The opinion
LEWIS, Circuit Judge,
dissenting.
.The contentions of petitioner require a consideration of transactions through which petitioner eventually acquired the Tulsa Democrat, that is, all the physical property used or connected with its publication and its subscription lists or rights to its circulation. The paper belonged to the Tulsa Democrat Company, a- corporation. Mr. Richard L. Jones acted for himself and four other persons associated with him in making the purchase. Por reasons stated by him he was not willing to purchase all of the shares of the old company, but purchased all of its property from Mr. Charles Page and ■ paid him the purchase price of $300,000.00 on November 22, 1*010, and possession of the property of the old company was then delivered to the purchasers. After the purchase from Mr. Page had been made and in accordance with a prior agreement before the purchase, the purchasers organized a new corporation, appellant here, to which they transferred the property, but before doing so they operated the plant purchased as individuals until January 19, 1920, when the property was transferred to the new. *941 company, an Oklahoma corporation with a capital stock of $300,000.00. All of the capital stock of petitioner was issued to Mr. Jones and his associates in consideration of a transfer of the property purchased by them. They took from the new company certificates of shares in the proportions that they had agreed upon before they purchased the property of the Tulsa Democrat Company. The auditor of petitioner entered on its books its assets in two items, $140,000.00 as the value of the physical plant, and $160,000.00 as the value of the circulation rights of the old company.
On these facts found by the Board, petitioner contended that the transaction was in form and also in fact the payment of $300,000.00 in cash for petitioner’s stock, and if not such in form it was clearly so in substance. It is conceded that if the facts sustain these contentions, the $300,000.00 constitute petitioner’s invested capital under section 326 of the Revenue Act of 1918 ( 40 Stat. 1057 , 1092), and would be the basis or starting point in the computation of the tax. To sustain this contention petitioner’s counsel argues that Mr. Jones and his associates in purchasing the property as individuals stood in the position of promoters of a corporation, that it should be regarded as though they had actually paid the $300,-000.00 to the corporation with which it purchased all of the property of the old company. I am unable to see the application of the principle relied on to the facts of this ease. The subject of promoters is discussed at length in chapter 5, vol. I, Fletcher, Cyclopedia of Corporations. It is there said:
“The. term ‘promoter’ does not carry any implication, however, that the person which it describes becomes related to the corporation as an-officer or even a stockholder,”
—that one cannot be charged with the duties and liabilities of a promoter merely because he is a subscriber for corporate stock and one of the original incorporators, though he is none the less such because he is also a subscriber; that the term also involves the idea of some duty toward the corporation imposed or arising from the position which the promoter assumes. Among the eases cited is Bigelow v. Old Dominion Copper M. & S. Co., 74 N. J. Eq. 457, 501, 71 A. 153 , 171, wherein it is said:
“A promoter is one who seeks opportunities for making advantageous purehasesi and profitable investments in industrial or other enterprises, who interests men of means in such a project when found, organizes them into a corporation for the purpose of ‘taking over’ the project, and attends upon the newly formed company until it is fully launched in business.”
In Diekerman v. Northern Trust Co., 176 U. S. 181 , on pages 203, 204, 20 S. Ct. 311, 319 , 44 L. Ed. 423 , this is found:
“A promoter is one who ‘brings together the persons who become interested in the enterprise, aids in procuring subscriptions, and sets in motion the machinery which leads to the formation of the corporation itself.’ Cook, Stock & Stockholders, §' 651. Or, as defined by the English statute of 7&8 Vict, chap. 110, § 3, ‘every person acting, by whatever name, in the forming and establishing of a company at any period prior to the company’ becoming fully incorporated. See also, Lloyd, Corporate Liability for Acts of Promoters, 17. He is treated as standing in a confidential relation to the proposed company, and is bound to the exercise of the utmost good faith. Lloyd, Corporate Liability, 18; Densmore Oil Co. v. Densmore, 64 Pa. 43 ; Bosher v. Richmond & H. Land Co., 89 Va. 455 , 16 S. E. 360 [ 37 Am. St. Rep. 879 ]. The promoter is the agent of the corporation and subject to the disabilities of an ordinary agent. His acts are scrutinized carefully, and he is precluded from taking a secret advantage of the other stockholders. Cook, Stock & Stockholders, § 651. ‘Accordingly, it has been held that, if persons start a company, and induce others to subscribe for shares, for the purpose of selling property to the company when organized, they must faithfully disclose all facts relating to the property which would influence those who form the company in deciding upon the judiciousness of the purchase. If the promoters are guilty of any misrepresentation of facts, or suppression of the truth in relation to the character and value of the property, or their personal interest in the proposed sale, the company will be entitled to set aside the transaction or recover compensation for any loss which it has suffered.’ Morawetz, Priv. Corp. §§ 291, 294, 546; New Sombrero Phosphate Co. v. Erlanger, 5 Ch. Div. 73; Bagnall v. Carlton, 6 Ch. Div. 371; Emma Silver Mining Co. v. Grant, 11 Ch. Div. 918.
“ ‘In those cases where the scheme of organization gives the promoters the power of selecting the directors who are to represent the company in the proposed purchase, they are bound to select competent and trustworthy persons who will act honestly in the interest of the stockholders. A purchase made *942 from the promoters under these circumstances will not bind the company unless it was a fair and honest bargain.- ”
See, also, 14 C. J. 251, note 32. Mr. Jones and his four associates were the organizers and owners of petitioner. He acted for himself and as agent for his associates in making the purchase, and later they-eonveyed the property purchased to the new company. That was its total capital assets. It never received or was entitled to receive the $300,-000.00 or any part of it. One who for a consideration plans the organization of a eor.poration, the conveyance of property to it, and subscriptions to its shares of proposed capital stock, and carries out the plan, is a promoter. But where expectant share holders organize' a corporation themselves, and each conveys to it property of the value of the shares he takes out, I cannot see a promoter in the ease. That was what was done here. The eases cited in the majority opinion deal with the rights and liabilities of a promoter. They are beside the mark. The transactions were simple.
The Commissioner rejected petitioner’s contention above considered, and in order to ascertain the taxable base proceeded under section 326 of said statute and determined that the value of the tangible property for purpose of taxation should not exceed twenty-five per cent, of the par value of the total stock of the corporation. This added to the $140,000.00 for tangibles brought the base to $215,000.00, thus leaving $85,000.00 constituting the deficiency here involved. The Board of Tax Appeals approved the method adopted by the Commissioner. In this respect I think there was no error and that the action of the Board should be affirmed.