Ritchie v. W. G. Strange Oil & Refining Co.

WALKER, Circuit Judge (after stating the facts as above). The averments of the bill show that the appellant complied with his part of the agreement in pursuance of which the corporation was formed, so far as he has been permitted to do so, and that he has been and is ready and willing to comply with the agreement on his part, so far as it is unperformed. Under that agreement the parties to it were to receive stock in the corporation to be formed by them in proportion to the value of the assets contributed to the corporation by them respectively; it being provided that each of the parties was to contribute one-eighth in value of the assets and was to get one-eighth of the stock issued therefor. The averments show that, as a result of excessive overvaluations of assets contributed by the individual appellees and of other means resorted to by them and the corporation controlled by them, they received greatly more of the stock of the corporation than they were entitled to under the agreement, and the appellee received greatly less than his proportional share of the stock issued. It is disclosed that in the issue and distribution of the stock of the corporation the provisions of the agreement were violated to the detriment of the appellant and to the inequitable advantage of the individual appellees. Every one who became a stockholder, director, or officer of the corporation which was formed was a party to the contract in pursuance of which appellant’s leases and money were acquired by that corporation. The agreement has the effect of making the individual appellees hold the stock issued to them in trust for the appellant to the extent [52] that those appellees got more stock than they were entitled to under the agreement. The trust so arising in favor of the appellant is enforceable in a court of equity. Rogers v. Penobscot Mining Co., 154 Fed. 606, 611, 83 C. C. A. 380. Equity looks upon that as done which ought to be done. It seems that that agreement is enforceable, not only against parties to it, but, so far as the issue and distribution of the stock is concerned, against the corporation which has acquired the. assets contributed by the appellant in pursuance of the agreement; it not being disclosed that anything has occurred to make it inequitable for that agreement to be binding on such corporation in respect to the distribution of its stock among the paxties to the agreement. Bispham’s Principles of Equity (7th Ed.) § 365. So far as appears, no beneficial interest of the cox'poratxon woxxld be affected by a redistribution of its issued stock pursuant to a valid contract between the parties to whom that stock was issued. Furthermore, the corporation, though it was in no way bound by an agreement to which it was not a party, was a proper party defendant, as the enforcement of the appellant’s rights under the agreement will involve action by the corporation in canceling stock certificates issued and iii issuing other certificates in making a redistribution of stock in conforxnity with the requirements of the agreement and the respective rights and obligations of the parties thereto. Construction Co. v. Cane Creek, 155 U. S. 283, 15 Sup. Ct. 91, 39 L. Ed. 152. The fact that the law of Louisiana was violated by the issue to the individual appellees of stock having a face value _ greatly in excess of the value of the property received by the coxrporation in payment for that stock is not an obstacle to the enforcement of the appellant’s rights under the agreement alleged. Nothing in that agreement indicates that any violation of law was contemplated or would be involved in properly complying with its terms. A violation by the appellees of the law on the subject of the correspondence between the face value of stock issued and the value of the property or labor received by the corporation in payment therefor is not involved in the enfox'cement of appellant’s contract right to or interest in that stock after it has beexr issued. The appellant’s right to have the issued stock distributed between the parties to the agreement and in accordance with its terms is not dependent on the conduct of the appellees in the matter of the issue of the stock having been in confoxmity with the law. For reasons above indicated, we are of opinion that the averments of the bill disclose a state of facts which, under the prayers to require specific performance and for general relief, entitles the appellant, upon his complying with such of his obligations under the alleged agreement as, without his fault, remain unperformed, to the enforcemerxt of his fight to the part of tlxe issued stock of the corporation to which, by the terms of the agreement, performance of his obligations thereunder entitled him. It follows that the court erred in dismissing the bill. ' The decree to that effect is reversed.