dollars; and that the blank assignment and power given to the defendant by Seeley, with the certificate No. 10, was filled up by the former in the due course of business before the commencement of the suit by Seeley against Reed, and others, and, according to the understanding with Seeley, at the date of the contract, but the secretary of the company, Crichton, acting in collusion with Seeley, illegally refused to make the transfer to the defendant, on the books of the company.

The defendant, also, in his answer, offers to rescind the contract and return the note and both the stock certificates if Seeley will return him the money paid on No. 22-six thousand two hundred and fifty dollars-which he avers was a part of the consideration of the contract.

The testimony taken by the plaintiff was quite voluminous, and covers a wide range: By far the greater portion of it relates to matters mooted in the other suits of his pending in this court, and have little or no application or weight in this.

The answer of the defendant is under oath, and so far as it is responsive to the bill, it is taken as true until the contrary is clearly established by the testimony of at least two witnesses, or one witness and clear corroborating circumstances: Hough v. Richardson, 3 Story, 692; Story's E. P., section 875a; Tobey v. Leonards, 10 Wall., 430.

corroborating_circumstances:

The only ground on which the court can give the relief prayed for in this bill, is that by the fraudulent representation or conduct of the defendant in or about a matter material to the subject of this contract, the plaintiff was misled to his injury: Story's E. J., sections 201-2, 695; 2 Pom. E. J., section 910; Hough v. Richardson, 3 Story, 690; Smith v. Richards, 13 Pet., 36.

The allegations of fraud are vague and indefinite. They may be condensed into two statements. One, that the defendant, at the time of making the contract, told the plaintiff that the company owed him about one hundred thousand dollars, when in fact he was indebted to it. The other that some time before that date, the defendant and his associates, without saying who they are, had fraudulently appropriated to their own use, four hundred thousand dollars of the assets of the company.

The only evidence in support of the first allegation is the testimony of the plaintiff, which is contradicted by the answer of the defendant.

Looking into the evidence to see on what this question of indebtedness turns, I find that the company was organized in April, 1882, with eighteen thousand shares of stock of the par value of one hundred dollars each, which was subscribed by W. S. Ladd, W. M. Ladd and E. W. Crichton, the latter taking one thousand seven hundred and seventy, and the others one hundred and fifty shares each; that in the fall of 1882 the company purchased the property of the Oswego iron works, valued at six hundred thousand dollars, for twelve thousand shares of its stock, valued at fifty cents on the dollar, and

issued the same to S. G. Reed, H. Villard and D. O. Mills, three thousand shares each, and to W. S. Ladd, L. B. Seeley, C. P. Donahue and E. W. Crichton, seven hundred and fifty shares each; that soon after the remaining six thousand shares were issued Crichton as paid up stock, to be disposed of as such, at fifty cents on the dollar, for the purpose of purchasing machinery for the company, which stock Crichton soon after surrendered, and the same was reissued to the defendant for that same purpose, and that he disposed of one-half of said shares for the sum of one hundred and fifty thousand dollars, for which he accounted to the company, but being unable to dispose of the remainder, he returned them to the company, when the directors, at a meeting held on September 24, 1883, accepted the same, and returned his receipt therefor, and at the same time, in pursuance of a vote of the stockholders, at a meeting thereof, held on the same day, the directors reduced the stock of the company one-half, and ordered the unsold shares returned by the defendant canceled; and that the defendant, prior to the making of said contract, had, in fact, advanced to the company near about one hundred thousand dollars.

It also appears from the testimony of the plaintiff, as well as otherwise, that all these matters were known to him at and before the making of the contract, and that he and the defendant acted on the assumption that such were the facts, without either relying on the other for his information; but afterwards, and before commencing this suit, the plaintiff, on the advice of counsel probably, came to the conclusion that the legal effect of the facts was, and is, that the defendant was a subscriber for said six thousand shares of stock, and not the mere agent of the company for its disposal, and, therefore, was still indebted thereon to the company in the sum of one hundred and fifty thousand dollars, from which the directors had no power or right to release him; and that deducting his advance from this sum, he remained and was indebted to the company in the sum of fifty thousand dollars. Now, admitting that the plaintiff's present view of the defendant's liability in regard to this stock is the correct one, there is no ground for saying that the plaintiff was misled in this matter by the defendant. The plaintiff knew as well as the defendant that the directors had accepted the return by the latter of the three thousand shares of this stock, and the facts relating to it, and could and did judge for himself as to the effect thereof. At least, the defendant does not appear to have been either his informer or adviser in the premises, while he does appear to have been in close correspondence with his friend E. W. Crichton, who has been a director and superintendent of the company since its formation, and the secretary thereof since December 1, 1883.

But, admitting that the defendant was indebted to the company in the sum of fifty thousand dollars instead of the company being indebted to him in the sum of one hundred thousand dollars, and that the plaintiff was ignorent of that fact, the knowledge of it would not

have prevented him from entering into this contract, but on the contrary would have been an additional inducement to do so. In this matter the plaintiff appears to have sought and obtained an opportunity to take an interest with the defendant in a loan to the company, not simply for the good of the latter, so far as appears, but his own good, as well. The state of the account between the company and the defendant was a matter of no importance in the premises to the plaintiff, except as it indicated the solvency or not of the former and its ability to repay the loan with interest. So that the defendant being abundantly able to pay this supposed indebtedness to the company, the fact of its existence instead of operating as a fraud on the plaintiff, as a party to this contract, was an advantage to him, both as a creditor and a stockholder, to the extent, that it increased the company's assets.

As to the other charge, the material facts appear to be that in the spring of 1883, negotiations were opened between the company and the firm of Smith Bros. & Watson, of this city, for the purchase of their foundry property, that resulted in a proposition by the latter to sell the same, at a valuation of two hundred and twenty-five thousand dollars for four thousand five hundred shares of the company's stock, valued at fifty cents on the dollar, and at a stockholders' meeting held on March 20, 1883, it was voted to authorize the directors to make the purchase, and upon the receipt of proper deeds and bills of sale of said property, to issue to Smith Bros. & Watson, four thousand five hundred shares of paid up stock of the company; but the directors took no action in the premises, nor did the former ever make any conveyance or transfer of their property to the company. Subsequently they proposed to withdraw their proposition of sale, and at a meeting of the directors, held on September 24, 1883, their request was unanimously complied with.

In the meantime, between the making of the proposition and the withdrawal of the same, the two concerns maintained intimate business relations, but were carried on separately and without any consolidation. In this time Smith Bros. & Watson put up the large iron transfer or ferryboat for the Northern Pacific, to be used on the Columbia river, at Kalama, by which it is said they cleared one hundred thousand dollars, and did work for the company for which they were allowed and paid on settlement forty thousand dollars.

The charge that the defendant and his "associates," meaning, I suppose, his codirectors, W. M. Ladd, E. W. Crichton, C. R. Donahue and F. C. Smith, the persons constituting the board when Smith Bros. & Watson were allowed to withdraw, appropriated four hundred thousand dollars of the assets of the company to their own use is based on these facts.

In other words, it is boldly assumed that the company not only lost the value of the foundry property, the alleged profits on the transfer boat construction and the money paid for work done for it, in all three hundred and sixty-five thousand dollars, by the illegal action of the defendant and his codirectors on September 24, but

that these parties thereby wrongfully appropriated the same to their

own use.

To begin with, the company could not have lost anything by not getting the foundry property unless it was worth more than it was to give for it, which does not appear, and that it could possibly have lost two hundred and twenty-five thousand dollars thereby, or any considerable portion of that sum, is, under the circumstances, simply absurd.

There is no proof of the profits made in the construction of the ferry boat, but it is highly probable that there were profits, and it may be admitted, for the purpose of this question, that they reached the figure stated-one hundred thousand dollars. The forty thousand dollars paid for work done could not have been lost to the company, unless the transaction was fraudulent or fictitious, which does not appear, but rather the contrary.

But admitting that there is no ground for the general allegation that the defendant and his associates converted these sums to their own use, it is alleged that the defendant was, at the date of the transaction complained of, a secret partner in the firm of Smith Bros. & Watson, and that, whatever the company lost by it, he, as a member of that firm, got a share of. Granting for the time being, that the defendant was a member of this firm, it does not follow that he was a gainer by any transaction between it and the company; even if the latter was the loser thereby. Taking the plaintiff's contention for true, the defendant was one of five persons constituting the firm of Smith Bros. & Watson, while it appears from the evidence that he was, and is the owner of one-fifth of the stock of the company, and was therefore liable to lose on the one hand as much as he could gain on the other.

And as to the question of whether the defendant and his codirectors acted wrongfully, or even improvidently, in consenting to the withdrawal of Smith Bros. & Watson's proposition, it must be remembered that it was done under the advice of eminent counsel, upon the very plausible ground, to say the least of it, that they could not be held thereto-the same not having been accepted by the directors, and the stockholders having no power under the corporation act to transact any such business.

But, however this may be, it is a sufficient answer to this charge, and to any claim the plaintiff may make on the facts involved in it, that he knew all about these matters, at and before he executed the contract, and was in no way misinformed or misled by the defendant concerning them.

With full knowledge of the facts, he then appears to have regarded the transaction as legal and honest and if he has since come to a different conclusion, or been advised that the company has a valid claim against the defendant and his "associates" for four hundred thousand dollars on this account, what possible cause is that for cancelling a contract for an interest in a loan to the company? When the plaintiff executed this contract, he must have supposed

the company was more or less financially embarrassed, and yet he was not only willing, but desirous of taking a considerable interest in a large loan to it; but now, that he finds it has a valid claim, of which he was then ignorant, against solvent parties, for four hundred thousand dollars, a sum greatly beyond the company's indebtedness, he wishes to be released from his engagement upon the plea that this claim arises out of the previous misconduct of the defendant and his associates, which made this loan necessary.

Neither is the plaintiff entitled to have this contract rescinded, by reason of anything that has happened or been omitted, since it was executed. The defendant did not undertake absolutely to make this loan to the company, or to do so within any specific time; and in any event, the consent of the company must first be obtained, and the one hundred thousand dollars already advanced was to be considered a part of it. Doubtless he was bound to make the loan in a reasonable time, the circumstances considered, or return the plaintiff his note and certificate of stock. But the loan has been made in pursuance of the contract, and as soon thereafter as the company would accept it, and give the plaintiff the proper acknowledgment thereof and obligation to repay it.

And now, whether as a result of this transaction, the plaintiff is, or may become, a non stockholder in the company, and, therefore, unable to maintain any suit for relief against these transactions, if wrongful and injurious to the stockholders, is altogether immaterial, so far as this case is concerned. An otherwise valid contract cannot be cancelled on any such irrelevant ground or apprehension as this. If the plaintiff, by pledging his stock to the defendant as collateral security, with a blank assignment and power of transfer, has deprived himself of the right and privilege of a stockholder in the company, during the existence of the pledge, he must submit to such deprivation until he is ready to redeem the same by the payment of his note.

On the argument it was maintained, on behalf of the defendant, that the sale and purchase of the sixty-two and one-half shares of stock was a material part of the transaction resulting in the contract of March 27, and, therefore, no decree of cancellation ought to be made under any circumstances, unless the plaintiff is required to return the six thousand two hundred and fifty dollars received for this stock, on which terms the defendant, waiving all other objections, offers to consent to a rescission of the contract.

The evidence tends strongly to show that the transfer of this stock was a part of the transaction and a substantial element in the considerations which induced or caused the parties to enter into the contract of March 27. Seeley, who seems to have been without present means and in debt to Reed, appears to have made his coming to Oregon and taking charge of the company's business, as the latter desired, conditional on the purchase of this stock, while Reed appears to have made his consent to advance money to the company conditional on Seeley's taking charge of its business; and so it would seem