though he does not participate in the organization, and though the corporation becomes merely a de facto corporation. McCarter v. Ketcham, 74 N. J. Law, 825. The subscription and the acceptance of a certificate for shares constitute a contract by which the subscriber agrees to pay the remaining instalments on demand by the corporation. Hood v. McNaughton, 54 N. J. Law, 425.

From this agreement the subscriber cannot recede without the assent of the company, evidenced by the consummation, in the form required by the statute, of the transfer by the entry of the name of the transferee on the registry of stockholders in the place of the subscriber, and the delivery of a new certificate to and in the name of the transferee. Id.

A stockholder is liable for assessments lawfully made while he is registered on the books of a corporation as such, and he is not released from such liability by a transfer of the stock after the call has been made, but before it becomes payable. Campbell v. American Alkali Co., 125 Fed. Rep., 207.

As to the liability of stockholders who assent to a special assessment on fully paid stock; where a judgment against the corporation has been regularly obtained; or, in the case of a de facto director, see Johnson v. Tennessee Oil Co., 74 N. J. Eq., 32.

In an action at law for contribution, recovery against a director or stockholder is limited to the proportionate share of each, independent of the question whether any of the contributors were insolvent or without the state. In equity the contributor or co-surety is liable to contribute to the payment of his proportionate share of any co-surety insolvent or beyond the reach of process. Johnson v. Tenn. Oil Co., 75 N. J. Eq., 314.

A subscriber, relying on false and fraudulent representations in a prospectus respecting the value of the property to be transferred to the company, has ground for relief against the corporation. Manning v. Berdan, 135 Fed. Rep., 159.

A provision in the certificate of incorporation that stockholders of record shall be liable for assessments on unpaid stock, is not inconsistent with the provisions of Sections 8 and 21. Such a provision is binding upon a stockholder who became such after the organization of the company, and, in case of a transfer, protects the company until it is informed of the name of the vendee or until the surrender of the stock certificate. Brown v. Morton, 71 N. J. Law, 26.

Assessments may be made on full paid stock by agreement of the stockholders and there is no reason why a consenting stockholder should not be bound by such agreement, and the company may enforce such agreement. Johnson v. Tenn. Oil Co., 74 N. J. Eq., 32. Liability of stockholders of foreign corporation depends on the laws of the state of incorporation. Id.

A court of equity is the proper tribunal to order an assessment on unpaid stock; but when the assessment has been ordered an action at law may be brought. Clevenger v. Moore, 71 N. J. Law, 148.

Actions upon stockholders' liability must be brought where the defendant resides or can be served with process. Bigelow v. Old Dominion Copper Co., 71 Atl. Rep., 153.

As to the right to enforce stockholders' liability outside of the state of incorporation, see Middletown National Bank v. Railway Company, 197 U. S., 394; Leyner Engineering Works v. Kempner, 163 Fed. Rep., 605.

The elements which constitute a contract of subscription to stock are stated in Woods Motor Vehicle Co. v. Brady, 181 N. Y., 145, and in Ecuadorian Association v. Ecuador Co., 70 N. J. Eq., 277; aff'd 71 Id., 757. This case, along with Honeyman v. Houghey, 66 Atl. Rep., 582, and In re Remington Automobile & Motor Co., 139 Fed. Rep., 766; s. c. 153 Id., 345, discusses the liability of a stockholder for corporate debts, especially where property has been exchanged for fully paid stock.

One may become liable as a stockholder without formal subscription. Clevenger v. Moore, 71 N. J. Law, 148.

In American Alkali Co. v. Kurtz, 134 Fed. Rep., 663; aff'd 138 Id., 392, it was held that the real owner of corporate stock standing in the name of a "dummy" was liable as a shareholder for unpaid assessments and for statutory liability for debts. The court cited Pauley v. State Loan & Trust Co., 165 U. S., 606.

On the question of the payment of subscriptions in stock of another company, see Southern Trust & Deposit Co. v. Yeatman, 134 Fed. Rep., 810.

Advances made by a promoter for the purpose of furthering a scheme to give stock the status of "full paid" stock were held, in Hollins v. American Union Electric Co., 66 N. J. Eq., 457, to be payments for stock and not loans.

Liability of transferee of stock.

A distinction is drawn between one who holds the stock by transfer and an original subscriber. The former may, it seems, in the absence of a fraudulent purpose, discharge himself of liability for unpaid instalments by due transfer of his shares, although the transfer may not be recorded on the books of the company. The latter cannot obtain immunity in that way. Hood v. McNaughton, 54 N. J. Law, 425, 428.

A bona fide transferee of stock, the certificate for which recites that it is full paid, is not liable on the contract of the original subscriber, provided he has no knowledge that the stock has not been fully paid and no notice from which knowledge may be inferred, or which requires him to make inquiry. The trust fund theory does

not go so far as to warrant the ruling that a creditor should be allowed to shift the right which he holds against the original subscriber to a bona fide transferee who receives the stock without knowledge of any infirmity. Easton Nat'l Bank v. Am. Brick & Tile Co., 69 N. J. Eq., 326; aff'd 70 Id., 722.

The registered holder of stock at the time of the call is liable. Campbell v. American Alkali Co., 125 Fed. Rep., 207.

The liability of stockholders for unpaid stock is analogous to that of joint guarantors and solvent stockholders within the jurisdiction are liable for the entire burden. See v. Heppenheimer, 69 N. J. Eq., 36.

For a discussion of the question of the implied liability of a transferee of stock for unpaid instalments, see Sigua Iron Co. v. Brown, 171 N. Y., 488, 496.

Remedy for collecting assessments.

The validity of an order of directors levying an assessment on a stockholder cannot be collaterally attacked in an action against him to recover the assessment. Campbell v. American Alkali Co., 125 Fed. Rep., 207.

Bonus stock.

Holders of stock given as bonus are liable on it to creditors, but not to the company. Hebberd v. Southwestern Cattle Co., 55 N. J. Eq., 18.

As to the legality of bonus stock issued under resolutions of a board of directors of a foreign corporation, see Central Consumers' Wine & Liquor Co. v. Madden, 68 Atl. Rep., 777.

Unless rights of creditors interve or unless positive fraud has been clearly established, stock issued as a bonus with the sale of bonds, or stock issued as a result of overvaluation of property, cannot necessarily be regarded as issued fraudulently. Arnold v. Searing, 73 N. J. Eq., 262.

Statute of limitations.

The statute of limitations commences to run, as to unpaid subscriptions to the stock of a corporation which has become insolvent, after a call and assessment has been made by the receiver upon an order of the court that a call is required to pay creditors. McCarter v. Ketcham, 72 N. J. Law, 247; see s. c., 74 Id., 825.

Stockholders' action.

There is no express liability of one stockholder to another for the payment to the company of unpaid stock. The court will not interfere to compel stockholders of a solvent company to make their

stock fully paid where the complaining stockholder is likewise in default. Sivin v. Mutual Match Co., 72 N. J. Eq., 577.

See also cases cited under Section 49.

22. Assessments on Unpaid Shares.

The directors of every corporation may, from time to time, make assessments upon the shares of stock subscribed for, not exceeding, in the whole, the par value thereof; and the sums so assessed shall be paid to the treasurer at such times and by such instalments as the directors shall direct, said directors having given thirty days' notice of the assessment and of the time and place of payment either personally or by mail or by publication in a newspaper published in the county where the corporation is established.

P. L. 1846, p. 67; P. L. 1849, p. 303; Act of 1875, §27; P. L. 1882, p. 252.

The general rule seems to be that a corporation must comply with all the conditions precedent to payment on the part of the subscribers before a suit can be maintained upon the subscription. Where a subscriber agreed to pay in certain instalments, after certain calls, the court held that there could be no recovery against him without proof that the calls had been duly made.

The rule in New Jersey may be stated as follows: A subscriber is not bound to pay for his stock except in the manner prescribed by statute or defined in the charter or by-laws, unless he waives these requirements. Grosse Isle Hotel Co. v. l'Anson's Exrs., 42 N. J. Law, 10; aff'd 43 Id., 442; Watjen v. Green, 48 N. J. Eq., 322; aff'd 49 N. J. Eq., 576.

In construing a similar section in the Railroad Act, the court held that a suit by the company will not lie on a subscription until a call has been duly made. Braddock v. P. R. R. Co., 45 N. J. Law, 363, 364; see N. J. Midland Ry. Co. v. Strait, 35 N. J. Law, 322.

Where the company has become insolvent and a receiver has been appointed, the Court of Chancery may direct the receiver to make calls. Hood v. McNaughton, 54 N. J. Law, 425; Barkalow v. Totten, 53 N. J. Eq., 573; Hebberd v. Southwestern Cattle Co., 55 N. J. Eq., 18; Cumberland Lumber Co. v. Clinton Hill Co., 57 N. J. Eq., 627; sustained, 72 N. J. Law, 247.

"A call is nothing more than an official declaration that the

sums subscribed are required to be paid." Braddock v. P. R. R. Co.,

supra.

The unpaid and uncalled subscriptions for stock cannot be mortgaged or sold by the corporation. Where the call has been duly made, but not collected, an assignment of the amount already called is valid. Cook on Corporations, Section 111; see N. J. Midland Ry. v. Strait, supra.

Preference stockholders are liable for calls and assessments made by directors. Kirkpatrick v. American Alkali Co., 140 Fed. Rep., 186.

23. Neglect to Pay Assessments.

If the owner of any shares shall neglect to pay any sum assessed thereon for thirty days after the time appointed for payment, the treasurer, when ordered by the board of directors, shall sell, at public auction, such number of the shares of the delinquent owner as will pay all assessments then due from him, with interest, and all necessary incidental charges, and shall transfer the shares sold to the purchaser, who shall be entitled to a certificate therefor.

P. L. 1846, p. 67; P. L. 1849, p. 304; Act of 1875, $28.

As to the liability of stockholders to contribute a proportionate share of an assessment due and unpaid by one who is insolvent or beyond the reach of process, see Johnson v. Tennessee Oil Co., 75 N. J. Eq., 314.

24. Sale of Shares.

The treasurer shall give notice of the time and place appointed for the sale, and of the sum due on cach share, by advertising the same three weeks successively, once in each week, before the sale, in some newspaper published in the county where the corporation is established, and by mailing a notice thereof to the delinquent stockholder, if he knows his post-office address.

P. L. 1846, p. 67; P. L. 1849, p. 304; Act of 1875, §29.

Where stock has once been rightfully issued, even though nothing has been paid on it by the stockholder, it can only be forfeited