existing procedure was amended by providing: (1) that as to any liability arising on and after April 6, 1908, it should "be an asset of the corporation for the benefit ratably of all the creditors * * * and enforceable only by appropriate proceedings by such corporation or by a receiver * * * acting under the orders of a court of competent jurisdiction." And as to any liability existing prior to April 6, 1908, it was enacted that the exclusive remedy should be by a bill in equity in the nature of a creditor's bill; and pending suits at law were abated, subject to the right of the plaintiffs to the equitable relief provided.1

§ 122. The extra liability in Maryland. This section. will deal with the legislation and decisions prior to 1904. In the succeeding section the subsequent changes will be noted.

Sources. (a) The Constitution (1867) provides in section 39 of Article III as follows: "The General Assembly

1Inasmuch as the provisions of Chapter 240 and those of Chapter 305 agree as to the procedure in cases of liability arising on and after April 6, 1908, the latter chapter is now of no practical importance: See Hughes v. Hall, 117 Md. 552. Since the liability, if any exists, is collectible only by the receiver or liquidator as an asset of the corporation, there can no longer be two liabilities for the difference between the par of the shares and the amount paid thereon, one to the corporation and the other to the creditors, as was the case prior to the legislation of 1908. Chapter 305 has been the source of interesting litigation, for which see Bettendorf Axle Co. v. Field, 114 Md. 487, affirming Pittsburg Steel Co. v. Baltimore Equitable Society, 113 Md. 77. The contention of the creditors in these cases was that the statute impaired a pre-existing right and did not merely effect a change of remedy. This contention was overruled and the decision of the Maryland court was followed in Republic Iron and Steel Co. v. Carlton, 189 Fed. 126. The former case was affirmed on writ of error and the latter approved, in 226 U. S. 455.

shall grant no charter for Banking purposes, nor renew any Banking Corporation now in existence, except upon the condition that the Stockholders shall be liable to the amount of their respective Share or Shares of Stock in such Banking Institution, for all its debts and liabilities upon note, bill or otherwise; the Books, papers and accounts of all Banks shall be open to inspection under such regulations as may be prescribed by law." (b) The Act of 1892, Chapter 109, limited to "every safe deposit, trust, guaranty, loan and fidelity company or association incorporated under any law of this or any other State, district or territory, the United States, or any foreign country receiving money on deposit, or assuming any obligations in this State," provided that "each stockholder shall be liable to the depositors

This provision is probably self-executing and operative ex proprio vigore-Murphy v. Wheatley, 100 Md. 362.

In Willis v. Mabon, 48 Minn. 140, the state constitution provided that the stockholders should be liable for the debts of the corporation to the amount of the stock held by them. This provision was decided to be self-executing, because the nature and extent of the right conferred and of the liability imposed, were fixed by the constitution itself. The subject is one upon which there is conflict of opinion. See Marshall v. Sherman, 148 N. Y. 9; Bell v. Farwell, 176 Ill. 489; and compare Thomas v. Owens, 4 Md. 189. As to the right of the legislature to change the liability fixed by the constitution, see Foster v. Row, 120 Mich. 1. In this case there was a provision in the constitution making the shareholders of every banking corporation issuing bank notes, liable for corporate debts. It was held that such a provision did not limit the power of the legislature to fix the liability of stockholders in banks not of issue.

2Invalid to the extent that it attempts to affect the stockholders of foreign corporations-Murphy v. Wheatley, 100 Md. 364. It is difficult to tell from the punctuation whether the qualification "receiving money on deposit” applies to the domestic corporations, or only to the foreign ones. See, however, Murphy v. Wheatley, 102 Md. at p. 516.

and creditors of any such corporation for double the amount of stock at the par value held by such stockholder in such corporation.'

The decisions. The earliest litigation involving any of the provisions recited, arose long after the cases construing and settling the Act of 1868 (ante, § 121). In Hammond v. Straus, 53 Md. 1 (1890), a depositor of the Union Banking Company was suing a shareholder, and the only litigated question was whether there had been a sufficient acceptance of the charter to bring the corporation into existence. In the general discussion, however, the court, following the decisions under the Act of 1868, said: "To entitle the plaintiff to recover in this action it was essential that three things be made to appear: 1. That a corporation, such as that alleged, should have been created; 2. That the defendant was a stockholder therein; and 3. That the plaintiff was a creditor of the corporation, and that he became such while the defendant was stockholder." In Colton v. Mayer, 90 Md. 711, it was held that the liability ran to the creditor and could not be enforced by the receiver of the corporation. In Cahill v. Original &c. Ass'n, 94 Md. 353, and in Straus v. Denny, 95 Md. 694, it was held that the defendant shareholder was entitled to set off any debt the corporation might owe him. And in Murphy v. Wheatley, 102 Md. 520 (which involved the Act of 1892), it was held specifically: (1) "that the liability for double the amount of stock at the par value, means twice the par value of the stock held in addition to the payment of the amount of the subscription for stock"; and (2) that "stockholders are not liable for debts due depositors or other creditors who become such prior to the time such stockholders acquired their stock."

This case was decided after 1904, but was governed, on the points cited, by the pre-existing law. Similar conditions growing

1

§ 123. The legislation of 1904 and after. First. The Act of 1892 was modified by two Acts of 1904, namely, Chapters 101 and 337. The former, which is substantially a reproduction of the corresponding provision of the national banking act: (1) reduces the limit of liability from "double the amount of stock at the par value" to "the amount of stock at the par value in addition to the amount invested in such stock;" and (2) makes the liability an asset of the corporation, enforceable only by the receiver or other liquidator. Chapter 101 expressly excepted any liability existing on March 18, 1904. To meet pending cases (a number of which had been brought against the stockholders of trust companies which had closed their doors in the panic of 1903), Chapter 337 provided that such cases should abate, and that the exclusive remedy should be a bill in equity in the nature of a creditor's bill, to which the plaintiffs in the pending cases could become parties.2

Second. By the Act of 1908, Chapter 153, the law was further amended by omitting from the extra liability provision, guaranty and fidelity companies. By the Act of 1910, Chapter 219, trust companies were transferred from Article 23 and included, with state banks, in what is now

out of the failure of the same corporation were considered in Miners' &c. Bank v. Snyder, 100 Md. 67. This was the first case in which the Act of 1892, Chapter 109, came before the court. The opinion contains a concise summing up of the previous decisions under the Act of 1868 and the provision of the Constitution. 1Code 1911, Art. 23, secs. 116 and 117.

2The legislation of 1904 was the model for Chapter 305 of the Acts of 1908, relating to the original liability of the state and discussed ante, § 121. Here, too, the contention was made that the change in remedy involved the impairment of a vested right, but the contention was overruled in Miners' &c. Bank v. Snyder, 100 Md. 57.

Article II of the Code of 1911, title "Banks and Trust Companies." In section 69 of this Article, governing stockholders of every state bank and trust company, the provisions of Chapter 101 of the Acts of 1904, above noted, are reproduced, and these, as has been said, are substantially those of the national banking act.1

§ 124. Summary. The extra liability in no manner depends upon whether the shares are or are not fully paid. Whatever may remain due upon the original liability (whether shares have been issued at a discount for cash, or for property at a fraudulent over-valuation) will be collected by the receiver or liquidator, and no longer by the creditor as such. The extent of this obligation, the person bound and the various defenses, have been sufficiently discussed. If the corporation happens to belong to one of the few classes upon which extra liability is imposed, then it may be assumed that the federal decisions, which have construed the national banking act, will be followed; and that the person liable will be the stockholder of record at the time of insolvency, subject to the rules heretofore noted in the case of fraudulent or colorable transfers.2

§ 125. Defenses. In addition to, and repeating for emphasis, some things that have been said in preceding sections, there will be noted in order: (1) The condition which the law implies in every stock subscription. (2) The case of a subscription obtained by fraud. (3) The question of set

1The Act of 1910 does not, of course, attempt to alter the quantum of liability fixed by the Constitution. It does, however, like the Act of 1908, ch. 240, supersede the previous decisions which, as to questions of procedure and the method of fixing, collecting and distributing the liability, followed the decisions under the Act of 1868.

2 Ante, § 119.