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to one of the defendants, receiving $11,700 in cash, it being agreed that the defendants should purchase the property and assets of the insolvent corporation, transfer the same to a new corporation to be formed, and upon the tender to it by the plaintiff, on or before May 1st, 1889, of the sum of $11,700 in cash, transfer to the plaintiff stock of the new company to the extent, and in the ratio, that $11,700 should bear to the aggregate cost of the aforesaid property and assets. The defendants subsequently denied their liability to deliver the stock to the plaintiff. The court held that the consideration for the assignment theretofore made by the plaintiff thereupon failed, and that a right of action arose to recover the dividend upon the plaintiff's claim against the insolvent corporation which the defendants had collected from the receivers, less the sum of $11,700 already paid to the plaintiff.

In Schneider v. Miller, 87 a firm of which the plaintiff was the surviving partner, being the holder of a lease of certain asphalt lands, agreed with the defendant that the latter should organize a corporation with a capital stock of at least $30,000 to which this lease should be transferred. The defendant agreed to contribute to the corporation, as capital, $10,000 within sixty days and $20,000 in six months. It was agreed that the plaintiff should have two-thirds of the stock of the corporation, and the defendant's firm one-third and certain specified royalties on the product sold. The corporation was organized and the lease assigned to it. The defendant failed to contribute the capital required by the agreement. The court held that the defendant's promise to advance the required capital should be considerd a condition subsequent, and that his failure to perform justified a rescission of the contract and entitled the plaintiff to a re-assignment of the lease.

In Atlanta & West Point R. R. Co. v. Hodnett, 38 a deed of a right of way given upon the sole consideration of certain promises

37. 129 N. Y. App. Div. 197, 113 Supp. 399. See same v. same, 132 N.

8. App. Div. 852, 117 Supp. 287.

38. 36 Ga. 669.

made by its promoters, was set aside upon the failure of the corporation to perform such promises.

In Slide & Spur Gold Mines v. Seymour,39 the plaintiff was allowed to enforce a vendor's lien for the unpaid purchase price, against property which he had sold to Haldeman, the promoter of the defendant corporation, and which Haldeman had in turn sold to the corporation.

In Curran v. Smith,40 the plaintiffs and defendants entered into an agreement under which the defendants agreed to construct a pipe line and reservoir, and the plaintiffs agreed to pay them therefor $110,000 in cash and one-half of the capital stock of a corporation to be formed to take over the pipe line. The remainder of the stock was to be retained by the plaintiffs. Investigation having shown that the cost of the pipe line would largely exceed, and the water supply fall short of, the estimates, the defendants abandoned the project. The plaintiff's demand for damages was denied on the ground that the value of the shares of the proposed corporation was too uncertain. The plaintiffs were, however, allowed to recover from the defendants the amount of certain expenditures in furtherance of the contract, made by them at the request of the defendants.

In Marston v. Singapore Rattan Co.,41 the plaintiff conveyed his business to the defendant corporation under an agreement that the plaintiff should be continued as manager, and should receive $12,000 in the shares of the company. The individual defendants agreed to take stock in the corporation for the moneys owing to them from the plaintiff, and one of the defendants from time to time furnished money and merchandise to the corporation, accepting shares in payment. The plaintiff was, after some eight months, discharged from his position as manager. He brought suit against both the corporation and the individual defendants, and recovered the value of the property which he had transferred to the corporation. The Supreme Court reversed the judgment of the trial court, holding that the plaintiff had for eight months had the benefit of the agreement, that the parties could not be restored to their original position, and that the plaintiff could not rescind the transaction and recover the value of the property conveyed, but could only recover the damages resulting from the breach of the agreement.

39. 153 U. S. 509, 38 L. Ed. 802, 14 Sup. Ct. 842.

40. 149 Fed. Rep. 945, 81 C. C. A. 537.

41. 163 Mass. 296, 39 N. E. 1113. See Rogers v. Garland, 19 Dist. Col. 24, 41.

§ 45. Actions to enforce mechanics' liens.

An interesting question arises out of the scheme under which butter and cheese manufacturing companies are frequently organized, and the attempt of the promoting contractors to secure their payments by means of an action to enforce a mechanic's lien. The scheme is, that the company engaged in the business of erecting such factories, prepares a contract in the form of a subscription agreement under which it agrees to erect a factory at a stated cost. The subscribers each sign for a stated amount and agree to form a corporation to take over the factory and to issue its shares to themselves in proportion to the amount of their respective subscriptions. The agreement sometimes contains a clause to the effect that the subscribers are liable each for himself alone, and not for the others, and this would, without such clause, be the proper interpretation of the agreement. 42 It has sometimes happened that the contracting promoters, finding themselves unable to collect all of the subscriptions, have attempted by enforcing a mechanic's lien against the property to secure the unpaid portion of the contract price. The enforcement of such lien would, in effect, compel those subscribers who had paid their subscriptions, to pay the subscriptions of the

42. Davis & Rankin, etc., Co. v. Barber, 51 Fed. Rep. 148; Davis & Rankin, etc., Co. v. Jones, 66 Fed. Rep. 124, 14 C. C. A. 30, 32 U. S. App. 32; Chicago Bldg. & M'f'g Co.

v. Graham, 78 Fed. Rep. 83, 23 C. C. A. 657, 41 U. S. App. 680; Davis & Rankin v. Creamery Assoc., 63 Mo. App. 477, 480 and cases cited.

Cf. Davis v. Shafer, 50 Fed. Rep. 43. Burnap v. Sylvania Butter Co., 12 Ohio C. C. 639; Davis & Rankin v. Creamery Assoc., 63 Mo. App. 477.

property. The right to enforce a mechanic's lien should in such case be denied, 43 but it has in at least one case been allowed.44

44. Davis & Rankin, etc., Co. v. Colusa Dairy Assoc., 55 Ill. App. 591.

CHAPTER IV.

OF CONTRACTS MADE FOR THE CORPORATION BY ITS PROMOTERS.

Section 46. Power of promoter to make contract for corporation.

47. Power of promoter to make contract for corporation after

granting of charter. 48. Power of promoter to make contract for corporation after

complete organization. 49. Liability imposed upon corporation by act of incorporation,

or articles of association. 50. Assumption of liability by the fully organized corporation. 51. Status of promoter's contract pending action of corporation. 52. Status of subscription agreements pending action of cor

poration. 53. Assumption of liability by agreement of corporation. 54. The act of assumption, 55. Necessity of consideration. 56. Liability of corporation resulting from acceptance of benefit

of promoter's contract. 57. Enforcement at law or in equity. 68. Lord Cottenbam's Rule. 59. Obligation of corporation to pay for services in procuring

contracts accepted by it. 60. Materiality of circumstance that original contract made by less

than majority of incorporators. 61. Acceptance must be with full knowledge. 62. Liability of corporation accepting benefit of contract not

contemplating performance by it. 63. The same subject. Contracts of a continuing nature. 64. The same subject.-Amended contracts. 65. The same subject.-Express adoption. 66. The same subject. Obligations cast upon assignee by terms

of contract. 67. The same subject. Where corporation is organized to escape

existing obligations.

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