certificates, there is, of necessity, at the time such subscriptions are entered into, no corporation in existence with which a contract could be made. The subscribers, as a consequence, and for the very purpose of effecting an organization, become stockholders by the mere act of subscribing, if there are no conditions precedent prescribed, and they are thereby invested with the privileges and subjected to the liabilities incident to that relation. The subscribers, in the absence of any statutory restrictions, acquire by such a subscription an interest in the body corporate and a right to participate in its organization. They all stand upon the same footing, incurring the risks and hazards of a failure of the enterprise or sharing its profits in proportion to their interests; and to give vitality to the artificial entity they must become stockholders immediately upon becoming subscribers, if no other method be provided in the charter. But the same reasons do not apply, and the same conditions do not obtain, in the case of new or additional stock authorized to be issued by an existing and completely organized corporation. A subscription to such new stock does not necessarily of itself make the subscriber a stockholder, because, generally speaking, it is a mere contract between the subscriber and the corporation. If by a mere subscription for new stock the subscriber becomes a stockholder, he at once becomes clothed with all the rights of a stockholder, and without the payment of a dollar he would be at liberty to vote his stock, and entitled to claim dividends upon it. As between shareholders of the same class there can be no discrimination, and profits set aside for dividends must be evenly divided amongst the stockholders according to the amount of stock each one owns. Harrison v. Mexican Railway Co., L. R. 19 Eq. Cases, 358. Hence the policy of a corporation might be molded or controlled by mere subscribers, who have paid nothing upon their subscriptions, to the prejudice or loss of the full-paid shareholders, whose money, contributed in the beginning, had actually developed the enterprise. Part of the stock would then be full-paid and the rest would be stock upon which nothing had been paid and yet the latter would possess all the advantages, privileges and incidents which belong to the former, and might be so managed as to render the paid-up stock wholly or partially valueless. Whilst it has been held that stockholders who have partially paid for, but have not been called upon to pay up their stock in full, are entitled, when dividends have been declared, to participate therein equally with shareholders whose stock has been entirely paid for, Oakbank Oil Co. v. Crum, L. R. 8 App. Cases, 65, still a mere subscriber for stock can claim no such right.

To constitute a subscriber for new stock a stockholder, something more than a mere subscription is requisite-payment is necessary. The subscription is but the contract; payment, when called by the company and when made by the subscriber, constitutes him a shareholder whether a certificate has been issued or not. Fulgam v. Macon & Brunswick R. Co., 44 Ga. 597; Terwilliger v. G. W. Tel. Co. et al., 59 Ill. 249; Johnson v. Albany & Susq. R. Co., 54 N. Y. 416; Jay Gould v. Town of Oneonta, 71 N. Y. 298; Pacific Nat. Bank v. Eaton, 141 U. S. 227. * * *

The sale by Miss Hollins' executor of the eighty-five shares of old stock carried with it as an incident the right which the testatrix had previously acquired by virtue of her subscription, to purchase eighty-five shares of the new stock, and the appellee has under the transfer made to him precisely that right and none other. The terms upon which the subscription was made by Miss Hollins are binding upon the appellee as they were upon her. Payment of the par value in money, at the times and in the installments to be named by the directors, must be made before the title will pass. The subscriber binds himself to pay when requested, and the company in turn undertakes upon receiving payment to enter him as a stockholder on its books. Until this is done the contract is executory, and neither the subscriber nor his assignee is a stockholder, and consequently neither is entitled to a certificate of stock or to any other instrument indicating that he is the owner of the shares. The obligation he assumes to pay for the stock enures under section 64, article 23 of the code, to the benefit of creditors of the corporation, but does not give him a beneficial interest in the body corporate as an owner of its stock until the stock has been paid for. * The decree of the court below directed an injunction to issue as prayed, but for the reasons we have given, that decree was erroneous, and must be reversed. And as Mr. Hambleton will not be entitled to any certificate until he becomes a stockholder as to these new shares, none of the relief sought under the bill can be granted, and the bill will. therefore, have to be dismissed.

*

*

CAREY V. WILLIAMS.1

79 Federal Reporter 906 (1897).

The plaintiff sought to prove that the defendant was a shareholder "by entries in the books of the company showing the trans

fer of two hundred and fifty shares of stock from the company to the defendant November 1, 1865, and his payment of two calls. thereon for $1,250 each- the first November 1, 1865, and the second March 9, 1866."

WALLACE, Circuit Judge. * * * We are thus brought to the important question in the case, which is whether the entries contained in the corporate books of the company afforded prima facie evidence that the defendant was a stockholder. The relation of corporation and stockholder is a contractual one, and can only be created with the consent, express or implied, of both parties. The assent is evidenced when the name of the stockholder appears as such upon the books of the company; as to the corporation, by its act in placing his name there, and, as to the stockholder, by his knowledge and acquiescence in the act. It is not enough that he appears to be a stockholder upon the books, and when this occurs without his sanction he incurs no liability as such.

It is an elementary rule of the law of evidence that a party. can not make evidence in his own favor, of a contract, by his own statements or declarations of its existence or its terms. They are evidence against him, but not for him. Accordingly it has uniformly been held that entries in the books of a copartnership, in the nature of declarations showing who are the persons that compose the firm, are not evidence in behalf of the partners, as against a third person, for the purpose of showing that the latter was a member. There is no reason why a different rule should be applied to the entries in the books or records of a corporation which tend to charge a party with the responsibilities of a stockholder. Corporations are not exempt from the ordinary rules of evidence, and there is no stronger presumption of honesty, or regularity or accuracy as to their books or records than there is in the case of natural persons.

Prior to the case of Turnbull v. Payson, 95 U. S. 418, in which Mr. Justice Clifford made an observation to the contrary, there was no respectable authority for the proposition that, without the aid of some statute changing the ordinary rule of evidence, the appearance of the name of a person on the books of a corporation as a stockholder, without other evidence, created a presumption, as against him, of his ownership of the stock. *

Turnbull v. Payson was an action to recover an assessment upon a stockholder, and the plaintiff offered to prove that the defendant was a stockholder (1) by the books of the corporation, in which the name of the defendant was entered as the owner of fifty shares; (2) by the stock-book of the company, with a duplicate of the stock

certificate issued to the defendant, showing that he was the owner of the same number of shares; (3) by testimony that the certificate was sent to the agents of the company to be delivered to the defendant when he paid 20 per cent. of the shares, and that he made the required payment; and (4) by a receipt, signed by the defendant, showing that the company paid the defendant a dividend upon his stock. The court decided that the exceptions to the evidence thus offered were not tenable, and Mr. Justice Clifford said:

"Taken as a whole, it is clear that the evidence offered was amply sufficient to warrant the jury in finding that the defendant was a stockholder, as alleged."

He then made this observation:

"Where the name of an individual appears on the stock-book of a corporation as a stockholder, the prima facie presumption is that he is the owner of the stock, in a case where there is nothing to rebut that presumption; and, in an action against him as a stockholder, the burden of proving that he is not a stockholder, or of rebutting that presumption, is cast upon the defendant."

He cited as authorities for the observation, Hoagland v. Bell, supra; Plank Road Co. v. Rice, 7 Barb. 162; Turnpike Road v. Van Ness, 2 Cranch C. C. 451, Fed. Cas. No. 11,986; Mudgett v. Horrell, 33 Cal. 25; Coffin v. Collins, 17 Me. 440; Merrill v. Walker, 24 Me. 237. None of the citations support the proposition, except the case of Hoagland v. Bell, which has been referred to. * * * The books and records of corporations, when properly kept, are evidence of the acts and proceedings of the corporate body, but can not be used to establish claims or rights of the corporation against third persons, unless pursuant to the sanction of some statute. Ang. & A. Corp., section 679. And they are not evidence against a stockholder in respect to a contract entered into by him with the corporation, notwithstanding he has access to them, because as to such a contract, he is regarded, not as a stockholder, but as a stranger. Hill v. Water Works Co., 2 Nev. & M. 573; Haynes v. Brown, 36 N. H. 545; Hager v. Cleveland, 36 Md. 476. In Wharton on Evidence (3d ed.), section 662, it is said that, in suits by a corporation against its members, its books can not be used as "proving in behalf of the corporation self-serving entries." Such is the rule recognized by the adjudications of the courts of New York. *

* * 1

The true ground upon which the books of a corporation, showing who are shareholders, are admissible in evidence, is that they are the

1

See Bridge Company v. Lewis, 63 Barb. 111; Rudd v. Robinson, 126 N. Y.. 113.

best evidence of the assent of the corporation to the contract of membership. Until that assent is proved, the contract is not complete, and no person who has bought shares of stock can be subjected to the liability of a stockholder. When it appears that a person has subscribed for or purchased shares, has voted upon them, has received dividends upon them, or in any other way has consented to occupy the relation of a stockholder, the contract of membership on his part is shown; and the stock books become competent evidence, because they show that the corporation has likewise consented.

We approve the language of a recent commentator, which is as follows:

"On principle, the books and records of the corporation are not competent evidence to prove that the defendant is a stockholder; for the general rule is that one party to an alleged contract can not prove the existence of the contract by his own private memoranda or records. The mere statement of this principle ought to be enough to convince one of its correctness without argument." Thomp. Corp., section 1924.

Affirmed.

VII. Rights and Remedies of Members.

The rights and remedies of members may be classified as follows: Individual Rights:

(a) To a certificate of shares.

(b) To transfer his shares.

(c) To vote at the shareholders' meeting. (d) To inspect the books of the company. (e) To dividends after same are declared. (f) To participate in issue of new stock. Collective Rights:

(g) To interfere with corporate management.

MITCHELL, C. J. In Butler University v. Scoonover, 114 Indiana 381 “The appellant contends that the bond or contract sued on was, in effect, a subscription to the stock of the University, and that hence the finding of the jury that Scoonover never had subscribed for nor received a certificate for any stock, and that he never acted as a stockholder nor owned or controlled any stock, and that he never received any consideration for the bond, is immaterial. The position is not sustainable. Of course, the fact that no certificate of stock was issued is of itself of no consequence. It is not essential that a certificate should have issued in order to create the relation of