principles of equity. But whether the cases referred to be right or wrong, we do not see that they are in point here. Our conclusion is that the court erred in admitting the evidence objected to, and for that reason a new trial must be awarded. Order reversed.

MARSON V. DEITHER.

SUPREME COURT OF MINNESOTA, 1892.

(49 Minn. 423.)

Calls Upon Stock of an Insolvent Company-Tender of Certifificate of Stock.

Mitchell J.: This was an action by the assignee of an insolvent corporation on a subscription for stock of the company. According to the complaint, the defendant had subscribed for a certain number of shares of the stock, payable in "such manner and at such times as the board of directors of the company might direct." The corporation had made an assignment for the benefit of its creditors under the general insolvency law, and the plaintiff had been appointed and had qualified as assignee. The court in which the insolvency proceedings were pending had made an order requiring the stockholders, including this defendant, to pay forty per cent. of the amount of stock subscribed for by them. Notwithstanding due and seasonable notice of this order, and a demand by plaintiff for payment, the defendant had neglected and refused to pay the same. We are unable to see why this does not state a cause of action. Some of counsel's criticisms on the complaint proceed upon the assumption that the action is brought on the order of court, and that defendant's liability is based upon that alone. This is clearly erroneous. The cause of action alleged is founded on the subscription contract. Of course, the money did not become due or payable until a call had been made by the directors, or some authorized demand for payment made equivalent to such a call. But this is but a step in the process of collection, and the order of court, which was equivalent to a "call," was pleaded, not as the basis of defendant's liability, but to show that the money had become due and payable according to the terms of the contract. The authority and jurisdiction of the court in which the insolvency

proceedings were pending to make an order requiring payment of unpaid stock subscriptions, as the directors might have done before the insolvency proceedings, is so well established as hardly to require the citation of authorities. The court will, in such cases, do, in behalf of creditors, what it is the duty of the corporation to do in respect to calls, and may itself make the call, although by the terms of the contract of subscription the money is payable on the call of the directors. Sanger v. Upton, 91 U. S. 56; Hatch v. Dana, 101 U. S. 215; Scovill v. Thayer, 105 U. S. 155; Cook, Stocks § 207. It is urged that the complaint is defective in not alleging the issue and tender of a certificate for the stock. This "call" is only for forty per cent., and it does not appear that the other sixty per cent. had been paid. As a party is not entitled to a certificate until the stock is fully paid, the point, so far as the present appeal is concerned, might be disposed of by this statement of the facts. But there is a doubt, under our decisions, as to the precise position of this court upon the question as to whether it is any defense to an action on a stock subscription that no certificate has been issued and tendered, which had better be removed at this time. In St. Paul, S. & T. F. Co. v. Robbins, 23 Minn. 439, (where the issue was of preferred stock, after the whole of the original stock had been issued,) it was held that a tender of a certificate was necessary and should be pleaded. This case seems to put the subscription for the stock on the footing of a contract for the purchase of property, where the promise to sell and the promise to pay are concurrent and dependent, and where consequently neither party can compel the other to perform without performing or offering to perform on his part. If the so-called "preferred stock" in that case was, as is often the fact, the obligations of the corporation, or merely pledges of its revenues, of course it stood on the same footing as any other purchase. But that the decision was understood as applying to subscriptions for stock, properly so called, is evident from what is said in Minneapolis Harvester Works v. Libby, 24 Minn. 327. Without having our attention called to these cases, and not having them in mind, we held in Columbia Electric Co. v. Dixon, 46 Minn. 463, 49 N. W. Rep. 244, that it is no defense to an action on a stock subscription to allege that no certificate for the stock has been tendered. It would a fortiorifollow that it was not necessary to allege a tender in the complaint. This is the rule generally, if not universally laid down in the textbooks, and is supported by an almost unbroken line of decisions. The ground upon which it is put is that a subscription for the stock of a corporation does not stand on the footing of a purchase of property; that when the subscriber pays, he is the owner of the stock; that it is the payment which makes him a stockholder, the certificate being merely the evidence of

his right; that he is a full stockholder, with all the rights of one, even if a certificate is never issued to him; and therefore it is for him to demand the certificate when he wishes one, and not for the corporation to tender one. This doctrine being, as it seems, in accordance with the general current of the authorities, we shall follow it, and adhere to the decision in Columbia Electric Co. v. Dixon, supra. And, so far as this question is concerned, we can see no distinction between a subscription to the stock of a corporation already fully organized and a subscription made prior to and for the purposes of or ganization. The rule, of course, has no application to the case of a sale of stock, which stands on the same footing as any other contract of purchase of property. It is also undoubtedly true that parties may contract that the stock shall not be paid for until the certificate therefor has been issued and delivered or tendered. Compare Summers v. Sleeth, 45 Ind. 598 with Miller v. Wild-Cat Gravel Road Co., 52 Ind. 51. Order affirmed.

CHAPTER IX

MEMBERSHIP.

HOOD V. MCNAUGHTON.*

NEW JERSEY SUPREME COURT, 1892.

(54 N. J. L. 425.)

Liability of Subscribers for Stock-Discharge by TransferAction to Recover Balance Unpaid on Stock Subscription.

Van Syckel., J.: The defendant was an original subscriber to the capital stock of the Fidelity Trust & Safe Deposite Company, for 10 shares of the par value of $100 each, on which only 10 per cent. of the subscription price has been paid. The by-laws of the said company provide that "transfers of stock shall be made only on the books of the company. That no transfer shall be made until the certificate granted to the transferrer is delivered up to the company; and the possession of a certificate of stock shall not be regarded as vesting any ownership in the same in any other than the person in whose name it is issued, as between the company and such owner, until the transfer be duly made on the books of the company as aforesaid." On the 28th day of February, 1890, and after the defendant had paid 10 per cent. on the said shares subscribed for by him, he sold the said shares, and delivered his certificate therefor to the vendee, but the shares were not transferred on the books of the company, as required by the by-laws. The said company subsequently became insolvent, and, upon proceedings duly taken in the court of chancery of this state, John Hood, the plaintiff, was appointed receiver thereof. The receiver filed his petition in the court of chancery, giving the names of the subscribers to the stock, and the amount still due to the company upon the shares subscribed for, and thereupon the chancellor, on the 27th day of October, 1890, ordered and decreed that the said subscribers be severally required to pay to the receiver the full amount due to the company for their stock, and the said receiver was authorized and directed to collect the same by suit if necessary. The defendant having refused to pay upon

*Young v. McKay, 50 Fed. Rep., 894. Plumb v. Bank of Enterprise (Kas.) 29 Pac. Rep. 699

demand made by the receiver, this suit was instituted, and under the direction of the trial court a verdict was rendered for the plaintiff for the amount claimed by him.

Section 5 of our corporation act (Rev., p. 178) provides that, where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy the claims of its creditors, each stockholder shall be bound to pay on each share held by him the sum necessary to complete such share, or such proportion of that sum as shall be required to satisfy the debts of the company. Section 70 of the same act prescribes how proceedings shall be taken to declare corporations insolvent; and section 77 provides that the receiver, when appointed, shall be a trustee for the creditors and stockholders of the company, with full power to institute suits at law or in equity to recover the assets thereof. These provisions are declaratory of the common law. By the common law the stockholders of an incorporated company are liable to pay their subscriptions, if such payment be necessary to discharge the debts of the company. A court of equity has power to compel such payment. The capital stock which has been paid in and which remains unpaid is regarded as a trust fund pledged for the payment of the debts of the corporation. Spear v. Grant, 16 Mass. 9; Nathan v. Whitlock, 9 Paige, 152; Ward v. Griswoldville Co., 16 Conn. 593; Adler v. Milwaukee Co., 13 Wis. 57.

The insistment that it was unnecessary, and therefore illegal, to require the defendant to pay the full amount unpaid on his shares in order to satisfy the debts of the company, cannot be entertained in this court. The decree of the court of chancery requires the payment of the entire amount, and the validity of that decree cannot be drawn in question in this suit, which is collateral to it. The receiver stands in the place of the stockholders as their representative, and all the rights of the company reside in him. The company, before insolvency, could have called the whole amount unpaid, and such a call could not, in the absence of fraud, have been questioned by the stockholders. If there remains a surplus in the hands of the receiver after the debts are paid, he will distribute it to the shareholders equitably. The real question in the case is whether the defendant had assigned his shares in such a way as to relieve him of responsibility. In Marlborough Co. v. Smith, 2 Conn. 579, the incorporating act provided that the stock of the company should be transferable only on the books of the company, and it was held that such mode of transfer was necessary to absolve the subscriber from the payment of an assessment on his stock. In the subsequent case of Oxford Turnpike Co. v. Bunnell, 6 Conn, 552, the same rule as to the validity of the transfer of shares was