Where stockholders have previously advanced to the corporation, for purposes of carrying on its business, an amount in excess or equal to what they are required to pay on the contract of subscription, such advances will be regarded as the required contributions.1 And even where there has been a gross over-valuation of the property, a creditor who has contracted with full knowledge of the fact will generally be held estopped from questioning the validity of the transaction.2

between the par value of the stock and what he actually paid for it. Boulton Carbon Co. v. Mills, 78 Iowa, 460; 5 L. R. An. 649. No device short of an actual payment will be allowed to defeat the claims of creditors. See Ailling v. Wenzell, 27 Ill. App. 511; Burke v. Smith, 16 Wall. 96; Curran v. Arkansas, 15 How. 304; Wood v. Dommer, 3 Mason, 308; Slee v. Bloom, 19 Johns. 45, 46; San Francisco v. Spring Valley Water Wks. 63 Cal. 532; Mumma v. Potomac Co., 8 Pet. 281; Ogilvie v. Knox Ins. Co., 22 How. 380; Payson v. Steover, 2 Dill. 427; Tarbell v. Page, 24 Ill. 46; Crawford v. Rohrer, 59 Md. 599; Lewis v. Robs, 13 Sm. & M. 558; Burns App., 105 Pa. St. 49; Germantown Pass. R. Co. v. Fit-ler Co., 60 Pa. St. 124; Osgood v. King, 42 Ia. 478; Jackson v. Frier, 64 Ia. 469; Chisholm v. Torney, 65 Ia. 333, where a stockholder after giving his note to the corporation in payment for stock, and by circuitous devices had the note transferred to himself for a trifle, it was held that though the corporation could not collect the amount of the note from him the creditors could. Bouton v. Dement, 123 Ill. 142; 14 N. E. 62. A tender of the amount due on subscription, with demand for a certificate and a refusal to either accept the tender or issue the certificate is a good defence to an action by an assignee in insolvency. Potts v. Wallace, 32 F. 272.

1 Appeal of Houston, 127 Pa. St. 620.

2 First Nat. B'k v. Gustin M. Con. Min. Co., 42 Minn. 327; Whitehill v. Jacobs, 75 Wis. 474. A bill by a judgment creditor of a corporation, which charges that the defendants are the stockholders and directors of the company; that the stock therein of $125,000 was paid by the conveyance of a lot and building suitable for its business, at a valuation of $200,000, though it was not worth more than $157,000; that the bonds of the company secured by mortgage on the building were issued to defendants to make up the deficit; that defendants were at the time stockholders and directors in the real estate company which owned the building and lot and made the conveyance, and were personally aware of the overvaluation, and benefited by it,—sufficiently charges fraud, although no actual fraud is alleged, and a demurrer thereto will be overruled. Nor is it a valid ground of objection that the bill fails to charge that complainant became a creditor of the company in ignorance of the way in which its stock was floated as paid up, for knowledge of such facts on its part is a matter of defence, to be pleaded by way of answer. Northwestern Mut. Life Ins. Co. v. Cotton Exch. Real Estate Co., 46 F. 22 (April 6, 1891).

Defendants organized a corporation with a capital stock of $250,000, and sub

§ 793. Shareholders assume a continuing liability.-The law does not divide up the term of a corporation's existence into periods, or separate its creditors into classes, having regard to the times at which they gave credit; nor does the fact that one was not a creditor at the time at which a transaction by which a fraudulent diversion or withdrawal of capital occurred affect his right to pursue it, and charge it with a trust in his favor. On the same principle, the fact that a division of the capital by shareholders among themselves, or the taking of certificates purporting to represent fully paid up shares, contrary to the truth, occurred before the debt was contracted on which an action is based, to set aside the transaction and recover against the shareholder, will furnish no defence to such action.1

§ 794. Rights of the parties may be altered by special agreement. Both the liability of shareholders to contribute capital and the right of creditors to enforce that liability rests upon contracts, express or implied. And since the equitable rights and relations of the parties arise from their contractual relations, it follows that these may be altered or modified by special

scribed for the whole amount. In payment of their subscription they transferred to the company, without actual fraud, a bond for title to land, for which they had paid only $5,000. For the balance of the purchase money (about $50,000) the company executed its notes. The land was worth no more than was paid for it. Held that, under Const. Ala., art. 14, § 6, prohibiting the issue of stock except for money or property actually received, and Code Ala. 1876, § 1805, requiring all stock subscriptions to be paid in money, or in labor or property at its money value, defendants are liable to creditors of the corporation to the extent of the difference between the value of the property and the amount of their subscription. Elyton Land Co. v. Birmingham Warehouse & Elevator Co. (Ala.), 9 So. 129.

'Bartlett v. Drew, 57 N. Y. 587; Williams v. Boice, 38 N. J. Eq. 364; Osgood v. Laytin, 3 Keyes, 521; Lexington, etc., Ins. Co. v. Page, 17 B. Monr. 412; Hastings v. Drew, 76 N. Y. 9; Sawyer v. Hoag, 17 Wall. 610; Burnes v. Pennell, 2 H. L. Cas. 531; Union Nat. B'k v. Douglass, 1 McCrary, 86; Shickle v. Watts, 94 Mo. 410; 7 S. W. 274; Van Dyck v. McQuade, 45 N. Y. Sup. Ct. 620.

agreement, importing obligations different from those which would ordinarily bind them.1

Where there is a stipulation or provision in the articles of association or partnership, or by-laws regulating or qualifying or limiting the extent of such personal liability, a creditor dealing with such association or partnership with full notice of the same is deemed to have assented thereto and is bound by it.2

Persons contracting with a corporation may also have knowledge of existing arrangements with respect to capital, and be deemed to have consented to the same. For instance, if one should give credit to a corporation knowing that its shares had been issued as fully paid up, in consideration of part payment or of property taken collusively at an exorbitant price, it could not be said that he had given credit to the capital represented by such shares or derived from their issue, and

1 Robinson v. Bidwell, 22 Cal. 518; French v. Teschemaker, 24 Cal. 518; Semmers v. Steath, 43 Ind. 598; Shaeffer v. Mo. Home Ins. Co., 46 Mo. 248; Reed v. Hoyt, 109 N. Y. 659; 17 N. E. 418; S. Ga. & Fla. R. R. Co. v. Ayers, 56 Ga. 234; Spear v. Crawford, 14 Wend. 20; Chester Glass Co. v. Dewey, 16 Mass. 94; Callanan v. Windsor, 78 Ia. 193; 42 N. W. 652; Fulgam v. Macon & B. R. Co., 44 Ga. 597; Minn. Harvester Wks. v. Libby, 24 Minn. 327; Blyth Case, L. R. 4 Ch. D. 140; Agr. B'k v. Burr, 24 Me. 256; Hawley v. Upton, 102 U. S. 314; Wheeler v. Millar, 90 N. Y. 353; Wemple v. St. L., etc., R. R. Co., 120 Ill. 196; 11 N. E. Rep. 906. In Robinson v. Bidwell, supra, CROCKER, J., said: "That persons dealing with a corporation have the right to waive by special contract, or in other proper mode, all claim upon the personal liability of the stockholders or to limit or qualify the extent of that claim, I have no doubt. The fact that such claim is founded upon a constitutional provision can make no difference, for a party may waive a constitutional provision as well as a statutory provision made for his benefit." See also Sedj. on Stat. and Const. Law, 111. An agreement by a corporation " to refund to J. the sum of $960.80 at one year's notice from the date of such notice," with "what interest it makes in proportion to all the shares in this institution," makes the payee a creditor of the corporation, and not a stockholder, and he can maintain an action against the stockholders under Rev. St. Idaho, § 2609. Jones v. Woolley, (Idaho), 26 P. 120.

2 Louisiana Paper Co. v. Waples, 3 Woods, 34; Kerridge v. Hesse, 9 Carr & Payne, 200; Collyer on Partnerships, secs. 1091, 98, 387, 488; Story on Partnerships, sec. 129; Dow v. Sayard, 12 N. H. 275; Ensign v. Ward, 1 John. Cases,

creditors would have no claim on the shareholders for further contributions of capital.1

$795. Customs of particular corporations.-It has been held that the liability of shareholders in mining corporations was affected by the familiar customs observed in organizing them and floating their stock. Such customs and practices as prevail among the class of business men who deal in such property and speculate in the stock of such companies might be allowed con

1 Peck v. Coalfield Coal Co., 11 Bradw. 88; Coit v. North Carolina, etc., Amalgamation Co., 14 Fed. Rep. 12; s. c. 15 Phila. 496. The subscribers to the stock of a bank paid fifty per cent. of their subscriptions, and afterwards, but before any statement of the amount subscribed had been filed and published as required by statute, entered into and carried out an arrangement among themselves by the terms of which fully paid stock was issued for the amount actually paid in, and the balance of the subscriptions were cancelled. It did not appear

that any debts had been contracted before the reduction took place. It was held that the agreement, having been made in good faith, was valid as against subsequent creditors, and that the stockholders were not liable for the balance of their original subscriptions, except in so far as necessary to make up the minimum capital required by the charter for the commencement of business. Hill v. Silvey, 81 Ga. 500; 26 Am. & Eng. Cor. Cas. 286. See also, Bailey v. Champlain M. & P. Co. (Wis.), 46 N. W. 539; Republic L. Ins. Co. v. Swigert (Ill.), 25 N. E. 275; Heggie v. Building & Loan Ass'n (N. C.), 12 S. E. 275; Glenn v. Hatchett (Ala.), 8 So. 656, holding that a resolution adopted by a corporation, authorizing the subscribers to the capital stock to reduce their subscriptions by the surrender of unpaid shares, is valid as between the company and the subscribers; and the assignee of the company cannot maintain an action to recover the face value of shares surrendered until the surrender has been set aside in a proceeding brought for that purpose. Under Rev. St. Wis., secs. 1753, 1758, stockholders, who have paid less than its par value for their stock, are liable to creditors of the corporation for the difference between that and its par value, and a creditor seeking to enforce this liability need not allege ignorance of the fact that the stockholders had procured their stock for less than par, nor that the credit was extended on the faith that par was paid for the stock. Gogebic Inv. Co. v. Iron Chief Min. Co. (Wis.), 47 N. W. 726, where a contract of subscription for corporate stock provided that on payment of 40 per cent. of the par value of the stock, the subscribers shall receive certificates of stock, it was held a decree directing the issuance of such certificates on payment of said 40 per cent. did not relieve the subscribers, as against creditors of the corporation, from liability for the remaining 60 per cent. Following Telegraph Co. v. Gray (Ill.), 14 N. E. 214; Bates v. Great Western Tel. Co. (Ill.), 25 N. E.

sideration as affecting the construction of special contracts seeking to limit or extend the personal liability of shareholders. But it is difficult to see upon what ground they could be allowed to lessen the liability imposed by the positive declarations of the statute. To recognize the dishonest and hazardous methods often employed by adventurers in mining jobs, as customs for the purpose of depriving creditors of the security of such individual liability as the holders of shares in such companies affords, would be to defeat a main object for which the statute was enacted, and encourage the frauds and evil schemes for which its absence furnished unlimited opportunities.

§ 796. Time to which liability relates. The owners of the stock in an insolvent corporation who are such at the commencement of a creditor's suit against its stockholders, upon their individual liability, are liable for its debts, though their stock may have been issued to them by the company after the creation of the debts.2 One who becomes a stockholder in a corporation, after the passage of a law lessening the liability of stockholders to creditors, is equally liable with the old stockholders, under the former law, to creditors whose claims existed previous to the change of law.3

Since creditors are considered to take cognizance of the terms of the corporation's charter or articles of association, it results that if these provide for a commencement of business as soon as a certain proportion or a given amount of stock has been subscribed, they have

1 In re S. M. Con. M. Co., 7 Sawy. 30; Ross v. S. & C. S. Min. Co. (Minn.), 31 N. W. 319.

2 Barrick v. Gifford (Ohio), 24 N. E. 259; Sayles v. Bates, 15 R. I. 342; Stutz v. Handley, 41 F. 531.

3 National Commercial Bank v. McDonnell (Ala.), 9 Soc. 149; Dorgan v. Same, Id.; Bush v. Same, Id.; McMillan v. Same, Id.