Page, J.,
delivered the opinion of the Court.
This suit was brought by a creditor of the United Milk Producers’ Association, an insolvent corporation, against the appellee, one of its stockholders, to enforce the liability imposed by the 64th section of Article 23 of the Code of Public General Laws. The association was incorporated, as appears from the certificate, on the 5th day of December, 1899. The purposes of its creation were for dealing in milk and cream and the manufacture of the same into butter, cheese, ice-cream, condensed milk, and other by-products, for -buying,
selling, and exchanging eggs, poultry and other'farm products, and the more effectually to carry into execution these objects, for buying, selling, leasing and mortgaging property of all kinds, real and personal, and for improving the same by erecting warehouses and cold-storage plants, and for manufacturing and selling ice and doing all things that may be lawfully done in connection with said main business. Its capital stock was $ i ,000, divided into two hundred shares of the par value of five dollars each. After eleven shares of the stock had been subscribed and paid for, a meeting of the stockholders, eleven in number, each holding one share, was held on the 16th December, 1899, and it was at that time resolved, “that the par value of the shares -* * be and the same is hereby reduced from five dollars per share to one dollar per share, and that the capital stock, * * * be and the same is hereby increased from $1,000 to $250,000, divided into 250,000 shares of the par value of one dollar each.” This resolution, attested by the president, was incorporated in a certificate, which is referred to by the stockholders as “a certificate of the amendment of its charter by providing for a
change
of the par value and number of shares of its stock.” It was filed for record on 2nd March, 1900. The company was organized, “first in December,” the precise time does not appear. The president testified it .“started to do business on 15th January”—“not before the capital stock was authorized, but before there was any action on the part of the Courts in granting the charter to increase our capital stock.” It was after the passage of the resolution authorizing a change in the par value and number of shares, and before the certificate was filed for record, that the appellee made his subscription . for 300 shares- of his stock; the remainder of his holdings, one hundred shares, was taken subsequently. The first subscription was. made sometime in January, before the company had commenced to do business, at a meeting of. the stockholders, who then stated that the capital stock was $250,000. He attended no other meeting; but received monthly statements showing his credits of five
per centum
per month on his sub
scription, on account of the milk shipped by him. .His second subscription for 100 shares was made about four months after the first. He testified it was not made “at any meeting,” but “just at the place where they doing business” and that he then subscribed because “we were to give them so much they said of the amount of milk we were shipping and I thought it was not honest unless I paid them five per cent of the 400 gallons.”
The law applicable to the liability under our statute of stockholders of insolvent corporations on account of unpaid subscriptions to the stock of the company has been stated by this Court in a number of cases. In
Hager
v.
Cleveland and Basset,
36 Md. 490, it was said, “ As a general rule where the capital stock and number of shares are fixed in the recorded certificate, no valid assessments or calls can be made on subscribers, until the whole capital stock is taken, unless there be a provision to that effect in the recorded certificate or general law, under which the company is incorporated.” “ It is a condition, however, which the subscriber may waive,” either expressly or impliedly. “ If knowing that the whole capital stock has not been subscribed, they attend the meetings of the company, co-operate in the votes for the expenditure ot money, for the purchase of property, for the making of contracts, and other acts which only could be properly done upon the assumption that the subscribers intended to proceed with the stock partially taken up, they would be estopped from setting up such a defense.”
Hughes
v.
Antietam Man. Co.,
34 Md. 332.
But as was said in
Garling
v.
Baechtel,
41 Md. 325, the “ mere fact that he paid part of his subscription knowing that the whole capital stock had not been paid in, and that the company was incurring debts for property and materials, are not such acts of participation as to estop him from setting up as a defense in this action the partial subscription of the capital stock.”
These rules apply to subscriptions made before and after the company is chartered.
Morrison, &c.,
v.
Dorsey,
38 Md.
472. ' They áre founded' upon'the theory that the subscription is'made upon-the implied understanding that the entire amount of stock fixed by the- charter is necessary for the successful prosecution of the business for which the company was incorporated.- It is not to be-supposed that a reasonably prudent person will invest in' a corporation which is not to be supplied with súfficient capital with which to prosecute its affairs ; and therefore it is that a presumption arises that the amount fixed in'the charter shall- be-raised before the corporation creates any liabilities. There is nothing, however, to be found in the Mws of this ’State that operates to prevent a corporation' from organizing and electing officers‘before the whole amount fixed by the charter has been subscribed' and paid in; and if after organization new- subscriptions ' are taken, the liability of the stockholders under sec. '64 of Article 23 is not thereby defeáted.' It is not- the acquiescence of the stockholder in the organization of 'the company that
per se
will estop him from setting up as a defense to the claim of a creditor of the corporation the fact of the partial subscription of its stock ; but such acts of participation on his part in the conduct of its business as will indicate that he has consented to, and acqui,esced in, the company’s proceeding in its business before the whole' amount of its capital stock has been subscribed.
• These principles are well settled in this State and elsewhere, but because of the reasons on which they rest they can apply only tó such stock as is necessary for the full organization of the company. Between such stock as may be authorized and required by the charter, that is “original” or “formative” stock and “increased stock” there are substantial differences.
Balto. City Pass. Ry. Co.
v.
Hambleton,
77 Md. 346.
In case of the issue of increased stock, there are no implied' understandings, that the whole of the authorized issue shall-be subscribed for. 1
Cook on Stock and
Stockholders, sec. 288 and authorities cited, 3rd ed. • '-
The subscribers’ contract for such stock is that he will pay the price agreed upon for the stock, and if it is not delivered in accordance with such contract, he is liable at any time to
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Page, J.,
delivered the opinion of the Court.
This suit was brought by a creditor of the United Milk Producers’ Association, an insolvent corporation, against the appellee, one of its stockholders, to enforce the liability imposed by the 64th section of Article 23 of the Code of Public General Laws. The association was incorporated, as appears from the certificate, on the 5th day of December, 1899. The purposes of its creation were for dealing in milk and cream and the manufacture of the same into butter, cheese, ice-cream, condensed milk, and other by-products, for -buying,
selling, and exchanging eggs, poultry and other'farm products, and the more effectually to carry into execution these objects, for buying, selling, leasing and mortgaging property of all kinds, real and personal, and for improving the same by erecting warehouses and cold-storage plants, and for manufacturing and selling ice and doing all things that may be lawfully done in connection with said main business. Its capital stock was $ i ,000, divided into two hundred shares of the par value of five dollars each. After eleven shares of the stock had been subscribed and paid for, a meeting of the stockholders, eleven in number, each holding one share, was held on the 16th December, 1899, and it was at that time resolved, “that the par value of the shares -* * be and the same is hereby reduced from five dollars per share to one dollar per share, and that the capital stock, * * * be and the same is hereby increased from $1,000 to $250,000, divided into 250,000 shares of the par value of one dollar each.” This resolution, attested by the president, was incorporated in a certificate, which is referred to by the stockholders as “a certificate of the amendment of its charter by providing for a
change
of the par value and number of shares of its stock.” It was filed for record on 2nd March, 1900. The company was organized, “first in December,” the precise time does not appear. The president testified it .“started to do business on 15th January”—“not before the capital stock was authorized, but before there was any action on the part of the Courts in granting the charter to increase our capital stock.” It was after the passage of the resolution authorizing a change in the par value and number of shares, and before the certificate was filed for record, that the appellee made his subscription . for 300 shares- of his stock; the remainder of his holdings, one hundred shares, was taken subsequently. The first subscription was. made sometime in January, before the company had commenced to do business, at a meeting of. the stockholders, who then stated that the capital stock was $250,000. He attended no other meeting; but received monthly statements showing his credits of five
per centum
per month on his sub
scription, on account of the milk shipped by him. .His second subscription for 100 shares was made about four months after the first. He testified it was not made “at any meeting,” but “just at the place where they doing business” and that he then subscribed because “we were to give them so much they said of the amount of milk we were shipping and I thought it was not honest unless I paid them five per cent of the 400 gallons.”
The law applicable to the liability under our statute of stockholders of insolvent corporations on account of unpaid subscriptions to the stock of the company has been stated by this Court in a number of cases. In
Hager
v.
Cleveland and Basset,
36 Md. 490, it was said, “ As a general rule where the capital stock and number of shares are fixed in the recorded certificate, no valid assessments or calls can be made on subscribers, until the whole capital stock is taken, unless there be a provision to that effect in the recorded certificate or general law, under which the company is incorporated.” “ It is a condition, however, which the subscriber may waive,” either expressly or impliedly. “ If knowing that the whole capital stock has not been subscribed, they attend the meetings of the company, co-operate in the votes for the expenditure ot money, for the purchase of property, for the making of contracts, and other acts which only could be properly done upon the assumption that the subscribers intended to proceed with the stock partially taken up, they would be estopped from setting up such a defense.”
Hughes
v.
Antietam Man. Co.,
34 Md. 332.
But as was said in
Garling
v.
Baechtel,
41 Md. 325, the “ mere fact that he paid part of his subscription knowing that the whole capital stock had not been paid in, and that the company was incurring debts for property and materials, are not such acts of participation as to estop him from setting up as a defense in this action the partial subscription of the capital stock.”
These rules apply to subscriptions made before and after the company is chartered.
Morrison, &c.,
v.
Dorsey,
38 Md.
472. ' They áre founded' upon'the theory that the subscription is'made upon-the implied understanding that the entire amount of stock fixed by the- charter is necessary for the successful prosecution of the business for which the company was incorporated.- It is not to be-supposed that a reasonably prudent person will invest in' a corporation which is not to be supplied with súfficient capital with which to prosecute its affairs ; and therefore it is that a presumption arises that the amount fixed in'the charter shall- be-raised before the corporation creates any liabilities. There is nothing, however, to be found in the Mws of this ’State that operates to prevent a corporation' from organizing and electing officers‘before the whole amount fixed by the charter has been subscribed' and paid in; and if after organization new- subscriptions ' are taken, the liability of the stockholders under sec. '64 of Article 23 is not thereby defeáted.' It is not- the acquiescence of the stockholder in the organization of 'the company that
per se
will estop him from setting up as a defense to the claim of a creditor of the corporation the fact of the partial subscription of its stock ; but such acts of participation on his part in the conduct of its business as will indicate that he has consented to, and acqui,esced in, the company’s proceeding in its business before the whole' amount of its capital stock has been subscribed.
• These principles are well settled in this State and elsewhere, but because of the reasons on which they rest they can apply only tó such stock as is necessary for the full organization of the company. Between such stock as may be authorized and required by the charter, that is “original” or “formative” stock and “increased stock” there are substantial differences.
Balto. City Pass. Ry. Co.
v.
Hambleton,
77 Md. 346.
In case of the issue of increased stock, there are no implied' understandings, that the whole of the authorized issue shall-be subscribed for. 1
Cook on Stock and
Stockholders, sec. 288 and authorities cited, 3rd ed. • '-
The subscribers’ contract for such stock is that he will pay the price agreed upon for the stock, and if it is not delivered in accordance with such contract, he is liable at any time to
be called upon to pay whatever balance he may owe.
Bank
v.
Eaton,
141 U. S. 227;
Delano
v.
Butler,
118 U. S. 634.
In the last mentioned case, as well as in
Aspinwall
v.
Butler,
133 U. S. 610, after the company had been fully organized, a resolution was passed to increase the stock in a regular manner by the board of directors who had authority for that purpose. A part of the stock finally remained unsubscribed for. In the last mentioned case Aspinwall was sued to recover from him his subscription. He contended that inasmuch as the whole ■amount authorized was not subscribed for he could withdraw his subscription. The Court held that there was no express condition that the individual subscription should be void if the whole amount was not subscribed, and “no implied condition in law to that effect.”
At the time when the appellee in this case subscribed, the eleven stockholders had determined by resolution passed at a regular meeting, substantially, that instead of undertaking to do business with a capital stock of $1,000, at $5 per share, they would surrender the provisions of their charter that authorized that number and amount of shares' and in lieu thereof by the means of an amendment or change in the original charter, organize another corporation which should have -a capital stock of 250,000 shares at
$
1 per share. This change when effected did not therefore operate to increase the number of shares the company then had, but it obliterated the old stock, and in lieu thereof substituted another, differing in amount, number and par value. The company at the time of and before the adoption of this resolution had done no business and did not propose to do so. The subscription made by the appellee was to the stock of a company that he was assured would have a capital of
$2
50,000 divided into as many shares, each of the par value of one dollar. If the concern in which he was to become a stockholder did not have such a capital, then he was made the victim of a fraud. The resolution had been passed, the assurances had been given him, and if the latter were honestly made and the resolution was to be carried out, the appellee had a right to believe that
the old company with its limited stock had been changed or would be changed, whereby an adequate capital for the business it proposed to engage in would be assured. If the charter had not been amended or changed, the company would have had no power to issue stock at
$
I per share, and after the adoption of the new charter, the stock at $5 per share was out of existence. What then was contemplated by the parties ? It is clear that it was understood there should be such a radical amendment in the charter that its very limited issue of stock at $5.00 per share should be annulled and its authority to issue stock should be totally changed as to the aggregate amount and the par value of its shares. The amount of the stock fixed by the new charter, was that which it was supposed by all parties would be requisite for the accomplishment of the objects for which the corporation was created ; and it must therefore be presumed that it would be all subscribed for inasmuch as the purposes of the corporation would fail unless it was.
The fact that the change in the charter was not made until sometime after the subscription of the appellee does not affect the legal aspects of the case. Had there been no alteration in the charter, the subscription would have been of no effect; for the reason that there would have been no power to issue a share of stock of the par value of one dollar. At most the subscription can be regarded as an agreement on the part of the appellee to take three hundred shares at
$1
per share, whenever the corporation should be authorized to issue stock of that kind to the extent of 250,000 shares. The power to issue such stock amounted to a condition precedent to the validity of the subscription. All the rights of the company with respect to the enforcement of the contract and of acreditar of the company, who cannot recover in an action like •this unless the party sued was a stockholder at the time his claim against the corporation was created, depended absolutely upon the amendment of the charter. If this be correct the appellee did hot and could not become a stockholder until the change in the charter had been effected, and the
question then would be whether the stock authorized by the change was formative stock. We have already said, we think it was.
(Decided June 19th, 1902.)
The Court below upon the view of the matter we have stated, rejected, without error, the appellant’s 2nd, 3rd, 4th and 5th prayers. The first and sixth prayers were also properly rejected. The Court could not say as matter of law that this corporation was of such a character that no stockholder could presume or that it could not be fairly presumed by any stockholder, that it would not commence business until the whole amount of increased stock was subscribed for.
There was no error in granting the defendant’s second prayer. Even if the concluding clause of the prayer were conceded to be erroneous, it would not be such error as would entitle the appellant to make complaint in this Court. The effect of it was merely to add another burden to the defense. It could not have injured the appellant’s case.
Finding no error the judgment will be affirmed.
Judgment affirmed.