Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/558

 § 523.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. opened to show fraud, and if the property received is grossly unequal in value to the par value of the shares, the share- holder who received the shares originally, or his subsequent transferee with notice of the circumstances, may be compelled to make up the difference in value in a suit brought by or on behalf of persons injured thereby. 1 But the equivalency of the property taken to the par value of the shares cannot (unless some statute warrants a contrary doctrine 2 ) be inquired into when the shares as fully paid have come into the hands of a bona fide purchaser who has no notice of the value of the prop- erty originally given for them, 3 and even though shares be is- sued for property worth less that their par value, it is only those persons who are injured thereby, and have not waived their rights, that can impeach the transaction. 4 § 523. A shareholder, however, whose subscription has been induced by a fraud which may be treated as the fraud of the corporation can annul his subscription and thereby free himself from all liability, provided others have not in the meanwhile justifiably acted on the faith of his subscription under such circumstances that as between him and them responsibility for the Subscrip- tions ob- tained by fraud void- able, pro- vided sub- scriber acts with de- spatch. valid on the face of it ; when it did not appear how the corporation had acquired the stock, and could not be inferred that it was not fully paid stock subsequently acquired. Otter v. Brevoort Petroleum Co., 50 Barb. 247. 1 Coleman v. Howe, 154 111. 458; Hastings Malting Co. v. Iron Range Co., 65 Minn. 28; Gilkie, etc., Co. o. Gas Co., 46 Neb. 333; Jones v. Whit- worth, 94 Tenn. 602; Jackson v. Traer, 64 Iowa, 469; Boulton Carbon Co. v. Mills, 78 Iowa. 460; Bailey v. Pittsburg and ConnellsvilleGas Coal and Coke Co.. 69 Pa. St. 334; Boynton v. Hatch, 47 X. Y. 225; Tallmadge r. Fishkill Iron Co., 4 Barb. 382; Gillin v. Sawyer, 93 Me. 151; see Foreman v. Bigelow, 4 Clifford, 508,543; Pell's Case. L. R. 5 Ch. 11; see Pickering 538 n. Townsend, 118 Ala. 351 ; Roman v. Dominick, 115 Ala. 233; Gates, Atlm., v. Tippecanoe Stove Co., 57 Oh. St. GO. See especially §§ 700 et seq. 2 See § 723. 3 Phelan v. Hazard, 5 Dillon, 45; Steacy v. Little Rock, etc., R. R. Co., ib. 348; Foreman v. Bigelow, 4 Clif- ford, 508; West Nashville Planing Mill Co. v. Bank, 86 Tenn. 252; Mc- Cracken v. Mclntyre, 1 Duv. (Can- ada) 479. See Waterhouse v. Jamie- son, L. R. 2 H. L. Scotch, 29; Roch- ester Laud Co. v. Roe, 7 N. Y. App. Div. 366; Troup v. Hornbach, 53 Neb. 795. And see § 702. 4 See St. Louis, etc., R. R. Co. v. Tiernan, 37 Kan. 606; Walburn v. Chenault, 43 Kan. 352; Wool folk v. January, 131 Mo. 620. See §§ 5226, 700 et seq.