Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/560

 § 525.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. land, at least, a person can bring no action for damages against a corporation for fraudulent misrepresentations, which induced him to purchase shares, as long as he remains in the company, and does not offer to rescind. 1 § 524. In regard to this exceedingly difficult question of an- nulling subscriptions on the ground of the fraud of English and corporate agents, there may be a shade of difference views. ' between the English and American views. In Eng- land a tendency has been shown to regard a contract of subscription as a contract strictly between the subscriber and the company. For instance, in Directors v. Kisch, 2 the court held that a person could dissolve a contract to take shares in a company when the inducement on its part was false, and, when not himself guilty of laches, could withdraw without regard ap- parently to the subsequently accruing rights of creditors, Lord Komilly saying, " that contracts of this description between an individual and a company, so far as misrepresentation or sup- pression of the truth is concerned, are to be treated like con- tracts between any two individuals." 3 The American cases, on the other hand, more generally recognize that a subscription contract is one on which persons other than the contracting parties are entitled to rely. 4 § 525. It is submitted that to questions regarding the right to rescind a subscription contract or defend in a suit Rationale, for calls, a course of reasoning somewhat like the fol- lowing is applicable. In all matters within the ordi- nary scope of the corporate powers, the corporation acting through whatever agency may constitute the corporate manage- ment represents all persons in any way interested in the corpo- rate enterprise. Consequently, the interests of all are bound by the acts of the corporate management (say, for simplicity, by the acts of the board of directors) within the scope of its 1 Houldsworth i City of Glasgow Bk. 5 App. Cas. 317. !See Western Bk. of Scotland v. Addie, 1 II. L. Sc. App. 145, 157; Nat. Exchange Co. v. Drew, 2 Macq. 103. Transferee of shares cannot plead fraud upon his transferror. Lewis v. Land Co., 90 Va. 603. 540 2 L. R. 2 H. L. 99. 3 See, also, Smith's Case. L. R. 2 Ch. 604 ; and compare Houldsworth v. City of Glasgow Bk., 5 App. Cas.317, ante.
 * See § 521, also §§ 701, 702.