2 Des Moines Valley etc. R. R. Co. v. Graff, 27 Iowa, 99; 1 Am. Rep. 256; Missouri Pacific R'y Co. v. Taggard, 84 Mo. 264.

3 Paris etc. R. R. Co. v. Henderson, 89 Ill. 86.

4 Des Moines Valley R. R. Co. v. Graff, 27 Iowa, 99; 1 Am. Rep. 256

5 Missouri Pacific R'y Co. v. Taggard, 84 Mo. 264; 54 Am. Rep. 97. 6 Paris etc. R. R. Co. v. Henderson, 89 Ill. 86.

7 Ogden v. Kirby, 79 Ill. 555.

§ 115. Cancellation-Of the consent of the subscriber and of the corporation.

§ 116. Cancellation-Of the consent of the corporate creditors.

§ 117. The directors have no authority to cancel.

§ 119.

§ 120.

§ 121.

The directors have authority to compromise and to correct errors. Amendments of charter-their operation as a release of the subscriber.

The same subject continued and illustrated.

§ 122.

§ 123.

§ 124.

Irregular incorporation-its operation as a release of the subscriber.
Illegal and wrongful acts of the corporate managers.
Failure or refusal to issue a certificate of stock.

The release of other subscribers not a valid defense.

§ 125.

§ 126.

Failure to make cash deposit required by statute-The general rule.

§ 127. Failure to make cash deposit required by statute-The New York

§ 129.

§ 130.

Fictitious agreements to influence others, enforceable.
Fraudulent misrepresentations inducing subscription.

§ 131.

What facts must be shown in support of an allegation of fraudulent ,misrepresentation.

§ 132.

§ 133.

§ 134.

§ 135. Of misrepresentation with respect to matters equally known to the subscriber and corporate agent.

$136. Of statements of opinion.

Of the authority of the agent making the misrepresentation.
Of misrepresentations contained in prospectuses and reports.
Fraud by suppression of truth and by statement of what is not
known to be true.

§ 137.

§ 138.

§ 139.

§ 140.

§ 141.

§ 142.

Of misrepresentation with respect to matters of law.
The misrepresentation must be shown to be material.
Set-off and counterclaim in actions to enforce subscriptions.
Abandonment, delay and failure of the corporate enterprise.
The statute of limitations.

Miscellaneous defenses to actions to enforce subscriptions.

§ 143. Waiver, acquiescence and delay, a bar to the subscriber's remedy. § 144. Corporate insolvency a bar to every remedy.

§ 114. Introductory.—It is a notorious fact that the original subscribers to the capital stock of railway corporations seldom derive from the undertaking that pecuniary profit which constituted the motive inducing them to enter into the contract of subscription. Many are the devices, therefore, by which the subscriber has sought to rescind the contract and to escape the liabilities thereby incurred; but the courts have seldom viewed these efforts with favor, except such as were based upon the failure of the company to comply with some condition expressly stipulated in the contract or annexed thereto by implication of law, or upon the ground of mistake as to the nature of the contract,3 or upon clear evidence of fraud. When the subscriber seeks to set aside the contract or to evade the liabilities which he has incurred, he may in a proper case, without legal proceedings, by notification to the corporate authorities and the consent of all the parties in interest, effect a cancellation of the contract, or a compromise with the directors of the company. 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

5

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; or upon the discovery of the fraud, he may recover money paid by him on his subscription in an action for money had and received.8

1 "The average return of the railroads in this country is under four per cent., the bondholders receiving an average of four and a half per cent., the stockholders of two and a Lali per cent.": Hadley's Railroad Transportation, p. 101. "Within the past twelve years, no less than three hundred and ninety-two railways, representing nearly forty thousand miles of road and having a capital stock and bonde lindebtedness of more than twenty-three hundred and ten millions of dollars, have been sold in the United States in foreclosure proceedings": Beach on Receivers, (October, 1887), preface.

2 Supra, §§ 94-113, and infra, §§ 120-122.

3 Infra, § 118.1

4 Infra, §§ 130-138.

5 Infra, §§ 115-117.

6 Infra, §§ 118, 119.

7 Paddock v. Fletcher, 42 Vt. 389.

8 Atkinson v. Pocock, 12 Jur. 60; Woutner v. Sharp, 4 Com. B. 404; Jarrett v. Kennedy, 6 Com. B. 319. These various proceedings are fully treated in Cook on Stock & Stockh. §§ 152-159.

§ 115. Cancellation.-Of the consent of the subscriber and of the corporation.—A contract of subscription, like other contracts, may be canceled by the consent of all the parties in interest. These parties are the subscriber on the one hand, and on the other the corporation and those persons to whom it is indebted at the time of the cancellation.1 The subscriber's consent to a cancellation may be shown by his failure to pay or to exercise the rights of a shareholder; and in such a case his subscription may be treated by the corporation as abandoned. The consent of the corporation can be given only by the shareholders either expressly, by an unani

mous vote, or by implication from long-continued acquiescence, and retention of benefits.5 Prior to the allotment of shares the company may release a subscriber from liability, and the same degree of proof is not required as would be necessary after allotment. For example, where a director appointed in the act of incorporation soon afterwards resigned and all the shares were allotted to others, it was considered an abandonment by the company of its right to treat him as a shareholder, and a subsequent creditor of the corporation could not hold him liable as a subscriber." It may be received as sufficient evidence of a cancellation, without any record of the cancellation having been made upon the books of the corporation, that neither the subscriber nor the company regarded the subscriber as a stockholder." The death of a subscriber prior to the acceptance of his subscription by the corporation, is a revocation thereof.

1 See Cook on Stock & Stockh. § 168.

2 Perkins v. Union etc. Co. 12 Allen, 273.

3 Lake Ontario etc. R. R. Co. v. Mason, 16 N. Y. 451, 463; Selma etc R. R. Co. v. Tipton, 5 Ala. 787; 39 Am. Dec. 344; Busey v. Hooper, 35 Md 15; 6 Am. Rep. 350; Jo nson v. Wabash etc. R. R. Co. 13 Ind. 389. Cf Cook v. Chittenden, 25 Fed. Rep. 544; Gelpecke v. Blake, 19 Iowa, 263 Marshall v. Glamorgan etc. Co. Law R. 7 Eq. 129.

4 Evans v. Smallcombe, Law R. 3 H. L. Cas. 249.

5 Miller v. Second, 50 Pa. St. 32.

6 Kiplin v. Todd, 3 Com. P. 350; Barry v. Navon etc. R'y Co. Ir. Rep 11 Com. Law, 403.

7 Stuart v. Valley R. R. 32 Gratt. 146.

8 Sedalia etc. R'y Co. v. Wilkinson, 83 Mo. 235; Wallace v. Townsend 43 Ohio St. 537; 54 Am. Rep. 829.

§ 116. Cancellation-Of the consent of corporate creditors.-The consent of the creditors also must be unanimous; and any single creditor tc whom the company was indebted before the time of