ARTICLE II. RIGHTS OF OFFICERS. Sec. 667. 1. To manage corporate affairs within their powers and in good faith without interference by creditors. See supra, §§ 587, 588, and Pond v. Framingham & L. R. R. Co., 130 Mass. 194, supra, p. 1808; Graham v. R. R. Co., 102 U. S. 148, supra, p. 1809; Mills v. Northern Ry., etc., Co., L. R. 5 Ch. App. 621, supra, p. 1813. Sec. 668. 2. To contract or deal with the corporation. See Twin Lick Oil Company v. Marbury, 91 U. S. 587, supra, p. 1750; Munson v. Syracuse & G. R. Co., 103 N. Y. 58, supra, P. 1753. Sec. 669. 3. To obtain a preference as creditor. See Olney v. Conanicut Land Co., 16 R. I. 597, supra, p. 1832; Howe, Brown, etc., Co. v. Sandford F., etc., Co., 44 Fed. Rep. 231, supra, p. 1835; Corey v. Wadsworth, 118 Ala. 489, supra, p. 1836. SUBDIVISION IV. Sec. 670. CREDITORS AND SHAREHolders. I. RIGHTS OF CREDITORS. A. ARISING FROM IMPERFECT INCORPORATION. See Martin v. Fewell, 79 Mo. 401, supra, p. 673; Fay v. Noble, 7 Cush. (Mass.) 188, supra, p. 677; Montgomery v. Forbes, 148 Mass. 249, supra, p. 594; Snider's Sons' Co. v. Troy, 91 Ala. 224, supra, p. 656; Guckert v. Hacke, 159 Pa. St. 303, supra, p. 662; Hawes v. Anglo-Saxon Petroleum Co., 101 Mass. 385, supra, p. 581; Wechselberg v. Flour City Nat'l Bk., 24 U. Š. App. 308, supra, P. 574; Curtis v. Tracy, 169 Ill. 233, supra, p. 650; Metcalf v. Arnold, 110 Ala. 180, supra, p. 97. B. COMMON LAW OR EQUITABLE LIABILITY OF SHAREHOLders. ARTICLE I. ARISING FROM OWNERSHIP OF SHARES. Sec. 671. I. Who are shareholders. See supra, §§ 529-533. Note. 1. Stock books are prima facie evidence: Supra, §§ 532, 533; note 3 Am. St. Rep. 866; 1896, Holland v. Duluth Iron Co., 65 Minn. 324, 60 Am. St. Rep. 480, note; 1902, Sherwood v. Trust Co., 195 Ill. 112, 88 Am. St. R. 183; 1903, Earle v. Carson, 188 U. S. 42. 2. Certificate is not necessary: Supra, §§ 529, 530; 1892, Marson v. Deither, 49 Minn. 423. 3. One who holds himself out as a member, becomes such by estoppel, as to creditors: 1882, Wheeler v. Millar, 90 N. Y. 353; 1899, Blien v. Rand, 77 Minn. 110, 79 N. W. Rep. 606; 1900, Beals v. Buffalo, etc., Co., 49 App. Div. (N. Y.) 589. But compare, 1878, In re Wincham Shipbuilding Co., L. R. 9 Ch. D. 329. 4. Holder of shares as collateral security, from the corporation itself, is not a shareholder, though his name is on the corporate books: 1882, Burgess v. Seligman, 107 U. S. 20; but if they are so held from another shareholder the collateral holder may be treated as a shareholder: 1897, State v. Bank of N. E,, 70 Minn. 398, 68 Am. St. Rep. 538, note, supra, p. 1585. 5. As to transferees generally, see supra, §§ 566, 567 and note, p. 1695. A purchaser of shares (through a broker on the stock exchange) to be sold on a margin, and whose name is not registered on the stock books, is not a shareholder, and is not liable to respond as the holder of unpaid shares: 1892, Glenn v. Garth, 133 N. Y. 18. 6. Corporations as shareholders. Private: See, 1898, Chemical National Bank v. Havermale, 120 Cal. 601, 65 Am. St. Rep. 206. See, also, note, supra, p. 1064. Municipal: See, 1900, Monongahela Br. Co. v. Pittsburgh, 196 Pa. 25, 46 Atl. Rep. 99. Sec. 672. 2. Creditors have no right, at common law or in equity, to have more than the face value of shares paid up. TRUSTEES OF THE FREE SCHOOLS IN THE SOUTH PARISH IN ANDOVER v. JOHN FLINT.' 1847. IN THE SUPREME JUDICIAL COURT OF MASSACHUSETTS. 13 Metc. (Mass.) Rep. 539-544. [Assumpsit by the trustees upon a note given by the Andover Mechanic Association, signed by Flint as treasurer, to collect from Flint, as a member of the association, the sum due, for which judgment had been rendered against the association, and execution returned unsatisfied. The corporation was authorized to make by-laws, the eleventh of which provided that "the members pledge themselves in their individual as well as collective capacity to be responsible for all moneys loaned to this association." The plaintiff offered to prove that Flint, while treasurer, had told other creditors that the members. 1 Statement abridged. Part of opinion omitted. were individually liable, and also by other members, that they considered themselves so liable.] DEWEY, J. Upon looking at the act incorporating the Andover Mechanic Association (St. 1821, ch. 40) we find it in the usual form of acts of incorporation, giving a corporate name and corporate powers, but imposing no individual liability on its members for the debts of the corporation. Individual liability, as incident to membership of a corporation, arises only from express legislative enactment, either in the charter or by some general law, to which all similar corporations and their individual members are made subject. But there is no general law applicable to this species of corporations, such as exist in reference to manufacturing corporations, or corporations for banking purposes, providing certain liabilities on the individual stockholders of such corporations, in certain specified cases. The only effect that can be given to this by-law is that of an act or vote of the members of the corporation acting in their corporate capacity. It is not the act of an individual member, nor does the fact of it being found upon the records of the corporation, as a vote duly. adopted, authorize the inference that all or that any number greater than a bare majority voted for its adoption. The question then arises, whether it be competent for an aggregate corporation, whose act of incorporation imposes no individual liability upon its members for the debts and contracts of such corporation, to render, by force of by-law, each individual member a guarantor or surety for all moneys lent to the corporation. It is clearly quite foreign from the general purposes and objects, in reference to which by-laws are authorized to be made by corporate bodies. See Rev. Sts., ch. 44, § 2, giving authority to corporations to make by-laws. It is not, in the opinion of the court, within the corporate powers conferred upon this and similar corporations, to impose upon their members, by any such by-laws, any personal and individual liability to third persons, beyond such as are specified in the charter, or in the general laws of the commonwealth. Such a power would be liable to great abuse, and would subject every member of a corporation, however liberal its charter in excluding individual liability, to be made responsible for the entire indebtedness of the corporation by the act of a majority of those convened at a meeting of such corporation. Take the case of a bank in a doubtful credit, and its active managers deem it useful to sustain it by pledging the individual responsibility of some of its more wealthy stockholders. Can they, by a corporate vote, impose upon all the stockholders a personal liability for all the debts of the corporation? We think not, and are of opinion that each stockholder, by becoming such, subjects himself to no liability beyond that created by the force of the charter itself, or declared by other statutes of the commonwealth. It is to be borne in mind that these declarations of the defendant were not made to the plaintiffs, but to other persons. The proposed evidence would, therefore, be inadmissible on a trial of this case before a jury, as it would not tend to charge the defendant. Whether for such false representations he may be held responsible to those to whom he made them, and who may have lent their money upon the faith of them, is a question not now before us. It is a fatal objection to the maintenance of the present action, that the defendant has never, by any valid legal contract, bound himself individually for the payment of the loan made by the plaintiffs to the mechanic association. His name was never subscribed to the pledge of the corporation, that the individual members would guaranty the debts of the corporation. His oral promises, if made, would be inoperative and void, by reason of the statute of frauds. To give any legal effect to these pledges of individual liability, they must have been the individual acts of the members, adopted and sanctioned by them by their signatures under their own hands. Without this the corporate act was a dead letter, and of no binding efficacy upon individual members in their personal capacity. We see no ground upon which this action can be maintained. Note. See, 1854, Carr v. Iglehart, 3 Ohio St. 458; 1869, Ireland v. Palestine, etc., Co., 19 Ohio St. 369, supra, p. 757; 1875, Upton v. Tribilcock, 91 U. S. 45; 1895, Sampson v. Fox, 109 Ala. 662, 55 Am. St. Rep. 950; 1898, Omaha Law Lib. Assn. v. Connell, 55 Neb. 396; 1899, Sullivan Co. Club v. Butler, 29 Miscl. (N. Y.) 306; 1899, Enterprise Ditch Co. v. Moffitt, 58 Neb. 642, 79 N. W. Rep. 560, supra, p. 1579; 1900, Woodworth v. Bowles, 61 Kan. 569, 60 Pac. Rep. 331, infra, p. 2014; 1900, Johnson Elec. Service Co. v. Detroit Ch. of Com., 124 Mich. 115, 82 N. W. Rep. 795. Sec. 673. 3. Right of creditors to have the full face value of shares paid, if necessary to pay creditors,-general rule. FLINN, ASSIGNEE, V. BAGLEY ET AL.1 1881. IN THE U. S. DISTRICT COURT, E. D. MICHIGAN. Rep. 785-792. 7 Fed. In equity. This was a bill in equity by the assignee of the Detroit Novelty Works to compel the payment of the balance due upon certain unpaid subscriptions to the capital stock of the company. The material facts were that the company was organized in 1859, with a capital stock of $50,000, divided into 2,000 shares of $25 each. In 1871 it was proposed to increase the stock of the company to $100,000, and the following agreement was entered into by the defendants in this suit, or by those from whom the defendants hold their stock: "The undersigned subscribe hereby the amount set opposite our respective names, and agree to pay the same towards the increased stock of the Detroit Novelty Works, in three equal installments, on April 3, 1871, May 3, 1871, and June 3, 1871 (without grace), it being understood that stock shall be is 1 Part of opinion omitted. sued to subscribers for such subscriptions at 66% cents upon the dollar, and that a total amount of the subscriptions hereto shall be $20,000; and further, that negotiations upon the basis proposed by T. W. Misner, under date of March 31st, shall be completed before these subscriptions shall be of binding force. Detroit, April 1, 1871." This agreement was assented to by all the existing stockholders of the company, and was carried out by the payment of the money, $20,000, and the issuance of the stock, $30,000. The corporation having gone into bankruptcy, and its assets proving insufficient to pay its liabilities, the complainant in the suit, who had been chosen its assignee, filed this bill to compel the defendants, who are stockholders of the company under the above subscription, to pay one-third of the par value of the increased stock taken under that agreement. On July 29, 1874, a majority of the directors of the company filed with the secretary of state the annual report required by the statute, in which it was stated that the amount of capital paid in was $75,000, and also set forth the names of the stockholders and the number of shares held by each, the aggregate being 4,000 shares, which at $25 each would be $100,000. BROWN, D. J. That the capital stock of a corporation is a trust fund for the payment of its debts, and that the law implies a promise by the subscribers of stock to pay its par value, which in this instance was twenty-five dollars per share, when called for, and that no subsequent release of their original contract or subscription by the corporation will avail against the claims of creditors, are propositions too clearly established to admit of question. But whether a court can not only compel a subscriber to live up to a bargain he has made, but can make another bargain for him, and compel him to live up to that, is a different question. In the case under consideration it is clear that no actual fraud was intended. The novelty works found itself embarrassed for means, and resolved to raise money by increasing its capital stock. As its existing stock, however, was worth only twothirds of its par value, it was obviously impossible to sell its new stock at par, since all the stock would stand upon an equal footing and no one could be found to pay a dollar for that which was worth but 6623 cents. There was, therefore, no recourse but to issue new stock at its real value. All the stockholders of the corporation having assented to this arrangement, it was evidently no fraud upon them, and the corporation itself would be estopped to claim more than the agreed price. Neither was it a fraud upon the existing creditors, since the assets of their debtor were increased by the amount of money actually paid in, and, to that extent, they were benefited by the subscription. It is, then, only as a fraud upon future creditors that exception can be taken to the transaction. While the statute (Comp. Laws, § 2841) requires the capital stock of such corporations to be divided into shares of twenty-five dollars each, there is no express prohibition against stock being issued for less than its par value. But conceding, upon the authority of Hawley v. Upton, 102 U. S. 314, and Sturges v. Stetson, 1 Bissell 246, that the directors of a corporation have no right to |