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2 Case & Com. 1 (1895-1896)

handle is hein.journals/cscmt2 and id is 1 raw text is: Case and Comment. NOTES OF RECENT IMPORTANT, INTERESTING DECISIONS. INDEX TO ANNOTATION OF THE LAWYERS' REPORTS, ANNOTATED. LEGAL NEWS NOTES AND FACETIYE. VOL. 2. JUNE, 1895. No. 1. CASE AND COMMENT. Monthly. Subscription, 50 cents per annum post- paid. THE LAWYERS' CO-OPERATIVE PUB. CO., Rochester, N. Y. New York, 177 Broadway. Branch Ofli Chicago, Lkeside Buildig. Boston, 10 Tremont Street. Entered at postoffice at Rochester, N. Y., as second class mail matter. Forfeiture of Corporate Stock. Unquestionably there are multitudes of people in this country who own shares of stock which are subject to forfeiture by rea- son of defaults in payment of installments. In the vast number of corporations this is all the time true. Yet cases in the courts on this subject are not remarkably frequent. Probably most stockholders who are from time to time delinquent afterwards pay what ,they owe and continue their relation to their corporation. Nevertheless forfeitures have been enforced in a considerable number of cases, and the proportion of the English an- thorities to the American authorities is greater on this subject than on most others. In a note on this question in 27 L. R. A. 305, it is shown that the English cases con- stitute an important part of the law on this subject. While the authorities establish the proposition that there is no inherent power in a corporation to declare a forfeiture, it is doubtless true nearly everywhere that author- ity of this kind has been conferred by stat- ute. In enforcing such forfeiture the courts proceed on the theory that the right is stric- tissimijuris. All provisions as to notice and procedure must be strictly complied with. Some interesting questions arise as to the right to redeem from a forfeiture. These generally depend on the validity of the for- feiture. Conflict has existed as to the effect of forfeiture on the personal liability of the stockholder. Some cases have proceeded on the theory that a forfeiture of shares was in- consistent with any further claims on the stockholder. But it seems reasonable to say, and other authorities make the distinction, that while this may be true of a literal for- feiture, it is not true of a so-called forfeiture which is made by a sale of the shares in the nature of a foreclosure of a claim against them. No more reason exists against hold- ing the stockholder liable for a deficiency remaining on such a sale than for holding the mortgagor personally liable for a de- ficiency remaining unpaid on foreclosure of his mortgage. In two or three states at least the liability of a stockholder for such a de- ficiency is denied by following out the the- ory, now repudiated in most jurisdictions, that there is no personal liability of a sub- scriber to stock to pay assessments or calls thereon. But the doctrine, almost every- where established now, holds that a subscrip- tion to stock includes a promise to pay law- ful assessments or calls thereon; and this logically requires the subscriber in case the shares are sold for unpaid installments to pay any deficiency that may be left on such sale. Another phase of the subject is as to the effect of forfeiture on a stockholder's liabil ity to creditors. An attempt has been made in some cases to procure a forfeiture in the interest of the stockholder with the secret purpose of avoiding liability to creditors. It is needless to say that the courts do not permit this to be done. But a forfeiture in the interest of the corporation is held to dis- solve the stockholder's connection with the company and terminate his liability to cred-

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