poration; 2, to the other shareholders in the company; and 3, to the creditors of the corporation.1

It is important to bear these several relations in mind in most questions involving the rights of creditors with respect to the capital derived from or promised by subscriptions. In view of the fact that the artificial body is but a representative of its stockholders and exists mainly for their benefit, and that the aggregate capital subscribed by them is the inducement held out to the public upon which the corporation obtains credit, it is but just that when the interest of the public or of strangers dealing with the corporation is to be affected by any transaction between the stockholders who own the corporation and the corporation itself, such transaction should be subjected to a rigid scrutiny, and, so far as it affects the real rights and interests of third parties, should be made to conform to the same rules of good faith and fair dealing as if it took place directly between the shareholder and a third party each in his own name and right.2

§ 784. Subscriptions treated in equity as assets.-Therefore, independent of statutory remedies for subjecting debts due the corporation to the claims of creditors, they are treated in equity as assets already in possession, and may be reached in the first instance without awaiting the slow and uncertain process of a judgment at law. It is, however, necessary in order to obtain a

Or if the amount is due and has become payable according to the terms of the charter, Brown v. Union Ins. Co., 3 La. Ann. 177, 182, or the principal debtor is a foreign corporation, so that process cannot be served upon it. Turner v. Alabama M. & M. Co., 25 Ill. App. 144. In this case it was held that a secret agreement between the non-resident corporation and the stockholders releasing them from further assessments would not bar a recovery in such proceeding. The unpaid capital may be reached by garnishment if due by terms of the charter by-laws or contract of subscription, the same as in case of a call. McKelvey v. Crockett, 18 Nev. 238; 2 P. 386.

1 Upton v. Englehart, 3 Dill, 496, supra, §§ 541-2.

2 Sawyer v. West, 17 Wall. 610, 623; Des Moines Gas Co. v. West, 50 Iowa, 16, 25.

standing in a court of equity in a proceeding to make equitable assets available, that the creditors should make it appear either that the ordinary remedy by judgment and execution has been resorted to and failed, or would prove inadequate or impracticable on account of inherent ineffectiveness or the incidental delay.

It has frequently been decided that the members of a corporation, who are by statute made answerable personally for the corporate debts and liabilities, stand in the same position in relation to the creditors of the corporation as if they were conducting their business as a copartnership.

But this cumulative right of action at law usually relates to the statutory liability and not to the common law liability to contribute capital to the amount of shares taken or held by him. It is important that this distinction should be carefully observed. To illustrate. suppose a party takes a certain number of shares, and while he holds them, a debt is contracted by the corporation and it afterwards becomes insolvent, leaving the debt unpaid, but before insolvency the shares had been forfeited for non-payment of assessments.

Here the creditor would have no remedy, and the shareholder's liability to contribute capital for his claim on the liability would depend upon the right of the corporation which is now gone. But the creditor's right of action on the independent statutory liability, to the extent of the proportion which those shares bear to the entire capital stock, would still survive, the corporation not having any part or interest in such liability.

§ 785. Remedies for unpaid capital and under statutes are concurrent.—A court of equity will, for the benefit of a creditor of an insolvent commercial corporation, compel a stockholder in such corporation to pay in the amount of capital stock which he has contracted with

the corporation to take. The two remedies are concurrent, in the one case constitutional or statutory, and in the other equitable. Statutes imposing personal liability beyond the capital promised in the subscription do not oust courts of equity of their jurisdiction.1

But the effect of local statutory provisions and rules of court should be considered in all these questions of practice. The great preponderance and tendency of authority is to conserve the best interests of all parties by compelling the creditor to seek his remedy in equity, thus avoiding confusion, conflict and multiplicity of action.2

1 See Harmon v. Page, 62 Cal. 448, 463; Baines v. Babcock (Cal.), 27 P. 674; Same v. Story, Id. 676; Henry v. Vermilion R. R. Co., 17 Ohio St. 189; Coffin v. Ramsdell, 110 Ind. 417; 11 N. E. 20; Farnsworth v. Robbins, 36 Minn. 369; 31 N. W. 349; Haskins v. Harding, 2 Dillon (C. C.) 106; Ogilville v. Knox Ins. Co., 22 How. 380; Adler v. Milwaukee, etc., Co., 13 Wis. 57; Brundage v. Monumental S. M. Co., 12 Or. 322; 7 P. 314; Matthews v. Murray, 24 Md. 527; Norris v. Johnson, 34 Md. 489; Harris v. First Parish, etc., 23 Pick. 112; Perry v. Turner, 55 Mo. 418; Pollard v. Bailey, 20 Wall. 520; Hawkins v. Glenn, 131 U. S. 319; and Hatch v. Dana, 101 U. S. 205. Where plaintiffs had obtained judgment in Illinois against a corporation of that state and execution had been returned nulla bona and they proceeded against holders of unpaid stock in Missouri, it was held that the proper forum was equity, and that a failure to plead remedy at law waived that objection. Shickle v. Watts, 94 Mo. 410; 7 S. W. 274. Pub. St. Mass. c. 106, § 46, providing that no corporation "shall commence the transaction of the business for which it was organized" until the whole of its capital stock has been paid in, and a certificate of such payment filed in the office of the secretary of state, and §§ 61, 62, providing that the stockholders shall be jointly and severally liable for debts or contracts prior to that time, and that their liability shall be conditional upon the recovery of a judgment against the corporation, does not render a contract entered into in the course of business void, but only substitutes the personal liability of the stockholders for what has not been paid upon the stock. Chase's Patent Elevator Co. v. Boston Tow-Boat Co., 28 N. E. 300, 152 Mass. 428.

2 See Phol v. Simpson, 74 N. Y. 137; Mathez v. Neidig, 72 Id. 100; Dayton v. Borst, 31 Id. 435; Stevens v. Fox, 83 Id. 313; Christensen v. Eno, 106 Id. 97, 100; Ward v. Griswoldville Mfg. Co., 16 Conn. 593; B'k of U. S. v. Dallam, 4 Dana, 574; Shickle v. Watts, 94 Mo. 410; 7 S. W. Rep. 274; Crawford v. Rohrrer, 59 Md. 599; Hightower v. Thornton, 8 Ga. 486; Dalton, etc., R. R. Co. v. McDaniel, 56 Ga. 191; Germantown, etc., Ry. Co. v. Fitler, 60 Pa. St. 124; Adler v. Milwaukee, etc., Co., 13 Wis. 57; Curry v. Woodward, 53 Ala. 371; Wincock

§ 786. Right of action not dependent upon the making of calls. Creditors have the same right to require the application of unpaid subscriptions to the liquidation of their claim as any other assets forming a part of the corporate property and funds.'

Accordingly it is held that a creditor may disregard the conditions in a subscription that the amount promised shall be payable only upon calls to be made by the company, and may, by an ordinary creditor's bill in equity, recover from the shareholders the balance remaining unpaid upon their shares.2

§ 787. Conditions not binding without notice.-The conditions entering into contracts of membership or of

v. Turpin, 96 Ill. 135; Hickling v. Wilson, 104 Id. 54; Henry v. Vermilion, etc., Turnp. Co., 17 O. St. 187; Van Pelt v. U. S., etc., Co., 13 Abb. Pr. (N. S.) 331; Marsh v. Burroughs, 1 Woods, 463; La. Paper Co. v. Wapples, 3 Id. 34; Faull v. Alaska Min. Co., 8 Sawy. 420; Holmes v. Sherwood, 3 McCary, 405; s. c. 16 Fed. Rep. 725; Chandler v. Şiddle, 10 Bank Reg. 236; Myers v. Sealey, 10 Id. 411; Wilbur v. Stockholders, 18 Id. 178; Harmon v. Page, 62 Cal. 448; Ogilvie v. Knox Ins. Co., 22 How. 380; Hatch v. Dana, 101 U. S. 205; Salmon v. Hamborough Co., 1 Cas. in Ch. (Eng.) 204; Patterson v. Lynde, 106 U. S. 519. It is the well settled rule in the federal courts that unpaid subscriptions can only be reached in equity. Brown v. Fisk, 23 Fed. Rep. 228.

1 Spackinan v. Evans, L. R. 3 H. L. 198; Bassett v. St. Albans Hotel Co., 47 Vt. 314; Jefferson's Case, L. R. 11 Eq. 115; per Justice GRIER, in Ogilvie v. Knox Ins. Co., 22 How. 387.

Hatch v. Dana, 101 U. S. 205, 214; Curry v. Woodward, 53 Ala. 375; Crawford v. Rohrer, 59 Md. 599; Salmon v. Hamborough Co., 1 Cas. in Ch. 204; Hawkins v. Glenn, 131 U. S. 319; Hill v. Mer. Mut. Ins. Co., 134 U. S. 515; Thompson v. Reno Sav. B'k, 19 Nev. 242: Myers v. Sealey, 10 N. B. R. 411; Ogilvie v. Knox Ins. Co., 22 How. 380; Cit. & M. Sav. B'k & Tr. Co. v. Gillespie (Pa.), 9 A. 73; Sanger v. Upton, 91 U. S. 56; Marsh v. Burroughs, 1 Woods, 463; Germantown, etc., Ry. Co. v. Fitler, 60 Pa. St. 124; Ward v. Griswoldville Mfg. Co., 16 Conn. 601; Adler v. Milwaukee, etc., Brick Co., 13 Wis. 60: Samainego v. Stiles (Ariz.), 20 P. 607; Dayton v. Borst, 31 N. Y. 435; Henry v. Vermilion, etc., R. R. Co., 17 Ohio, 187, 191; Hamilton v. Glenn, 85 Va. 901; 9 S. E. 129; Dalton, etc., R. R. Co. v. McDaniel, 56 Ga. 191. The trustee appointed by a decree to sue for and collect the unpaid subscriptions has the right to bring such suits against stockholders in other states, though they have had no personal notice of the suit against the corporation. Howard v. Glenn (Ga.), 11 S. E. 610. See also Glenn v. Liggett, 135 U. S. 533.

subscription for stock in a corporation are binding upon the immediate parties thereto, and all other parties who contract with full knowledge of them.

But when shareholders have organized and have launched the enterprise of which they form a part, and held it out as possessing a certain amount of capital as a trust fund, to secure persons dealing with it, they cannot avoid making good the representation in case it becomes necessary to call upon them, and each of them to pay up the unpaid balances of the capital in their hands, merely because of some undisclosed conditions in the contract, or of some neglect of their chosen agents to call for the sum promised.1

§ 788. Illegal conditions not binding. Conditions inserted in contracts of subscription which are contrary to law, or which contravene the settled policy of the state where made in regard to corporations, may be disregarded not only by the corporation, but, it seems, by the corporation itself."

But the party must have actually been a stockholder. If his name was placed upon the books as such without his authority he will not be bound.3

§ 789. Where business commenced before full amount of capital is subscribed. Subscriptions to capital are not binding as between the subscribers and the corporation

1 Re Glenn Iron Wks., 20 Fed. Rep. 674.

2 Preston v. C. C. & H. V. R. Co., 36 F. 54, where the condition was that each subscriber should receive bonds to the amount of his subscription secured by mortgage upon the company's property and bearing interest, it was held to be void as to the company's creditors, and the subscriber was not relieved from his liability thereunder, because agreement to issue the bonds was illegal and void. Morrow v. Nashville, etc., Co., 3 Pick. (Tenn.) 262; 26 Am. & Eng. Corp. Cas. 421.

3 Cook v. Chittenden, 25 F. 544; 11 Am. & Eng. Corp. Cas. 625.