*CHAPTER IX.

ASSESSMENTS OR CALLS.

SECTION I.

Party liable for Calls.

1. The party upon the register liable for calls. | 4. Trustee compelled to pay for shares.

2. Bankrupts remain liable for calls.

3. Cestuis que trust not liable for calls in law or equity.

5. One on registry may show his name improperly placed there.

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§ 47. 1. It seems to be settled law that the registered owner of railway shares is liable for all calls thereon, so long as his name remains upon the register. The effect of the transfer of railway scrip is only to convey an equitable interest in the shares, with the right to have the shares formally assigned to him, and his name entered upon the register as a shareholder.1

2. In case of bankruptcy, the bankrupt remains liable for all calls, unless the names of the assignees are registered on the books of the company, as this is not regarded as a debt

1 Midland Great Western Railw. Co. v. Gordon, 5 Railw. C. 76; s. c. 16 M. & W. 804; Mangles v. Grand Collier Dock Co., 2 Railw. C. 359; Sayles v. Blane, 6 Railw. C. 79; West Cornwall R. v. Mowatt, 15 Q. B. 521. In this case it was said, even if the transaction by which the title to the stock and the registry of defendant's name were made, were illegal, it could not avail him in an action for calls. See post, § 236.

Long Island R. Co., 19 Wend. 37; Mann v. Currie, 2 Barb. 294; Hartford & N. H. R. v. Boorman, 12 Conn. R. 530; Mann v. Cooke, 20 Conn. R. 178; Rosevelt v. Brown, 1 Kernan, 148. The registry-book of shareholders is primâ facie evidence of the liability of those whose names appear upon it, to calls, although irregularly kept. Birmingham R. v. Locke, 1 Q. B. 256; London Grand J. R. v. Freeman, 2 M. & G. 606; Same v. Graham, 1 Q. B. 271; Aylesbury R. v. Thomson, 2 Railw. C. 668. This last case holds that the purchaser of shares is only liable for calls made after his name is upon the register. The company may, by its charter, and probably by a by-law, provide that the original subscriber shall be holden for all calls, or until a certain amount is paid in. Vicksburg, Shreveport, & Texas Railw. v. McKeen, 14 La. Ann. 724.

payable in future, and which may be proved under the commission.2

*3. The trustee of shares, whose name appears upon the books of the company, is alone liable for calls, and the company have no remedy in equity for calls against the cestui que trust.3

But if a shareholder when the company is in extremis makes a colorable transfer to an irresponsible person, it will not be held to relieve him from liability to contribute. But in the absence of fraud or mala fides the cestui que trust cannot be subjected to a call, although he may be compelled to indemnify his trustee.5 But it seems finally to be settled in the English Court of Chancery, that a shareholder may transfer his shares in an abortive company, where such shares pass by delivery to an insolvent person, for the purpose of getting rid of liability to contribute to its responsibilities, provided the transaction be a real one, and not a false or hollow contrivance. But where the transaction exhibits no motive except escape from the liability of the company, and especially where it transpires after the company is publicly declared insolvent, it will be regarded as merely colorable and not valid. But where the holder of shares threatened to put the company into insolvency unless the directors would find some one to purchase his shares and give him an indemnity, which was done twelve months before the company became insolvent, it was held to be a valid transfer.8 Trustees under a will are properly made contributories.9

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2 South Staffordshire R. v. Burnside, 2 Eng. L. & Eq. 418; s. c. 5 Exch. 129; 6 Railw. C. 611.

3 The Newry, W. & R. R. v. Moss, 4 Eng. L. & Eq. 34; s. c. 14 Beav. 64. But where, in winding up the affairs of a company, the name of one of the members, who had obtained his certificate since the expenses were incurred, was placed among the contributories, it was held he was not liable. Chapple's case, 17 Eng. L. & Eq. 516; s. c. 5 De Gex & S. 400.

* Lund ex parte, 27 Beav. 465; Hyam ex parte, 6 Jur. N. S. 181; s. c. 1 De G. F. & J. 75. See also De Pass's case, 4 De G. & J. 544; Chinnock ex parte, 1 Johns. Eng. Ch. 714. Post, § 242.

5 Electric Tel. Co. v. Bunn, 6 Jur. N. S. 1223.

• Mexican & South Am. Co. in re, 2 De G. F. & J. 302; Slater ex parte, 12 Jur. N. S. 242.

7 Electric Tel. Co. in re, 30 Beav. 143.

› Phoenix Life Assurance Co., 7 Law T. N. S. 267.

Drummond ex parte, 2 Gif. 189; s. c. 6 Jur. N. S. 908.

4. The trustee, into whose name the cestui que trust had caused shares to be transferred by deed, reciting that the price of the same had been paid to the vendor, who executed the deed, may nevertheless be compelled to make good such price to the vendor, if it were not in fact paid, although he accepted the transfer in the belief that it had been paid.10

5. Notwithstanding the defendant's name appear upon the register of shares, he will be permitted, in a suit for calls, to show that it was illegally placed there, and without his authority; but a purchaser of shares, or even an original subscriber, cannot be sued for calls, under the English statute, until his name is placed on the registry.11 But one's name appearing upon the books of the company as a shareholder is prima facie evidence of the fact, in an action against such person to enforce against him the personal responsibility of a stockholder for the debts of the company.12 And in such an action the judgment against the corporation is primâ facie evidence of its indebtedness as against the stockholder. 12

SECTION II.

Colorable Subscriptions.

1. Colorable subscriptions valid.

4. Register evidence although not made in the

2. Directors may be compelled to register them. time prescribed.

3. Oral evidence to vary the written subscrip- 5. Confidential subscriptions void. tion inadmissible.

§ 48. 1. Equity will not restrain a railway company from enforcing calls, by action at law, upon the ground that one of the conditions of the charter, requiring a certain amount of subscriptions of stock before the incorporation took effect, had not been complied with, but that a fraud upon the provision had been practised by means of colorable subscriptions. The Court of Chancery regards colorable subscriptions, made in the course of

10 Wilson v. Keating, 27 Beav. 121.

11 Hodges on Railways, 101, 4th ed. Newry & Inniskillen Railw. v. Edmunds, 2 Exch. 118.

12 Hoagland v. Bell, 36 Barb. 57.

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getting a bill through the House of Lords, (to comply with one of the standing rules of that house, requiring three fourths of the requisite outlay to be subscribed before the bill passes,) to be binding upon the directors and managers, who make the same, and that they are in fact valid and binding subscriptions, although such subscriptions were made with the purpose of being subsequently cancelled, and had never been registered upon the books of the company, or any calls made upon them.

2. It is within the proper range of the powers of a court of equity to compel the directors to register such shares and enforce the payment of calls upon them.1

In a recent case 2 where this subject came under discussion in

1 Preston v. Grand Collier Dock Co., 2 Railw. C. 335; Mangles v. The Same, id. 359. The principle of these cases is very distinctly recognized in the case of Blodgett v. Morrill, 20 Vt. R. 509, and it lies at the foundation of all fair dealing, that one is bound by his own representations, upon which he had purposely induced others to act, although at the time he did not intend to be himself bound by them, but expected, through favor, to be relieved from their performance. See also Henry v. Vermilion R. Co., 17 Ohio, 187. But if one obtain shares in a distribution by commissioners by fraud, he may be compelled, in equity, to surrender them to other subscribers, to whom they would have been awarded but for such fraud. Walker v. Devereaux, 4 Paige, 229.

A subscription to the stock of a railway made in the common form upon the books of the company, the subscriber at time of subscription taking the following writing, signed by the clerk of the company, by order of the directors:

"In consideration that Ebenezer E will subscribe for thirty shares in the White Mountains Railway, said company agree to release him from twenty-five of said shares, or such portion of said twenty-five shares, as he may within one year elect to withdraw from his subscription, and if he has been assessed, and has paid anything on said shares, that he elects to be released from, that these payments shall be allowed him, on the shares that he retains, and that the treasurer shall regulate his stock accounts and assessments accordingly," is a valid subscription for the thirty shares, it having been understood, at the time of making the subscription, between the subscriber and the directors, that the same was to be held out to the public, as a bonâ fide subscription for the thirty shares, and no disclosure made of the writing given to the subscriber.

It was held that the agreement to release the subscriber was a fraud upon other subscribers, and void, and the subscription may be enforced. White Mountains Railw. v. Eastman, 34 New H. R. 124; Downie v. White, 12 Wisc. 176.

See also Conn. & Pass. Rivers R. v. Bailey, 24 Vt. R. 465; Mann. v. Pentz, 2 Sand. Ch. 257; Penobscot & Kennebec R. v. Dunn, 39 Maine R. 601.

2 North Shields Quay Co. v. Davidson, 4 Kay & J. 688.

equity, it was held that where the provisional directors, in the process of carrying a bill through parliament, proposed to the contractor that he should have the contract for the company's works, provided he would accept payment partly in shares, the number to be settled by the company's engineer; but contracted for him to sign for a sufficient number of shares to make up the amount required by the standing orders of parliament, which was 630 of £10 each, which he accordingly subscribed and the bill passed; but when the contract was closed he was to take but 300 shares, the scheme being abandoned before the works were commenced, it was held that the arrangement made by the directors with the contractor was ultra vires; and if not a fraud upon the orders of parliament it was void as against such subscribers as were not privy to it; and that the circumstance of the contractor having subscribed the deed last but one, and the last subscriber being privy to the arrangement, did not alter the rights of those subscribers who were not privy to it; and that the contractor was liable, as a contributory, for the entire number of shares for which he signed the deed.

*3. Oral evidence is inadmissible to vary the terms of a subscription to the stock of a railway unless it.tend to show fraud or mistake. But where the subscriber is really misled, and induced to subscribe for stock, upon the representation of a state of facts

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Wight v. Shelby Railw., 16 B. Monroe, 5; Blodgett v. Morrill, 20 Vt. R. 509; Kennebec & Portland R. v. Waters, 34 Maine R. 369. But mere mistake, or misapprehension of the facts, by the subscriber, is no ground of relief unless it amount to fraud and imposition, brought about by some agent of the company. Hence where one subscribed for shares in a railway, under the mistaken belief that he might forfeit his stock at will, and be no further liable, he was held liable, notwithstanding this belief was the result of assurances made by the person taking the subscription at the time of its being made, that such were the terms of subscription secured by the charter, such assurances being founded in mistake, and not wilfully false. Railroad Company v. Roderigues, 10 Rich. (S. C.) 278; N. C. Railw. v. Leach, 4 Jones Law, 340. It is here said, that one of the commissioners, in taking subscriptions to the stock of a railway company, has no right to give any assurances as to the line of location which will be adopted. And if the location is different from that provided in the charter of the company, the party may lose the right to object to paying his subscriptions on that ground, unless he resort to mandamus or injunction, at the earliest convenient time. Booker ex parte, 18 Ark. R. 338; Brownlee v. Ohio, Ind. & Ill. Railw., 18 Ind. R. 68.