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themselves by stipulating in their contract that they shall, upon the assumption of their contract by the projected corporation, be released from further personal liability thereunder.61

It is generally held that the promoters are released from further responsibility if the other party accepts the corporate responsibility.62 The mere presentation by the opposite party of a claim against the corporation does not release the promoters from liability. That result is only affected when it is made to appear, not only that the opposite party expressed his willingness to accept the corporate liability, but also that the corporation accepted responsibility.63 It has been held that the promoters are not released by the opposite party's acceptance of partial payments

Missouri.-Queen City Furniture Co. v. Crawford, 127 Mo. 356, 365, 30 S. W. 163, 166.

Pennsylvania.-Witmer v. Schlatter, 2 Rawle, 359.

Jones,

Texas.-Bradshaw v.
Tex. Civ. App. —, 152 S. W. 695.
Virginia.-Fentress v. Steele &
Sons, 110 Va. 578, 66 S. E. 870;
Strause v. Richmond Woodworking
Co., 109 Va. 724, 65 S. E. 659, 132
Am. St. R. 937, citing Taylor on
Priv. Corp., § 76.

Wisconsin.-Bohn Mfg. Co. V.
Rief, 116 Wis. 471, 93 N. W. 466.

United Kingdom and Colonies.Kelner v. Baxter, L. R. 2 Com. Pl. Cas. 174; Sugg & Co., Ltd., v. Hill, 10 Times Law Rep. 288; Scott v. Lord Ebury, L. R. 2 C. P. 255, 267, 270, 36 L. J. C. P. 161.

61. O'Rorke v. Geary, 207 Pa. 240, 56 Atl. 541.

62. Case Mfg. Co. v. Soxman, 138 U. S. 431, 11 Sup. Ct. 360, 34 L. Ed. 1019; Van Vlieden V. Welles, 6 Johns (N. Y.) 84; Mildenberg v.

James, 31 N. Y. Misc. 607, 66 Supp. 77, aff'd, 62 App. Div. 617, 71 Supp. 1142, aff'd, 175 N. Y. 494, 67 N. E. 1085; J. H. Lane & Co. v. United Oil Cloth Co., 103 N. Y. App. Div. 378, 92 Supp. 1061; Munson V. Magee, 161 N. Y. 182, 55 N. E. 916, reargument denied, 161 N. Y. 638, 57 N. E. 1118; Rudd v. Magee, 51 N. Y. App. Div. 624, 65 Supp. 65; Ennis Cotton Oil Co. v. Burks, (Tex.), 39 S. W. 966. And see Bradshaw v. Jones, Tex. Civ. App. 152 S. W. 695.

Cf. Bohn Mfg. Co. v. Reif, 116 Wis. 471, 93 N. W. 466; Dengler v. Helms, 4 Walker (Pa.) 476, 483.

It was held in Scott v. Lord Ebury, L. R. 2 C. P. 255, 36 L. J. C. P. 161 that under the circumstances of that case the creditor by bringing suit against the corporation did not release the promoters from liability upon a loan made to them.

63. Sugg & Co., Ltd., v. Hill, 10 T. L. R. 288; Longman v. Hill, 7 T. L. R. 639.

made by the corporation, and not necessarily by his bringing suit against it.64

It has been said that after the corporation has assumed responsibility for the performance of the promoters' contract, the promoters, if not completely released, become, as between themselves and the corporation, sureties for the latter, and are released from liability if the opposite party with knowledge of the facts deals with the corporation in such a way as to prejudice the promoters' rights.65 If the promoters are made to satisfy the obligations which have been assumed by the corporation, they are as such sureties entitled to be subrogated to the claim of the other party against the corporation.66

It has, in one case, been said that if the corporation has assumed responsibility for the performance of the promoters' contract, both it and the promoters may be joined as parties defendant in an action thereon.67

The fact that the act of the corporation in assuming responsibility for the performance of the promoter's contract, is voidable because the promoter himself voted as a director upon the resolution pursuant to which such responsibility was assumed, does not affect the question of the promoter's discharge, as the action of the directors is voidable only upon the complaint of the corporation.68

§ 79. Enforcement of contract by promoter.

After a contract made by the promoter has been assumed by the corporation, or, strictly speaking, after the corporation has entered upon a new contract upon the terms of the agreement

64. Wells v. J. A. Fay & Egan Co., 85 S. E. 873.

Ga. 65. Bohn Mfg. Co. v. Rief, 116 Wis. 471, 93 N. W. 466.

66. Bank of South Carolina v. Campbell, 2 Rich. Eq. 179.

67. Jones v. Smith, (Tex.), 87 S. W. 210.

An action for compensation for services rendered for the benefit of the promoter individually cannot be joined with a cause of action against the corporation. Jones v. Smith, (Tex.), 87 S. W. 210.

68. Munson v. Magee, 161 N. Y. 182, 55 N. E. 916, reargument denied,

which the promoter attempted to make for it before its organization, the corporation is, in case of breach, the only proper party to bring suit.69

If, however, the other party breaches the contract, or withdraws therefrom, before any binding agreement with the corporation has been made, no cause of action accrues to the latter.70 The only binding agreement that in such case exists is the contract between the promoter and the opposite party. An action for the breach of this contract may be maintained by the promoter and such damages recovered as were fairly in contemplation at the time of making the agreement.71

A question arises as to whether a suit may be maintained by the promoter for the specific performance of the agreement of the opposite party to convey lands to the corporation. There should be no difficulty in sustaining such suit in a proper case. The promoter is a party to a valid agreement in the enforcement of which he has in almost every case a personal interest.

In Rogers v. Penobscot Mining Co.,72 an agreement with the promoter to convey mining claims to a proposed corporation was specifically enforced at the suit of the promoter's assignees. Options upon these mining claims had, however, in that case been procured by the promoter in the name of the individual defendant, under an agreement that the latter should convey the options to the corporation to be formed, and the suit might well have been sustained as an action to enforce a trust.

161 N. Y. 638, 57 N. E. 1118; Rudd v. Magee, 51 N. Y. App. Div. 624, 65 Supp. 65.

69. See ante, § 73. 70. See ante, § 73.

71. Abbott v. Hapgood, 150 Mass. 248, 22 N. E. 907, 5 L. R. A. 586, 15 Am. St. Rep. 193; Drummond v. Crane, 159 Mass. 577, 35 N. E. 90, 23 L. R. A. 707, 38 Am. St. Rep. 460,

and see DeLery v. Rogers, 71 N. Y. App. Div. 99, 75 Supp. 513.

72. 154 Fed. Rep. 606, 83 C. C. A. 380.

See Burke v. Mead, 159 Ind. 252, 64 N. E. 880, where a suit by a promoter for specific performance of an agreement to convey to the corporation was dismissed on other grounds.

If the promoters fail to organize the corporation which was under the agreement to assume the performance of their contract, or if the corporation after its organization refuses to be bound by its terms, the other party cannot be compelled to carry out the agreement with the promoters as individuals. His contract contemplates performance by the corporation, and he may properly refuse to accept performance by the promoters.73

In Niles v. Graham,74 the defendant delivered to the plaintiff an assignment of a certain patent, under an agreement that, after certain clouds thereon had been removed, the patent should be assigned to a corporation to be formed, the working capital of which was to be furnished by the plaintiff and the shares divided equally between the parties. While the plaintiff was proceeding to have the clouds on the patent removed the defendant wrongfully repossessed himself of the written assignment, mutilated it, and thereafter refused to recognize it as binding. The court directed the plaintiff to re-execute the assignment, saying that if the plaintiff did not within a reasonable time assign the patent to a corporation formed as provided in the agreement and furnish the capital reasonably necessary therefor the defendant might have an action for damages.

§ 80. Pleading the promoter's contract.

After the obligations of a contract made by the promoter have been assumed by the corporation, a pleading based thereon must set forth the making of the contract by the promoter and the subsequent acts of the fully organized corporation by which the obligations of the contract became binding upon it,75 or else, without referring to the contract of the promoter, set forth the

73. See O'Neill v. Patterson, 27 Pitts. Leg. Journal O. S. 189.

74. 181 Mass. 41, 62 N. E. 986. 75. Penn Match Co. v. Hapgood, 141 Mass. 145, 149, 7 N. E. 22, and

see Schmidt v. Nelke Art Lithograph Co., 16 N. Y. Misc. 300, 74 St. Rep. 308, 37 Supp. 1138, reversed, 17 N. Y. Misc. 124, 39 Supp. 353.

making of an agreement by the corporation at the date when it accepted responsibility for the performance of the obligations of the promoter's contract.76

76. McArthur v. Times Printing Co., 48 Minn. 319, 51 N. W. 216, 31 Am. St. Rep. 653; Farmers' Mut.

Fire Ins. Assn. v. Burch, 46 S. C.

550, 24 S. E. 503.

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