the subscriber may impose conditions which must be fulfilled before his offer becomes binding upon him. The earlier special charters usually named commissioners to receive subscriptions and provided (a) that intending subscribers should prepay some fixed percentage of the amount taken; and (b) that not until some fixed amount of the capital stock had been subscribed should corporate life begin. In such cases the courts held that the commissioners, having only a special authority, could neither waive the deposit nor accept conditional subscriptions; and that in either event there was no binding contract.1 It was further held, however, that a different rule would apply to dealings with the corporation after its organization. The following are the principles to be noted:

First. Except in the case of railroads, the general incorporation law does not require payment on account of subscriptions to be made at the time of subscribing. The provision for railroads (Code, 1911, Art. 23, sec. 265) is

scriber is not entitled to the status of shareholder. Busey v. Hooper is cited with approval in Railway Company v. Hambleton, 77 Md. 341. The latter case, however, deals with increased stock,—as to which the rule is clear that payment by the subscriber and the tender of a certificate by the corporation are necessary to complete the status. Compare Oler v. R. R. Co., 41 Md. 593, and Webb v. R. R. Co., 77 Md. 92.

1 Bank v. Nelson, 12 Md. 35; Plank Road Co. v. Hoffman, 9 Md. 568: "Commissioners are appointed to receive subscriptions to stock for the purpose of giving the subscribers a right to organize as a corporation under the charter. So soon, however, as the organization takes place, the authority of the commissioners ceases; and all corporate powers conferred by the charter vest in the body politic. Such, at least, is the general rule applying in every case where there is no special provision to the contrary."

2 Taggart v. R. R. Co., 24 Md. 563.

that "an instalment of five dollars in actual cash on each share of stock shall be payable at the time of making the subscription," but in Oler v. R. R. Co., 41 Md. 593, it was held that this language does not import a condition precedent to the validity of the subscription.1

Second. A conditional subscription is a continuing offer which becomes binding on the performance of the condition. In Webb v. R. R. Co., 77 Md. 92, the appellant had signed the following paper: "I hereby agree to take twenty shares of the Baltimore and Eastern Shore Railroad stock when completed to Vienna-$1,000." The road was completed to the point named but the subscriber refused to pay. The court first disposes of the defenses that no certificate had been tendered to the appellant and that he had not paid the instalment of five dollars at the time of subscribing, as required by the Code,-holding that neither tender nor payment was necessary to the validity of the subscription; and then it is said: "The subscription in the form in which it was made was inchoate and conditional. It was such, however, as the Company had a right to accept. It was simply a continual offer by the defendant to become a stockholder after the condition specified had been performed by the Company. The performance of the condition precedent on the part of the Company was necessary to a valid acceptance of the offer thus made by the subscriber; and before this acceptance by the performance of the condition precedent, the defendant did not by virtue of such subscription become a member of the Company. The subscription was a mere offer and unless withdrawn before the condition

1 Affirmed, Webb v. R. R. Co., 77 Md. 92. The authorities are conflicting. See 10 Cyc. 395, 397.

was performed by the Company, it became final and absolute immediately upon the performance of the condition." Whether conditions may be inserted in a subscription made in contemplation of incorporation, is a debated question. In Burke v. Smith, 16 Wall. 390, it was held that where the charter or some governing statute provides that a certain amount of stock must be subscribed before corporate powers shall be exercised, conditional subscriptions are impliedly forbidden and, on the ground that they constitute a fraud upon the unconditional subscribers, they will be treated as absolute. Where, however, there is no governing charter or statutory provision and where proper conditions are plainly written, there is no reason why they should not be upheld in the case of preliminary subscriptions; and it is difficult to see how, under such circumstances, the unconditional subscribers can claim to have been defrauded.1

Third. The Court may reject a condition because it is illegal or because it represents an attempt to vary by parol evidence the terms of a written contract. In Baile v. Calvert College, 47 Md. 117, the appellant attempted to set up a condition that his shares should be paid for in property and not in money. The general incorporation law provided that money only should be considered as payment of a subscription unless payment in property "shall have been previously authorized by the stockholders assembled in general meeting." The court said: "It was not in the power of the appellee to make an agreement with the appellant in regard to his subscription in plain violation of its charter. The evidence thus offered was not only inconsistent with

1 See the treatment of this subject in 10 Cyc. 411, &c.

the written terms of the agreement itself but it was an attempt on the part of the appellant to set up a contract expressly forbidden by the law under which the Company was chartered." But oral evidence is admissible to show that a written subscription was delivered as an escrow.1

Fourth. A condition may be implied in law, namely: that a subscription is not to become binding unless all the shares are taken. The effect of this condition as a defense in suits against shareholders is treated more fully hereafter.

§ 105. Proof of share ownership by the corporate books. Following a ruling of the Supreme Court, presertly mentioned, many decisions hold that in a contest between the corporation and a person sought to be charged with liability as a stockholder, the stock book is admissible evidence to prove membership. In Hammond v. Straus, 53 Md. 1, it is said: "When the name of a person appears on the stock book of the corporation as a stockholder, the prima facie presumption is that he is the owner of the stock and the burden of rebutting that presumption is on the defendant." This language is taken substantially from the opiniou of Justice Clifford in Turnbull v. Payson, 95 U. S. 418. In this case, however, it appeared that the plaintiff to prove that the defendant was a stockholder: (1) offered the

1 See the cases collected in 1 Thomp. Corp. 1253 and 2 Clark and Marshall, Corp. Sec. 464. In sec. 460 of the latter work, it is said: "In Pennsylvania the doctrine with respect to the admissibility of parol evidence is not the same as in other states. It is there held that if the subscription would not have been made except for the precedent condition, it may be proved, provided the rights of creditors are not involved, since to allow the corporation to enforce the subscription would operate as a fraud."

It is obvious that the line between misrepresentation and the breach of an oral condition may sometimes be hard to draw.

books of the corporation in which the name of the defendant was entered as the owner of fifty shares: (2) offered the stock book with a duplicate of the stock certificate issued to the defendant: (3) introduced testimony to prove that the certificate was sent to agents to be delivered to the defendant and that he paid twenty per cent of the shares: (4) introduced a receipt signed by the defendant showing that the company had paid him a dividend on his stock.

The doctrine is forcibly criticised by Judge Thompson 1 as follows: "Under this rule a number of adventurers can organize a real or pretended corporation and by opening a stock book and inserting thereon the name of one of the Judges so holding (this doctrine), charge him with a liability as a stockholder not only in favor of themselves but also in favor of their creditors. The true principle is that before the books of the corporation can be put in evidence against a person charged with liability as one of its members, his membership must be admitted or established by evidence aliunde, a thing which is not difficult in view of the fact that his relation as stockholder can be shown by his conduct."

16 Thompson Corporations, sec. 7732. Compare Keyser v. Hitz, 133 U. S. 138; Foote v. Anderson, 123 Fed. 659.