Field, C. J. and Cope, J. concurring.

This was a bill filed by the plaintiff for the specific performance of a certain agreement made in Hew York between the plaintiff and the defendants, Gordon and Bond, on the fourth of April, 1856. The agreement provided for the formation of a company, to be called the “ San Francisco Sugar Refining Company,” to consist of 1,000 shares of stock, of the nominal value of one hundred dollars per share. This agreement provides that one-third of the stock, or three hundred and thirty-three and one-third shares, were to be issued to J. B. Bond or his assigns, upon him or them paying *230 $12,500, and Bond to convey back to the company eighty-three and one-third shares of the stock into the common stock of the company. A like provision is made in reference to Gordon. The third clause in the agreement is in these words: “ one-third, or three hundred and thirty-three and one-third shares of said stock, are to be issued to George Gordon or to his assigns, upon him or them paying $12,500, and the said George Gordon is to transfer back to the company eighty-three and one-third shares of the said stock into the common stock of the company.”

The agreement proceeds: “ one-third, or three hundred and thirty-three and one-third shares of said stock, are to be issued to Nathaniel Chater or his assigns, upon him or their executing two notes—one of $6,250 to J. B. Bond, collaterally secured by one hundred and twenty-five shares of stock, having two years to run, bearing two per cent, per month interest; and another of $6,250 to George Gordon, collaterally secured by one hundred and twenty-five shares of stock, having the same time to run, and bearing the same interest—and the said Chater is also to transfer back to the company eighty-three and one-third shares of stock into the common stock of the company.

“ It is agreed that the two hundred and fifty shares of stock thus given back to the company shall be sold only by a majority vote of the company, and J. B. Bond guarantees to the extent of the note of said Chater held by him, ($6,250) that from one hundred and twenty-five of the shares he will raise the sum of $12,500, as needed, and George Gordon guarantees to the extent of the note of said Chater held by him, that he will, on one hundred and twenty-five shares, also raise the sum of $12,500.

“And it is further agreed, that the shares not sold belonging to the common stock of the company, as above recited, shall, if it be not. found necessary to sell them, be divided equally among the-three parties hereto, but not until the company’s works have been in operation for at least twelve months.

“ It is agreed that George Gordon shall organize the company in San Francisco by taking out articles of incorporation according to law, and that the first Trustees shall be Charles W. Bond, Nathaniel Chater and George Gordon.

*231 "That upon the organization of the company and on the enactment of its by-laws, the Trustees shall issue stock as herein set forth, to the parties, upon their furnishing the respective amounts they herein agree to furnish, or in proportion as they furnish said amount.

“Each certificate of stock to be signed by two Trustees and countersigned by the Secratary.

“ The stock of N. Chater to be issued to him as herein provided on the execution of the agreement to manage the works, a memorandum of which agreement is made simultaneous with this.

“ The said Gordon and Chater agree that, to the extent of the interest which they may control, they will vote for the said Bond to act as agent of the company in San Francisco, attending to the commercial affairs of said company there, for which service he shall receive a salary of $1,800 per annum.”

Afterwards, another agreement was made, of the same date, as follows:

We have given the agreement at length, as it would require as much space to give its substance as that occupied by the copy.

Chater, afterwards, on the seventeenth of October, 1856, was seized with paralysis, and was rendered incapable of attending to the business.

The notes mentioned in the agreement as those to be made by the plaintiff were never given, nor, so far as appears, demanded.

The defense seems to rest principally upon the point that these notes were not made as contemplated by the agreement; that the plaintiff, therefore, did not comply with the contract on his part, and consequently has no right to insist on performance by defendants ; that one of the principal, if not the leading, inducements to the contract was the rendition of the services of the plaintiff, and that the failure to render these, though caused by his sickness, was a failure of the consideration of the agreement; and that the agreement was that of the individual members or stockholders, Gordon and Bond, and not of the corporation.

The appellants’ argument seems to proceed upon the idea that Gordon and Bond were the principal parties in this company and to *234 this agreement, and that Chater was to come in secondarily and derivatively, and to acquire the interest which he claims by concession from them, or through or by virtue of certain conditions to be performed by contract with them. This, however, does not appear to be the true relation of these parties. The plaintiff and defendants were the original projectors of the enterprise, and equally interested and influential in respect to matters involved. Chater’s rights and obligations stand substantially on the same footing as those of Bond and Gordon. He was, in other words, an equal partner, with the same original rights, and the benefits of the agreement accrued to him in like manner and to the same extent as to them. Upon the organization of the corporation, the stock and the right to control the affairs of the company as stockholder would enure to him as well as to them. It is true, some conditions and restrictions qualifying his right to receive the stock appear in the agreement; but the same observation applies to them. His title to the stock and to the interests in the' business come from his character as stockholder, and from the original articles of association. It is true, that in order to entitle him to receive the certificates of stock which he claims, as against Bond and Gordon, he must comply with the conditions, which, by the contract, he bound himself to perform. These conditions, as we have seen, are, as in one part of the agreement set out, the execution of two notes—one to Gordon and the other to Bond. It is provided, that, for the payment of these notes, the stock was to be held as collateral security. If nothing more had been said, probably the true construction would be that the making of the notes and the issuing of the stock were to be cotemporaneous acts; as it is difficult to see how the stock was to be received as collateral security before it was issued. In fact', the circumstance that the stock was to be issued in his name and deposited- by him as collateral security to his notes, shows that he was regarded as the owner; that the title to it had attached and vested in him, subject only to the conditions of the proposed bailment. The transaction was an hypothecation of the stock by one stockholder to secure his debt to his associate or to the corporation—it is immaterial which—and this supposes an original ownership in the stock by the pledgor. If this share of the stock did not belong to *235 Chater, to whom did it belong ? Sot to the corporation, nor to Bond and Gordon; for the agreement only gave them a lien on it, and this as the property of Chater, and to secure Chater’s debts. But it is provided in a subsequent clause of the article that the stock of Chater was to be issued to him on the execution of the agreement afterwards entered into, by which Chater bound himself to manage the works. It seems that Bond was to pay $12,500 and Gordon a like sum; this was their contribution to the capital stock; Chater, we infer, was unable to pay in money; but to enable him to raise his proportion, he was to execute his notes to Bond and Gordon, and they guaranteed that they would raise it for him on his stock. The notes bore, er were to bear, interest. Chater did not at this time owe Bond and Gordon anything on this agreement; but this arrangement of the notes was a mere mode of enabling him to raise money which it was anticipated might be needed for the purpose, and as a part of the capital of this business; and they guaranteed, as said before, that on this security they would raise it for him; and the form the transaction took was designed for their security. If they loaned him the money on other security, or without any security, they could not complain because he had not gone through the particular, process which the agreement prescribed. They might waive this or any other term of the agreement designed for their benefit or protection. The agreement that the stock should be held, and that Chater should pay this sum, was the security to Gordon and Bond, which they could enforce if they advanced the money according to contract. There is no proof that they demanded the notes or issued the stock, or that the failure to give the notes operated in any way to their prejudice; and there is proof that long after the time when the notes, according to the pretension, were to be made and the stock issued, the business was continued and Chater recognized as interested in it. If Bond and Gordon had not paid their money for all this time, and Chater had made his-notes in time, could it be pretended that payment by Gordon and Bond afterwards would not entitle them to their interest ? Or if they had never paid, and the business was carried on on credit, or otherwise, until the profits paid the debts, could it be held that they had forfeited their stock ? The truth is, we do not regard either. *236 the payment of the money or the giving the notes of Chater as conditions precedent to the rights of these parties as stockholders. These rights they had by the agreement and the act of incorporation ; for if none had paid, to whom would belong the stock ? There is no clause, of forfeiture for nonpayment or nonperformance; as corporators, the whole business and the whole stock were theirs. But this clause as to Chater was for the security of the corporators inter sese; it qualified the title to stock as between the parties, which title the law gave by virtue of the relation of the stockholders to the corporation. But so long as Chater owed for the stock or capital, he could not have it issued to him; not because he did not originally own it, but because he had agreed that another disposition should be temporarily made of it; it was pledged, in other words, for the payment of his debt; and whenever the debt was discharged—it is not material in what way—it became released. If it was necessary to use the money represented by Chater’s notes or debt, Bond and Gordon were to raise it; and whether they raised it on the notes, or stock and notes, or in any other way, is not mar terial. In any event, by the agreement, they held the stock as security, and they bound themselves to raise the money for Chater; the failure to issue the certificates of stock was merely a failure to get the security in the form which might be more convenient to them if they had to borrow the money from third persons; and so of the failure to get the notes of Chater. But if no money was necessary, or if it could be conveniently raised otherwise, or advanced by Gordon and Bond, every object was answered that could be accomplished by the literal performance of this agreement. The whole case in this view of it may be thus summed up: Three men enter into an agreement to form a corporation for commercial purposes. By this agreement, and the corporate act, each corporator is entitled to an equal proportion of the stock; two contribute to the capital in money; the third has no money—he proposes and is ■allowed to give his note in lieu of money, pledging his stock as ■security; the other two agree that on this stock they will raise him the money. It is agreed that the stock due him shall be issued on •a given event; the event happens. The note is not made nor the .-stock issued to him, but the company, controlled by the other two *237 corporators, goes on recognizing the third as a corporator; no demand is made for his note or the stock issued to him. The corporation makes profit enough to pay the debts, and the share coming to the third partner pays his contribution. Ho stock is issued to him, and he now claims it. If the two who were to raise the amount to be contributed by the third, having by the agreement the right to demand his note and stock, do not demand them or issue the stock to him, and without this form of security, advance the money which was to be raised, they are to be considered as waiving this formal right, and are not at liberty to plead the want of a mere literal compliance as a forfeiture—for such it would be—of the interest of the third partner in the common enterprise. In equity, the substance of the whole transaction is fulfilled; the object of the security answered; and the original right of the plaintiff here to his stock is not lost by a mere failure on his part to give a particular form of security, upon which those beneficially interested in demanding it did not insist. What, in such a state of things, was not insisted upon was waived; and equity not regarding mere modes or forms, but looking at the very substance of the transaction, is satisfied when the substantial purpose is effected, though not effected in the precise way contemplated by the parties; and this is the more especially true, if this failure to follow the prescribed mode be owing to the laches, or be by the waiver or acquiescence of the party entitled in strict right to insist upon it. The notes of Chater were merely to represent his debt, and the money to pay this debt Bond and Gordon were to raise on the security of his stock, they being interested in using it; and whether the stock was issued in the form of a certificate or not, it was bound by the agreement; and if they chose, they could as safely advance the money without the note, and the substance of the whole arrangement be attained. It is not necessary for us, therefore, to consider the other points urged, to say the least, with plausibility in avoidance of the ground taken by the appellants to sustain the proposition just discussed.

This view distinguishes this case from mere executory agreements through a performance of the terms of which a party becomes entitled to property, of which class Green v. Covillaud (10 Cal.) and the other cases cited by appellants, are examples. Here Chater *238 was entitled, as of original right, to his stock, and the conditions annexed to the issuance of the certificates to him, even if not waived, at most were mere qualifications in favor of his associates, of that right, and in the nature of security to them, the substance of which security they enjoyed, and a failure of the precise process prescribed, neither by the general principles of law applicable to such contracts, nor by the express terms of the agreement, worked a forfeiture of his interest in the stock, nor in the business of the corporation.

2. We think there is nothing in the point that the rendering of plaintiff’s services for the five years was a condition precedent to the vesting of the plaintiff’s title to the stock. Nothing in the agreement so declares. The provision for the employment of plaintiff as superintendent seems to be an independent term of the agreement. He was to get a salary of $3,000 per annum for his services as such, which does not seem to be entirely consistent with the idea that these services entered into and constituted a part of the general consideration of the agreement which was the basis of the association. It is very true that the reputed or supposed skill of the plaintiff in the proposed business may have been a motive for proposing to take or accept him as a partner in a new and hazardous enterprise of this sort; but this is a very different thing from making the rendition of his services an indispensable requisite to any claim to the profits or business, and his contracting that, despite of all accidents or casualties, he would render the services or lose his interest; or in other words, insure his life, mind and health for five years, or forfeit everything except the salary already earned. The more reasonable interpretation of the contract is, that the services, advice, etc., of such a man were of value to this company in this untried scheme, and that to carry it on they were as willing as himself to take the risk of natural or accidental causes which might disable him from prosecuting the business of superintendent, and that for his contribution to the capital of the company, his stock was considered as good security. This construction is strongly fortified by the provision that if the company became dissatisfied with his management they might discharge him, thereby stopping his pay as superintendent; but it was stipulated in this connection that *239 this discharge was not to affect the agreement otherwise. This itself is strongly persuasive, if not conclusive, of the inference that his death or sickness was not to affect it; for it is incredible that if he became wholly unfit for the business, or acted so fraudulently and culpably as to require the company, for their safety and protection, to discharge him, this was to be insufficient to deprive him of his rights, under the contract, to his share in the business, and yet that a mere misfortune or visitation of Providence, for which no blame rested on him, was to have this effect; and this, even though the casualty happened in the last year of his service. Nor is it at all probable, if this had been the understanding, that the agreement would have provided for the issuance of the stock to him so long in advance of the time, and the events when or upon which he would be entitled to it.

Moreover, if the rendition of these services was a consideration of the vital importance to the contract now pretended, it is not apparent why, in case of his misconduct or mismanagement, the consequence should be confined to the mere loss of the place and the wages, with an express reservation in favor of the interest he held under the other parts of the agreement.

Such an agreement as that supposed would be very unequal, if we suppose that Chater had the qualifications evidently attributed to him at the time of the forming of the agreement. It could scarcely be supposed he would be willing to leave New York— where he was residing—to come to San Francisco to be discharged at any time, thus losing his wages as superintendent, and then without wages to wait for five years before he could get anything on the contract; or in case of sickness or death, after inaugurating the business and giving his assistance in getting it under way, should lose, for himself or family, everything for which he had made sacrifices in migrating to this State.

It is much more reasonable to suppose, as well from the nature of the case and surrounding circumstances as from the language of the contract, that the services of Chater were considered equal to the money, or money and credit of Bond and Gordon, in' starting a new enterprise of this sort, especially when he was to draw no profits and be entitled to no interest in the business until after he *240 had paid his proportion—the stock itself being the security for such payment. Other portions of the agreement—such, for example, as the obligation of Chater, if discharged, not to engage in California in the business of sugar refining, add weight to the construction we give to the agreement. We do not consider it necessary to give further elaboration of these views.

3. We think that this agreement, made by these stockholders, Bond and Gordon, who really represented the interests and persons afterwards incorporated, and whose agreement was only in anticipation of the formation of the corporation, and for its benefit, and was carried out by it, and recognized by it, bound the defendants.

4. Other points need not be noticed; for the provision for the salary of Chater as superintendent, being independent of his interest as stockholder, it is not necessary to go into any inquiry in this place of the failure, or of the consequences of a failure on his part to fulfill his obligations as such.

A speedy remedy, however, was left by the contract to the corporation for any failure, for any cause, to discharge his duties, by his dismissal.

Decree affirmed.

Hepburn & Dwinelle, on petition for rehearing.

I. The Court takes no notice of the objection that the decree of the Court below gives three hundred and thirty-three and 'one-third shares of the stock to Chater, when, by the agreement, he was only entitled to two hundred and fifty shares.

The agreement provides that if any of these shares belonging to the common stock of the company shall remain unsold, and “ if it shall not be found necessary to sell them,” such remaining shares shall then be equally divided among the three parties to the contract.

The contingent interest of Chater in this unsold portion of this common stock, together with the two hundred and fifty shares apportioned to him, were to be held to guarantee the performance of his contract.

Nevertheless, the decree compels the company to issue to Chater the eighty-three and one-third shares, which he, in common with Bond and Gordon, was not to be entitled to, except in a remote con *241 tingency, without his paying anything for them ; and more particularly it discharges them from the lien which he agreed to give the company upon his stock to secure the performance of his contract. The Court below, without evidence, decides: 1st, that the shares of common stock have not been sold; 2d, that it is not necessary to sell them; 3d, that Chater has a higher, better and different right to these than to the two hundred and fifty shares, because they are to be.given to him without any lien on them, to secure either his original subscription or his performance of contract.

The company have either sold these shares, or they have not. If they have sold them, then the contingency on which Chater was to be entitled to them never happened ; and if they have not sold them, they should not have been assigned to Chater, but held subject to a final account, so as to ascertain whether or not it would be “ necessary to sell them.” In either case the decree is erroneous.

II. The Court, it is respectfully submitted, have not given due consideration to the vital question, that the corporation was not bound.

The whole reasoning of the opinion is founded on the assumption that the agreement and the corporate act give Chater a right to one-third of the stock as against the corporation. We take ground against this position, and propose to show: 1st, that neither the agreement nor the act of incorporation gave Chater any rights whatever against the corporation; 2d, that the corporation could be bound, only by adopting or becoming a party to the agreement, and that the evidence shows it never did adopt or become a party to the agreement.

1. As to the agreement and the act of incorporation.

The corporation was organized and took effect under the Act of April 14th, 1853, and we contend that Chater got no rights against the corporation in virtue either of the act of incorporation or the agreements.

By the Act of April 14th, 1853, a corporation is born on the filing of a “ certificate of incorporation,” which also creates shares of capital stock by simply declaring their number and amount. These remain until by-laws are formed which direct the mode and condition of their transfer. They do not vest in a private person *242 except by some act of the corporation done according to law, which is called “ issuing.” Until this act takes place, shares of stock remain in the corporate estate, to be transferred to any subscriber who, contracting with the corporation, takes them for a consideration (which then becomes the property of the company in the place of the shares) who thereupon, and not before, becomes a stockholder. Some precise action defined in the by-laws is imperative, otherwise the corporation is not divested and the stockholders invested. The idea is, that no shares of stock in an incorporated company can vest in any private person, unless they are issued by the corporation according to law, and properly recorded in the company’s records. No agreement which may have been made by the corporators before incorporation, as to dividing stock, makes them stockholders, or vests in them any right to stock. No man can become a stockholder, unless he obtains an issue of stock from the corporation according to its by-laws.

By the agreement, Chater, Gordon and Bond, so far from making themselves partners with each other in a manufacturing enterprise, were simply contracting with each other to get somebody else, an entirely distinct individual, to carry on the business. They, Bond, Chater and Gordon, were not to refine sugar, but another person— a body corporate yet to be born according to California law—was to do it, and the thing they were agreeing to do was to give birth to this individual, and give him capital to work with.

They might or might not be members of this body corporate ; for the issue of stock in it, which was to give membership, was to be made to “ them or their assigns upon either they or their assigns paying ” certain amounts of money to the corporation—upon here meaning after, or upon condition.

The certificate of incorporation was taken out on the twenty-fourth of July, 1856, in San Francisco. It was done by Chater) Gordon and C. W. Bond. At the time, James B. Bond was in New York, where he has been ever since, and where he is still; and he has never owned one share in the stock of this company. The act of incorporation was made by others than the parties to the New York agreements; that the company was a stranger to the agreements when they were made, and the act of incorporation in nowise changed its position or affected its liability.

*243 III. The company never adopted, or made itself a party to these agreements.

The first agreement says: “ The stock of N. Chater to be issued to him on the execution of an agreement to manage the works, a memorandum of which is made simultaneous with this.”

There is no direct proof that the corporation ever adopted the New York agreements, nor is there any act or acts of the company which show an adoption or ratification.

As Chater, under the agreements, was entitled to his stock on the execution of his notes and the execution of the contract for personal service, the fact that he neither executed the notes, nor the contract, nor got the stock, shows that there must have been some reason for it; either that he backed out, or that the company refused to come in.

But it may be said, he was an organizing trustee. So was C. W. Bond, but neither he nor Chater were stockholders, and the law did not require them to be. The act of signing and filing a certificate of incorporation vests no stock, nor any right thereto, in the organizing trustees. The trustees for the first three months are only organizing machines necessary to form a company by which shares of stock may be created and issued.

But it may further be said that he was employed by the company at the works. The proof is distinct that this was as foreman and not as chief, and that Gordon was chief. The Court itself has said that “ the provision for the salary of Chater as superintendent is independent of his interest as stockholder.” With equal reason may it not be said that the payment of his salary as foreman “ is independent of his interest as stockholder.”

To be told of the agreement between Gordon, Bond and Chater, is to be told of a transaction between Gordon, Bond and Chater, and them only. New stockholders could not imagine that the corporation, which never contracted with Chater, would be sued for one-third of its property, on an agreement made before its existence with one, and only one, of its stockholders; and that judgment would go against it without evidence as to whether Gordon, Bond or the corporation had any stock to issue, or whether assignees or new corporators owned it all, or what additional capital had been created, and what additional stock had been sold.

*244 There is but one way in which stock in a corporation can vest, and that is the way pointed out and prescribed by the statute. (Wallingford Manufacturing Co. v. Fox, 12 Vt. 304 ; 15 Id. 519 ; 35 Eng. C. L. 96 ; 35 Eng. L. & E. 23 ; 30 Law Times, 84.)

Heydenfeldt, Contra.

Each of the three parties forming the corporation was entitled to an equal one-third of the stock, three hundred and thirty-three and one-third shares; but eighty-three and one-third shares of the shares of each were to be reserved and not issued, to be used by the corporation if a contingency should arise—that is, should be sold—but if not sold, these to be equally divided between the three not sooner than twelve months after the works have been in operation.

The answers do not pretend that it was ever necessary to sell this reserved stock, or that it ever was sold, so that Chater’s claim remains undiminished to the entire one-third of the stock. If it should turn out in taking the account which has been ordered, that any of this reserved stock was necessarily sold, if it is not too late, the Chancellor below might, upon the report coming in, make the allowance, but there is absolutely nothing in relation to that matter which this Court can act upon.