their doing so without taking security for its repayment, just as Thompson laid out and expended these immense sums, under the like belief? The law does not demand the infliction of any such punishment, nor will its principles warrant the court in depriving him of compensation for his expend .itures merely because of his fiduciary status at the time the contract was made, even if this court has correctly decided that he is not entitled to damages by way of compensation for the loss of anticipated profits, as to which it is now too late to enter upon any inquiry.

"The rule under consideration does not extend so far as to work an entire confiscation of the property of the unfaithful director, which he may have attempted to sell to his provable demand, although he consented to take one half the amount until such time as it might be convenient for the company to pay the other half. Cope's Case, 20 L. J. Ch. N. S. 28, 1 Sim. N. S. 54.

The salaries of the officers of a corporation cease upon the appointment of a receiver empowered and directed to take control of all its property and to assume the entire management of all its affairs. Lenoir v. Linville Improv. Co. 126 N. C. 922, 51 L. R. A. 150, 36 S. E. 185.

The New Jersey rule, as exemplified in Spader v. Mural Decoration Mfg. Co. 47 N. J. Eq. 18, 20 Atl. 373, that claims for damages arising from breaches of contract for services occasioned by the insolvency of a corporation are entitled to be paid pro rata out of funds in the hands of the receiver, has much to commend it, says the North Carolina supreme court; but we think that the average ends of justice would be better and more generally subserved by following the New York rule as laid down in People v. Globe Mut. L. Ins. Co. 91 N. Y. 174, that such contracts are terminated by the dissolution of the corporation at the instance of the sovereign power, and not broken. Ibid.

The dissolution of a corporation and annulment of its charter for the nonpayment of taxes preclude a manager, who was at the same time one of its stockholders and directors, from recovering from its assets in the hands of a receiver any salary on account of services rendered in continuing the business after dissolution of the corporation, as his contract terminated when the corporation was dissolved. Louchheim v. Clewson Printing & Weighing Co. 12 Pa. Super. Ct. 55.

2. With superintendents.

When, by the insolvency and winding up of a banking company, its manager is discharged by the official liquidator, and his contract has not expired, and he was by such contract entitled, in addition to a stated annual salary, to residence and offices upon the bank's premises free of rent and taxes, he is entitled to damages from the effects of the bank for the loss of his contract, computed upon the basis of the present value of an annuity equal to his annual salary and terminating at the end of his term of employment, with a proper rent for the bank premises for the unexpired term, deducting what is just for his being at liberty to obtain

corporation at an advance over its cost to him, so as to derive a secret profit therefrom; but in the accounting which takes place under the principle the director will be compelled to yield to the corporation the secret profit, but will be allowed a credit for the property sold to the corporation at its real value." 10 Cyc. Law & Proc. p. 795.

"In most jurisdictions, as we have seen, a contract or other transaction between a corporation and its directors or other officers, the corporation being represented by others, or a contract or other transaction between a corporation and a third party, from which a director or other officer derives a profit, or in which he is otherwise personally interested, is merely voidable at the option of the corporation, and not absolutely a fresh appointment. Yelland's Case, L. R. 4 Eq. 350.

When it is part of the contract under which one is employed as manager for a corporation, that, if he is deprived of his employment for other than his gross misconduct, he shall be paid by the company a sum equal to three years' salary, he is entitled, upon the winding up of the corporation under the English companies act, to the sum stated without deduction as in Yelland's Case, because, had the corporation while a going concern discharged him without his misbehavior, it would be bound to pay him the three years' salary, and he might have entered at once upon а new employment. Re London & S. Bank, L. R. 9 Eq. 149, 18 Week. Rep. 273.

One who has a contract to serve a corporation as superintendent for a period of ten years at a stated annual salary and a percentage of profits, which is duly performed for nearly two years by both parties, when further performance is stopped by the adjudication of bankruptcy of the corporation, is entitled to prove against the assets in bankruptcy, and to share in the distribution thereof, damages for the breach of such contract as if he had been discharged without legal cause at the time the adjudication took place. Ex parte Pollard, 2 Low. Dec. 411, Fed. Cas. No. 11,252.

The reasoning of Lowell, J., in the above case as to the provability and right of participation of a claim for damages against a bankrupt manufacturing corporation, of one employed as its superintendent under a written contract at a stated annual salary for ten years with a percentage of profits, and which was in course of performance by both parties, and had eight years and upwards to run when it was interrupted by an adjudication in bankruptcy following the voluntary petition of the corporation, is worth outlining, and in striking contrast to the reasoning of the New York case of People v. Globe Mut. L. Ins. Co. 91 N. Y. 174. Has there, he asks, been such a breach of the contract as will give the petitioner a right of proof for any damages which he may have suffered against the estate of the bankrupt corporation? That, he says, is a difficult question. It is easy to show the very great hardship of a negative answer. No corporation has been wound up in bankruptcy in this district, and ever been revived in such a form as to give its old creditors redress. In most cases, here or elsewhere, a

dress for the benefit of the corporation, as has been explained in a former chapter. But where the transaction is of such a character that it might lawfully have been authorized by the majority, it may lawfully be ratified or acquiesced in by them, and their ratification or acquiescence will bar an action by a dissenting minority to set it aside. The board of directors may ratify a transaction if they could have authorized it, but not otherwise. When they do undertake to ratify, a majority must be disinterested. It is also well settled that the corporation and the stockholders may and will lose the right to have the contract or transaction set aside by laches in exercising their option to disaffirm it. Whether the delay in electing to set the transaction aside constitutes laches, form because the state would not allow him to do so.

The court dismissed the English cases with the statement that in all of them the companies stopped payment before the law took them in hand, and they did so by open public notice, which was in legal effect a refusal to perform their contracts. The law did not break the contracts; they were already broken.

After disposing of the troublesome precedents in this wise, the court faced the contention that the agent's contract is to be regarded as only dissolved when destroyed by an outside, independent force, operating separately, and not set in motion directly or indirectly by the act of the party pleading it as an excuse. In other words, such party must be innocent and blameless respecting the vis major which dissolves the contract, and, if not so, cannot plead as an excuse what is practically his own act and fault. The argument was pressed upon the court that, unlike the corporations in all the precedent authorities, the Globe company at the bar was not only not blameless, but that its dissolution resulted from, and was directly caused by, Its own acts and omissions.

The answer to this seems deplorably weak. The court said, the fact is not shown, nor necessarily to be inferred, from aught in the record, that the corporation was derelict, although at the same time it admitted that it should presume the legal reserve to have fallen below the safe level, since this was the statutory ground for state intervention. Moreover, this result, it added, may have been due to investments seemingly prudent when made, but which, contrary to all reasonable expectation and foresight, turned out bad. As, however, even this pointed to an indirect responsibility, the court retreated to the fellow-servant doctrine, that has done such yeoman service in preventing recoveries for personal injuries.

On the whole this decision is unsatisfying. Waiving the question as to why the court in one case implied a contract with the policy holder that the company should maintain the legal reserve, and not provoke corporate death at the hands of the state; and in the other refused to imply any contract with its agent to refrain from disabling itself from doing the business it was chartered to do,-there are difficulties with the court's theories. To say that the agent contracted with knowledge that the corporation must die whenever its creator so willed does not

so as to bar the right to relief, will depend upon the circumstances, and not merely upon the length of time which has elapsed. It was said by Mr. Justice Miller in a leading case in the Supreme Court of the United States [Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. 328], in which a director had purchased property of a corporation at a sale under a deed of trust: "The doctrine is well settled that the option to avoid such a sale must be exercised within a reasonable time. This has never been held to be any determined number of days or years, as applied to every case, like the statute of limitations, but must be decided in each case upon all the elements of it which affect that question. These are generally the presence or absence of the parties at the place of the help, since both policy holder and landlord did the same. It is also unsatisfactory to say that there was, by the failure to maintain the legal reserve, a breach of the contract with the policy holder before dissolution,-such breach being the cause and the dissolution the consequence. This alleged breach did not authorize any policy holder to refuse to carry out his contract until the state intervened. The policy holder was bound to pay his premiums down to the very moment of dissolution, or his policy would have lapsed and he have been barred from sharing in the corporate assets. Why, then, was not the company up to the instant of its dissolution as much performing its contracts with its policy holders as with its general agents? How could the policy holder, more than the agent, when dissolution occurred by the vis major, put the company in default?

In Hepburn v. Montgomery, 97 N. Y. 618, and in Atty. Gen. v. Continental L. Ins. Co. 93 N. Y. 630, the decision in People v. Globe Mut. L. Ins. Co. 91 N. Y. 174, was followed.

A question arose in a New Jersey litigation over the sufficiency of a plea in answer to a declaration by the general agent of a credit insurance company claiming damages for a breach of his contract to solicit insurance, which set up in defense, in substance, that the corporation became insolvent, and ceased to employ the agent because it was declared insolvent and enjoined from doing further business by the court of chancery, was put in the hands of a receiver, and its charter was declared to be forfeited and void, except for the purpose of collecting and distributing its assets. The supreme court held the plea good, and overruled the plaintiff's demurrer thereto, reasoning as follows: It is well settled that contracts for personal services are made upon the implied agreement that both contracting parties will continue alive, and are terminated when either dies. The distinction between such contracts and those with policy holders was applied in People v. Globe Mut. L. Ins. Co. 91 N. Y. 174, a case involving the question here, and where, as here, the life of the company was extinguished by the act of the state. The New York supreme court held, and its view was unanimously concurred in by the court of appeals, that a general agent whose compensation depended upon his success in procuring insurance for the company upon a percentage could not maintain an action for damages against the receiver because, be

transaction, their knowledge or ignorance of the sale and of the facts which render it voidable, the permanent or fluctuating character of the subject-matter of the transaction as affecting its value, and the actual rise or fall of the property in value during the period within which this option might have been exercised.' Laches may bar the right of a corporation or its stockholders to maintain a suit to compel directors to account for secret profits. Individual stockholders may be estopped to attack a contract or other transaction on behalf of the corporation on the ground that directors or other officers were personally interested. If they participated or consented, or if they have ratified the transaction with knowledge of the facts, they are clearly estopped. fore the expiration of the period for which he was engaged, he was prevented by the insolvency, receivership, and dissolution of the company from continuing his employment. The rule in that case will be accepted here. Rosenbaum v. United States Credit System Co. 60 N. J. L. 294, 37 Atl. 595.

But this judgment was reversed by the New Jersey court of errors and appeals, which, in doing so, said: In the case of People v. Globe Mut. L. Ins. Co. 91 N. Y. 174, upon which the supreme court relied, both parties to the contract, the company and the agent, were restrained by injunction, at the instance of the attorney general, from further prosecution of the business of the company and the exercise of any of its corporate franchises, followed by the appointment of a receiver and dissolution of the company; and it was held that, as the action of both contracting parties was paralyzed by injunction at the same time, so that neither could put the other in the wrong, there was no breach of the contract. But in the case at bar there was no such injunction. The contraction of debts and disposition of assets was forbidden, and afterwards there was an adjudication of insolvency and a receiver, but without continuing the injunction. The New Jersey statutes do not provide that a mere adjudication of insolvency and the appointment of a receiver take from a corporation its right to do business. The practical effect is to stop business, but the right to go on is not taken away. Rosenbaum v. United States Credit System Co. 61 N. J. L. 543, 40 Atl. 591.

Chancellor McGill, of New Jersey, in writing for the court of errors and appeals in Rosenbaum v. United States Credit System Co. 61 N. J. L. 543, 40 Atl. 591, which unanimously reversed the supreme court in the same case (60 N. J. L. 294, 37 Atl. 595), sharply criticises the reasoning of the New York court of appeals in People v. Globe Mut. L. Ins. Co. 91 N. Y. 174. upon which the court below had relied in coming to the conclusion about to be reversed. The learned chancellor had pointed out at the beginning a very material distinction between the case in hand and the New York case, which deprived the latter of authority as a precedent; but he did not rest there. He took up the broad question whether the forfeiture of the corporate charter would bar a general soliciting agent's claim for damages for a breach of his contract of employment for the term of the

Stockholders will not be heard to complain of their own acts as directors. The right of individual stockholders to complain may also be barred by laches." Clark & M. Priv. Corp. § 764.

This text is supported by authorities too numerous to mention or examine, one of which is the leading case of Foss v. Harbottle, 2 Hare, 461, in which the vice chancellor, after laying down the rigid rules of law requiring the exercise of the utmost good faith on the part of promoters of corporations, treating them as acting in a fiduciary capacity, proceeds as follows: "If persons, on the other hand, intending to form a company, should purchase land with a view to the formation of it, and state at once that they were the owners of such land, contract which had not expired at the date of that forfeiture. Following the reasoning of the New York court in the case mentioned, the court below, he said, looked upon the contract as one merely for skilled personal service, and treated the insolvency of the company and forfeiture of its charter as analogous to the death of the master of such a servant, which, by an implied condition, ended the contract. The court of appeals of New York carried the doctrine of implied condition in the contract still further, Finch, J., saying: What had happened was the dissolution of the contract by the sov ereign power of the state, rendering performance on either side impossible. This result was within the contemplation of the parties, and must be deemed an unexpressed condition of their agreement. One party was a corporation. It drew its vitality from the grant of the state, and could only live by its permission. It existed within certain defined limitations, and must die whenever its creator so willed. The general agent who contracted with it did so with knowledge of the statutory conditions, and these must be deemed to have permeated the agreement and constituted elements of the obligation. The judge admits, says the chancellor, that the implication will not exist if it appears that the corporation was culpably responsible for state intervention. He then proceeds: It appears to us that both these implied conditions are forced, or at least forced in their application to cases in this state similar to the case now considered. It appears to us that the material fact that the corporation defendant is a stock company, and that its capital stands as a trust fund for the payment of its debts, is lost sight of. Such a company may become insolvent, and its charter may be forfeited when its assets may be more than sufficient to pay its debts. Everyone who deals with such a corporation does so in view of the trust fund its capital provides and the security that fund is intended to afford. The stockholders who provide the fund invite confidence because of it, and through such confidence their venture may be profitable to them. The mere statement of this situation makes conspicuous the injustice of any course of reasoning which will return to the stockholders their capital before satisfac tion of all losses induced by faith in it should be made. The state creates corporations, and requires of them the provision of such a trust fund, and, when it destroys their corporate ex

and propose to sell it at a price fixed, for the purposes of the company to be formed, the transaction, so far as the public are concerned, commencing with that statement, might not fall within the principle of Hichens v. Congreve, 4 Russ. Ch. 562. A party may have a clear right to say: 'I begin the transaction at this time. I have purchased land, no matter how or from whom, or at what price. I am willing to sell it at a certain price for a given purpose.' Another is Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. 328, heretofore quoted from. It holds: "The right of a corpora tion to avoid the sale of its property by reason of the fiduciary relations of the purchaser must be exercised within a reasonable time after the facts connected therewith are istence, natural justice requires that it shall provide for distribution of the fund so that no part of it shall be returned to those who offer it as security for the action of others, until the latter shall have all the protection against loss in their undertaking that it is capable of affording.

The insolvency of a corporation and appointment of a receiver of its assets under the New Jersey laws do not rescind or terminate a contract with individuals to set up and operate a soda water fountain in the premises of the corporation, and pay, in lieu of rent, 15 per cent. of the gross receipts. Bolles v. Crescent Drug & Chemical Co. 53 N. J. Eq. 614, 32 Atl. 1061. The ground of the decision in People v. Globe. Mut. L. Ins. Co. 91 N. Y. 174, that the contract for service was annulled by the act of the state in dissolving the corporation, not by default of the corporation in performing it, "does not seem to be very perspicuous or satisfactory in any view; but the case certainly does not hold that contracts for personal services are rescinded by the insolvency of a corporation." Ibid.

An agent of a corporation, engaged for the term of five years, during which period the company goes into voluntary liquidation, and is wound up, and whose employment is continued by the official liquidators for a considerable length of time after the winding-up order, is entitled, under the rule in Yelland's Case, L. R. 4 Eq. 350, to his full salary to the end of the five years' term. Re London & C. Co. L. R. 7 Eq. 550, 38 L. J. Ch. N. S. 562, 20 L. T. N. S. 774.

An agent of an insurance company, employed for a term of years upon a stated annual salary and a commission of 10 per cent of the net profits of each year, when the company is wound up before the term of employment expires, is entitled to his stated salary, but not to damages for loss of his commission for the rest of the term of employment. The reason

is, he cannot compel the company to do business, and, unless business is profitable, he earns no commissions. Re English & S. Marine Ins. Co. L. R. 5 Ch. 737, 39 L. J. Ch. N. S. 685, 23 L. T. N. S. 685, 18 Week. Rep. 1122.

If an agent is employed for a term of years to sell goods of a corporation upon a commission, and the company winds up before the term expires, he is entitled to his damages for the breach of his contract. Re Patent Floor Cloth Co. 41 L. J. Ch. N. S. 476, 26 L. T. N. S. 467.

made known, or can by due diligence be ascertained. As the courts have never prescribed any specific period as applicable to every case, like the statute of limitations, the determination as to what constitutes a reasonable time in any particular case must be arrived at by a consideration of all its elements which affect that question." In Stewart v. Lehigh Valley R. Co. 38 N. J. L. 505, Mr. Justice Dixon, delivering the opinion of the court, said: "After an examination of all the cases cited, and such others as I have found, and a careful consideration of the principle, and the results of regarding and disregarding it, I have come to the conviction that the true legal rule is that such a contract is not void, but voidable, to be avoided at the option of the

Bacon, V. C., distinguished English & S. Marine Ins. Co.'s Case by the circumstance that Maclure was to be paid a salary and a tithe of the net profits besides, while the claimants at bar were to be paid a commission on sales as sole compensation, and whether the sales were profitable or not. He did not venture to state any rule for computing the damages, or suggest any method of proving them.

The winding up of a corporation does not ab rogate a contract made with a broker to place its shares and receive a stated fee for doing so, payable when all the shares have been allotted. Inchbald v. Western Neilgherry Coffee, Tea & Cinchona Plantation Co. 17 C. B. N. S. 733.

Notwithstanding the assignee of a corpora tion is enjoined by the courts from consummating a sale of the corporate property negotiated by a broker, the latter may recover his commissions, since these were earned as soon as he found a purchaser ready and able to buy. Gibson v. Gray, 17 Tex. Civ. App. 646, 43 S. W. 922.

This is the distinguishing feature that makes inapplicable People v. Globe Mut. L. Ins. Co. 91 N. Y. 174.

The salaried selling agent of a corporation, employed for a definite term, who is discharged before that term expires because the company is embarrassed and unable to continue business, and when, immediately after such discharge the corporation is dissolved by the decree of a competent court in regular proceedings voluntarily instituted, has a valid claim for damages against the property and assets of such corporation for a breach of his contract of employment, and the measure of such damages is the salary for the rest of the term less the net amount he has earned in the meantime. Tiffin Glass Co. v. Stoehr, 54 Ohio St. 157, 43 N. E. 279.

In Tiffin Glass Co. v. Stoehr, 54 Ohio St. 157, 43 N. E. 279, the supreme court of Ohio properly distinguished the case at bar from People v. Globe Mut. L. Ins. Co. 91 N. Y. 174, by pointing out that in the case before it the employee had been discharged from his employment before the company was dissolved, and, consequently, that a breach of his contract had been committed by the corporation before its dissolution, and that dissolution was the result of its own voluntary request. The fact that the damage could not be computed until long after the dissolution did not affect the case. Unlike