others the parties to the fraud would not be permitted to avail themselves of their own wrongful acts to avoid their contract. They would be estopped to deny its binding character and obligation, and be required to discharge to the corporation and all interested therein that obligation which they have assumed, according to its terms. In depriving them of such matters in defense, the law makes the subscriptions bona fide, and requires them to fulfill and answer those expectations and inducements which they have held out for the purpose of procuring other subscribers. Since then, the prior subscribers are held bound to their subscription, and to carry out to the letter every inducement they have held forth, no fraud has been practiced upon others to make their subscriptions, and they have no reason to complain, for they see fulfilled and answered every inducement that was held out to operate upon them. The case is made to stand, in that respect, in the same situation in which they were induced to believe it stood when they subscribed for the stock. Another consideration in point is that the creditors of the company are not to be affected by mere private understandings between the subscriber and the subscription agent of the company, by which the former is exonerated from the performance of that which his subscription, by its very terms, plainly requires. To permit such a thing would be to sanction a palpable fraud upon the creditors of the company and the other stockholders. If wrong has been done in this respect, the injury may be repaired by the directors or injured stockholders, or by legal action, but not by a renewal of the wrong by the court.

§ 110. (e) Mismanagement of corporate affairs.- Unwise and injudicious management of the affairs of the company on the part of those to whom they have been intrusted, does not constitute a valid ground of withdrawal and repudiation of shares; for it is the duty of the members to select competent

1"This doctrine is enforced by considerations of public policy, as well as of good faith, and is now considered as settled law in this State." Connecticut & P. Rivers R. Co. v. Bailey, (1852) 24 Vt. 465; s. c. 58 Am. Dec. 181, 188.

? Connecticut & P. Rivers R. Co. v. Bailey, (1852) 24 Vt. 465; s. c. 58 Am. Dec. 181, 189.

3 Jewell v. Rock River Paper Co., (1881) 101 Ill. 57, 67.

4 Dorman v. Jacksonville &c. R. Co., (1857) 7 Fla. 265, 281.

officers to conduct the corporate affairs, and failing so to do, they can not complain if those whom they have chosen for that purpose commit errors of judgment and are led into making unprofitable bargains. It has been said obiter that a member might complain if the directors should go beyond the common course of procedure, as, if they should consolidate a railway company with others, without the consent of the shareholders of the company. But it seems to be well settled that even illegal and wrongful acts of the corporate managers do not constitute a valid ground of withdrawal from the company and repudiation of shares; and that a subscriber will not be released from paying for his shares because the managing agents of the corporation have violated its charter. For ex

1 Illinois Grand Trunk R. Co. v. Cook, 29 Ill. 237; Chetlain v. Republic Life Ins. Co., 86 Ill. 220; Merrill v. Beaver, 50 Iowa, 404. "Procuring subscriptions of stock was directly in the line of their (the directors') duty. If land was taken, it was because the railway charter permitted it. It was only an error of judgment if they paid too high a price." Hornaday v. Indiana & I. C. R. Co., (1857) 9 Ind. 263. See also Dorris v. French, 4 Hun, 292; Maccow v. Indiana &c. R. Co., 9 Ind. 262. The member can not plead that insufficient notice of the election of directors was given. Eastern Plank Road Co. v. Vaughan, 14 N. Y. 546; Central Plank Road Co. v. Clemens, 16 Mo. 399; nor that officers of the company were illegally elected. Bucksport &c. R. Co. v. Buck, 68 Me. 81; Eakright v. Logansport &c. R. Co., 13 Ind. 404; Johnson v. Crawfordsville &c. R. Co., 11 Ind. 280.

2 Hornaday v. Indiana & I. C. R. Co., (1857) 9 Ind. 263.

3 Hannibal &c. Plank Road Co. v. Menefee, 25 Mo. 547; Mississippi &c. R. Co. v. Cross, 20 Ark. 443; Smith v. Tallassee &c. Plank Road Co., 30 Ala. 650; Merrill v. Gamble, 46 Iowa, 615; Merrill v. Beaver, 46

Iowa, 646; Merrill v. Beaver, 50 Iowa, 404; Dorris v. French, 4 Hun, 292; Troy &c. R. Co. v. Kerr, 17 Barb. 581; Mississippi &c. R. Co. v. Gastner, 20 Ark. 455; Hammett v. Little Rock &c. R. Co., 20 Ark. 204; Vicksburg &c. R. Co. v. McKean, 12 La. Ann. 638; People v. Logan County, 63 Ill. 387, where it was said that if the railway company had exceeded its powers by giving a perpetual lease of its road instead of one for years, the subscribing municipality would have a remedy against such an exercise of power after receiving its shares of stock, but that it formed no excuse for failing to pay subscriptions previously made; Illinois &c. R. Co. v. Cook, 29 Ill. 237; Hays v. Ottawa, O. & F. R. V. R. Co., 61 Ill. 422; Ottawa, O. & F. R. V. R. Co. v. Black, (1875) 79 Ill. 262, 268, where the court said: “If the company had no power to lease the road and its franchises, then the lease is void, and appellees can, when they receive their stock apply to a court of equity and have the lease canceled;" Chicago &c. R. Co. v. McGinnis, 79 Ill. 269; Illinois Midland Ry. Co. v. Supervisors, 85 III. 313; Johnson v. Crawfordsville &c. R. Co., 11 Ind. 280; Tuttle v. Michi

ample, such acts as making a fraudulent contract with a construction company for the building of a railway,' making an unauthorized change in the location of a railway,2 or misapplying a check given in payment of a subscription by paying it away upon a private debt of one of the directors,3 or selling or giving a perpetual lease of the corporate property, being ultra vires or illegal acts, are void and can not injuriously affect the shareholders' rights; and, accordingly, are not accepted as a ground for the repudiation of shares or as an excuse for nonpayment of subscriptions previously made.'

§ 111. (f) Delay in prosecuting the purpose of the undertaking. It may be said, by way of generalization, that unreasonable delay on the part of the corporate managers in carrying out the purposes for which the company was projected, amounting practically to an abandonment of the enterprise, is a sufficient ground for his withdrawal and repudiation of the shares which he had agreed to take. There must be evidence, however, of formal abandonment, or of such unrea

gan &c. R. Co., 35 Mieh. 247; Taggart v. Western Maryland R. Co., 24 Md. 563, 596; Southern Life Ins. Co. v. Lanier, 5 Fla. 110; s. c. 58 Am. Dec. 448; 1 Morawetz on Corporations, 115, 116. But in South Georgia & F. R. Co. v. Ayres, (1876) 56 Ga. 230, 234, it was held that an unauthorized sale of a railway did release a subscriber from his contract to take and pay for shares.

powers by giving a perpetual lease of their road, instead of one for years, the county would have its remedy against such an exercise of power after receiving its shares of stock, but that it formed no excuse for not paying subscriptions previously made. The remark, we think, applies equally here." Illinois Midland R. Co. v. Barnett, (1877) 85 III. 313, 318, citing Ottawa, O. & F. R.

1 People v. Logan County, 63 Ill. V. R. Co. v. Black, 79 Ill. 262; Hays 374, 387.

2 Mississippi &c. R. Co. v. Cross, 20 Ark. 443. But see Chartiers R. Co. v. Hodgens, 77 Pa. St. 187.

v. Ottawa, O. & F. R. V. R. Co., 61 Ill. 422. See also Taylor on Corporations, (2d ed. 1889) § 529. But see South Georgia &c. R. Co. v. Ayres,

3 Croker v. Crane, 21 Wend. 211; 56 Ga. 230. s. c. 34 Am. Dec. 228.

4If the purchase was unauthorized, we do not consider that it forms an excuse for not paying subscriptions previously made. In People v. Logan County 63 Ill. 387, it was said, in reference to a somewhat analogous question, that, if the railroad company had exceeded their

5 Delaware River R. Co. v. Rowland, (1887) 9 Atlan. Rep. 929; s. c. 8 Cent. Rep. 814; McCully v. Pittsburg &c. R. Co., 32 Pa. St. 25; Fountain Ferry T. R. Co. v. Jewell, 8 B. Mon. 147, where there was a delay of, nine years in beginning to construct the road.

6 In Buffalo & J. R. Co. v. Gifford,

sonable delay as practically to amount to a final abandonment of the enterprise.' But when the company has contracted debts, or has expended funds contributed by other members, in attempting to carry out the scheme, new equities arise which will debar a member who has not yet contributed his pro rata of the common expenses, from availing himself of the abandonment as a means of avoiding liability. For debts due by the company to other individuals for work and service rendered, are not abrogated, and its own ability to discharge these may be dependent upon its realizing upon the claims. due by its own debtors. Even if the debts due by the corporation were settled and adjusted, it might be that one or a few stockholders had paid all their subscriptions and advanced means, whilst others had paid none and thereby defeated the undertaking. To acquit and discharge the latter would be to offer a premium to wrong- to tempt those who enter upon

(1882) 87 N. Y. 294, the articles of association for organizing a railroad company stated that the road was to be constructed, maintained and operated from Buffalo to a point on the State line between New York and Pennsylvania. The road was actually built from Buffalo to Jamestown, about twelve miles north of the State line; and the proof was simply that the construction stopped at Jamestown. There was no finding that the remaining portion was formally abandoned, and it was held that a subscriber was liable on his subscription, and the fact that after commencement of an action on such subscription, a mortgage issued by the plaintiff company was foreclosed, and the road and its franchises sold to purchasers who took possession, was held to be no defense.

Am. Dec. 181, 184, it was said: "The other matters of defense set up and relied upon in the answer, are obviously untenable. The fact that the company have suspended operations upon the road, and that it will require a large additional expenditure of labor and money to complete its construction, and even the additional fact that the means of the company are wholly inadequate to the accomplishment of this object, do not furnish any sufficient reason why the defendant should not pay for his stock. It may be, and probably is, necessary to aid in the payment of debts already incurred in the work previously done upon the road, or it may be required for the purpose of assisting in its further prosecution. The defendant could only be absolved from liability for the payment of his stock by al

1 Vide cases cited in the two notes leging and proving a final abandonpreceding. ment of the work by the company,

2 Dorman v. Jacksonville &c. R. and also that its payment was not

Co., (1857) 7 Fla. 265, 281.

3 In McMillan v. Maysville & L. R. Co., (1854) 15 B. Mon. 218; s. c. 61

necessary for the purpose of satisfying any existing demand against the corporation."

these undertakings to seek the means of evasion and of escape from a just responsibility. The unreasonableness of the delay which in other cases, where no such equities as those referred to above have arisen, may justify a repudiation of shares, depends in a large measure upon the circumstances of each case. Thus, for example, after a railway had been located and its construction begun and fairly prosecuted as rapidly as the company's means would permit, a suspension of the work under pressure of hard times and default in payment of subscriptions, has been held to be no ground for a refusal to pay the amounts due upon the shares subscribed for, even though they were taken upon condition that the company should locate "and construct" the road along a designated route.2 So again, a statutory extension of the time allowed in the charter for building the road, does not warrant a repudiation of shares; for, if the legislature chose to relieve the road from a cause of forfeiture of charter, instead of enforcing it by quo warranto, it does destroy or impair existing contracts, unless that were made and accepted as a condition of the relief. Nor when a suit is brought by a cor

1 Dorman v. Jacksonville &c. R. him. The necessity for that suspenCo., (1857) 7 Fla. 265, 181.

2 Miller v. Pittsburgh &c. R. Co., (1861) 40 Pa. St. 257; s. c. 80 Am. Dec. 570, 572, where the court said: "The condition in his contract did not mean that the road should be constructed and finished before he paid, but only meant that when it was located and constructed, it should occupy the route designated. On his part the undertaking was to pay as calls should be made. On the company's part the undertaking was to locate as stipulated and to construct bona fide as fast as the means at their command would allow. This was the whole scope and effect of the condition. A suspension of the work two years and a half after the time when every dollar of the defendant's subscription ought to have been in the treasury of the company, is no defense for

sion was no doubt aggravated, perhaps induced, by the failure of himself and others to pay up this stock; but, whether it was or was not, the suspension was the exercise of a discretion which every subscriber had committed to the directors. Let them not complain, therefore, that their constituted agents have, under the pressure of the times and the default of subscribers, exercised the discretion that was voluntarily committed to them for the benefit of the common enterprise. Until it can be shown how railroads can be built without money, no such defense as is here set up can prevail." Acc. McMillan v. Maysville & L. R. Co., (1854) 15 B. Mon. 218; s. c. 61 Am. Dec. 181.

3 Jacks v. City of Helena, (188.) 41 Ark. 213, 222, per S. W. Williams, Special Judge.