National Electric Signaling Co. v. Fessenden

Citations

• 207 F. 915
• 125 C.C.A. 363
• 1913 U.S. App. LEXIS 1664

Syllabus

<p>1. Corporations (§ 187*)—Agreements Between Stockholders—Construction.</p> <p>Plaintiff and W. transferred certain patents, etc., to a corporation in exchange for all of its stock. They subsequently transferred a majority of the stock under an agreement that they should be paid therefor $300.-000 out of the profits of the company before any dividends should be declared. The majority stockholders had advanced large sums of money to the corporation, for which they held interest-bearing notes, and plaintiff became dissatisfied because the amount due him did not also bear interest. One of the majority stockholders, who was also a director, prepared an agreement stating that plaintiff demanded that the $300,000 be put on an equal basis to that advanced on the notes, that he agreed to that proposition and thought the best way to d'o this was by the issue of 6 per cent, preferred stock, to be repurchased by the company out of surplus as accumulated, that plaintiff was to receive a specified salary, that the majority stockholders would make other advances as needed, that all questions of policy in the company as to which differences might arise between the majority and a minority should be submitted to arbitration, and that the provision for issuing preferred stock should include all money payable by the company under its contracts; This agreement was signed by such majority stockholder and by plaintiff. Held, that this did not constitute an agreement by the corporation to assume an indebtedness to plaintiff of $300,000 or to put plaintiff’s claim on an equal basis with the promissory notes, leaving the way of doing tins open, but was an agreement between the stockholders to equalize their claims by advancing the claim of plaintiff and W. to the form of interest-bearing stock; the majority stockholders to waive their position as creditors by exchanging their notes for preferred stock, especially as the corporation could not require the majority stockholders to accept sto