Kollock & Zollinger, of Portland, for appellant. Flegel, Reynolds & Flegel and H. L. Parcel, all of Vancouver, Wash., for respondent.

BENSON, J. (after stating the facts as above). The entire problem in this case is based upon the question as to whether or not there have been such breaches of the contract as to entitle plaintiff to rescind.

the same. From a decree in favor of plain- [ question of its effect upon the agreement detiff, defendant appeals. pends upon the facts of the individual case, especially in a suit to rescind; for, if the prospective highway renders the premises unsuitable for the purposes intended by the vendee, the discovery thereof presents a condition which was not in the contemplation of the parties, and the vendee ought not to be compelled to purchase something different from that for which he bargained. In the case at bar the land was about 25 miles from Portland where plaintiff resided. He [1, 2] It is obvious from an examination of was purchasing the land for the special purthe writing that the agreement is nothing pose of making the 40-acre tract a summer more or less than a unilateral option to buy home for his family. The possibility of havin which the vendee may or may not at his ing a dusty country road within 50 feet of own pleasure make the payments specified his dwelling house, rendering habitation therein. Scott v. Merrill's Estate, 74 Or. therein disagreeable and the passing of au568, 146 Pac. 99, and cases there cited. He tomobiles and other vehicles so near his home did not assume the Balfour, Guthrie & Co. bringing added dangers into the lives of his mortgage; for the time had not arrived children, presents a condition not contemwhen he would be called to elect as to its plated at the time of entering into the opassumption. Reading the supplemental con- tion agreement and entitled him, we think, tract in the light of this conclusion, it fol- to a decree of rescission. A decree will therelows that if the plaintiff complied with the fore be entered here annulling the contract, terms thereof in seeking a deed to the 40-acre and a judgment in favor of plaintiff as praytract, he was entitled to a good and sufficient ed for in his complaint, except that the taxes deed free from the incumbrance of the mort-paid by him should be offset by his occupagage. However, it is conceded that plaintiff never specified in writing the land that he desired to have conveyed, and therefore, having failed to comply with the terms of the contract himself, he is in no position to complain of a default upon the part of his adversary.

tion of the premises from December 4, 1913, and that the moneys expended by him in putting in a crop should be eliminated, since, so far as the record discloses, he harvested and derived all the benefits from such crop. It appears from the record that pending litigation the property was leased for the crop season of 1914, at a rental of $350, of which $175 was deposited in court with the lease, by agreement of the parties, to abide the decision of the court. This money and the

[3] Plaintiff's second contention presents greater difficulty. There is much diversity of opinion in the authorities as to whether or not a public highway is such an incumbrance as to constitute a breach of the cov-lease are to be withdrawn by the defendant, enants in a conveyance. Many of those which agree upon the main point differ widely as to the reasons which lead to the common conclusion. These authorities are quite fully collated in Sandum v. Johnson, 122 Minn. 368, 142 N. W. 878, 48 L. R. A. (N. S.) 619, Ann. Cas. 1914D, 1007, and in that opinion the result is stated in this language:

"While the decisions are conflicting, the clear weight of both argument and authority is that the existence of a known rural highway does not constitute a breach of the usual covenants in a deed conveying agricultural land."

This court has held that the existence of an open, notorious, and visible incumbrance upon land contracted to be conveyed, such as a railroad in operation, is not an incumbrance which renders the owner's title unmarketable and assigns as the reason for so holding that it is presumed that in fixing the purchase price the existence of the incumbrance was taken into consideration. Barnum v. Lockhart, 75 Or. 528, 146 Pac. 975; Wetherby v. Griswold, 75 Or. 468, 147 Pac. 388. The inevitable logic of this deduction is that, if the establishment of the highway is unknown to the contracting parties, the

who will be given four months from the entry of the mandate herein in the lower court in which to pay the sums so adjudged to be paid, and plaintiff decreed to have a lien upon the premises for such payment.

EAKIN, J., took no part in the consideration of this case.

SARGENT, Superintendent of Banks, ▼.
AMERICAN BANK & TRUST CO.
OF PORTLAND et al.

(Supreme Court of Oregon. Feb. 1, 1916.)
1. BANKS AND BANKING 49-LEGAL CA-
PACITY TO SUE-LIABILITY OF STOCKHOLD-
ERS-CONVERSION.

Under L. O. L. § 4586, as amended by Laws 1911, p. 244, providing that the superintendent of banks may liquidate the affairs and administer the assets of a bank of which he has taken charge, and do whatever is necessary to preserve its assets and business, and enforce the individual liability of stockholders, the superintendent of banks representing primarily the creditors and depositors of the bank had legal capacity to sue defendant for the value of stock transferred to him in consideration of a conveyance of realty to which his title was

practically worthless, and for the value of other stock alleged to have been wrongfully converted by him to his own use.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 71-812, 513, 534, 535; Dec. Dig. 49.]

2. BANKS AND BANKING 49-ACTION BY
SUPERINTENDENT OF BANKS DEFENSE
FRAUDULENT AND UNAUTHORIZED ACTS OF
BANK.

In a suit by the superintendent of banks against a stockholder of an insolvent bank for the value of stock converted by him to his own use, and also stock transferred to him in consideration of a worthless title to realty, fraudulent and unauthorized acts of the bank are not available as a defense.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. 88 71-812, 513, 534, 535; Dec. Dig. 49.]

3. BANKS AND BANKING

39-STOCK-PUR

CHASE BY BANK-VALIDITY.

Under L. O. L. § 4569, forbidding a bank to buy its own stock except under circumstances not existing when the stock in question was surrendered, an attempted surrender of bank stock by a subscriber who had given worthless assets of another bank in exchange therefor, was void, and did not vest the bank with ownership of the stock surrendered or give it a right to reissue same.

he gives in exchange is equal to the par value of the stock.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 44-48; Dec. Dig. 39.]

8. BANKS AND BANKING 539 SALE OF STOCK-PAYMENT IN REALTY.

Under L. O. L. § 4571, prohibiting banks from purchasing realty except such as is neces sary for the location of its business, including other premises in the same building to rent for income not exceeding in cost 50 per cent. of its paid-in capital, surplus, and undivided profits, and such as shall be conveyed to it in satisfac tion of debts previously contracted, or as shall be purchased by it for its protection at judicial sales, an attempted payment for bank stock in realty, not within the exceptions of the stat ute, was unauthorized and amounted to no payment at all, except to the extent that the proceeds of the attempted payment went to swell the bank's assets.

Banking, Cent. Dig. 88 44-48; Dec. Dig.
[Ed. Note.-For other cases, see Banks and
39.]

9. BANKS AND BANKING 49-INSOLVENCY
-SUIT FOR VALUE OF STOCK-DEFENSE.

In a suit in equity by the superintendent of banks for the value of bank stock bought by defendant, defendant could not be heard to say by way of defense that he had given certain property in exchange for the stock, where it apDig.peared that after becoming president of the bank he removed such property from the bank's assets and converted it to his own use.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 44-48; Dec. 39.]

4. BANKS AND BANKING 47-INSOLVENCY -SUBSCRIBER-LIABILITY.

In a suit by the superintendent of banks to recover from a stockholder of an insolvent bank the value of stock for which he had given a practically worthless title to realty, the fact, if it were a fact, that the stock was some which bad been unlawfully bought in by the bank and reissued to defendant, did not render him any the less a subscriber liable for whatever he had not paid on the stock.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. 88 62, 64-68, 341; Dec. Dig. 47.]

5. BANKS AND BANKING

49—INSOLVENCY

-ACTION BY SUPERINTENDENT OF BANKS-
DEFENSE.

In a suit by the superintendent of banks for the value of stock for which defendant had given practically worthless property, it was no defense that defendant had caused part of the stock to be issued to a third person.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 71-812, 513, 534, 535; Dec. Dig. 49.]

6. BANKS AND BANKING 49 INSOLVENCY -SUIT BY SUPERINTENDENT OF BANKS-DE

FENSE.

Where in a suit by the superintendent of banks for the value of stock for which defendant had given a practically worthless title to realty, it appeared that the transaction was a fraud on the bank, its stockholders and creditors, and that for several months after it took place, defendant acted as president of the bank, and held it out to the public as being solvent, he could not be heard to say by way of defense that the bank stock was as worthless as his title to the realty.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 71-812, 513, 534, 535; Dec. Dig. 49.]

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 71-812, 513, 534, 535; Dec. Dig. 49.]

10. BANKS AND BANKING 39-LIABILITY OF STOCKHOLDERS-RELEASE-VALIDITY.

Where a purchaser of bank stock gave in exchange therefor practically worthless property, a release, executed in the name of the bank and signed by its manager and cashier, of all claims against such purchaser, was ineffective, where it was executed without authority of the board of directors or of the stockholders.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 44-48; Dec. Dig.

39.]

11. BANKS AND BANKING 48-INSOLVENCY -SUIT BY SUPERINTENDENT OF BANKS-DEFENSE.

An indemnity agreement purporting to be a sale of bank stock to another by defendant, who had purchased same giving practically worthless property therefor, was unavailable to protect defendant from liability for the value of stock in a suit by the superintendent of banks, where it appeared that the transaction was in fact a retransfer of the stock to the bank and a mere subterfuge to circumvent the law which prohib its a bank from purchasing its own stock, and was adopted to enable defendant to escape liability.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. §§ 69, 70; Dec. Dig. — 48.]

12. BANKS AND BANKING 49-CONVERSION
OF BANK STOCK
RECOVERY.

RESTORATION-RIGHT OF

Where, in a suit brought by the superintendent of banks in the interest of creditors and innocent stockholders of an insolvent bank for the unlawful appropriation of bank stock which defendant, while president of the bank, unlawfully and without consent of the directors, caused to be issued to himself and for which he paid nothing, it appeared that defendant had restored the equivalent of that which he had thus un lawfully retained, and that the bank had lost

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

In a suit by the superintendent of banks for the value of stock exchanged for practically worthless property, it was no defense that other stockholders had failed to pay in full for their stock.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. 88 71-812, 513, 534, 535; Dec. Dig. 49.]

17. BANKS AND BANKING 49-INSOLVENCY -SUIT BY SUPERINTENDENT OF BANKSPLEA IN ABATEMENT-PENDENCY OF ANOTHER SUIT.

In such suit, a plea in abatement alleging that plaintiff was suing another person for a subscription for the same stock was not available, though such fact might be considered as evidence of an admission by plaintiff that such other person and not defendant was the person liable.

[Ed. Note.-For other cases, see Banks and Banking, Cent. Dig. 88 71-812, 513, 534, 535; Dec. Dig. 49.]

In Banc. Appeal from Circuit Court, Multnomah County; R. G. Morrow, Judge.

stock of the said defendant corporation issued to him as aforesaid; that on the 2d day of May, 1908, the said defendant L. O. Ralston was duly elected as president of the said defendant corporation, and continued as such president until on or about the 10th day of January, 1910; that during the time the said Ralston was president of said defendant corporation, he removed from the said defendant corporation without any action of the board of directors, or without any authority therefor, or without paying any consideration therefor, the said 23 shares of the capital stock of the said City Messenger & Delivery Company; that the said defendant corporation received no consideration for the pur-itors of the bank as to any balance due on chase of the said 245 shares of its capital stock other than as hereinabove alleged, save and except the sum of $300 received for the sale of lot No. 5, in section No. 30, township No. 1, north of range 5 east, containing 11.35 acres, more or less, lying and being within Multnomah county, state of Oregon, said above-described real estate being a portion of the real property conveyed by the said defendant Ralston to the said defendant corporation, and being the only portion of said real property so conveyed by the said defendant Ralston that the defendant corporation could dispose of for the reason that the title to the said property was of no value, as herein before alleged; that the par value of the said 245 shares of the capital stock of the said defendant corporation so subscribed for by the said defendant L. O. Ralston, as alleged in paragraph 5 hereof, is $24,500, which sum the said defendant Ralston promised and agreed to pay therefor, and that no part thereof has been paid, except the sum of $300 received for said 11.35 acres lot described in paragraph 7, and that there is now due and owing from the said defendant L. O. Ralston to this plaintiff as state superintendent of banks of the state of Oregon on behalf of the creditors of the defendant corporation the sum of $24.200, with interest thereon from the 2d day of May, 1908, at the rate of 6 per cent. per annum."

The second cause may be stated as fol

lows:

"That the said defendant corporation has an authorized capital stock of $150,000, divided into 1,500 shares of the par value of $100 a share; that on or about the 11th day of May, 1908, the defendant L. O. Ralston caused to be issued to himself 91 shares of the capital stock of the said defendant corporation: that on or about the 8th day of December, 1908, the defendant Ralston caused to be issued to himself 10 shares of the capital stock of the said defendant corporation: that the defendant L. O. Ralston caused the said stock to be issued to himself without any authority of the board of directors of said defendant corporation, or without paying any consideration therefor; that the said defendant, though often requested, has failed. refused, and neglected to pay any consideration for the said 91 shares of the capital stock of the said defendant corporation or for the said 10 shares of the capital stock of said defendant corporation, and there remains due and owing the plaintiff on behalf of the said defendant corporation from the defendant L. O. Ralston therefor the sum of $9.100 and interest thereon from the 11th day of May, 1908, at the rate of 6 per cent. per annum, and the further sum of $1.000 and interest thereon from the 8th day of December, 1908, at the rate of 6 per cent.

per annum."

It is also alleged that a release of liability from the defendant bank to Ralston was executed without consideration and without authority of the board of directors, and was void. The defendant demurred upon each of the statutory grounds specified in section 68, L. O. L., and, the demurrer being overruled,

answered, denying all the material allegations of the complaint, and pleaded a number of affirmative defenses, among which was a transfer by defendant Ralston of the 346 shares of stock of defendant bank to Samuel Connell, a release executed in the name of the bank and signed by its president and secretary of all claims against defendant Ralston, and a bond signed by Connell and the defendant bank indemnifying defendant Ralston against all liability to existing credsaid shares of stock or any other claim or demand that might arise out of Ralston's ownership of said 346 shares, and containing such claims and save Ralston harmless therea covenant that Connell should satisfy all from. It was further alleged that such proceedings were taken with the knowledge and consent of the officers and stockholders of the bank, that Connell was still the owner of the 346 shares of stock, and that the plaintiff, the defendant corporation, and its of ficers and stockholders were therefore estopped to maintain this suit. By a further and separate answer it was averred that all persons who were creditors of the defendant bank at the date of the assignment of stock by Ralston to Connell had ceased to be creditors upon the commencement of this suit. It was also declared that Connell was a necessary party to this suit, and should be made a defendant therein. A further defense stated that plaintiff had no legal authority to sue, which defense was stricken out on motion of plaintiff. Thereafter a supplemental answer was filed by the defendant, alleging, in substance, that on or about the 27th day of August, 1913, the plaintiff in this suit commenced another and different suit, in the same court, against G. W. Waterbury, E. C. Knoernschild, C. W. Miller, S. Logan Hays, Julius H. Alexander, John E. Davis, and W. A. Currie, defendants therein, to recover from them on their subscription to 2,500 shares of the capital stock of the Bank of America, setting forth the complaint in that suit, including the prayer, and making the following additional allegations, to wit:

"That any capital stock of the American Bank & Trust Company, which this defendant ever owned or held therein, was delivered to him from and out of the capital stock of the said defendants in the said suit commenced on or about the 26th day of August, 1913, and which is now pending before this court, and that such suit was commenced after the commencement of this suit, and after this defendant Ralston had filed his answer herein; that the plaintiff in the suit commenced, on or about the 26th day of August, 1913, and which is now pending before this court, and that such suit was commenced after the commencement of this

suit, and after this defendant Ralston had filed his answer herein; that the plaintiff, in the suit commenced on or about the 26th day of August, 1913, seeks to recover from the defendants therein on account of their respective subscriptions of capital stock of said corporation, for and on account of the subscriptions to the identical capital stock, and the issue thereof, to such defendants, for which the plaintiff seeks

to recover against this defendant for and on ac-marily the creditors and depositors of the count of his alleged subscription to such capi- bank. If he merely represented the corpotal stock, and the alleged issuance of such capital stock to this defendant; that any and all of rate entity, there would be little reason for the capital stock of the American Bank & Trust permitting him to interfere in the winding Company, which was ever owned or held by, up of an insolvent institution. His duties or was ever issued to this defendant, was the and rights are, except as somewhat extended capital stock which a long time prior thereto had been subscribed for and was issued to the by the statute, analogous to those of a receivdefendants in the other suit, by reason of which er of a national bank or a trustee in bankthe plaintiff is not entitled to have or recover ruptcy under the federal statutes. The exany decree against this defendant for any stock tent of the authority of a trustee in bankwhich was issued to, or ever owned or held by him, which prior thereto had been subscribed ruptcy has been defined by this court in the for and issued to the defendants, or either of case of Falco v. Kaupisch Creamery Comthem, in the other suit above mentioned." pany, 42 Or. 422, 70 Pac. 286, in the following language:

A further statement of issues appears in the opinion. There was a decree for plaintiff, and defendant appeals.

C. A. Johns and Jay Bowerman, both of Portland, for appellant. Sidney Graham, of Portland, and I. H. Van Winkle, of Salem (Geo. M. Brown, Atty. Gen., on the brief), for respondent.

MCBRIDE, J. (after stating the facts as above). [1] At the threshold of the discussion of this very intricate case we are met with the suggestion that the superintendent of banks has not the legal capacity to maintain this suit. It must be premised that the authority of that officer is purely statutory, and unless it is given in express language or by necessary implication from the language used, he does not possess it. Section 4586, L. O. L., as amended by the Laws of 1911, chapter 171, provides, among other things, that the superintendent of banks may under certain circumstances (shown to exist here), take possession of the property and business of a bank, and liquidate its affairs and administer upon its assets. It is further provided that he may collect money due the bank and do such other acts as are necessary to preserve its assets and business, and may, if necessary to pay the debts of such bank, enforce the individual liability of stockholders. The first cause of action is based upon the allegation that defendant Ralston subscribed for 245 shares of stock, and procured its transfer by promising to convey to the bank certain real estate, which he falsely represented was of the value of $22,500, whereas in truth he had only a practically worthless tax title to the property, from which the bank realized only $300; that the worthless character of his title was well

known to him, and that such representations were made with intent to defraud the bank; that in 1910 Ralston caused to be executed a release from all liability to the bank, signed by the manager and cashier, but that said release was not authorized by the board of directors or by the stockholders, and was without consideration and void. Other allegations too numerous to be inserted here show the insolvency of the bank, the extent of its assets, liabilities, and the necessity of enforcing the liability of stockholders.

"From this doctrine it necessarily follows that unpaid subscriptions to the capital stock of a corporation pass like other assets to the trustee in bankruptcy, and he is the only party that can bring an action or proceeding thereon. Sanger v. Upton, 91 U. S. 56 [23 L. Ed. 220]; In re Crystal Springs Bottling Co. (D. C.) 96 Fed. 945; Lane v. Nickerson, 99 Ill. 284. And it also follows that any fraudulent act of the corporation itself, intended to deprive the creditors of a right to resort to the unpaid subscription, is of the same nature as fraudulent conveyances of any other property of the bankrupt, and may be avoided at the suit of a trustee.

*

The rights and duties of a receiver of a national bank are prescribed in the following opinions of the federal and state courts:

In Case v. Terrell, 11 Wall. 202, 20 L. Ed. 134, wherein it was contended that the receiver represented the government, the court answered said contention:

"As to the receiver, the claim, if any such be made, is not worth serious consideration. He represents the bank, its stockholders, its creditors, and does not in any sense represent the government."

In the case of Brown v. Schleier, 118 Fed. 986, 55 C. C. A. 475, the court says:

"As such receiver he is vested with all the rights of creditors and the rights of the corporation itself, and may doubtless challenge any wrongful act which creditors could challenge, and maintain such suits against third parties, including actions against directors and stockholders of the bank on account of wrongful and fraudulent acts, as the corporation might main

tain."

"The first objection urged to the verdict is, that the court misdirected the jury when instructing them that the plaintiff represented the creditors of the bank, and could look behind its acts in the assertion of their rights. It is difficult, however, to see the force of this objection in a case where the charge and the proof is, that the defendant, in a breach of his trust, as president of the bank, connived with sharpers to sell out the bank to them, and take payment from them in the assets of the bank, knowing, or having every reason to know, that their purpose in the purchase was to defraud the public. One would think, especially if this was done without authority even formally legal, that it was a wrong for which the bank itself might have redress, if it was ever rescued from the