*

the managers power to expend the money in carrying forward the undertaking in the mode they did, and they having expended it in that manner.15

6. And the party having made his application for shares in such an undertaking, and paid his deposit and received scrip certificates in the usual form, stating that the parliamentary contract and subscribers' agreement had been subscribed by the person to whom the certificate was issued, is bound by such contract and agreement, the same as if he had subscribed them.16

7. And it was held, that the fact that the plaintiff is not informed that deposits had not been paid upon all shares allotted, at the time the plaintiff subscribed for shares, is no such fraud as will exonerate him from his obligation.17

8. By the deed of settlement of a joint-stock company no shares could be transferred without the consent of the directors; the company being unprosperous, and getting into serious disputes, the shareholders agreed to pay a sum to the directors, in full discharge of their liabilities, which was accepted, and transfers made accordingly, and the shareholders retired. The company being ordered to be wound up, it was held that the retiring shareholders were still liable as contributories.18

9. An insolvent corporation cannot give away its effects, to the prejudice of its creditors; and any arrangement between the company and the shareholders, to enable them to escape from their just liabilities to the company, to the prejudice of their creditors, will be void, both in equity and at law.19 But this will not preclude the company from allowing legal or equitable set-offs, upon debts due them.19

10. Where the legislature, either in granting a charter to a company, or by the general laws of the state, have a right re

15 Garwood v. Ede, 1 Exch. 264; Atkinson v. Pocock, Id. 796; Jones v. Harrison, 2 Id. 52; Willey v. Parratt, 3 Id. 211.

16 Clements v. Todd, 1 Exch. 268; Carrick's case, 5 Eng. L. & Eq. 114. But he is not a contributory for expenses, unless he authorizes them. Id. Sunken Vessels Recovery Company in re, Wood's case, 3 De G. & J. 85; s. c. 5 Jur. N. S. 1377; New B. & Canada Railw. & Land Co. v. Muggeridge, 4 H. & N. 580; s. c. 5 Jur. N. S. 1131.

17 Vane v. Cobhold, 1 Exch. 798.

18 Bennett, ex parte, 27 Eng. & L. Eq. 272.

19 Goodwin v. McGehee, 15 Alabama R. 232.

served to repeal the charter, and the right is accordingly exercised, courts will primâ facie presume in favor of the regularity of the act.20

11. Shareholders cannot exonerate themselves from their statutory liability, either for the debts of the company or expenses incurred by a transfer of their shares to irresponsible persons.21 But a bona fide forfeiture of shares, whether confirmed by the company or not, if acquiesced in by the share-owner and the company, will release such owner from all responsibility thereafter accruing.22 But even when the company declare a forfeiture of shares it will not have the effect to exonerate the holder, if done without any legal warrant for the act.23

12. But where the transfer is made for the purpose of enabling the transferee to become a director, or for any other boná fide purpose, and not merely to evade the statutory responsibility, it will be regarded as valid and not impeachable in equity.24 And even when sold at a nominal price, and because the vendor anticipated a disastrous result in the affairs of the company, if bona fide, and no trust exists in behalf of the vendor, it will be regarded as valid.25

13. Where one is induced to take shares from the company, in consequence of the misrepresentations of the directors and agents of the company, the membership is not in general regarded as binding upon the purchaser.26 But where a party is thereby induced to purchase shares of third parties, his membership is valid.26 So, also, if the first purchaser had conveyed the

20 State v. Curran, 7 Eng. (Ark.) 321. But to make the surrender of a corporate charter effectual, it is necessary that it be accepted by the government, and that this appear of record. Norris v. Smithville, 1 Swan (Tenn.),

164.

The repeal of a charter vests the public work in the state, to be managed by them, or regranted, at their election. Erie & Northeast Railway v. Casey, 26 Penn. St. 287.

21 Lund, ex parte, in re Mexican & S. Am. Co., 5 Jur. N. S. 400.

22 Home Life Ass. Co. in re, ex parte Wollaston, 5 Jur. N. S. 853.

23 Barton, ex parte, 5 Jur N. S. 420, s. c. 4 Drew., 435.

24 London & Comity Assurance Co. in re, ex parte Jessup, 2 De G. & J. 638;

s. c. 5 Jur. N. S. 1; Bigge, ex parte, 5 Jur. N. S. 7.

25 De Pass, ex parte, 5 Jur. N. S. 1191.

26 Liverpool Borough Bank in re, 26 Beavan, 268.

shares to a bonâ fide purchaser.27 And where one is induced to buy shares of the company by the fraudulent representation of a stranger, the membership is valid.28

* SECTION II.

Levy upon Property of Company.

1. Where charter creates lien, it is para- 2. Road, or tolls, not subject to levy of execumount to all others.

tion.

§ 243. 1. Where the statute of the state provided that the state shall subscribe for half the stock in all incorporated railway and turnpike companies, and have a lien upon the property of the company to the extent of the money advanced by the state, as a corporator, to secure the payment of the other half of the stock by individual subscribers, it was held that the property of such corporation was not liable on fi. fa. for its debts till the lien of the state was extinguished by the payment of the stock.1

2. It has been held that creditors cannot levy their executions upon a turnpike-road,2 and the same rule will necessarily apply to railways. And it has been determined that a judgment lien, which attaches only to estates in land, does not bind tolls collected after the rendition of the judgment.3

27 Worth, ex parte, 4 Drew., 529; s. c. 5 Jur. N. S. 504. 28 Ayres, ex parte, 25 Beavan, 513.

1 State v. Lagrange & Memphis Railway, 4 Humph. 488.

210.

2 Ammant v. The New Alexandria and Pittsburg Turnpike, 13 Serg. & R. Other real estate of the company may be levied upon, but if it be joined in one levy with the road, the whole levy is void. But in a subsequent case it was held, that the toll-house of a turnpike company was so far an integral part of the franchise and a necessary incident, that it was not liable to the levy of an execution by the creditors of the company. Susquehanna Canal Co. v. Bonham, 9 Watts & Serg. 27.

3 Leedom v. Plymouth Railway, 5 Watts & Serg. 265; s. c. 2 American Railw. C. 232.

*606

SECTION III.

Execution against Shareholders.

1. Mode of obtaining execution under Eng-5. How stockholders may transfer personal lish statute.

liability.

2. Remedy, in this country, by distinct action, 6. Corporation cannot protect their property

more commonly.

3. May proceed in equity.

4. Payments in land valid.

from the levy of an execution for the protection of a mortgagee, who himself does not appear.

§ 244. 1. By the thirty-sixth section of the English Companies' * Clauses Consolidation Act of 1845, it is provided, that if execution shall have issued against the company and proved unproductive, it may issue against any shareholder to the extent of his shares remaining unpaid. This execution not to issue except upon the order of the court. It is a general rule that where a party out of the record is made subject to execution, the proper mode of procedure is by scire facias.1 It seems that something more must be shown than the mere return of nulla bona, as to the company. Bona fide and substantial efforts must be first used to obtain payment of the company.2

The scire facias must state that the party is a shareholder, and the amount unpaid, and that execution has issued against the company, and been found unavailing, all which is traversable. 3

1 Cross v. Law, 6 M. & W. 217; Ransford v. Bosanquet, 12 Ad. & Ellis, 813. This is a decision, in the Exchequer Chamber, where the award of execution in the King's Bench is reversed, on the ground that it should be by scire facias, but not upon suggestion, or motion, merely. A similar decision is made, ten years later, in 1850, in Hitchins v. The Kilkenny & G. S. & W. Railway, 10 Com. B. 160; 1 Eng. L. & Eq. 357. The court will not grant a scire facias against a party, as a shareholder in a company, upon a judgment obtained against the company, unless the affidavits show reasonable grounds for believing that the party sought to be charged is a shareholder. Edwards v. Kilkenny, &c. Railway, 14 C. B. N. S. 526; Mather v. National Assurance Association, in re Clark, Id. 676. And the fact that one has applied for and received an allotment of shares, and paid a deposit thereon, is not enough. Edwards v. Kilkenny, &c. Railw., supra.

2 Eardley v. Law, 12 Ad. & El. 802; Hitchins v. Kilkenny and G. S. & W. Railway, supra; s. c. 29 Eng. L. & Eq. 341.

* Devereux v. Kilkenny, &c. Railw., 1 Eng. L. & Eq. 481. In this case, while

It is sometimes said to be discretionary with the court whether to issue execution against a shareholder, even where it is shown that a former one against the company has proved unavailing. But this can only import that the court have a discretion to determine when the party claiming the execution brings himself within the spirit of the statute.4

In the case of the Kilkenny & Great Southern and Western Railway Co. in Ireland, which had an office in London, the court of exchequer granted scire facias against a director, upon proof of his declaration at a meeting of the body that they had no funds to meet their obligations, in consequence of the shareholders not paying calls, although perfectly able to do so.5 If in this way a shareholder should be compelled to pay more than is due from him he is to be reimbursed by the company.5

It is no defence to the scire facias against the shareholder the court hold that scire facias is the appropriate remedy to obtain execution against a shareholder, Pollock, C. B., protests that, in his opinion, a less formal mode, as by suggestion or motion, is equally competent. In Iowa, where an execution against a corporation had been returned "no property found," and thereupon the plaintiff served a notice upon the company in its corporate name, to show cause why the individual property of the members of the corporation should not be made liable; and at the next term of the court a default was taken against the corporation, and the court heard the cause, and found that the judgment against the corporation was recovered; that an execution had been issued, and returned "no property found"; that the corporation was organized in 1851, under the incorporation act of 1847; that each share in the company was fifty dollars; that the debt on which the judgment was recovered was contracted after the company was duly organized, and after the subscription of stock, and that there was no corporate property to satisfy the judgment; and where the court further found the truth of the contents of a schedule which set forth the names of the stockholders, the number of shares subscribed by each, the amount of each subscription, the amount called in, the amount unpaid, and the whole amount of unpaid stock due from each stockholder; and rendered a judgment, that the individual property of the members of the company, to the amount of stock subscribed by each, and not yet paid, be subjected to said judgment, and that execution issue, to be levied on the private property of the members, to the amount of stock subscribed by each, and not yet paid, as found by the court; it was held that the court could not proceed, at that stage of the case, and in that manner, to adjudge who were the stockholders, and in what amount each was liable. Donworth v. Colbaugh, 5 Clarke (Iowa), 300.

4 * 1 Bennett's Shelford, 224; Hodges on Railways, 92.

• Devereux v. Kilkenny, &c. Railway, 1 Eng L. & Eq. 481; Walford, 236.