§ 131. The case of shareholders in foreign corporations. From the principle that a corporation has no existence beyond the bounds of the state that made it, follow logically three conclusions: Ist. The incidents of membership, including the contract by which it is created, are to be determined and construed by the law of the creating state.1 2nd. One who deals with a corporation thereby submits to whatever may be the rights of the creating state over it. 3rd. Where a court of the domicil is administering the affairs of the corporation, all of its members, although not parties to the proceeding, are bound by the court's orders so far as they determine the assets and liabilities of the corporation and the necessity for and the amount of an assessment. To illustrate: A citizen of the United States who purchases the bonds of a corporation of Canada cannot, in a United States court, enjoin proceedings under a re-adjusting Act of the Dominion Parliament which impairs the obligation of his contract. Again, a citizen of Maryland

For a qualification, see Pinney v. Nelson, 183 U. S. 144. Here the charter of a Colorado corporation specified as its one purpose the transaction of business in California. The California law, enacted prior to incorporation, imposed the same liability upon stockholders of foreign corporations doing business within the state as upon stockholders of domestic corporations. It was held that the stockholders of the Colorado corporation were subject to the California liability, although no such liability was imposed by the law of Colorado.

2 But the order of the domicil court does not deprive the shareholder of any defense peculiar to himself. "He had the right to plead a release, or payment, or the statute of limitations, or any other fact going to show that he was not liable on his subscription." Great Western Co. v. Purdy, 162 U. S. 329. To the same effect is Stockley v. Benedict, 92 Md. 325.

'Canada R. R. Co. v. Gebhard, 109 U. S. 527. In this case the mortgage securing the bonds was executed to a corporation of

who takes out a policy in a mutual insurance company of Pennsylvania, thereby becomes a member of the corporation; and when the company goes into bankruptcy, the assessment levied by the Pennsylvania court fixes him, although not a party to the winding-up proceeding-Lycoming Insurance Co. v. Langley, 62 Md. 196.

Again, if an unwise man from the east invests in the shares of a Kansas corporation, he cannot be heard to plead ignorance of the provision in the constitution of that state which imposes an extra iiability in favor of creditors, upon the shareholders of all corporations, except railroads, religious and charitable institutions. Nor can he escape trouble by the simple device of keeping away from Kansas; in the prevailing view, such a liability is not penal and can therefore be enforced wherever the defendant may be sued. The following are further illustrations of the rule and its limitations:

First. Questions relating to the formation, interpreta

New York as trustee, and the bonds, principal and interest were payable there. The court said: "It follows that every person who deals with a foreign corporation impliedly subjects himself to such laws of the foreign government, affecting powers and obligations of the corporation with which he voluntarily contracts, as the known and established policy of that government authorizes. To all intents and purposes he submits his contract with the corporation to such a policy of the foreign government, and whatever is done by that government in furtherance of that policy, which binds those in like situation with himself, who are subjects of the government, in respect to the operation and effect of their contracts with the corporation, will necessarily bind him. He is conclusively presumed to have contracted with a view to such laws of that government.

* It follows, therefore, that anything done at the legal home of the corporation, under the authority of such laws, which discharges it from liability there, discharges it everywhere."

tion and discharge of the subscription contract are to be answered by the law of the corporate domicil. Whether and when fraud in obtaining the subscription is a good defense to a suit on behalf of creditors,-Fear v. Bartlett, 81 Md. 435; whether the common law liability shifts with a transfer, Glenn v. Williams, 60 Md. 93; what constitutes a limitation upon the statutory liability,'-these are all questions which depend upon the laws of the parent state.

Second. An ordinary chancery receiver is a mere arm of the court appointing him, is invested with no estate in the property committed to his charge, and is clothed with no power to exercise his official duties in other jurisdictions-Converse v. Hamilton, 224 U. S. 257; and except in states which apply the doctrine of comity-Castleman v. Templeman, 87 Md. 546-the foreign receiver cannot collect even a subscription balance. Much greater is the difficulty where a foreign receiver or creditor is seeking to enforce a statutory liability. Unless the procedure for collecting the extra liability provided by the state of the domicil, is one which will ensure equal treatment for all stockholders, the court of the forum will usually decline to enforce it. Where, however, the statute of the domicil makes the receiver a quasi-assignee of the corporate assets and vests him with authority to collect, he may sue in a

1The period of limitations is normally that prescribed by the law of the forum; but where the law of the creating state provides a shorter period for collecting a stockholder's liability, the latter will be regarded as a limitation upon the right; and will prevail. See Davis v. Mills, 194 U. S. 451; Ramsden v. Knowles, 151 Fed. 721; and 19 Am. & Eng. Ency. Law, 2 Ed. p. 150.

2Hale v. Allison, 188 U. S. 70; and compare Evans v. Nellis, 187 U. S. 271 and Whitman v. Oxford Bank, 176 U. S. 559.

foreign jurisdiction; and the refusal of the court of the forum to recognize his title, will constitute a denial of the constitutional full faith and credit to the laws and proceedings of the domicil state.1

1Converse v. Hamilton, 224 U. S. 243; Bernheimer v. Converse, 206 U. S. 516,—in which all of the earlier cases are reviewed. Many states have now enacted laws similar to the recent legislation of Maryland; and in the case last cited such legislation is said to embody "substantially the procedure authorized by the rrational banking act."

CHAPTER XVII.

TRANSFER OF STOCK.

§132. Preface. When you execute and deliver an assignment, whether on the back of the certificate or inde pendently of it, you are not, technically speaking, transferring the share. Transfer effects a change in the membership, and it implies the concurrence of the corporation manifested by some entry on its books.

We have seen how, formerly, the power to introduce a new member by assigning to him a share, was not a thing of course; and how, at the present time, it is, in the absence of charter or statute restriction, a matter of right. But the old conception, while nearly forgotten, is still necessary to account for some rules of the existing law. It is true that little of the membership element clings to the modern idea of a share, and that the tendency to identify it with the certificate is strong. It is often said that stock was "transferable at common law"; and that a mere assignment of a certificate, without registration, passes the legal title to the share, or such a title "for many purposes." These expressions, properly understood, do no harm, but they darken the approach to the subject. Transferability,—that is, the right to assign the share and also to substitute as

1 Compare §§ 54 and 56, ante.