variance not being material, and such as to amount to a failure of identity.1 § 1959. That the Shares Were not Allotted by Numbers.— Where a person has subscribed to the capital stock of a corporation, and an action is brought against him for an assessment, it will be no defense on his part that the shares were not allotted to him by numbers; but that notwithstanding this, the company proceeded to forfeit his shares, to sell them, and to bring the present action against him for the residue. The reason is that, the shares being equal in amount, no confusion could arise from the failure to allot the shares to the subscriber by particular numbers. Of course, the rule is different where the governing statute prescribes that the name of the shareholders shall be entered upon the register of the company, "together with the number of shares to which such shareholder shall be entitled, distinguishing each share by its number;" and on this ground certain English cases are to be distinguished.3 § 1960. That Notes were Received from the Subscriber instead of Money. Nor is it a good defense to an action by the corporation on a promissory note given by a subscriber in settlement of his subscription, that the corporation improperly received the note in payment of the stock, instead of requiring the defendant to pay the money.* 1 Hagerstown Turnp. Co. v. Creeger, 5 Har. & J. (Md.) 122; s. c. 9 Am. Dec. 495. So of a subscription book: Ober v. Baltimore &c. R. Co., 41 Md. 583. 2 European &c. R. Co. v. McLeod, 3 Pugsley (N. B.), 3, 32, 40. 3 Newry &c. R. Co. v. Edmunds, 2 Exch. 118, 123; Wolverhampton Water Works v. Hawksford, 7 C. B. (N. s.) 795, 809. In the latter case it was said by Erle, C. J., that "no share had been numbered and no specific shares had been appropriated;" but the real ground of the decision seems to have been that the defendant's name was not on any register of shareholders such as the company was required by the act to keep. At least, this was the understanding of the case by a majority of the Supreme Court of New Brunswick. European &c. R. Co. v. McLeod, 3 Pugsley (N. B.), 3, 33. 4 Finnell v. Sandford, 17 B. Mon. (Ky.) 748; Home Stock Ins. Co. v. Sherwood, 72 Mo. 461; ante, §1220. It is not a good defense, within Sec. 9 of the Illinois act of 1845, to an action by a corporation on notes given for a subscription to the stock, that the notes were stock notes. Vanlandingham, 25 Ill. 128. § 1657, et seq. Ryan v. See ante, § 1961. Release by Directors of Other Shareholders. Nor is it any defense to such an action that the directors, without the consent of the other stockholders, released certain of the subscribers to the company's stock from liability therefor; for such a release, if made, is void, and the stockholder whom the directors have attempted to release remains bound to make good his subscription.1 A similar view of the question was taken in a case which arose between the transferor and transferee of certain corporate shares. F. had agreed to sell certain shares to H. The corporation, by allowing those who paid but $30 per share an equal participation in the profits with those who had paid $100, had lessened the market value of the stock. It was held that if this act was legal, H. was bound to know what the railroad company might do, and this would therefore form one of the contingencies of his purchase; but if the act was unlawful, H. might resist it when he became a stockholder in the legal way, and it would form no defense for H. in a suit for non-performance of the contract.2 § 1962. Non-Delivery of Stock Certificate.-As already suggested, the subscriber cannot set up the failure or refusal of the corporation to deliver to him his stock certificate as a defense against its action for calls. No tender of a certificate of stock is necessary as a condition precedent to the right of the corporation to maintain an action for assessments against the subscriber. The reason has been said to be that the certificate does not constitute his stock, but is only the evidence of it, or his muniment of title, and that it is the registry of his name upon the stock book of the company opposite the number of his shares which in fact gives him his title to his stock. Accordingly, a complaint or declaration in such an action is not bad because it does 1 Chouteau Ins. Co. v. Floyd, 74 Mo. 286, 291; Dorman v. Jacksonville &c. Plank Road Co., 7 Fla. 265. Compare Gill v. Balis, 72 Mo. 432; Upton v. Tribilock, 91 U. S. 45; ante, § 1545. 2 Faulkner v. Hebard, 26 Vt. 452. 3 Ante, § 1140. 4 Smith v. Gower, 2 Duv. (Ky.) 17; South Georgia &c. R. Co. v. Ayres, 56 Ga. 230; Dallas Cotton &c. Mills v. Clancey (Tex. App.), 15 S. W. Rep. 194. See Hawley v. Upton, 102 U. S. 314; Farrar v. Walker, 3 Dill. (U. S.) 506. 5 New Albany &c. R. Co. v. McCormick, 10 Ind. 499; s. c. 71 Am. Dec. 337. not aver that certificates of stock were tendered to the defendant before the action was brought.1 Especially is it true that the mere failure to issue certificates to the subscriber, in respect of the shares for which he has subscribed, can not be set up as a defense, where he has not demanded them and the corporation has not refused them, and this for the reason above stated.2 Accordingly, a paragraph of an answer setting up that the corporation has made no tender of a certificate of his stock to the defendant, is bad." § 1963. Guaranty that Company will Pay Interest on Stock. A guaranty in the contract of subscription that the corporation will pay interest on the stock, "as soon as paid,' constitutes no defense to an action against the stockholder for an assessment, although the company in the meantime has suspended operations. The reason is that the obligation of the company does not arise by the terms of the contract, and consequently is not broken until all the assessments which may be made upon the subscription have been paid.1 The defendant may, § 1964. Legality of the Assessment. of course, challenge the legality of the assessment.5 He may show that the order for it was made by less than a majority of the directors, and is therefore void; and subsequent action by the whole board under this order will not amount to a ratification. Where the governing statute requires that the share 1 Miller v. Wild Cat Gravel Road Co., 52 Ind. 58. 2 Chester Glass Co. v. Dewey, 16 Mass. 94; s. c. 8 Am. Dec. 128. 3 Vawter v. Ohio &c. R. Co., 14 Ind. 175; Heaston v. Cincinnati &c. R. Co., 16 Ind. 275; s. c. 79 Am. Dec. 430; Drover v. Evans, 59 Ind. 458; Beaver v. Hartsville University, 34 Ind. 248; Hartsville University v. Hamilton, 34 Ind. 509; Slipher v. Earhart, 83 Ind. 178. That the company is at most bound to make a conditional tender, see Hardy v. Merriweather, 14 Ind. 206. 4 Miller v. Pittsburgh &c. R. Co., 40 Pa. St. 237; s. c. 80 Am. Dec. 570. In this case and in the subsequent case of Pittsburgh &c. R. Co. v. Allegheny County, 63 Pa. St. 136, the practice of paying interest on stock is denounced, and in the latter case it is held that the corporation cannot, without statutory authority, bind itself for such interest. 5 Ante, § 1702. Lancaster Starch Co. v. Moore, 62 N. H. 671. 6 Price v. Grand Rapids &c. R. Co., 13 Ind. 58; Cowley v. Grand Rapids &c. R. Co., Id. 61; Hamilton v. Grand apids &c. R. Co., Id. 347. holders shall be assessed equally in respect of their subscriptions, if an equal assessment has not been made, this fact is a good defense on the part of any shareholder when sued by the company to recover an assessment. It was so held under such a statute in respect of an assessment of the shares of capital stock of the New Brunswick Railway Company, where the assessment was made upon the stock, exclusive of the sum of $250,000, stock which had been subscribed in the United States.1 § 1965. Prior Forfeiture of the Shares. The defendant cannot plead that, by reason of his default respecting another installment, he had forfeited to the corporation all the shares subscribed by him, and that the amount thus forfeited was equal to the amount claimed in this suit.2 But as already seen,3 a valid forfeiture of shares, and hence one not fraudulent or collusive,1 dissolves the connection between the shareholder and the company, and therefore creditors of the company cannot, in the event of its becoming insolvent, charge him as a shareholder with the amount remaining unpaid on his shares.5 6 § 1966. Transfers to Escape Liability. Within the limits. hereafter discussed, if a subscriber to stock of a corporation transfer it without the assent of the corporation, for the purpose of escaping liability on his subscription, the transfer will be no defense to him in an action for the amount due on his subscription. But the corporation-the rights of the creditors not being involved - may affirm such a transfer and proceed against the transferee; and it will be no defense for the transferee to show that the transfer was made without any consideration.o § 1967. That the Directors Made an Assignment of the Right of Action in Fraud of the Corporation. We have seen9 that a corporation has the power to make an assignment of its stock subscription, and this is even more clear where the indebtedness of the subscriber for his shares has been liquidated by his notes.1 In such a case, the assignment being valid, the assignee will, under any circumstances, succeed to the rights of the corporation, his assignor. When, therefore, a corporation, by its directors, assigned one of its stock notes to certain of its directors, as security for advances, who afterwards brought suit upon it in the name of the corporation for their own benefit; and the corporation was at that time, and had ever since remained insolvent; and the defendant, at the time of the assignment and of the bringing of the suit, was a stockholder,—it was held that he could not avail himself, by way of defense to the suit, of the fact that the note had been so assigned, even if such assignment could be regarded as a fraud upon the corporation.2 § 1968. Violations of Charter. It is no defense to such an action that the directors of the corporation have violated the charter; as by issuing shares to the defendant in contravention of its provisions; that they have caused a portion of the roadway of the plank road which the corporation was organized to build to be constructed of gravel instead of plank; or that the corporation has not managed its business in the places required by law. Nor can the stockholder in such an action set up that which, in a contract proceeding by the State, would work a forfeiture of the charter; for such matters cannot be inquired into collaterally, but can only be challenged by the State. But of course it is competent for the legislature to make the individual subscriber a representative of the State, just as the plaintiff is, to some extent, in an action qui tam. It can enact that a particular violation of the charter or governing statute shall take away a given right of action by the corporation, in which case 1 Ante, § 1660. 2 Protection Ins. Co. v. Ward, 28 Conn. 409. 3 Hannibal &c. Plank Road Co. v. Menefee, 25 Mo. 547. 4 Canal Bank v. Holland, 5 La. An. 363. 5 Hannibal &c. Plank Road Co. v. Menefee; supra. 6 Courtright v. Deeds, 37 Iowa, 503. Vt. 465; s. c. 58 Am. Dec. 181; Smith |