collected is for the common benefit of the creditors entitled, a stockholder-creditor cannot set off a debt due him by the corporation against the debt due by him to the common fund.1

§ 114. Calls. Dealing now with cases of normal subscription, that is to say, where there has been no agreement to pay for the shares otherwise than in money at par,-the subscription creates membership status and the law imposes an obligation to pay when and as calls are duly made; and this is so even where there is no express promise to pay.' Conversely, where there is no agreement to pay at specified times, it is the call and not the subscription that creates the debt. Therefore, however old the subscription contract may be, limitations do not begin to run in favor of the shareholder until the call is made; nor will a prior discharge in bankruptcy affect the liability where such discharge operates only "upon such debts which were proved or were provable against the insolvent estate" but otherwise where the discharge covers "all debts and contracts made before the filing of the petition.""

Within the limits of any governing statute, the contract or a by-law may fix the times and amounts of the instalment payments; and where there is no statutory provision, contract or by-law, the directors have discretionary power to

1 § 115, post.

2 Hughes v. Antietam Co., 34 Md. 327,-discussing the New England rule, namely, that in such a case the only remedy against the delinquent subscriber is the forfeiture or sale of his stock. 8 Glenn v. Williams, 60 Md. 122.

Glenn v. Howard, 65 Md. 40.

Glenn v. Clabaugh, 65 Md. 66. • Morrison v. Dorsey, 48 Md. 461.

make calls. The provisions of the Maryland statute are typical and are as follows (Code 1911, Art. 23, sec. 61):

"Unless otherwise payable by the subscription contract, the directors of any corporation having a capital stock, may call in and demand from the stockholders the amounts due on their subscriptions at such times and in such payments and instalments as the said directors shall deem proper; but at least thirty days' written or printed notice of the amount, time and place of payment of such calls shall be given to each stockholder; such notice shall be delivered to each stockholder by leaving the same with him, or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to him at his address as it appears upon the books of the corporation."

§ 115. Calls for the benefit of creditors. Being an asset of the corporation, the right to call for further payments passes to its receiver or liquidator. Subject to the rule forbidding fraudulent and colorable transfers (post, §117), the person liable is the shareholder of record when insolvency intervenes. The amount collectible is determined by the court of the corporate domicil administering the assets; such court succeeds to the power of the directors to make calls; and its order is binding upon all stockholders, resident and non-resident, whether parties to the suit or not. 2 The amount collectible will depend upon the excess of corporate debts over assets, and will, of course,

1 For the law prior to the Act of 1908, see Hughes v. Antietam Co., 34 Md. 331; Scarlett v. Academy of Music, 43 Md. 203 and 46 Md. 150.

2 Glenn v. Williams, 60 Md. 93; Crawford v. Rohrer, 59 Md. 599; Hall v. Insurance Co., 5 Gill 484; Glenn v. Liggett, 135 U. S. 533. And compare Williams, Receiver, v. Watters, 97 Md. 113.

be limited to the difference between the amount paid in on the share and its par value. A creditor-shareholder cannot set off his claim against the amount due by him to the common fund.1

§ 116. Forfeiture of shares. This right is purely statutory; unless otherwise provided, it is alternative with suit and not cumulative; and, when duly exercised in good faith, the status of shareholder, with its rights and liabilities, is terminated. The corporation thereupon becomes the owner of the share, and may dispose of it as property acquired in the ordinary course of business. The provisions of the Maryland statute (Code 1911, Art. 23, sec. 62) are as follows:

"When any stockholder fails to pay any instalment or call upon his stock which may have been properly assessed thereon by the directors, at the time when such payment is due, the directors may collect the amount of such instalments or call or any balance thereof remaining unpaid, from the said stockholder by an action at law, or they shall sell at public sale such part of the shares of such delinquent stockholder as will pay all assessments then due from him with interest and all incidental expenses, and shall transfer the shares so sold to the purchaser, who shall be entitled to a certificate therefor. Notice of the time and place of such sale and of the sum due on each share shall be given by advertisement for three weeks successively; once in each week before the sale, in a newspaper of the county or city where the principal office of said corporation is located in

1 Sawyer v. Hoag, 17 Wall. 610; Cahill v. Original &c. Asso., 94 Md. 355. The rule of course is otherwise where the corporation, as a going concern, is suing for an unpaid instalment.

this State, and such notice shall be mailed by the treasurer of the corporation to such delinquent stockholder at his last known postoffice address at least twenty days before such sale. If no bidder can be had to pay the amount due on the stock, and if the amount is not collected by an action at law, brought within the county or city where the principal office of said corporation is located within six months from the date of the bringing of such action at law, the said stock shall be forfeited to the corporation and the amount previously paid in by the delinquent on the stock shall be forfeited to the corporation."

§ 117. Novation. When share-owning was merely an incident of membership, a member could not, as a matter of right, assign his subscription or his share and thereby put the assignee in his place. Afterwards the point of view changed: share property became alienable as a matter of right; attempted restrictions on alienation were treated as contrary to public policy and void,-at least as against assignees without notice; and it became the rule that the assignee, if under no disability, is entitled to a transfer and registration on the corporate books, i. e. membership. And this is the law today except where, by statute, restrictions

1 This section differs from that contained in the original draft of the Act of 1908, and is not happily conceived or worded. See, generally, Murphy v. Patapsco Insurance Co., 6 Md. 99; Maryland Agric. College v. R. R. Co., 43 Md. 439; and cases collected in the notes in 27 L. R. A. 305; 47 L. R. A. 251.

2 Post, Chapter XVII-Transfer of Stock. In the early charters it was thought necessary to provide that "stockholders shall be members, and every person, having transferred his stock shall cease to be a member." See Maryland Act of 1809, ch. 163: Charter of the "Washington Cotton Manufacturing Company of the City of Baltimore."

on alienation are permitted. The assignee, when registered, succeeds to all the rights and liabilities of the subscription contract, including the liability for future calls. Where, however, the corporation is in failing circumstances, a transfer with intent to escape liability is voidable as to creditors. On the other hand, a transfer in good faith works a novation; but in this connection transfer means some entry on the corporate books showing the substitution. Until this is done, the registered holder remains liable for calls.3

§ 118. The statutory liability. Watered stock. In the absence of a statute to which the holder can lawfully be deemed to have assented, a share never owes to the stock capital more than its original or subscription liability, that is to say, the par value in money or its equivalent; and, furthermore, as we have seen, there are courts which, in

1 As in Maryland: ante, § 21-(e),-with which compare the provisions of Code (1911), Art. 23, secs. 33 and 52. These sections provide that all restrictions upon the transfer of shares must be stated on the share certificate.

2 Rider v. Morrison, 54 Md. 444. Cook Corporations, 6th Ed. sec. 263. Magruder v. Colston, 44 Md. 349.

See also: post, § 119 and For an exceptional case see

3 Magruder v. Colston, 44 Md. 349; but he may show that the failure to make the transfer was the fault of the corporationWhitney v. Butler, 118 U. S. 655; Earle v. Carson, 188 U. S. 42; and post, § 119. For the effect of transfer upon the statutory extra liability, see the next succeeding sections. The Uniform Stock Transfer Act (Code 1911, Art. 23, sec. 40) provides that "Nothing in this Act shall be construed as forbidding a corporation (a) to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, or (b) to hold liable for calls and assessments a person registered on its books as the owner of shares."

Ante, § 110, III.