2 attending and voting at corporate meetings, either in person or by proxy,1 paying calls or paying for one of the shares irregularly taken, accepting dividends or acting as a director," operate to estop a person from denying the regularity and validity of an alleged subscription. And in general any defense to the subscriber's liability may be considered as waived by acquiescence or delay after discovery of the facts, or by any act indicating a clear intent to abide by the contract or to pass over an objection thereto which might have been made." 7 § 546. Effect of legislation upon subscription agreements. Non-essential irregularities in the subscription may be cured by legislative enactment. The extension by the legislature of the time allowed by a railroad company's charter in which 1 Duffield v. Barnum &c. Co., (1887) 64 Mich. 293; Erie &c. Plank Road v. Brown, 25 Pa. St. 156; Buffalo &c. R. Co. v. Gifford, 87 N. Y. 294; Rockville &c. Co. v. Van Ness, 2 Cranch, C. C. 449. But see Stewart's Case, L. R. 1 Ch. App. 574; McCully v. Pittsburg &c. R. Co., 32 Pa. St. 25. 2 Maltby v. Northwestern &c. R. Co., 16 Md. 422; Mississippi &c. R. Co. v. Harris, 36 Miss. 17; InterMountain Publishing Co. v. Jack, 5 Mont. 568. 88. L. 118, and McCully v. Pittsburgh &c. R. Co., 32 Pa. St. 25, where voting by proxy, were not considered acts sufficient to amount to a waiver. 7 Cf. Schwanck v. Morris, 7 Rob. (N. Y.) 658; State v. Jefferson Turnpike Co., 3 Humph. (Tenn.) 305; City Bank v. Bartlett, 71 Ga. 797; Sharpley v. Louth &c. Ry. Co., 2 Ch. Div. 663; Ehrlanger v. Sombrero &c. Co., 8 App. Cas. 1218; Peel's Case, L. R. 2 Ch. App. 674; Ashley's Case, L. R. 9 Eq. Cas. 263; Heyman v. European 3 Bell's Appeal, (1887) 115 Pa. St. Central Ry. Co., L. R. 7 Eq. Cas. Duffield v. Barnum &c. Co., (1887) 61 Mich. 293. Contra, Philadelphia &c. R. Co. v. Cowell, 28 Pa. St. 329; s. c. 70 Am. Dec. 128, where demanding a dividend was not considered a waiver. 5 Weinman v. Wilkinsburgh &c. Ry. Co., (1888) 118 Pa. St. 192; Rice v. Rock Island &c. R. Co., 21 Ill. 93; Hunt v. Kansas &c. Co., 11 Kan. 412; Meadow v. Gray, 30 Me. 547. 6 But see Stewart's Case, L. R. 1 Ch. App. 574, where merely attending meeting, and Philadelphia R. Co. v. Cowell, 28 Pa. St. 329, where demanding a dividend, and Greenville &c. R. Co. v. Coleman, 5 Rich. 154. 8 Chubb v. Upton, 95 U. S. 665; Ogilvie v. Knox Insurance Co., 22 Hun, 380; City Bank v. Bartlett, 71 Ga. 797; Chaffin v. Cummings, 37 Me. 76; Ex parte Briggs, L. R. 1 Eq. Cas. 486; Scholey v. Central Ry. Co., L. R. 9 Eq. 266, n.; Ayres' Case, 25 Beav. 513; May v. Memphis Branch R., 48 Ga., 109; McCully v. Pittsburgh &c. R. Co., 32 Pa. St. 25. 9 Rice v. Rock Island &c. R. Co., 21 Ill. 93; Clark v. Monongahela Navigation Co., 10 Watts, 364. Contra, New York &c. R. Co. v. Van Horn, 57 N. Y. 473; Richmond &c. Co. v. Clarke, 61 Me. 351. to build the road will not release the subscribers to stock.1 Where at the time a contract of subscription was made under an agreement that payment should be made in property, the laws of the State permitted contracts of that character, but subsequently, before the organization of the company, a change in the code of the State required payments of subscriptions to be made in money, it was held that the subscription, not having been accepted by the company before it had become illegal, could not be enforced. But a statute in respect of subscriptions to the stock of companies, not prescribing the form in which they shall be made, does not invalidate a contract of that character which would be valid at common law.3 A subsequent reduction of the capital stock by the legislature to the amount actually subscribed can not relieve prior subscriptions from the implied condition that the full amount originally fixed be taken. The legislature may impart validity to a municipal subscription made without its authority, provided it would have had power in the first instance to authorize it, unless special remedial legislation of this character be prohibited by the constitution of the State. 1 Jacks v. Helena, 41 Ark. 213. 2 Knox v. Childersburg Land Co., (1889) 86 Ala. 180. 3 Buffalo & Jamestown R. Co. v. Gifford, 87 N. Y. 294. ing effect to its ratification of the action of the town, and holding its consent thus expressed effectual." Acc. Williams v. Duanesburgh, 66 N. Y. 129; People v. Mitchell, 35 4 Oldtown &c. R. Co. v. Veazie, 39 N. Y. 522; Gelpecke v. Dubuque, 1 Me. 571. 5 Grenada County v. Brogden, 112 U. S. 261; Anderson v. Santa Anna, 116 U. S. 365; Thompson v. Perrine, 106 U. S. 589; National Bank v. Yankton Co., 101 U. S. 129; Thompson v. Lee County, 3 Wall. 377; Beloit v. Morgan, 7 Wall. 619; St. Joseph v. Rogers, 16 Wall. 663; Cooper v. Thompson, 13 Blatchf. 434; Perrine v. Thompson, 17 Blatchf. 18; Horton v. Thompson, 7 Hun, 452; Rogers v. Smith, 5 Hun, 475; Duanesburgh v. Jenkins, 57 N. Y. 188, where the court said: “As it might have authorized action in this way and on these conditions by the town originally, I see no objection to giv Wall. 253; Dows v. Town of Elmwood, 34 Fed. Rep. 114; Leslie v. Urbana, 2 Biss. 435; Duanesburgh v. Jenkins, 57 N. Y. 188, restricting People v. Batchellor, 53 N. Y. 131, to the circumstances of that particular case. Cf. Hays v. Holly Springs, 114 U. S. 120; Bolles v. Town of Brimfield, 120 U. S. 759. The decisions in the United States Supreme Court to the contrary, (see Elmwood v. Morey, 92 U. S. 289) do not express the prevailing doctrine of the court, but simply follow the decisions of the appellate court in the State in which the case arose, Wood's Railway Law, § 113, note. 6 Horton v. Thompson, 71 N. Y. 520; 8547. Effect of consolidation.- A consolidation of one corporation with another releases dissenting subscribers who agreed to take shares at a time when consolidation was not authorized either by the charters of the companies or by some existing statute, and it is immaterial that the union may be authorized by a subsequent amendment of the charters or by a statute thereafter enacted. The fact that the consolidated company bears the same name as the original company does not change this rule. Even though consolidation may have been authorized at the time the subscription contract was made, a dissenting subscriber can not be held liable. thereon, if the effect of the consolidation is to work a material alteration in the original purpose for which the company was formed. It is not necessary that the subscribers' consent be expressly given. It may be presumed from such acts as taking stock in the new corporation formed by the consolidation.' By a converse rule to the general doctrine, the consolidated. company can not release a subscriber to one of the original companies from his liability to corporate creditors by acquiescing in a devise whereby he seeks to evade it." § 548. Failure of consideration. If a subscription be induced by promises on the part of the corporation which it fails to fulfil, the contract is not enforceable, since there is held to be a failure of consideration. Thus where a railway Gaddis v. Richland County, 92 Ill. 114; William v. Roberts, 88 Ill. 11; Marshall v. Selliman, 61 Ill. 218; Richland County v. People, 3 Bradw. 210. 1 Illinois &c. R. Co. v. Cook, 29 Ill. 237; Lauman v. Lebanon Val. R. Co., 30 Pa, St. 42; Gardner v. Hamilton, 33 N. Y. 421; Midland &c. Ry. v. Leech, 3 H. L. 872; Cook &c. R. Co. v. Paterson, 18 C. B. 414; Shelbyville &c. Turnpike Co. v. Barnes, 42 Ind. 498; State v. Bailey, 16 Ind. 46; s. c. 79 Am. Dec. 405; Harshman v. Bates County, 92 U. S. 569; Martin v. Junction R. Co., 12 Ind. 605; McCray v. Junction R. Co., 9 Ind. 356; Bish v. Johnson, 21 Ind. 299; Hanna v. Cincinnati &c. R. Co., 20 3 Illinois Grand Trunk R. Co. v. Cook, 29 Ill. 237. 4 Fisher v. Evansville &c. R. Co., ' 7 Ind. 407. 5 Bouton v. Dement, (1887) 123 Ill. 142. 6 Burrows v. Smith, 10 N. Y. 550. Cf. Kennedy v. Panama &c. Co., L. R. 2 Q. B. 580, company, by a promise of collateral securities, induced a party to subscribe to a road it proposed to build, and, after part payment on the subscription, placed the collaterals beyond the reach of the subscribers, in violation of the original agreement, he was declared relieved from his obligations.1 549. Withdrawal and abandonment.- A subscriber who for a long period has failed to pay his subscription or to exercise the rights of a member of the company, may be treated by it as having abandoned his connection therewith. But it is seldom that the company takes the initiative in the cancellation of subscriptions. It is generally the subscriber who seeks to sever his relations with the corporation; and it has been said that he may do this at any time before the organization of the company has been completed. Thus prior to the 1 Reusens v. Mexican National Construction Co., 22 Fed. Rep. 522. 2 Perkins v. Union &c. Co., 12 Allen, 273. Cf. Evans v. Smallcombe, L. R. 3 H. L. 249. La. Civil Code, art. 3506, (3472,) declaring that three years' possession in good faith of a movable - which corporate stock is declared to be, Civil Code, art. 474, (466) — is sufficient to give good title, does not apply to a suit brought by a stockholder against a corporation to compel it to replace in his name certain shares of stock alleged to have been negligently canceled, and the certificates therefor unlawfully issued to a third person; the defendant in such case never having been in possession of the stock. St. Romes v. Levee Steam Cotton-Press Co., (1888) 127 U. S. 614. 3 Gaff v. Flescher, 33 Ohio St. 107; Garrett v. Dillsburg & M. R. Co., 78 Pa. St. 465; Holt v. Winfield Bank, 25 Fed. Rep. 812; Cook v. Chittenden Bank, 25 Fed. Rep. 544. See Rose v. San Antonio & M. G. R. Co., 81 Tex. 49; Tillsonburg R. Co. v. Goodrich, 8 Ont. Q. B. Div. 565. Where one signs a subscription paper, entirely misunderstanding the nature of the agreement, he may obtain release from the obligations thereby incurred. County of Schuylkill v. Copley, 67 Pa. St. 386; Smith v. Reese &c. Co., L. R. 2 Eq. 264. Cf. Rockford &c. R. Co. v. Schunick, 65 Ill. 223. One induced to subscribe through fraud may upon discovery thereof recover money paid by him on his subscription in an action for money had and received. Atkinson v. Pocock, 12 Jur. 60; Woutner v. Shairp, 4 C. B. 404; Jarrett v. Kennedy, 6 C. B. 319. Or the subscriber may wait until an action at law has been brought against him by the corporation to enforce payment of his subscription and then set up by way of defense any valid cause for the illegality of the contract; or he may file his bill in equity to restrain such suit at law and to set aside the contract and to recover back payments; or, where his defense is founded upon fraud, he has also his action for damages against the parties making the misrepresentations. Paddock v. Fletcher, 42 Vt. 389. 2 date of filing of the certificate from which the incorporation of the company dates under the New York General Railroad Act of 1850, a promoter who retains possession thereof may erase or alter his subscription thereto notwithstanding his having induced others to subscribe.' But the better opinion is thought to be that in those cases where a subscription is made with full knowledge of the purpose and scope of the undertaking, and has been acted upon either by the corporation, or by other subscribers, it is irrevocable. Accordingly, the consent of all the other subscribers is necessary to effect a valid cancellation of a subscription contract; and in America, if the affairs of the company have become involved, the consent of creditors, whose equities have intervened, is also requisite to render the cancellation valid. This rule grows out of the American doctrine that the subscriptions are a trust fund for the security of corporate creditors and does not prevail in England. Accordingly, in that country, the consent of the company alone is required. While the directors have authority 1 Beach on Railways, § 129, citing parties to the action. Chandler v. Burt v. Farrar, 24 Barb. 518. 2 See New Albany & S. R. Co. v. McCormick, 10 Ind. 499; Hughes v. Antietam M. Co., 34 Md. 316; Hutchins v. Smith, 46 Barb. 235; Gulf, C. & S. F. R. Co. v. Neely, 64 Tex. 344; Kidwelly Canal Co. v. Raby, 2 Price, 93. But see Payson v. With ers, 5 Biss. 269, holding that the subscriber can not plead that he was ignorant of the true condition of the affairs of the corporation. 3 Robinson v. Pittsburgh &c. R. Co., 32 Pa. St. 334; s. c. 72 Am. Dec. 772; Zirkel v. Joliet &c. Co., 79 Ill. 334; Ryder v. Alton &c. R. Co., 13 Ill. 516; White Mountains R. Co. v. Eastman, 34 N. H. 124; Jewett v. Valley Ry. Co., 34 Ohio St. 601; Burke v. Smith, 16 Wall. 390; New Albany v. Burke, 11 Wall. 96; Bedford R. Co. v. Bowser, 48 Pa. St. 29. Thus a receiver can not compromise subscriptions except by leave of court when all the stockholders are Brown, 77 Ill. 333. Cf. Pearson's Case, L. R. 7 Ch. 309. In a Pennsylvania case the defendant had been active in soliciting subscriptions for the building of a railroad, having taken a book from its agent, subscribed therein himself and persuaded others to subscribe, and after keeping the book for about six months, by reason of a disagreement with the company's agent about the payment for his services, cut his name out of it and returned it to the company, and it was held that he could not thus cancel his contract but was liable for the amount of his subscription. Green v. Chartiers Ry. Co., 96 Pa. St. 391; s. c. 42 Am. Rep. 548. Acc. Railroad Co. v. White, 10 S. C. 155. Cf. Jewett v. Valley R. Co., 34 Ohio St. 601. 4 Coffin v. Ransdell, (1887) 110 Ind. 417. 5 In re Dronfield &c. Co., 17 Ch. Div. 76. |