the full amount;20 by the other view, nothing more can be rightfully demanded.21 In support of the latter view, it is said that there is nothing immoral in thus investing stock with a new quality, because creditors contract with the corporation, well knowing the amount of its resources.

(a.) If credit has been given to a bank, supposing that all the stock has been, or will be, paid, or will be demanded to discharge its obligations, then the stockholders may be compelled to pay whatever may be required for this purpose, not exceeding their fixed liability.22 On the other hand, if creditors know that only a portion has been paid, and that the stockholders have determined to contribute no more, and no statutory rule exists requiring stockholders to pay more, no deception is practised, and creditors have no rightful claim for further contributions.2

23

(b.) A purchaser or assignee of stock issued as fully paid, though not in truth, which is acquired by him without any knowledge of the fact, is not liable either to the bank,24 or to its creditors,25 for the unpaid portion. But he is not protected by the recital in the certificate he has secured, that the stock is

20

Fouche v. Merchants' Nat. Bank, 110 Ga. 827; Camden v. Stuart, 144 U. S. 104; Potts v. Wallace, 146 U. S. 689; Richardson v. Green, 133 U. S. 30; Scoville v. Thayer, 105 U. S. 143; Shields v. Hobart, 172 Mo. 491; Sprague v. National Bank, 172 Ill. 149, 167; Coleman v. Howe, 154 Ill. 458; National Tube Works Co. v. Gilfillan, 124 N. Y. 302; Gager v. Paul, 111 Wis. 638, 648; Kelly v. Clark, 21 Mont. 291, containing an elaborate review of the cases on this subject.

21 Young v. Erie Iron Co., 65 Mich. 111.

22

Bent v. Underdown, 156 Ind. 516, 518. See Chrisman-Sawyer Bkg. Co. v. Independence Mfg. Co., 168 Mo. 634′

23 Walburn v. Chenault, 43 Kan. 352; Callanan v. Windsor, 78 Iowa 193; State Trust Co. v. Turner, 111 Iowa, 664; Phelan v. Hazard, 5 Dill. (U. S.) 45.

24 Albitztigui v. Guadalupe Mining Co., 92 Tenn. 598, 604; Brant v. Ehlen, 59 Md. 1; Young v. Erie Iron Co., 65 Mich. III, 127; Rood v. Whorton, 74 Fed. 118, 123; Steacy v. Little Rock R., 5 Dill. (U. S.) 348: Burkinshaw v. Nicolls, L. R. 3 App. Cas. 1004; Waterhouse v. Jamieson, L. R. 2 H. of L. (Scotch) 29; Sprague v. National Bank, 172 Ill. 149, 167; Coleman v. Howe, 154 Ill. 458.

25 Ibid.

fully paid and non-assessable, when knowing that the statement is not correct.20 26 On the other hand, an assignee who knows that his stock has been improperly issued as fully paid is liable for the deficiency.27

6. Liability of Bank for Partly Paid Stock Taken for Debt.

Another invasion in this rule has been made in favor of an assignee who has taken stock for a debt. The exception, though easily abused, is founded on a good reason. The stockholder is an unwilling owner; he takes the stock to save his debt, in a sense it is forced on him. Doubtless he would sell at the first opportunity, and usually does so. By the national banking law, he must speedily part with it. In such case the assignee is released, and the assignor is held.28

7. Liability of Subsequent Stockholders of Partly Paid Stock for Debts Incurred Before Transfer.

After the transfer of partly paid stock, who is liable for the balance? The original holder, or assignor of unrecorded stock, is liable for the amount; 29 but he may have a remedy against the assignee.30

If the transfer has been recorded, then one of four consequences follows from the act. (a) In some states the assignor is still liable;31 and doubtless in all if the transfer was to a

26 Fouche v. Merchants' Nat. Bank, 110 Ga. 827.

27 Allen v. Grant, 122 Ga. 552.

28 Graham v. Platt, 28 Colo. 421; Hill v. Graham, 11 Colo. App. 536. 29 McKim v. Glenn, 66 Md. 479, 483; Hammond v. Strauss, 53 Md. 1, 15; Magruder v. Colstan, 44 Md. 349, 356 and cases cited. And if a broker buys stock for a customer and treats it as his own, he is held by the above rule. McKim case, 66 Md. 479.

30 See §18.

31 Upton v. Tribilcock, 91 U. S. 45; Webster v. Upton, 91 U. S. 65; Glenn v. Scott, 28 Fed. 804; Hamilton v. Glenn, 85 Va. 901; McKim v. Glenn, 66 Md. 479; Maine Trust & Bkg. Co. v. Southern Loan & Trust Co., 92 Me. 444, 451; Pittsburg & Connelsville R. v. Clarke, 29 Pa. 146; Neb. Constitution, Sec. 4, Art. 11b, and Wyman v. Bowman, 127 Fed. 257 construing it; People's Home Sav. Bank v. Rickard, 139 Cal. 285. By the Nebraska constitution the original subscriber, after the sale of his stock,

worthless person to escape liability for the balance of his stock. (b) In others, the assignor is released from liability within a few months after transferring his stock, the period stretching from two months to two years.33 This rule is simple and can be easily enforced, the only serious question lying in the judicial pathway is in determining the nature of the debts for which the stockholders are still liable.34

(c.) In other states the assignee succeeds to all the rights and liabilities of the assignor.35 By this rule the assignor is divested of all liability after making a bona fide transfer of his stock for the bank's indebtedness, whether contracted before or after his purchase. On the other hand, the assignee purchases his share of all the assets, and assumes his share of all the liabilities. This is the general rule in administering the national banking law,36 and it is so just and simple that it commends itself more and more to the state tribunals.

becomes a guarantor "to pay the unpaid part of the subscription only after the corporate property is exhausted." Wyman case, supra. p. 261.

"Equity treats the capital stock of a corporation as a fund for the security of creditors. If the stock is not fully paid at par value, and there is a failure of assets of the corporation to pay its creditors, the stockholders may be compelled to make payment upon his stock to its par, if so much is necessary to pay the debts. This liability may be enforced by the corporation, or by the creditors, but it applies only to parties taking the stock di rectly from the corporation; a purchaser in the market for less than par value is not liable." Strout, J., Maine Loan & Bkg. Co. v. Southern Loan & Trust Co., 92 Me. 444, 451. See Libby v. Tobey, 82 Me. 397.

32 People's Home Sav. Bank v. Rickard, 139 Cal. 285; McConey v. Belton Oil Co., 106 N. W. (Minn.) 900; National Carriage Co. v. Story Com. Co., III Cal. 531. And if the bank was insolvent, the burden of proof is on the assignor to prove the honesty of the transaction. Ibid.

33 Gager v. Paul, 111 Wis. 638; Hyatt v. Anderson, 74 S. W. (Ky.) 1094; Gen. Stat. of Ky. 1894, §2501; Union Bank v. Wando Mining & Mfg Co., 17 S. C. 339; Wincock v. Turpin, 96 Ill. 135.

34 See (d) of this section.

35 Foster v. Row, 121 Mich. 1; Latimer v. Citizens' State Bank, 102 Iowa 162; McConey v. Belton Oil Co., 106 N. W. (Minn.) 900.

36 Richards v. Attleborough Nat. Bank, 148 Mass. 187. "The transfer of the stock in a national bank honestly made while the bank is in operation will substitute the transferee for the original stockholder, relieving the latter from his responsibilities, and imposing them on the purchaser." Devens, J., Ibid 195.

(d.) Finally, in some states, the assignor is liable for all debts contracted prior to the sale or transfer of his stock, and the assignee for all subsequent indebtedness.37 Wherever this rule prevails, a grave question sometimes arises in fixing the liability begun but not ended during the assignor's ownership. The difficulty of applying it clearly reveals the unwisdom of its existence.38

(e.) The right of a bank to enforce an assessment against the assignor of stock is not affected by his subsequent transfer. The new owner takes the stock subject to the bank's lien. The assessment is against the stock whose identity is not affected by the transfer. 39

Again, where the first, second and fourth rules prevail, there is still more refinement in renewals of the bank's indebtedness. In most states a renewal does not affect a stockholder's liability because he is not regarded as a surety, but jointly liable with the corporation;40 in other states by an extension without his consent he is released.41 Thus his liability turns on the answer

37 New England Com. Bank v. Newport Steam Factory, 6 R. I. 154; Morgan v. Brower, 77 Ga. 627; Matthews v. Albert, 24 Md. 527; Bond v. Appleton, 8 Mass. 472. See Wheeler v. Faurot, 37 Ohio St. 26. See §18.

38 Thus an attorney is employed on the first day of a month and his service is rendered three months afterward. The assignor sells his stock at the end of the first month, and the bank fails within a year. Is the unpaid attorney's debt to be regarded as contracted during the assignor's ownership of the stock, or during the ownership of the assignee? Johnson v. Bank, 125 Cal. 6. For other cases, see Herrick v. Wardwell, 58 Ohio St. 294, also note 73 Am. St. Rep. 19.

By this rule an assignor is liable for rent on a lease given before, but accruing after the transfer. Hyatt v. Anderson, 74 S. W. (Ky.) 1094. 39 Craig v. Hesperia Land & Water Co., 113 Cal. 7; Hawley v. Brumagim, 33 Cal. 394; Atkins v. Gamble, 42 Cal. 99.

40 Continental Nat. Bank v. Burford, 114 Fed. 290, 292; Boice v. Hodge, 51 Ohio St. 236; Taylor v. West Liberty Co., 9 Am. Law Rec. (Ohio) 28; Jackson v. Meek, 87 Tenn. 69; Young v. Rosenbaum, 39 Cal. 646; Davidson v. Rankin, 34 Cal. 503; Mokelumne Mining Co. v. Woodbury, 14 Cal. 265; Harger v. McCullough, 2 Denio (N. Y.) 119; Hardman v. Sage, 124 N. Y. 25; Jagger Iron Co. v. Walker, 76 N. Y. 521; Hyatt v. Anderson, 74 S. W. (Ky.) 1094.

41 Union Bank v. Wando Mining & Mfg. Co., 17 S. C. 339; New England Com. Bank v. Newport Steam Factory, 6 R. I. 154; Hardman v. Sage,

to the question whether his obligation is primary or secondary; one rule exists for all, but on its application the courts have divided.

8. Distinction Between Stockholders' Liability to Bank and to Its Creditors.

Lastly, the distinction should be kept in sight between the liability of the two classes of stockholders just described to their bank and to its creditors. There may be a valid settlement or satisfaction of a subscription as between the bank and a stockholder that would be unavailing against its creditors. For this reason, that a balance due on unpaid stock is a bank asset which the owner may at any time pay to the bank,—he cannot pay to one creditor to the injury of others.42 Indeed, the principle may be applied more widely to all classes of stockhold

ers, 43

In another way does the importance of this distinction reveal itself. A stockholder can set off any indebtedness he may have against his bank while solvent in response to its demand for an unpaid subscription;44 but after the happening of this event, such a set off against unpaid subscriptions can no longer be interposed.45

9. Remedy to Recover Unpaid Subscriptions.

The remedy generally employed to recover unpaid stock is a bill in equity, brought by one or more creditors for the benefit of all,46 though on a few occasions an action at law has

124 N. Y. 25; Jagger Iron Co. v. Walker, 76 N. Y. 521; Parrott v. Colby, 6 Hun 55, affd. 71 N. Y. 597.

42 Welch v. Sargent, 127 Cal. 72.

43 Camden v. Stuart, 144 U. S. 104, 113, 114. Cases in §5, note 5; Scovill v. Thayer, 105 U. S. 143, 153, 154; Fouche v. Merchants' Nat. Bank, 110 Ga. 827. See §31 c.

44 Barnett's Case, L. R. 19 Eq. 449. See Bausman v. Denny, 73 Fel. 69 and 1 Cook on Corp. §193.

45 See 831 a.

46 Hatch v. Dana, 101 U. S. 205; Ogilvie v. Knox Ins. Co., 22 How. (U S.) 380; Marsh v. Burroughs, 1 Woods (U. S.) 468; Wood v. Dummer, 3 Mason (U. S.) 308; Briggs v. Penniman, 8 Cow. (N. Y.) 387; Mann v.