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It was held in Peek v. Steinberg 32 that an agreement that the plaintiff should receive for his property “ paid up stock * * to the amount of $12,000 " did not entitle him to receive stock actually worth $12,000, but merely stock of the par value of $12,000.

In Hardee v. Sunset Oil Co.,88 one Richardson owned certain oil claims in California which he agreed to convey to one Handy, or to a corporation to be formed by him, in consideration of the sum of $5,000 to be paid in cash. The agreement provided that if a corporation should be formed one half of the capital stock was to be allotted to Richardson. Handy further agreed that he would deposit the sum of $25,000 with the company's treasurer, to be expended in the development of the oil claims. The complainants, the heirs of Richardson, subsequently claimed that the $25,000 paid into the treasury by Handy should have been credited to Richardson on the books of the corporation. The court held that this was not the proper construction of the agreement,—that the intention was that Richardson as the owner of one half of the stock, should reap the benefit of the expenditure of this $25,000 in the development of the property, and that there was no basis for the complainants' contention.

In McNeil v. Fultz 34 a promoter obtained the transfer of the plaintiff's property, under an agreement that the same should be sold, with other properties, to a corporation to be formed, the promoter agreeing to give the plaintiff for his property whatever bonds and shares he, the promoter, might receive therefor from the corporation. The promoter was forced, in order to save some of the other properties, to borrow money and to pay a bonus therefor. He attempted to charge the plaintiff with a proportionate share of this bonus, but the court held the bonus to be an item of the expense of the flotation, the burden of which the promoter had no right to cast upon the plaintiff.

32. 163 Cal. 127, 124 Pac. 834. 34. 38 Can. Sup. Ct. 198. 33. 56 Fed. Rep. 51.

§ 31. Performance of agreements for sale of property to cor

poration In Field v. Pierce, 85 the plaintiffs, having secured certain contracts or options for the purchase of mining properties in Nova Scotia, agreed to transfer them to the defendant upon consideration that the defendant should furnish the money to pay for the properties, organize a corporation to take them over, and transfer to the plaintiffs one-tenth of the shares issued by the company. Plaintiffs duly performed on their part. The defendant organized a corporation with a capital stock of $500,000. The defendant and his associates met and each gave his check to the treasurer of the company for the par value of the shares allotted to him. The defendant gave his check for the shares to be transferred to the plaintiffs. The treasurer delivered all the checks to the defendant and the corporation took a conveyance of the property. The defendant then returned the checks to the drawers, each of them paying him the price of the shares actually agreed upon between the parties. An assessment was afterwards levied upon all the shares, including the plaintiffs'. The plaintiffs called upon the defendant for their certificates, which the defendant declined to deliver until the assessment had been paid. The company sold the plaintiffs' shares to pay the assessment. The plaintiffs sued the defendant for the market value of the shares. The court held that the plaintiffs' shares were full paid as to them, that the certificates were not the shares, and that the rights of the plaintiffs were not affected by the refusal of the corporation to deliver the certificates ; that the plaintiffs had a right to the shares, and that if the corporation had wrongfully refused to deliver the certificates, there was nothing to show that the defendant was responsible; that the defendant, as a stockholder, might have voted for the assessment and the sale of the plaintiffs' shares, but such acts were the acts of the corporation

35. 102 Mass. 253.

and not of the defendant, and that the remedy of the plaintiffs was against the company.

§ 32. Donating shares to the treasury.

The fact that the promoters return to the treasury of the corporation, a portion of the shares previously issued to them, does not necessarily give rise to an implied agreement of the corporation to pay therefor.

In Eldred v. Bell Telephone Co., 36 the plaintiff acquired from the National Bell Telephone Company the right to operate telephone exchanges in Kansas City and St. Louis, his agreement requiring the organization of the defendant corporation under the laws of Missouri and, among other matters, the acquisition by it of certain outstanding contracts between the National Bell Telephone Company and the American District Telegraph Company of St. Louis. The defendant corporation was thereupon organized with a nominal capital of $400,000, all of which was issued as full paid to the plaintiff and his associates in consideration of the transfer to it of the rights acquired, or to be acquired, from the National Bell Telephone Company. A preliminary understanding was arrived at, under which the four associates of the plaintiff were to receive 1770 shares and the plaintiff was to retain the remaining 2230 shares for himself. It was subsequently found that shares were needed in order to take in the American District Telegraph Company, and the plaintiff thereupon, for this purpose, surrendered 250 shares of the stock allotted to him. The plaintiff subsequently brought suit upon a supposed implied agreement of the defendant to pay him the reasonable value of the 250 shares so surrendered. The court, upon a consideration of the evidence, decided that there was nothing to warrant the conclusion that there was any sale of this stock by the plaintiff to the defendant, or any loan or advance of it for its uses, for

36. 119 U. S. 513, 7 Sup. Ct. 296, 30 Law Ed. 496.

which it was expected that any return or payment should be made.

It has been held that an agreement between the parties engaged in the formation of a corporation, that a portion of the stock to be issued to them shall be used for the benefit of the corporation, cannot be enforced by the corporation, but only by the parties to the agreement. 37 § 33. Interpretation of agreements relating to promoter's com1 pensation.

Corporations are often promoted in pursuance of an agreement by which a person owning property which he desires to sell to the contemplated company, undertakes to pay the promoter a stipulated compensation for his services. Such agreements are, if properly disclosed to the corporation, unobjectionable, but questions arise as to their interpretation.38

In Locke v. Wilson 39 the defendant Wilson employed the plaintiff to form a corporation to take over certain brewery properties under an agreement to pay the plaintiff for his services, $2,000 in the shares of the company, provided that the plaintiff secured $28,000 in bona fide subscriptions, of which said defendant agreed to take $12,000. The plaintiff maintained that the correspondence and evidence did not constitute the entire contract and that the defendant Wilson had orally agreed to take all the stock that the plaintiff could not place elsewhere. The court held that the written contract conclusively negatived this contention, and that the trial court had erred in submitting the question to the jury.

In Hix v. Edison Electric Light Co.,40 the defendant had em

37. Flanagan v. Lyon, 54 N. Y. 39. 135 Mich. 593, 98 N. W. 400, Misc. 372, 105 Supp. 1049. See also 10 Det. Leg. News 900. Brennan v. Vogler, 174 Mass. 272, 40. 10 N. Y. App. Div. 75, 75 N. 54 N. E. 556.

Y. St. R. 1067, 41 Supp. 680. See 38. See in addition to the cases same case on later appeal, 27 N. Y. discussed in this section, Proskey v. App. Div. 248, 50 Supp. 592, Manning, 110 N. Y. Supp. 221. See affirmed, 163 N. Y. 573, 57 N. E. also $$ 30, 34 and 42.

1112.

ployed the plaintiff to promote and organize a corporation for electric lighting in Philadelphia, under a memorandum reciting that of the $1,000,000 of capital stock of the Philadelphia company, the defendant company was to receive 30 per cent in stock and 5 per cent in cash, that the “ promoters ” were to receive 10 per cent in stock, as a rebate from the defendant company's 35 per cent, and that the plaintiff was to receive 5 per cent, as a rebate from the defendant company's remaining 25 per cent. The contract further provided that in case of any future increases in the capital of the Philadelphia corporation, 35 per cent of the increase was to go to the defendant, and a rebate of 5 per cent therefrom to the “present promoter.” The court admitted evidence of surrounding circumstances to aid in determining whether the plaintiff was the “ present promoter " intended by the agreement. After the Philadelphia company was organized, the successor of the defendant company made a new agreement whereby it reduced its percentage of future increases from 35 per cent to 10 per cent, in consideration of which the Philadelphia company relinquished certain rights. The plaintiff was a stockholder in the Philadelphia company and voted in favor of this new contract. The court held that neither the fact that the defendant's percentage had been reduced, nor the fact that the plaintiff as a stockholder of the Philadelphia company voted in favor of the agreement reducing such percentage, affected his right to receive his 5 per cent of the increase from the defendant. The court did, however, hold that the plaintiff was not entitled to 5 per cent upon the first issue of increased stock, as that increase represented the value of earnings put into betterments, and was not an increase within the meaning of the contract.

In Varnum v. Thruston, 41 the plaintiff had induced one Cowles, the holder of certain contracts for the purchase of coal lands, to enter into an agreement with the defendants which provided for

41. 17 Md. 470.

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