and as defining their relations to each other with respect to the property acquired under it. As evidence, the contract may be competent as tending to show the right of plaintiff to recover independently of any contract rights conferred by it.

The result of these views is that there must be a decree in this case setting aside, as fraudulent and void, the release, assignment, and conveyance executed by the executors of John P. Cook, and the said Edward E. Cook individually, to said B. F. Allen, of their respective interests in the joint account and property, and for an accounting, to the end that the complainants may recover to the extent of the value of the services rendered and money contributed by John P. Cook to the joint account; and for the purpose of ascertaining the sum to which they are entitled, this case will be referred to a master for such accounting and for report.

A question may arise as to the proper measure of damages. Can complainants recover upon the basis of the contract, or only for the value of the services, etc., contributed by him to the joint account? We do not decide this question now, but will direct the master to report the sum that would be due upon each hypothesis, reserving the question until the final hearing.

Officer making Fraudulent Use of Position.-It is well settled, both on principle and authority, that the officers of a company occupy towards it a fiduciary capacity, and cannot lawfully make use of their position to enter into contracts whereby they secure to themselves personal advantages. Cumberland Coal Co. v. Sherman, 30 Barb. 553; Aberdeen Ry. Co. v. Blackie, 1 Macq. 461; York Buildings Co. v. Mackenzie, 3 Paton, H. L. 378; Koehler v. Black Riv., etc., Co., 2 Black, 715; Cumberland Coal Co. v. Parish, 42 Md. 598; Blake v. Buffalo Creek R. Co., 56 N. Y. 485; Covington, etc., R. Co. v. Bowler, 9 Bush, 468; Port v. Russell, 36 Ind. 60; Cook v. Berlin, etc., Co., 43 Wis. 433; Harts v. Brown, 77 Ill. 227; Stewart v. Lehigh Valley R. Co., 38 N. J. Law, 505; Rice's Appeal, 79 Pa. St. 168; First Nat. Bank v. Gifford, 47 Iowa, 575; Levisee v. Shreveport, etc., Co., 27 La. Ann. 641; Austin City R. Co. v. Swisher (Tex. Ct. App.), 15 Reporter, 760; Wardell v. Union Pacific R. Co., 103 U. S. 651; s. c., 1 Am. & Eng. R. R. Cas. 427; Thomas v. Brownville, etc., R. Co., 109 U. S. 522; s. c., with note supra; Gallery v. Nat. Exchange Bank, 41 Mich. 169; Metropolitan, etc., R. Co. v. Manhattan, etc., R. Co., 15 Am. & Eng. R. R. Cas. 1.

UNION PACIFIC R. R. Co.

v.

CREDIT MOBILIER OF AMERICA.

(135 Massachusetts Reports, 367.)

A bill in equity, brought by a railroad corporation against a construction company, to restrain an action at law, brought by the company against the corporation, to recover sums of money alleged to be due for building its railroad, can be maintained only on the equity which the stockholders in the corporation have, if the bill proceeds upon the ground that the work was done under a contract entered into by the corporation with an irresponsible person, through the fraudulent procurement of the managing director of the corporation and for his personal benefit, which contract was assigned to the construction company, with the assent of the directors of the corporation, many of whom were interested in the construction company, although there are creditors of the corporation, and among them is the government which granted its charter.

He

By the terms of the charter of a railroad corporation, the subscription books were to be kept open until $100,000,000 should be subscribed, and persons were to be allowed to subscribe at a late date on the same terms with the earlier subscribers, and one hundred miles of railroad were to be built within a certain time. Capitalists were unwilling to risk their money in the construction of the railroad, if others, after success was assured, could share the profits equally with themselves. The managing director of the corporation procured an irresponsible person to offer to construct a portion of the railroad, and procured the directors to accept the offer on behalf of the corporation. The managing director furnished this person with means to carry on the work, and took to himself the profits of the enterprise. also had an agreement with this person, by which the contract should be assigned to such person as he should direct. The managing director intended that, if the scheme could be carried out, all of the stockholders of the corporation would have an opportunity to become interested in it, in proportion to the number of their shares of stock. Subsequently, a construction company was chartered, in which the managing director and other directors of the corporation were largely interested, and which had as its directors some of the directors of the corporation; the contract already made was assigned to this company with the assent of the directors of the corporation, and an opportunity was given to all the then stockholders of the corporation to become members of the company, and the road was built by the company. Held, on a bill in equity, brought by the railroad corporation against the construction company to restrain the prosecution of an action at law brought to recover sums of money due for building the road, that the managing director did not stand as to the contract procured by him in the relation of an undisclosed principal. Held, also, no actual fraud being found to exist, that the above facts did not show constructive fraud, so as to render the contract void in the hands of the construction company.

BILL in Equity, filed April 10, 1876, to restrain the defendant, a corporation chartered by the State of Pennsylvania, from the prosecution of an action at law by the present defendant against the present plaintiff, and now pending in this court, upon an

account stated between the two corporations on March 28, 1867, for the sum of $1,994,769.96; for the additional sum of $268,850.17, alleged to be due on September 11, 1868; and upon a promissory note for $2,000,000, given by the present plaintiff to the present defendant in partial settlement of said account, and dated August 4, 1869.

Hearing, upon the pleadings and evidence, before Endicott, J., who reserved the case for the consideration of the full court. S. Bartlett and F. Bartlett for the plaintiff.

W. G. Russell and G. Putnam (G. F. Betts with them) for the defendant.

C. ALLEN, J.-This case is submitted to us upon the pleadings and a report of the whole evidence taken; without any finding of facts by the judge before whom it was heard.

the

Upon the pleadings, the plaintiff's case must depend upon equity of its stockholders. It has, indeed, been suggested in argument, that the bill may be maintained on the equity of creditors. It appears incidentally in the course of the evidence that the government lent its security to the Union Pacific R. R. Co., to aid in the construction of the railroad; and that other indebtedness exists. But this is no substantive part of the plaintiff's case. The bill does not purport to be brought in the interest of the government, or of creditors; but it is made to rest expressly upon the equity of stockholders. Neither party contends, or admits, that any violation of the charter of the Union Pacific R. R. Co., or of its duty to the government, was involved in the transactions set forth. Both parties, indeed, at an earlier stage of the case, have united in a statement, and in an elaborate argument, to the contrary. The bill contains no averment whatever of any indebtedness of the plaintiff; and, of course, there is no statement of how much is due to creditors, and how much it is necessary to realize in order to supply any deficiency of other means and resources of the plaintiff to make such creditors whole. In considering the case, therefore, the equity of the plaintiff corporation, in behalf of its stockholders, as against the defendant corporation, is alone to be considered.

It is also to be borne in mind that the relief sought for is founded upon the money and securities averred to have been. received by the Credit Mobilier under the Hoxie contract, after its assignment to the defendant. There was testimony to the effect that, prior to such assignment, certain profits were realized under this contract by one Durant; but he is not a party to the suit, and no consideration need be given to the question of what rights the plaintiff might have as against him, except as this may affect the further question of its rights as against the defendant. The facts, upon which the determination of the case must

depend, not having been found by the single justice, it is expedient, in the first instance, to state the material facts, as they are found by us to exist, upon the evidence which has been introduced.

The Hoxie contract, so called, and other formal papers relating thereto, were as follows: By a proposition dated August 8, 1864, addressed to the President and Committee on Contracts of the Union Pacific R. R. Co.," and signed "H. M. Hoxie, by H. C. Crane, attorney," Hoxie proposed to enter into a contract to build and equip one hundred miles of railroad and telegraph, commencing at Omaha, according to certain specifications and upon certain terms and conditions. Appended to this proposition was a paper addressed to Hoxie, and signed "George T. M. Davis, Special Commitee," as follows: "H. M. Hoxie, Esq., Dear Sir: You will please to go on with the work, under the above proposition, and, if the company do not accept it before the first day of October next, they will pay you upon the same terms and conditions for what work may be done, as shown by the estimates of the engineers, made as provided in this proposition, first giving you thirty days' notice that they do not accept. George T. M. Davis, special committee."

Underneath this paper was the following: "September 23, 1864. Above contract is approved and ratified. John A. Dix, C. S. Bushnell, George T. M. Davis."

On

The following additional papers were also executed between the same parties. New York, October 4, 1864. To the President and Executive Committee of the Union Pacific R. R. Co. condition that your railroad company will extend my contract from its present length for one hundred miles, so as to embrace all that portion of the road between Omaha and the one hundredth meridian of longitude, I will subscribe, or cause to be subscribed, for five hundred thousand dollars of the stock of your company. Respectfully yours, H. M. Hoxie, by H. C. Crane, attorney.

"The above proposition is hereby accepted for and on behalf of the Union Pacific R. R. Co. John A. Dix, C. S. Bushnell, Geo. T. M. Davis, special committee. October 3, 1864."

At these dates, there were twenty-eight directors and two government directors of the Union Pacific R. R. Co., and an executive committee consisting of Dix, Bushnell, Davis, and four others. Dix was president and Durant was vice-president of the corporation. There was no evidence of the extent of the authority conferred upon the executive committee, or of the existence of any committee known as the committee on contracts. The bill, however, alleges that the proposition of August 8th was accepted by a committee of the board of directors of the Union Pacific R. R. Co. on the 23d of September, 1864, and that the subsequent proposition of October 4, 1864, was accepted by a committee of

said corporation by a writing bearing date the third day of the same month of October; and the answer admits that said propositions were accepted by the plaintiff, at or about the dates alleged in the bill.

On October 5, 1864, a new board of officers was elected, with fifteen directors and five government directors, and an executive committee of seven. With one exception, the fifteen directors thus chosen were members of the former board; with two exceptions, the executive committee remained the saine as before, including Dix, Bushnell, and Davis; Dix continued president, and Durant vice-president.

By a paper dated September 30, 1864, and executed at about that date, an agreement was made between Hoxie, for himself and as agent, and Durant, for the assignment of the contract for the construction of the one hundred miles of railroad and telegraph to Durant, or any party or parties he might direct. A paper dated October 7, 1864, was drawn up for signatures, at about the time of its date, reciting the last-mentioned paper, and providing that the subscribers agreed to take an interest in the Hoxie contract to the extent set opposite their respective names. This paper was signed by Durant and others, but was not fully carried out, as hereinafter stated.

On or about March 15, 1865, various papers were executed as follows:

1. A letter from Hoxie, by H. C. Crane, attorney, to the president and directors of the Union Pacific R. R. Co., consenting to their terminating the contract for building one hundred miles. of railroad.

2. An agreement between Hoxie and the Credit Mobilier, by which Hoxie assigned to it his contract with the Union Pacific R. R. Co., and the Credit Mobilier agreed to execute to said company a guaranty of the performance thereof, and to indemnify him from all claims under the same.

3. A guaranty of such performance, executed by the Credit Mobilier to the Union Pacific R. R. Co.

On April 6, 1865, the board of directors of the Union Pacific R. R. Co. passed a resolution, accepting and recognizing the said assignment and guaranty, and ordering them and the Hoxie proposition or contract to be recorded in the directors' book of minutes. Another resolution was also adopted on the same day, that additional surveys and contracts for construction should be made as fast as the means of the company would properly justify.

Prior to the passage of these votes, Durant had proceeded with the work under the Hoxie contract, and taken to his own use such profits as arose therefrom. No other contracts were put in evidence; and the Credit Mobilier, after these votes, proceeded to build the railroad and telegraph, not only for the distance of one