Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1885-10-10
THE COTTON CASE.
FULL TEXT OF THE DECISIGN
OF JUDGE TEMPLE.
Judgment is Given for the Defend
ants-The Question OF Trusts,
Good Faith and Compromise.

NJ Cotton against Leland Stanford Charles
Croker aud others, history of which has
already appeared in the REcoRD-UNIoN
In the Superior Court of the County of So
nona State of California. Ellen NJ Cotton plain
tiff. vs. Leland Stanford ct al, defendants.
The action is brought to rescind contract
made by the plaintiff as executrix end general
legatee of David Cotton, with the individual
defendants, August y, 1879.
This settlement made by such defend
ants, acting for various corporations in which
Cotton had been stockholder, and had held
various official positions with the estate of Col
ton. II was also an agreement By which such
defendants acquired from the plaintiff certain
stocks and bonds.
1t is here charged that this contract was OBJ
tanned by fraud, both actual and constructive
through misrepresentation, coneealment I'M
due influence ana under mistake both of law
and fact.
The pleadings are voluminous and present
many issues OF TACT. 1t has been necessary to
investigate IN great detail the affairs of numer-
Gus corporations having larger properties widely
scattered; and in general all the important
transactions OF the defendants and their asso-
ciates for many years.
Whenever an issue of fraud is on trial wide
latitude is necessarily allowed, for such charges
are largely proven by inference. The door for
the admission OF testimony was still more wide
~ opened here, for the plaintiff was allowed to
show the relations which had existed between
her husband and the individual defendants by
evidence OF the manner in which they trans
acted their business, and how they had built up
and managed their many railroads and other
properties.
In the difficult task of sitting this immense
mass OF evidence and arriving at correct con-
illusions from it, my sense of responsibility is
greatly lessened by the conviction that in this
particular case it is easy for either party to have
every issue of fact and law fully considered by Il
higher tribunal with every advantage possessed
by the trial Court For, vast as is the Volume of
testimony, ana numerous and complicated as
the issues are, and widely as counsel differ as
TO the effect of the testimony, there is no sub
stE1tdal conflict in it.
REVIEW OF THE COMPLAINT.
The first question naturally is, what issues are
presented by the pleadings? The complaint
commences with the ayerment that long prior
to october, 1871, the individual defendants and
Mark Hopkins had been associated and were
carrying on business together copartners as
common carriers, in constructing, leasing, equip
ping and operating railroads and steam vessels;
owning and operating coal mines and furnish
ing railroads and steam vessels with supplies
and in various other enterprises That the bus
mess was carried on by means of various corpo-
rations, organized by them as deemed requisite
from time to time, or of which they obtained
control, and in each and all of which they
owned and held either the entire or q large ma
jority of the stock and were the Directors or had
these positions filed by their servants, selected
by them for that purpose. That in consequence
of the use OF the corporate agencies and their
manner of doing business, they had no firm
name or partnership capital stock designated as
such, but the different branches of their bust
ness were carried on in the names of the re-
spective corporations used by them and the
individual interests of the corporation were
measured by the amount of stock held by each
of them in the respective corporations, and the
profits paid and divided TO each partner were
paid as dividends on the shares of stock held by
each, and by way of salaries paid them as Off
GERS of the corporations.
That ON the 9Th day of October 1874, owing to
the increase of their business they desired an
other partner and so agreed with Cotton that he
should be member of the partnership and be
associated with them as they had before been
associated with each other; and to efeetuate
and carry into operation that agreement they
2NRFIIfRd aUrppmpnf inc t'zr aud
Cotton gave his note as provided in the agree
ment.
From that time the parties became partners
carrying on business together through the same
and similar agencies as previous by others; and
during that time Cotton put in large sums of
and ability thereto.
Hopkins died ON March 90, 1878, and the sur
yivors carried on business after his death as be-
fore.
That while they so carried on business to-
gether they assumed and sustained relations of
peculiar and intimate personal trust and conf
dence, each toward the other, and to the bust
ness, and had confidential information and con
troll each over the affairs, business and property
of the Others connected with such business: and
a warm personal friendship existed between
them.
The complaint then proceeds to complete the
charge OF fraud, dureSs and undue influence
against the defendants, but there are no other
facts alleged from which it could be claimed
that the relation of the parties was fiduciary
This Is Important for the chief complaint is that
trustees, which in the negotiations and com
promise they, violated or failed to perform; and
that they took advantage OF the relation 10 ex-
tort unfair terms from her.
THE PARTNERSHIP RELATION
1t is claimed by the defendants counsel that
the only relation alleged is that of partnership.
and that we cannot consider under these allie
cations any other relations of trust, although
the evidence properly admitted on other
grounds would be sufficient to establish such re-
lation.
1t is further commended that the partnership
relation not being proved in this case and no
other hduciary relation averred the impeached
transaction must be regarded as one between
strangers.
l do not so understand the rules of pleading
The plaintiff is required to state the facts which
constitute his cause OF action. If the facts thus
stated entitled him 10 the relief demanded he
will, upon due proof, recover, although he may
have in some respects misapprehended the
legal eheet OF such facts. And il seems of little
consequence if, having stated facts which show
fduciary relation he has misnamed that re-
lation.
The plaintiff here has set out generally the
business carried on and the mode of conducting
1t, the preceding contract to give their services
and the mode OF dividing the profits Evident
ly from these facts the Court will infer the rela-
ton OF the parties. And these material matters
being stated, ii is difficult TO see how defendants
could have been misled.
Ii is also averred in the complaint that il hay
ing been agreed that Cotton should become Il
partner to ehectuate and carry out that agree
ment EX A was executed and Cotton gave his
note, etc. 1t is now commended that we must
look to this contract Elk, A.. alone to determine
the relations which existed between the parties
TO IT. Turning to that contract we find that by
1t the individual defendants and Mark Horkins
sold to Cotton certain stock, and that Cotton
agreed to give his services in the business and
management OF the business interests of such
corporations as all should be interested in and
assume certain liabilities.
1t seems very singular to begin with, for A to
contract with that he Will serve C, and at a
fixed compensation, without reference to the
wishes of C. When We look clearly at this
agreement, or rather, when we seat ourselves in
their seats and take the contract by its four cor
ners. and read it, we find that the parties did
not intend 10 become the mereemployes of GER
tain corporations. 1t was really intended as an
agreement TO stand in together and control such
corporations IN the personal interest of the par
ties to the agreement.
The contract does not specify the services and
evidently they were to serve each other, and in
such manuer and in pursuance of such policy
as they should agree upon from time to time
among themselves. The entire understanding
was not reduced to writing. and we do not allow
plaintiff to add to or vary the terms of the writ
ing when we admit proof of their actual rela-
tons.
THE CHARGES OF FRAUD.
Inc same method of reasoning which shows
the fallacy OF plaintiffs claim, that the only
trust relation aVerred is partnership. will dis
pose 81 the claim that no fraud is alleged except
actual fraud and, therefore, she can base no
S S LOT renef upon proof of constructive
lrdud. here too, the essential matters are the
facts, and if she has alleged more than she has
proven; she still must have her decree if the
io.ts "iAASh dtS aN SIE6u ana proven entitle her
to it.
If these amount to constructive fraud their
force is not impaired because of the added cir
cumstaneeS of an actual interest which has not
been proven. There is much more force how
ever, IN my opinion. in the claim of defendants
that many OF the charges of fraud upon which
plaintiff now seeks to recover are founded upon
facts not only not averred or allowed in the
pleadings, but-some of them upon facts concern
ing which no such claim was indicated during
this lengthy trial: that really the defendants
have not been heard upon some OF the issues of
fact upon which it is now sought TO base de
cree against them; have had no opportunity to
explain them; TO show that plaintiff knew all
about them, or that they have no weight in in
ducing the contract.
No rule is better established in this State than
that plaintiff claiming relief on the ground OF
fraud must specify with some particularly the
Iacts upon which he relies TO prove the charge.
ms rule was happily stated by one of the coun-
sci Tor plaintiff during the trial
Now the plaintiff, proceeding against the de-
lShdant upon the grounds of fraud, either acttl-
alor constructive willful or legal merely by this
proceeding IS compelled by MISUNDERSTOOD
rules OF pleading to specify in her Complaint the
particular facts upon which she relies to i'm
peach the transaction for fraud. She is com
peied 70 state accurately. and somewhat mi
nutely, the circumstances of fraud As yOur
honor well understands il would NOT hsv bean