How. 307. The liability to pay was fixed; the time-the precise moment when to pay-may have been uncertain. The subscription was an absolute promise, debitum in præsenti, a part possibly, solvendum in futuro. Re Iron Works, 20 Fed. Rep. 680. It constituted a part of the assets of the company, (Myers v. Seeley, 10 N. B. R. 411,) and as such was by it assigned. for the benefit of the creditors,-became the property of the creditors, (Sanger v. Upton, supra; Morgan Co. v. Allen, 103 U. S. 498.) The subscriber was bound to pay it in full. If the corporation had been successful and thus in the uncontrolled direction of its own affairs, it may possibly have indulged its stockholders. Perhaps if its profits were sufficiently large it may have declared dividends with which the stockholder could have been credited upon his debt for subscription and in time have so paid up the debt. But when the insolvency occurred, in 1866, its capacity to do business was ended. It lost all self-control. Its existence continued for no other purpose than the realization of its assets and the payment of its debts. Its duty and the duty it devolved on its. assignee was to collect in these assets immediately among them the unpaid subscription to stock and to pay the creditors. Scovill v. Thayer, 105 U. S. 154. This made the obligation of the subscriber to pay fixed and certain, immediate on demand; in other words, a debt. Re Iron Works, 20 Fed. Rep. 680. No action of the corporation, of its office:s or its assignee, could discharge, alleviate, or extend this obligation. Upton v. Tribilcock, 91 U. S. 48; Sanger v. Upton, supra. But the subscriber was permitted to pay only 20 per cent. in cash. ments were to be made on calls by the company or its officers. The time or times, the proportion or proportions, of these calls were uncertain. It may be they were contingent upon the necessities of the company. Does this deprive the debt on the subscription of its provable character in bankruptcy? Here, then, we have an absolute promise to pay whenever called, "that is to say, a demand existing, the accrual of the cause of action thereon dependent on a contingency," the call. If so, it is provable in bankruptcy. French v. Morse, 2 Gray, 111. Let us assume that a call was necessary before payment could be required; that such call might never have been made, either through neglect of the corporation, its assignee, or its creditors; that thus the remainder of the subscription was "payable upon an event which might never have occurred," yet the contract of subscription and the liability of the defendant to pay were in full force when the petition of bankruptcy was filed. The sum for which he could be made liable was certain in amount,$80 per share. In the language of WAITE, C. J., in Wolf v. Stix, 99 U. S. 1, this clearly is such a case as was provided for in section 5068, Rev. St., and the debt was provable in bankruptcy. See also Parbury's Case, 64 Eng. Ch. 87. Let the complaint be dismissed.

The other pay

This result renders unnecessary any discussion of the defense of the statute of limitations.

NOTE BY THE JUDGE. In the case of Hawkins v. Glenn, 9 Sup. Ct. Rep. 739, (May 13, 1889,) the supreme court of the United States decide that the statute of limitations is not a bar. That case was brought by the same plaintiff as in our case against a subscriber in like plight.


(Circuit Court, D. Connecticut. June 17, 1889.)


Defendant, an experienced and successful rubber manufacturer, was employed by plaintiff's company, which was then in financial difficulties, and not succeeding well with its rubber business, to take entire charge of the business as managing agent, and as a part of the transaction he purchased 4,00 shares of its capital stock at a low price. He devoted his attention and active services to the business for over four years, when the company became insolvent. Frequently during the first year or two he stated that he was serving without compensation, but in this action, involving his right to a salary, he testified that he supposed his salary would be determined at the proper time, when the company became more prosperous, and that he would then be paid what was right for the past. There was no evidence of a contrary agreement. Held, that he was entitled to a reasonable salary ($2,500 per year) from the beginning of his employment.


A purchaser of preferred stock issued without express statutory authority, who voluntarily subscribed and paid for it for the purpose of promoting the scheme under which it was issued, and who was a promoter of the scheme, cannot hold it for 28 months after the conditions upon which it was issued have been fulfilled, and then, on the insolvency of the company, assert the invalidity of the stock, and recover back his money.

At Law Action by Charles Bard, receiver of the Hayward Rubber Company, against Joseph Banigan, for money had and received. Halsey & Briscoe, for plaintiff.

Doolittle & Bennett, for defendant.

SHIPMAN, J. This is an action at law which was tried by the court, the parties having by a duly signed written stipulation waived a jury trial, and agreed to a trial by the court. The first count of the complaint was for money had and received by the defendant for the use of the Hayward Rubber Company, before the appointment of a receiver. The second count was for money had and received for the use of the plaintiff, after his appointment as receiver. A stipulation between said parties is as follows:

"It is stipulated and agreed by and between the plaintiff and defendant in the above-entitled action that the balance due to the plaintiff from the defendant under the first count of the substituted complaint, exclusive of the disputed items of $21,808.40 claimed by the defendant for services as general manager, and of $17,550 had and received by Hayward Rubber Company in payment of preferred stock, is the sum of $10,494.96, with interest thereon from December 15, 1887, and that the balance due to the plaintiff from the defendant under the second count of the substituted complaint is the sum of $24,011, with interest from January 15, 1888."

The facts which upon such trial were found to be true, and which are true, are as follows:

The Hayward Rubber Company was a joint-stock corporation, for the manufacture of India rubber shoes, duly incorporated in accordance with the statutes of Connecticut, and located in Colchester, in this state. Its

capita! stock was $400,000. The par value of its shares was $25. Before 1879 it had been a very profitable company, and had paid large dividends. Its last dividend was made in 1881. Thereafter its business deteriorated, and became unprofitable. In January, 1883, some of the principal stockholders endeavored to find a skilled rubber manufacturer, who would become interested in the company, and would oversee or direct its management, and would take the charge of selling its goods. Negotiations were entered into with the defendant, Joseph Banigan, who was president and general agent of the Woonsocket Rubber Company, and was a well-known and successful rubber manufacturer, which resulted in their agreeing to furnish him, and his agreement on January 12, 1883, to purchase, 4,000 shares of the capital stock of said company, at $12.50 per share. The agreement was carried out, and on January 30, 1883, Mr. Banigan was appointed general agent by the directors, who defined his duties, which were, in general, that he was to have full control of the manufacturing, subject to their approval. No salary was then or ever designated, nor was any vote passed on the subject. Mr. Banigan still attended to his duties and business at Providence. He went to Colchester once in a week or fortnight, remaining there one, two, or three days, as the case might be. He entered actively upon the oversight of the business; laid out and arranged for new buildings; bought new machinery; ordered new lasts, tools, rolls, and cutting machinery; had automatic sprinklers put in the mill,-all at an expense of some $120,000; inspected the new goods; secured the dismissal of old officers, appointed a new superintendent; caused a saving in the management of the business; and reduced the pay-roll, while not reducing the quantity of manufactured goods; and carried on correspondence with the new superintendent and the treasurer. He also purchased the supplies, except for three months, when he was in Europe. In April, 1883, the Woonsocket Rubber Company, 40 or 50 per cent. of the stock of which Mr. Banigan owned, became the selling agents of the Hayward Rubber Company, and so continued until 1886. At that time the various rubber manufacturing companies formed a corporation called the Rubber Boot & Shoe Selling Company, in which each company took stock, and which was to sell all the production of all the stockholders. The Hayward Rubber Company took about $24,000 of stock. The agency continued a year, with disastrous results, particularly to the Hayward Rubber Company. The Woonsocket Rubber Company then declining to be its selling agent, Mr. Banigan became such agent, and sold all the goods thereafter, upon the same commission which had been paid to the Woonsocket Company. The amount of commissions was paid. In March, 1885, a committee of the directors, of which committee Mr. Banigan was a member, sent a circular to the stockholders, recommending an increase of the capital, by the issue of preferred stock to the amount of $100,000, saying that it was desirable to have a unanimous vote in favor of the proposition, asking for proxies, and inclosing the proposed resolutions, which were to be submitted to a stockholders' meeting to be held on March 25, 1885. At said meeting the stock was increased $100,000,

by the authorization of the issue of preferred stock entitled to cumulative dividends of 8 per cent. per annum, which should take precedence of all dividends on the common stock and any future additions thereto, and which preferred stock could be retired when the financial condition of the company would warrant, in such amounts and at such times as might be determined on by vote of the stockholders, at par and accrued dividends, and such retirement should be pro rata. The votes in regard to the issue of preferred stock were passed by a unanimous vote of the shares present or represented at said meeting at a time when said votes were taken; being 13,404 shares. The whole number of shares was 16,000. One stockholder of record holding stock hypothecated to it, subsequently brought to the proper state court a petition for an injunction against the issue of said preferred stock, but discontinued or withdrew said petition. Each stockholder had the privilege of subscribing to said preferred stock in proportion to the number of shares of existing stock by him owned. If any stockholder neglected, for a specified time, to subscribe for his portion of preferred stock, the same could be disposed of by the treasurer, for the use of the company, at not less than par. Mr. Banigan subscribed for 702 shares of the preferred stock, and on April 2, 1885, paid the company therefor $17,550, and received a certificate for said shares, which contained, in substance, the provisions of said votes. Shares to the amount of $25,000 in all were subscribed for. The subscription agreement which Mr. Banigan and the other subscribers signed was as follows: "We, the undersigned, herewith subscribe for the number of shares of the preferred stock of the Hayward Rubber Company affixed opposite our names." The defendant voted upon his stock at one or two annual meetings thereafter. On June 26, 1885, he wrote to Potter, Lovell & Co., note brokers of Boston, inclosing a statement of the company's affairs, and saying that it had arranged to issue $100,000 preferred stock, but "only one-quarter of it has yet been issued, which I have taken principally." No claim for the repayment of this $17,550 was made until 1888. No certificate of the increase of capital stock was filed in the office of the secretary of state, or of the town-clerk of Colchester.

Mr. Banigan continued to be the general agent until the company went into the hands of a receiver, on August 9, 1887. No charge was made by him on the books of the company and no claim was made for salary until after the appointment of the receiver. At the annual meeting of the stockholders in January, 1884, he said to them that he was serving the company without compensation. At another subsequent meeting of the stockholders, when his management was criticised, he justified it, and said that he was not receiving compensation for his services. On May 26, 1887, he wrote to the treasurer criticising a neglect to receive the company's goods from the selling company, and said: "I am not under pay by the Hayward Rubber Company, and I should not be expected to look after such business, but, if no one gives it any attention, I feel it incumbent on myself to protect the company." He testified, upon cross-examination, that he supposed his salary would be

determined at the proper time, when the company was in funds; and, further, that he supposed when the company got in good condition he was to have a salary. There was no understanding, express or implied, that he was to have no salary in consideration of the sale of 4,000 shares at $12.50 per share. Nobody testifies to that effect. He made a large investment in the stock, at a price supposed to be cheap, in the expectation that it would be a profitable one. The stockholders wanted him to become pecuniarily interested in the company, and so be stimulated to render it valuable services and assistance. He thought that the company was not in a condition to pay large salaries, and was out of funds, and therefore took no money and made no charge. When it became prosperous, he expected to have a large salary for the future, if he remained in the company, and that he would be paid something that was in the way towards compensation for the past. He trusted that future success would enable him to be compensated. He thus truthfully said that he was serving without pay He was not at that time receiving, and it might be that he would never receive, pay. I find no agreement between the parties for service without compensation, and no abandonment on the part of Banigan of a claim for some compensation for the current service, but the subject was one to be determined at a future time, when the company was pecuniarily able to determine it. He was serving upon a contract that he should have payment in the future, and his conduct and testimony show that the time and amount of payment were to be contingent upon the time when, and the sum which, the company should be able to pay. In now ascertaining the proper amount, the contract is to control and reference is to be had to the financial ability of the company, as well as to the amount of services, and what would have been the market value under other and different circumstances. The company is now insolvent, and unable to pay its creditors in full. Mr. Banigan actually served from January 13, 1883, to August 9, 1887, except an absence of about three months, and is entitled to compensation for the period of four years and four months at the rate of $2,500 per annum, being $10,833.33.

The claim for $17,550 rests upon a question of law. The contention of the defendant is that, inasmuch as the statutes of Connecticut simply allow a joint-stock company to increase its capital stock, and the articles of association gave no authority to make preferred stock, it was beyond the power of the Hayward Rubber Company to create such a class of stock, and there was a total failure of consideration for the contract; that no estoppel can exist against the assertion of the invalidity of the stock; and that the defendant is entitled to recover the amount paid by him from the corporation. The text-books announce the doctrine that, in the absence of authority in the charter or statutes or articles of association to make a preferred or a special stock, and in the absence of unanimous consent on the part of the stockholders preferred stock cannot be created. Mr. Beach, whose learning on the subject of corporations made any utterance of his on that subject valuable, said, in his treatise on the joint-stock act of Connecticut, (page 25:) "It seems to

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