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the conveyance of the lands to the defendants, who were to provide the funds necessary to complete the contract, and to organize a corporation to take title to the lands and mine the coal. The defendants were to sell sufficient shares to reimburse themselves for the cost of the land and the expenses in relation thereto, to pay to Cowles the sum of $15,000, and to raise the sum of $200,000 working capital. The agreement then provided that the defendants “after making the sales and payments aforesaid, shall next transfer one-twentieth part of the whole of the said capital stock to Charles M. Thruston (the plaintiff), and the balance of the said stock then remaining shall belong” one-half to Cowles and the other half to the defendants. The enterprise was not successful. The plaintiff brought suit, claiming that he was in any event entitled to a one-twentieth part of the entire capital stock. The court held that the plaintiff was not entitled to receive any part of the stock until sufficient shares had been sold to reimburse the defendants for the cost of the land, the incidental expenses, and the amount agreed to be paid to Cowles.

§ 34. Interpretation of agreements for division of profits of pro

motion, or shares of corporation. Agreements for the division of the shares of the corporation, or of the profits of its promotion, frequently give rise to questions of interpretation. The courts, in case of doubt, always attempt to interpret the agreement in such manner that it shall, in view of all the circumstances, effect justice between the parties.

In Bates v. Wilson 43 an agreement between three parties that

42. See also cases cited, ante, 88 30 and 33, and post, 42.

43. 14 Colo. 140, 159–160, 24 Pac. 99, 105.

The mere fact of being an incorporator does not, independent of a contract, entitle one to a proportionate share of the capital stock

of the company based upon an equal division of the total capital stock among all the incorporators. Brown v. Florida Southern Rail. way, 19 Fla. 472.

A promoter who has refused to take his share of the unissued stock, will not be heard to complain

the capital stock of the corporation to be formed should be “ divided half and half between the parties” was held, standing alone and unexplained, to be without significance unless construed to mean “equally between the parties."

In Donner v. Donner,44 the plaintiff bought from the defendant “$25,000 worth of the defendant's interest” in three companies. These companies were shortly afterwards sold to the United States Steel Corporation, at a large profit. A dispute having arisen as to the plaintiff's interest in the profits, the court found that the evidence established that the plaintiff acquired one-tenth of the defendant's interest of $250,000 in the stock of these companies, and should consequently have been allowed one-tenth of the profits of the transaction.

In Logan v. Simpson, 45 the plaintiff had obtained control of 7202 shares of the stock of the Williamsburg Gaslight Company, and agreed to transfer the same, at a price of $87.50 a share, to a syndicate formed to effect the consolidation of various gas companies in Brooklyn. A syndicate agreement was prepared under which the subscribers agreed to raise a fund of $15,000,000 to be used for the purpose of bringing about such consolidation. This agreement was subscribed by the plaintiff for $650,000. The syndicate committee proceeded with the consolidation, organized a new company under the name of Brooklyn Union Gas Company, and received from such company for the transfer to it of the shares of the various constituent companies, bonds of the Brooklyn Union Gas Company, amounting to $5,816,069.09 and stock of that company of the par value of $8,710,761.47. The sum which the committee had paid for the stock of the constituent companies plus the allowance made to the committee for services, aggregated $8,725,804.01. The committee distributed profits among the members of the syndicate based upon an aggregate subscription of $15,000,000, of which the plaintiff's interest was 41% per cent, based upon his subscription of $650,000. The plaintiff claimed that he was entitled to receive that proportion of the stocks and bonds distributed, which his interest of $650,000 bore to the $8,725,804.01 actually contributed by the syndicate. The court pointed out that while the plaintiff had delivered to the pool 7202 shares of stock, for which he was allowed $87.50 a share and an additional sum representing the excess over $87.50, which the plaintiff had been compelled to pay for some of his shares, the syndicate had been called upon to pay out over $400,000 representing money which the plaintiff owed upon his stock. The case was complicated by a question of fact which was, however, determined adversely to the plaintiff. The court held that the syndicate committee had given to the plaintiff all that he was, under the agreement, entitled to receive.

that all of such stock was then
taken by his co-promoter. Conklin
v. United Construction & Supply
Co., 166 N. Y. App. Div. 284, 151
Supp. 624.

44. 211 Pa. 409, 60 Atl. 1036. See also Donner v. Donner, 217 Pa. 37, 66 Atl. 147.

45. 60 N. 1. App. Div. 617, 70 Supp. 86. Appeal dismissed, 169 N. Y. 599, 62 N. E. 1097.

In Hunter Smokeless Powder Co. v. Hunter, 46 the defendant Hunter, being the owner of a valuable secret formula, entered into an agreement with certain individuals that they should contribute $250 each to perfect a machine for utilizing the formula, the agreement providing that the interest of the defendant Hunter should be three-fifths, and the interest of the other parties should be two-fifths, “ for the purpose of organizing a stock company or for the purpose of a co-partnership; and the capital stock shall be distributed accordingly, or as the co-partnership shall be provided for the same.” The parties organized the plaintiff corporation, with a capital stock of $100,000. The trial court held that the defendant Hunter was entitled to have $60,000 par value of the stock and that the other parties to the agreement should receive $250 par value of stock each. This judgment was reversed

46. 100 N. Y. App. Div. 191, 91 Supp. 620.

on appeal, the Appellate Division holding that the individuals contributing $250 were entitled to divide between themselves $40,000 par value of the capital stock of the company.

In Spier v. Hyde,47 the plaintiff had, at the request of the defendants, and with a view to the resale thereof at an advance, secured options on 10,100 shares of the stock of the Goodson Type Casting & Setting Machine Company. The parties subsequently concluded that the shares could be used to better advantage by the formation of a new company to take over these shares. An agreement was thereupon entered into reciting that a new company should be formed, and that it was the intention of the parties to exchange 10,100 shares of the stock of the new company for an equal number of shares of the existing company, and to pool the 10,100 shares of stock of the new company. The agreement provided that modifications and changes in the plan proposed might be made by the defendants. The plaintiff was to receive as compensation for his services, 15 per cent of whatever net profits might be realized by a sale of the pooled stock, the contract providing that “this 15 per cent interest relates only and applies solely, to the 10,100 shares of stock of the new company and to the net profits, if any, to be derived from the sale thereof on the basis as above stated.” The defendants afterwards modified the plan outlined in the agreement by making the 10,100 shares of stock of the old company the basis of the issue of the entire capital of the new company. The court held that the defendants were, under the terms of the contract, authorized to make this change of plan, but that they could not make such change at the expense of the plaintiff without his consent, and that the latter was entitled to 15 per cent of the value of the 10,100 shares of the old company and of the stock of the new company received in exchange therefor, and that his agreement did not restrict him to 15 per cent of 10,100 shares of stock of the new company which

47. 92 N. Y. App. Div. 467, 87 Supp. 285.

10,100 shares of the stock of the old company.

In White v. Wood, 48 the defendants, as trustees for the holders of 994 bonds, of the par value of $1,000 each, of the Chatteroi Railway Company, a Kentucky corporation, purchased the property of that company under foreclosure. The agreement under which the defendants were appointed provided that, in case the defendants were unable to sell the railroad within a fixed time, a new corporation should be organized to take over the road, and the stock of such new company issued and divided among the bondholders in proportion to the number of bonds held and deposited by them. The defendants organized a new corporation under the laws of Kentucky with an authorized capital of $2,000,000, of which it was agreed that $994,000 par value should be issued to the bondholders in consideration of the conveyance by the defendants of the property purchased by them at foreclosure. The plaintiff was the owner of 27 bonds of the old company, and brought suit to restrain the transfer of the railroad to the new company, claiming that he was entitled under the agreement to a proportionate share of the entire $2,000,000 capital stock of the new corporation. The court pointed out that the actual property represented by the stock to be issued to the bondholders was precisely the same whether there was distributed among them, the entire $2,000,000 of capital stock or only $994,000, and held that under the laws of Kentucky the paid up capital stock which the bondholders were entitled to receive could not exceed the original cost of the road purchased; that the plaintiffs would have a right to complain had the defendants intentionally fixed the amount of the paid up capital stock to be issued to the bondholders at less than the value of the property purchased, but as it was not suggested that they had done this, and as there was no evidence that they had acted in bad faith, the plaintiff had no cause for complaint.

48. 129 N. Y. 527, 29 N. E. 885.

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