The opinion of the court was delivered, by
Sharswood, J.
— The Germantown Passenger Railway Company was incorporated, with a capital of 4000 shares of $50 each, by Act of Assembly, approved April 21st 1858, Pamph. L. 494, and hy a supplement of March 22d 1859, Pamph. L. 284, the stock was increased to 10,000 shares. The plaintiff below, after this supplement, became entitled to 250 shares, and paid in two instalments of $5 on each share. A third instalment of the same amount he refused to pay, and the directors declared his shares forfeited. He filed this bill in the court below to have this forfeiture declared null and void, and the court decreed accordingly upon bill, answer and proofs, and that the company should cause 250 shares of stock to be restored to the name of the complainant, subject to all lawful calls, and issue to him a certificate for said stock in usual form, upon his surrendering any certificate he may now hold to be cancelled.
The grounds upon which this decree was made appear hy the opinion below, and the course of the argument hy the able counsel of the appellee, to he reducible to two. First, that no notice was given to the plaintiff of the intention of the directors to forfeit the stock. “In analogy,” says the opinion, “to proceedings in court, should not a rule to show cause first go against him, or a demand in the nature of a scire facias issue, which would give notice that at a place and on a day certain, judgment of forfeiture would be entered if the alleged default was not repaired ?” We must look to the charter for the power of the directors to forfeit the stock. No doubt the power given must he strictly pursued, and if any restrictions or limitations there provided have been disregarded, the alleged act of forfeiture must he declared invalid. This is so for the special reason that it is one of those forfeitures’ against which, if regular, equity does not relieve: 1 Redfield on Railways 214. By the 5th section of the charter of this corporation it is provided, “ that if any stockholder shall omit, for the space of six months, to pay any instalment which may be called for, the managers of the company may either declare the shares of stock, on which the instalments are unpaid as aforesaid, to be forfeited, or may at their option bring suit ■ to recover the said instalments with interest, at the rate of 12 per cent, per annum, as debts of a like amount are by law recoverable against the person or persons appearing by their books to be the owners of those shares.” It is not pretended that the call was not duly made and published, that the plaintiff had not personal notice, and that six months had not elapsed before the forfeiture was declared. Where, then, is the provision of the charter that requires any other or further notice ? The plaintiff, as a subscriber to the stock and a member of the corporation, must be presumed to know its terms. He knew, then, that he had six months to pay, [131]*131but that at the expiration of that time his stock could be declared to be forfeited. That equity will not relieve against such a forfeiture has been a settled doctrine of the court ever since Sparks v. Liverpool Waterworks, 13 Ves. 428. The reasoning of Sir William Grant in that case admits of no answer. He considered the charter as a contract between the subscribers. “ The parties might contract upon any terms they thought fit, and might impose terms as arbitrary as they pleased. It is essential to such transactions. This struck me as not like the case of individuals. If this species of equity is open to parties engaged in these undertakings, they could not be carried on. It is essential that the money should be paid and that they should know what is their situation. Interest is not an adequate compensation, even among individuals, much less in these undertakings.” It follows that at the expiration of six months, the time limited in the charter, the power of the managers to forfeit the stock was perfect, and the defaulting stockholder could claim no further delay or any other notice than he had already received.
The second ground of objection to the forfeiture is, that before the call in question was made, the company had made a general assignment for the benefit of its creditors, and that the call was unauthorized by the assignee. This, indeed, is the principal contention, and it„ has received, as it deserves, careful consideration. It is certainly an acknowledged principle that the entire capital stock of a corporation is a trust fund for the payment of its debts: Wood v. Dummer, 3 Mason 308; Mann v. Pentz, 3 Comst. 422. The unpaid subscriptions to its stock are a part of its assets, which can be made available in equity by the creditors, and therefore a general assignment for their benefit passes them to the assignee: West Chester and Philadelphia Railroad Company v. Thomas, 2 Philada. R. 344. It is, however, but the assignment of a chose in action, and the legal title being still in the corporation, the assignee can proceed only in their name, and must be able to show that the provisions of the charter have been pursued so as to give the company the right; in other words, that a call for the unpaid capital has been duly made, and by the proper authority. It was said by Chancellor Dessaussure, that where the funds of a corporation are not whole and tangible, but consist in the liability of the members to be assessed, a court of equity will lend its aid in favor of a creditor of the company to assist him in enforcing the payment of instalments required by the members, and will apply the fund so raised to discharge the debt. It is as if it were a subrogation to the rights of the company: Hume v. Winyaw and Wando Canal Co., 1 Car. Law Jour. 217 ; and this language is cited with approbation in Washington Beneficial Society v. Bacher, 8 Harris 429. A chancellor will consequently compel the directors to make the calls required by the charter, whenever [132]*132bis aid is invoked by creditors or the representative of creditors. There is a moral obligation both upon the officers and the stockholders to use the property and claims of the company as far as they will reach, to satisfy the demands of creditors, and when the company cease to keep up their organization, and abandon all action under their charter, then the intervention of equity becomes indispensable: Henry v. Vermillion and Ashland Railroad Company, 17 Ohio 187. The members of a corporation would not be allowed to shake off their responsibility by a dissolution, any more than by a division of the paid-up capital among themselves : Wood v. Hummer, 3 Mason 308. But a corporation is noffnecessarily dissolved by its insolvency; not, as has been held, by a writ of sequestration operating as a legal divestiture of all its available assets: Mann v. Pentz, 3 Comst. 422; much less, it would seem, by a voluntary assignment for the benefit of creditors. If it keeps up its organization it still exists in law, and its franchises and powers, not capable of assignment, must be exercised by it, but in subserviency to its legal and equitable obligations. The discretion of the managers, as has been well said, as to calls, is modal merely, relating to the time and manner of making payments. When the debts of the company require the calls to be made, it becomes the duty of the managers to make them, as much so as to collect other debts due to the company. It is not discretionary with them to say whether the debts of the corporation shall be paid or not, when they have the means at command: Ward v. Griswold Manufacturing Company, 16 Conn. 601.
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The opinion of the court was delivered, by
Sharswood, J.
— The Germantown Passenger Railway Company was incorporated, with a capital of 4000 shares of $50 each, by Act of Assembly, approved April 21st 1858, Pamph. L. 494, and hy a supplement of March 22d 1859, Pamph. L. 284, the stock was increased to 10,000 shares. The plaintiff below, after this supplement, became entitled to 250 shares, and paid in two instalments of $5 on each share. A third instalment of the same amount he refused to pay, and the directors declared his shares forfeited. He filed this bill in the court below to have this forfeiture declared null and void, and the court decreed accordingly upon bill, answer and proofs, and that the company should cause 250 shares of stock to be restored to the name of the complainant, subject to all lawful calls, and issue to him a certificate for said stock in usual form, upon his surrendering any certificate he may now hold to be cancelled.
The grounds upon which this decree was made appear hy the opinion below, and the course of the argument hy the able counsel of the appellee, to he reducible to two. First, that no notice was given to the plaintiff of the intention of the directors to forfeit the stock. “In analogy,” says the opinion, “to proceedings in court, should not a rule to show cause first go against him, or a demand in the nature of a scire facias issue, which would give notice that at a place and on a day certain, judgment of forfeiture would be entered if the alleged default was not repaired ?” We must look to the charter for the power of the directors to forfeit the stock. No doubt the power given must he strictly pursued, and if any restrictions or limitations there provided have been disregarded, the alleged act of forfeiture must he declared invalid. This is so for the special reason that it is one of those forfeitures’ against which, if regular, equity does not relieve: 1 Redfield on Railways 214. By the 5th section of the charter of this corporation it is provided, “ that if any stockholder shall omit, for the space of six months, to pay any instalment which may be called for, the managers of the company may either declare the shares of stock, on which the instalments are unpaid as aforesaid, to be forfeited, or may at their option bring suit ■ to recover the said instalments with interest, at the rate of 12 per cent, per annum, as debts of a like amount are by law recoverable against the person or persons appearing by their books to be the owners of those shares.” It is not pretended that the call was not duly made and published, that the plaintiff had not personal notice, and that six months had not elapsed before the forfeiture was declared. Where, then, is the provision of the charter that requires any other or further notice ? The plaintiff, as a subscriber to the stock and a member of the corporation, must be presumed to know its terms. He knew, then, that he had six months to pay, [131]*131but that at the expiration of that time his stock could be declared to be forfeited. That equity will not relieve against such a forfeiture has been a settled doctrine of the court ever since Sparks v. Liverpool Waterworks, 13 Ves. 428. The reasoning of Sir William Grant in that case admits of no answer. He considered the charter as a contract between the subscribers. “ The parties might contract upon any terms they thought fit, and might impose terms as arbitrary as they pleased. It is essential to such transactions. This struck me as not like the case of individuals. If this species of equity is open to parties engaged in these undertakings, they could not be carried on. It is essential that the money should be paid and that they should know what is their situation. Interest is not an adequate compensation, even among individuals, much less in these undertakings.” It follows that at the expiration of six months, the time limited in the charter, the power of the managers to forfeit the stock was perfect, and the defaulting stockholder could claim no further delay or any other notice than he had already received.
The second ground of objection to the forfeiture is, that before the call in question was made, the company had made a general assignment for the benefit of its creditors, and that the call was unauthorized by the assignee. This, indeed, is the principal contention, and it„ has received, as it deserves, careful consideration. It is certainly an acknowledged principle that the entire capital stock of a corporation is a trust fund for the payment of its debts: Wood v. Dummer, 3 Mason 308; Mann v. Pentz, 3 Comst. 422. The unpaid subscriptions to its stock are a part of its assets, which can be made available in equity by the creditors, and therefore a general assignment for their benefit passes them to the assignee: West Chester and Philadelphia Railroad Company v. Thomas, 2 Philada. R. 344. It is, however, but the assignment of a chose in action, and the legal title being still in the corporation, the assignee can proceed only in their name, and must be able to show that the provisions of the charter have been pursued so as to give the company the right; in other words, that a call for the unpaid capital has been duly made, and by the proper authority. It was said by Chancellor Dessaussure, that where the funds of a corporation are not whole and tangible, but consist in the liability of the members to be assessed, a court of equity will lend its aid in favor of a creditor of the company to assist him in enforcing the payment of instalments required by the members, and will apply the fund so raised to discharge the debt. It is as if it were a subrogation to the rights of the company: Hume v. Winyaw and Wando Canal Co., 1 Car. Law Jour. 217 ; and this language is cited with approbation in Washington Beneficial Society v. Bacher, 8 Harris 429. A chancellor will consequently compel the directors to make the calls required by the charter, whenever [132]*132bis aid is invoked by creditors or the representative of creditors. There is a moral obligation both upon the officers and the stockholders to use the property and claims of the company as far as they will reach, to satisfy the demands of creditors, and when the company cease to keep up their organization, and abandon all action under their charter, then the intervention of equity becomes indispensable: Henry v. Vermillion and Ashland Railroad Company, 17 Ohio 187. The members of a corporation would not be allowed to shake off their responsibility by a dissolution, any more than by a division of the paid-up capital among themselves : Wood v. Hummer, 3 Mason 308. But a corporation is noffnecessarily dissolved by its insolvency; not, as has been held, by a writ of sequestration operating as a legal divestiture of all its available assets: Mann v. Pentz, 3 Comst. 422; much less, it would seem, by a voluntary assignment for the benefit of creditors. If it keeps up its organization it still exists in law, and its franchises and powers, not capable of assignment, must be exercised by it, but in subserviency to its legal and equitable obligations. The discretion of the managers, as has been well said, as to calls, is modal merely, relating to the time and manner of making payments. When the debts of the company require the calls to be made, it becomes the duty of the managers to make them, as much so as to collect other debts due to the company. It is not discretionary with them to say whether the debts of the corporation shall be paid or not, when they have the means at command: Ward v. Griswold Manufacturing Company, 16 Conn. 601. As a forfeiture of the stock extinguishes all the rights and liabilities of the shareholder — all title of the corporation to recover what may be due upon it — it follows that the creditors by whom the money is needed can object to such action and invoke the interposition of a court of equity to prevent it or set it aside: Small v. Herkimer County Manufacturing Company, 2 Comst. 330. -
It would seem from this course of reasoning that it was the right and the duty of the assignee of the Germantown Passenger Railway Company to require the managers to make the calls necessary to enable them to settle with their creditors. He appears not to have considered the unpaid instalments as assets coming to him under the assignments. He understood very well, however, that he took the course he did on his own responsibility. “When I found things going on well,” as he states in his testimony, “ I took the responsibility of letting Mr. Singerly and his road work themselves out of their difficulties.” The event justified his confidence. Though he may not have assented to the calls, it is certain that with full knowledge he took no steps to prevent them, or the forfeiture of shares on non-payment. This was a power or franchise which, beyond all question, was vested in the board of managers, and no one had any right to object to its [133]*133lawful exercise except creditors, or the representative of creditors. Had the stockholders objected to the payment of their subscriptions under the calls to the treasurer of the company, on the ground that they had notice of the assignment,. their duty was to tender the amount to the assignee, and then if he had refused to accept it, they would have had a clear equity to be relieved from any attempted forfeiture. The plaintiff helow, so far 'from taking this course, appeared to have concluded that because the assignee had not expressly authorized the call, he was not bound to pay any attention to it. If this were so, it was incumbent upon him promptly to take the proper measures to enjoin the proceedings. He could not sleep on his rights, and take the chances of a favorable turn of affairs. When the call was made the 'stock was without market value. There were but two instalments paid up, and each share was subject to a further call of $40. Even the bonds of the company were not and could not be sold for fifty cents on the dollar. The last call was made October 3d 1860, payable on or before the 5th of November following. He lay by for three years, until the 10th of November 1863, when he filed his bill in the court below. In the mean time the company had emerged from its difficulties, paid its floating debts, and the stock had become valuable. He is now willing and desirous to take it subject to all the unpaid instalments. It would be strange equity to allow a party thus to. speculate upon contingencies. The forfeiture relieved him from all the obligations of his subscription. Neither the company nor the assignee could have pretended to enforce those obligations. Thus he alone would be allowed to play fast or loose. Equity aids the vigilant and active, not the sleeping and indolent. “Nothing,” in the language of Lord Camden, “ can call forth this court into activity but conscience, good faith and reasonable diligence. When these are wanting the court is passive aftd does nothing:” Smith v. Clay, 3 Bro. C. C. 639 note.
Decree reversed, and now bill dismissed at the costs of the appellee.