United States has, however, refused to recognize this doctrine.59 It seems to be generally agreed that the trust relation of a promoter to future stockholders extends in any event, only to those who acquire their shares from the corporation itself as original subscribers, and not to those who subsequently acquire by purchase, shares originally issued to others.60 § 15. Inception of the relation. The question as to when a promoter first entered upon that relation to the corporation may become a matter of considerable moment, if he has sold to the corporation, property which he acquired at about the time that he undertook the promotion. In such case the question whether the promoter's transaction was a proper one, the remedies open to the corporation, and the measure of its recovery may depend upon whether the property was ac operative Society, L. R. 21 Ch. Div. 492, 496 497; Components Tube Co. v. Naylor, 1900, 2 Ir. R. 1, 71. See post, § 124, et seq. A subsequent issue of shares not contemplated at the time of the organization of the company does not extend the trust obligations of the promoters to the subsequent subscribers. See post, § 125. 59. Old Dominion Copper, etc., Co. v. Lewisohn, 210 U. S. 206, 215, 28 S. C. 634, 52 L. Ed. 1025. This matter is discussed at length in a subsequent chapter. See post, §§ 124-130. 60. Mason v. Carrothers, 105 Me. 392, 399, 74 Atl. 1030, 1033. See post, §§ 120-121, 233. Cf. Wills v. Nehalem Coal Co., 52 Or. 70, 77, 96 Pac. 528; Brewster v. Hatch, 122 N. Y. 349, 25 N. E. 505, 33 N. Y. St. Rep. 527. If shares are upon their issue, transferred as a gift to the treasury of the corporation, the purchasers of these treasury shares may perhaps be considered original subscribers. Hinkley v. Sac Oil & Pipe Line Co., 132 Iowa 396, 107 N. W. 629, 119 Am. St. R. 564. But see Parsons v. Hayes, 50 N. Y. Super. 29, 14 Abb. N. C. (N. Y.) 419; Watkins v. Mills, 114 N. Y. App. Div. 903, 100 Supp. 1148. See post, § 127. While the fiduciary relation does not extend directly to persons who acquire their stock otherwise than from the company or its treasury, the purchaser of shares stands in some respects in the shoes of his vendor, and is entitled to some of the rights of the latter against the promoters. Lagunas Nitrate Co. v. Lagunas Syndicate, 1899, 2 Ch. Div. 392, 449. quired by the promoter before, or after, he entered upon the trust relation. It, therefore, often becomes necessary to determine at what precise moment the person in question first entered upon the somewhat indefinite relation of promoter to the corporation. There is, it has been said, no one decisive test of the moment at which the character of promoter is assumed.61 That the promoter may become such, and subject himself to the limitations of the fiduciary relation, before the corporation achieves legal existence, is not open to doubt. It has been objected that a promoter cannot be an "agent" for a non-existing corporation, and a similar difficulty is felt in calling him a "trustee." 63 Lord Justice Lindley remarked in Lydney & Wigpool Iron Ore Co. v. Bird 64 that it is not "much less objectionable to talk of his being in a fiduciary relation to the company before the company had 61. In re Olympia, Ltd., 1898, 2 Ch. Div. 153, 181-182, affirmed sub nom. Gluckstein v. Barnes, 1900, App. Cas. 240. 62. Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 122, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159, 47 Am. & Eng. Corp. Cas. 647; Arnold v. Searing, 78 N. J. Eq. 146, 157-158, 78 Atl. 762, 767; Lydney & Wigpool Iron Ore Co. v. Bird, L. R. 33 Ch. Div. 85, 93, 24 Am. & Eng. Corp. Cas. 23. It is said in Arnold v. Searing, supra, that the fiduciary relationship of the promoter to the corporation is "an extension of the doctrine of agency, a sort of agency by anticipation, for the promoter is not, strictly speaking, an agent of or trustee for the company before incorporation, but it is a salutary and necessary fiction of equity for the protection of the company." See also Jordan v. Annex Corporation, 62 109 Va. 625, 64 S. E. 1050, 17 Am. & Eng. Ann. Cas. 267. The promoter does not, strictly speaking, ever become, as such, the agent of the corporation. Tegarden Bros. v. Big Star Zinc Co., 71 Ark. 277, 281, 72 S. W. 989, 991. And see post, §§ 46-48. Promoters are spoken of as agents in Simons v. Vulcan Oil & Mining Co., 61 Pa. 202, 218, 100 Am. Dec. 628. 63. In re Leeds & Hanley Theatres of Varieties, 1902, 2 Ch. Div. 809, 819, 822; Lydney & Wigpool Iron Ore Co. v. Bird, L. R. 33 Ch. Div. 85, 94, 24 Am. & Eng. Corp. Cas. 23; Cuba Colony Co. v. Kirby, 149 Mich. 453, 457, 112 N. W. 1133, 1135; Arnold v. Searing, 78 N. J. Eq. 146, 157-158, 78 Atl. 762, 766– 767. 64. L. R. 33 Ch. Div. 85, 93, 24 Am. & Eng. Corp. Cas. 23, quoted in Cuba Colony Co. v. Kirby, 149 any existence." The difficulty is, however, merely one of terms, for in all of these, and in numerous other cases, the fact that the fiduciary relation of the promoter can, and does, arise before the corporation has acquired existence, is fully conceded.65 § 16. The same subject.-Purchase of property with view to resale to corporation. The purchase of property with a view to its resale to a corporation to be formed, does not, though the plan be subsequently fully carried out, constitute the purchaser a promoter of the company as of the time of the original purchase, for the mere contemplation of the organization of a corporation is not, of itself, sufficient to create that relation.66 This is so, even though the Mich. 453, 457, 112 N. W. 1133, 1135. S. 65. Federal.-Commonwealth S. Co. v. American Shipbuilding Co., 197 Fed. 797, 804, affirmed, 215 Fed. Rep. 296, 131 C. C. A. 596. California.-Burbank v. Dennis, 101 Cal. 90, 97, 98, 35 Pac. 444, 446, 447; California-Calaveras Mining Co. v. Walls, Cal. 149 Pac. 595. Illinois.—Mississippi Lumber Co. v. Joice, 176 Ill. App. 110, 120. Massachusetts.-Old Dominion Copper Mining, etc., Co. v. Bigelow, 203 Mass. 159, 177, 89 N. E. 193, 201, 40 L. R. A. N. S. 314. Missouri.-South Joplin Land Co. V. Case, 104 Mo. 572, 580, 16 S. W. 390, 392, 38 Am. & Eng. Corp. Cas. 333. New York.-Brewster v. Hatch, 122 N. Y. 349, 362, 25 N. E. 505, 33 N. Y. St. Rep. 527. United Kingdom and Colonies.Emma Silver Mining Co. v. Lewis, L. R. 4 C. P. D. 396, 407; Hichens v. Congreve, 4 Sim. 420, 427; Bagnall v. Carlton, L. R. 6 Ch. Div. 371, 384; Twycross v. Grant, L. R. 2 C. P. D. 469, 527; Gover's Case, L. R. 1 Ch. Div. 182, 187, affirming, L. R. 20 Eq. 114; Gluckstein v. Barnes, 1900, App. Cas. 240, 249, 256, affirming, In re Olympia, Ltd., 1898, 2 Ch. Div. 153; Alexandra Oil & Dev. Co. v. Cook, 11 Ont. W. R. 1054, 1059. See also cases cited in notes 62, 63, and 64. See contra Stewart v. St. Louis Ft. S. & W. R. Co., 41 Fed. Rep. 736, 738. It is said in Gluckstein v. Barnes, 1900 App. Cas. 240, that the promoter stands before the company is formed in a fiduciary position towards it for some, but not for all, purposes. 66. Connecticut.-Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 115, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159, 47 Am. & Eng. Corp. Cas. 647. parties to the purchase agree that the purchaser shall organize a corporation to take over the property and pay the purchase price, or some part thereof, in the shares of the company to be formed.67 The purchaser does, it seems, enter upon the relation of promoter to the corporation if he makes his purchase, not for himself, but on behalf of the contemplated corporation.68 He will, at any rate, be held to have acted for the company in the trans Massachusetts.-Old Dominion Copper, etc., Co. v. Bigelow, 188 Mass. 315, 321, 74 N. E. 653, 655, 108 Am. St. Rep. 479. Michigan.-Cuba Colony Co. V. Kirby, 149 Mich. 453, 455-456, 112 N. W. 1133, 1134. New Jersey.-Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq. 219, 230, 233, 27 Atl. 1094, 44 Am. & Eng. Corp. Cas. 686; Woodbury Heights Land Co. v. Loudenslager, 55 N. J. Eq. 78, 90, 35 Atl. 436, affirmed, 56 N. J. Eq. 411, 41 Atl. 1115, but modified, 58 N. J. Eq. 556, 43 Atl. 671. United Kingdom and Colonies.Gover's Case, L. R. 1 Ch. Div. 182, affirming, L. R. 20 Eq. 114; New Sombrero Phosphate Co. v. Erlanger, L. R. 5 Ch. Div. 73, 91, 25 W. R. 536, affirmed sub nom. Erlanger v. New Sombrero Phosphate Co., L. R. 3 App. Cas. 1218, 1234-1235, 1242-1243, 1255, 6 Eng. Rul. Cas. 777, 39 L. T. N. S. 269, 27 W. R. 65; Ladywell Mining Co. v. Brookes, L. R. 35 Ch. Div. 400, 409, 412, 415, 17 Am. & Eng. Corp. Cas. 22, affirming, L. R. 34 Ch. Div. 398; In re Hess Manufacturing Co., 23 Can. S. C. 644, 660, et seq., affirming, 21 Ont. App. 66, revers ing, 23 Ont. 182. See also Burland v. Earle, 1902, App. Cas. 83, 98-99. See contra a dictum in Central Trust Co. v. East Tennessee Land Co., 116 Fed. Rep. 743, 748. The language of the court in Re Leeds & Hanley Theatres of Varieties, 1902, 2 Ch. Div. 809 at p. 822 may seem to the contrary. If so, it is dicta, for it was wholly unnecessary for the decision of the case, to determine that the Finance Company became a "promoter" before the organization of the Leeds & Hanley Theatres of Varieties. 67. Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 115, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159, 47 Am. & Eng. Corp. Cas. 647; Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq. 219, 234, 27 Atl. 1094, 44 Am. & Eng. Corp. Cas. 686; Woodbury Heights Land Co. V. Loudenslager, 55 N. J. Eq. 78, 91, 35 Atl. 436, affirmed 56 N. J. Eq. 411, 41 Atl. 1115, but modified, 58 N. J. Eq. 556, 43 Atl. 671. Gover's Case, L. R. 1 Ch. Div. 182, 197, affirming, L. R. 20 Eq. 114; Ladywell Mining Co. v. Brookes, L. R. 35 Ch. Div. 400, 412, 17 Am. & Eng. Corp. Cas. 22. 68. See Gover's Case, L. R. 1 Ch. action, and be compelled to give to it, when formed, the full benefit of his purchase.69 Whether the purchase was in fact made by the promoter for himself individually, or for the corporation to be formed, is often a question of some nicety.70 A matter of considerable, though not of controlling, importance in the determination of this question, is the circumstance that the purchase price is afterwards actually paid, not with moneys of the promoter, but in the shares, or out of the funds, of the company,71 or with moneys contributed by a syndicate organized for the purpose, the members of which are repaid by a pro rata distribution of the shares of the subsequently organized corporation.72 § 17. The same subject.-Taking step in organization of the corporation. The relation of promoter to the corporation arises when the parties actually enter upon its organization,73 that is, when they Div. 182, 187; Bagnall v. Carlton, L. R. 6 Ch. Div. 371, 405–407. And see post, § 162n. Cf. In re Leeds & Hanley Theatres of Varieties, 1902, 2 Ch. Div. 809, 821-822. 69. Minister of Rys. & Canals v. Quebec South Ry. Co., 12 Exch. Rep. of Can. 11, 24. See cases cited in succeeding notes. And see Mississippi Lumber Co. v. Joice, 176 Ill. App. 110, 118. 70. It is said to be a question of fact, in Omnium Electric Palaces Lim. v. Baines, 1914, 1 Ch. Div. 332, 347, 82 L. J. Ch. N. S. 519, 526, 109 L. T. N. S. 206. 71. Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 116-117, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159, 47 Am. & Eng. Corp. Cas. 647; Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq. 219, 233-235, 27 Atl. 1094, 44 Am. & Eng. Corp. Cas. 686; Woodbury Heights Land Co. v. Loudenslager, 55 N. J. Eq. 78, 91, 35 Atl. 436, affirmed, 56 N. J. Eq. 411, 41 Atl. 1115, but modified, 58 N. J. Eq. 556, 43 Atl. 671. Ladywell Mining Co. v. Brookes, L. R. 35 Ch. Div. 400, 409-411, 17 Am. & Eng. Corp. Cas. 22; same v. same, L. R. 34 Ch. Div. 398, 407. 72. Parker v. Boyle, 178 Ind. 560, 99 N. E. 986; Bigelow v. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 503, 71 Atl. 153; Arnold v. Searing, 78 N. J. Eq. 146, 159, 160, 78 Atl. 762, 767; Arnold v. Searing, 73 N. J. Eq. 262, 67 Atl. 831; Alexandra Oil & Dev. Co. v. Cook, 11 Ont. W. R. 1054. 73. Yeiser V. U. S. Board & Paper Co., 107 Fed. Rep. 340, 348, 46 C. C. A. 567, 52 L. R. A. 724; South Joplin Land Co. v. Case, 104 Mo. 572, 580, 16 S. W. 390, 392, |