authorizing words, it will be ultra vires, and a dissenting shareholder will not be bound, though the others assent.1 Leaving out of view now mere societies, it would seem that corporations could not amalgamate without legislative power. If legislative authority existed when the corporations were chartered, a subsequent amalgamation would bind dissentient shareholders, as they might be assumed to have assented to it when they made their subscriptions.2 (a)

V. Effect of dissolution. This must be regarded in two aspects: (1) In a court of common law. (2) In a court of equity as aided by statutes.

(1) In a court of common law. In the early common law, a corporation was regarded from the point of view that its rights and liabilities depended upon the continuance of its technical existence as an artificial person. If a natural person died, his existence was, to a certain extent, prolonged by the presence of heirs or executors or administrators to represent in court his various rights and liabilities. Should he die without heirs, his lands escheated to the State as "ultimate heir" (ultimus hæres). On the other hand, in the case of a corporation, the fee simple was supposed to vest in the corporators in their politic or corporate capacity created by the "policy of man," and to such vesting the law annexed an implied condition that if the body politic were dissolved, the grantor might re-enter upon the land and repossess himself of his former estate. The personal property belonged to the king, as succeeding to all goods without an owner. So on technical grounds, no action could be brought by a creditor to recover a debt, as there was no "person that he could sue, and for a like reason debts due to the corporation were extinguished. Strictly speaking, if an action were pending when a corporation was dissolved, it would instantly terminate. Rules such as these are to the last degree technical and subversive of substantial justice.

(2) In courts of equity and by statute. The old common law doctrine is practically obsolete. In most cases, the corporation would be regarded as holding its property in trust for those

1 Clinch v. Financial Corp., L. R. 4 sembling amalgamation are granted under Ch. App. 117. certain circumstances to an official liquidator or receiver.

2 Earl of Lindsey v. Great Northern R'way Co., 10 Hare, 664. See also 25 & 26 Vict. c. 89, § 161, where powers re

8 1 Co. Litt. 13 b.

(a) The term "consolidation" is employed in the United States in much the same sense as amalgamation is in England.

whom it represented. In the case of a commercial corporation, it would be a trustee for shareholders and creditors. (a) In the case of a charitable corporation, it would be a trustee for those whom the founders had designated. It is a settled rule in equity that no trust shall fail for want of a trustee. Accordingly, on the dissolution of a corporation, the court, if the trust be a permanent one, may designate a new trustee, or if that be the better course, may close up the affairs and distribute the property among the proper beneficiaries. Statutes are enacted in the various States in aid of this theory, and facilitating the exercise of this jurisdiction.1

An analogous inquiry has been raised, when land is acquired by a corporation in full ownership, by eminent domain for a particular purpose, and that purpose is no longer practicable, whether it can be devoted to some other purpose. It is decided that in such a case there is no reversionary interest in the grantor.2

Notwithstanding dissolution, the legislature may revive or renovate the corporation, or may substitute a new one in its place. There is a distinction between the two cases. The revival restores the corporation with its former rights and duties. A strictly new corporation would not represent the old one. When a controversy arises as to which result has taken place, it must be decided as a matter of interpretation, regard being had to the intent of the legislature as well as of the corporators.3

DIVISION II.

Special Rules applicable to Stock Corporations.

The phrase "stock corporations" is here used to embrace all corporations having a capital consisting of shares susceptible of separate ownership. These have largely taken the place of partnerships in business transactions, as the capital of small owners may thus be readily aggregated, and at the same time, in case of disaster, they will be able to escape unlimited personal liability.

1 Angell & Ames on Corporations (11th ed.), §§ 779 and 779 a.

2 Heyward v. Mayor of New York, 7 N. Y. 314.

(a) Cole v. Millerton Iron Co., 133 N. Y. 164. While admitting that corporate assets should be devoted to the payment of corporate debts to the exclusion of the claims of stockholders, some authorities refuse to place the principle upon the theory of a trust, contending that corporate capital belongs to the corporation to con

8 Bellows v. Hallowell & Augusta Bank, 2 Mason, 31, 43, 44.

trol and dispose of as a natural person may, if done in good faith. Hospes v. Northwestern Car M'fg Co., 48 Minn. 174; Wabash, etc. Ry. Co. v. Ham, 114 U. S. 587; Fogg v. Blair, 133 Id. 534; Clark v. Bever, 139 Id. 96; Gould v. Little Rock M. R. & T. Ry. Co., 52 Fed. R. 680.

The shares also have this advantage, that an assignment of them has no effect upon the continuance of the organization, while in an ordinary partnership, an assignment would work its dissolution. SECTION I. Subscriptions for Stock and Assessments. There are two instances under this head, one, where the company is already organized, and the other, where it is projected.

-

In the first instance, if a subscriber on the one hand agrees to take and pay for stock, and the company to supply it, the transaction has all the usual elements of a contract.1

The second instance presents greater difficulties. The corporation not yet being formed, there is no true contract when the subscription is made. It must be regarded as an offer to contract, which is accepted by the corporation on its organization. Still, it is the prevailing view that even while the transaction is imperfect or inchoate, it cannot be withdrawn.2 (a) The advantage to be derived from membership in the company is a sufficient consideration for the subscription. A promise to "take" a specified number of shares will be sufficient, as there is implied in the use of the word "take" a promise to pay for them.3 The subscription paper may refer to the charter, in which case it would in contemplation of law become incorporated into it. When the corporation is organized, an action will lie on the subscription. It is not material that no cash payment was made when the subscription was received, unless that was made necessary to its validity by statute, nor is it necessary to give any notice that an action will be brought.5 In fact, the ordinary rules of the law of contract prevail. The subscriber becomes a stockholder when the shares are apportioned to him, though no certificate of stock has been issued to him. The certificate is only evidence of title.

It is frequently the case that the corporation has by law the

1 Angell & Ames on Corporations (11th ed.) § 517.

2 Lake Ontario & C. R. R. Co. v. Mason, 16 N. Y. 451; Schenectady, &c. Plank Road Co. v. Thatcher, 11 Id. 102. Spear v. Crawford, 14 Wend. 20.

(a) See Minneapolis Threshing Machine Co. v. Davis, 40 Minn. 110. The contrary is maintained by several authorities. See Athol Music Hall Co. v. Carey, 116 Mass. 471; Hudson Real Estate Co. v. Tower, 156 Mass. 82; Auburn Bolt Works v. Shultz, 143 Pa. St. 256. The theory on which these decisions are based is that there is no promisee capable of enforcing

4 Buffalo & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336.

5 Lake Ontario, &c. R. R. Co. v. Mason, 16 N. Y. 451.

6 Burr v. Wilcox, 22 N. Y. 551; Buffalo & N. Y. City R. R. Co. v. Dudley, 14 N. Y. 336, 347.

the inchoate contract, even though there is no want of consideration. If the agreement is a mere promise to subscribe, and not an actual subscription, it is not an offer which the corporation when formed can accept. Lake Ontario Shore Ry. Co. v. Curtiss, 80 N. Y. 219; Morawetz on Corporations, § 49.

right to forfeit the stock in case the subscription money is not paid. This is but a cumulative remedy, the corporation not being bound to resort to it. It cannot, however, bring an action to recover the subscription after having forfeited the stock, since there would be an inconsistency between the two remedies. This rule will prevail, although the forfeiture was but for the nonpayment of a fractional part of the subscription. No action will lie for the residue.1 A forfeiture once made is absolute and complete; and the subscriber has no equitable claim upon the company for any assumed excess of value of the stock above the amount due the company.3

A subscriber cannot escape liability on his subscription by a colorable transfer of his shares. While he may transfer his rights, he cannot by any such course divest himself of his liabilities. It was said in one case where the sale occurred after calls were made, but before they were payable, that the transferor ought still to be held liable, though the transaction was in good faith and the transferee a person pecuniarily responsible. Much more would this be true were he without means, for a contrary doctrine might result in the impairment of the corporate capital. (a)

It may happen in the case of a corporation organized under a general law that all the stock contemplated by the articles of association is not subscribed for. This is not material if there be sufficient subscriptions to organize the corporation.5

It may be urged as a defence to an action on the subscription that the company has without the subscriber's consent materially changed the articles of the association since the subscription was made. One party to a contract cannot modify it without the other's consent. If, on the other hand, the legislature alter the constituting act under a reserved power to do so, the reservation is deemed to enter into the original act and to become a part of it, so that the subscriber is still liable.

1 Small v. Herkimer Mfg, &c. Co., 2 N. Y. 330, 339; see ante, p. 365.;

2 Id. and Story on Equity (13th ed.) § 1325, and cases cited.

See remarks of JOHNSON, J. in Schenectady Plank Road Co. v. Thatcher, 11 N. Y. 102.

When new stock is issued,

Schenectady, &c. Plank Road Co. v. Thatcher, 11 N. Y. 102, 107.

6 B. C. & N. Y. R. R. Co. v. Pottle, 23 Barb. 21.

7 Schenectady, &c. Plank Road Co. v. Thatcher, 11 N. Y. 102; Buffalo & N. Y. City R. R. Co. v. Dudley, 14 Id. 336, 354,

Nathan v. Whitlock, 9 Paige, 152; 355. Affg. 3 Edw. Ch. 215.

(a) If the sale be made in good faith to a solvent purchaser, many authorities exonerate the transferor from liability for calls made subsequent to the transfer. Billings v. Robinson, 94 N. Y. 415; Tucker v. Gilman, 121 N. Y. 189; Cowles v.

Cromwell, 25 Barb. 413; Cole v. Ryan, 52 Barb. 168; Isham v. Buckingham, 49 N. Y. 216; Morawetz on Private Corporations, § 159. In several States there are statutes upon the subject.

existing shareholders are entitled to subscribe for it rather than strangers.1

The rules above stated are not to be extended to assessments made upon stockholders, after the stock has been fully paid for. The corporation has no incidental or implied power to make such an assessment and sue a subscriber upon it. There must be an agreement to pay it or a statute justifying it. If a remedy by forfeiture is given, no other can be resorted to, unless the stockholder expressly agree to pay the assessment, in which case the remedy is cumulative. The reason is that when a statute creates a new power and gives the means of executing it, it can be executed in no other way.

SECTION II. The Nature of Stock. Stock is an interest appertaining to a shareholder in the franchises and property of the corporation. While the corporation owns the land and other property, the stockholder has an interest in the nature of a thing in action. It is not negotiable, like a promissory note, but simply assignable. It is, however, personal property, even though the corporation own principally real estate. The leading rights which a stockholder possesses are to receive the dividends, to participate in the election of managers or directors, to hold the corporation to the performance of the trust, and on dissolution to receive a proportional share of the corporate property, which would, in that event, on final adjustment belong to the stockholders free from all trust of the corporation. The ownership of stock is commonly evidenced by a certificate. This is a statement by the corporation that the holder is entitled to a specified number of shares. It is commonly stated in the certificate that the shares are transferable to another on the return of the certificate properly indorsed. The certificate may be transferred in an informal manner by merely writing the name of the owner on the back of it and delivering it in that condition to a purchaser. This confers on the latter by implication an authority to write over the indorsement a power of attorney authorizing a transfer of the stock to whomsoever he will. In that way, the old certificate being surrendered to the corporation, a new one may be taken out in the name of the transferee. If the corporation improperly refuse, it can be required to make the transfer on its books by an action in equity. If the owner of the indorsed certificate does not have the transfer made,

1 Gray v. Portland Bank, 3 Mass. 364.

2 Angell & Ames on Corporations (11th

ed.) § 544.

8 Id. § 548.

Andover Turnpike Corp. v. Gould,

6 Mass. 40. 44.

5 Germain v. Lake Shore & Mich. So. Ry. Co., 91 N. Y. 483.

6 Mechanics' Bank v. N. Y. & N. H. R. R. Co., 13 N. Y. 599.