owners of the outside properties so far as the case was concerned, because the rights of the syndicate were not in question, and that the company was not entitled to the benefit of the purchase, That may have been because the bill in one place charged that the outside properties were acquired for the common benefit of Bigelow and Lewisohn, without mentioning the syndicate; and where mention was made of the syndicate it was not perhaps clearly shown that the members thereof were prospective members of the company. Justice Sheldon, however, evidently accepted the view expressed by the court on demurrer, for he did not give to the company the benefit of the purchase of the Baltimore stock, but, on the contrary, credited it to the promoters upon the basis of the quantum valebat. Whether he should have given them credit for the inflated value of the properties of the Baltimore company, which was caused, as he says, by "the skillful manipulation of Bigelow and Lewisohn and the ingenious manner in which they created a desire on the part of men interested to be allowed to join in the transaction," is another question. So it may be a question whether he should have allowed any credit for the value of the "outside properties," or should rather have treated them as a part of the value of the Baltimore stock. I have nothing to do with the merits of these questions, and am not expressing a definitive opinion about them; I am only endeavoring to determine whether there is any question of law or equity involved that is peculiar to New Jersey.

In the argument before me stress was laid upon the fact (averred in the bill) that the stock of the new company has been sold in the market at $100, and even as high as $106, per share, more than four times its par value. These were recent sales, made after the control of a large majority of the stock had been acquired by the Maine company, and perhaps after the New Jersey Company had increased its capital and taken in additional properties as above mentioned. But supposing the stock from the beginning had never sold at less than par, my view is that it does not at all follow from this that the company has not been damnified by the subtraction of a secret promoter's profit. Because an individual who buys shares at $25 per share, and afterwards sells them out at that price or at a higher price, does not individually sustain a loss, it does not follow that the company, as company, has sustained no loss in the premises. The error in the reasoning, as I take it, arises from considering corporate shares solely in respect of their secondary and derived function as counters in a speculative game, rather than in their original and legal significance as a right to permanently participate in the business enterprises of the company. In order to discover whether the company has been damnified, it is safer to take the case of the individual

ning and remains such until the expiration of the charter, and who participates in the distribution of assets on dissolution. Such a man would of course bear his share in the impairment of the assets of the company. The man who buys to sell again, buys a property right, including a right to participate in all the assets of the company, including its claims against faithless trustees; when he sells, he passes that same right on to his vendee.

It is, I think, erroneous to deal with the question of nondisclosure or of profits as if it affected only those stockholders who did not know the facts. The duty of faithfully executing the trust is a duty, owing to the company; the duty of disclosure is owing to the company. If there be a competent and independent board of directors, disclosure to them is disclosure to the company. But when the promoter stands on both sides of the bargain, by virtue of his control of the board of directors, there is in equity no disclosure to the company, and the profit cannot be retained unless there be unanimous consent of the shareholders. It is like any other irregular transaction affecting the interest of the company, which so far as not prohibited by law or not affecting the rights of creditors may be sanctioned by unanimous vote of all the stockholders. Breslin v. FriesBreslin Co., 70 N. J. Law, 274, 282, 58 Atl. 313. It is, as I take it, likewise erroneous to treat the nonassenting stockholders as if they were damnified in their individual capacity merely, rather than in their property rights; and equally erroneous to say that, because no member of the syndicate and no original or subsequent stockholder is here complaining about any injury to their rights, the transaction is not open to question. Their successors in property interest are here, in the form of the company; the former stockholders may have recouped their individual damnum, or even turned it to a profit, by selling out their stock in the market that Mr. Bigelow created. See the remarks of James, L. J., in the Erlanger Case, L. R. 5 Ch. D. 121, 122.

So much for my impressions of the law of promoter's liability with respect to the questions raised in the present case. All I decide is that it is not a department of the law that is peculiar to New Jersey.

The doctrine of promoter's liability is not the creature of statute; it is "judge-made" law, in the sense that courts of equity everywhere, recognizing the obligations arising from the fiduciary relation, have applied to it the same principles of equity that obtain in all cases of trust. As stated by Lord Penzance in Erlanger v. New Sombrero Phosphate Co. (1878) 3 App. Cas. 1218, 1230, 6 Eng. Rul. Cas. 777, 788: "The principles of equity to which I refer have been illustrated in a variety of relations, none of them, perhaps, precisely similar to that of the present

and one which is strictly applicable to the present case. The relations of principal and agent, trustee and cestui que trust, parent and child, guardian and ward, priest and penitent, all furnish instances in which the courts of equity have given protection and relief against the pressure of unfair advantage resulting from the relation and mutual position of the parties, whether in matters of contract or gift." In this state the same general doctrine has been applied in every variety of confidential relation, whether the cestui que trust be individual or corporation; as, for instance, in the case of executors (Marshall v. Carson, 38 N. J. Eq. 250, 252, 253, 48 Am. Rep. 319); director of a company (Stewart v. Lehigh Valley R. R. Co. 38 N. J. Law, 505, 522, 523; Marr v. Marr [recently decided by our Court of Errors and Appeals and not yet officially reported] 70 Atl. 374); attorney and solicitor (see cases cited in Lynde v. Lynde, 64 N. J. Eq. at page 749, 52 Atl. 694, 58 L. R. A. 471, 97 Am. St. Rep. 692); donor and donee, where a confidential relation exists (Slack v. Rees, 66 N. J. Eq. 447, 449, 59 Atl. 466, 69 L. R. A. 393).

No reported decision has been cited to me, and I have been unable to find any, holding that the liability of a promoter is to be determined by the law of the state where the corporation is created, rather than by the law of the state where the transaction occurred or where the action is tried.

But this entire discussion, as it seems to me, is aside from the question. It is all very well to say that the transactions between these parties ought to be governed by the law of New Jersey; a more pertinent question would be, by what law is Mr. Bigelow to be governed? Government acts in personam, and ordinarily in invitum. The real question in the case is whether the company has acted unconscionably in pursuing Mr. Bigelow in the courts of Massachusetts; that question is to be determined primarily by the conditions existing at the time its actions were commenced. It could subject him to process in the commonwealth of Massachusetts; it does not appear that it could have reached him elsewhere. If New Jersey law is involved, it ought to have been, or ought now to be, set up in the Massachusetts actions. It is said that the Massachusetts court is under no obligation to apply what it may conceive to be the public policy of another state. This may be admitted arguendo, and yet it should be presumed that the courts of Massachusetts would not in comity refuse to recognize the law or policy of another state. Certainly it comes with poor grace for a citizen of Massachusetts to say that the highest court in his state will refuse to recognize the law of a sister state, when he has preferred no request to the court that it be recognized. It is argued, indeed, that it is impossible to introduce evidence in one state

that in the absence of reported decision it rests in the mind of the court. Our courts, however, have repeatedly declared that the public policy of the state is not the creature of the courts, but of the Legislature (Dimick v. Metropolitan Life Ins. Co., 69 N. J. Law, 384, 389, 55 Atl. 291, 62 L. R. A. 774; and many other cases); that the courts have nothing to do with forming it, and can only recognize it like any other matter of public law. The truth is that the public policy of New Jersey is not occult or mysterious, nor are its sources far to seek. Subject to the federal Constitution and a written Constitution of our own, the people of this state have adopted in the main the common law and equity system of England, and this obtains here subject to modification by the Legislature. Add to these that New Jersey expects all persons and corporations subject to her jurisdiction to observe the law or abide by the consequences, and we have the public policy of New Jersey in a nutshell.

Mr. Bigelow, in his answers in the Massachusetts actions, not only raised no question of the applicability of New Jersey law or policy, but on the contrary averred that "the transactions, matters, and contracts complained of in the plaintiff's bill took place and were made in the state of New York, by the laws whereof said transactions, matters, and contracts are valid and cannot be complained of." Upon this issue, among others, he went to hearing and submitted his evidence to the trial justice, who found that the directors' meeting of July 11, 1895 (which Bigelow claimed was governed by the law of New York) was held in New York City, and that the proposals were made and accepted there; that the company was a New Jersey corporation, and was to have places of business also in Arizona, New York, and Massachusetts; that it was the intention of the parties that the agreements should be carried out and consummated by the delivery of the deeds and the issue of certificates of stock in Boston, Mass., where it was intended that the offices of the company should be, and where they were established, and where in fact the agreements were so carried out; that it was intended that the business of the company, aside from actual mining and smelting operations, which were to be conducted in Arizona, should be carried on in Massachusetts, and that this was done. And he ruled, upon these findings, that the agreements in question were governed by the laws of Massachusetts.

Some of complainant's arguments proceed upon the theory that the Massachusetts actions are based upon the statutory liability for unpaid stock subscriptions, in which case, of course, the liability would be governed by the New Jersey statute. They are not of this character. If they were, the New Jersey law could be shown by proof there. Actions upon the stockholder's liability must perforce

served with process. An instance in our own courts is Grosse Isle Hotel Co. v. I'Anson, 42 N. J. Law, 10; Id., 43 N. J. Law, 442. The fact that the promoters' share certificates were stamped "issued for property purchased" is not controlling in an action against a participant in an intentional inflation of capital, where there was no independent board of trustees and no bona fide appraisement of the property. Donald v. American Smelting, etc., Co., 62 N. J. Eq. 729, 48 Atl. 771, 1116; Volney v. Nixon, 68 N. J. Eq. 605, 609, 60 Atl. 189; Easton Natl. Bank v. American Brick & Tile Co., 70 N. J. Eq. 722, 728, 64 Atl. 1095.

It is contended that the general rule that a party seeking relief in the courts may choose his own forum, in any jurisdiction where the defendant may be found, does not extend to corporations; that these creatures of the law should pursue their rights according to the law of the state of their origin. This is a sufficiently startling proposition, and is, I believe, entirely novel; certainly no authority has been found for its support. It is conceded that there is no statutory prohibition, but it is seriously contended that the supposed limitation of liability laid down in the Loudenslager decision enters so deeply into the policy of this state that, to use the words of counsel. "New Jersey is bound to protect those organized under its corporation laws according to the laws of the state." How the legitimate interests of those organized under the corporation laws of New Jersey are to be protected by forbidding to our corporations as ample a remedy against fraudulent promoters and trustees as the corporations of another state would have, or as individual citizens of this state if in like manner aggrieved would have I confess I cannot understand. The principal object of our corporation laws is to endow organizations of men and capital incorporated thereunder with the capacity to do business in any part of the world in competition with natural persons and with corporations organized under other laws. For this purpose they require of course, as ample remedies against their trustees for breach of trust as other persons and corporations would have in similar circumstances. The act under which the present defendant was incorporated (Revision 1877, p. 175, § 1) conferred upon it, in terms, the right to sue and complain "in any court of law or equity."

are (supposedly) more lenient to the delinquent trustee than the courts of New Jersey, would find sanctuary at home. If the proposed doctrine is to be applied to promoters, it must, I presume, be applied to other kinds of trustees who may defraud the company, and thus we should have the New Jersey corporation in a substantial measure left defenseless against its most dangerous enemies. And this novel doctrine is based upon what, after all, is but a fiction of the law-that a corporation organized under the laws of this state, although its actual business is carried on in other states, remains at all times a "resident" of New Jersey. The doctrine, it seems to me, is as unfounded in reason as it is unsupported by authority.

Nor do I find any greater merit in the argument that this court ought to intervene because the decisions or the federal courts in the Lewisohn Case are in conflict with the decisions in Massachusetts in the Bigelow suits. This conflict, by the way, turns upon a point that apparently does not reach the merits, if we accept Justice Sheldon's findings as true. The conflicting decisions were upon demurrer in both cases. The pleader seems to have made a slip in averring that the company, when incorporated July 8, 1895, had an authorized capital of only $1,000, which was afterwards increased to $3,750,000; and in averring that the purchase by the new company of the properties in question, the taking possession thereof, and the delivery of deeds, were all consummated prior to July 18th, on which date it was resolved to issue the 20,000 shares to the public for working capital. On this basis of facts the federal courts held that there was disclosure to all stockholders who were such at the consummation of the purchase; apparently referring to the holders of the original amount of $1,000 of stock, who were either the promoters themselves or their dummies. The Massachusetts court held that disclosure should have been made, and was not made, to the corporation as organized with a capital of $3,750,000. But the bill herein avers that the corporation was originally capitalized at $3,750,000, and Justice Sheldon's findings show that the purchase of the property was not consummated, nor the stock issued to the promoters, until after the sale of stock to the public for working capital; that the promoters' stock was issued to them on September 18 and 19, 1895, the deeds de

cember or January, while the issuance of the 20,000 shares to the public for working capital was done "in the summer or fall of 1895."

But even if the decisions in Massachusetts and in the federal courts were irreconcilably contradictory upon matters that are dispositive of the case, I cannot see how that raises the least equity for the complainant in this jurisdiction. It is not pretended that the courts of Massachusetts are, in such a con

and, if they were so, Mr. Bigelow's plain remedy would be to apply to the Massachusetts courts or to the federal courts for relief in the premises. It is certainly a novel suggestion that the Court of Chancery of New Jersey should stretch forth its strong arm and require a litigant in Massachusetts to abandon his claim there because in another action the Supreme Court of the United States has expressed a different view upon the matters in controversy. Upon this point I approve of the decision in Carson v. Dunham, 149 Mass. 52, 20 N. E. 312, 3 L. R. A. 202, 14 Am. St. Rep. 397, above cited.

But further it is strenuously argued that Mr. Bigelow, if held liable to the defendant company in solido, is entitled to contribution from the estate of Lewisohn; that he will be barred of this right by the failure of the defendant to make good its action against Lewisohn in the federal courts; and that hence the Massachusetts actions should be enjoined and the company required to proIceed in this court, with the Lewisohn executors joined as parties. This argument strikes me as little less than absurd. Upon the face of it, the supposed bar is to arise not because defendant company is endeavoring to recover against Bigelow in Massachusetts, but because, notwithstanding its best endeavors, it seems liable to fail of recovery against the Lewisohn Estate. How the company can be held responsible for this result I am at a loss to perceive. Certainly Mr. Bigelow has no apparent right to complain because of the nonsuccess in the Lewisohn suit, for his bill does not allege that he made any offer to aid the company therein, and it is not to be presumed that his assistance would have been declined.

Mr. Bigelow does not join the Lewisohn executors as parties to the present bill, nor show how this court or any other court of this state can get jurisdiction over them, they residing in New York. The bill alleges that the estate of Lewisohn "owns a large amount of property within the state of New Jersey," but there is no averment of its value, nor suggestion that it is by any means adequate to secure even one-half of the moneys claimed by the company. But besides, equity does not recognize any right of contribution between joint tort-feasors, the reason being that such contribution must be sought, if at all, by action brought by one against the other, and the actor therein is barred by the maxim in pari delicto. Pom. Ed. Jur. § 1081, and cases cited in notes. And surely one of several wrongdoers will not be given a better right against the injured party than he has against his fellows; else, what becomes of the doctrine of clean hands? Conceding the general rule to be so, counsel insist that it does not apply to joint trustees who "have merely mistaken their legal rights and have not been guilty of intentional wrongdoing"; and it is gravely argued that the fact that

properly from their dealings with the corporation "is not inconsistent with the supposition that they have acted in entire good faith." Whether the latter remark can be true in any case of wrongful promoter's profit, I need not stop to consider, because it certainly cannot be true in Mr. Bigelow's case, upon the basis of Justice Sheldon's findings.

Accepting those findings as true, or at least as judicially established-and we must accept them, else the question of contribution is not raised-the case stands thus: Messrs. Bigelow and Lewisohn buy certain corporate stock for $1,000,000, with the very purpose of causing the property represented thereby "to be transferred to a new corporation which they should procure to be organized with a much larger capital, for a much increased price." This property-the property of the Baltimore company-"was not of the intrinsic value of more than $1,000,000. But its market value at the time of its transfer to the (new) company seems to have been greater than this, probably due in large part to the skillful manipulation of Bigelow and Lewisohn, and the ingenious manner in which they created a desire on the part of men interested in mines, as investors or speculators, to be allowed to join in the transaction they were carrying out." They lead their associates in the syndicate the men who unite with them in raising the $1,000,000-to believe that the new company is to have a capital of only $2,500,000, taking the property of the Baltimore company and the "outside properties" for $2,000,000, and raising $500,000 with the rest of its stock. In order to carry out their real scheme, they make the nominal capital of the new company $3,750,000, sell $500,000 worth at par to the innocent public, turn in the property for the balance of the stock, account to the syndicate members for only $2,000,000 of this, and retain $1,250,000 of it for their individual benefit, subject to the payment of legitimate expenses not exceeding $20,000. Mr. Bigelow "did not act towards the members of his syndicate with the good faith which they had a right to expect. * With a few individual exceptions, he did not disclose the facts to them." Thus Bigelow and Lewisohn get (in stock certificates made out in manifest evasion of the New Jersey corporation law) an undisclosed profit of at least $1,230,000. And then, in order to convert their illicit gains into money, they proceed (or, at least, Bigelow does) to unload their fraudulent stock upon the credulous public. For the finding is that "the stock which they thus took was then of fully its par value, this being due mainly to the skillful conduct and manipulation of Bigelow and Lewisohn, and continued to be so for some time, and until Bigelow had sold out substantially all the stock that he took for his own use."

Stripped of all disguises, the transaction

thorized capital, $1,000,000 represents the cost of the Baltimore property; $1,000,000 is "water," representing the manipulated increase in the value of that property due to the stirring up, by Bigelow and Lewisohn, of a desire on the part of investors and speculators to join them in their scheme; and $1,250,000 (less $20,000 for legitimate expenses) represents nothing more substantial than "wind." And this latter large block of stock the promoters proceed to sell to the unsuspecting public, in a market manipulated by them, at fully its par value. Besides this, they cause the company to sell $500,000 to the public for working capital. When men who are implicitly trusted, by all persons concerned, to fairly organize a new corporation and launch it upon its business career, make use of their temporary control to lift from its treasury, for their own use, upwards of a million dollars, in par value, of its shares, without mentioning the circumstance to others who in fact and in law are their business associates and cestuis que trust, it requires more hardihood than I possess to declare there is no intentional moral obliquity in the transaction. The moral obligation was perhaps more immediately and evidently owing to the syndicate members than to the purchasers of working-capital shares; but it existed equally in both cases. But the taking of the secret profit in the form of shares was of course but the means to an end; the ultimate purpose being to get a fortune for nothing, and to get it at the expense of their fellow men, by selling these shares to the public as if they had honest value behind them (for they were stamped "Issued for property purchased," as the bill avers), when, according to Justice Sheldon's findings, they represented a deliberate and intentional overvaluation of the property. I do not speak of the sales of the promoter's stock to the public as the basis of their liability to refund the undisclosed profit to the company, except as those sales go to measure the amount of the liability. I speak now of the moral quality of their acts-the question of intentional wrongdoing-liability having been assumed as the hypothesis. Upon this question, the fraud upon the public is not to be ignored.

The only element of "mistake" that I can discern is that the promoters assumed that all this wrong could be made unassailable in law, if only they should cause "dummy" directors to go through the form of placing a fictitious valuation upon the property; whereas the law required real value. Act May 9, 1889 (P. L. 1889, p. 414, § 4); Act March 21, 1893 (P. L. 1893, p. 444, § 2). I am unable to see how such a transaction could be accompanied with an honest belief on the part of the promoters that it was either lawful or right.

Besides, irrespective of wrongful intent, this plain violation of the letter and policy of our own corporation act, done for the

very purpose of acquiring the secret profit that is the basis of the liability to the company, debars either of the participants from resorting to the courts of New Jersey for assistance in recovering contribution from his fellow. In Volney v. Nixon, 68 N. J. Eq. 605, 60 Atl. 189, our court of last resort held that a contract between two persons that in exchange for their joint property one of them shall procure from a corporation of this state an issue of stock to an amount known by all parties to be in excess of the value of the property, and shall divide the stock thus procured with the other person, is illegal, and the courts of this state will not aid in its enforcement, even though the objectionable feature has been accomplished by the actual issue of the stock. The principle of this decision was again affirmed by the same court in Easton Natl. Bank v. American Brick, etc., Co., 70 N. J. Eq. 722, 728, 64 Atl. 1095. If our courts will not lend their aid to the enforcement of a contract made for such a purpose by one of the parties against the other, they certainly will not lend aid to one of two promoters who jointly work a fraud upon the company, as well as a fraud upon the law, in order to accomplish a scheme for issuing stock of a New Jersey company having no value behind it. Still less will they aid the wrongdoer in his action against the company.

But, finally, this whole question of contribution, if there be any sort of question about it, belongs in the Massachusetts court, and Mr. Bigelow should apply there for his remedy. The company is already in court, and, if equity requires that its actions be stayed, the Massachusetts court will of course stay them.

It is further argued that either the decision of the fedéral courts in the Lewisohn Case, if affirmed by the Supreme Court of the United States (and I assume the presumption was when the present bill was filed that there would be such affirmance, as in truth there has been [210 U. S. 206, 28 Sup. Ct. 634, 52 L. Ed. 1025]), works an estoppel against the company (defendant herein) in favor of Mr. Bigelow; or else that this court should restrain the defendant from further proceeding in the Massachusetts court until a final decision is reached in the Lewisohn Case such as can be availed of by him as estoppel. The argument made to show the alleged estoppel is elaborate, voluminous, and ingenious. It is rested upon the circumstance that the so-called "outside properties" which were transferred to the new company in exchange for 30,000 shares of its stock were held in legal title by Lewisohn, but (as is argued) in trust for himself and Bigelow; that Lewisohn was authorized by Bigelow and the syndicate members to do what he did with the property; that the decision in the federal courts in favor of Lewisohn, the trustee, inures to the benefit of Bigelow as cestui que trust, and, since it has been determined in an action against him that the transfer to