a set-off to apply the dividends accruing upon stock after the death of the stockholder upon notes indorsed by him.25

55. Statutory prohibition of transfers.- Where the statute prohibits a transfer, as, for example, before the whole amount of subscription has been paid in, no legal transfer of the stock can be made until it is fully paid.' So where the right of the subscriber to his stock is forfeitable for failure to pay an instalment or call, no right in the stock can be transferred before the instalment is paid, even though the assignee paid the instalment.2

§ 56. Prohibition of transfers by agreement.-There seems to be authority for the proposition that the corporators or shareholders may agree not to dispose of their stock for a certain time, and that such a contract may be specifically enforced by a court of equity. A court has specifically enforced an agreement of a stockholder to sell to other stockholders. But the enforcement of such a contract belongs to that receptacle which has been made the custodian of many remarkable decisions, to wit: the discretion of the court." But such contracts do not bind a bona fide purchaser, nor do they prevent a legal title in the stock from passing to the transferee, although he had notice. But a by-law of the corporation cannot restrain the absolute right of the stockholder to transfer his stock. If the provision against alienability is incorporated in the articles of agreement, it would seem to follow that it would be valid under some of the above decisions, which have entirely lost sight of the general principle of law that any restraint on alienation of real or per

25 Brent v. Bank of Washington, 2 Cranch C. C. 517.

Merrill v. Call, 15 Me. 428.

2 Coleman v. Spencer, 5 Blackf. 195. This case cannot be considered sound. See also 2 Cook on Corp., sec. 621a.

1 Williams v. Montgomery, 148 N. Y. 519.

2 Jones v. Brown (Mass.), 50 N. E. R. 648.

3 Re Argus Co., 138 N. Y. 557.

4 Brinkerhoof-Farris Co. v. Home Lumber Co., 118 Mo. 447.

5 See 2 Cook on Corp., sec. 621a, note 2.

62 Cook on Corp., sec. 621a.

sonal property held in absolute ownership is void. The obvious expedient of putting the stock in the hands of a trustee does not restrain the alienation by the beneficiary of his equitable interest. Yet if the stock is put in the hands of a trustee, who is given the voting power, it is probable that some courts would refuse to compel the trustee to transfer to the real owner.

$57. Right of stockholders in bank.- A state statute granting to stockholders access to and the right of inspection of the books is binding upon national banks, and does not conflict with sections 5240 and 5241 of the Revised Statutes. Stockholders in banks have the usual remedies as against the directors to prevent a breach of duty. In the case of state banks the United States courts are governed by the rules as to their jurisdiction laid down in Hawes v. Oakland, 104 U. S. 450, and the rule of the Supreme Court in pursuance thereof. The remedies to inquire into elections and abuse of powers given by statute do not call for particular mention."

§ 58. Liabilities of stockholders.-The first and original liability of a stockholder is that upon his stock subscription, to pay the full amount subscribed. But in addition to this liability various statutes have added an additional liability to stockholders for debts of the corporation. It is, of course, a matter of common legal knowledge that no liability upon a stockholder as such, except for the stock subscription, exists at common law. But as a general rule statutes have

See Gray, Restraints on Alienation, sec. 105 et seq.

8 If this device was taken merely to destroy the alienability, no court ought to enforce it.

1 Winter v. Baldwin, 89 Ala. 483. Compare as to the general right to inspect, Hatch v. City Bank, 1 Rob. (La.) 470; Cockburn v. Union Bank, 13 La. Ann. 289.

2 Reese v. Bank of Mont. Co., 31 Pa. 78; Manderson v. Comm. Bank, 28 Pa. 379; Dodge v. Woolsey, 18 How. 331.

3 Quincy v. Steel, 120 U. S. 245; Dimpfell v. Railroad Co., 110 U. S. 211.

4 See Albert v. State, 65 Ind. 413; Wiltz v. Peters, 4 La. Ann. 339.

imposed additional liabilities upon bank stockholders. And these statutes will doubtless be held to apply to all corporations with banking powers, whether they are named banks or trust companies, but the double liability would only apply to that part of their business transactions which was that of a bank. Sometimes the stockholders of the bank are made. liable for its debts upon insolvency or dissolution. In one instance found in State Savings Bank v. Foster, 76 N. W. R. 499 (Mich.), the stock liability is for depositors, but not other creditors. At other times they are made liable to a certain amount for debts contracted while they were stockholders, regardless of a transfer. By other statutes the stockholders existing at the time suit is brought are made liable. In some instances both the stockholders when the debt was contracted, and those existing at the time suit is brought, are made liable. There have been in times past statutes imposing on stockholders in state banks of issue a particular liability upon the circulating notes of the bank. Under our national banking system the notes of national banks are fully secured. But the stockholders of national banks are made liable for an amount equal to the amount of their stock in addition to the stock subscription for the debts of the bank. This is the common form of liability for bank shareholders. Only those who are stockholders at the time when insolvency impends are liable under the national bank act. There are yet other statutes which make stockholders liable for certain acts of the corporation, which liability is something in the nature of a penalty. It is not the purpose of the writer to examine this subject minutely, for it is so complicated with general corporation law that it would swell this chapter beyond reasonable limits. The subject has been fully treated by excellent authorities.1

§ 59. Liability on stock subscription. The engagement which a stockholder makes when subscribing for stock is to pay the amount of his stock subscription. This engagement

1 See 3 Thompson on Corp., secs. extensive use of a learned note, 3 2925-3843, who must have made an Am. St. R. 806.

is a contract with the corporation which becomes binding as soon as the corporation is formed. This capital fund must be paid to the corporation. If the statute requires payment in specie it must be so made. If the law of the particular jurisdiction permits a payment in something else than money, payment may be so made.2 The contract may be avoided, it is true, on the ground of fraud if the subscriber is not estopped from making that defense. But conceding a valid subscription, the subscribed capital becomes the security of the creditors, and the stockholders are powerless to make any arrangement among themselves relieving them from this liability. Nor can this capital stock be divided up among the stockholders to the prejudice of the creditors of the corporation. If a stockholder has given a note to the corporation in payment of his subscription, he cannot defend against it on the ground that the corporation had no power to take it." Nor can a stockholder escape this liability by showing that the bank was not properly organized; but it has been held that a violation of law in organizing the bank would be pleadable against this stock subscription. Even this decision is wrong unless it is explainable on the theory that it was a contract which the law forbade. The state can be compelled to meet this liability. It will not avail the stockholder to show that he has paid the notes of the bank up to the extent of his liability, nor that he has paid a judgment against

10

1 King v. Elliot, 5 Smedes & M. 428, on a statutory implication.

2 See § 19, supra.

3 See 3 Am. St. R. 824 et seq., in note; Bissell v. Heath, 98 Mich. 472; In re Empire City Bank, 6 Abb. Pr. 385, and see § 48, ante.

Sagory v. Dubois, 3 Sandf. Ch. 466; Palmer v. Lawrence, 3 Sandf. 161; Dayton v. Borst, 7 Bosw. 115. 5 Wood v. Dummer, 3 Mason, 308; Bank of St. Mary's v. St. John, 25 Ala. 566, a case where the directors and all who participated were held liable for the money and for profits.

6 Finnell v. Sandford, 17 B. Mon. 748; Farmers' Bank v. Jenks, 7 Metc. 592.

7 Palmer v. Lawrence, 3 Sandf. 161.

8 North Missouri Co. v. Winkler, 33 Mo. 354. If it had been the statutory liability, this defense would have been irrelevant beyond a doubt.

9 Curran v. Arkansas, 15 How. 304. See note to § 48, ante.

10 Marsh v. Burrows, 1 Woods, 463. See § 315, notes 15 and 16, post.

12

himself as a partner responsible for the bank's debts." If the subscriber sells his stock to the bank he is still liable, but it has been held otherwise. But a valid transfer completed and assented to by the bank releases the original subscriber, unless a statute makes him liable.13 The authorities heretofore cited as to the effect of a transfer when not in good faith or for the purpose of avoiding liability are all in point here. The right to call in unpaid stock subscriptions, however, it has been held in a case of doubtful authority, may be taken away by statute as to debts contracted after the statute was passed.15 The ruling shows the result of foolish schemes for state banking.

§ 60. Statutory modifications.- Some instances occur where the statute makes the original subscriber a guarantor of the payment of the stock subscription by a transferee.' Statutes which were works of supererogation have been passed declaring the stockholders liable for unpaid subscriptions. This is merely declaring the liability that the law already imposed. Courts have in some instances construed statutes making the stockholder liable for the amount of his stock to be declaratory of a liability to the amount of the original subscription, but not a double liability. These statutes have some bearing upon the matter of remedy.1

§ 61. Remedies upon stock subscriptions.- The unpaid stock subscription belongs to the corporation, and the method

11 Bates v. Lewis, 3 Ohio St. 459. The payment was after suit brought.

12 In re Reciprocity Bank, 22 N. Y. 9. Contra, Robinson v. Bank of Darien, 18 Ga. 65. This latter bank was well named. See 10 Macaulay's England, 185.

13 Cowles v. Cromwell, 25 Barb. 413.

14 See SS 49, 50, ante.

15 Robinson v. Bank of Darien, 18 Ga. 65. If it is a contract this case

is wrong. See Hawthorne v. Calef, 2 Wall. 10, which holds the double liability to be an unrepealable contract. But the original stock subscription must be a contract between all the stockholders. It is mere folly to say the legislature can vary private contracts.

1 Marr v. Bank of West Tennessee, 4 Lea, 578; Harper v. Carroll, 69 N. W. R. 610 (Minn.).

1 See next section.