shall be eligible to the office of director of such corporation, the same as if they were individually stockholders therein and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, powers and privileges of individual owners or holders of such stock.

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§ 53. Subscriptions to stock. If the whole capital stock shall not have been subscribed at the time of filing the certificate of incorporation, the directors named in the certificate may open books of subscription to fill up the capital stock in such places and after giving such notices as they may deem expedient, and may continue to receive subscriptions until the whole capital stock is subscribed. At the time of subscribing, every subscriber, whose subscription is payable in money, shall pay to the directors ten per centum upon the amount subscribed by him in cash, and no such subscription shall be received or taken without such payment.

(L. 1890, ch. 564, § 41, as re-enacted by L. 1892, ch. 688, § 41.)

1. This section does not point out how or where the books of subscription shall be opened, or what kind of books shall be used. Buffalo & J. R. R. Co. v. Gifford, 87 N. Y. 294. Every purpose of the statute is satisfied, if the directors adopt a book which some one else has provided. Id.

2. A subscription of the whole amount of stock is never held a condition precedent to a legal corporate existence, except when it is made so by the act of incorporation. Schenectady, etc., Co. v. Thatcher, 11 N. Y. 102.

3. Form of complaint in action on agreement. Knickerbocker Trust Co. v. Hard, 67 App. Div. 463.

4. Subscription cannot be enforced where prospectus differs from certificate of incorporation. Stern v. McKec, 70 App. Div. 142.

5. Railway corporation authorized to issue preferred stock without conditions. May make such conditions as it chooses. Hackett v. N. P. R. Co., 36 Misc. 583. 6. Subscriber not mentioned in certificate liable when demand made shortly after organization. Woods M. V. Co. v. Brody, 39 Misc. 79.

7. Plaintiff relying on representations of facts, not merely opinions, which were untrue, can rescind his subscription and recover the amount paid thereon. Mack v. Latta, 83 App. Div. 242.

8. When directors are not necessary parties in action to rescind, etc. Mack v. Latta, 83 App. Div. 242.

9. Defendant's giving note as payment for ten per cent. of value of stock purchased by him not equivalent to cash payment, being merely a promise to pay. Hapgoods v. Lusch, 123 App. Div. 23.

10. Action brought on subscription to stock of corporation cannot be sustained unless ten per cent. of stock subscription is paid in cash at the time it is made. May v. Charlouis, 128 App. Div. 127.

11. Even if whole capital stock has not been paid in, subscribers are liable for

debts incurred by corporation in preparing to begin business. Myers v. Sturgis, 123 App. Div. 470; 108 N. Y. Supp. 528.

12. As to rights of stockholder who has been induced to subscribe to stock through misrepresentation, see Cawthra v. Stewart, 59 Misc. 38; 109 N. Y. Supp. 770.

54. Time of payment of subscriptions to stock. — Subscriptions to the capital stock of a corporation shall be paid at such times and in such instalments as the board of directors may by resolution require. If default shall be made in the payment of any instalment as required by such resolution, the board may declare the stock and all previous payments thereon forfeited for the use of the corporation, after the expiration of sixty days from the service on the defaulting stockholder, personally, or by mail directed to him at his last-known post-office address, of a written notice requiring him to make payment within sixty days from the service of the notice at a place specified therein, and stating that, in case of failure to do so, his stock and all previous payments thereon will be forfeited for the use of the corporation.

Such stock, if forfeited, may be reissued or subscriptions therfor may be received as in the case of stock not issued or subscribed for. If not sold for its par value or subscribed for within six months after such forfeiture, it shall be canceled and deducted from the amount. of the capital stock. If by such cancellation, the amount of the capital stock is reduced below the minimum required by law, the capital stock shall be increased to the required amount within three months thereafter or an action may be brought or proceedings instituted to close up the business of the corporation as in the case of an insolvent corporation. If a receiver of the assets of the corporation has been appointed, all unpaid subscriptions to the stock shall be paid at such times and in such instalments as the receiver or the court may direct.

(L. 1890, ch. 564, § 43, as amended by L. 1892, ch. 688, § 43.

1. "The general rule is well settled in this State, that in the absence of a contract to make payments in future instalments, subscriptions become due and payable at once and no call or demand before action therefor is necessary." Willams v. Meyer, 41 Hun, 545.

2. It is competent for a subscriber to enter into a contract whereby he cannot be called upon to pay at the time of subscribing, but at future periods continuing for more than six years. Ib.

3. But it seems the court has power to disregard in its discretion the terms

of the contract and hold the price of the shares payable at once. Ib. Per DANIELS, J.

4. As to effect of transfer of shares of stock upon liability for unpaid subscriptions, see editorial note to Rochester & Kettle Falls Land Co. v. Raymond, 47 L. R. A. 246, presenting the authorities on that question.

§ 55. Consideration for issue of stock and bonds. No corporation shall issue either stock or bonds except for money, labor done or property actually received for the use and lawful purposes of such corporation. Any corporation may purchase any property authorized by its certificate of incorporation, or necessary for the use and lawful purposes of such corporation, and may issue stock to the amount of the value thereof in payment therefor, and the stock so issued shall be full paid stock and not liable to any further call, neither shall the holder thereof be liable for any further payment under any of the provisions of this chapter; and in the absence of fraud in the transaction the judgment of the directors as to the value of the property purchased shall be conclusive; and in all statements and reports of the corporation, by law required to be published or filed, this stock shall not be stated or reported as being issued for cash paid to the corporation, but shall be reported as issued for property purchased.

(L. 1890, ch. 564, § 42, as amended by L. 1892, ch. 688, § 42, L. 1901, ch. 354, §1.)

1. When the president of a corporation had received no salary for his services and in addition to the services had advanced money, Held that the satisfaction of these debts was a good consideration for the transfer of some of its stocks by the corporation to the president. Reed v. Hoyt, 51 Superior Ct. 121, aff'd 109 N. Y. 659, 17 N. E. 418.

2. "A corporation cannot avoid its bonds on the ground that they were issued at less than their face to persons who were its trustees when the act has received the acquiescence and ratification of the stockholders." Lyceum v. Ellis, 57 Superior Ct. 532, 8 N. Y. Supp. 867.

3. See note on liability for illegal or exaggerated stock. 14 Abb. N. C. 441. 4. See note to Van Cleve v. Berkey, 42 L. R. A. 593, presenting the authorities on the question as to how far payment for stock by transfer of property will protect the shareholder against creditors of the company.

5. The application upon his stock of an account for services rendered in constructing furnaces for the company by a subscriber for original stock, is a payment in money within the meaning of this section. Veeder v. Mudgett, 95

N. Y. 295.

6. A corporation may issue stock for portion of purchase price, and may pay in cash or issue bonds for balance. Gamble . Queens C. W. Co., ante

7. Stockholder to whom full paid stock was issued for less than par only liable to amount he agreed to pay. Thompson v. Knight, 74 App. Div. 316.

8. What held to constitute defect of parties defendant. Jones v. Nassau Sub. Home Co., 53 Misc. 63; 101 N. Y. Supp. 1089.

9. One who buys stock in a corporation, issued contrary to the provisions of section 55, that is, neither for money, labor or property, cannot recover the price from the seller, in the absence of fraud or deceit. Ersfeld v. Exner, 128 App. Div. 135.

§ 56. Liabilities of stockholders. Every holder of capital stock not fully paid, in any stock corporation, shall be personally liable to its creditors, to an amount equal to the amount unpaid on the stock held by him for debts of the corporation contracted while such stock was held by him. As to existing corporations the liability imposed by this section shall be in lieu of the liability imposed upon stockholders of any existing corporation, under any general or special law, excepting laws relating to moneyed corporations, and corporations and associations for banking purposes, on account of any indebtedness hereafter contracted or any stock hereafter issued; but nothing in this section contained shall create or increase any liability of stockholders of any existing corporation under any general or special law. (L. 1890, ch. 564, § 57, as amended by L. 1892, ch. 688, § 54; L. 1901, ch. 354, § 1.)

See section 42 Stock Corporation Law, ante.

1. It is a defense, and a stockholder may show in his exoneration, that his name was placed on the books of the corporation without his consent, but when he actually buys stock, whether from the corporation or an individual, it is no defense that he was induced to do so through fraudulent representations e. g., the representations of the president that it was 'full-paid capital stock upon which there was no liability of the stockholders," and it makes no difference that he did not know that the representations were false until after the insolvency of the corporation. Briggs v. Cromwell, 9 Daly, 436.

2. If a stockholder, sued for the indebtedness of the corporation, can show in his defense that he has paid on account of its debts or has become an honest creditor thereof in a sum equal to the liability which the statute has imposed upon him, he will be entitled to judgment; but such a defense being of an equitable character, it is essential to show that the defendant and creditor stand on an equality. Hence, where the defendant stockholder set up as a defense the purchase by him of two judgments against the corporation, but it did not appear that he had paid for such judgments the full amounts thereof, Held, that he therefore did not bring himself within the rule of law permitting in such action a defense of equitable offset. Buckley v. Whitcomb, 49 Hun, 290, 1 N. Y. Supp. 748.

3. When a single stockholder or his representative is sued as such by a creditor of a corporation, to charge him with a debt of the, corporation, he may set off a claim against the latter of a greater amount of which he is owner. Christiansen v. Colby, 43 Hun, 362.

4. The liability of a shareholder to pay for his shares does not arise out of the relation, but upon his contract, express or implied, or upon statute; and in the absence of either of these grounds a person to whom shares have been issued gratuitously (bonus stock) is not liable to pay the par value as upon a subscription. Christiansen v. Eno, 106 N. Y. 97, 60 Am. Rep. 429, 12 N. E. 648.

5. So, also, where bonds of a corporation have been issued by it gratuitously to a stockholder, but no portion of its property or assets has been applied in payment thereof, the stockholder is not liable to account to creditors for the proceeds of the sale of said bonds by him. Ib.

6. As creditors of an insolvent corporation, seeking to recover of a holder of its stock an unpaid balance on his subscription, simply claim through the corporation, they have no greater rights than it. Glenn v. Garth, 133 N. Y. 18, 30 N. E. 649, 31 N. E. 344.

7. In an action against a stockholder to recover a debt due from the corporation, a judgment against the corporation furnishes no evidence of the debt, but plaintiff must prove its (debt's) existence. Beveridge v. Abernethy, 24 Weekly Dig. 513.

8. See N. T.W. Co. v. Gilfillian, 124 N. Y. 302, 26 N. E. 538.

9. As to right to enforce stockholder's liability outside of State of incorporation, see editorial note to Cushing v. Perot, 34 L. R. A. 737, presenting the authorities on that question.

57. Liabilties of stockholders to laborers, servants and employees. The stockholders of every stock corporation shall jointly and severally be personally liable for all debts due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation. Before such laborer, servant or employee shall charge such stockholder for such services, he shall give him notice in writing, within thirty days after the termination of such services, that he intends to hold him liable, and shall commence an action therefor within thirty days after the return of an execution unsatisfied against the corporation upon a judgment recovered against it for services.

(L. 1890, ch. 564, § 57, as amended by L. 1892, ch. 688, § 54; L. 1901, ch. 354, §1.)

1. In the enactment of such provisions it has been the policy of the legislature to protect those only who are the least able to protect themselves, and who earn their living by manual labor for a small compensation. Gurney v. A. & G. W. Ry. Co., 58 N. Y. 358; Stryker v. Cassidy, 76 id. 53.

2. Under chapter 611 of 1875, stockholders were not under any special liability to laborers, servants or employees for services performed for the corporation. Richards v. Beach, 19 Abb. N. C. 84.

3. Laborers or servants, within the meaning of this section, are persons who, in common parlance, and according to the general understanding of men, fall under that appellation, in enumerating the different classes of persons employed by a corporation. Dean v. De Wolf, 16 Hun, 186; aff'd 82 N. Y. 626.