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 413 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.

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.

47

In Spier v. Hyde, 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.

represented only a part of the shares issued in exchange for the 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. 835.

In Burdette v. Universal Cleanser & Mfg. Co.,49 the plaintiff agreed to sell his one-tenth interest in a certain business known as the Universal Manufacturing Company under an agreement that a corporation should be organized to take over such business, and that the plaintiff should “ have a full one-tenth interest represented by this sale in said corporation." The court held that the plaintiff was entitled to receive one-tenth of the issued stock but could not insist on a full one-tenth of the authorized capital, a large part of which had, pursuant to the agreement of the organizers, been returned to the treasury for the use of the corporation.

In Hennessy v. Griggs,50 the parties entered into an agreement to form a copartnership under the name of Dakota Gas & Fuel Company, it being agreed that the copartnership should, as soon as possible, proceed to organize a corporation under the same name to take over the partnership property. The agreement provided that "the capital of said copartnership shall consist of $50,000,-Alexander Griggs to furnish $5,000; Thomas Hennessy, $10,000; and J. S. Eshelman, $10,000; the remaining $25,000 to be held by Griggs, to be by him negotiated and raised to and from certain persons in St. Paul, Minn." The plaintiff claimed that the capital to be furnished by Griggs, Hennessy and Eshelman was nominal only, that they were to pay in no money, but that their services as copartners were to be accepted as such capital, and that the works were to be constructed with the $25,000 to be raised from outside parties. The court held that such was not the contract, that the capital to be furnished by these parties was to be actual capital and that no compensation was to be paid for services.

It was held in A. J. Cranor Co. v. Miller 51 that an agreement providing that one-fourth of the capital stock of the proposed corporation should be issued to the owner of a certain mill property in payment therefor, and the other three-fourths to the pro

49. 44 Utah 275, 140 Pac. 119. 50. 1 N. D. 52, 44 N. W. 1010.

51. 147 Ala. 268, 41 So. 678.

moter, intended, not that three-fourths of the capital stock should be issued to the promoter without consideration, but that such stock should be paid for by him.

§ 35. Interpretation of agreements restricting sale of shares. In Burden v. Burden,52 the parties agreed to organize a corporation with a total capital of 2,000 shares, of which the defendant was to have 1,000, the plaintiff 998 shares, and one Arts 2 shares. The defendant agreed with the plaintiff that if he, the defendant, should at any time sell 998 of his 1,000 shares, then he would, without consideration, transfer the other two shares to the plaintiff. It was further agreed that Arts should not receive any dividends on his shares, but should receive a salary in lieu thereof, and that all the profits were to be divided equally between the plaintiff and the defendant. Thereafter the defendant caused the corporation to increase the number of its directors from three to five, and transferred to the new directors their qualifying shares. The plaintiff brought suit, claiming that the defendant was by the agreement prohibited from making any disposition of his shares, except a single sale of 998 shares, accompanied by a transfer to the plaintiff of the remaining two shares. The court held that the agreement did not intend that the defendant must sell 998 shares at one time, but merely that when the defendant had by one sale, or by a number of sales, disposed in the aggregate of 998 shares, he must then transfer his remaining two shares to the plaintiff.

52. 159 N. Y. 287, 54 N. E. 17.