Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/613

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 586. made to an irresponsible person for the purpose of getting rid of liability on the shares, is void both as to the corporation and as to its creditors. 1 The English cases, on the other hand, hold that a shareholder, for the sole purpose of escaping liabil- ity, may transfer his shares to a man of straw for a nominal consideration or as a mere gift, even when the company is in a failing condition ; and if the transfer be absolute, the trans- ferrer will be freed from his liability. 2 Not so, however, if the transfer be merely colorable, so that the transferee as between himself and his transferrer remains a trustee for the latter. 3 the two by the assignment of the one and the acceptance of the other; and also between them aud the corpora- tion, for it would be absurd to say upon general reasoning, that if the original subscribers have the power of assigning their shares, they should, after- disposing of them, be liable to the burdens which are thrown upon the owners of the stock." Angell and Ames on Corp., §534; Hartford, etc., R. R. Co. v. Boorman, 12 Conn. 530; Mann v. Currie, 2 Barb. 294; Isham v. Buckingham, 49 N. Y. 216; Cowles v. Cromwell, 25 Barb. (N. Y.) 413. See Billings v. Robinson, 94 N. Y. 415 ; Rochester & K. F. Ry. Co. v. Raymond, 158 N. Y. 576; Rafferty v. Donald, 197 Pa. St. 423; Stewart©. Printing Co., 1 Wash. 521. 1 Nathan v. Whitlock, 9 Paige (N. Y.), 152; Marcyv. Clark, 17 Mass. 330; Rider v. Morrison, 54 Md. 429; Welch v. Sargent, 127 Cal. 72. See § 749. A corporation was indebted beyond the amount of its assets. The defendant, an original subscriber to its stock, and a director, objected to the management, threatening to bring proceedings for a winding up. Thereupon, with the consent of the trustees and all the shareholders who had made any payments on their shares, he transferred his shares, which were not fully paid up, and resigned from his position as trustee, 38 which was taken by his transferee, who on his part agreed to indemnify defendant from further liability on his subscription or to creditors, and loaned to the corporation enough money to make it solvent. The transfer was recorded on the books of the corporation. That the pur- pose of the whole transaction was to free defendant from all further lia- bility was understood by all. Held, that the receiver could not recover from the defendant the unpaid por- tion of the shares subscribed for by him. The court said that there were no creditors having equities against defendant by virtue of his having been a shareholder, and that the re- ceiver represented only the corpora- tion which had assented to the sub- stitution of the transferee's liability for that of defendant. Billings v. Robinson, 94 N. Y. 415. 2 In re London, etc., Assurance Co., Jessopp's Case, 2 De Gr. & J. 638; In re Mexican, etc., Co., De Pass's Case, 4 De (i. & J. 544; Har- rison's Case, L. R. 6 Ch. 286; King's Case, ib. 196; Master's Case, L. R. 7 Ch. 296, note; Williams's Case, 1 Ch. Div. 576. See Thompson's "Li- ability of Stockholders," § 213. 3 Chinnock's Case, Johns. (Eng. Ch.) 714; In re Mexican, etc., -Co., Hyman's Case, 1 De G., F. & J. 75; In re Mexican, etc., Co., Costello's 593