Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1885-10-10

relation. The principle is the same in all of
them. But equity goes further than this. 1t
not only watches over these defined relations of
parties, but it scrutinfzes the underlined rela-
tons of friendly habits of intercourse, personal
reliance and contidentiaI advice. II is well
known that habits of kindness, confidence and
trust grow between neighbors and friends and
II advantage is taken OF such relation to obtain
an Unfair bargain, equity viii set 1t aside or
convert the offending party into Il trustee. OF
course no rule can be laid down by which to
judge ell such cases; for every case must, of
necessity, depend on its own acts. AS under
stand counsel, they contend that all these last
named relations are by the code called trust re-
lations, because there is the reposition and the
acceptance OF confidence, and dealings between
such persons are obstrueted to the full extent of
difficulties to transactions between guardian
and ward or executors and residuary legatees,
or any of the clearest trust relations. ON this
principle the defendants are charged, or sought
10 be, with all the duties obligations and dis
abilities which it can be discerned from he de-
cided cases have ever been held applicable TO
any and all instances Of trust by the Courts.
One distinguished counsel claims that personal
confidence is conclusively presumed by the
statute and that defendants owed the duty of
advice and protec ion, as though they were
| special counsel or trustees to protect a spend
thrift from his own improvidence, and, there
fore, bound to advise as faithfully against them
selves us in contracts with others. 1t is also
claimed that q trust relation existed by reason
of the pledge of stock TO secure The million dol
lar note Ii my view of the law of trust and the
effect of the Code be correct, it is hardly neces
sary TO pursue that subject further than to say
that this fact-the pledge OF the stock-as a
matter of fact gave defendant no control and no
| opportunities TO gain information of her affairs
! Cotton was continued in the active control by
| the terms of the contract exhibit AZ.
The authorities seem practically agreed upon
the proposition that there is no such relation of
trust between the Directors, even of a close cor
| poration, and the stockholders as will imperil
| the dealings between them TO the stock of the
corporation. The Directors are trustees rs to
| the property of the corporation, and in respect
to the property of the corporation are not trust
| ees of the stockholders in regard to the stock.
This view has been questioned by some law
writers, and il is difficult to see on principle
! how they can escape the responsibilities of the
| ndueiary relation in their dealings with the
| stockhOlder who is not Director for his stock
/ which only represents his interest in the prop
erty of the corporation. At all events il raises
some presumption of knowledge on the part of
| the Directors, and of control over the property
| OF the stockaolder in the corporation. II should
| pc taken into consideration i'll determining the
harness of any transaction between them
CoLToN's DEATH DID NOT AFFECT THE W D. co.
Here the relation of the defendants as virtual
| Directors of the Western Development Com
| pany was quite similar to the assignees of the
! late firm. The corporation had gone out of
| poses of liquidation. The case differed from
| that OF surviving partners in that the corpora.
| ton must act as unit, through the resolutions
| of its Board, and was not bound because of the
death of Cotton to immediate liquidation and
| settlement. The individual Directors .too were
not bound as individuals to liquidate and settle
| at all. Mrs. Cotton could not have complained
| had they sold their stock in that company with
out realizing on its assets or settling the iudebt-
| edness They were not her agents, then, indi-
vidually to sell these assets and to account fol-
| the proceeds. She, too. had the right secured
to her by law to inspect the books. Ifthis con.
stituted the trust relation, therefore il was as
all others, in fact are, SUI qeaa'is. We must de
| termine the difficulty in dealing with plaintiff
| from their active 0ntipc and
These certainly did not, nor did any other
suggested hduciary relations, in my opinion
| impose upon the defendants the duty of coun
selling or protecting the plaintiff as one to any
| extent their ward, in her dealings with The
| assets of the Western Development Company
or any other corporation: In reference to the
Rock Mountain Coal and Iron Company, the
| defendants were i'll no sense at any time the
trustees of Cotton. Cotton was their agent in it.
management, and in that sense their trustee.
If there was no duty to arise there was NJ
other obligation upon the defendants than thai
of a full disclosure of facts within their knowl
edge as trustees which were material for her Il
know in conducting the negotiations and L
deal fairly with her. This can be better consid
cred, however, in connection with the circum
stances of the negotiations and settlement.
l VIII now proceed to consider some of the
most important issues of fact in the case anC
nrst, i'll regard to the 40S shares of Rocky
Mountain Coal and Iron Company's stock sur
rendered by Mrs. Cotton. The complaint charge
that the defendants falsely represented tina
this stock did not belong TO Cotton but wa,
held in trust by him for defendant and Mari
hopkins, and upon their paying the cost price
they would be entitled to demand an assign
ment and transfer thereof. That she according
ly, believing this representation, upon receiving
$3.50 %, which they represented to be the COS
price assigned the same to the defendants a
part. OF course, of the general compromise anC
sale shown by Elk. +. That she has discovered
that this stock belonged wholly to Cotton, an,
consequently to his estate, and was worth so
OoO. The answer practically admits the repre-
SentatlOn as to the ownership of the stock bu
AYERS that the reason for the claim on their par
was fully known TO Wilson and Tevis, and ais
the facts IN which their claim was founded, an,
that no false representations whatever wer
made IN relation to the matter.
II appears that defendants also claimed tina
| Cotton had received on this stock held by hin
! in trust dividends amounting to about Slo,OOC
which amount was released 70 plaintiff as par
consideration for the compromise.
Upon the question arising in connection will
TINS issue, an immense mass of testimony ha
been taken, and there has been submitted state
ments from the stock books accounts of diyi
dends and numerous computations intended t
prove or dlsprove the various positions as
SuIned. These arrays OF figures as argument
are calculated to bewilder one not more ac
customed TO such matters than myself; bu
after considerable study have at least satisfied
my own mind upon this question.
TESTIMONY OF CHARLES CRoCKER.
The only witness who gives direct and posi-
tive evidence in regard to any understanding il
reference to the stock is Charles Croker an(
Ile issue seems narrowed down to this question
whether the witness correctly stated the under
standing or agreement under which the stock
was purchased, or ifhe did, whetherthe under
Standing had not been modified or was not ig
nored by the parties afterwards
Charles Croker states that in 1870 he invited
Cotton, who then had no connection with tn,
defendants, to visit the mine with him. They
| went, were pleased with the property ant
| Croker purchased 1000 shares for himself anC
associates, Stanford, Huntington and Hopkins
On the way home Cotton asked permission Il
7 II nsNFf hn
promised If he would buy 900 shares to make
| him President and manager at salary of SIOC
per month. To this Cotton assented and set tC
| work at once to buy stock He was now per
mltted to buy one thousand shares subse
quently II was agreed that Cotton should buy a!
much of the stock as he could on Joint account
OF Crocker Stanford, Huntington, Hopkins and
| himself. At that time he, Croker had 800
| for himself and his then associates, and Coltor
l,OOO shares, giving each of them two hundred
ana nifty shares more than Cotton. This dispar
lty was to be maintained, each of the other
having two hundred and fifty shares more thar
Cotton.
such testimony must always be taken will
great caution. Memory is apt to be uniaithfu
| in such things subsequent impressions OF trans
actions blend with original impressions Coltof
may have understood that matter quite differ
emily. Had they brought suit for the stocl
| against Colton's representative this evidence
would not have been received. During the YEA
that had passed. Croker had been purdeneC
with important business and had conlessedN
and Iron Company's affairs. They were in
trusted, he says entirely 20 Cotton. Soon aftel
the agreement to purchase the stock Croker
sold out his interest in the mine and all the cor
porations with which he and the other defend
ants had been connected, and started upon
voyage around the world. He was absent two
years. during which time he had no reason L
trouble himself with the business of the Goa
company. In October 1878, he repurchaSed hi.
former interest but in the following Decembel
again went on his travels in Europe and did no
return until August, 1874. Since that time anC
until Colton's death, according to his own tcsti
mony he had paid no attention 10 the affairs o.
the coal company
His memory would be remarkable if he re
tanned, under the circumstances, an accurate
recollection of the conversation in all particu
lars, and the facts do not substantiate his state
ment.
CoLToSs INTEREST IN THE ROCKY MOUNTAIN
COAL COMPANY.
There was no time prior to his selling out
and starting on his travels, when Cotton had
600 shares. In fact, there never was a time
when Cotton had just 900 shares and the otheE
1900 shares. Cotton was made President and
manager in January, 1871, although he had but
300 shares, and he acquitted no more until
after Croker had sold out and started on his
travels The first step toward the purchase OF
stock which can now be discovered was an
assessment levied on the 10th day of August A
j. 1871, which Wilson was informed was levied
10 aid their purchase of the stock The first
stock acquired after the agreement TO purchase
on joint account was in September, 1871. They
continued then DIIrClaEq the stock beiru