its debts. He was under no obligation to pay anything until the amount necessary for him to pay was, at least, approximately ascertained. Until then his obligation to pay did not become complete."

There is no allegation that in any way would show that it is yet ascertained how much Muth would be called upon to pay on his unpaid subscription of stock. The requiring him to set off the claims he has against the company in part liquidation of his subscription of stock would, in effect, be requiring him to pay the company so much of his subscription. I do not think the time has come when this can be done.

It is claimed that the case of Emmert v. Smith, 40 Md. 123, is an authority in point justifying the proceedings sought in this case. In that case the property of the corporation had been converted into money under a sale made by trustees in pursuance of an order of court, and the contest was as to the distribution of the proceeds among the creditors. In that case the court says:

"In the distribution of this fund in equity the creditors are severally actors, and each entitled to set up any equitable defense against each other. The provisions of the statute, without undertaking to prescribe any specific mode of recovery, make the stockholders of the company individually responsible to the creditors, and were designed for the relief of the creditors, and to afford them an ample and expeditious remedy before any forum competent to administer the law."

There is no statute in Montana which makes the stockholders of a railroad corporation individually liable to the creditors of the same for unpaid subscriptions of stock. In the case of Terry v. Little, 101 U.S. 216, the supreme court say: "The individual liability of stockholders in a corporation is always a creature of statute. It does not exist at common law. It will be seen that, while that was a different proceeding from that now presented in this case, there was also a different element for consideration, namely the individual liability of a subscriber of stock to a creditor. It would seem, also, that in that case the court did not consider the precise point presented in this,-namely, the right to have an individual claim against a corporation set off against an unpaid subscription of stock,-but whether this could be done without calling in all of the other stockholders who where indebted to the company for unpaid subscriptions of stock, and the liability of each determined, and only the amount each was required to contribute and pay in so as to liquidate the debts of the company determined. The court held that it could. That case, however, I do not consider in point in this case. For these reasons I think the demurrer should be sustained; and it is so held.

CHAPTER X.

BURGESS V. SELIGMAN.

SUPREME COURT OF THE UNITED STATES, 1882.

(107 U. S. 20.)

Liability of Holder of Stock as Collateral.

Mr. Justice Bradley:-This is an action brought by the plaintiff Burgess, against J. & W. Seligman & Co., as stockholders of the Memphis, Carthage & Northwestern Railroad Company, under a statute of the state of Missouri, to recover a debt due to him by the company. The plaintiff, in his petition alleges that on the fifth of November, 1874, judgment was rendered in his favor against the corporation by the district court of Cherokee county, Kansas, for $73,661, which remains unsatisfied; that in December, 1874, the corporation was dissolved; and that the defendants, at the date of the dissolution and of the judgment, were, and still are stockholders of the corporation to the amount of $6,000,000, on which there is due and unpaid $1,000,000; and he demands judgment for the amount of his debt. Joseph Seligman, the principal defendent, answered, denying that the defendants were ever stockholders, or subscribers to the stock, of the corporation, and setting forth certain facts and circumstances (stated in the findings) under which the stock alleged to be theirs was merely deposited in their hands by the corporation in trust for a temporary purpose by way of collateral security, to be returned when that purpose was accomplished.

The cause was tried by the court, and judgment was rendered for the defendants on certain findings of fact; and the question here is whether the facts as found are sufficient to support the judgment.

The principle facts upon which the case must turn are substantially the following;

The Memphis, Carthage & Northwestern Railroad Company was a corporation organized under the general laws of Missouri, with an authorized capital of $10,000,000. On the tenth of March, 1872, a contract in writing was entered into between the corporation and J. & W. Seligman & Co., (the defendants), which is set forth in the findings. In the recitals of this contract it was

stated that certain municipal subscriptions, in the shape of bonds, to the amount of $645,000 had been obtained in aid of its construction; and that a portion of the road (27 miles) was already graded, bridged and tied, and the right of way obtained, and all paid for by the proceeds of said subscriptions; and that the company now sought additional capital for procuring iron and equipment for the road by the sale of its first-mortgage bonds. It was, there. fore, agreed that the railroad company should furnish the capital necessary to completely prepare the road for the iron, and would execute and deposit with the defendants its entire issue of first mortgage bonds, to-wit, $5,000,000, and a majority of its capital stock authorized to be issued; "said stock to remain in the control of said party of the second part [J. & W. Seligman & Co.] for the term of one year at least." The latter agreed to purchase 2,000 tons of railroad iron under the railroad company's direction, and from time to time make advances of cash during the completion of the road, not exceeding $200,000, (including the amount paid for iron,) and to receive interest thereon at the rate of 7 per cent. per annum until reimbursed by sale of the bonds. They were to have the privilege for the term of 12 months of calling any portion of the five million dollars of bonds at the rate of 70 cents currency and accrued interest less 22 per cent., and if more bonds were sold than enough to iron the road, they should advance funds to purchase rolling stock, $2,000 per mile, the balance to remain with them on deposit, on interest at the rate of call loans, to pay any deficiency in net earnings of the road to meet demands for interest on the bonds. If the bonds, or part of them, could not, for any unforeseen cause, be negotiated during the next 12 months, the company was to repay to J. & W. Seligman & Co. all moneys advanced by them, with interest at the rate of 7 per cent. per annum, and a commission of 22 per cent. on all bonds returned. This is the purport of the written agreement.

On the first of May, 1872, a trust deed was executed by the company on its railroad and appurtenances to Jesse Seligman and John H. Steward, trustees to secure the company's bonds. On the eleventh of May, 1872, the following resolution of the directors was passed: "It is ordered by the board of directors that in making negotiations for money with J. & W. Seligman & Co., certificates for a majority of the capital stock of this company be issued to the said J. & W. Seligman & Co., to hold in trust for the period of 12 months, and that such certificates be signed by the president and secretary, with the corporate seal of this company affixed." A stock certificate for 60,000 shares, or $6,000,000, was accordingly issued in the usual form to J. & W. Seligman & Co. This certificate was delivered to the defendants, but

the court finds that they never subscribed for the stock nor agreed to do so, and obtained it only in the manner set forth. The list of stockholders on the stock-book of the company, required by law to be kept, contains the names of certain townships which contributed aid to the road, and several individuals, including J. & W. Seligman, but not the amount of shares held. The stock transfer-book (also required by law) contained the same list, with date, number of shares, and amount carried out opposite to each name. The name of J. & W. Seligman appeared therein as follows:

The court further found that shortly after the contract of of March 14, 1872, Joseph Shippen, an attorney of St. Louis, saw and examined its provisions, and a few days after told Burgess (the plaintiff) of the contract, and that thereby the Seligmans were to have control of the road, and of the stock and bonds, and told Burgess it would be well for him to have a talk with Joseph Seligman before entering into contract with the railroad for its construction. Burgess accordingly saw Seligman, and testifies that the following conversation ensued: "I told him I had been constructing on that Carthage road, and that I understood he was interested in the road now, and I would like to talk to him on that matter; that this company owed me-or Cunningham, who was the president of the corporation-that he owed me then some money for work I had done between there and Pierce City, and I wanted to know what the prospect was for pushing the work forward, the means of getting the iron, and so on, and he said: 'I think the best thing you can do is to go on with the work westward, and we will have ample means to get hold of the local bonds.' It seems Cunningham had represented to him that there was local means enough to grade the road, and he suggested to me then that I would be safe in going on and entering into such a contract, and then he mentioned that he thought it would be better for all parties if the road was built and the work prosecuted westward."

Afterwards, on June 14, 1872, Burgess entered into a contract with the railroad company for the construction of the road from Carthage, Missouri, to Independence, Kansas. He immediately began work under the contract, and so continued until the fall of

1873. The bonds of the company to the amount of $864,000 were issued, and were negotiated and sold by J. & W. Seligman & Co., they themselves becoming holders of over $400,000 thereof. The stock issued to them was voted on by proxy at two successive annual meetings for election of directors. The company being unable to meet its interest on the bonds, the road and property were delivered to the trustees of the mortgage and sold in December, 1874, and Joseph Seligman and Josiah Macy, as a bondholders' committee became purchasers thereof, and the railroad corporation was dissolved, in conformity with the laws of Missouri about the same time.

On the fifth of November, 1874, Burgess obtained judgment in the district court of Cherokee county, Kansas, against the railroad corporation for work and materials under his contract, for the sum of $73,661, which judgment recited that it was entered by agreement, with a stipulation that it would be entitled to a credit of the amount which had been paid by the railroad company to subcontractors and laborers of the plaintiff, when the exact amount thereof should have been ascertained and proper vouchers furnished. No credits, however, were claimed. The present action was brought to recover the amount of this judgment. The findings also set out the contract made by Burgess and his associate with the railroad company, fourteenth June, 1872, for constructing the road, by which it appeared that they agreed to take their pay in township bonds, so far as the same should be furnished.

Upon these facts the court gave judgment in favor of the defendants. Burgess brings the case here by writ of error.

The statutory provision upon which the action is founded is the twenty-second section of article 1 of the act of Missouri relating to private corporations, (1 Wagner's St. c. 37,) which declares as follows:

"If any company, formed under this act, dissolve, leaving debts unpaid, suits may be brought against any person or persons who were stockholders at the time of such dissolution without joining the company in such suit, and if judgment be rendered and execution satisfied, the defendant or defendants may sue all who were stockholders at the time of dissolution for the recovery of the portion of such debt for which they were liable."

By section 9 of article 2, of the same chapter, it is enacted as follows:

"No person holding stock in any such company as executor, administrator, guardian, or trustee, and no person holding such stock as collateral security, shall be personally subject to any liability as a stockholder of such company, but the person pledg ing such stock shall be considered as holding the same, and shall