nor a vote of the directors nor of a majority of the stockholders can compel a dissenting stockholder to accept a material alteration of the terms of the contract in view of which he intrusted his funds to the corporate management.1 The member may say, I have agreed to become interested in a business. of a certain description and have contracted in view of the profits to be expected and the perils and losses incident to that description of business; but I have not agreed that those to be intrusted with the capital I contribute shall have power to use it in a business of a different character and attended with hazards of a different nature. irregularity consisted in the failure to have the articles of incorporation amended so as to permit the increased issue. Plaintiffs alleged that they purchased the certificate of a stockholder on his representation that his certificate was for all the capital stock, and that they purchased after having examined the articles in the Secretary of State's office, showing that sixty shares were the entire stock. It appeared that defendants had a majority of the original capital stock, and plaintiffs obtained a majority of the increased issue. It was held that the subsequent issue did not invalidate the original issue of stock, and, as cancellation of all the stock in defendants' hands was asked for, such cancellation was properly refused. It also appeared that at the time of the purchase of the certificate by plaintiffs, it was well known that the principal defendants were the managers and directors, and had been such managers and directors since the corporation's organization, and that plaintiffs purchased with knowledge of those facts, and the further fact that under the law none but stockholders could be directors of a corporation. The certificate which plaintiffs purchased was not under the seal of the company, and was Slight variations, how not signed by its president. And it was decided that the plaintiffs were put on inquiry, and reasonable inquiry would have disclosed the condition of affairs as shown by the books of the corporation; and that under this aspect of the case, plaintiffs were not entitled to a decree of cancellation. Byers v. Rollins, (Colo. 1889) 21 Pacif. Rep. 894. So also, where a railroad corporation obtains authority from the legislature to change one of its termini and to increase its capital stock without the consent of a subscriber to stock under the original charter, the latter is released from his subscription, where at the time thereof the general law, under which the first charter was obtained, authorizes amendments to the charter increasing the capital stock, and changing the route, but does not authorize a change in the termini. Snook v. Georgia Imp. Co., (Ga. 1889) 9 S. Rep. 1104. 1 Winter v. Muscogee R. Co., (1852) 11 Ga. 438. 2 Marietta &c. R. Co. v. Elliott, (1859) 10 Ohio St. 57. By a Kentucky statute (2 Ky. Acts of 1865, p. 97, § 2) the Kentucky River Navigation Company was incorporated, for the purpose of improving the navigation of the river by building additional locks and dams. A county interested in 2 ever, between the undertaking authorized in the act of incorporation and the original plan contemplated, will not constitute a valid ground of withdrawal. And when the articles of agreement authorize the directors to vary or abandon any part of the undertaking, the subscriber will not be released from liability by an alteration of the scheme. Even a permanent abandonment of a part of the original plan has been held, under certain circumstances, not to release him. The main points in such cases have been the nature of the variance which has caused the liability to be contested, and the acquiescence of the shareholder in the actual constitution of the company; while the consideration of these points has had reference sometimes to companies where the question lay between the shareholder and the company only; and at others to companies where, by reason of winding-up proceedings, creditors had acquired a statutory interest in the retention of the objecting member, and were parties to the litigation. § 108. (d) Secret concessions to other members. It has frequently happened that subscriptions to a portion of the capital stock of a company have been colorable and fictitious, that the subscribers in some instances were notoriously insolvent, in others that it was expressly understood that payment was not expected or to be exacted, in others that only a part of the subscription should be paid, and in other instances that payment should be made in services of some kind, or in securing such additional improvements subscribed to the stock. The work of making new locks and dams was soon abandoned, and the company undertook to maintain and repair the old locks, which were not in any way beneficial to the county. It was held that the subscription could not be enforced either by the corporation or by creditors whose debts had been contracted after the abandonment of the building of new locks. Jessamine v. Swigert, (Ky. 1887) 3 S. W. Rep. 13, not officially reported. 16 Mees. & W. 805, where the original plan was to construct a railroad from A. to B. via C., but the charter authorized a railway only from A. to B., substituting the purchase of a canal from B. to C. 2 Nixon v. Brownlow, 2 Hurl. & N. 455; s. c. 26 L. J. Ex. 273; s. c. 27 L. J. 509. 3 Buffalo &c. R. Co. v. Gifford, 87 N. Y. 294; s. c. 22 Hun, 359; Dorman v. Jacksonville &c. R. Co., 7 Fla. 265. 4" Relief from Shares," 44 L. T. 40. These questions have been al1 Great Western Ry. Co. v. Gordon, ready treated supra, §§ 41-43. property, accepted at an overvaluation;1 again, some of the subscribers may have neglected to make the cash deposit required by statute to constitute a valid subscription, or the shares of other members may have been forfeited and the subscriptions of others compromised; and the question arises whether a shareholder to whom no such concessions have been made, may avail himself of these circumstances to withdraw from the company and repudiate his shares. It is said, on the one hand, that where subscriptions are made under an agreement that they are not to be binding unless a specified sum is subscribed, it is essential that there should be no conditions as to the liability of any of the subscribers not applicable to all; that confidential subscriptions, given for the purpose of making up the required sum, are a fraud upon the other subscribers, and should not be treated as valid subscriptions; and that when by deducting these confidential subscriptions the required sum remains unsubscribed, the contract of subscription does not become operative, so as to bind other subscribers;' so that unless there be some proof that the member seeking to withdraw had assented to this release of other subscribers, or some fact appearing from which his assent could be implied, be is released from his liability upon his original subscription. In support of this view it is argued that when one agrees to 1 Jewell v. Rock River Paper Co., iff was necessitated to show such (1881) 101 Ill. 57, 67. 2 Swartwout v. Michigan &c. R. Co., 24 Mich. 389, 396, where the court said: "But although the plaintiff below was a corporation de facto, and entitled to maintain actions as such, it may still be true that it was not authorized to recover upon subscriptions to its corporate stock. For this purpose it is not sufficient that its corporate powers are, under the circumstances, to be taken as conceded by the subscribers. The statute has pointed out certain steps, which are to be taken by the corporation, and has made these conditions precedent to its right to enforce the obligations of its members. Performance of these the corporators have the right to insist upon; and the plaint performance before recovery could have been had in this suit. The first and most important of these is that subscriptions to a certain amount should be obtained to the capital stock." 3 Dorman v. Jacksonville &c. Plank R. Co., 7 Fla. 265. 4 New York Exchange Co. v. De Wolf, (1865) 31 N. Y. 273, 281, 282. 5 Rutz v. Esler &c. Manuf. Co., (1878) 3 Bradw. (Ill.) 83, 89. In this case a resolution was passed authorizing an arrangement with certain subscribers to the capital stock, by which, upon giving their individual notes for one-half of their subscriptions, they were to be released from the payment of the other half; and this arrangement was made with pay so much for an enterprise, how much it will take to complete it, is a most important question. There can be no doubt that he subscribes on condition that the charter shall be complied with, that instrument forming part, and an important part, of his contract. The law of the corporation defines the terms upon which he agrees to pay; and the amount of valid subscriptions made for the common enterprise is most material. One might be willing to be one of ten men to raise a thousand dollars, but not one of ten to raise five hundred for a given purpose. The former sum might, in his judgment, be the least sum that could accomplish the object; while he might believe the latter sum could not, and that his subscription in the latter case would be money thrown away. It surely can not alter the case if a large and material subscription were merely nominal, and was afterwards released because it had always been a sham, and all this had been done without the knowledge and consent of the member seeking to repudiate his shares, who was thus duped and cheated into his subscription by the sham.2 the court, applying the illustration above, continued, "In this very case he might be quite willing to be one of five thousand shareholders at a hundred dollars each, believing that the road, a good substantial road, could not be built for a dime less than five hundred thousand dollars; but he might think it folly to venture on such an enterprise with one hundred thousand dollars, and would not subscribe a cent for it, because it would waste his money for nothing; and so we find the authorities to be," citing Salem Milldam Co. v. Ropes, 6 Pick. 23; Central Turnpike Co. v. Valentine, 10 Pick. 142; Somerset & K. R. Co. v. Cushing, 45 Me. 524; 1 Redfield on Railways, 176 et seq., and cases cited there. quite a number of the original stock van, (1876) 57 Ga. 240, 242, where subscribers, and their notes taken and accepted for a moiety of their subscriptions in full satisfaction. "Did this act of the board release appellant from his obligation to pay his subscription? The courts of this country, with but few exceptions, have held that a release of a portion of the subscribers to the capital stock releases all the subscribers who do not assent to that release, or in some way give their sanction to it." Rutz v. Esler &c. Manuf. Co., (1878) 8 Bradw. (Ill.) 83, 88, citing Pittsburgh &c. R. Co. v. Graham, 12 Casey, 77; Pittsburgh & C. R. Co. v. McCully, 8 Casey, 25; Pittsburgh & C. R. Co. v. Graham, 2 Grant, 259; Stewart v. Trustees of Hamilton College, 2 Denio, 403; Crawford County v. Pittsburgh &c. R. Co. 32 Pa. 141; New York Exchange Co. v. DeWolf, 31 N. Y. 273. 2 Memphis Branch R. Co. v. Sullivan, (1876) 57 Ga. 240, 242, per Jack 1 Memphis Branch R. Co. v. Sulli- son, J. § 109. The same subject continued. On the other hand it is said that each subscription to the stock of a corporation is an independent contract and in no way connected with or dependent upon the terms or agreements concerning other subscriptions. And under this view it is held that a member can not repudiate his shares on the ground that other subscribers were allowed to obtain shares upon more favorable terms.' Certainly a subscription to corporate stock will not be invalidated by the irresponsibility of other subscribers for shares necessary to be subscribed before the organization of the corporation, if such other subscriptions were made and accepted by the company in good faith, the subscribers being apparently responsible. And it is held that if the directors of the company, either with or without authority, have released even the larger stockholders from the payment of a part of their stock, such an act can not discharge another member from the payment of his stock, either in whole or in part. For if such a release were made in virtue of a legal power, it could not be objected to, and if without authority, it would be merely void.' So that in an action upon a subscription to corporate stock, the defendant can not set up secret fraudulent arrangements by which other subscribers were to have stock upon terms different from those specified in the contract, those arrangements being of no avail to the persons in whose behalf they were made. And in the case of fictitious subscriptions to influence 1 Connecticut & P. Rivers R. Co. v. Bailey, (1852) 24 Vt. 465; s. c. 58 Am. Dec. 181, 182; Rensselaer &c. Plank Road Co. v. Wetsil, 21 Barb. 56. 2 Anderson v. Newcastle &c. R. Co., 12 Ind. 376; s. c. 74 Am. Dec. 218. Thus, where the defendant's subscription was made after another subscriber, and the subscription paper showed the name of the latter canceled by lines across it, and opposite appeared the words "by agree't Mar. 5, "73"-the alteration did not, per se, discharge the defendant. Whittlesey v. Frantz, 74 N. Y. 456. 4 Hall v. Selma & T. R. Co., (1844) 6 Ala. 741, 744. 5 Anderson v. Newcastle &c. R. Co., (1859) 12 Ind. 376; s. c. 74 Am. Dec. 218; Memphis Branch R. Co. v. Sullivan, 57 Ga. 240; Hall v. Selma & T. R. Co., 6 Ala. 74; Jewell v. Rock River &c. Co., 101 Ill. 57; Connecticut & P. Rivers R. Co. v. Bailey, (1852) 24 Vt. 465; Jewett v. Valley Ry. Co., 34 Ohio St. 601. But see New York Exchange Co. v. DeWolf, 31 N. Y. 270, reversing s. c. 5 Bosw. 593; Berry v. Yates, 24 Barb. 199; Rutz v. Esler & R. Manuf. Co., (1878) 3 Penobscot &c. R. Co. v. White, 41 Bradw. (Ill.) 83. Me. 512; s. c. 66 Am. Dec. 257. |