Judgment was given against all the defendants. The defendants Griffin and the Glendale Company appealed. The court said that the action to recover the money paid was based upon an implied assumpsit, and was really an action for money had and received. "Such being the case, it becomes important to inquire whether the recovery against the defendant Griffin can be maintained. The rule is quite elementary that, to enable a person to maintain an action for money had and received, it is necessary for him to establish that the persons sought to be charged have received money belonging to him or to which he is entitled. That is the fundamental fact upon which the right of action depends.33 The purpose of such an action is not to recover damages, but to make the party disgorge; and the recovery must necessarily be limited by the party's enrichment from the alleged transaction. Evidence of crooked dealing or fraudulent practices is only important in determining the plaintiff's right to secure the fund. While it be admitted that all the defendants were joint tort feasors, to the extent that they would be jointly liable for all damages the plaintiff has sustained by reason of their fraud, yet, when it is sought to render them liable on quasi contract, a different rule prevails. The basis of recovery in the latter case being a loss on one side and a consequent enrichment on the other, liability can only exist in so far as these elements concur.

may

The law does not imply a promise to pay for something the party has not received, while in the case of the tort it casts upon him an obligation to pay all damage done, regardless of a promise. Applying these observations to the facts before us, we find that every dollar of the money sought to be recovered in this action. was paid to the defendant Glendale Investment Association by the plaintiff. Not one cent was paid to Griffin, or came to his pocket, except as it came through the Glendale Company to Clay

33. The court here cites National Trust Co. v. Gleason, 77 N. Y. 400,

33 Am. Rep. 632.

ton, and then to him. The amount received by Griffin was but a small fraction of the money paid by plaintiff to the Glendale Company. The plaintiff, suing as for a rescission of its contract, and upon the implied promise to restore that which has been taken from it, is bound to look to the one to whom it paid the money. Cases may and do occur where the money sought to be recovered was received by one for the benefit of others, and where all interested in the fund will be jointly liable. But this is not such a case."

§ 305. Contribution between promoters.

It has been held that promoters joining in a fraud upon the corporation are joint tort feasors, and that a promoter who has been compelled to pay more than his proportionate share of the damages of the corporation, or of the profits of the promoters, cannot enforce contribution from his fellows.34

The English Directors Liability Act of 1890 35 provided that every person who became liable to make any payment thereunder, should be entitled to contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment. This rule is now qualified by a proviso contained in the Companies Act of 1908,36 that such person

34. Lomita Land & Water Co. v. Robinson, 154 Cal. 36, 52, 97 Pac. 10, 18 L. R. A. N. S. 1106, 1134; Old Dominion Copper, etc., Co. v. Bigelow, 203 Mass. 159, 217, 89 N. E. 193, 40 L. R. A. N. S. 314, affirmed, 225 U. S. 111, 32 Sup. Ct. 641, 56 L. Ed. 1009, Am. & Eng. Ann. Cas., 1913 E. 875; Bigelow v. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 512-513, 71 Atl. 153. See Gluckstein v. Barnes, 1900, App. Cas. 240, 255, affirming, In re Olympia, Ltd., 1898, 2 Ch. Div. 153;

New Sombrero Phosphate Co. v. Erlanger, L. R. 5 Ch. Div. 73, 114, 25 W. R. 436, affirmed, sub nom. Erlanger v. New Sombrero Phosphate Co., L. R. 3 App. Cas. 1218, 6 Eng. Rul. Cas. 777, 39 L. T. N. S. 269, 27 W. R. 65.

35. Stat. 53 & 54 Vict., Ch. 64, § 5; Gerson v. Simpson, 1903, 2 K. B. 197; Shepheard v. Bray, 1906, 2 Ch. Div. 235, 75 L. J. Ch. N. S. 633; but see 1907, 2 Ch. Div. 571, 76 L. J. Ch. N. S. 692.

36. Stat. 8 Edw. 7, Ch. 69, § 84, sub-section 4.

shall not be entitled to contribution if he was, and the other person was not, guilty of fraudulent misrepresentation.

§ 306. Promoter's liability for compensation of co-promoter. A promoter is not, in the absence of an express agreement, liable to pay compensation for the services rendered by a fellow promoter.37

37. Eakins V. American White Bronze Co., 75 Mich. 568, 42 N. W. 982; Baily v. Burgess, 48 N. J. Eq. 411, 22 Atl. 733; Parkin v. Fry, 2 C. & P. 311; Wilson v. Curzon, 16 L. J. Exch. N. S. 122, 15 M. & W. 532;

Patterson v. Brown, 6 Ont. W. R. 204.

As to the right of a promoter to recover compensation from the fully organized corporation, see ante, §§ 84-87.

CHAPTER XVIII.

OF REORGANIZATIONS AND CONSOLIDATIONS.

Section 307. Introductory.

308. Promotion under employment of corporation to be reorganized.

309. Promoter relying upon express agreement for compensation bound to show performance within its terms.

310. Necessity of disclosing to new corporation compensation paid by old corporation.

311. Payment of promoter's fee by new corporation, not a fraud upon rights of non-subscribing stockholders of old corporation.

312. Reorganization in fraud of rights of minority stockholders. 313. Retention by promoter of dividend paid pending consolidation.

314. New corporation not necessary party to suit arising out of promoter's fraud upon holders of securities of old corporation.

307. Introductory.

It is obvious that a promoter engaged in the reorganization or consolidation of existing corporations, is, in general, subject to precisely the same liabilities and limitations as a promoter engaged in the organization of a new company.1 There are, however, some questions which, from their nature, arise only upon the reorganization or consolidation of existing corporations.

§ 308. Promotion under employment of corporation to be reorganized.

The situation of a promoter upon the reorganization of an

1. See Thompson on Corporation, (2nd ed.), § 6019.

existing corporation is somewhat different from that of a promoter of a new enterprise, in that he is in the former case not necessarily a volunteer, but may render his services pursuant to an employment by the existing corporation.

If an existing company has, under its charter, or by the terms of the statute under which it is organized, power to reorganize or to consolidate with other corporations, it has implied power to employ agents to accomplish that end and to obligate itself to compensate such agents for their services.2

It is held in a New Jersey case that a corporation, though it is insolvent and its property in the hands of a receiver, retains, under the provisions of the statutes of that state, power to reorganize and to employ agents for that purpose, and that the corporation may, after it has resumed control of its property, be held answerable for the compensation of such agent. The question whether the agent could have made effectual his claim for compensation if the corporation had remained insolvent and in the hands of the receiver was expressly reserved.3

The agreement of an existing corporation to compensate a person employed to promote its reorganization or consolidation may sometimes be implied. If the promoter is a director or an officer of the company it will be presumed that his services were rendered gratuitously.*

Whether a promoter not officially connected with the existing corporation can recover for his services upon an implied contract

2. Linn v. Dixon Crucible Co., 59 N. J. Law 28, 35 Atl. 2. See perhaps General Exchange Bank v. Horner, L. R. 9 Eq. 480, and Dundee Suburban Ry., 10 Scots Law Times, 253, 257.

If the contemplated reorganization or consolidation is beyond the corporate powers, the agreement of the corporation to pay for services

to be rendered in relation thereto is invalid and unenforceable. See MacGregor v. Deal & Dover Ry. Co., 18 Q. B. (Ad. & El. N. S.) 618, 22 L. J. Q. B. N. S. 69.

3. Linn v. Dixon Crucible Co., 59 N. J. Law 28, 35 Atl. 2.

4. Eakins V. American White Bronze Co., 75 Mich. 568, 42 N. W. 982.