otherwise for a lack of ordinary diligence, it is bound to issue new certificates to the rightful owner and account to him for dividends. And in case it has no stock which it can issue, it must pay the value of the shares. The law imputes to the fiduciary relation to its members and creditors assumed by the corporation liability for constructive or permissive as well as actual fraud.

When the transfer agent has knowledge of a fraud perpetrated through him, while acting within the scope of his authority, his knowledge is that of the corporation. And when, by reasonable diligence, he could have discovered the fraud and prevented its consummation, he renders his principal liable for the consequences.

1 Telegraph Co. v. Davenport, 97 U. S. 369; Pratt v. Taunton Copper Mfg. Co., 123 Mass. 110; Pollack v. Nat. B'k., 7 N. J. (3 Seld.) 274; Hamilton v. Cent. Ohio, etc., R. R. Co., 44 Md. 551; Caulkins v. Gas Co., 1 Pickle (Tenn.), 683; 4 S. W. 287; Allen v. S. Boston R. Co., 150 Mass. 200; 22 N. E. 917; M. & O. R. Co. v. Humphries (Miss.), 7 So. 522; March v. Eastern R. R. Co., 43 N. H. 515; B. & A. R. R. Co. v. Richardson (Mass.), 18 Cent. L. J. 92.

But it is not the duty of the officers of a corporation to inquire into the motives of an attorney in fact having full power to transfer stock for desiring it to be transferred to himself, although the indorsement of the owner does not appear upon the certificate. The corporation's agents in such case being ignorant of any intention on the part of the attorney to misappropriate the stock, the corporation will not be guilty of conversion simply by issuing another certificate in the name of the attorney who appropriates the stock wrongfully, and the fact that the attorney is also a director of the corporation does not alter the case. Taft v. Presidio Ferries R. Co., 84 Cal. 131; 24 Pac. Rep. 43. See also, Colt v. Ives, 31 Conn. 25; Trust Co. v. Abbe, 48 Mo. 136; B'k v. McElrath, 13 N. J. Eq. 26; Scripture v. Soapstone Co., 50 N. H. 571; Baldwin v. Canfield, 26 Minn. 43, 1 N. W. 261; Lathain v. Wood, 55 Cal. 161; Blen v. Min. Co., 47 Ia. 581.

2 Bridgeport Bank v. N. Y. & N. H. R. R. Co., 30 Conn. 231.

3 Loring v. Salisbury Mills Co., 125 Mass. 150. See Salisbury Mills Co. v. Townsend, 109 Mass. 115; Pratt v. Taunton Copper Mfg. Co., 123 Mass. 110. In Parrott v. Byers, 40 Cal. 614, 625, it was held that an assignee of shares whose title had not been perfected by a transfer on the books was entitled to the assistance of a court of equity in protecting his rights under the assignment from being impaired by the wrongful acts of the trustees.

In a Pennsylvania case it was held that the circumstance that the signature of the assignor of a certificate of shares was thirteen years old was enough to

But a corporation is not liable for dividends paid on stock, before it has notice of a transfer of the same. The production of the certificate is not a condition to the right to draw dividends, as in the case of a right to have a transfer on the books.1

§ 582. Laches of owner releasing corporation from liability. While, in case of delivery of a stock certificate to a person not entitled to it, the corporation may become liable to the real owner for the value of the shares, yet the laches on his part may be such as to exempt it from the duty of accounting to him for dividends wrongly paid to the fraudulent owner.2 What amounts to laches is a question to be determined in each particular case, according to facts and circumstances. All the authorities affirm such liability where the corporation has notice that the present holder is a trustee and of the name of his cestui que trust, and issues the new certificate without making any inquiry whether his trust authorizes him to make the transfer.3

§ 583. The doctrine that a receiver cannot release subscriptions. It is said that each stockholder in a corporation is interested in the subscription of every other stockholder; and it has been held that a receiver cannot, without the consent of all, release one from his liability, and that a court of chancery has no power to authorize him to do so by its decree to which the

arouse suspicion and put the transfer agent on inquiry. Pa. St. R. R. Co.'s App., 86 Pa. St. 81. See also Lowry v. Commercial, etc., Bank, Taney's Decis. 310.

1 Cleveland, etc., R. R. Co. v. Robbins, 35 Ohio St. 483. See also as to notice generally Holbrook v. N. J. Zinc Co., 57 N. Y. 616; Bank v. Lanier, 11 Wall. 369; Factor's, etc., Ins. Co. v. Marine, etc., Co., 31 La. Ann. 149; Cushman v. Thayer Mfg. Co., 76 N. Y. 365; Brisbane v. Del., Lackawanna, etc., R. R. Co., 25 Hun, 438; 94 N. Y. 204.

2 See last note.

3 Loring v. Salisbury Mills Co., 125 Mass. 150; Pratt v. Taunton Copper Mfg. Co., 123 Mass. 110; Salisbury Mills Co. v. Townsend, 109 Mass. 110.

stockholders are not made parties. But as we have seen, the agents of the corporation may rescind contracts of subscription obtained by fraud, and in a few other instances, and on principle and reason, the receiver who only succeeds to such title as the corporation had may do the same.

As was said with reference to the agent's authority under these circumstances, he would only be doing what the law directs him to do. So in case of insolvency of the stockholder it would generally be to the interest of all parties that the receiver should accept part of the sum due, by way of compromise, rather than fail to recover any of it by action. And if he did so in good faith, no court ought to hold him guilty for a breach of duty, or release the other stockholders on account of his having done so.

§ 584. Subscriptions no more sacred than other assets after insolvency. The doctrine that agreements to contribute capital by stockholders are more sacred than other debts due the corporation, and that a receiver holds a different relation or footing with respect to them than the corporation held previous to his appointment, is not founded upon any rules of practical convenience or justice. After the operations of the corporation have ceased, the assets, whether in the shape of property or choses in action, are no longer distinguishable into capital and surplus, but are alike applicable to the extinguishment of debts due by the corporation.3

The theory that each subscriber has contracted with reference to all other subscriptions is, after insolvency, unimportant, inasmuch as they are interested in com

mon and to the same extent, in the collection and application to the satisfaction of creditors of all debts due to the corporation.

585. The right to forfeit shares for non-payment of assessments. At common law, the remedy against shareholders by forfeiture and sale of shares for non-payment of subscriptions did not exist in favor of a corporation. The remedy is exclusively statutory. But where the remedy is given by statute, it does not take away the ordinary common law remedy by action against the delinquent; and the remedies are concurrent.

The corporation is given its choice of remedies, and its agents may pursue either for the purpose of collecting the subscription.2 But the corporation cannot pursue both remedies. Having exhausted one, it cannot resort to the other. It cannot forfeit the stock and then sue for the amount due on the subscription; nor can it exhaust the remedy by suit and afterwards forfeit the stock, unless expressly authorized in the charter or bylaw to do so.3

1 Williams v. Lowe, 4 Neb. 302.

2 Del., etc., Co. v. Simpson, 1 Binn. 70; Instone v. Frankfort Bridge Co., 21 Bibb. 576; Rensselaer, etc., T. Co. v. Barton, 16 N. Y. 457; Lake Ont., etc., R. R. Co. v. Mason, Id. 451; McDonough v. Phillips, 15 How. Pr. 372; Freeman v. Winchester, 18 Miss. 577; Mann v. Cooke, 20 Conn. 178; Rutland, etc., R. R. Co. v. Thrall, 35 Vt. 536; New Hampshire, etc., R. R. Co. v. Johnson, 30 N. H. 390; Piscataqua Ferry Co. v. Jones, 39 Id. 491; Hightower v. Thornton, 8 Ga. 486, 502; Hughes v. Antietam, etc., Co., 34 Md. 316; Selma, etc., R. R. Co. v. Tipton, 5 Ala. 787; Gratz v. Redd, 4 B. Mon. 178; Boston, etc., R. R. Co. v. Wellington, 113 Mass. 79. The last case conflicts with a long line of decisions in Massachusetts, and indeed in all the New England states where, as has been seen, the general rule does not apply. Supra, § In support of the rule as stated in the text see the following additional authorities: N. O., etc., Co. v. Briggs, 27 La. Ann. 318; Greenville, etc., R. R. Co. v. Cathcart, 4 Rich. L. 89; Peoria, etc., R. R. Co. v. Elting, 17 Ill. 429; Kirksey v. Florida, etc., Co., 7 Fla. 23; Far River, etc., Co. v. Neal; 3 Hawks. (N. C.) 520; Stokes v. Lebanon, etc., Co., 6 Humph. 241.

3 Small v. Herkimer, 2 N. Y. 330; Mills v. Stewart, 41 N. Y. 384; McAuley v. Robinson, 18 La. Ann. 619; Allen v. Montgomery, etc., Co., 11 Ala. 437; Mechanics', etc., Co. v. Hall, 121 Mass. 272. In England the right to pursue.

There are respectable authorities, however, which take a contrary view and hold that the forfeiture of shares is in the nature of a foreclosure of a mortgage, and that the corporation, like an unsatisfied mortgagee, may have its action of assumpsit against a subscriber whose stock has failed to sell for enough to pay his entire indebtedness on the subscription. The mode of exercising the right must be carefully observed, and the formalities of the proceeding must be strictly complied with. The exercise of such a power is a strict right, to be employed with due regard to the exact terms upon which the right is given and under the express terms justifying the forfeiture.2

And where, after a sale under forfeiture proceedings for assessments, an action is brought (where statutory provisions allow the action) for a balance due beyond the amount realized from the forfeiture sale, the requirements of the statute are conditions precedent which must be performed before the action will lie, and must be strictly proven.

The right to sell stock under forfeiture proceedings

both remedies is given by statute. Gt. North, etc., Ry. Co. v. Kennedy, 4 Ex. 417; Inglis v. Gt. North. Ry. Co., 1 MacQ. 112; Birmingham, etc., Ry. Co. v. Locke, 1 Q. B. 256; Edinburgh, etc., Ry. Co. v. Hibblewhite, 6 M. & W. 707; London, etc., Ry. Co. v. Fairclough, 2 Man. & Gr. 674.

1 Merrimac Min. Co. v. Bagley, 14 Mich. 501. It is often so provided by statute and is a common provision in charters formed under the English companies act. Creyke's Case, L. R. 5 Ch. 63; Stockeris' Case, L. R.

Eq. 6.

2 Green's Brice's Ultra Vires, 2d Ed., 186. Unless the power given to a corporation to forfeit stock be strictly pursued, its attempted exercise will be nugatory. But a forfeiture will not be relieved against in equity, if all of the proceedings have been regular. Germantown Pass. R. R. Co. v. Fitler, 60 Pa. St. 124.

3 Accidental, etc., Ass'n v. Sullivan, 62 Cal. 394; Portland, etc., R. R. Co. v. Graham, 11 Metc. 1; Johnson v. Little's Iron Agency, 40 L. J. Eq. 786; Germantown, etc., R. R. Co. Co. v. Fitler, 60 Pa. St. 124; Johnson v. Alb. etc., R. R. Co., 40 How. Pr. 193; 54 N. Y. 416; Mitchell v. Vermont Min. Co., 40 N. Y. Sup. Ct. 406; 67 N. Y. 280; Eastern Plank R. Co. v. Vaughan, 20 Barb. 155; Lexington, etc., R. R. Co. v. Chandler, 13 Metc. 311; Troy, etc., R. R. Co. v. Newton, 1 Gray, 544; Lewey's Island R. R. Co. v. Bolton, 48 Me. 451.