en notice as herein provided, shall allow all parties in interest a period of at least ten days after the date fixed by him for filing all claims against said company and said fund as hereinabove provided, within which to file exceptions to any of said claims, demands, bills, accounts or debts.

"The said special master is further hereby directed, upon such notice as shall seem to him meet and proper, to receive evidence and take testimony relative to all claims, demands, bills, accounts and debts so presented and filed before him, at a time and place to be by him fixed, to the end that the character, validity, amount, lawful order and priority of such claims, demands, bills, accounts and debts may be ascertained and reported to this court, and to report his findings, both upon facts and law, to this court with all convenient speed."

There was also a reservation by the Chancellor of power to modify the above order and to make such other and further orders in the premises as he should deem proper, and under this clause, upon recommendation of said master, further orders were made as the matter progressed.

After the master had complied with the orders of the Chancellor, and before filing his report, he was ordered to notify counsel for the receivers and claimants that he had prepared a draft report, to which they could take exceptions, and that he would hear and determine any exceptions taken to said report before filing it with the register in chancery. The final report of the master was subject to further exceptions, to be determined by the Chancellor, but no new exceptions were permitted to be taken before the Chancellor that were not taken before and determined by the master. The exceptions taken before the master to his draft report were all overruled and the same exceptions were taken to the final report, which are divided into three classes, as follows:

Class 1. Exceptions on behalf of part paid subscribers to the capital stock of the company.

Class 2. Exceptions on behalf of Frank W. Springer, whose claim covered the price paid for the stock owned by him, on the ground that he was induced to purchase the same by false representations.

Class 3. Exceptions to the disallowance by the master of the claim of Elizabeth C. Ruley, executrix of William W. Ruley, deceased.

(1) Exceptions on behalf of part paid subscribers to the capital stock of the company. Concerning this class of exceptions, the record and report of the master shows that the par value of the stock was $10 per share, but the prices at which it was subscribed for range from $15 to $24 per share. The contracts are all of the same form and read as follows:

......

ance Company at $...... per share and pay herewith the sum of $......, and agree to pay the balance due, in installments of $...... each, payable hereafter without further notice, until the full amount due shall have been paid, whereupon a full-paid nonassessable certificate shall be issued.

"I understand and agree that the installments so paid to the extent of $...... per share shall be first credited, as received, to the company's contingent fund, which fund shall be transferred to the permanent surplus fund of the company at the discretion of the board of directors, after deducting therefrom such amounts as it may be necessary to expend in extending and maintaining the company's business, so that the remaining $...... per share may be credited to the capital account without deduction. "Witness:

"Date:

Name: Address: Business:

"Checks to be made only to order of Economic Life Insurance Company."

None of the contracts of the exceptants have been fully performed by the payment of all the installments due thereunder to fully pay for the stock subscribed for. These exceptants are representatives of a very much larger number of part paid subscribers for stock under similar contracts. Some of such part paid subscribers for stock have made sufficient payment to cover the excess above par of their stock and a portion of the par value of the stock. Such subscribers have been found by the master to be entitled as stockholders, to the extent of their payments on account of the par value of the stock subscribed for by them, to participate in their proportionate part of the net fund for distribution among the stockholders after the payment of the debts of the company and the costs of these proceedings. Others of said part paid subscribers for stock have made no payments on account of the par of their stock, inasmuch as their part payments have not equaled or exceeded the excess price of said stock so sold to them above the par value thereof. Such part paid subscribers for stock have been held by the master not to be entitled to participate as stockholders, or otherwise, in the distribution of the fund in the hands of the receivers.

The exceptions filed to the finding of the master by this class of exceptants are on the following grounds:

(a) That the subscription contracts are themselves illegal, in that the company sold their stock for a price above par.

(b) That none of said part paid subscribers for stock were stockholders of the company and that their rights should be determined as if they were creditors instead of stockholders of the company.

the stock subscriber would equitably be entitled to 30 shares of stock which his remaining $300 had paid for.

[1, 2] There are no precedents to guide this court, and the principles of law applicable thereto are not of much service. The contention of the exceptants that the contracts were all ultra vires because the subscriptions were at prices above par and because it was an attempt in that way to increase the par value of the stock is untenable. The contracts are valid and the rights of the exceptants and those in like position are based thereon, and there is no real ambiguity in their terms. The master rightly found that the installments so paid to the extent of the excess above par on the entire subscription must first be credited as received to the company's contingent fund and nothing credited thereunder to the capital fund until the full extent of the excess above par on all the shares subscribed for shall be paid, and only the last remaining $10 per share when paid should be credited to the par value of the shares. By the terms of his subscription each prospective stockholder must first pay the entire premium to the company before he was entitled to have applied to his shares any money paid by him, and was not entitled to receive a certificate for his shares until he had paid in full both premium and par value. This seems clear beyond question. If all the persons who had subscribed for the stock of the company had belonged to either of the classes herein referred to, then it might justly have been held that they were all to be on the same basis, not as creditors or stockholders, but as joint adventurers in an unsuccessful enterprise, which had failed of its purpose, and as no one of them was responsible for the failure, or in default (so far as it appears from the testimony) in not completing their payments in full, either before or since the dissolution of the company, that they should share proportionately according to the amounts paid in the fund now for distribution, to which each contributed. In such a situation equality would be equity, meaning in this case equality of participation in the distribution of a fund in proportion to the contributions to it.

[3] But there are several hundred other persons who were subscribers to the company and not included in schedule L, and not in the same relation to the company as the exceptants. These other persons subscribed and paid in full for their shares, the terms of their subscriptions as to price and terms of payment being unknown so far as appears in the record. They must be treated otherwise than the exceptants are, having fully performed their contracts, and cannot be put on the same basis with those who have not fully performed, whether failure to fully perform be their misfortune or fault. All the subscribers, those who have paid in full and those who have not, embarked in the

tingent fund was a method of providing an insurance company with money to be expended in extending and maintaining the business of the company without impairing the capital. This fund was especially useful to a company engaged in insuring lives. Thereby also the company would perhaps obtain that thing so much desired by financial institutions, a permanent surplus fund, if the directors found it wise to make that use of the premiums rather than spend them in enlarging the business of the company. All those who ventured into the plans of the corporation have lost. All have lost the premiums paid by them, much or little. To say that those stockholders who have paid in full their contracts should, because thereof, be put either into the same class as, or in the class behind those who have only part paid, is wholly inequitable. Some subscribers will, it is true, receive nothing. But that a subscriber who has only partly paid up should wholly lose his money paid in on account of the premium above par is no more unfair than that a full paid stockholder should entirely lose the amount of premiums above par which he has paid in. It is equal justice then that stockholders who have fully paid should share proportionately with those who have paid part of the par of their stock, the latter to the extent only that they have so paid on the par of their shares.

[4] The exceptants and all other subscribers in like case are not creditors, for by their subscriptions they assumed the relation of stockholders, with some of their rights curtailed until they should have paid in full all the installments of money due on their shares, and then only were they entitled to have certificates for their shares of stock. This relationship is not changed by the dissolution. If stockholders are not creditors then they participate to the extent that they are entitled to stock. Those whose payments do not exceed the premium were not at the dissolution entitled to receive shares or fractions of shares and have done nothing since the dissolution to so entitle them. Those whose payments exceeded the premium which they agreed to pay are to the extent of their payments in excess of such premiums entitled to shares or parts of shares though they have not paid in full and to the extent of their payments on account of par are entitled to shares. The method of the calculation the master has made in schedule L is therefore approved.

[5] All the exceptants and those other stockholders in like position should be treated alike, though they have performed their contracts in various proportions; that is, some have paid a much greater proportion of the amounts payable by them than others have, and some have made payments within shorter intervals than others, and some have failed to make any payments for periods of time much longer than others, some having

prior to the dissolution. But inasmuch as the contracts do not fix a time or times within which the installments are due, and in view of the absence of testimony as to the demands for payment, reasons for delay in payment and like matters, it cannot be held that any one or more of the subscribers who have not paid in full their subscriptions are thereby and therefore in legal default. If none are known or proved to be in default either in fact or by the terms of the contract, then all must be treated alike in the

distribution.

The exceptions of all the exceptants are disallowed and the report of the master in respect to the claims is approved and confirmed. No subscriber whose payments in the aggregate did not exceed the premium which by the contract he agreed to pay shall receive any portion of the fund for distribuEvery subscriber whose payments in the aggregate exceeded the premium which by the contract he agreed to pay shall receive from the fund for distribution a sum proportionate to the amount paid in excess of the premium, which is to be treated as payments on account of his stock.

tion.

(2) Exceptions on behalf of Frank W. Springer, whose claim covered the price paid for the stock owned by him, on the ground that he was induced to purchase the same by false representations.

Frank W. Springer, in December, 1908, subscribed and paid for 50 shares of stock of the defendant company at $23 per share, and filed a claim as a creditor for the full amount paid therefor, basing his right to file such claim on the ground that he was induced to purchase said stock by false representations of one Conway McMillan. The testimony of Springer shows that he and McMillan have been friendly for nearly 20 years; that they were members of the faculty of an educational institution in the Middle West for several years, and have been more or less closely associated socially; that McMillan entered the employ of the defendant company to solicit subscribers to its stock, and, acting in that capacity, he stated that the investment was better than bank stock; that it was absolutely safe; and that it was impossible to lose $500, because it was secure to the extent of $10 a share by the law under which the company was incorporated; that owing to the friendship existing between him and McMillan, and their past business and social relations, he had confidence in McMillan's statements; and that because of such confidence in McMillan's statements be became a subscriber to the stock. The record shows that Springer held the stock from the time he received the certificate to the time he filed the claim; that he voted said stock by proxy at a stockholder's meeting held in May, 1909, at which meeting the stockholders decided to dissolve the corpora

of the proposition; and that he made no effort to rescind his contract until after the dissolution proceedings had been begun.

The master recommended the disallowance of the claim as a creditor, and exceptions were taken to his findings of fact and law.

Herbert H. Ward and William W. Porter,

for receivers. Christopher L. Ward, for exceptant.

THE CHANCELLOR. [6] The master has given several reasons why the claim should be disallowed, and without adopting all his reasons, I agree in his conclusions and some, Some of the repreat least, of his reasons. sentations made to Springer by McMillan were so clearly puffing statements and of such an exaggerated character as that no one could reasonably have relled on them-such for instance as statements that the investor was absolutely secure as to the amount of $10 per share, or that it was absolutely impossible for him (Springer) to lose $500 on a purchase of 23 shares of stock of the par value of $50. Such talk must be treated as an exaggeration as to the future prospects of the corporation and not a misstatement of a material existing fact upon which the claimant had a right to rely. Stockholders in every business corporation take risks of loss in the venture and no one should be heeded who professed to think otherwise.

[7, 8] Other statements were that the claimant was protected by the law under which the company was incorporated and that "the investment was absolutely secured for $10 per share by the law under which the company was incorporated." The master rightly found that these were representations as to the law, and the stockholder is chargeable with notice of the provision of the charter of the company and of the law governing the same; and furthermore, Springer was given the source of the truth of the statement, the law of the state where incorporated, and had equal opportunity with McMillan to verify the statements, even if it be the law of a state other than that in which Springer resided when he subscribed for the stock.

The reference must have been to the laws of Delaware, and having been given the source of the information, Springer was bound to investigate for himself the truth of the representations before relying thereon so explicitly as he testifies that he did. His assertion of his reliance on McMillan's statement of the law was extraordinary, because McMillan was known to Springer not to have been a person of skill or experience in such matters.

[9] It is not clear either that Springer relied on the statements of McMillan for he testified that he didn't understand the explanations made by McMillan as to the law protecting the investor. Without understanding the explanations he could hardly have relied on them as statements of existing facts. It is made plain to me that the in