performance only to the corporation to be formed and in no event to the promoter.47 If the promoter is, under the terms of the 911, 914. See also cases cited in succeeding notes. This may not be the rule in all jurisdictions. Alabama.-McQuiddy Printing Co. v. Head, 7 Ala. App. 384, 62 So. 287. Illinois.-Seeberger V. McCormick, 178 Ill. 404, 416, 53 N. E. 340, affirming, 73 Ill. App. 87, writ of error dismissed, 175 U. S. 274, 44 L. Ed. 161, 20 Sup. Ct. 128. Massachusetts.-Jefts v. York, 4 Cush. 371, 50 Am. Dec. 791; same v. same, 10 Cush. 392. Michigan.-See supra. And see 16 Am. Law. Rev. 281, 282. A somewhat different situation arises if the other party to the contract is also one of the promoters of the corporation. Belding V. Vaughan, 108 Ark. 69, 157 S. W. 400. It is held in Bradshaw v. Jones, Tex. Civ. App. —, 152 S. W. 695, that the promoters are not liable for services rendered directly to the corporation after its organization, though pursuant to a contract made with the promoters before its organization. To hold the promoters liable it must be shown that they actually made a contract. Mere negotiations for a contract to be made with the corporation when organized, do not fasten any liability upon them. Donaldson Bond & Stock Co. v. Houck, 213 Mo. 416, 112 S. W. 242. As to whether the promoters can be held personally liable where the corporation is organized on the same day that the contract is made, see Ryland v. Hollinger, 117 Fed. Rep. 216, 54 C. C. A. 248; see also Lockwood v. Wynkoop, 178 Mich. 388, 144 N. W. 846. As to the liability of the promoters for damages for personal injuries suffered pending the complete organization of the corporation, see Farmers' Gin & Milling Co. v. Jones, Tex. Civ. App. —, 147 S. W. 668. In Selkirk v. Windsor, etc., Railway Co., 20 Ont. L. R. 290, 15 Ont. W. R. 87, the promoters' liability was based upon their misrepresentation as to their authority to bind the company. See also Seeberger v. McCormick, 178 Ill. 404, 53 N. E. 340, affirming, 73 Ill. App. 87, writ of error dismissed, 175 U. S. 274, 44 L. Ed. 161, 20 Sup. Ct. 128. 47. Federal.-Wiley v. Borough of Towanda, 26 Fed. Rep. 594; Marconi's Telegraph Co. v. Cross, 16 Hawaii 390. Georgia.-Wells v. J. A. Fay & Egan Co., - Ga., 85 S. E. 873. Missouri.-Queen City Furniture Co. v. Crawford, 127 Mo. 356, 30 S. W. 163. Pennsylvania.-O'Rorke v. Geary, 207 Pa. 240, 56 Atl. 541; Dengler v. Helms, 4 Walker 476, 481. Texas.-Weatherford M. W. & N. W. Ry. v. Granger, 86 Tex. 350, 352, 24 S. W. 795, 796, 40 Am. St. contract, not to be held individually responsible for the performance thereof, there is, until the corporation after its organization assumes responsibility, no mutuality of contract, and the promoter's agreement constitutes, in the absence of an independent consideration, a mere offer not binding upon any one. An agreement will not be construed as intending that the promoter is to be free from personal responsibility, unless that intention is clearly stated.48 If the written contract contains no provision to that effect, evidence of a parol understanding that the promoters should be free from personal liability, is inadmissible.49 The promoters of a corporation are not partners 50 and have, V. Richmond Virginia.-Strause United Kingdom and Colonies.Touche v. Metropolitan Ry. Warehousing Co., L. R. 6. Ch. App. 671, 676; Parsons v. Spooner, 5 Hare, 102; Higgins v. Hopkins, 3 Exch. 163; Giles v. Smith, 11 Jur. 334; Landman v. Entwistle, 7 Exch. 632; Kerridge v. Hesse, 9 Car. & Payne 200; Thomson v. Feeley, 41 U. C. Q. B. 229; Thames Nav. Co. v. Reid, 13 Ont. App. 303, 307. And see post, §§ 88, 316. It has been held that one who loans money to the promoter under an agreement that he shall be repaid when the promoter receives the money from the corporation, cannot recover from the promoter if the corporation is not formed, Wheeler v. Fradd, 14 Times Law Rep. 302. A promoter who as agent and trustee" for the proposed corporation agrees to make a certain payment upon the organization of the corporation, is not liable if the corporation is not organized. Belding v. Vaughan, 108 Ark. 69, 157 S. W. 400. 48. See Scott v. Lord Ebury, L. R. 2 C. P. 255, 36 L. J. C. P. 161. See post, § 88. It was held in Lewis v. Smith, 19 L. J. C. P. 278, that an agreement to indemnify a provisional committeeman against personal responsibility and to hold him harmless against any costs, charges and expenses incurred in the formation of the company does not extend to costs incurred in the defense of an action unsuccessfully brought against such provisional committee man. 49. See Bohn Mfg. Co. v. Reif, 116 Wis. 471, 93 N. W. 466. 50. See post, §§ 302, 316. in the absence of an express or implied authorization, no power to act for nor bind each other. It follows that only those promoters can be held liable on a contract made for the corporation, who either themselves made the contract, or in some way authorized or sanctioned it.51 The question whether a contract is authorized or sanctioned by a particular promoter is one of fact,5 and while the burden of proof rests upon the party asserting the promoter's liability 53 an authorization, or sanction, will readily be inferred.54 The courts look through the form of the transaction to the substance, and seek to hold the actual principals.55 51. Kennedy v. Fulton Mercantile Co., 33 Ky. Law Rep. 60, 108 S. W. 948; Railroad Gazette v. Wherry, 58 Mo. App. 423; Hepner v. Maybury, 23 N. Y. Misc. 262, 51 Supp. 170, (citing Taylor on Private Corporations, 77); Beale v. Mouls, 10 Ad. & El. N. S. 976; Hung Man v. Ellis, 3 Brit. Col. 486; Thames Navigation Co. v. Reid, 13 Ont. App. 303, 311. And see post, § 316. Presumably, nothing to the contrary is intended by the somewhat loosely worded dictum in Lewis v. Fisher, 167 Mo. App. 674, 676-677, 151 S. W. 172. As to the liability of those who allow their names to be published as directors of the proposed company, see Collingwood v. Berkeley, 15 C. B. N. S. 145, evidently decided upon the particular facts. As to the liability of promoters who with the knowledge and consent of the opposite party drop out before the organization of the corporation, see Burgess v. Sherman, 147 Pa. 254, 23 Atl. 554. 52. Reynell v. Lewis, 15 M. & W. 52 517, and see post, § 88 and § 316n. 53. Wood v. Argyll, 6 M. & G. 928, and see post, § 316n. 54. Roberts Mfg. Co. v. Schlick, 62 Minn. 332, 64 N. W. 826; same v. Wright, 62 Minn. 337, 64 N. W. 827, and see post, § 88 and § 316n. 55. McFall v. McK. & Y. Ice Co., 123 Pa. 253, 16 Atl. 478. Subscribers for the shares of the corporation are not liable upon the promoter's contracts, (Esper v. Miller, 131 Mich. 334, 91 N. W. 613; Shibley v. Angle, 37 N. Y. 626; Rambaut v. Tevis, 164 N. Y. App. Div. 324, 149 Supp. 993; Dengler v. Helms, 4 Walker (Pa.) 476, 484), unless the promoter was expressly authorized to act for them. Buffington v. Bardon, 80 Wis. 635, 50 N. W. 776. An agreement to advance the money necessary for the purchase of a mine, made in consideration of a promise of a certain portion of the capital stock of the projected corporation which is to take over the mine, does not make the lender liable as an undisclosed principal upon a note of the promoter, given The liability of those promoters who can be connected with the contract has been said to be joint,56 and a promoter who has been made to bear the entire obligation of a contract is entitled to contribution from such of his fellow promoters as were likewise responsible therefor.57 Where, however, expenses have been incurred by other promoters, the promoter seeking contribution must consent to the taking of an account of all the expenses so that the mutual liabilities of all the promoters may be determined in one action.5 58 § 78. Liability of promoter after obligations are assumed by corporation. That the promoters are personally liable on the contracts made by them for the proposed corporation is established by the great weight of authority. The question of the liability of the promoters after the corporation has been organized and has assumed the performance of the contract made for it by them, is one on which the cases are, however, not in accord. Some cases hold that when a corporation has treated as binding in part payment for the mine. Krohn v. Lambeth, 114 Cal. 302, 46 Pac. 164. In Maxey v. Rideout, 173 Fed. Rep. 172, the defendant had agreed with the plaintiff to advance to the corporation sufficient money to enable it to pay for lands sold to it by the plaintiff. The plaintiff accepted the corporation's notes in payment and discounted one of them. The corporation failed to pay this note at maturity. The defendant refused to protect the note and judgment was taken against the plaintiff as indorser. It was held that the defendant's contract to advance money for the promotion of the corporation was an agreement to create an indemnity fund for the protection of the plaintiff, and not an agreement to indemnify him against liability on the note, and that the plaintiff had, before satisfying the judgment recovered against him, no right of action against the defendant. 56. Bailey v. Haines, 15 Ad. & El. N. S. 533. And see McRee v. Quitman Oil Co., Ga. App. 84 S. E. 487. .57. Boulter v. Peplow, 9 C. B. 493; Batard v. Douglas, 2 El. & Bl. 287; Batard v. Hawes, 2 El. & Bl. 287; Edger v. Knapp, 7 Jur. 583; and see Norbury's Case, 5 DeG. & Sm. 423, and Sandusky Coal Co. v. Walker, 27 Ont. 677. 58. Denton v. Macneil, L. R. 2 Eq. 352. upon it, a contract made on its behalf before its organization upon the understanding by all the parties that such contract was made on behalf of the proposed corporation, the adoption of the contract by the corporation makes it in all respects what it would have been had the corporate power existed when the contract was entered into by the promoters, and that the promoters are thereby released from further liability.59 This rule would in most cases undoubtedly effect justice between the parties. When the promoters agree that the corporation to be organized by them shall enter into a particular contract, and the corporation is organized in accordance with the terms of the agreement, the assumption by the corporation of the obligations of the contract constitutes a complete and exact performance of the promoters' engagements and should relieve them from further responsibility. Some cases, however, hold that the agreement entered into by the promoters contsitutes a valid contract with the opposite party, and that the assumption of its obligations by the corporation cannot, without the consent of such opposite party, release the promoters from liability thereon.60 The promoters may, of course, protect 59. Federal.-Whitney v. Wyman, 101 U. S. 392, 25 L. Ed. 1050; Harrill v. Davis, 168 Fed. Rep. 187, 94 C. C. A. 47, 22 L. R. A. N. S. 1153. Georgia. Chic. Bldg. & Mfg. Co. v. Talbotton, etc., Co., 106 Ga. 84, 31 S. E. 809. Indian Territory.-Western Investment Co. v. Davis, 7 Ind. Terr. 152, 104 S. W. 573, 15 Am. & Eng. Ann. Cas. 1134, reversed, sub nom.; Harrill v. Davis, 168 Fed. Rep. 187, 94 C. C. A. 47, 22 L. R. A. N. S. 1153. Pennsylvania.-Heckman's Estate, 172 Pa. 185, 33 Atl. 552. Tennessee.-Shields V. Clifton Hill Land Co., 94 Tenn. 123, 28 S. W. 668, 26 L. R. A. 509, 45 Am. St. 60. Federal.-Bonsall V. Platt, 153 Fed. Rep. 126, 82 C. C. A. 260. Petition for writ of certiorari denied, 206 U. S. 564, 27 Sup. Ct. 796, 51 L. Ed. 1190; American Paper Bag Co. V. Van Nortwick, 52 Fed. Rep. 752, 3 C. C. A. 274, 9 U. S. App. 25; Marconi's Telegraph Co. v. Cross, 16 Hawaii, 390, citing Clark & Marshall on Priv. Corp. 107. Maryland.-Holland v. Lee, 71 Md. 338, 18 Atl. 661. |