Martin Ch. J.:
The question of the liability of the plaintiff in error, in an action at law, for the calls upon his subscription for stock, was settled by this Court, in the case of The Dexter & Mason Pl. R. Co. vs. Millerd, 3 Mich. 91, in which it was held that the signing of the articles of association and subscription for stock imported a promise to the Company to pay the amount of such subscription when called in, although the in•strument contained no express promise to that effect. To this decision, founded as we conceive it to be in justice, and based upon sound reason, we shall adhere.
An attempt was made upon the argument of this case, to distinguish that from the present, but we’ can perceive no substantial difference in principle between them, and none except what may spring from mere verbal criticism. The former was under the general Plank Road Act, the present 'under the general Mining and Manufacturing Act. The directors of the plaintiff, in the one case, were authorized to require payment of the sums subscribed, &e. (Comp. L. §1912); those of this plaintiff below to call in the subscrip’tion to the capital stock by installments, &c. (Comp. X, § 1809); and both Acts denominate the installments thus re quired to be paid, or called in, as debts — that is, as thereafter due and payable to the Company. We cannot regard the difference in the language of these Acts as one affecting the powers of the different corporations, or as indicative of •an intention to confer upon the one a greater authority than upon the other. It is a different expression of the same thing — the Legislature intending in both instances to confer Upon the directors such power and authority as might be necessary to enable them to secure the payment of the con•sideration of the purchase of stock, so as to insure the ob[294] jects of the association, and to secure both the stockholders.: and the public from imposition and fraud. And, upon verbal criticism, it is difficult to comprehend how, from the words themselves, in the connection in which they are employed, the directors of the one corporation can require payment of an installment, without calling for it, or those of the other, call for such payment, without requiring it. In both cases,, it is a demand of payment, and the common law provides, the necessary remedies and requisites to enforce it.
The reasoning of the Court in Dexter & Mason Pl. R. Co. vs. Millerd, and of the Supreme Court of Connecticut, in Hartford & New Haven R. R. Co. vs. Kennedy, 12 Conn. 499, we regard as fully applicable to this case, and as based upon sound considerations and wholesome policy: Indeed, the whole current of decisions, both in this country and in England, establishes the right of action for delinquent installments, and the apparently conflicting decisions of the courts of Massachusetts, Maine, and New Hampshire, which have been referred to, will be found to arise upon facts and considerations which in no wise affect the class of cases within which the present is embraced. — See Redf. on Railw. 70, 71, §49, and Notes; Hartford & New Haven R. R. Co. vs. Kennedy, 12 Conn. 499; The Northern R. R. Co. vs. Miller, 10 Barb. 260.
The only question arising in this ease, for our considera-tion, is the right of the Company to maintain this action for-the deficiency remaining after a sale of the stock, for payment of the calls upon' which Carson was delinquent. The determination that a right of action, to recover unpaid installments or calls, exists at the common law, relieves this question of much of the difficulty which is supposed to surround it, and disposes of most of the arguments found in the books against the maintenance of such action; for the 'right once existing, it must continue, until satisfaction of the-demand.
But it is claimed by the plaintiff in error that the de[295] mand in this case was satisfied by tbe forfeiture of the stock, and that the sale was a confirmation of such forfeiture. If it be true that the stock was forfeited to the use of the Company upon the failure to pay the assessment, there would perhaps be no difficulty in holding that the remedy by action was taken away thereby; and such is the weight of authorities (see, among other cases, Small vs. The Herkimer Man. Co. 2 Comst. 330; Allen vs. Montgomery R. R. Co. 11 Ala. 437); and when forfeiture is made, an alternative and not a concurrent remedy, such is most certainly the result. — See London & Brighton R. Co. vs. Fairclough, 2 Man. & Gr. 674; Edinburgh R. Co. vs. Hobelwhite, 6 M. & W 715; Giles vs. Hutt, 3 Exch. 18; Great Northern Railway vs. Kennedy, 4 Exch. 417.
But by forfeiture in the sense employed in all these cases,' and all others of the same class, is meant the reclamation by the corporation of the entire stock to its own use; and this result is held to follow upon the principle that such forfeiture necessarily involves a total loss of interest in the thing forfeited, by the party in default, and a resumption by the Company of the entire consideration of the debtor’s promise. The stock forfeited vests absolutely and beneficially in the Company, and the debtor can have no benefit from it or its proceeds. We shall see, as we progress, that no such consequences attend the sale of the stock under the charter of the present defendant in error, and that consequently there is in this case no forfeiture which satisfies the call and extinguishes the Company’s claim therefor.
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Martin Ch. J.:
The question of the liability of the plaintiff in error, in an action at law, for the calls upon his subscription for stock, was settled by this Court, in the case of The Dexter & Mason Pl. R. Co. vs. Millerd, 3 Mich. 91, in which it was held that the signing of the articles of association and subscription for stock imported a promise to the Company to pay the amount of such subscription when called in, although the in•strument contained no express promise to that effect. To this decision, founded as we conceive it to be in justice, and based upon sound reason, we shall adhere.
An attempt was made upon the argument of this case, to distinguish that from the present, but we’ can perceive no substantial difference in principle between them, and none except what may spring from mere verbal criticism. The former was under the general Plank Road Act, the present 'under the general Mining and Manufacturing Act. The directors of the plaintiff, in the one case, were authorized to require payment of the sums subscribed, &e. (Comp. L. §1912); those of this plaintiff below to call in the subscrip’tion to the capital stock by installments, &c. (Comp. X, § 1809); and both Acts denominate the installments thus re quired to be paid, or called in, as debts — that is, as thereafter due and payable to the Company. We cannot regard the difference in the language of these Acts as one affecting the powers of the different corporations, or as indicative of •an intention to confer upon the one a greater authority than upon the other. It is a different expression of the same thing — the Legislature intending in both instances to confer Upon the directors such power and authority as might be necessary to enable them to secure the payment of the con•sideration of the purchase of stock, so as to insure the ob[294] jects of the association, and to secure both the stockholders.: and the public from imposition and fraud. And, upon verbal criticism, it is difficult to comprehend how, from the words themselves, in the connection in which they are employed, the directors of the one corporation can require payment of an installment, without calling for it, or those of the other, call for such payment, without requiring it. In both cases,, it is a demand of payment, and the common law provides, the necessary remedies and requisites to enforce it.
The reasoning of the Court in Dexter & Mason Pl. R. Co. vs. Millerd, and of the Supreme Court of Connecticut, in Hartford & New Haven R. R. Co. vs. Kennedy, 12 Conn. 499, we regard as fully applicable to this case, and as based upon sound considerations and wholesome policy: Indeed, the whole current of decisions, both in this country and in England, establishes the right of action for delinquent installments, and the apparently conflicting decisions of the courts of Massachusetts, Maine, and New Hampshire, which have been referred to, will be found to arise upon facts and considerations which in no wise affect the class of cases within which the present is embraced. — See Redf. on Railw. 70, 71, §49, and Notes; Hartford & New Haven R. R. Co. vs. Kennedy, 12 Conn. 499; The Northern R. R. Co. vs. Miller, 10 Barb. 260.
The only question arising in this ease, for our considera-tion, is the right of the Company to maintain this action for-the deficiency remaining after a sale of the stock, for payment of the calls upon' which Carson was delinquent. The determination that a right of action, to recover unpaid installments or calls, exists at the common law, relieves this question of much of the difficulty which is supposed to surround it, and disposes of most of the arguments found in the books against the maintenance of such action; for the 'right once existing, it must continue, until satisfaction of the-demand.
But it is claimed by the plaintiff in error that the de[295] mand in this case was satisfied by tbe forfeiture of the stock, and that the sale was a confirmation of such forfeiture. If it be true that the stock was forfeited to the use of the Company upon the failure to pay the assessment, there would perhaps be no difficulty in holding that the remedy by action was taken away thereby; and such is the weight of authorities (see, among other cases, Small vs. The Herkimer Man. Co. 2 Comst. 330; Allen vs. Montgomery R. R. Co. 11 Ala. 437); and when forfeiture is made, an alternative and not a concurrent remedy, such is most certainly the result. — See London & Brighton R. Co. vs. Fairclough, 2 Man. & Gr. 674; Edinburgh R. Co. vs. Hobelwhite, 6 M. & W 715; Giles vs. Hutt, 3 Exch. 18; Great Northern Railway vs. Kennedy, 4 Exch. 417.
But by forfeiture in the sense employed in all these cases,' and all others of the same class, is meant the reclamation by the corporation of the entire stock to its own use; and this result is held to follow upon the principle that such forfeiture necessarily involves a total loss of interest in the thing forfeited, by the party in default, and a resumption by the Company of the entire consideration of the debtor’s promise. The stock forfeited vests absolutely and beneficially in the Company, and the debtor can have no benefit from it or its proceeds. We shall see, as we progress, that no such consequences attend the sale of the stock under the charter of the present defendant in error, and that consequently there is in this case no forfeiture which satisfies the call and extinguishes the Company’s claim therefor.
The case of Small vs. The Herkimer Manufacturing Co. is familiar to the profession, and a consideration of the reasoning of the Court of Appeals, in deciding it, will illustrate the view we hold of the present. The question there was as to the effect of a forfeiture for non-payment of a subsequent call, upon actions commenced for prior unpaid installments. The language of the charter of the Company authorized the directors to call upon the stockholders for payment [296] of their subscriptions, at such times and in such proportions as they should see fit, under penalty of forfeiture to the Company of their shares, and all previous payments made thereon. The Supreme Court had held that the stock was holden by the Company as security, in the nature of a mortgage, and that the forfeiture was nothing more than a strict foreclosure: but the Court of Appeals, from a consideration of the nature and incidents of a forfeiture, held that this was error; that the Company did not have a lien upon the stock, in the nature of a mortgage or pledge, but that the transaction was a conditional sale, and that the absolute title to the stock could only be apquired upon the payment of the purchase-money, until which event the right was reserved in the Company to reclaim the property upon non-payment of any installment of the purchase-money. Li discussing this proposition, and the effect of the forfeiture upon the pending action for prior calls, Gardner J. says: “ The forfeiture embraces the entire consideration of the defendant’s promise. The directors can not graduate it according to the amount •of the call. The right is not divisible, but extends to the whole subject of the contract. The call is made a condition precedent to the forfeiture — the occasion upon which it may be enforced: but, when made, it applies to the ‘sum subscribed,’ and not to the particular installment.” And the reason he assigns for this conclusion is worthy of particular notice, as potent in the present case to establish, e converso, this Company’s sale to be absolute, and its lien upon the stock to be in the nature of a mortgage or pledge. “This follows,” he says, “necessarily from the principle in which we all agree, that there is no legal mode of ascertaining the value of the stock.”
The language of Hoyt J. is also worthy of consideration, as showing the grounds upon which the right of forfeiture is held to make the sale of stock conditional, and the remedy, consequently, final. “I do not think,” he says, “this is to be regarded in the light of a mortgage. Upon' a foreclosure [297] and ‘sale of property mortgaged, if it bring more than the debt, the mortgagor is entitled to the surplus. But no provision is made for the Company’s refunding the surplus in this case. And if the Company, ■ after forfeiture, should sell the stock for a sum beyond the amount unpaid thereon at the time of forfeiture, the defendant could not recover such surplus. Again, in all cases of a mortgage, the mortgagor has an equitable right of redemption until a strict foreclosure, or a foreclosure and sale, of the mortgaged property. But no such remedy exists for the redemption of the stock forfeited under the provisions of a statute like the one in question.” And he concludes: “ I can not see how this can, upon 'principle, be regarded as a mortgage. On the contrary, it has, I think, more of the properties of a conditional sale, where the absolute title does not pass until payment in full.”
Now, this reasoning incontrovertibly establishes the proposition that the absolute and conclusive effect of a reservation of the penalty of forfeiture is to render the sale of stock to which it attaches conditional, and that the enforcement of the remedy obliterates the contract of sale, and extinguishes all rights of action upon it. But if the reasoning establishes this fact, it also establishes the further proposition, that where the security reserved is less than forfeiture; where, as under our statute, it is a simple power of sale, with the right reserved to the debtor to any surplus which may remain; then the sale is absolute, and the security is in the nature of a mortgage or pledge.
The case of The Great Northern Railway vs. Kennedy, 4 Exch. 417, we regard as precisely in point. Under its charter, that Company was authorized to forfeit and sell delinquent stock, rendering the surplus to the debtor. The action was for unpaid calls. Plea, puis darrien continuance, that after the action was commenced, the Company had forfeited and sold the stock, &c. Upon demurrer, this plea was held bad, 1st, Because the remedy was cumulative, and not alternative; and, 2d, Because the remedy by forfeiture and [298] sale was a security for the calls in the nature of a mortgage or pledge. Upon this latter point, Parke B. says: “Until the Company have finally disposed, of the shares, and are satisfied the debt and costs, they may continue this action. When they have sold the shares, and converted them into money, the defendant would be entitled to credit to the extent of the amount for which the shares sold.” And Rolfe B. says: “It is clear, from the language of the 34th and '35th sections, that the declaration of forfeiture is in the nature of a mortgage. The Company are not to sell more of the shares than will be sufficient, as .nearly as can be ascertained, to pay the arrears of calls, together with interest and expenses; and if there be any surplus, it is to be j>aid to1 the defaulter, who has a right to redeem at the last moment. This shows that the forfeited shares are a security only until payment.” This reasoning is applicable to the case at bar, and impels us to the conclusion that the remedy by sale, given by our statute, is cumulative upon that by action, and that, until actual satisfaction, there is no bar to an action for the arrears of calls.
This case is in harmony, also, with Small vs. Herkimer Man. Co.; and the two illustrate the difference between the effect of a forfeiture to the use of the Company, and of a forfeiture and sale to enforce a security.
■ The effect of a strict forfeiture is to rescind the sale, and thereby condemn the stock to the use of the Company, regardless of its value, or the amount of the payments which have been made upon iti The call may be for five dollars, and the value of the stock one hundred dollars, yet this difference between the call and the value is absolutely lost to the stockholder, and goes to increase the resources of the Company. For these reasons, and as the remedy is optional with the Company, there is propriety in holding that. the sale is conditional, and that the forfeiture satisfies all arrears of calls. It may also well be so held, because, when the stock is forfeited, it is re-taken at its nominal value, which must [299] always exceed the call, and can not be taken at any other, as there is no legal mode of ascertaining its real value. Not having parted with the absolute title, the Company has no concern with the market value, nor can it be permitted to insist that the real value is less than that the charter has affixed to it, and at which it was taken by the stockholder. It can not speculate upon its own stock in a manner so detrimental to the interests of its members and the public, or be allowed to hold the value of its stock to be at one price on the sale, and at another on the rescission of the sale.
But, as we have seen, the effect of a sale of the stock is altogether different. It had been absolutely, and not conditionally sold to the stockholder, and the security of the Company is in the nature of a mortgage for the purchase-money. The sale is a foreclosure, upon which the Company can only make the amount of the calls — the surplus, if any, going to the defaulter. Hence the Company is not, and should not be, bound by the nominal value of the stock, but may go out into the market to find its value there; and .the benefits arising from its real value accrue to the delinquent, who should, by all the analogies of the law, suffer the loss of its depreciation. This is equality, and operates as a protection to the Company by furnishing the means of securing the payment of the capital stock upon which its operations are based, and protection to all its members, and to those dealing with it, by preventing the voluntary abandonment by a stockholder of his enterprise whenever he finds it hazardous, or capriciously chooses to do so; thereby freeing himself from liability for the arrears of calls which have been demanded of him. As he reaps the benefit of the appreciation, so he should suffer the loss of the 'depreciation of his stock; and we can perceive no sound reason why a different rule should obtain in the case of a mortgage of stock from that which exists in every other case of a mortgage of personal property to se-i -cure the payment of the purchase-money.
It was contended on the argument that the right to sue [300] for arrears of calls after sale can only exist by virtue of statutory authority; and that the cases recognizing this right do so upon this ground. With the exception of Troy & Greenf. R. R. Co. vs. Newton, 1 Gray, 544, we do not so read 'the cases; and that view may have been well taken in that case, in consideration of the previous course of decisions of that Court. In Danbury & Norwalk R. R. Co. vs. Wilson, 22 Conn. 436; this right is expressly recognized, upon principles springing from the right to sue for the calls. The Court says: “ The defendant further insists that the plaintiffs, by the sale of the shares, are precluded from maintaining this suit. That claim is directly opposed, not only to our decision in Hartford & New Haven R. R. Co. vs. Kennedy, but also to the general Railroad Act, which provides,” &c. And it being established that a right of action exists for an unpaid call, it is difficult to maintain the proposition that anything short of complete satisfaction by payment will discharge it. And in our opinion it can only be done by the arbitrary adoption of a rule in favor of stock operators, utterly repugnant to those which govern every other class of citizens. If the effect of a sale, unlike that of a forfeiture, is to foreclose a security, and not to rescind a contract, it should also be to satisfy pro tanto the debt secured, leaving to the Company the further remedy by action for the deficiency, if one exists, as in all other cases. And we should be extremely reluctant 'to recognize as authority any adjudications holding a contrary rule, unless based upon some principle not hitherto developed.
We have bestowed upon this case the careful consideration which its importance demands, and the result of our examination of all the authorities within reach, is, as already intimated, That the remedy by sale of the stock is cumulative, and that a resort to it does not debar the Company of a ■subsequent action, if any deficiency should be found to exist— a result which we think introduces no novelty into the law, but accords with the whole doctrine of remedies upon obligations and their securities.
[301] The judgment of the Court below is therefore affirmed, with costs.
Manning and Christiancy JJ. concurred.