538
FEDERAl" REPORTEH.
a party to avail himself of the statute when, by his own fraud, he has pre· vented the other party from knowing or asserting his rights within the pre--scribed period. "
however, proceeds upon the idea of concealment by the party setting up the statute, and seeking an advantage therefrom. Massachusetts Tumpike Co. v. Field, 3 Mass. 201. The rule, and the reason for the rule, are stated forcibly and tersely in Beattie v. Pool, 13 S. C. 383: "It has been placed on the ground that it would be against conscience for
In this case the parties now claiming-that is to say, the trustee, and those for whom he held-made no concealment. They put their deed on record, and published their claim. The rule does not apply. The assignee is barred by the statute. Let a decree be entered in accordance with this opinion.
CHANDLER, Receiver,
11.
BACON and others.
(No. 1,992.) (No. 1,790.)
BROWNE v. NATIONAl, COLOR PRINTING Co. (Oirouit Oourt,
n. Ma88aoku8etta.
March 28, 1887.)
1.
ColtPORATIO!'fIl-PROMOTERS-STOCK-F:aAUD.
I.
B. and C., as promoters of a projected corporation, negotiated an agreement between the' owners of cerlainpatents, and the corporation to be formed, by which B. and C. were to receive 8,750 shares of the capital stock of the new company, less 625 shares, which they were to assign to P. B. and C. o1Iered the public an option to take stock in the new company, disclosing the purchase of the patents, and that a portion of the stock was to be issued to the former owners in part payment, but not informing purchasers that they were to have jltock on any different terms or conditions. It was further agreed that B. should be president and C. treasurer of the corporation, and they were so elected, and placed a large amount of stock at seven dollars a share. obtaining their own stock for nothing. Held that, as promoters of the new com· pany. they occupied a fiduciary relation towards It, and had no right to de· rive any advantage over other stockholders without a full and fair dis· closure of the transaction, and that any secret profits made must be refunded to the company
SAME-RIGHTS OF CORPORATION.
8.
In such a case, the corporation 'has aright to elect (1) whether the shares should be transferred back to it; or, (2) if the shares have been sold, their entire profits made by the sale should be turned over; or (3) that it should be paid the sU,m lost by reason of being deprived of the right to place such shares with other persons at seven dollars per share.
SAME-PARTNERSIIIP.
B. and C., as promoters of the new corporation, signed the secret agreement as parties of the second part. and acted in concert to promote a common purpose for their common benefit. they became jointly and severally liable to account, as partners, whatever may h-ave been their private intention.
In Equity. Intervening petition of E., ErnestCaduc. R. M. Mor86 and A. D. Chandler, for Chandler t receiver. J. R. Bullard, for Bacon and Caduc.
(lHANDLER Vi BACON·
539
.were. heard on exceptions to the master's report. . COLT, J. These The master found that· the. defendants Bacon and Cadue were promoters of the National Color Printing Company; that, as such they negotiated.an agreement between the owners of certain patents and the National Color Printing Company to be formed, by which, among other things, they were to receive two-sixteenths or 3,750 shares of the capital stock. of the new company, less 625 shares, which they were to assign to Robert A. Piper; that the defendants offered to the public an option to take the stock in the new company,disclosing the fact of the purchase of the patents, and that a portion of the stock in the company was to be issued to the former owners of the patents in part payment therefor, but not informing the persons who subscribed for the stock.that were to have stock on any different terms or conditions. The master further finds that, at the time the agreement was signed, an understanding was amved at between the defendants and the officers of the United States Label, Card & Tag Company, the owners of the patents purchased, that the defendant Bacon shQuld be president of the new company, and the defendant Caduc treasurer, and that, pursuant to this agreement, these officers were elected; that the defendants obtained for .themselves these positions, and the eop,tr()l of the books of the new company; that they placed a largeamoUDt of stock at the uniform price of seven dollars a share; and that, under the agreement, they obtained shares of stock, without paying anything into the treasury of the company, as all other persons did who subscribed for the stock upon the solicitation of the defendants, or upon the solicitation of other persons whom the defendants had interested in said company. The master further finds that the defendants were partners, and that they should pay the receiver at the rate of seven dollars per share for each of the 3,125 shares of stock received by them, with interest from September 23, 1880, amounting to the total sum of $28,794.78, less. $17,289.55, the amount the master finds, in cause No. 1,790, the defendant Caduc advanced to the company. The defendants object to the finding" of the master that they received 3,125 shares to their own use, without payment of Eleven dollars per share, because they say that he disregards the fact that said shares had been fully paid for, and that the Color Printing Company had received full value therefor, and that the United States circuit court of New Jersey had decreed that these shares were fully paid and properly issued. It appears that Judge NIXON, upon an application by the present receiver, held that these shares in question were fall-paid stock for the property purchased, and therefore not liable to assessment, but he also subsequently said that no decision was made as to the validity of the issue of this stock to these defendants, and it was his intention simply to instruct the receiver not to assess this stock. The question before us now is not whether these shares are to be considered as full-paid stock, but whether these defendants, as promoters of the new company, could take them without consideration, while other stockholders paid seven dollars per share. Clearly, they could not lawfully do this. As promoters of the new company, they occupied a
540
FEDERAL REPORTER.
fiduciary relation towards it similar to that of agent to a principal, and they badni:> right in these negotiations to derive any advantage over otherstockholde,rs without a full and fair disclosure of the transactions, and any secret profits so made they must refund to the company. That this may have been done without any fraudulent intent, or that the price paid for the patents was fair and reasonable, cannot relieve these defendants. The law forbids them, from their position, to secretly derive any benefit over other stockholders, and makes them accountable to the company for any profit so derived. Bagnall v. Carlton, 6 Ch. Div. 371jWhaley, etc., Co. v. Green, 5 Q. B. Div.109; New Sombrero Phosphate Co. v. Erlanger,5 Ch.Div. 73; Emma Silver Min. Co. v. Grant, 11 Ch. Div.918; Densmore Oil 00. v. Densmore, 64 Pa. St.43j McElhennY'8 Appeal, 61 pa.. St. 188j Simons v. Vulcan Oil, etc., 00., Id. 202; Emery v; Parrott, 107 Mass. 95; Getty v. Devlin, 54 N. Y. 403. The finding of the master that the defendants should pay seven dollars a share is objected to as without warrant oflaw, and it is contended that the defendants are only liable to account for the shares themselves, or for the profit, if any, they have made upon them. I think the company had a right to elect (1) whether they would have the shares ferred back to them; or, (2) if the shares had been sold, that these defendants should turn over the entire profit made by the sale; or (3) that the company may say: "Although you may have derived no profit by selling the shares, yet you deprived us of placing them with other persons, and you must therefore pay us the sum we have lost by reason of our being deprived of the right of placing these shares with other persons." Oarling'8 (hse, 1 Ch. Div. 115, 126, 127;1 McKay's Case, 2 Oh. Div: Ij"DeRuvigne'8 Case, 5 Ch. Di"'. 306; Nant-y.:glo, etc., 00. v. Grave, 12 Ch. Div.73S: The last measure of damages has been adopted by the master in this case. It is in proof that a large amount of the stock of the company was placed at a uniform price of seven dollars a share, and the defendants are called upon to account for their stock at this price. I can see no error in this finding of the master. As to the third exception, the master properly said that thetewas no evidence that the defendant Bacon,upon request of the plaintiff, delivered up to him, before the proceedings, 750 of the shares in question, and that, therefore, Bacon must be charged as found. The remaining exception is to the master's finding that the defendants were partners, and as such are jointly and severally liable to the complainant.. These defendants signed the secret agreement as parties of 'second part, and they were acting in concert to promote a comnion purpose for their common benefit, and consequently they were jointly and severally liable to aecount to the complainant. When the conduct of parties operates as a fraud or deceit upon third persons,whatever their private intention, the relation of partnership may be said to exist as to such third persons. Story, Partu. § 49; Emeryv. Parrott, 107 Mass. 95. The only exception in case No. 1,790 to the inaster's report relates to the rejection by the master of certain items in the claim Of the interven·· ing petitioner, Caduc, against the National Color Printing Company.
CHICAGO, M. &:
:ST. p;lty.
CO. V. HARTSHORN.
5U
Caduc testifiestha.Hheloanscoverirt{the in question were made by Go6qyeat'Dental Vtilcanite Company,of which he was urer.ThatcCimplmy, aftefthe appointment of Mr. Chandler as of the ColbrPrinting Conl pany, claimed from him the balance due uport these the the claim, taking a. full release from the 'If·Cad\1c had no authority to thus use the money of the Goodyear Company , that question cannot affect the rights of the receiver in' this case. Whether made without authority or wise,the loana, u);>on the m'idetrce, were made by the Goodyear Coni. pany, fl,l1d:notbt Caduc/andthefinding 'of the master is therefore correct. , The ,exce!>tions to the master's Teport in each case must be overruled.
CBrCAGO,'y.
& ST. P.
Ry. Co: v. HARTSHoRN,'Treas., etc., and a.1). ,
«»cuit Oourt, No iJ.lowa. 1.
Notwithstanding that the law of Iowa restricts taxation in aid of raUroa.ds to the suin of5 per cent."upPu the taxable property in the township,stU! ce.n be lawfulli compelled to pay. lU addition to such o per cent, tax and, interest thereon, the peMlty.provided by law for delay in the pay· ment'of taXes'; .following:7'oPnn v. HartBhorn,29 N'. W. Rep. 764. B.ut:E-PENA1.TIEB-REPEAL OF STATUTE.
TO RAiLROADS-PENALTIES, , '
Under Oode IQwa,§ 45.. pal!.) 1, which providllll that'. the repeal of. e.,statute not aftect, any ,!nder tha< statute, La:,!,/! Iow!i' 159, 1, repealing Laws 1876,c.123.whlCh authorIzed the votIng by any township lUI the GUlta' of taxes in aid of· railroads. does not .repeal :anypenalties of taxes so .vo}ed, WhiGh. had accrued at the time of the passage of the act of 1884;. followmg 'J'obm v. 'iIi};l'tg-Mrn, 8Upl'a. On demurrer'to a bill to restrain the sale of realt.,y for delinquent. .. where :it: appears thJtt,a.lthough the coroplfl;ilJ,ant did not tender thefllll pounw·tre.asu,l'er demandeci a pellaH;v in excess of what'Was dbe,'aili;tt'he complainarlt is therefore entitled to SOII}6 relief, though nono the' fl111l'elief aslt&d. the demurrer cannot be sustained. i' FOR ..'
8. , "
InEquity. Bill to restrain sale of realty for delinquent taxes. Demurrer to bill. Goo; E. Clark and BlUrton Ha'lUJOn, for complainants. E. B. Soper, for SH'IRA!',J.. Tn the of May sud June, 1881, several of the to'Wnships Qf Falo AltoeountYi Iowa, voted a 5 per cent. tn: in aid: of the :consttuction of the line 'of. the Cedar Rapids, .Iowa Falls & Northwestern "&l.i1w.a.y Company,through the respective townships. The validity ofithie'tl1OC thus voted 'wftsdisputed, and" t<> determine this questibnrsltits were: institute<lin the state courts; and, in the fall of 1885, by of thesuprel1lecourt of Iowai,JJitwasheld that the taxes I