§ 130 (111a). Implied conditions. It is not only true that a provision in a charter to the cffect that no subscription shall be enforceable until a certain amount of stock has been subscribed for is a condition precedent, but 't is aso held in many jurisdictions that where the capital stock is fixed, it is an implied condition, in the absence of anything to the contrary, that it shall all be subscribed for before a subscriber is liable upon his subscription. Thus it is said: "It is a general and well-settled rule, subject to a few qualifications only, that where the capital stock of a corporation is fixed, it is implied in every contract of subscription, as a condition precedent to liability thereunder, that all the capital stock must be subscribed. Until all the capital stock is subscribed, payment of his subscription or any part thereof cannot be required of any subscriber."2 But if the subscription con shares are limited to a certain number, and whose charter provides that payment shall be made as may be determined by the board of directors, can not be compelled to pay until the whole capital has becn subscribed for and the board has called for payment, unless it is shown that by their acts they have waived their rights in those regards. Exposition R. &c. Co. v. Canal St. E. R. Co., 42 La. Ann. 370, 7 So. 627. This is the common law rule where the charter does not otherwise provide, but such defense may be waived by the subscriber. Masonic Temple Assn. v. Channell, 43 Minn. 353, 45 N. W. 716; International &c. Assn. v. Walker, 83 Mich. 386, 47 N. W. 338, 3 Lewis' Am. R. & Corp. 731. See also McConnaghy v. Monticello Const. Co., 135 Ky. 667, 117 S. W. 372. 2 Note to Gettysburg Nat. Bank v. Brown (95 Md. 367, 52 Atl. 975), in 93 Am. St. 339, 368; Stoneham Branch R. Co. v. Gould, 68 Mass. 277; Contuocook Valley R. Co. v. Barker, 32 N. H. 363. See also Santa Cruz R. Co. v. Schwartz, 53 Cal. 106; Stearns v. Sopris, 4 Colo. App. 191, 35 Pac. 281; Allman v. Havana &c. R. Co., 88 Ill. 521; McCoy v. World's Columbian Exposition, 186 I11. 356, 57 N. E. 1043, 78 Am. St. 288; Hoagland v. Cincinnati &c. R. Co., 18 Ind. 452; Peoria &c. R. Co. v. Preston, 35 Iowa 115; Exposition R. &c. Co. v. Canal St. &c. R. Co., 42 La. Ann. 370, 7 So. 627; Somerset &c. R. Co. v. Cushing, 45 Maine 524; Somerset &c R. Co. v. Clarke, 61 Maine 379; Rockland &c. Co. v. Sewall, 78 Me. 167, 3 Atl. 181, 80 Maine 400, 14 Atl. 939; Hughes v. Antietam Mfg. Co., 34 Md. 316; Musgrove v. Morrison, 54 Md. 161; Worcester &c. R. Co. v. Hinds, 62 Mass. 110; Shurtz v. Schoolcraft &c. R. Co., 9 Mich. 270; International &c. Assn. v. Walker, 88 Mich. 62, 49 N. W. 1086; Curry tract or agreement shows a contrary intention there is no room for such an implication, and an express unconditional provision. to pay has been held in some cases to evince such an intention.* So, the matter is frequently regulated and determined by statute. And a subscriber may be responsible for preliminary ex Hotel Co. v. Mullins, 93 Mich. 318, 53 N. W. 360; Masonic Temple Assn. v. Chanwell, 43 Minn. 353, 45 N. W. 716; Duluth Inv. Co. v. Witt, 63 Minn. 538, 65 N. W. 956; Haskell v. Worthington, 94 Mo. 560, 7 S. W. 481; Sedalia &c. R. Co. v. Abell, 17 Mo. App. 645; McCann v. American Cent. Ins. Co., 4 Nebr. 256; Macfarland v. West Side &c. Assn, 53 Nebr. 417, 73 N. W. 736; Jewett v. Valley R. Co.. 34 Ohio St. 601; Astoria &c. R. Co. v. Hill, 20 Ore. 177, 25 Pac. 379; Read v. Memphis &c. Gas. Co., 56 Tenn. 545; Anderson v. Middle &c. R. Co., 91 Tenn. 44, 17 S. W. 803; Galveston Hotel Co. v. Bolton, 46 Tex. 633: Norwich Lock Mfg. Co. v. Hockaday, 89 Va. 557, 16 S. E. 877; Denny Hotel Co. v. Schram, 6 Wash. 134, 32 Pac. 1002, 36 Am. St. 130; Birge v. Browning, 11 Wash. 249, 39 Pac. 643; Greenbrier Industrial Exp. v. Ocheltree, 44 W. Va. 626, 30 S. E. 78; Milwaukee Brick &c. Co. v. Schoknecht, 108 Wis. 457, 84 N. W. 838; Wontner v. Shairp, 4 Com. B. 404. But see South. Ga. &c. R. Co. v. Ayres, 56 Ga. 230; Rensselaer &c. Plank Road Co. v. Wetsel, 21 Barb. (N. Y.) 56; Schenectady Plank Roa 1 Co. v. Thacher, 11 N. Y. 102; Lynch v. Eastern &c. R. Co., 57 Wis. 430, 15 N. W. 743, 825. As to the rule where the capital stock is not fixed, see note in 93 Am. St. 375, citing apparently conflicting authorities from the same states, most of which, however, may probably be reconciled in view of the fact that in all or nearly all of those holding that there was no such implied condition there was an express promise to pay, and that both the fact of the express promise and of the capital not being fixed were influential factors in the decision. As to when, if at all, a subscriber can question the validity of the corporate organization in case it exists as a de facto corporation, see Jones v. Dodge, 97 Ark. 248, 133 S. W. 828, L. R. A. 1915A, 472, and elaborate note. 3 Arkadelphia Cotton Mills V. Trimble, 54 Ark. 316, 15 S. W. 776; Troy &c. R. Co. v. Newton, 74 Mass. 596; Sedalia &c. R. Co. v. Abell, 17 Mo. App. 645; Anderson v. Middle &c. R. Co., 91 Tenn. 44, 17 S. W. 803. 4 See West v. Crawford, 80 Cal. 19, 21 Pac. 1123; Lail v. Mt. Sterling Coal Road Co., 76 Ky. 32; Skowhegan &c. R. Co. v. Kinsman, 77 Maine 370; Rockland &c. Co. v. Sewell, 80 Maine 400, 14 Atl. 939. 5 See San Bernardino &c. Co. v. Merrill, 108 Cal. 490, 41 Pac. 487; Mandel v. Swan &c. Co., 154 Ill. 177, 40 N. E. 462, 45 Am. St. 124; Anglo-American &c. Co. v. Dyer, penses, even though not subject to calls and assessments for the general purpose of the corporation." § 131 (112). Valid and invalid conditions. Where the condition is that the capital stock shall be limited to a certain amount, after that amount is reached a subscription in excess thereof cannot be enforced by the corporation. Parol and secret conditions. annexed to an absolute subscription are held void as a fraud upon the corporate creditors and other subscribers who are injured thereby, and the subscription is enforceable according to its 181 Mass. 593, 64 N. E. 416; Fairview R. Co. v. Spillman, 23 Ore. 587, 32 Pac. 688. This the statutes frequently provide for organizing and doing business when a certain amount less than all the stock is subscribed, and a subscriber is generally liable in such a case, having subscribed with reference to such provision. See Jewett v. Valley R. Co., 34 Ohio St. 601; Hanover Junction R. Co. v. Haldeman, 82 Pa. St. 36; Milwaukee &c. Co. v. Schoknecht, 108 Wis. 457, 84 N. W. 838, and other authorities cited in note in 93 Am. St. 373. 6 Covington &c. R. Co. v. Moore, 3 Ind. 510; Salem Mill &c. Corp. v. Ropes, 23 Mass. 23; Littleton Mfg. Co. v. Parker, 14 N. H. 543; Anvil Min. Co. v. Sherman, 74 Wis. 226, 42 N. W. 226, 4 L. R. A. 232 n. Such a condition is waived if the subscriber, with knowledge that the required proportion of the stock has not been subscribed attends the meetings of the company and participates in its organization, but not if he acted in ignorance of the fact that the required stock had not been sub scribed. Fairview &c. R. Co. v. Spillman, 23 Ore. 587, 32 Pac. 688; Auburn Opera House &c. v. Hill, 97 Cal. xvii, 32 Pac. 587; International &c. Assn. v. Walker, 97 Mich. 159, 56 N. W. 344. 7 Clark v. Turner, 73 Ga. 1; Merrill v. Gamble, 46 Iowa 615; Oler v. Baltimore &c. R. Co., 41 Md. 583; Burrows v. Smith, 10 N. Y. 550. See also Laredo Imp. Co. v. Stevenson, 66 Fed. 633; 1 Thomp. Corp. (2d ed.) § 578. 8 Mississippi &c. R. Co. v. Cross, 20 Ark. 443; Mann v. Cooke, 20 Conn. 178; Ridgefield &c. R. Co. v. Brush, 43 Conn. 86; Johnson v. Pensacola &c. R. Co., 9 Fla. 299; New Albany &c. R. Co. v. Fields, 10 Ind. 187; Chouteau Co. v. Floyd, 74 Mc. 286; Kishacoquillas &c. R. Co. v. McConaby, 16 Serg. & R. (Pa.) 140; Robinson v. Pittsburg &c. R. Co., 32 Pa. St. 334: Philadelphia &c. R. Co. v. Conway, 177 Pa. St. 364, 35 Atl. 716; Connecticut &c. R. Co. v. Bailey, 24 Vt. 465, 58 Am. Dec. 181; Preston v. Grand Collier Dock Co., 2 Eng. Rail. & Canal Cas. 335; Davidson's Case, 3 DeG. & S. 21. But see Pickler v. terms. It cannot even be varied by a separate written contract executed at the time the subscription was made, if such separate contract was unknown to other subscribers and creditors. But as a general rule any condition which can be legally 10 performed or complied with by the corporation,11 may be annexed to a subscription given for stock in a corporation which is already organized, if such condition be expressed therein.12 It has also been held that a condition will be presumed to have been made when the subscription was given, in the absence of proof to the contrary,13 and will be held valid when annexed to the subscription after it was given, if done with the consent of all the parties, and for a consideration.14 § 132 (113). Conditional subscription is a mere offer until accepted. A conditional subscription usually constitutes only an offer on the part of the subscriber until it is accepted by the Arkansas Packing Co., 112 Ark. 33, 164 S. W. 764 (parol evidence admissible to show application for stock not to be delivered or to become operative until subscriber so directed). 9 Brownlee v. Ohio &c. R. Co., 18 Ind. 68; White Mountains R. Co. v. Eastman, 34 N. H. 124; Meyer v. Blair, 109 N. Y. 600, 17 N. E. 228, 4 Am. St. 500. 10 As to the effect of an ultra vires condition in a subscription, see Pellatt's Case, L. R. 2 Ch. 527; Thigpen v. Mississippi &c. R. Co., 32 Miss. 347. See also Morrow v. Nashville &c. Co., 87 Tenn. 262, 10 S. W. 495, 3 L. R. A. 37, 10 Am. St. 658; Laredo Imp. Co. v. Stevenson, 66 Fed. 633. 11 Penobscot &c. R. Co. v. Dunn, 39 Maine 587; Louisville &c. R. Co. v. Sumner, 106 Ind. 55, 60, 55 Am. Rep. 719, 5 N. E. 404; Bobzin v. Gould Balance Valve Co., 140 Iowa 744, 118 N. W. 40; McMillan v. Maysville &c. R. Co., 54 Ky. 218, 61 Am. Dec. 181; Ashtabula &c. R. Co. v. Smith, 15 Ohio St. 328; Dayton &c. R. Co. v. Hatch, 1 Disney (Ohio) 84; Lake Ontario Shore R. Co. v. Curtiss, 80 N. Y. 219. See Chicago &c. R. Co. v. Aurora, 99 Ill. 205, where it is held that a town may issue railroad aid bonds, payable upon a condition which can not legally be fulfilled. 12 For conditions which have been held valid see 1 Cook Corporations (7th. ed.), § 83; 8 Thomp. Corp. §§ 591, 612, 619, 628; Cox v. Hardee, 135 Ga. 80, 68 S. E. 932. 13 Robinson v. Pittsburgh &c. R. Co., 32 Pa. St. 334, 72 Am. Dec. 792. 14 Pittsburgh &c. R. Co. v. Stewart, 41 Pa. St. 54; Tonica &c. R. Co. v. Stein, 21 Ill. 96; New Hampshire Cent. R. Co. v. Johnson, 30 N. H. 390, 64 Am. Dec. 300. corporation,15 after which, upon performance of the condition, it has the binding force of any other subscription,16 but it has been held that such a subscription may be recalled if there is an unreasonable delay in accepting it.17 So, a gratuitous subscription with only one signer is said to be an offer, which, until accepted by the promisee in express terms, or by a performance of the conditions stipulated therein, is but a nudum pactum, and cannot be enforced, against the will of the subscriber, by an action at law. 18 § 133 (114). Subscriptions in escrow-Parol evidence.-A contract of subscription to capital stock, absolute on its face, may, 15 Junction R. Co. v. Reeve, 15 Ind. 236. See also Cass v. Pittsburgh &c. R. Co., 80 Pa. St. 31; Taggart v. Western Md. R. Co., 24 Md. 563, 89 Am. Dec. 760. But see Mansfield &c. R. Co. v. Stout, 26 Ohio St. 241, to the effect that the question of acceptance is immaterial where the corporation has fully performed the condition imposed. The death of the subscriber before acceptance of a conditional subscription amounts to a revocation. Sedalia &c. R. Co. v. Wilkinson, 83 Mo. 235; Wallace v. Townsend, 43 Ohio St. 537, 3 N. E. 601, 54 Am. Rep. 829. Where the acceptance must be formal, as in an offer to give land in payment for stock, it must be by the board of directors, or a specially authorized agent, so as to bind the company to issue stock in exchange for it before the subscriber will be bound. An acceptance by less than a quorum of the directors will not bind him. Junction R. Co. v. Reeve, 15 Ind. 236. 16 New Albany &c. R. Co. v. Mc Cormick, 10 Ind. 499, 71 Am. Dec. 337; Webb v. Baltimore &c. R. Co., 77 Md. 92, 39 Am. St. 396, 54 Am. & Eng. R. Cas. 202; Ashtabula &c. R. Co v. Smith, 15 Ohio St. 328; Armstrong v. Karshner, 47 Ohio St. 276, 24 N. E. 897. Immediately upon performance of the condition, a promise on the part of the subscriber to pay, and of the company to issue its stock upon such payment, is implied. Mansfield &c. R. Co. v. Brown, 26 Ohio St. 223. See also Webb v. Baltimore, &c. R. Co., 77 Md. 92, 26 Atl. 113, 39 Am. St. 396; St. Paul &c. R. Co. v. Robbins, 23 Minn. 439. 17 Taggart v. Western Md. R. Co., 24 Md. 563, 89 Am. Dec. 760n. See also Wood's Case, L. R. 15 Eq. 236, holding that notice of such recall may be given to the secretary. That a conditional subscription may be revoked while still in the hands of the corporate agent, see Lowe v. Edgefield &c. R. Co., 1 Head (Tenn.) 659. 18 Broadbent v. Johnson, 2 Idaho 300, 13 Pac. 83. |