defence would not be good in favor of any who have acquiesced.1 The corporation is estopped if it has derived a benefit from the cancellation.2 But a subscriber to the articles may withdraw at any time before they are filed, if no others have subscribed in reliance thereon and no debts have been incurred. In Pennsylvania, he may withdraw at any time before the charter is applied for. But without such power expressly conferred, neither the directors nor a majority can rescind the contracts of membership and abandon the corporate enterprise over the objections of a dissenting minority.5 A single dissenter may file a bill in equity, and enforce the released stockholders' liability in the name of the corporation, and if any money paid on the subscription has been refunded to him, compel repayment to the corporation. It is too late, however, for the corporation to object after acceptance. With respect to the power of the corporation to release its members. from their obligations a somewhat different rule applies to incorporated building and loan associations. Where the parties to the compromise have acted in good faith, the transaction will not be rescinded because the released member was paid a greater sum than he would 1 Evans v. Smallcombe, L. R. 3 H. L. 249. 3 Gulf C., etc., R. Co. v. Neeby, 64 Tex. 344. • Muncy, etc., Co. v. De La Green, 13 Atl. Rep. 747; 21 Am. & Eng. Corp. Cas. 328. 5 Busey v. Hooper, 35 Md. 15. Where a contract between the subscribers to the capital stock of a corporation and the parties proposing to erect a building for them is modified in a manner which improves the building, with the consent of a majority of the subscribers, but without the knowledge or consent of one of them, that one is not released from liability for his subscription by reason of such change. Gibbons v. Grinsel (Wis.), 48 N. W. 255. • Melville v. Lainor, Ins. Co., 80 Ill. 446. Tilsonburg, etc., Co. v. Goedrich, 8 Ont. (Q. B. Div.) 565; Ross v. San Antonio, etc., R. R. Co., 31 Tex. 49. See also Goff v. Flesher, 33 O. St. 107. have received upon a pro rata distribution of the assets.1 § 566. When objects of enterprise abandoned or impracticable. A shareholder cannot refuse to pay his subscription, upon the sole ground that it is injudicious in his opinion to require the company's capital to be paid in at that particular time.2 But the undertaking of the subscriber is to contribute capital for the purpose of carrying on the business for which the corporation was organized only, and his liability ceases when that business is abandoned, or the further prosecution of the enterprise becomes impossible. There can, in that event, be no further use for capital, unless required to pay the claims of creditors, and unless required for that purpose his liability by the implied terms of his contract is at an end. But it would be necessary, in such case, and in all cases where a right of refusal to pay on account of the lack of authority or necessity for an assessment is claimed, that its invalidity should be plainly apparent. Probably in most cases the shareholder would be required to proceed by injunction against the corporation, and thus determine the rights of all parties in one suit.3 If each shareholder were allowed to make his defence separately, a multiplicity of suits might arise and in 1 Wangerein v. Aspell (Ohio), 24 N. E. 405. 2 Chouteau Ins. Co. v. Flloyd, 74 Mo. 286. 8 Salem, etc., Co. v. Ropes, 9 Pick. 196. In an action on a note given in payment of a subscription to the stock of a corporation organized to build cotton and woolen mills, a plea alleging that the company had failed to issue a certificate for the stock, that it had never erected cotton and woolen mills, but a conton-mill only, and that "the charter members of the corporation had organized it for their sole benefit, ignoring the right of the defendant," is not sufficient to show failure of consideration. Dallas Cotton & Woolen Mills v. Clancey (Tex.), 15 S. W. 194. consistent decisions ensue. Whenever unsatisfied creditors remain after the failure or abandonment of a corporate enterprise, it is the duty of each shareholder to contribute his proportion of the capital needed to satisfy their claims and wind up the company's affairs.1 And neither the fact that the corporation's funds have been wasted and misappropriated,2 nor that all its property has been sold under the foreclosure of a mortgage, furnishes any defence to the shareholders' liability to contribute to the satisfaction of the claims of creditors.3 § 567. Capital can only be demanded to carry on the corporate enterprise.-But it should be remembered that the liberal discretionary powers with which directors are vested in making assessments can only be exercised to accomplish objects for which the corporation was formed; and an assessment levied for other purposes is void.1 § 568. Contracts of membership cannot be cancelled by mutual consent.-There are several methods by which memberships in corporations may be terminated, and 1 Chouteau Ins. Co. v. Floyd, 74 Mo. 286; Phoenix Warehousing Co. v. Badger, 67 N. Y. 294; Smith v. Gower, 2 Duer, 17; Hardy v. Merriweather, 14 Ind. 203; McMiller v. Maysville, etc., R. R. Co., 15 B. Monr. 218. 2 Marshall v. Golden Fleece Mining Co., 16 Nev. 156. 3 Buffalo, etc., R. R. Co. v. Gifford, 87 N. Y. 294. + Hibernia Fire Engine Co. v. Commonwealth, 93 Pa. St. 264, 269; London Tobacco Pipe Makers' Co. v. Woodroffe, 7 B. & C. 838. A life insurance company reinsuring its policies has the right to retain the notes and mortgages given by its stockholders to secure their stock until all the outstanding debts of the society are paid, and all equities are adjusted between the company and its stockholders. Held, further, that to raise money to pay its outstanding debts it has the right to make assessments upon the shares of stock owned by its several stockholders, and to dispose of to its stockholders paying assessments upon their stock the notes and mortgages given to secure the identical stock upon which such assessments are made and paid. Markson v. Buchan, 33 Kan. 739; 7 P. 578. yet the method which without reflection readily suggests itself, namely, by mutual consent between the corporation and the member, is not one of them. Consequently, such release would, except in a few peculiar instances, constitute no defence to calls.1 § 569. Shares issued fraudulently or through mistake may be cancelled. The release of a member by purchase, of his shares should not be confounded, however, with a cancellation of certificates which have been irregularly issued. The latter is merely the evidence that the holder is a member, and of the extent of his interest; and to cancel it in some cases would not release the shareholder from his membership.2 So where one has been induced by fraud of the company's agents to become a member, the corporation may do, in the first instance, what it could be compelled to do by legal proceedings. In this case, however, it may be said that there never was a valid contract, and by a rescission the parties are simply left where the law would place them.3 570. Diminution of capital stock under statutory authority. Of course, the rule has no application where the charter expressly authorizes a corporation to diminish its capital stock. In this case, the diminution may be accomplished either by a release of subscriptions for shares unissued, or by a purchase of shares at their real value. The manner of accomplishing it prescribed in the charter or general law must be strictly observed. When shares have been purchased by a corporation and subsequently reissued, they are by a fiction con 1 Bedford, R. Co. v. Bowser, 48 Pa. St. 34, 37. 2 Infra, § 799. Infra, § 788. sidered as the original shares of the corporation which has occupied the position of transferrer.1 The inability of the agents of the corporations to release a member from his membership duties and responsibilities, in consideration of his surrendering all corporate benefits, arises from the fact that his contract is not one in which he and the corporation alone are interested; but there is an interdependence and mingling of rights and interests between him and all his fellow members. In other words, the constating instruments are the bond which not only binds each member to the corporation, but to every other member.2 § 571. Release by unanimous consent. It is sometimes asserted that a contract of membership may be rescinded by unanimous consent of the members. But this is not true, if it is meant that they may do so in their individual capacities, keeping in view the distinction between the corporation itself, and the membership composing it. True, all the members acting together, can release one of their number from his connection with the corporation, but they must do so in the latter's name and right, just as they would convey its property. Authorities are not harmonious in favor of a member's right to withdraw by unanimous consent of all other members, or, which is equivalent, the right of the members to dissolve the corporation by unanimous consent in the absence of statutory permission. There is but little doubt, however, of the right of the members of a private corporation to dissolve it by mutual consent of all its members at common law. This includes the 1 Where directors of a corporation subscribed for its shares in its name, their act was decided to be null and void. 8 Or. 84. 2 Supra, §§ 283, 294, 353. * Angell & Ames on Corp., sec. 766. Where, however, the manner of dissolution is expressly pointed out by statute, no other method can be legally adopted. Kohl v. Lillienthal, 81 Cal. 378; 20 P. 401; 22 P. 689. |