Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/714

 § 701.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. § 700. When, according to the constitution of a corpora- Rights of ^ on > liability for corporate indebtedness is not creditors in extended bevond the corporate funds properly so absence of J statutory liability. called, that is, not beyond the capital named in the charter or articles of association, paid up or agreed to be paid up, and to be used in the corporate business, it is almost an identical proposition to say that the shareholders, provided they honestly pay what they have subscribed, are not personally liable to creditors of the corporation. 1 AVhen such is the constitution of a corporation, creditors have but two general and comprehensive rights as against shareholders : the one right, that each shareholder, unless cash in amount or property in value equal to the par value of his shares has been paid to the corporation on account of them, shall contribute to the corporate funds the amount unpaid on his' shares when necessary to meet the corporate indebtedness ; 2 the other right, that shareholders shall not, to the injury of creditors, divert the funds of the corporation from their proper function of discharging the corporate indebtedness. Whatever rights against shareholders in a corporation with a constitution of this nature creditors may have, are incidental to these two main rights. § 701. By subscribing for shares in the capital stock of a „ corporation, subscribers, even without an express Liability r '. ' incurred by promise to pay, are held impliedly to agree to pay Condmo^I' to the corporation the par value of the shares sub- 1 See Seymour v. Sturges, 26 N. Y. 134. A statute prescribing that no shareholder shall be liable to creditors of the corporation for more than the amount subscribed by him is declaratory of the com- mon law. Walker v. Lewis, 49 Tex. 123. 2 This right of creditors, or liabil- ity of shareholders, is sometimes ex- pressed by statute. (See N. Y. Rev. Stat. chap. 18, tit. iii. §1, par. 5); Morgan v. New York and Albany R. R. Co., 10 Paige (N. Y.), 290. But no implied promise to pay for shares can be held to arise when 694 the defendant never agreed to be- come a shareholder nor accepted that relationship, but repudiated it as soon as he knew it was put upon him by another person, as, for in- stance, where one stockbroker or- ders another to purchase stock, and the second broker has it transferred to the name of the broker who sent the order. No implied authority can exist in such case to transfer stock to the name of the broker ordering it, for the other broker knows him to be acting merely as a broker. Glenn v. Garth, 133 N. Y. 18.