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This brief disposition of the topic suffices only to state what must be deemed a doctrine established beyond possible question hereafter, and as such would not justify a longer discussion here; but the cited cases, especially that in 11 Peters, are very exhaustive, and deserve thorough examination if the complete history of the discussion is sought for.



Liability of Subscribers for the Full Amount of their Subscriptions.

The obligation of payment upon a subscription for shares in the capital stock of a banking corporation is created and perfected by the act itself of subscription. In the absence of a proviso to the contrary, the whole amount is payable immediately upon demand. But it may be stated that it shall be demanded only in instalments of specified amounts, respectively, to be called for not before certain periods; and the statement will enter into and become a valid part of the contract of subscription, except in cases where it conflicts with the charter or the organic law under which the corporation exists. But no statement, however explicit, in the original contract of subscription can relieve the subscriber from the ultimate necessity of paying the full par value of the full number of shares he subscribes for, so long as any creditors of the corporation remain unpaid.

The shifts to which shareholders, who have only paid a percentage of the par value of their shares, have resorted, in order to avoid further payments after the corporation has proved unsuccessful, are very numerous. But they have uniformly met with well-deserved failure, at least so long as bona fide debts of the bank were outstanding. Among the most common of these subterfuges has been an agreement or understanding entered into at the time of subscription between the subscriber and the directors to the effect that only a partial payment, or sometimes even no real payment at all, shall be demanded. Notes of the nominal subscriber are then given, upon which it is agreed that no collection shall ever be demanded. The shares are or are not actually transferred, as the case may be; but whether transferred or not they are always regarded as the property of the bank ; while at the same time the direction is able to assume that all the stock has been taken and paid for. Want of consideration, it has been held, cannot be set up in these cases. An irregularity in the organization of the corporation, whether intentional and fraudulent or merely accidental, has also often been urged as a ground for invalidating stocksubscriptions, at least so far as they have not been already paid up. But this plea cannot be sustained to the injury either of corporate creditors or of subsequent bona fide purchasers or holders of the stock, who have taken it without participation in or knowledge of any illegality or fraud. Where there has been fraud, the maxim, in pari delicto potior est conditio possidentis, has been relied upon as a ground why the corporation could not recover. It might avail if the question lay only between the bank and the subscriber; but the corporation in such cases is not regarded as the real or exclusive party in interest. It is rather a trustee for the creditors; and they, who are therefore the real parties, are certainly not in pari delicto.

1 Palmer v. Lawrence, 3 Sandf. 161 ; Lewis v. Robertson, 13 Sm. & Mar. 558.

Neither does it relieve any one subscriber that the subscription of another is invalid. It does not on this account follow that his own subscription is invalid. Each one may be individually sued; and if he would defend, he must set up some matter going to his own individual case, and constituting a part of his own especial dealing or contract with the corporation. That the corporation has been dissolved by the expiration of its charter, or by the judicial forfeiture thereof, or that it has ceased to act as such; or that it has stopped business, or has even gone into insolvency, are none of them facts which suffice to remove the liability. The receiver or the trustee, or whoever else may have charge of the corporate affairs for the purpose of winding them up and settling with the creditors, succeeds to all the rights of the corporation in this respect. It is not only within his power, but it is a part of his legal duty, to enforce collections of unpaid stock-subscriptions, so far as may be needful to discharge the corporate indebtedness. It makes no difference that all prior calls and instalments have been duly paid. Neither does a provision for the forfeiture of stock in case of a default in the payment of an instalment have any bearing upon this rule. It cannot supersede the obligation to pay in full ; but is to be construed as cumulative.1

1 Agricultural Bank v. Burr, 23 Me. 256; Litchfield Bank v. Church, 29 Conn. 137.

2 Palmer v. Lawrence, 3 Sandf. 161; Pine River Bank v. Hodsdon, 46 N. H. 114, and cases cited; Cowles v. Gridley, 24 Barb. 301; Johnston v. Southwestern R.R. Bank, 3 Strobh. Eq. 263; Minor v. Mechanics' Bank of Alexandria, 1 Pet. 46 ; McDougald v. Lane, 18 Geo. 444.

3 Sagory v. Dubois, 3 Sandf. Ch. 466 ; Litchfield Bank v. Church, 29 Conn. 137.

The doctrine that the stock subscriptions are in the nature of a trust fund for payment of corporate liabilities seems to be well established. From it results the principle that subscribers cannot avail themselves of the Statute of Limitations in bar of the claims of creditors to have full payment made. For the subscribers are chargeable with the trust, and though the corporation may never have seen fit to enforce it, yet the cestuis do not thereby lose their rights. The collection in due season by the corporation is a matter lying wholly between itself and the subscribers. The neglect of the former cannot exonerate the latter from obligations which do not run alone to the corporate body for its sole benefit, but rather continue through it, as through a conduit pipe, for the real and ultimate benefit of creditors. The corporation cannot stand between the real debtors and the real creditors, and by its laches, continued for six years, which under such circumstances would often be vol

1 Sagory v. Dubois, 3 Sandf. Ch. 466 ; Lewis v. Robertson, 13 Sm. & Mar. 558 ; Bank of St. Mary's v. St. John, 25 Ala. N. s. 566 ; Thornton v. Lane, 11 Geo. 459.

Payne v. Bullard, 23 Miss. 88; King v. Elliott, 5 Sm. & Mar. 447; Arthur v. Commercial & R. R. Bank of Vicksburg, 9 id. 480. Also see cases cited supra, reference 3, which also assert the doctrine of a trust as laid down in the text.


untary and culpable, save the former from a bona fide liability to the latter. The cited case of Payne v. Bullard, however, allows the possibility of one very reasonable exception to this rule in the case where the bank ceases to elect officers and to carry on business. A contemporaneous cessation of the trust may be fairly considered as taking place, from the date of which the statute may properly begin to run.

Whether the corporation itself by neglecting for six years to call for any instalment would thereby forfeit its rights to demand further payments for any other purpose than that of meeting corporate debts which the corporate assets do not suffice to pay, is a question which has never been decided. Probably the bank would not be regarded as having released its original subscribers simply because it had refrained from mulcting them for a few years. But the lapse of several years creates a natural presumption that the subscriptions have been paid in, and therefore one who held through mesne conveyances from an original subscriber, and had had no personal knowledge of the fact that full payments had not been made, might have a reasonable and a sufficient claim to protection.

To the same doctrine of trust must be referred the further principle that a subscription for bank stock cannot be diminished after it is once made. So soon as it is legally complete it is an obligation from which even the directors cannot grant the subscriber any absolution, either for the whole or for any part, which will avail him as against persons who were creditors of the corporation prior to the diminution. The directors do not represent these persons, and are unauthorized to discharge an indebtedness of which they are the real beneficiaries. Though as towards subsequent creditors the proceeding may doubtless be perfectly valid, if not tainted in any respect with ill-faith.2

After shares have been issued the owner of course has the

1 Agricultural Bank v. Burr, 23 Me. 256.
2 Payne v. Bullard, supra.

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