but that the two judgments must stand on a footing of equality in respect to the commencement of the lien, and share pro rata in the proceeds of the property available for their payment. Druro v. Cross, 7 Wall. (U. S.) 302; Jackson v. Ludeling, 21 id. 616; Richards v. New Hampshire Ins. Co., 43 N. H. 263.

2 Marsh v. Burroughs, ante; Bassett v. St. Albans, &c. Co., 47 Vt. 313; Schaeffer v. Missouri, &c. Ins. Co., 46 Mo. 248.

8 Putnam v. New Albany, 4 Biss. (U. S. C. C.) 365; Firkel v. Joliet Opera House Co., 79 Ill. 344; Hughes v. Antietam Mfg. Co., 34 Md. 316; Osgood v. King, 42 Iowa, 478.

446.

4 Melvin v. Lamar Ins. Co., 80 Ill.

5 Price v. Grand Rapids, &c. R. R. Co., 18 Ind. 137; Erie & N. Y. R. R. Co. v. Patrick, 2 Abb. App. Cas. (N. Y.) 72; 2 Keyes (N. Y.), 256.

Therefore, where two subscriptions are made to the same stock by the same person, one as an individual and another in some other capacity, as an executor, trustee, etc., separate actions must be brought for the recovery of each.1 Each subscription is an independent undertaking, and in no way affected by the terms of other subscriptions.2

SEC. 25. Agreements to Subscribe. A mere agreement to subscribe for stock in a corporation is not a subscription for stock; but under such an agreement, a person is liable for all the actual damages resulting to the corporation from his failure to subscribe, and in such cases the par value of the stock is not the measure of recovery.* SEC. 26. Agreement to take and fill. An agreement to take a certain number of shares of the capital stock of a company, entered into in writing before the company is incorporated, is held by some of the cases to create at least an implied contract to pay, which will sustain an action by the corporation when it comes into existence to recover calls on the stock, and an agreement to "take and fill" a certain number of shares is equivalent to a promise to take and pay for them. Of course, agreements to take stock, as a rule, always relate to corporations which exist only in contemplation, and are to be thereafter formed; and there is always an implied condition connected with such agreements, that such agreement shall only be operative when the corporation comes into existence, and unless this implied condition is complied with, the agreement has no validity. And agreeably to the common-law rule, that, in order to give validity to a promise, there must, at the time when it was made, be a person in esse to receive it, it is difficult to see how such a subscription made before the corporation was incorporated, can be

1 Erie, &c. R. R. Co. v. Patrick, ante. 2 Connecticut & Passumpsic R. R. Co.

v. Bailey, 24 Vt. 465.

3 Mount Sterling Coal Road Co. v. Little, 14 Bush (Ky.), 429.

6 Penobscot, &c. R. R. Co. v. Dunn, 39 Me. 587; and is liable to pay all assess ments legally made thereon, Buckfield Branch R. R. Co. v. Irish, 39 id. 44; Fry v. Lexington, &c. R. R. Co., 2 Met. (Ky.)

4 Thrasher v. Pike, &c. R. R. Co., 25 314; Troy, &c. R. R. Co. v. Tibbetts, 18

Ill. 393.

5 Buffalo & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336; Johnson v. Wabash, &c. R. R. Co., 16 Ind. 389; Penobscot R. R. Co. v. Dummer, 40 Me. 172; Anderson v. Newcastle, &c. R. R. Co., 12 Ind. 376; Tanica, &c. R. R. Co. v. Neeley, 21 Ill. 71; Midland Great Western Railway, 16 M. & W. 804; Hughes v. Antietam Mfg. Co., 34 Md. 316.

Barb. (N. Y.) 298; City Hotel v. Dickinson, 6 Gray (Mass.), 586; Northern R. R. Co. v. Miller, 10 Barb. (N. Y.) 260; Buffalo, &c. R. R. Co. v. Dudley, 14 N. Y. 336; Fort Edward, &c. Plank Road Co. v. Payne, 17 Barb. (N. Y.) 567; Merrimac Mining Co. v. Levy, 54 Penn. St. 227; Dayton v. Borst, 31 N. Y. 435.