by the company, and the issuing of new stock in lieu of the forfeited shares, the subscriber is still liable for any deficiency. The cases all regard him as liable, under the English statutes, to a personal action, until the confirmation of the forfeiture of his stock.4

*4. But in a late case, in the House of Lords,5 it seems to have been settled, upon great consideration, that where the charter or general statutes give the right to forfeit the shares, or to collect the amount of the shareholder, and the forfeiture, sale, and cancellation of the shares, does not produce the requisite amount, the company may issue new shares for the deficiency, and at the same time maintain an action for it, against the former owner.

Irish, 39 id. 44; P. & K. R. v. Dunn, id. 587; Penobscot R. v. Dummer, 40 Maine R. 172; White Mountains Railw. v. Eastman, 34 N. H. R. 124. So, too, an agreement to take shares before the act of incorporation is obtained, creates an implied duty to pay calls duly made thereon. Buffalo & N. Y. City Railw. v. Dudley, 4 Kernan, 336. The general subject is discussed somewhat at large in this case, and the results arrived at confirm the doctrines laid down in the text. Rensselaer & W. Pl. Rd. Co. v. Barton, 16 N. Y. Court of Appeals, 457. The same rule is mentioned in Fry's Exrs. v. Lex. & Big. S. Railw., 2 Met. (Ky.) 314, where the question of the extent of implied obligation assumed by subscription to the capital stock of a corporation is very fully and fairly illustrated.

4 Great Northern R. v. Kennedy, 4 Exch. 417. So the allottees of shares in a projected railway company are made liable for a proportionate share of the expense. Upfill's case, 1 Eng. L. & Eq. 13; The Direct Shrewsbury & Leicester Railway Co., in re, 7 id. 28; London & B. R. v. Fairclough, 2 M. & G. 674; Edinburgh L. & N. H. R. v. Hebblewhite, 2 Railw. C. 237; Birmingham, Bristol & Th. J. R. v. Locke, 2 Railw. C. 867; Railway Co. v. Graham, 1 Ad. & Ellis (N. s.), 271; Huddersfield Canal Co. v. Buckley, 7 T. R, 36. It has been held, that a shareholder cannot absolve himself from calls by paying the directors a sum of money for his discharge, even though the money be accepted, and the shares transferred. Bennett ex parte, 27 Eng. L. & Eq. 572. See also § 4, ante. Eng. L. & Eq. 55. See also Peoria & Cross v. Mill Co., 17 Ill. R. 54.

5

Inglis v. Great Northern R., 16 Oquawka R. v. Elting, 17 Ill. R. 429; But where the deed of settlement gave the right to forfeit the shares at once, or to enforce the payment, if they should think fit, it was held, that a judgment for the amount due is a bar to any subsequent forfeiture. Giles v. Hutt, 3 Exch. 18. And where the charter of the company provided, that the shares of a delinquent shareholder "shall be liable to forfeiture, and the company may declare the same forfeited and vested in the company," it was held the option, in declaring such forfeiture, was in the company, and not in the shareholders. Railway Company v. Rodrigues, 10 Rich. (S. C.) 278.

5. It seems to be well settled, that to entitle the company to sue for calls, the provisions of their charter, and of the general laws of the state, must be strictly pursued. And if the shares have been forfeited and sold without pursuing all the requirements, in such case provided, no action will lie to recover the balance of the subscription. And if the shares be sold for the non-payment of several assessments, one of which is illegal, the corporation cannot recover the remainder of the subscription.7 But where the by-laws of the company prescribe a specific mode of notice to the delinquent, of the time and place of sale, through the mail, this is not to be regarded as exclusive, but other notice which reaches the party in time will be sufficient.8

9

But in a recent case the law in regard to proceedings in forfeiture of shares is held very strictly. It is here considered that notice must be given in the precise time and in the exact form required by statute, and that the sale must in all respects correspond precisely with the requirements of the provisons of the law. The rule is carried so far here that posting notice in a public place was held no sufficient compliance with the law requiring it to be in a 66 conspicuous" place; and it was here considered that subscriptions to preferred stock could not be reckoned to make up the requisite amount of capital to enable the corporation to go into operation.

6. But notice that shares in a railway corporation will be sold

• Portland, Saco, & Portsmouth Railw. v. Graham, 11 Met. 1.

7 Stoneham Branch R. Co. v. Gould, 2 Gray, 277.

* Lexington & West Cambridge Railw. v. Chandler, 13 Met. 311. And where the charter required notice of the instalment three weeks prior to the same becoming due, it was held primâ facie evidence of compliance by producing the publication, and oral evidence of its being repeated the requisite number of times, without producing all the papers. Unthank v. Henry County Turnp. Co., 6 Porter (Ind.), 125. And in a later case, Anderson v. The Ohio & Miss. Railw. Co., 14 Ind. R. 169, where the charter limited the amount of calls to ten per cent per annum upon subscriptions to stock, and ten per cent had been paid, a call was held sufficient without specifying the place of payment or the per cent to be paid, only five remaining within the power of the directors to call for, and the notice fixing the time and place of payment.

9

Lewey's Island Railw. v. Bolton, 48 Me. R. 451. The rules of law as to what is requisite to constitute a valid subscription to a stock in a railway company and to justify calls, are much considered in the recent case of Maltby v. N. W. Va. Railw., 16 Md. R. 422.

for nonpayment of assessments on a day fixed, and by an auctioneer named, who is and has long been an auctioneer in the place at which the notice bears date is insufficient if it do not name the place of sale.10

7. The validity of calls cannot be called in question upon the ground that the directors making the same are acting in the interest and for the benefit of a rival company, and have in consequence unnecessarily retarded the construction of the company's works. But the directors must be duly appointed.12

8. And the proceedings in making the calls must have been substantially in conformity with the charter and by-laws of the company and the general laws of the state at the time of making the same. Any subsequent ratification by the directors of an informal call will only give it effect from the date of the ratification.13

9. A subscriber who has executed the deed of settlement, purchased shares and received dividends upon the same, is not at liberty to object to their validity upon the ground that the company were by the deed of settlement authorized to issue shares for £100, and these were issued as half shares at £50; this acquiescence estops him from doing so.14

10. It seems that unless the constitution of the corporation or the general laws of the state contain a provision justifying a forfeiture of shares, it is not competent for the majority of the shareholders by prospective resolution to establish a regulation whereby the shares shall be forfeited upon failure to comply with the requirements of such resolution.15

11. It is no valid reason for making more calls than are justified by the constitution and laws affecting the question, that some of the calls were not regularly made and were therefore void, and were not paid by the defendant. It should appear that

10 Lexington & West Cambridge Railway v. Staples, 5 Gray, 520.

11 Orr v. Gl. A. & M. J. Railw., 6 Jur. N. S. 877.

12 H. B. Coal Co. v. Teague, 5 H. & N. 151; s. c. 6 Jur. N. S. 275.

13 Cornwall G. C. M. Co. v. Bennett, 5 H. & N. 423; s. c. 6 Jur. N. S. 539; Anglo California G. M. Co. v. Lewis, 6 Jur. N. S. 1376.

14 Hull Flax & Cotton Co. v. Wellesley, 6 H. & N. 38.

15 Barton's case, 4 De Gex & J. 46.

such irregular calls had been declared void, otherwise the directors may have secured most of the money demanded by them.16

*SECTION IV.

Creditors may compel Payment of Subscriptions.

1. Company compelled to collect of subscribers by mandamus.

2-4. Amount due from subscribers, a trust

fund for the benefit of creditors.

the company, and a state law authorizing it invalid.

8, 9. The general doctrine above stated found in many American cases.

5. If a state own the stock it will be the 10. Judgment creditors may bring bill in

same.

6, 7. A diversion of the funds from creditors is a violation of contract on the part of

equity.

11.

Promoters of railways liable, as partners, for expenses of procuring charter.

§ 50. 1. By the present English statute, the creditors of a company may recover their judgment debts, against shareholders, who have not paid the full amount of their shares to the extent of the deficiency.1 Before this statute, it was considered that a writ of mandamus would lie, to compel the company to make and enforce calls against delinquents.2

2. In this country this question has arisen, not unfrequently, in the case of insolvent companies, no such provision existing in most of the states as that of the English statute just referred to.

3. This subject is very extensively examined, and considered, by the national tribunal of last resort, in a case of much importance and delicacy, and the following results arrived at:

3

4. On the dissolution of a corporation, its effects are a trustfund, for the payment of its creditors, who may follow them,

16 Welland Railw. v. Berrie, 6 H. & N. 416.

1 8 & 9 Vict. c. 16, §§ 36, 37.

2 Walford, 277; Hodges, 106, n. (u); Reg. v. Victoria Park Co., 1 Q. B. 288, where the opinion of the court very clearly intimates, that the writ of mandamus will lie, to compel the company to enforce the payment of calls, where it appears that judgments against the company remain unsatisfied for want of assets. But, under the circumstances of this case, it was not deemed requisite to issue the writ.

3 Curran v. State of Arkansas, 15 How. 304.

into the hands of any one, not a bona fide creditor, or purchaser without notice; and a state law, which deprives creditors of this right, and appropriates the property to other uses, impairs the obligation of their contracts, and is invalid.

5. The fact, that a state is the sole owner of the stock in a banking corporation, does not affect the rights of the creditors.

6. The capital stock of a company is a fund set apart by its charter for the payment of its debts, which amounts to a contract, * with those who shall become its creditors, that the fund shall not be withdrawn and appropriated to the use of the owner, or owners, of the capital stock.

7. A law, which deprives creditors of a corporation of all legal remedy against its property, impairs the obligation of its contracts, and is invalid.

8. These propositions, with the exception of the constitutional question, in regard to the impairing of an assumed or implied contract with the creditors of the corporation, are all fully sustained by numerous decisions of the highest authority in this country.

4

5

9. Thus in a case before Mr. Justice Story, in the Circuit Court, it was held, that the capital stock of a corporation is a trust-fund, for the payment of its debts, and being so, it may, upon general principles of equity law, be followed into other hands, so long as it can be traced, unless the holder show a paramount title. And in cases where the capital stock or assets. of a corporation have been distributed to the stockholders without providing for the payment of its debts, a court of equity will allow the creditors to sustain a bill against the shareholders, to compel contribution to the payment of the debts of the company, to the extent of funds obtained by them, whether directly from the company, or through some substitution of useless securities for those which were good."

4 Wood v. Dummer, 3 Mason, 308.

5 Adair v. Shaw, 1 Sch. & L. 243, 261. See Dayton v. Borst, 31 N. Y. R. 435. • Nathan v. Whitlock, 9 Paige, 152; s. c. 3d Edwards's Ch. 215. But it has been held, that the distribution of the capital stock among the shareholders, before the debts of the company are paid, and leaving no funds for that purpose, will not render the shareholders liable to an action of tort, at the suit of the creditors of the company, there being no such privity as will lay the foundation