for to the vendee, but the shares were not transferred on the books of the company, as required by the by-laws. The said company subsequently became insolvent, and, upon proceedings duly taken in the court of chancery of this state, John Hood, the plaintiff, was appointed receiver thereof. The receiver filed his petition in the court of chancery, giving the names of the subscribers to the stock, and the amount still due to the company upon the shares subscribed for, and thereupon the chancellor, on the 27th day of October, 1890, ordered and decreed that the said subscribers be severally required to pay to the receiver the full amount due to the company for their stock, and the said receiver was authorized and directed to collect the same by suit if necessary. The defendant having refused to pay upon demand made by the receiver, this suit was instituted, and under the direction of the trial court a verdict was rendered for the plaintiff for the amount claimed by him.

shareholders equitably. The real question in the case is whether the defendant had assigned his shares in such a way as to relieve him of responsibility. In Manufacturing Co. v. Smith, 2 Conn. 579, the incorporating act provided that the stock of the company should be transferable only on the books of the company, and it was held that such mode of transfer was necessary to absolve the subscriber from the payment of an assessment on his stock. In the subsequent case of Oxford Turnpike Co. v. Bunnell, 6 Conn. 552, the same rule as to the validity of a transfer of shares was applied, where the by-laws, and not the charter, prescribed that the transfer should be made upon the books of the company. In Dane v. Young, 61 Me. 160, the transfer not having been made in accordance with the requirement of the bylaws, the original subscriber was charged with liability for the debts of the company. In Pennsylvania the capital stock of a corporation is regarded as a trust fund for the protection and benefit of cred

Section 5 of our corporation act (Re-itors, and a subscriber cannot cast off his vision, p. 178) provides that, where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy the claims of its creditors, each stockholder shall be bound to pay on each share held by him the sum necessary to complete such share, or such proportion of that sum as shall be required to satisfy the debts of the company. Section 70 of the same act prescribes how proceedings shall be taken to declare corporations insolvent; and section 77 provides that the receiver, when appointed, shall be a trustee for the cred. itors and stockholders of the company, with full power to institute suits at law or in equity to recover the assets thereof. These provisions are declaratory of the common law. By the common law the stockholders of an incorporated company are liable to pay their subscriptions, if such payment be necessary to discharge the debts of the company. A court of equity has power to compel such payment. The capital stock which has been paid in and which remains unpaid is regarded as a trust fund pledged for the payment of the debts of the corporation. Spear v. Grant, 16 Mass. 9; Nathan v. Whitlock, 9 Paige, 152; Ward v. Manufacturing Co., 16 Conn. 593; Adler v. Milwaukee Co., 13 Wis. 57.

The insistment that it was unnecessary, and therefore illegal, to require the defendant to pay the full amount unpaid on his shares in order to satisfy the debts of the company, cannot be entertained in this court. The decree of the court of chancery requires the payment of the entire amount, and the validity of that decree cannot be drawn in question in this suit, which is collateral to it. The receiver stands in the place of the stockholders as their representative, and all the rights of the company reside in him. The company, before insolvency, could have called the whole amount unpaid, and such a call could not, in the absence of fraud, have been questioned by the stockholders. If there remains a surplus in the hands of the receiver after the debts are paid, he will distribute it to the

liability for corporate debts by the transfer of his stock to another. Messersmith v. Bank, 96 Pa. St. 440. A distinction is drawn between one who holds his stock by transfer and an original subscriber. The former may, in the absence of any fraudulent purpose, discharge himself from liability for unpaid installments by due transfer of his shares; while the latter cannot obtain immunity in that way. The cases of Canal Co. v. Innes, 3 Whart. 197, and Railroad Co. v. Clarke, 29 Pa. St. 146, show that the decisions in that state are somewhat controlled by the provisions of the acts of incorporation. Upon principle it seems that the result must be the same without regard to charter provisions. The subscription to the stock and the acceptance of a certificate for the shares constitute a contract between the subscriber and the company, by which the subscriber engages to pay the remaining installment on demand by the corporation. From this agreement the subscriber cannot recede without the assent of the company. He may transfer his stock without consent of the company, and thereby vest in the purchaser his right to the shares, and, as between himself and such purchaser, cast upon the latter the obligation to pay him such installments as are called upon the stock; but the subscriber cannot thereby impair or affect the contract rights of the company. His lia. bility to the company cannot thereby become extinguished. In Burke v. Smith, 16 Wall. 395, Mr Justice STRONG, recognizes the rule that the mere assignment of his shares by a subscriber does not relieve him from liability until the assignee is accepted as a shareholder by the company, and substituted in his place. The New York statute provides that "no transfer of stock shall be valid for any purpose whatever except to render the person to whom it shall be transferred liable for the debts of the company according to the provisions of said act, until it shall have been entered in the corporate stock book by an entry showing to and by whom transferred. In Shellington v. Howland, 53 N. Y. 371, the New York court of appeals declared

corporators as directors, and with Cord as president, and Korb as secretary and treasurer, and proceeded to issue to each other certificates of stock, 10 shares to each, according to the apportionment contained in the certificate of incorporation, that of complainant being dated May 21, 1889, and signed by Cord as president and Korb as secretary and treasurer. No cash was paid by either for his stock, which represented nothing more than prospective profits, which, according to the preliminary agreement, was to be equally divided between the three. The corporators proceeded to have the farm laid out into streets and lots, and Cord and Korb undertook to make sales, in which they were very successful. The sales were made on the installment plan, a cash payment being made and a contract given to the purchaser for the delivery of the deed upon the payment of the balance in monthly installments. By a statement made up by Korb for the meeting of the stockholders on the 1st of April, 1890, after one year's existence, the financial situation of the corporation was shown as follows:

Gross amount of sales to date, 208 lots, at a value of.........

RECEIPTS.

.....

$47,010 00

Money received on account of lots...... $10,746 58

EXPENDITURES.

For payment of mortgage, interest on mortgage, improvements, and other incidental expenses...

$10,556 52

$ 190 06

| complainant from the direction, produced dissatisfaction on his part, and put a stop to anything like co-operation between him and his associates, and some litigation ensued, not important for present purposes. On the 10th of June, 1890, the two Cords,-father and son,-together with Korb, formed a new corporation called the "Laurel Springs Land & Improvement Company," similar in its provisions to those of the Laurel Springs Land Company, having a capital of $5,000, divided into 50 shares of $100 each, 48 of which were allotted to the defendant S. S. Cord, one to the defendant Korb, and one to Samuel T. Cord, the father of the defendant S. S. Cord. On the 13th of June the defendants caused to be executed by the Laurel Springs Land Company to the defendant Korb a deed of conveyance conveying the farm aforesaid, excepting the lots in the mean time actually conveyed, and two or three lots in addition thereto, in consideration of $5,000, and on the same day Korb, for the same consideration, conveyed the premises to the Laurel Springs Land & Improvement Company. The old company on the same day, under the same management, transferred to Korb all the contracts for the lots already taken, thereby denuding the old company of the greater portion of its property. These deeds of conveyance were lodged for record in the register's office of Camden county, and were each marked on their back with the words, "don't pub.." for the purpose of preventing their being given out to the newspapers for publication. These transfers were made without actual consideration paid, in pursuance of a set of resolutions adopted by the elder company as follows: " Whereas, this company heretofore, on or about the eighth day of April, 1889, purchased of Chas. Korb and Samuel S. Cord a tract of land situated at Laurel Springs, Camden county, for the sum of nine thousand five hun. dred and fifty dollars, a certain mortgage of five thousand five hundred dollars made by Samuel S. Cord to Montgomery Staf ford forming part of the consideration, the balance of the price being secured by judz ment bonds of this company to said Charles Korb and Samuel S. Cord, no cash having been paid; and whereas, this comAt this annual meeting, the defendant pany has disposed of a large portion of Samuel S. Cord transferred one share of said premises, the payment of much of his stock to his father, S. T. Cord, and which is to be paid for in monthly installwith the aid of Korb elected the said S. T. ments, and this company having collected Cord a director in place of the complain- a large number of said monthly installant. In the statement above set forth the ments and used the same in paying off item of indebtedness of $19,745 is com- said mortgage and defraying necessary posed of outstanding bonds for $3,050 expenses, whereby this company has ingiven to S. S. Cord and Korb, for the $3,050 curred the obligation of conveying said cash payment advanced by them to the sold portion to the purchasers thereof; owner of the property, and the items of and whereas, this company has been uncommissions and salary, amounting to able to pay to said Korh and Cord the $16,512, claimed by Cord and Korb to be money due them upon the obligation of due to them for one year's services. This the company; and whereas, this comclaim was attempted to be sustained at pany is largely indebted to the said Korb the hearing, on the ground that the com- and Cord for services and commissions, plainant had failed to do anything to- and has been unable, for lack of funds, to wards aiding and furthering the enter- pay them the amounts due them for the prise, so that the whole burden fell on purchase price of said lands or their servCord and Korb, and justified them in pay-ices since rendered; and whereas, said ing themselves liberally for their services. These large charges, and dropping of the

ASSETS.

Amount due on lots sold...

Estimated value of unsold lots

Balance in treasury........

EXISTING LIABILITIES

Interest due on bonds..

Commissions on sales, 20%...

Bonds outstanding..

Secretary and treasurer's

salary.....

.......

$9,312 00
183 00
3,050 00
3,600 00
8,600 00

President's salary..

Estimated surplus..

$36,263 42 20,000 00 190 06 $56,453 48

$19,745 00

$36,708 48

Korb and Cord have signified their willingness to receive back the unconveyed

portion of said premises, in liquidation of the original purchase price and all moneys due to them, excepting out certain lots, and to assume the contracts made by this company for the sale of a portion thereof, and have requested said conveyance to be made to Charles Korb: Now, therefore, be it resolved that this company do torthwith reconvey the unconveyed portion of said premises to Charles Korb, excepting thereout lots 5 and 6, section F, and 9, section A in full satisfaction of the obligation and indebtedness of this company to said Charles Korb and Samuel S. Cord, he agreeing to perform all the agreements for the sale of any portions of said premises for which this company is now liable, and furnishing this company a release from Samuel S. Cord of all indebtedness. Resolved, that all contracts for the sale of any portion of said premises be and the same are hereby assigned to Charles Korb, and the officers of the company are hereby requested to make and execute the necessary deed and assignments to carry out this resolution." The business of selling lots was conducted after these conveyances precisely in the same manner as before, the new company, under the management of Cord and Korb, recognizing and fulfilling the contracts of the old company whenever they matured, and Cord and Korb receiving payment of install. ments due and paid by purchasers on those contracts.

allege that the consideration which complainant agreed to pay and perform therefor had never been paid or performed by complainant, and that his certificate of stock should be delivered up to be canceled, and they add a cross bill, in which they pray that it may be so delivered up. They allege that the stock in the elder company was equally divided between the three corporators without the payment of any money, and upon the agreement and understanding that each should devote and contribute his whole time and attention to pushing the sale of the lots into which the tract was to be divided, and that the complainant had not only wholly failed to assist in any manner the furthering of the enterprise, but had done all he could to embarrass and retard it, and for that reason was not entitled to any of the profits theretofore or thereafter to be derived from it; that the whole of the skilled labor which resulted in the prosperity of the company had been performed by the defendants Cord and Korb. This answer was supported by affidavits, which were read on the hearing of the order to show cause, and, after argument, I expressed the opinion that the transfers of property complained of were fraudulent and void as against the complainant, and advised an order that the defendants should produce, before a special master of this court, for inspection by the complainant, all the papers, books, vouchers, and

On the 23d of September, 1890, complain-contracts of sale belonging to the business ant, having acquired uotice of these conveyances, filed his bill, with supporting affidavits, setting forth some of the foregoing facts, and praying that he might be decreed to be entitled to the equal onethird part of the profits already derived and thereafter to be derived from the enterprise; that the conveyances by which the land was transferred from the first to the second company might be decreed to be fraudulent and void as against the complainant and the first company; that the money claimed and charged by S. S. Cord and Korb, as commissions and salaries, might be declared to be fraudulent and void, as against the complainant and the first company; and that S. S. Cord and Korb might be compelled to bring the books of the company into this state for examination; that Korb and the two Cords and the two companies might account to the complainant for his interest in the enterprise, and for a receiver, and an injunction restraining the second company from conveying or contracting to sell or mortgaging or in any way disposing of any of the lands, and from assigning, transferring, or in any way disposing of, any of the assets of the first company, and for further relief. On presenting that bill, an order was made on the defendants to show cause on a future day why an injunction should not issue according to the prayer of the bill, and, interim, restraint was made. On the return of the order the several defendants joined in an answer, in which they deny that complainant had any option for the purchase of the Stafford farm; they admit that 10 shares of full paid-up stock of the first company were issued to complainant, but

of either of the land companies, and that, whenever the funds in the hands of the treasurer of either of the companies should exceed the sum of $3,000, they should pay the same to the master, to be by him paid into court, and the individual defendants should appear, if required, to be examined by the master under oath. The defendants were further ordered to give bond conditioned that each of them should come to an account with the complainant, and should pay over the money received by them from the sale of the lots, and they were restrained and enjoined from assigning, transferring, or disposing of any of the personal assets of either of the defendant companies, or any contracts for the sale of any of the lands in question. The order was made in this shape, instead of for the appointment of a receiver, at the request of the defendants, and to avoid a complete interruption and destruction of the enterprise. Subsequently, on the 25th of March, 1891, the defendants applied for and obtained leave to file an amended answer, which they did on the 6th of April, 1891, in which they set up that on the previous 24th of February the Laurel Springs Land & Improvement Company conveyed the premises in controversy to the Laurel Springs Land Company; and they further set forth that while the title was in the younger company it had entered into contracts for the sale of 23 lots, giving their numbers, and had assigned those contracts to the Laurel Springs Land Company; that the younger company had carried out contracts for the elder company for the conveyance of 2 lots, giving their numbers, and that it had also sold and conveyed 12lots, giving their numbers. The

was

answer then sets out an account of receipts and disbursements between the Laurel Springs Land & Improvement Company and the Laurel Springs Land Company; also "a full and complete account of the Laurel Springs Land Company up to and including February 24, 1891. This last would seem to be, upon its face, a cash account of the older company. To the account contained in this answer the complainant, at the suggestion of the court, filed exceptions, and the cause brought to a hearing upon the pleadings, including the exceptions to the account. At the final hearing three matters were litigated-First. The right of the complainant to hold his certificate of stock entitling him to a one-third interest in the adventure. Second. The exceptions taken by the complainant to the account contained in the second answer of the defendants. Third. Whether the complainant was entitled at this time to a final ascertainment and setting off to him of one third of the assets of the company.

organization of the company and the laying out of the land into streets and lots, the defendants Cord and Korb began to scheme to get rid of the complainant. They tried first to buy him out; failing in that they called a special meeting of the directors for June 14, 1889, served notice of it upon him by mail, which reached him after the hour appointed for the meeting, and at that meeting they voted themselves each a salary of $3,000 per year, and, in addition thereto, a commission of 20 per cent. on all sales of lots, and Mr. Cord advertised himself as the sole agent for such sales. The fair inference from this conduct on their part is that they then thought that such salaries and commissions would absorb the bulk of the profits and leave little or nothing to be divided with the complainant, and that they did not anticipate that the enterprise would be so successful as it afterwards proved to be. Then, I think that the fair inference is, further, that such success was due, not only to the tact, industry, and energy of Cord and Korb, but also to the favorable situation and other characteristics of the land itself, and for the finding of this land and procuring the purchase of it the associates were indebted to the complainant. The defendants, after the resolution fixing their compensation, seem to have carried on the business of the corporation without any consultation with, or asking any aid from, the complainant. A charge was made that the complainant had used his situation and influence to injure rather than to aid the enterprise. I think the charge fails. It depends upon the accuracy of the memory of a single witness, and her testimony in that regard is denied by Mr. Fougeray, and the

consideration of the situation in which he was placed as secretary of the Magnolia Company. I think that the complainant's title to one-third interest in the profits of the enterprise, manifested by his certifi cate of stock, has not been shaken. If he has failed to perform his contract to aid in the enterprise, such failure might subject him to payment of damages in an action at law for its breach. He has not forfeited his proprietary right.

First. The evidence showed clearly enough that the complainant had an oral option for the purchase of the Stafford farm; that he was considerably advanced in years, and had been for several years secretary of the Magnolia Land Company, a corporation of a similar character owning land situate about two miles from Laurel Springs; that he had no tact or ability in finding purchasers for lots of this character, or promoting their sale, and his lack of efficiency in this respect was manifest. The defendant S. S. Cord was a sales agent on commission for the Magnolia Company, and was well acquainted with the complainant. Korb was Cord's friend, and was induced by him to join in the enterprise. Korb saw the complainant sev-discrepancy may well be explained by a eral times before he paid his money and signed the articles of association. Cord and Korb insisted upon being elected to the offices which they afterwards beld. The complainant was not asked or expected to resign his position in the Magnolia Company in order to assist in carrying out the Laurel Springs enterprise. All that he agreed to do was to assist it as far as he could. At the time that the ar. ticles of association were signed, and after Korb had paid his money towards the purchase of the land, he objected to complainant's having one-third interest, and proposed to cut him down to a one-fifth interest, but complainant resisted this, and insisted upon having his full one-third interest in accordance with the previous verbal agreement, and threatened to bring suit if it were not accorded to him, whereupon Korb yielded, and signed the articles upon that basis. As before stated, the certificate of stock was dated and issued to complainant on the 21st of May, 1889, but was not called for or taken away by him until the 25th of March, 1890, when it was delivered to him by the defendants without objection. This was long after the failure of the complainant to perform his agreement to assist in making sales had occurred, if it ever did occur; the evidence, however, shows that the complainant did all he could ever have been expected to do in that direction. Very soon after the

Second. The action of the two defendants-S. S. Cord and Korb-in their capacity as directors, in fixing their compensation in the way they did, is of no value whatever. Gardner v. Butler, 30 N. J. Eq. 702, where the question is exhaustively examined both in the opinion of Chancellor RUNYON, in this court, and by Justice VAN SYCKEL in the court of errors and appeals; Cone v. Russell, 48 N. J. Eq. 208, 21 Atl. Rep. 847, and cases there cited. The defendants are entitled to what their services are reasonably worth, and no more. Evidence on this subject was adduced at considerable length. Before the launching of this enterprise, Korb was a butcher in the city of Philadelphia, with no experience whatever in affairs of this kind. His business had produced him about $2,000 a year. He conducted it by the aid of an agent after the undertaking of this enterprise. The defendant S. S. Cord had been a sales agent for the Magnolia Land Com