The preamble of the contract, Exhibit 19, is as follows: —
"Whereas, Edward J. Kelley, aforesaid, is desirous of disposing of the shares of stock owned by him in the Kelley Tire and Rubber Company, a Delaware corporation, and
"Whereas, Charles H. Bortell, Jr., and Edward J. Kelley, have made certain representations to the Martin Tire Corporation and made certain proposals to the Martin Tire Corporation, contemplating the association of James Martin, president of the Martin Tire Corporation with the Kelley Tire and Rubber Company aforesaid, and the association of the Martin Tire Corporation with the Kelley Tire and Rubber Company.
"Now, therefore," etc., etc.
Then follow the agreements of the three individual *Page 538 and two corporate parties, expressed in eighteen paragraphs, of which the first and tenth form the basis for the first two items of claim #3.
In paragraph one the Martin Tire Corporation agrees to purchase from Edward J. Kelley 10,000 shares of the Kelley Company stock, and to pay him $10,000 in cash on the execution of the contract and $15,000 in notes payable in three instalments. This agreement is on its face absolute and unconditional.
Then in paragraph ten it is agreed "between the parties of the second, third, fourth and fifth parts" — that is, between all the parties to the contract except Edward J. Kelley — "that the purpose of this association between James Martin and the Martin Tire Corporation with Kelley Tire and Rubber Company, is the forming of an association with a factory which can manufacture high class tires, and that therefore should it appear, at any time before the notes given to Edward J. Kelley, under this agreement are paid, that the Kelley Tire and Rubber Company is unable to accomplish such object, that the stock of Edward J. Kelley, transferred under this agreement, shall then be returned to the Kelley Tire and Rubber Company, operated under that name or any other name, and any monies paid for such stock shall be returned to the Martin Tire Corporation by Kelley Tire and Rubber Company, whether operated under that name or any other name, and that the Kelley Tire and Rubber Company shall indemnify Martin Tire Corporation with respect to the payment of any notes then outstanding to Edward J. Kelley under this agreement."
Other agreements are that the name of the corporation shall be changed to the Martin Tire and Rubber Company, that Martin shall be made president of the company under its changed name, that Martin and Bortell shall conduct the business operations of the *Page 539 Kelley Tire and Rubber Company, and that the sales policy, advertising policy, management and finance shall be subject to the joint control of Bortell and Martin.
The transaction thus set forth is that upon representations made by Kelley and Bortell, the Martin Tire Corporation bought Kelley's stock outright and paid for it; that Martin and Bortell were jointly to control the Kelley Company; that if the Kelley Company, under their control, failed to make high class tires, the Martin Tire Corporation should "return" the Kelley stock — not to the seller — but to the Kelley Company, and that in that event all moneys paid to Kelley should be "returned" to the buyer — not by the seller — but by the Kelley Company, which should also indemnify the Martin Tire Corporation against liability on any outstanding notes given to Kelley in part payment for his stock.
The contract on the part of the Kelley Company is to buy its own stock from a stockholder, in case it cannot satisfactorily carry out its corporate purposes, and in that event to buy it at the same price which the stockholder paid for it when the corporation was expected to be successful.
This contract is open to the fundamental objection that it attempts to give a preference to the claimant out of corporate assets as against other stockholders, and perhaps against creditors also, as the facts may appear at the termination of the present receivership. It is also ultra vires in the larger sense of being opposed to public policy, for § 3429 of the General Statutes provides that "no corporation shall acquire, purchase and hold its own stock unless to prevent loss upon a debt previously contracted, except with the approval of stockholders owning three-fourths of its entire capital stock given at a stockholders' meeting warned and *Page 540 held for that purpose"; and no such meeting was held.
Claimant contends that the defendant is estopped from setting up the defense of ultra vires, because the contract has been performed by the claimant and the defendant has received the benefit of such performance. This contention is based primarily on the claimant's performance of the contract for the purchase of Kelley's stock for $25,000; but that payment is not available as a basis for the claimed estoppel, for the contract set forth in paragraph one is solely between the claimant and Kelley; the defendant had no part nor lot in it, and there is no finding that it derived any benefit even indirectly from the sale of Kelley's stock to the claimant. Nor will the receipt of the moneys and merchandise referred to in claims #1 and #2 estop the defendant: first, because these transactions had no connection with the ultra vires contract expressed in paragraph ten; and second, because the defendant has been fully compensated for such extensions of credit by the allowance of the balance found due from the defendant.
As to the verbal order for $500,000 worth of tires, which is said to have been given by claimant to the defendant, and which was the basis of the abandoned claim for damages for breach of contract, there is no finding that the order was given or accepted. Reference is made to services in the re-organization of the defendant corporation; but there is no finding that the Martin Tire Corporation rendered such services, nor that the re-organization — which was never carried into effect by a transfer of assets — was beneficial to the defendant corporation.
The claimant's brief refers also in general terms to other benefits not specified, and as to these, and to all claims of benefits conferred, it is to be noted that the defense of ultra vires was made before the State Referee. *Page 541 He had no jurisdiction to determine the question of law involved, but did have jurisdiction to find and report all facts bearing on the enforcibility of the claim in question. That was the tribunal before which the claimant was bound to establish the facts upon which it based its asserted estoppel in pais; and no claims of fact can now be advanced which are not supported by the report of the referee.
The report contains no findings of benefits received by the defendant from the claimant other than those for which it has been compensated by the allowance of the balance due on claims #1 and #2.
We do not mean to be understood as acquiescing in the claimant's theory, that if the defendant corporation had in fact received a consideration for its illegal contract, it ought to be compelled to do that which the statute forbids it to do.
There is no error.
In this opinion the other judges concurred.