on the books of the company necessary to make the legal title complete where delivery of a certificate of stock is accompanied by an assignment. O'Connor v. International Silver Co., 68 N. J. Eq., 67; aff'd Id., 680.

A sale of stock accompanied by the delivery of the certificate and a power of attorney authorizing its transfer on the books of the company, is valid against creditors of the seller, and gives the buyer precedence over subsequent judgments, executions, and attachments procured against the seller. But failure to demand a transfer on the books of the company will make it necessary for the buyer to indemnify the company against loss before a decree will be granted requiring the corporation to transfer the stock to him on the books where in the meantime the stock has been levied on and sold in attachment proceedings against the seller. Reilly v. Absecon Land Co., 71 Atl. Rep., 248.

The liability of a transferee of stock for unpaid calls due and to become due upon stock standing in his name on the books of the company is considered at length by the Court of Appeals of New York in Sigua Iron Co. v. Brown, 171 N. Y., 488, at p. 496. See cases cited.

Specific performance of sales of stock.

Where the corporate stock to which a contract of sale relates is not procurable in the market, and its pecuniary value is not readily ascertainable, specific performance will, as a rule, be decreed. Safford v. Barber, 70 Atl. Rep., 371.

Fraudulent issue by directors.

Where directors, to secure themselves in office and in control of a corporation, issue stock to their friends for a small proportion of its par value, it is a fraud, and the company will be restrained from receiving votes on such stock. Way v. Am. Grease Co., 60 N. J. Eq., 263.

Fraud in sales of stock.

Defendant (an officer of a corporation) knew that the corporation had made a favorable sale of property which enhanced the value of the stock, which fact was known only to the directors and officers. Plaintiff had no knowledge of it, and no knowledge of facts to put him on inquiry as to it. Defendant bought the plaintiff's stock at much less than its real value, at a price for which the plaintiff, in his ignorance, was willing to sell it. Held, that there was no fraud and that there was no duty from the officers to the stockholders to make any disclosure. Crowell v. Jackson, 53 N. J. Law, 656.

A person making false representations in the sale of stock is liable for the loss which the purchaser suffers by retaining the stock

under the belief that the representations are true. In such cases the market value of the stock while the fraud is operative on the conduct of the purchaser is unimportant; the measure of damages is the difference between the amount paid for the stock and the value of the stock after the fraud ceased to be operative. Duffy v. Smith, 18 N. J. L. J., 217; aff'd Smith v. Duffy, 57 N. J. Law, 679. See also Crater v. Binninger, 33 N. J. Law, 513; Hubbard v. International Mercantile Agency, 68 N. J. Eq., 434; Phillips v. Crosby, 70 N. J. Law, 785.

Diligence in the discovery of the fraud and promptness in repudiation of the purchase or subscription are necessary conditions for the rescission of the contract for the subscription of stock on the ground of false representations by the president of the company as to its financial condition and the issue of its stock. Three years' delay held to be fatal to recovery. Tierney v. Parker, 58 N. J. Eq., 117.

Equity will not entertain a suit for the repayment of money paid for stock on the ground of fraudulent representations. Krueger v. Armitage, 58 N. J. Eq., 357; Polhemus v. Holland Trust Co., 59 N. J. Eq., 93. See contra, Manning v. Berdan, 135 Fed. Rep., 159.

As to the prosecution of a corporation for false statements with intent to mislead investors, see P. L. 1898, p. 842. State v. Ware, 71 N. J. Law, 53.

Proceedings to compel company to issue stock.

The subscribers to the capital stock of a telegraph company upon payment of one-third of the par value caused to be issued to themselves certain shares of full-paid capital stock. At the same meeting of stockholders it was resolved that certain shares of stock be issued to said subscribers for services alleged to have been rendered by them to the company, without any account or statement of the amount due them. In such a case the presumption is that full-paid stock was issued upon payment of only a third of its par value. To the enforcement of a contract thus tainted with illegality the court will not lend its sanction. The court said that the relators had an adequate remedy by suit for damages, and were not entitled to mandamus; that mandamus will not issue where the contract is unexceptional in its character. Morton v. Timken, 48 N. J. Law, 87. Refusal to transfer stock.

Ordinarily mandamus will not lie to compel the transfer of shares of a corporation to a purchaser, or to compel the company to issue certificates of stock. Bush v. Warren Foundry Co., 32 N. J. Law, 439; Curtis v. Steever, 36 N. J. Law, 304; Galbraith v. Building Ass'n, 43 N. J. Law, 389; Morton v. Timken, supra. The owner has an adequate remedy in an action for damages. A court of equity will compel the transfer of stock to the equitable owner thereof,

upon the books of a corporation, when such transfer is fraudulently withheld by the agents of the corporation. Archer v. American Water Works Co., 50 N. J. Eq., 33.

A new company was formed to take over the assets of an old company under an agreement that stockholders of the old company were to receive share for share of stock in the new company. Held, suit for specific performance would lie at instance of an individual stockholder of the old company for himself alone. Fletcher v. Newark Telephone Co., 55 N. J. Eq., 471.

Where the certificates of stock are transferable without restriction, the corporation cannot discriminate and refuse to transfer certificates to a person who is hostile to it. Rice v. Rockefeller, 134 N. Y., 174.

Where the corporation cancelled an entry of stock standing on its books and issued a new certificate without a surrender of the outstanding certificate, a bona fide holder of the latter may maintain an action for damages upon the company's refusal to transfer it. Holbrook v. N. J. Zinc Co., 57 N. Y., 616.

The improper refusal of an officer to transfer stock does not render him personally liable for damages to the stockholder. The cause of action is against the corporation. Dunham v. City Trust Co., 115 App. Div. (N. Y.), 584; aff'd 193 N. Y., 642; Cooley v. Curran, 54 Misc. (N. Y.), 221.

Attachment of shares of stock.

Shares of stock of a corporation may be attached by virtue of the Attachment Act (P. L. 1901, p. 158). Castle v. Carr, 16 N. J. Law, 394; Curtis v. Steever, 36 N. J. Law, 304, 307; Cord v. Newlin, 71 N. J. Law, 438.

Shares cannot be attached if the certificate has been delivered or transfer has been made on the books of the company, before the issue of the attachment. Bush v. Warren Foundry Co., supra. See also Broadway Bank v. McElrath, 13 N. J. Eq., 24; Matthews v. Hoagland, 48 N. J. Eq., 455, 486, and cases cited.

A transfer or pledge of stock as collateral security, without a transfer on the books of the company, but accompanied by a blank power of attorney, will protect the holder against the claims of an attaching creditor. Broadway Bank v. McElrath, supra. See also Hood v. McNaughton, 54 N. J. Law, 425.

Capital stock of a domestic corporation is subject to attachment under the statute, although the certificate of stock be in possession of the debtor outside of the state. Cord v. Newlin, 71 N. J. Law, 438.

Ownership of stock.

The Court of Chancery has jurisdiction of a suit to establish a trust in shares of stock in a New Jersey corporation, although the

trustee resides out of the state, and cannot be served with process, but can only be brought in by the statutory proceedings against absent defendants. Amparo Mining Co. v. Fidelity Trust Co., 73 Atl. Rep., 249.

21. Stockholders liable until subscriptions are fully paid.

Where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy its debts and obligations, each stockholder shall be bound to pay on each share held by him the sum necessary to complete the amount of such share, as fixed by the charter of the corporation, or such proportion of that sum as shall be required to satisfy such debts and obligations.

P. L. 1846, p. 16; P. L. 1846, p. 68; Act of 1875, §5.

Stock issued at an admitted overvaluation but without fraud is not subject to a further call, either directly or indirectly, by the suppression of dividends declared from net profits where the assets are not impaired, and such a dividend is not a dividing of the capital of the corporation. Goodnow v. American Writing Paper Co., 72 N. J. Eq., 645; aff'd 69 Atl. Rep., 1014.

General creditors' bill.

Where the capital, i. e., the property of a corporation has proved insufficient to satisfy its debts and obligations, each stockholder is liable for the amount of his unpaid subscriptions, or such proportion thereof as shall be necessary to satisfy the debts of the company and meet the expenses of winding up its affairs, but no more. Wetherbee v. Baker, 35 N. J. Eq., 501; Hood v. McNaughton, 54 N. J. Law, 425, 427; Cumberland Lumber Co. v. Clinton Hill Co., 57 N. J. Eq., 627. The unpaid subscriptions constitute a trust fund for the payment of the debts of the corporation. A creditor may file a bill to enforce this liability only after he has exhausted his remedies at law by judgment, issue of execution and its return unsatisfied. He must sue in behalf of all the creditors of the corporation and not for himself alone; the corporation must be made a party; and all the property and assets of the corporation must be brought into the suit and put in course of administration. The proceedings are in the nature of an equitable accounting. Bickley v. Schlag, 46 N. J. Eq., 533.

The ultimate liability of a stockholder of a foreign corporation

for payment of corporate debts depends on the law of the state of incorporation, not on the law of the forum, the control of which goes no further than the remedies for enforcing the liability. This liability is to be enforced according to the statutes of the foreign state adopting the construction of its courts and the decisions of the courts of such states so far as they have declared the principles controlling the same. Johnson v. Tennessee Oil, &c., Co., 74 N. J. Eq., 32.

Where statutory provisions exempting stockholders from personal liability except for unpaid subscriptions are used to issue stock fraudulently at an overvaluation the holders of such stock remain subject to liability to creditors, under the principles of the "trustfund" doctrine. Ibid.

The Attorney-General is not a necessary party to proceedings to enforce liability of stockholders under the statute. See v. Heppenheimer, 55 N. J. Eq., 240; aff'd 56 Id., 453.

The "trust-fund" rule does not apply to creditors who had knowledge of a fraudulent issue of stock for overvalued property. Johnson v. Tenn. Oil Co., supra.

Mere creditors have no interest in a proceeding charging directors with wasting assets until their claims are established at law or in equity and other assets of the company have been exhausted. Edwards v. National Window Glass Jobbers' Ass'n, 58 Atl. Rep., 527; 68 Id., 800.

Action at law by receiver.

When a corporation is insolvent and its business is ended, the subscribers for or holders of its unpaid stock are assessable for only so much of what is unpaid on the stock as will satisfy the claims of corporate creditors and meet the expenses of winding up its affairs. An order for such an assessment may be made by the Court of Chancery in the suit wherein the corporation was adjudged to be insolvent and when so made its propriety cannot be questioned in suits brought against the stockholders for its enforcement. Such an order is the result of an exercise of judicial power and therefore should be made only after a reasonable opportunity has been afforded to the stockholders to be heard in the matter. The petition of the receiver should set forth all the facts showing the necessity for an assessment. Cumberland Lumber Co. v. Clinton Hill Co., 57 N. J. Eq., 627. also Barkalow v. Totten, 53 N. J. Eq., 573; Hood v. McNaughton, 54 N. J. Law, 425; Kirkpatrick v. Am. Alkali Co., 135 Fed. Rep., 230; s. c. 140 Id., 186.

Liability of original subscriber to stock.

See

An original subscriber to stock becomes liable for his subscription upon the execution of the certificate of incorporation,