Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/562

 § 529.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. party might visit on an innocent head the results of a fraud committed by the corporate agent on a person whom at the time of the subsequent contract the directors represent, and ■who, therefore, should bear the loss rather than the parties subsequently contracting. 1 § 527. To subscriptions induced by error or justifiable igno- rance of material facts a rule somewhat similar to error.* ° the one above stated in regard to fraudulently in- duced subscriptions, and a course of reasoning some- what similar to the above would apply. " Except where a person has induced others to act on his own representations, ignorance of material facts on his part affords a sufficient reason for not holding him bound by what in such ignorance he may have said or done." 2 § 528. When a contract between two individuals is violated by one of them, the other may often acquire thereby tionfhow ^he r igbt to rescind ; but in such case either of the affected by contracting parties could have released the other. subsequent ° [ unautuor- With regard to the contract between the subscriber ized or im-. . . .~ proper and the corporation the case is manifestly different. the'parTof I n the first place, the corporation has ordinarily no Dora°tion power to release the subscriber, for numerous per- sons, creditors, and shareholders, have in regard to the contract rights which a release would infringe. 3 If the corporate management violates the contract with the sub- scriber by diverting the funds of the corporation to unauthor- ized purposes, it does an act which may violate the rights of all non-consenting persons in respect of the corporate enterprise ; but this act is in itself clearly no ground on which one of these injured persons may claim a release from his obligation to the other injured persons. 4 § 529. Accordingly, after a person has subscribed for shares in the stock of a corporation he will not be released from his 1 This reasoning is sustained by Howard o. Turner, 155 Pa. St. 349. See, also, Savage v. Bartlett, 78 Md. 561; Fear v. Bartlett, 81 Md. 435; Cardwell v. Kelly, 95 Va. 570. Lindley on Part., 135. See Salem Mill Dam Co. v. Ropes, 9 Pick. 187; j 443, and the following pages Payson r. Withers, 5 Biss. 269; Four ' 542 Mile Val. R. R. Co. v. Bailey, 18 Ohio St. 208. 3 See §§ 549-551. * enjoin unauthorized acts. See Mis- sissippi, etc., R. R. Co. v. Cross, 20 Ark.
 * The shareholder's remedy is to