Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/572

 §541.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. Shareholder may plead that officers making calls are not legally- elected. § 540. To a suit for calls, unless affected with some special estoppel, a shareholder may plead that the officers making them were not legally officers of the corpo- ration. Accordingly, where the notice of a meeting contained nothing about electing directors, directors chosen at that meeting are not validly elected, and an assessment or call made by them is void. These facts a shareholder may plead. 1 § 541. When a corporation increases its capital stock and issues further shares, a subscriber to them, when sued on his subscription, cannot avail himself of any irregularities in their issue, if he has acquiesced or taken part in the proceedings by which they were issued, 2 or has paid voluntarily an assessment on his new shares, 3 or has subscribed subsequently to their issue and may be presumed to have waived any irregularities. 4 But when the subscriber has done nothing by which he may be held estopped, he may decline to receive stock improperly issued, 5 Subscribers to shares irregularly or illegally issued. 1 People's Mut. Ins. Co. v. West- cott, 14 Gray, 440. Accord, How- beach Coal Co. v. Teague, 5 II. & N. 151. Compare Ginrich v. Patrons' Mill Co., 21 Kan. Gl ; and § 529. In a suit to recover a subscription it will be presumed, in the absence of proof to the contrary, that the meeting of directors authorizing the assessment was legally noticed. Chouteau Ins. Co. v. Holmes, C8 Mo. 601 ; see, also, § 190. 2 Clarke v. Thomas, 34 Ohio St. 46; Kansas City Hotel Co. v. Harris, 51 Mo. 464; Barrows v. Natchang Silk Co., 72 Conn. 658. So a trans- feree, even one who has taken the shares as collateral, may be estopped. Pullman v. Upton, 96 U. S. 328. 8 Delano v. Butler, 118 U. S. 634. 4 Kansas City Hotel Co. v. Hunt, 57 Mo. 126. 5 See American Tube Works v. Boston Machine Co., 139 Mass. 5; Reed v. Boston Machine Co., 141 Mass. 454. Holders of increased 552 shares have no standing in court to contest the validity of other (pre- ferred) shares issued at the same time, on the ground that formalities required by the statute authoriz- ing the increase had not been com- plied with. Columbia National Bank's Appeal, 16 Weekly Notes of Cases (Pa.), 357. A sale of stock in a railroad company by the directors at a less rate than that fixed by the charter is a fraud in law. The issu- ing of a bond convertible into stock has the same effect as issuing stock; and the sale of such a bond at a dis- count is unlawful; and this though the charter contain no prohibition against taking a subscription at less than the charter price. These facts constitute a defence to an action on an executory contract to take such stock, when the subscriber has acted in good faith and without notice. Sturges v. Stetson, 1 Biss. 246. Com- pare Fosdick v. Sturges, 1 Biss. 255. When a statute exists forbidding