asserting such right, and any statement in the opinion respecting its right to the money would be only a dictum, and not binding either upon the court or the corporation.

2. It was necessary that Shippee should have been made a party defendant. The action was brought originally against West to recover certain moneys which had been collected and were held by him for the use and benefit of the plaintiff. This money was paid into the court, and the appellants were substituted as defendants in the place of West, and in their cross-complaint they asked that the money be paid to them alone. Inasmuch as West held the money for the use and benefit of the plaintiff, he could not, by paying that money into court, change or diminish the right of the plaintiff to receive it, nor was its right in any respect affected by the substitution of the appellants as defendants in the place of West. The appellants, after having repudiated their agency, can not claim that Shippee's presence in court was essential to a determination of the plaintiff's right. Shippee and the appellants are in no respect trustees under the instru ment for the purposes of carrying into effect any of its provisions. There was no trust created by the instrument other than such a trust as always exists between a principal and his agent, nor do the moneys in question constitute a trust fund to be disposed of under the direc tions of a court of equity. They are simply moneys belonging to the plaintiff, and which it has the right at any time to demand from its agent.

The judgment and order are affirmed.

GAROUTTE, J., and DE HAVEN, J., concurred.

Note. See note, p. 482.

Sec. 112. Same.

WORKS, J. Extracts from opinion in West v. Crawford, 8o Cal. 19, on pp. 27, 28, 29, 30, 31 and 32.

The action is not brought by a corporation, nor is this an attempt to enforce an assessment made by a corporation. The contract sued on is two-fold-it amounts to a subscription to the stock of a corporation, to be thereafter organized; and in addition, it is an express promise to pay to the plaintiff in this action twenty per cent. of the amount of such subscription. The simple question, then, is, whether or not this promise to pay the plaintiff can be enforced. The subsequent incorporation of the company named in the contract was a matter of no consequence, except that it fixed the time when the money should become due and payable, the agreement being to pay five days after the articles of incorporation should be filed. The subsequent action of the board of directors ordering the collection of twenty per cent. of the money subscribed was wholly unimportant. If this action is maintainable at all, it is not by reason of any such action on the

part of the corporation, but by virtue of the mutual promise of these parties to pay to the plaintiff the amount of money named.

It is true, as contended by counsel for the appellants, that the mere signing of this agreement to subscribe to the stock of the corporation did not make the defendants members of such corporation. To do so the statute must have been complied with by the signing of the articles of incorporation, or otherwise complying with its provisions. (Troy and Boston Railroad Co. v. Tibbits, 18 Barb. 297; Erie and New York City Railroad Company v. Owen, 32 Barb. 616; Dorris v. Sweeney, 64 Barb. 639.)

But it seems to us that the question whether they thereby became members of the corporation or not is immaterial to this controversy. The right to recover here, as we have said, depends wholly upon their express promise to pay the money to the plaintiff in this action, and if the suit can not be maintained on that ground, it is quite clear to us that the judgment of the court below is erroneous.

It is insisted that the agreement sued upon was not binding until all the capital stock had been subscribed for, but we see nothing in the agreement indicating such an intention on the part of the signers, nor does any reason occur to us for so holding. There are authorities to the effect that a party agreeing to subscribe to a certain number of shares of a corporation to be organized can not be held liable to pay assessments on his subscription until the whole of the stock is taken. (Steamboat Co. v. Seawell, 78 Maine 176; Oldtown and Lincoln R. Co. v. Veazie, 39 Maine 571; Atlantic Cotton Mills v. Abbott, 9 Cush. 423; Stoneham Branch R. Co. v. Gould, 2 Gray 277; Hughes v. Antietam Mfg. Co., 34 Md. 316.)

But the contract under consideration bears evidence of a different intention on the part of its signers. They contract to pay a sum of money to a third party and not to the corporation. We must presume that they contracted with knowledge of the fact that a valid incorporation of the company mentioned might take place under our code without the whole of the stock being subscribed. Therefore, it can not be presumed that their promise to pay was on condition that the whole of the stock should be taken. If this was their intention, it should have been expressed in the agreement.

The parties mutually agreed with each other, that is, with those who signed the contract, to pay a certain sum of money to the plaintiff. He was thereby made a trustee of an express trust and authorized to collect the money agreed to be paid. (Code Civ. Proc., $369; Winters v. Rush, 34 Cal. 136; Considerant v. Brisbane, 22 N. Y. 389.)

The parties, by their mutual agreement, made the plaintiff their trustee to collect and receive the money to be paid. He was not in any sense the trustee of the corporation. There is nothing to indicate that the money was ever to go to the corporation. On the contrary, the contract shows on its face that it was not. When collected by the plaintiff it was to go into the hands of the other trustees, to be used by them in the purchase of water rights. How these water rights are

to be transferred to the corporation, if at all, is not stated, but this omission can not affect the liability of the parties to pay their debt. Their mutual promise, one to the other, was a sufficient consideration for the promise of each, and the contract was valid and binding. (Twin Creek and Turnpike Co. v. Lancaster, 79 Ky. 552; Christian College v. Hendley, 49 Cal. 347; George v. Harris, 4 N. H. 533, 17 Am. Dec. 446; Amherst Academy v. Cowls, 6 Pick. 427, 17 Am. Dec. 387; Funk v. Hough, 29 Ill. 145.)

Note. Compare Lake Ontario, etc., R. Co. v. Curtiss, 80 N. Y. 219; Quick v. Lemon, 105 Ill. 578.

See 23 Am. & E. Encyc., p. 800; Beach, § 519; Clark, p. 272; Cook, §§ 57-69; Elliott, § 347; Morawetz, §§ 47, 66; I Thompson, § 1245.

Sec. 113. (4) Underwriting.

IN RE LICENSED VICTUALLERS' MUTUAL TRADING ASSOCIA TION. Ex PARTE AUDAIN.1

1889. IN THE ENGLISH COURT OF APPEAL. L. R. Division, 1-8, 26 A. & E. C. C. 217.

42 Chancery

After a company called the Licensed Victuallers' Mutual Trading Association, Limited, had been formed, but before its shares had been fully offered to the public, George Rudall, an agent of the company, applied on its behalf to Claude Audain, a stock broker and financial agent, who traded as Holloway & Co., to "underwrite" a portion of its shares, which were of the nominal value of £1 each, and an agreement was entered into between them, which was embodied in two letters dated the 19th of March, 1888.

The first of these letters was written to Holloway & Co. by George Rudall, and was as follows:

"GENTLEMEN-In consideration of your underwriting £10,000 'A' shares in the Licensed Victuallers' Mutual Trading Association, Limited, at 15 per cent. discount, I, acting on behalf of the company, undertake that all the applications which have been received up to the present time, or may be received within one week of the closing of the lists, shall be allotted in full from the said 10,000 shares underwritten by you. Yours truly, GEORGE RUDALL."

The second letter was written to George Rudall by Audain, and was as follows:

"DEAR SIR-Referring to your favor of even date, copy of which we inclose, we hereby agree to underwrite £10,000 'A' shares in the Licensed Victuallers' Mutual Trading Association, Limited, on the terms therein named. Yours faithfully, HOLLOWAY & Co."

"P. S. We further agree to pay the application money upon any balance of shares required to make up the 10,000 within one week's date. HOLLOWAY & Co."

1 Statement of facts abridged; arguments and opinions of Lindley and Bowen, L. JJ., omitted.

On the 14th of April, 1888, the company proceeded to allotment, and 8,555 shares were, in pursuance of the agreement thus constituted, and without any further application for them being made, allotted to Claude Audain under the name of Holloway & Co. Notice of such allotment was given to him on the same day.

On the 17th of April Claude Audain returned to the company the notice of allotment which had been sent to him, and at the same time wrote to the secretary declining to take the shares.

On the 23d of May a resolution was passed for the voluntary winding-up of the company, and on the 16th of July an order was made that the voluntary winding-up of the company should be continued under the supervision of the court.

On the 17th of August, 1888, the liquidator settled the name of Holloway & Co. on the list of contributories in respect of these 8,555

Claude Audain then applied to be removed from the list of contributories, and his motion for that purpose came on before Mr. Justice Chitty on the 20th of December, 1888.

Mr. Justice Chitty considered that the letter (Mr. Audain's letter of the 19th of March, 1888) must be treated as an application for so many of the 10,000 shares to which the underwriting agreement extended as might not be applied for by the public, i. e., for the 8,555, and that whatever question might have been raised at the time, the case was merely the common case struck at by the 25th section of the Companies Act, 1867. The parties, his lordship said, were apparently not aware of the fact that issuing shares at a discount of 15 per cent. was beyond the powers of the company; and he held that the application, not having been made until after the winding up, must be refused with costs.

From this decision Claude Audain appealed.

COTTON, L. J. This is an appeal from the refusal of Mr. Justice Chitty to relieve the appellant from liability in respect of a number of shares which had been allotted to him in a company now being wound up, as the balance required to make up a certain number of 10,000 shares. The substantial question is whether the appellant is or is not under any liability at all in respect to the shares so allotted to him. That question turns upon the contract, and the contract, if any, is to be found in the underwriting agreement which was entered into between the appellant and the agent of the Licensed Victuallers' Mutual Trading Association. From the evidence which has been given as to the meaning of the expression "underwriting" as applied to shares, it appears that an "underwriting" agreement means an agreement entered into before the shares are brought before the public, that in the event of the public not taking up the whole of them, or the number mentioned in the agreement, the underwriter will, for an agreed commission, take an allotment of such part of the shares as the public has not applied for. That is what is meant when it is said that a person has agreed to "underwrite" a certain number of shares in a company, and that is, in my opinion, what was meant by the term "underwrite"

in the present agreement. "Underwriting" is a well-known thing in connection with the formation of companies. The appellant, in agreeing to "underwrite" a certain number of shares, has agreed to do this particular thing, and, in my opinion, he is just as much bound in equity as if the thing which he was to do had been set out at length in the contract which was entered into. (His lordship then read the letters of 19th March, 1888, and continued): It appears to be the usual course that some formal application should be made for the shares, and it is said that there should have been some formal application made for allotment of the shares in the present case. But the postscript to the letter writtten by the appellant shows that he considered that what he had done amounted to an application, and that he himself treated the letter not only as a guarantee, but as an application to take the balance of the shares required to make up the £10,000.

A further question arises as to the meaning of the expression underwriting "at 15 per cent. discount." It appears from the evidence that the expression "discount" is an unusual term in connection with the underwriting of shares, and that it is not a term to which any meaning of art can be given; and it further appears that under an underwriting agreement a commission is paid on all the shares to which the agreement applies, whether taken by the public or by the underwriter himself. But the court must put a construction on the word. And I think that upon the fair construction of the words used, they mean not "discount" in the proper sense of the term, but merely "commission," the amount to be paid to the underwriter in respect of the shares which he underwrote. It is not really a sum to be deducted from the nominal amount of the shares when they are applied for and allotted, but a sum to be paid on all the shares underwritten. "That being so, it was not an agreement to allot shares at 15 per cent. discount, but to pay 15 per cent. commission to the appellant in consideration of his having made the contract with the company. I think, therefore, that the decision of Mr. Justice Chitty was right in not removing the appellant's name from the register in respect of these shares. The appeal must accordingly be dismissed.

Note. See Cook, § 15.

Sec. 114. (5) Application, allotment and notice.

IN RE FLORENCE LAND AND PUBLIC WORKS COMPANY, NICOL'S CASE.1

1885. IN THE ENGLISH COURT OF APPEAL. L. R. 29 Chancery Division, 421-447.

[The Florence Land and Public Works Company, Limited, was incorporated on the 25th of January, 1866, under the Companies Act,

1 Statement abridged. Only part of opinion of Chitty, J., of the Chancery Division is given. Arguments and the opinions of Baggallay, Bowen and Fry, L. JJ. of Appeal, affirming Chitty's decision, are omitted.