224 F. 372 | 7th Cir. | 1915
(after stating the facts as above). The relations between Dozier and the Desnoyers Shoe Company, in our judgment, are' to be determined from the written agreement of January 24th. The testimony establishes that this document was intended to embody, and was regarded by the parties as covering, their entire agreement. Claimant correctly alleges that it was ratified by the board of directors, so that we are not now concerned with any question of Desnoyers’ lack of authority to enter into this kind of an agreement on behalf of the company. It is to be observed, too, that the document purports to be executed, not only by Desnoyers as president of the company, but also by him in his individual capacity. The consideration for the $50,000, as expressed in the agreement, was, first, to issue stock to that amount to Dozier, as part of a larger increase of stock to be voted after July 1st; second, to pay Dozier an amount equal to any dividend that might be declared on a similar amount of stock after January 1, 1911; third, to pay, in addition; interest at the rate of 6 per cent, until July 1st (subsequently, by implication resulting from the actual payment and receipt, extended to- September 1st); fourth, to give the son an opportunity to learn the business.
Unless the statement that the $50,000 “is to become special capital until such time as we are able to merge it into the general capital stock” is to be entirely disregarded as meaningless, the money cannot be said to have been paid merely as an advance payment on account of the stock to be issued. Even if these words were to be interpreted as indicating a loan to the company until July 1st and such reasonable time thereafter as might be necessary to effectuate the increase of the stock (an interpretation to be hereafter considered), the implied obligation of the company to repay the loan, with the interest thereon, would be an enforceable counter promise for the payment, and, notwithstanding the lack of enforceability of the additional promise to issue the unauthorized stock, would bar a rescission of the agreement on the part of the lender.
We need not consider what Dozier’s rights would be if he had relied upon fraud or fraudulent misrepresentations as a ground of rescission of the entire contract, inasmuch as no such contention is made. Whatever claim, therefore, Dozier may have against the bankrupt because of the $50,000 advanced by him, the basis thereof is not money had and received and equitably due the plaintiff after a rescission based either on illegality, total failure, or total lack of consideration. The claim as filed was, therefore, properly rejected.
The parties, however, agreed that this $50,000, from the time of payment until it could be "merged into the general capital stock,” should become “special capital”; that Dozier should receive therefor, in addition to interest, exactly the same compensation that a stockholder to the extent of $50,000 would receive, namely, dividends. The capital of a stock company or of a business has a well-defined meaning. It is the fund intended to be subject to the risks of the business, the fund contributed to meet the obligations of the business, and to be repaid to the contributors only after all of the other obligations should have been satisfied. While the phrase “special capital,” in reference to a corporation, has no established legal meaning, it would seem to be clear that what thq parties had in mind was that the $50,000 should be subject to the risks of the business and should enjoy the profits thereof in exactly the same way as the actual capital of the business until such time as it could be legally exchanged for capital stock. In other words, something in the nature of a joint venture was entered upon by Dozier and the company.
If, as between Dozier and the stockholders of the company, the former would be entitled to priority in the distribution of the funds as if he were a lender, by his express agreement he has subjected any-such claim to the prior rights of creditors. Advances to individuals and corporations for the very purpose of bettering their financial condition by increasing their assets without correspondingly increasing their liabilities as against other creditors are not uncommon, and there
The order appealed from will therefore be affirmed.