Ll^CM A A n SOUT 1 1 6 1 4 8 8 HERN REGIONAL LIBRARY FACILIT u California. Supreine court. Opinion of the supreme court of California in the Col ton case , ^ipr5;s^^^^^^g^g'" 4^"s^^ /' »-^ . ;^, "!Q -^ OPINION OF THE Supreme Court of California, IN THE COLTON CASE. ARGUED BY J. A. STANLY AND E. W. McKINSTRY, FOR APPELLANT. CREED HAYMOND and JOHN GARBER, FOR RESPONDENTS. June 4TH, 5TH and 6th, 1889. CROCKER & CO S PRINT. SAN FRANCISCO. m SAN C.^VRI-OS 1700 ROBERT ERNEST COWAN THE COLTON CASE. OPINION OF THE SUPREME COURT OF CALIFORNIA. [Filed January 2, 1890.] COLTON, Appellant, ^ vs. >No. 11,983. STANFORD et al., Respondents. J Held, affirming the judgment and order of the Court below : That the business relation which existed between the associates, Stanford, Huntington, Hopkins, Crocker and Colton, is much like a partnership for the purpose of organ- izing, controlling and operating railroad and other corpor- ations, but in view of the manner in which the compro- mise impugned was effected and of all the circumstances surrounding the settlement of the dispute between plaint- iff and defendants it is unnecessary to determine this question. That there was a relation of mutual trust and confi- dence between these associates, and if this tr\ist relation continued to exist after the death of Colton and impose any active duties upon the sur\'ivors as trustees of his estate they were waived by the plaintiff herself, and the relation of trustee and cestui que trust was so entirely discarded and dissolved during the negotiations that they were not 2 bound by any fiduciary relation to counsel, advise and pro- tect the plaintiff, or to perform any other duty than to deal fairly by her and in good faith to disclose all facts within their knowledge material for her to know in conducting the negotiations fairly and to enable her to make a full and unhampered investigation into the matters in contro- versy. That in all trust relations the existence of confidence will be presumed, and if it appear that any advantage has come to the trustee in dealing with \\\s cestui qiic irtisf^ the burden will be thrown upon him to show that confidence was not in fact abused. That this presumption may be overcome b\- proof of the fact that confidence has not been abused and that the bene- ficiary acted not upon au)- reliance or confidence placed in the trustee but upon the advice of an independent pro- fessional, disinterested and competent adviser. That plaintiff did not rest any confidence or reliance upon anything said, done or omitted to be said and done by defendants or any of them, but called in and secured the aid of four or five disinterested and competent advisers, who had sources of information other than those possessed by defendants, and both plaintiff and her advisers knew, partly from discoveries they made themselves and partly from information given by the defendants before the com- promise agreement was executed, that there were many inaccuracies in some of the statements furnished to the plaintiff. That no source of information was withheld from plaintiff" or her agents, and no means of ascertaining intelligently the true state of the accounts was covered up before they acted upon and compromised the matters upon which the controversy arose; every fact which has since been discov- ered could have been discovered before the execution of the agreement, and the findings show that defendants in good faith disclosed every fact within their knowledge. r — 3 — That, under such circumstances^ the compromise agree- ment should not be set aside, even though the trustee did not impart to the cestui que trust all the knowledge of the transactions which he might have acquired by diligent and skillful search. That if at the time of the compromise the trustee had shaken off his fiduciary character and the confidence which is presumed to result therefrom, it matters not what has occurred immediately preceding or long prior to the final transaction; or, in other words, if the transaction is one in which the trustee may lawfully deal with his cestui que trust by first dissolving the trust relation, it is not too late for him to do so at any time before the beneficiary is pre- vented from making a full and fair investigation, and before he executes the contract. That the fact that the list of assets of the W. D. Co. fur- nished by defendants did not set forth all the assets does not raise a presumption of actual or constructive fraud, ur. where they believed the list correct; as a general proposi- ^ tion, where a party acting without belief or without infor- >£ mation makes a representation which is not true, the law c5 imputes to him a knowledge of its falsity and makes him Zj responsible, but this principle is without effect where the 5 representation is discarded as unworthy of belief, and inde- g pendent investigation is made, as in this case. That the fact that a few days after the execution of the compromise agreement, the W. D. Co. paid its indebted- ness of over $3,000,000, with interest, to the C. P. and S. P. with S. P. bonds at 90 cents on the $1, which were represented to plaintiff to be worth only 60 cents, is not a fraud on plaintiff or an equitable estoppel preventing defendants from claiming that they were not worth 90 cents at the date of the compromise, as this value was fixed b\' defendants themselves, at what they supposed they would be worth when called on to pay the C. P. bonds, and was merely a temporary mode of settling a corporate obliga- .'511784 — 4— tioii; beside, the values set opposite the names of the stocks, were not relied upon in the compromise. That the claim of appellant that the judgment should be reversed on the twentieth finding is unfounded, as it clearly appears from the evidence that the compromise would have been made even had the truth been known, and hence, plaintiff cannot complain. That such a mistake or misrepresentation would not justify setting aside the agreement especially where as here expenditures have been made by the defendants on the faith of the agreement which have materially enhanced the value of the property in litigation. That plaintiff sought and urged the compromise, refusing to proceed with the enterprises undertaken and partly car- ried out; that the corporations were heavily indebted and the outlook seemed gloomy; that plaintiff was ably represented in her negotiations by men of experience and great business capacity, and the settlement arrived at was on the whole fair and equitable and no unconscionable advantage was taken of plaintiff. From the 5th day of October, 1874, down to the time of his death, David D. Colton was associated with defendants in the ownership, control and direction of certain corpora- tions. Prior to that time defendants and Mark Hopkins had been the principal owners of the stock of the Central Pacific Railroad Company, the Southern Pacific Railroad Company and of various other subordinate and connected railroad companies, and also of the Contract and Finance Company. They had associated themselves together for the purpose of securing the co-operation and assistance of all in the furtherance of certain railroad enterprises, and of such others as they should from time to time agree upon. In pursuance of the terms of their association and agree- ment they had invested respectively large sums of money, and were giving their time and labor to the management and direction of the corporations above-named, and to the acquisition and control of other corporations which they desired to operate in furtherance of the general schemes they then had and might thereafter have in view. Being desirous of securing the aid and co-operation of another associate, negotiations were opened with Mr. Colton, whom the defendants had known for several years prior thereto — which ended in an agreement between him and them that he should become associated with them in like manner as they had theretofore been associated with one another. By the terms of this agreement with the defendants and Mark Hopkins, Mr. Colton was to have 20,000 shares of the cap- ital stock of the C. P. R. R. Co., and 20,000 shares of the capital stock of the S. P. R. R. Co., in consideration of the sum of $1,000,000, for which sum he gave his promissory note, with interest at 6 per cent per annum, payable on or before October 5, 1879. ^^^ dividends on the stock were to be applied as payments on the note. It was agreed that Colton was to share in the proportion that his stock bore to the stock issued in all responsibilities, damages, penal- ties, etc., and to share in all the liabilities of the C. P., S. P. and Contract and Finance Companies, the same as if he had been associated and connected with them from the time of their organization. On the 15th of December, 1874, they organized the Western Development Company, the affairs of which cut a most important figure in the con- troversy. The capital stock of this company was fixed at $5,000,000, of which Stanford, Huntington, Crocker and Hopkins each took two-ninths and Colton one-ninth. Gen- eral Colton' s interest in all other properties acquired by the associates came to him through this corporation— except that which he held in the lone Coal and Iron Company — which had a capital stock of $4,000,000, divided equally between the associates — and that which he held in the Colorado Steam Navigation Company, and in the Occiden- tal and Oriental Steamship Company. He was also one of the original incorporators of the S. P. Company of Arizona, organized in 1878, and held 30,000 shares of the capital stock thereof. In 1876 the parties made and executed a new agreement, which they antedated as of October 5, 1874. This agree- ment differs in some material respects from the original. A copy of it is annexed to the complaint and is set ont in the statement of facts. By the terms of this modified agreement the stock sold to Mr. Colton was pledged as col- lateral security for the payment of the $1,000,000 note, and it was agreed that neither party should sell his interest in the contract without the written consent of all parties thereto. The enterprises entered into and carried on by these associates during the life-time of Mr. Colton were of stu- pendous magnitude, involving face values amounting to hundreds of millions of dollars. , The success of their schemes depended upon many things. In the midst of their most important operations both Mr. Hopkins and Mr. Colton were taken from the association by death, the former on- March 29, 1878, the latter in October following. The bond 'of friendship which had bound the five associates together was of the strongest kind, and the confidence which one reposed in another had no limit. Soon after the death of her husband, Mrs. Colton — this plaintiff — began to make inquiries as to the interest of the estate in the various corporations with which Mr. Colton had been connected. In his last will and testament Mr. Colton had recommended that if his wife should desire the a.ssistance of any one in the settlement of his estate, his friend, S. M. Wil.son, and his .secretary, Charles E. Green, should be called in as co-executors. Mrs. Colton being the universal legatee, and entirely ignorant of her hus- band's affairs, called upon and secured the services of Mr. Wilson to aid her. Negotiations were entered into between ])laintiff and defendants for a .settlement. During these negotiations the plaintiff became suspicious of the motives and conduct of the defendants, believed that they had manipulated the books to deceive her, and that they were unworthy of trust or confidence. Nevertheless, after a tliorough examination of the books and many interviews with defendants, a compromise agreement was entered into on the 27th day of August, 1879, by the terms of which certain stock.s, including 408 .shares of the Rocky Mount- ain Coal and Iron Company, were assigned to defendants, the $1,000,000 note was cancelled, and all the liabilities of the W. D. Co., and other corporations, were a.ssumed by them and the estate of Colton was released therefrom. About two years after the execution of the compromise agreement plaintiff discovered many errors in the calcula- tions upon which the compromise had been made. She thereupon served a notice of rescission and demanded a new accounting-. A complaint was drawn up charging the defendants with misrepresentation, concealment, etc., and after several interviews, to-wit, on May 24, 1882, plaintiff commenced this action for a rescission of the compromise agreement of August 27, 1879, (referred to as "Exhibit F"), on the ground that said agreement had been procured through false and fraudulent representations made by defendants during the course of the negotiations which resulted in the execution of the compromise. The answer denies the charges of fraud, alleges that whatever statements were made by defendants were made by them in good faith, believing them to be true, and avers that Colton, during the time that he was connected with the W. D. Co., fraudulently appropriated to his own use certain large sums of money belonging to said company and to these defendants. After a trial, lasting nearly two years, before Hon. Jack- son Temple — who was at that time Judge of the Superior Court of Sonoma county, and who has recently left this Court on account of illness — findings and judgment were rendered in favor of defendants. From this judgment, and an order denying the motion for a new trial, the plaintiff has appealed. Although the record herein covers about 12,000 pages of printed matter there is no substantial conflict in the evi- dence. The questions involved in this appeal have been debated by counsel upon the assumption that the Jhc/s found by the learned Judge of the court below are unassailable, and that the decision is correct, except as to the legal deductions drawn from the specific facts found. It is not contended by the appellant that the defendants knowingly made any false statements or uitoided to de- ceive plaintiff in the negotiations, but it is claimed that the facts found show the existence of a fiduciary relation between plaintiff and defendants; that in dealing with plaintiff" it was the duty of the defendants to make a full and correct disclosure of the condition of the business in which Colton held an interest, whether the plaintiff was — 8— relying upon their advice or upon her own investigation, and the advice and judgment of Wilson and other friends; that it is immaterial whether the parties believed there was in fact any such duty resting upon the defendants, or whether the plaintiff did actually rely upon and confide in them; that where the negotiations begin in peace and con- fidence between trustee and cestui que trusty it matters not that suspicion, distrust and fears may lead the bene- ficiary to make independent investigation during the ne- gotiations, and rely upon independent advice, and her own judgment, in finally concluding the compromise; that the trustee can shake off the duty referred to, if at all, only b}' a clear and unequivocal dissolution of the trust relation before the negotiations commence; that the business rela- tion between Colton and defendants was a partnership, and that the surviving partners were bound to know the condition of the business, and impart full information thereof to plaintiff; that in cases of this kind the surviv- ing partners must show affirmatively that the settlement was fair and the consideration adequate, the contract being prima facie void; that the Court erred in ignoring this principle, and in holding that it was for plaintiff to prove fraud; that the findings show both actual and constructive fraud and threats, and that the representions made by de- fendants with respect to the ownership of the 408 shares of Rocky Mountain Coal and Iron Company stock are sufficient of themselves to call for a reversal of the judg- ment; that the judgment should be reversed and a judg- ment entered in favor of the plaintiff on account of undue influence, concealment and fraudulent misrepresentations, although it be conceded that the parties making the con- tract herein sought to be rescinded dealt as strangers, and that the findings do not cover the material issues; and that the Court erred in its conclusions of law, and as to the effect of certain evidence. Many of the topics discussed by counsel are involved in the question whether there existed such a fiduciary rela- tion as called for a full, fair and accurate statement by defendants of the condition of the affairs of the several corporations in which Mr. Colton, in his lifetime, had been interested; counsel for appellant contended all the time that such relation did exist, and that by virtue of their su- perior knowledge and means of information, the duty of making a full disclosure and truthful statement by defend- ants became imperative and absolutely essential to the val- idity of any compromise, based upon negotiations between the parties. The respondents have claimed at all stages of the litigation that the business relation of the several associates was not that of partners, and that upon the death of Mr. Colton the defendants owed plaintiff no duty other than that which arises from the relation of stock- holders in a corporation. In this branch of the contro- versy the learned Judge of the Court below sided with the respondents, and upon this subject he expressed his opin- ion in the following language : "At no time were the de- fendants, Leland Stanford, C. P. Huntington, Charles Crocker and jMark Hopkins, copartners, or associated in any business or enterprise as copartners. Nor did they at any time carry on any business as copartners," etc. (Finding 3). "xA.t the death of Colton the association between him and the defendants and Mark Hopkins entirely ended and ceased. There was no property belonging to the associ- ates, as such. After his death the plaintiff was merely a stockholder in the various corporations. * ^ ■^' After the death of Colton the individual defendants had no other power over the affairs of the plaintiff and occupied toward her no other relationship than as controlling the corporations in which she was a stockholder, and as creditor and pledgees." (Finding 22). "But if a trust relation of this character existed between these associates, what was the relation of the survivors, upon the death of Colton, to his representative? At his death the association was entirely ended. It was a case where confidence was given for confidence, service for service. There was no prop- erty belonging to the associates, as such. No power over the affairs of Mrs. Colton or the estate of D. D. Colton, survived his death. His position was one of great power over many things, through this mutual confidence. She was merely a stockholder in various corporations. It is true they continued to be virtual directors of these cor- porations, as they and Colton had previously been. But this no longer depended upon any confidential relations with the holders of Colton' s stock. * * * The previous relations with Colton did not affect the ques- -lo- tion. They and Colton had no vested interests in any new- projects not )et begun. * * * There was not then, after Colton' s death, any further active duties, as trustees, due from defendants to the estate of Colton." (8 W. C. Rep., Supplement, p. 31). It must be admitted, however, that the arguments of the appellant upon this question are most persuasive, and make the business relation which existed between the associates look like a partnership for the purpose of organizing, con- trolling and operating railroad and other corporations ; but in view of the manner in which the compromise was effect- ed, and of all the circumstances surrounding the settle- ment of the dispute, we deem it unnecessary to determine this particular question. There is no doubt that the asso- ciates occupied toward one another relations of the great- est confidence and trust. This relation of trust and confi- dence, indeed, was one of extraordinary character, greater than ever existed in any partnership with wdiich we have been acquainted. The power and authorit)- possessed by each associate over the business, property and standing of others interested with him never was possessed, perhaps, by a member of any other concern or a.s.sociation. That there was a relation of mutual trust and confidence of high char- acter between the associates, and that such relation was recognized by Judge Temple, is apparent from the follow- ing extracts taken from his findings and opinion : "Some of their transactions in the payment and disbursement of money were private and confidential between .said associ- ates, the character and rea.son of such disbursements being known only to and by said associates, and not recorded or entered in any books or writings kept by them, or any of said corporations, and said five associates until the death of said Hopkins, and .said four associates thereafter, until the death of said Colton, had and assumed and sustained relations of intimate and peculiar trust and confidence, each toward and with the others, in regard to their said enterpri.ses and their management and conduct ; and they accpiired, obtained and had confidential information and control each concerning and over the affairs of the property and business connected with, growing out of and accumu- lated !)}• and through the enterprises in which said Stan- ford, Huntington, Hopkins, Crocker and Colton wxne a.sso- —11— ciated together. As each new scheme was determined upon each had his part in the work, though each party then decided for himself whether he would go into each scheme or not, and there was no power in the majorit\- to commit any one to any new enterprise until he approved of it." (Finding 13.) "Fiduciary relations may exist between stockholders of various corporations, who have associated themselves to control such corporations and make them work in harmony ; but they would not be partners. And so I conclude, although the corporations managed by these associates cannot be regarded as partnerships, nor as mere instrumentalities of a partnership, the relation between the parties was nevertheless of a fiduciary character. I think it already appears that the parties to the agreement, "Ex- hibit A," intended something more than to procure situa- tions for each other as employes in various corporations. They had designs not stated in that paper, which were the real purposes of that association. The fiduciary relation must have existed under our Code as to these projected enterprises, and the management of the system of roads they had built and acquired. '''' * ^^ Each had invest- ed his money and expended his labor in reliance upon this fidelity of the others. (Page 30, Supplement.) It is a nice question whether the trust relation which had existed between the associates, continued to exist after the death of Colton, and imposed any active duties upon the survivors as trustees of his estate; but, if any such duties were cast upon the defendants b}- reason of the death of Mr. Colton, they were waived by the plaintiff herself, and the relation of trustee and cestui que trust was .so en- tirely discarded and dissolved during the negotiations that they were not bound by any fiduciary relation to counsel, advi.se and protect the plaintiff, or to perform any other duty than to deal fairly by her, and in good faith to dis- close all facts within their knowledge material for her to know in conducting the negotiations fairly, and to enable her to make a full and unhampered investigation into the matters in controversy. We have been unable to find a case in which a lump agreement of compromise, entered into b\- survi\"ing part- ners and the representative of a deceased partner, or by a trustee and cestui que trust — the latter acting by the advice ■12- of experts and able counsel, and renouncing all confidence in the trustees — after full, fair and honest investigation, has been rescinded because of actual and unintentional in- accuracies discovered subsequent to the execution of the agreement; nor do we know of any universal rule of equity, or any provision of our Code, tending to establish the prop- osition that from the mere fact of a prior existing fiduciary relationship everything in the absence of proof must be presumed against the trustee who has entered into a con- tract with his cestui que trusty regardless of the question whether confidence has, in fact, been reposed and abused. Of course in all trust relations the existence of confidence will be presumed, and if it appear that any advantage has come to the trustee in dealing with his cestui que trusty the burden will be thrown upon him to show that confidence was not in fact abused. But it has always been held, as we understand it, that this presumption might be overcome by proof of the fact that confidence had not been abused, and that the beneficiary acted, not upon any reliance or confi- dence placed in the trustee, but upon the advice of an in- dependent, professional, disinterested and competent advi- ser. There is a distinction to be made between transactions occurring directly between the trustee and his beneficiary, and those transactions in which the trustee deals with himself or another party. Thus, if a trustee in the execu- tion of his trust sells property to himself, the transaction may be set aside by the cestui que trust as void, without giving any reason or alleging any fraud, or any disadvan- tage or inadequacy of price. In such case there are no two parties to the contract, the trustee dealing witli himself alone, but where the tru.stee deals directly with the cestui que trust the latter having for himself an independent ad- viser, and the trustee making no pretense of advising him, the tran.saction is not voidable at the election of the bene- ficiary, but it will devolve upon the latter, if he would .set it aside, to show some reason therefor. He must show either actual or constructive fraud. Of course the fraud may be .shown in .some in.stances by presumptions. Section 2,219 of the Civil Code provides : " Kvery one who voluntarily assumes a relation of personal confidence with another is deemed a trustee, within the meaning of this chapter, not only as to the person who reposes such —13— confidence, but also as to all persons of whose affairs he thus acquires information which was given to such person in the like confidence, or over whose affairs he, by such confidence, obtains any control." Section 2,228 is as fol- lows : ". In all matters connected with his trust, a trustee is bound to act in the highest good faith toward his bene- ficiary, and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat, or adv^erse pressure of any kind." Section 2,229 ^^ as follows ; "A trustee may not use or deal with the trust property for his own profit, or for any other purpose uncon- nected with the trust, in any manner." Section 2,235 is as follows : " All transactions between a trustee and his beneficiary during the existence of the trust, or while the influence acquired by the trustee remains, by which he ob- tains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient considera- tion, and under undue influence." That these provisions are consistent with the rules of equity, as w^e have construed them, is apparent, we think, when read in connection with the following provision : "The person whose confidence creates a trust is called the trustor; the person /;/ u'honi confidence U reposed is called the trustee; and the person for whose benefit the trust is cre- ated is call the beneficiary." (C. C, Sec. 2,218.) These provisions show that the fundamental principle of the rela- tion of trustee and cestui que trust is that of confidence. In the case at bar Mrs. Colton not only did not rest anv confidence or reliance upon anything said, done, or omitted to be said and done by the defendants, or any of them, but she called in and secured the aid of four or five disinterested and competent advisers; among these was vS. M. Wilson, one of the leaders of the bar of this State, a man of irre- proachable character, in the prime of life, for twenty-five years the warm, personal friend of her husband, and the man whom he had recommended on his death-bed, and she was fully informed by him as to her legal rights. She also obtained the services of Mr. Lloyd Tevis, a skillful and successful financier, to assist Mr. Wilson in his in\-esti- gations as to the business of the corporations. The in- vestigations made by these gentlemen and the plaintiff' lasted for over six months, and were most thorough, care- —14- fiil and diligent. It is found, as a matter of fact, that they had sources of information other than those possessed by the defendants, and that they were, in fact, more tlior- oughly acquainted with, and better qualified to form an accurate judgment as to the condition of the affairs of the company than any of the defendants. Mrs. Colton had also the advice of Mr. Steinberger, an old friend of her hus- band, and the advice and assistance of Mr. Green, his Secretary for many years, and of Mr. Douty, who was a cousin and intimate friend of General Colton, and a busi- ness man of great capacity and experience, and a skillful and expert accountant. All the claims preferred by the defendants on their own behalf were fully discussed, con- sidered and investigated. The subject-matters of the ne- gotiations were of the most complicated nature, con.sisting in part of accounts running through many years and re- corded in many volumes of books and thousands of vouchers and papers relating in part to the transactions, some of which had gone out of the niemor}- of the parties thereto. The Court found as a fact, and it seems practically undis- 'puted, that during the negotiations defendants were ready and willing to answer, and did truthfully answer, all ques- tions asked them and .submitted freely all the books and accounts in their pos.se.ssion, or under their control, to the inspection and investigation of the plaintiff and her agents. The plaintiff and her agents knew, partly from discoveries they made themselves, and partly from information given by the defendants before the compromise agreement was executed, that there were many inaccuracies in some of the statements furnished to the plaintiff. Among other important matters in dispute between the parties, and which were com])romised, was the right to Western Develop- ment Company dividends, amounting, according to plaint- iff 's valuation, to over half a million dollars. At the time the negotiations were in ])rogress the plaintiff saw no justice whatever in the transaction; her heart rebelled against the whole matter. She believed that the defend- ants were unworthy of any credit or confidence, and were endeavoring by all the means in their power to cheat and defraud her. She suspected that the defendants had made some of the charges against her husband, knowing them to be false, and that they had manipulated their books —15— to sustain those charges. No source of information was withheld from them ; no means of ascertaining intelligently the true state of the accounts were covered up before they acted upon and compromised the matters upon which the controversy arose ; every fact which has since been dis- covered could have been discovered before the execu- tion of the compromise agreement, as well as thereafter; the witnesses who could throw any light upon the matters in controversy were within their reach. Mrs. Colton was most anxious to make the settlement. The defend- ants "insisted that they were not bound to discount the future of their securities for her, thus giving her the benefit of their contemplated enterprises and the ex- penditure of more millions. She was not entitled to the profits when she would not share the risks." The property in controversy was of immense value — chiefl\' speculative value. Mr. Tevis "was known as a bold, enterprising and successful speculator. He was intimately acquainted with the railroads and was a man of great wealth, abun- dantly able to pick up the burden where Colton had drop- ped it and carry it along without asking any favors from the defendants," all of which was known to the plaintiff at the time she acted upon his advice and accepted the terms of the compromise. (Findings i8, 55, 57; Supple- ment p. 67). The findings show that the defendants in good faith dis- closed every fact within their knowledge. There is noth- ing in the findings to show that plaintiff or her agents were misled as to any matter except the statement in regard to the number of shares of the Rocky Mountain Coal and Iron Company stock, which they claimed to own, though held by Mr. Colton. Of this matter we shall speak hereafter. Here, therefore, we have a case in which — assuming the existence of a fiduciary relation and that the presumptions as to confidence and the burden as to proof are as claimed by appellant — the undisputed facts show that there was absolutely no confidence reposed by the beneficiary, but that she acted exclusively upon the advice of several dis- interested experts and professional friends, specially selected to investigate and counsel her, because of their ability and familiarity with the affairs of the trustees with whom she was dtaling, and who acted toward her in the highest good faith. —16- To hold that under sitc/i ciraniistancesa. contract, entered into by the parties compromising and settling dispntes of the most doubtful character and value cannot stand, if it subsequently appear that the trustee did not impart to the ccshii (/lie trust not only all the knowledge of the transac- tions of which he was possessed, but all that he might have acquired by diligent and skillful search, would be to place an absolute embargo upon all settlements of disputed questions between parties holding trust relations, although equity favors the amicable adjustment of claims which, like those involved in this settlement, bid fair to become a fruitful source of litigation. Under such a rule it would be difficult to find men fit to be trustees who would accept such a trust; there would be no inducement to compro- mise doubtful matters, however advantageous the settle- ment might seem to be to the cestui que trust, and no trustee, or his sureties, who had settled with his cestui que trust would feel secure in his position until either time or circumstances had dispelled every possible chance of a suc- cessful contest, based upon new evidence or a rise in val- ues. Such a construction of the provisions of our code would not only place them in antagonism to all the author- ities which have explained and applied the rules of equity governing such contracts between trustee and cestui que trust — and the code provisions are but a digest of these rules — but would convert a rule intended to prevent fraud into one creating an incentive to, and a cover of, fraud; because it would afford a convenient method for a party who had repudiated any reliance upon or trust in his trus- tee, and who had acted upon the advice of independent, skilled and di.sinterested champions and his own investi- gations, to turn around when subsequent facts showed that the bargain was to his disadvantage and say in effect: "It is true I did not place any confidence in your statements, and told you that I should not, but should rely on my trusted agents. It is true I acted only in my own inter- est, being sole legatee. It is true you laid before me all the means of information, and I and my agents assumed to act upon them. We had the means of information, and might have discovered the truth, but we were not fully informed. It is sufficient to sa)' \\\dX you did not correctly represent the condition of the bu.siness. It was your duty —17— to do so. I admit that you acted honestly and fairly; that yon did not intend to misrepresent any fact, or any value, and I admit that my means of information were as good as yours were. It matters not that I gave you notice in advance, I should not trust you in anything you said or did, but should rely upon the investigations and advice of my friends, because your representations were not correct. It was your duty to make them full, fair and accurate. I claim a rescission upon the representations you made, althouo;h I did not believe them." If there is a case in which a court of equity has decreed a rescission under such circumstances, it has not been called to our attention. Whatever may have been said as to the presumptions aris- ing out of proof of a fiduciary relation, the fundamental principle upon which rescission is granted is always, and under all circumstances, the claim and consideration that confidence has been reposed and that confidence has been abnsed. No such claim can in reason be made where the party seeking the rescission — being of competent age and understanding, and acting only in his own interest — has undertaken to investigate for himself, called in experts, been given free and fair means of ascertaining the truth, acted upon his own judgment and the advice of friends, and repudiated any confidence in or reliance upon the par- ties with whom he was dealing. It matters not what the relations of the parties have been prior to, or at the time of the negotiations for a settlement and compromise of their disputes, the principle is one of universal application, and it is a principle of common sense and of good policy. It is unnecessary for us to review the authorities on this subject. They will be found, we think, to fully support the views we have expressed, and, in order to make as brief as possible this opinion, which, perhaps, is already unnecessarily extended on this question, we simply cite some of the cases without commenting upon the peculiar features of any of them. We have examined the cases cited by appellant, and find nothing in them which con- flicts with what is said herein. (Kimball vs. Liucoln, 99 111., 578; Gage vs. Parmalee, 87 Id., 330; Casey vs. Casey, 14 Id., 113; Farnum vs. Brooks, 9 Pick., 213; Knight vs. Majoribanks, 11 Beavan, 324; Morse vs. Royal, 12 Vesey; Hunter vs. Atkyns, 3 Mylne and K.; Hagar vs. Thomp- -l.s- son, I Black, 80; Cartriolit vs. Kurnes, 2 INIcCrary, 532; (iedde's Appeal, 80 Pa. St., 460; White vs. Walker, 5 Fla. , 478; Hall vs. Johnson, 41 Mich., 289; Bowman vs. Carithers, 40 Ind., 90; Turner vs. Otis, 30 Kan., i; ]\Iur- ray vs. Elston, 24 N. J. Eq., 310; Korn vs. Becker, 40 Id., 408; De Montmorency vs. Devereaux, 7 Clark & Finnelh, 188; Hough vs. Richardson, 3 Story, 690; Loesser vs. Loesser, 81 K)., 139; Motley vs. Motley, 45 Ala., 558; Kissling vs. Shaw, 2,t, Cal., 425.) It is claimed, however, that the trustee cannot, after negotiations are begun between himself and his cestui que iriist^ dissolve the trust relation " and place the parties at arm's length," and that " the rights of these parties and the rules by which they are to be investigated should be determined by the relation of the parties zvhen their nego- tiations coniDieticed.'''' We see no reason for such distinc- tion. Sugden's definition of the rule applicable in such cases is expressed in the following language: "It must not be understood that a trustee cannot buy from his cestui que trust where he is sui generis; the rule is that he can- not buy from himself. If the cestui que trust clearly discharges the trustee from the trust, and considers him as an indifferent person, he may purchase; but it must clearh' appear that the purchaser at the ti)ne of the pur- chase had shaken off his confidential character by the consent of the cestui que trusty freely given after full information and bargaining for the right to purchase." (2 Sugden on \'endors, 417, bottom paging 693.) There is nothing in this text, or any decision we have seen, requiring a contract preceding the contract to purchase, or compromise, giving the trustee permission to purchase as a basis for a second contract in which the terms of the sale, or compromise, may be lawfully agreed to. If at the ti^ne of the purchase^ or compromise, the trustee has shaken off his fiduciary character, and the confidence which is presumed to result therefrom, it matters not what has occurred immediately preceding or long prior to the final transaction. In other words, if the tran.saction is one in which the trustee may lawfully deal with his cestui que trust by first dissolving the trust relation, it is not too late for him to do so at any time before the cestui que trust is —19— prevented from making a full and fair investigation and consideration of the business in hand, and before he exe- cutes the contract. Other points discussed at the bar are involved in the question whether plaintiff was induced by fraud, actual or constructive, to enter into the compromise agreement — whether there were false representations, concealments, threats or any unconscionable advantages gained b}- de- fendants through their superior opportunities and power. Upon ever}' material issue of fact the Court below found in favor of defendants, except as to a part of the 408 shares of Rocky Mountain Coal and Iron Company stock, and its finding of fact upon that issue was, in the opinion of the Court, insufficient, in view of other findings to support a decree of rescission. Since it is claimed, however, that the specific facts found do show fraud, concealments and undue advantage, not- withstanding the general findings of the Court, which negative the charges thereof, it becomes necessar\- to look into the circumstances under which the compromise was effected. So far as the exhibits of the condition of the W. D. Co. (Exhibits D. and E.) are concerned, the facts found show that there was no fraudulent representation by defendants as to anything contained therein, and that plaintiff did not rely upon them. She relied upon her own judgment and the advice of those who were assisting her, and entered into the compromise agreement after a careful and thor- ough examination of all the books and vouchers. The Court finds that she was not ignorant of any fact or circum- stance material to her rights, that there were no misrepre- sentations or concealments by defendants, but, on the con- trary, they answered truthfully all questions relating to the affairs of the company, repeatedly went over the subjects under investigation with Mr. Wilson, and gave him free access to all the books, and secured for him all the assist- ance and information in their power. The defendants did not pretend to know anything of the condition of the affairs of the W. D. Co. outside of what was shown in its records, Mr. Wilson knew this. They told him so. They gave him every facility in their power of ascertaining the true state of the accounts. They instructed their employes to -20- aid liini as best tliey could. With their consent and ap- proval he had the books carefully and thoroughly exam- ined by experts — men who had been trusted friends of General Colton — one of them his cousin, another his secre- tary. In no part of his testimony does Mr. Wilson indicate that he or the plaintiff placed any reliance upon the state- ments contained in Exhibits D or E, or upon any informa- tion furnished by the defendants with regard to the affairs of the W. D. Co. Mr. Wilson was active, alert, self-reli- ant and zealous in the cause of his client — the widow to whom he had been recommended by his friend Colton as the one man worthy of entire confidence and trust in case of trouble. Spurred on by a keen sense of the trust which had been reposed in him, he devoted his entire time and energy for a period of about six months, laboring with clerks and bookkeepers, until, as he says, he had exhausted and tired himself out, sacrificed his own interests and had "abused these people to the extremity almost of fighting personally." In connection with his deposition in this case there was introduced in evidence his memoranda, taken during the investigations which he and others were making into the affairs of the W. D. Co., which show the most unmistakable care and a painstaking and minute consideration of the subject. Upon this showing, no doubt, it was that Judge Temple was induced to believe and find that plaintiff and her advisers were ignorant of no material fact or circumstance of which she ought to have been informed. The presumption would follow from the fact of investigation that everything material was discov- ered; but the presumption is fortified by the introduction of these memoranda and by proof of the fact that many others had been made which at the time of the trial were lost. Under such circumstances is plaintiff entitled to a rescis- sion of the contract thus deliberately entered into? We think she is not. Her counsel claim that there was actual and constructive fraud, and cite Sections 1,571, 1,572, C. C. ; they say that defendants furnished a list of the assests of the W. D. Co.; that this was equivalent to a positive assertion that the list contained all the assets — an assertion not true, not warranted by the information of the parties making it, and, therefore, fraudulent, although they be- —21 — lieved it to be true; that where a party, acting without belief or without information, makes a representation which is not true, the law imputes to him a knowledge of its falsity, and makes him as fully responsible as if he had such a knowledge. This is true as a general proposition, where the other party has acted upon the representation, relying upon it as correct; but the rule as stated is not upon authority or principle applicable where such party, dis- carding the representation as unworthy of belief, proceeds to inquire for himself, is given full and fair facilities of informing himself, takes independent counsel, and, finally, acts upon his own judgment and that of his advisers. Mis- representations cannot be predicated upon such a state of facts, (2 Parsons on Contracts, 770; Percival vs. Horger, 40 Iowa, 289; Matthews vs. Bliss, 22 Pick., 53; Von Trott vs. Weise, 36 Wis., 439; Hall vs. Johnson, 41 Mich., 289; Light vs. Light, 21 Pa. St., 413; Smith vs. Kay, 7 H. L. C, 775; So. Development Co. vs. Silva, 125 U. S., 258; Bigelow on Fraud, pp. 7, 8 ) We do not find anything in the authorities cited bv the appellant which is in conflict with the views we have ex- pressed. Excerpts from a few of them will show this to be the case. Thus, in Taylor vs. Fleet, (i Barb. 475) the Court said : "If the purchaser has acted upon his own judgment, and has not been influenced by the misrepresen- tations, however untrue, they may have been, he has no right to be released from his bargain. But I cannot con- cur with the counsel for the vendor in his position that the purchaser examined the land with a view to test the ac- curacy of the representations made b}- Fleet. On the con- trary, all the witnesses agree that no personal examination of the land would enable any person not previously ac- quainted with its capabilities to determine whether the statements made by Fleet were true or not. The only means of knowledge within his reach was information to be obtained from those whose experience enabled them to speak from actual observation with respect to the material question which constituted the object for which the pur- chase was made." In Rawlins vs. Wickham (3 de Gex & J., 310) the books showed so plainly the fraud that any man of ordinars' ca- pacity could have detected the fraud. The Court there says: "During the negotiations for the partnership, a paper was produced which has been kept by Mr. Rawlins from that time, giving an account of the assets of the concern. The amount due to the customers of the bank was there stated to be ^ii,ooo and a fraction. Upon ex- amination of the books it appears that the real amount ex- ceeded this by many thousands, a fact which an exmina- tion of the books by any person of the most ordinary com- petency would have shown. * * * Was there any excuse for such a misrepresentation ? As regards Mr. Bailey there was none. He was a professional man tak- ing an active part in the affairs of the bank, and it was his duty to know them wliether he did or not. Mr. Wick- ham was an inactive partner, knowing but little of its affairs, attending only occasionally at the bank, not med- dling with the books, and probably knowing little or nothing of what they contained. * '^ * He joined with Mr. Bailey in producing the statement of ac- counts which I have mentioned, and in ascribing accuracy to it. Now, he ought not to have asserted what he did not know to be true. He ought to have said : ' It may be true; I have a good opinion of Mr. Bailey, and Mr. Gat- trill, but I am not acquainted with the books, and, as far as I am concerned, you must look at them for yourself.' He did not do so, but joined in a representation which was not true, and, for every purpose of pecuniary liability, the case is the same as if he had known that it was not true. * * '^ Mr. Rawlins might have inspected the books. " * He, however, did not ex- amine them, and, improbable as it may appear, I must hold that Mr. Rawlins entered into the partnership in com- plete ignorance of the contents of the books, and continued so for four years. * * * j^g ^y^^j; entitled to believe their representations to be accurate without look- ing at the books. He was entitled to continue in that belief iditil ground for suspicion arose ^ or information zvas given him by one of tJic partners . No such information was given. They did not coniplain that he did not look at the books^ and there is reason to believe that they ivould not have liked him to examine them^ The difference between this case and the case at bar is too apparent for comment. -2.S- In Hif;;-gin.s vs. vSainels (2 Johns & Heiiiinin(^s, 467) the lang^iiage of the Court shows the distinction between the case and the one at bar. It is tliere said : "It is not ne- cessary to show that the defendants knew the facts to be untrue, if they siated a fact which w^as untrue y^^r a frniid- jilciit p2irposc ^ they at the same time not belie: in i^ that fact to be true. In that case it would be both illej^al and im- moral fraud. * * What wei.i^^hs upon my mind is the circumstance that the quality of the lime was not a mere subject of speculation^ but a fact which the plaint- iff, without any special familiarity with the business, could have made himself acquainted with." In Carpmeal vs. Powis (10 Beavan, 44), the Court uses this lant^ua^ye : " Mr. Powis offered to procure the informa- tion. He did procure it and communicate it to the plaint- iff, who relied upon it, and entered into the aj^reement on the credit of it. It turned out to be erroneous ; but before the agreement, and until long after the agreement, Mr. Powis appears to have had no reason whatever to suspect that there was an}' error. He adopted it implicitly on the authority of Mr. Cuthbert^ and very injiocentlv produced it to the plaintiff as a true statement of tJiat upon icJiich the amount of the annuity ivas to be calculated. If the plaintiff was guilty of any error or laches it was in giving too much credit to the statement which had been adopted and com- municated to him by the defendant's agent as true." In Miller vs. Craig (6 Beavan, 437), it appears that the plaintiffs, who lived in Scotland, never had an opportunity of examining the accounts. The Court said that there was no proof whatever that the plaintiffs relied on Miller as their agent in the treaty with the other executors. On the contrary they employed their own solicitor, or law agent, in Scotland. The release was signed in confidence, in the belief that the accounts had been truly stated. In Reynell vs. Sprye (i deOex M. .S:. O., 709), the Court says : " It was said that during the whole of the ne- gotiations Captain Sprye not only left Sir Thomas Reynell at perfect liberty to consult his friends and professional advisers, but even on several occasions recommended him to do so. To a great extent this certainly was the case ; and if the relief sought in this suit had rested on mere mistake, if Captain Sj^rye had not, b\- misrepresentations of —24— fact, "vhich I cannot treat as uninteutioual^ led Sir Thomas to believe that his rights were different from what in truth they were, it may be that the argument' to which I am now adverting would have prevailed. In such a case, per- haps this Court might have considered that it was the foil)- of Sir Thomas Reynell to have acted without advice, and might have refused to assist any person who was so singu- larly little alive to his own rights. ■^'' * * But no such question can arise in a case like the present, where one contracting party has iiitentioially misled the other by des- cribing rigfhts as different from what he knew them reallv to be." In Doggett vs. Emerson (3 Story, 732), it appeared to the Court that the purchase of the plaintiff was made upon an entire credit given to the representation of Williams as to the quantity and quality of tlie timber. The plaintiff resided in Boston and confessedly had no knowledge of timber lands, and had never seen the township in which they were situated. He must, therefore, have placed im- plicit reliance upon the statements of Williams. It ap- peared, also, that Emerson not only knew the contents of the certificates upon which the plaintiff relied, but corrob- orated the statements therein contained. In Lewin on Trusts, cited by appellants, the author says: " Before any dealing with the cestui que trust the relation between the trustee and cestui que trust must be actually or virtually dissolved. * * * 'The parties must be put at such arm's length that they agree to stand in the adverse situations of vender and purchaser, the cestui que trust distinctly and fully understanding that he is .selling to the trustee, and consenting to waive all objec- tions upon that ground, and the trustee fairly and honestly disclo.sing all the necessary particulars of the estate, and not attempting a furtive advantage to himself by means of any private information. * '''' ^^ Where the cestui que trust took the whole management of the sale, hiuhself chose, or at least, approved the auctioneer, made surveys, settled the plan of .sale, fixed the price, and .so had a per- fect knowledge of the value of the property. "^^ * * Lord fCldon .said that if, in any instance, the rule was to be relaxed by consent of the parties, this was the case. * * * Again, a cestui que trust had urged the purchase -2o — upon the trustee, who at first expressed an unwillingness, but afterward agreed to the terms, and the sale was sup- ported. So, where the trustee had endeavored in vain to dispose of the estate, and then purchased himself of the cestui que trust at a fair and adequate price, and there was no imputation of fraud or concealment, Lord Northington said : ' He did not like the circumstance of a trustee deal- ing with his cestui que trusty but upon the whole he did not see any principle upon which he could set the transac- tion aside. * ''^ ^"^ If it be absolutely necessary that the propert)' should be sold, and the trustee is ready to give more than anyone else, he may file a bill in chancery, and apply b}' motion to be allowed to purchase, and the Court will then examine into the circumstances, ask who had the conduct of the transaction, whether there is reason to suppose the premises could be sold better, and upon the result of that inquiry will let another person prepare the particular sale, and allow the trustee to bid.' '' (^Sec. 463.) . In Boyd vs. Hawkins (2 Devereaux Eq., 208) we find this language: "The prohibition of the trustee to pur- chase from the cestui que trust himself, is not found to be so absolute. * -5^ ^v Bargains between them are viewed with anxious jealous}-. It must appear that the relation has ceased, at least that all necessity for activity ifi the trust has terininated^ so that the trustee and cestui que trust are two persons^ each at liberty ivithout the co7icurrence of the other to consult his oivn interest^ and capable of vindicating it ; or that there was a contract definitively made, the ter^ns and effect of ivhicJi were clearly understood^ and that there rcas no fraud or misapprehen- sion, and no advantage taken by the trustee of the dis- tresses or ignorance of the other party. The purchase must also be fair and reasonable." Mr. Pomeroy, in his work on Equity Jurisprudence, at Section 855, uses this language: "When parties have entered into a contract or arrangement based upon uncer- tain or contingent events, purposely as a compromise of doubtful claims-arising from them; and where parties have knowingly entered into a speculative contract or transac- tion — one in which they intentionally speculated as to the result; and there is in either case an absence of bad faith, — 2»i— violation ot confidence, misrepresentation, concealment and other ineqnitable conduct mentioned in a former parao^raph; if the facts upon which such agreement or transaction was founded, or the event of the agreement itself, turn out very different from what was expected or anticipated, this error, miscalculation, or disappointment, although relating to matters of fact and not of law, is not such a mistake, within the meaning of the equitable doc- trine, as entitles the disappointed party to any relief either by way of cancelling the contract and rescinding the transaction, or of defense to a suit brought for its enforce- ment. /// siu/i classes of agrce)}ic7its and (ratisaciiois tJic parties are supposed to calculate the chances^ and they cer- tainly assume the risks luhere there is no element of bad faith^ breach of confidence^ misrepresentatio7i^ culpable concealment or other like conduct amounting to actual or constructive fraud.'''' In Badger vs. Badger (2 Wall., 73) it appears that Brooks took advantage of his position as partner, agent and brother-in-law of Martin intentionally to conceal from the latter the prosperous condition of the concern, and pur- chased his interest for a price totally disproportioned to its real value. So, also, in Addington vs. Allen (11 Wend., 383) there appeared an actual intent to mislead and defraud the plaintiff. In Safford vs. Grout (120 ]\Iass., 26) the character of the representations was not disclosed by the record. No ob- jection was made that they were mere expressions of opinion, judgment or estimate, or that they were intended to be understood as expressions of belief only. The Court said: " We must presume that they were legally sufficient to support the action ; that is to say that they were state- ments of facts susceptible of knowledge, as distinct from matters of mere opinion or belief; and that they were calculated to have, and did have, material influence in deceiving the plaintiff as to the maker's means and ability to pay in inducing them to part with their property." All that is decided in Redgrave v.s. Hurd (20 Chanc. Div., 24) is "that, where afal.se representation has been made it lies upon the party who makes it, if he wishes to escape its effect in avoiding the contract, to show that, although he made the false representation, the defendant, the other party, did not rely upon it. The onus probandi is on him to show that the other party waived it, and re- lied on his own knowledge. Nothing of that kind appears here." In Wells vs. Millet (23 Wis., 67) the Court assume that, if the defendant had been careless or indifferent to ordinary and accessible means of information as to the truth or falsehood of the representation which had been made, he would have had no right to rely upon that. In Rohrschneider vs. Knickerbocker L. Ins. Co. (76 N. Y. , 218) the Court said that "the fraud was really undis- puted. The managers of the defendant had made the false representations, and they kneic them to be false^ as the div- idends of the company never had paid the notes thus given for the one-half of the annual premiums. But on the contrary, such dividends had always fallen far short of making such payments; and they must have known that they generally, if not always, would fall short. There was, in fact, no foundation or excuse whatever for making the untrue representations. * * * It is said on behalf of the defendant that the plaintiff did not rely upon these representations, and was not induced by them to take the policy. But there was sufficient evidence from which the jury could have found that she did thus rely, and was thus induced." In Baker vs. Spencer (47 N. Y. , 564) the Court said that the appellant's claim that the settlement of the action by the giving of a three hundred-dollar note operated as a compromise of the alleged fraud, and was a bar to the action, might have been well taken if it had appeared from the pleadings, or the findings, that at the time of the .set- tlement the defendant had knowledge of the facts consti- tuting the fraud alleged; but that such claim was not well founded, being based entirely upon the statement that after giving the note, the plaintiff began to suspect that the defendant had not the right to sell and transfer the agency. The Court said: "It does not appear from the complaint, or findings, that the plaintiff had any grounds for his sus- picion, or any information on the subject, nor what defense was interposed on the trial before the Justice in the action on the five hundred-dollar note." The Court then pro- -2.S- ceeds to distinguish the case before it frotii the case of Adams vs. Sage (28 N. Y., 103). lu the latter case the Court held that "where a party to whom representations were made has the means at hand of determining their truth or falsehood, and resorts to such means, and, after investi- gation, avows his belief that the statements are false, and acts upon such belief by bringing an action to recover money obtained from him by means of the fraudulent rep- resentations, he is not entitled to credit when he alleges that upon reiteration of the truth of the same statements by the same party he was induced to enter into an agree- ment to settle the suit, and was thereby defrauded. Such investigation and ascertainment of facts and belief in the falsity of the representations made, exclude the idea that any reliance could have been placed upon the repetition of the falsehood, and the verdict of a jury, or finding of a referee to the contrary, should be set aside, as unsustained by the evidence. Indeed, upon such evidence it would be error to submit to a jury the question whether reliance was or was not placed upon the reiterated false representa- tions. Under the circumstances assumed the law presumes that the party relied in making the agreement upon his own investigation, and not upon the representations of the party with whom he is dealing. This conduct in acting in opposition to the knowledge acquired by inquiry from one who knows the facts is attributable, and is set down by the law, to his own indiscretion and recklessness, and not to any fraud or surprise of which under the circumstances he has any right to complain. * * =^ In 2 Parsons on Contracts, 270, the rule is laid down in relation to defenses to actions on the ground of false representations that it must appear that the injured party, not only did, in fact, rely upon the fraudulent statement, hut had a right to rely upon it in the full belief of its truths for otherwise it was his oii'n fault or folly, and he cannot ask of the laic to relieve him. Many of the cases cited by the author to sus- tain this rule hold that, if the truth or falsehood of the representation might have been tested by ordinary vigi- lance and attention, it is the party's own folly if he neglect to do so, and he is remediless.'" In Perkins vs. Gay (3 S. and R. 331) the Court said : " It is a principle of equity that the parties to an agreement —20— must be acquainted with the extent of their rights, and the nature of the information they can call for respecting them, else they will not be bound. The reason is that they proceed under an idea that the fact which is the in- ducement to the agreement is in a particular way, and give their assent, not absolutely but on conditions that are fals- ified by the event. (Citing cases.) But where the parties treat upon the basis that the fact which is the subject of the agreement is doubtful^ and the consequent risk each is to encounter is taken into consideration in the stipulations assented to, the contract will be valid notwithstanding any mistake of one of the parties, provided there be no conceal- ment or unfair dealing by the opposite party that would affect any other contract. * * * Every compromise of a doubtful right depeuds on tJiis principle. "^ '- * * There is an express mutual abandonment of their former rights upon an agreement, that whether they be good or whether they be bad, neither is to recur to them on any pretense whatever, or claim anything that he does not derive from the terms of the agreement. Each takes his chance of obtaining an equivalent for everything he relin- quishes, and if the event turn out contrary to his expecta- tions, so much the worse for him. If there be no intention of fraud, no unfair dealing, and neither party has more knowledge of the fact misconceived "than the other had, the contract will bind." In Peck vs. Derry i^-] Chanc. Div., 577), while the Court did not attribute to the defendants any intention to commit a fraud, it found that they had made a statement which was incorrect to induce the plaintiff to act upon it, luitJioiit any sufficient reason for making tJiat statement.^ or any sufficient reason for believing it to be true. Kerr on Fraud and Mistake thus states the proposition : " If a man to whom a representation has been made knows at the time, or discovers before entering into a trans- action that the representation is false, or resorts to other means of knowledge open to him and chooses to judge for himself in the matter, he cannot avail himself of the fact that there has been misrepresentation; * ■^" * or say that he has acted on the faith of trie rcprese)itatio)i. '^" * If the party to whom the representations were made, him- self resorted to the proper means of verification before en- -:50— tering into the contract, it may appear that he relied on tlie resnlts of his own investig'ation and inqniry, and not upon the representations made to him by the other party. * * * If the subject is in its nature uncertain, if all that is known is matter of inference or something; else, and if the parties making- and receiving representations on the subject have equal knowledge and means of acquiring knowledge, it is not easy to presume that the representa- tions made by the one could have much or any influence upon the other/' (Pages 75 to 78.) Speaking of fiduciary relation the author says : "A transaction between them (trustee and cestui que trust) will be supported if it can be shown to the satisfaction of the Court that the parties were notwithstanding the relation substantially at arm's length, and on equal footing, and that nothing has happened which might not have happened had no such relation ex- isted. The burden of proof lies in all cases upon the party who fills the position of active coujidoicc to show that the transaction has been fair. If it can be shown to the satis- faction of the Court that the other party had competent and disinterested or independent advice, or that he per- formed the act, or entered into the transaction voluntarily, deliberately and ad\'isedh', knowing its nature and effect, and that his consent was not obtained by reason of the power of influence to which the relation gave rise, the transaction will be supported.'' In Shaw vs. Stine (8 Bosw., 159) it is held that the true test in ca.ses of false representations may be found in the inquiry whether the plaintiff would have entered into the contract if the false representations had not been made. If he would, then the false representations did not con- tribute to the sale. In Matthews vs. Bliss (22 Pick., 53) it is held that where one of the parties has an advantageous knowledge, if he exercise a studied effort to prevent the other from coming to the knowledge of the truth, or if there be any, though slight, false and fraudulent suggestion or reprc'-entation, then the transaction is tainted with turpitude, and alike contrary to the rules of inorality and of law. In Gilbert vs. Endean (9 Chanc. Div., 268) there was a material fact intentionally concealed, namelv, that the son was without means because the father was still alive, and was still rcfusinir to assist him. -31 — Some of these cases, it will be observed, involved trans- actions between trustee and cestui que trust and are ap- plicable to the first proposition discussed herein. After the execution of the compromise ag^reement the W. D. Co. paid an indebtedness of over $3,000,000, with interest, to the C. P. with S. P. bonds at 90 cents on the dollar. These bonds were represented to plaintiff to be worth 60 cents on the dollar. It is now claimed that the transfer to the C. P. , a few days after the compromise, at 90 cents on the dollar is conclusive evidence that they were worth 90 cents on the dollar at the time they were repre- sented to be worth 60 cents and that this was a fraud on the plaintiff — at least that there is an equitable estoppel preventing defendants from claiming that they were not worth 90 cents at the time of the compromise. The trans- action seems to have been one in which the defendants practi- cally dealt with themselves. They paid off the debt of the W. b. Co. to the C. P. Co., with bonds of the S. P. Co., and themselves fixed the value of the bonds at what they sup- posed they would be worth when they should be called on to pay the C. P. bonds. Equitable estoppels must bfe mutual. If the defendants in attempting to pay off some debt similar to that of the W. D. Co., about the time the compromise was effected had rated the S. P. bonds at 25 cents on the dollar would their act fix irrevocably the mar- ket value of the bonds so that Mrs. Colton would have been bound by tJieir act and forever thereafter estopped from proviui^ that in fact they were zcorth more? The transaction was but a temporary mode of settling up a corporate obliga- tion. The Court weighed it as evidence, and as the intrin- sic value of the property did not enter into the questions involved in the compromise, we do not perceive any ground upon which plaintiff can complain. (Friz vs. Binn, 55 Cal., 461; 2 Sutherland on Damages, 374; Kountz vs. Kirkpatrick, 72 Penn., St., 389). Furthermore, the values set opposite to the names of the stocks men- tioned the Court finds were not relied upon, and, in fact, the controversy was chiefly over this very matter, I\Ir. Wil- son insisting all the time that they were too low and the defendants contending that they could not afford to allow more for them. (See Findings 26 and 27.) The charge that Mrs. Colton was induced b\- threats to —32— enter into the contract is unequivocally denied by Mr. Wil- son in the following testimony : " O. — Now, in the course of these negotiations, did the defendants or any of them, make any threat in reference to aspersing the menior}' of General Colton, unless a settle- ment was made, or anything of that kind ? "A. — No, sir; nothing of the kind." (See Findings 43 a"d 45). Counsel for appellant rely with much confidence for a re- versal of the judgment upon the 20th finding of the Court, which is as follows : "That the individual defendants, prior to the execution of the contract, ' Exhibit F,\and during the negotiations which preceded and led to that contract, stated and represented to the plaintiff that D. D. Colton had in his hands and standing in his name on the books of said com- pany 408 shares of the capital stock of the Rocky Mount- ain Coal and Iron Company, which were in truth and in fact the property of and belonging to Stanford, Hunting- ton, Crocker and the estate of Mark Hopkins, in equal pro- portions, and which were held by said Colton in trust for them and said estate of Mark Hopkins, and that upon pay- ing the plaintiff, as successor of said D. D. Colton, the cost price of said 408 shares of stock, which they represented to be $6,625.92, they were entitled to have said 408 .shares assigned, transferred and delivered to them. That the plaintiff relied upon said statement and representation, and accordingly did assign and transfer said .shares of stock by and in .said agreement and contract .sought to be rescinded b\- this action. "That said representation was not true and was made by said defendants without due circumspection and was unwarranted by the facts within their knowledge. "That in truth and in fact said Colton did have in his possession, and there were standing in his name on the books of the company, only 240 shares of stock, which he held as trustee of said defendants and the estate of Mark Hopkins, and to that extent of 168 shares, .said representa- tion was a false representation. " That .said representation, however, was not made with any actual fraudulent intent, but through inadvertence and lack of due circumspection. And that said contract would have been executed by the plaintiff had she known the truth in regard to said stock, if the defendants, upon being made aware of the facts, had still insisted upon it. " That during the negotiations which resulted in the making of the compromise expressed in ' Exhibit F,' Mr. S. M. Wilson knew precisely wdiat the claim of defendants was as to the aforesaid 408 shares of said Rocky Mountain Coal and Iron Company stock ; had the books of last men- tioned corporation before him, including the dividend book ; knew that Colton had collected dividends for sev- eral years on said 408 shares of stock ; knew that the claim of defendants to said 408 shares of Rocky Mountain Coal and Iron Company's stock was supported by no written evidence. "Defendants also claimed from the estate of Colton the dividends on the stock of the Rock\- Mountain Coal and Iron Company, which they asserted to be held in trust for them." It is contended that this finding conclusively establishes the fact that plaintiff was induced to enter into the con- tract by a false representation as to a material fact ; that it is immaterial whether the representation was the result of an innocent mistake, it having been made without due circumspection, which is the equivalent of a positive asser- tion of a fact without knowing it to be true, or being war- ranted by the information of the person making it ; that it is not necessary the false representation should have been the sole or controlling inducement to the making of the contract, it being sufficient to defeat the contract if it ap- pear that it was one of the inducements and a motive of her action ; that the Court could not say as a matter of fact or matter of law if she had known the truth in regard to the stock, she would have executed the contract, provided the defendants, upon being made aware of the ficts, had still insisted upon it. There are cases in which it could not be said, in view of the evidence, that the party would have entered into the contract if the false representation had not been made, and there are many cases reported in which the courts have said that it was error to apply the rule referred to. But where it clearly appears from the evidence that the contract would have been made if the truth had been -84- kiiown, we see no reason why the Court may not find tlie fact and act upon it. If, as a matter of fact, the contract would have been without regard to the character or force of the representation relied upon for a rescission, the plaintiff cannot complain. As said by Judge Temple : '' The power to cancel a contract is a most extraordinary power. It is one which should be exercised with great caution, nay, I may say, with great reluctance, unless in a clear case. A too free use of this power would render all bu.siness uncertain, and, as has been said, make the length of a Chancellor's foot the measure of individual rights. The greatest liberty of making contracts is essen- tial to the business interests of the country. In general the parties must look out for themselves." Our Code provides that a contract may be rescinded '4f the consent of the party rescinding ^ * '''' was given by mistake, or obtained through duress, menace, fraud or undue influence." (Section 1,689, C. C.) Section 1,565, C. C. , says : " The consent of the parties to a contract must be : " I. Free; "2. Mutual ; and "3. Communicated by each to the other." Sections 1,566, 1,567 and 1,568, C. C, read as follows: "1,566. A consent which is not free is nevertheless not absolutely void, but may be rescinded by the parties, in the manner prescribed by the Chapter on Rescission." " 1,567. An apparent consent is not real or free when obtained through : " I . Duress ; " 2. Menace; "3. Fraud; "4. Undue influence, or, "5. Mistake." "1,568. Consent is deemed to have been obtained through one of the causes mentioned in the last section only ci'/icn it rcoii/d not have been given had such cause not existed. ' ' The most that can be said in support of appellant's contention is that there is a conflict in the decisions on the subject, but the .sections of the Civil Code above quoted are clear and unambiguous in language, and they seem to establish the rule beyond all controversy that the contract cannot be rescinded when it appears that consent would have been given and the contract entered into notwith- standing the duress, menace, fraud, undue influence or mistake relied upon. A misrepresentation as the basis of rescission must be material, but it can be material only when it is of such a character that if it had not been made the contract would not have been entered into. The mis- representation, it is true, need not be the sole cause of the contract, but it must be of such nature, weight and force that the Court can say "without it the contract would not have been made." That the Code Commissioners recognized the fact of a conflict of authority upon this subject, and desired to settle it in accordance with what seems to us to be the plain meaning of the language used in Section 1,568, C. C, is apparent, we think, from the authorities quoted by them in a note to that section. Thus, in Flight vs. Booth, (i Bing New Cases, 376), the Court said: "It is extremely difficult to lay down from the decided cases any certain, definite rule which shall determine what misstatement^ or misdescription in the particulars shall justify a rescinding of the contract, and what shall be ground of compensation, only. All the cases concur in this, that where the mis- statement is willful, or designed, it amounts to fraud; and such fraud, upon general principles of law, avoids tlie contract altogether. But with respect to misstatements which stand clear of fraud, it is impossible to reconcile all the cases; some of them laying it down that no misstate- ments which originate in carelessness, however gross, shall avoid the contract, but shall form the subject of compen- sation only; * ^' * whilst other cases lay down the rule that a misdescription in a material point, although occasioned by negligence only, not by fraud, will vitiate the contract of sale'. In this state of discrepancy between the decided cases, we think it is, at all events, a safe rule to adopt, that where the misdescription, although not proceeding from fraud, is, in a material and substantial point, so far affecting the subject matter of the contract that it may reasonably be supposed that, but for such mis- description, the purchaser might never have entered into -:m\- the contract at all, in such case the contract is avoided altogether and the purchaser is. not bound to resort to the clause of compensation." In Shaw vs. Stine (8 Bos- worth, 159), a case also cited by the Code Commissioners, the Court said: " The true test in such cases may be found in the inquiry whether the plaintiff would have sold the goods if the false representations had not been made. If he would, then the false representations did not contribute to the sale, for he would have made the sale without them." They also cite Section 1,819 of the Civil Code of Louisi- ana, which reads as follows: " The error in the cause of a contract, to have the effect of invalidating it, must be on the principal cause when there are several; this principal cause is called the motive^ and means that consideration without which the contract would not have been made." (See, also, the cases cited by appellant and reviewed herein on another topic.) Here the Court found that plaintiff never intended after the death of her husband to go on with the enterprises in which he and the defendants had been interested — that she did not intend to take any further risks in the business ventures; that the transaction was a lumping settlement, all parties understanding it to be such, and that no accurate adjustment of the accounts could be had; that the repre- sentatioji as to this stock zcas made ivithoiit any actuat fraud- ulent intent^ but through inadvertence^ and the plaintiff ivould have executed the contract sought to be rescinded had she k)io7vn the truth in regard to the matter if defendants had insisted 07i it ; that Wilson knew exactly what defend- ants' claim as to the stock was, had the books of the com- pany, including the dividend book, examined them, knew that Mr. Colton had collected dividends, and that defend- ants' claim was not supported by any written evidence; that Wilson made a thorough investigation into the affairs of the R. M. C. & I. Co., and had many sources of informa- tion other than those possessed by the defoidants^ and was more thoroughly acquainted with and better qualified to form an accurate judgment as to the condition of the affairs of that company than were the defendants, or either of them; that Mr. Douty, cousin and friend of Mr. Colton, and bookkeeper of said company; Mr. Green, Secretary of General Colton in his lifetime, and Mr, Steinberger, an 37— old friend, frequently consulted with plaintiff and Wil- son with regard to the business in hand; that plaintiff placed no reliance upon the defendants, and had no con- fidence in them; and that before consummating the agree- ment, she had. discovered many inaccuracies in the state- ments they had presented. At that time there was one error in the account of the W. D. Company, which would, if known, have shown the liabilities of that company to be $1,000,000 greater than they were represented. In a transaction involving such vast properties and values as we find here the amount involved in this particular transaction is comparativel}^ a small item, only about $10,- 000. But if the defendants had relied upon their strict rights in regard to this stock they would have been entitled to receive back the dividends on the 240 shares wrongfuU}' appropriated, with interest on each one, from the time it was so taken, and plaintiff would have been entitled to re- ceive the purchase price of the 240 shares and interest upon it from the time it was paid. So that if the truth had been stated and the controversy as to this particular stock had been settled upon a fair accounting, plaintiff would not have been more than $1,000 or $2,000 better off than the set- tlement left her. From all the circumstances of the case Judge Temple concluded that this representation as to the 168 shares had no material influence. It is true, the Judge states, " that the plaintiff relied upon said statement and representation, and accordingly did assign and transfer said shares of stock by and in said agreement and con- tract sought to be rescinded in this action." Plaintiff believed — at least assumed — the statement of defendants as to this stock to be true, and therefore assigned it. This is entirely consistent with the finding that she would have executed the compromise agreement had she known the truth in regard to the stock. From all the circum- stances, especially the testimony of Mr. Wilson, it is made very clear that this representation was not an inducing cause of plaintiff 's action. Speaking upon this subject, the Court, in its opinion, said that "W^ilson concluded it would do no good unless he could satisfactorily explain away charges of appropriating $181,000. In comparison with these figures the sum involved in this unwarranted assertion is small. But, I think, on general principles. 311784 in a matter of such inagiiitiide as this, such a mistake or misrepresentation would not justify setting aside the agree- ment, especially where, as here, expenditures have been made by the defendants on the faith of the agreement, which have materially enhanced the value of the property involved in the litigation." In these observation of the learned Judge we full)" concur. It remains onh- to consider whether there was any un- conscionable advantage taken of plaintiff. This question must be determined, not in the light of subsequent events, but upon the circumstances existing at the time of the negotiations and the execution of the contract. The Court found that defendants did not obtain great advantage, or any advantage over plaintiff, and that the agreement was fair, just and equal. (Finding 45.) The question whether there has been an undue advan- tage — an unconscionable exercise of a superior power — de- pends largely upon the situation of the parties at the time of the negotiations. The immediate cause of the trouble between the parties arose from the fact that after the death of General Col ton, who had been President and Treasurer of the R. M. C. & I. Co. from January i, 1871, until the time of his death, the books and papers of that corporation showed that he had used large sums of money belonging to that company, for which he had never accounted. He had also taken large amounts which he designated as salary, in contra- vention of the terms of his agreement with Mr. Crocker, and with the other associates. There were also some seri- ous irregularities in his account with the W. D. Co., of which he had been manager from its organization in De- cember, 1874. The latter company was heavily in debt. It owed at that time to Stanford, Crocker and the estate of Hopkins, over $10,000,000. Its assets consisted chiefly of railroad stpck and bonds wdiich had no market value. Mrs. Colton concluded before the commencement of the negotiations that she could not go on with the enter- prise in which her husband had been interested. (These facts are found by the Court.) In one of the preliminary interviews with Mr. Crocker, when asked whether she wished to pay for the stock pur- chased bv Mr. Colton, and continue along in the execution -39— of the corporate schemes which her husband had helped to advance, she replied that "she was in no condition or state to build railroads," and her chief adviser, IMr. Wilson, said in his testimony, "very early in the conversations that I had with Mrs. Colton it was agreed and understood be- tween us that she was to sell out her interest there, and not to remain in the railroad. That was our leading prop- osition from the beginning of my relation with the busi- ness, and we never swerved or never wavered on that. * ^ * We had made up our minds that she should not go ahead. * * ^'' We had already determined that she should not go ahead, and would get out if she should get a certain sum of money." It must be remembered that the plaintiff herself first sought a settlement — a fact which deserves attention. As was said in Morse vs. Royal, 12 Vesey, 275, by Lord Eldon : " This is not a trustee lookr ing around him and fixing his eye upon this property, as increasing in value. It is in evidence that Mor.se deter- mined to sell it, and if he could not get what he wanted that he would put it up at Gara way's ; that he frequently teased Vanheylin to purchase it, who was reluctant, but at last said he would go the length of giving ^5,000.'' So in the case at bar, Mr. Huntington, in his deposition, sa\s that he was teased into making the settlement. In many cases we have examined, the fact that the party en- deavoring to rescind the compromise agreement made the first proposal, and persuaded the other party to enter into the agreement, has been adverted to and considered by the Court as an important factor in determining the rights of the plaintiff to a rescission of the contract. (Harrison vs. Guest. 6 deGex ]\I. & G., 433 ; Montesqueiu vs. Sandys, 18 Vesey, 311.) The evidence before us shows, without conflict, that the defendants did not want to make the settlement with plain- tiff which was made, or any settlement at that time. The circumstances were .so unfavorable for the prosecution of the plans, which had been laid out, that the surviving as- sociates believed they required more help financial and ex- ecutive, rather than more property in the hands of, and to be managed b)-, the survivors. Mr. Wilson, in his dispo- sition, referring to this matter, says: ''Several times during our later negotiations they had stated that they did -40— not care about buying her out; they would do it at certain prices, at this rate; but they would prefer she should go on and meet her obligations, and be enabled to meet her advances for the needs of the building of the railroads, if they would be called for from time to time; that they would prefer that she should stay in; they wanted money; they had not any money to pay out, and they wanted money. They preferred to get money in rather than to pay it out." The Court also found that the defendants, at the time they requested plaintiff to continue along with them in the corporation, offered to manage her interest for her as well as they could their own, and promised that she should receive the full benefit of their knowledge and experience, and that they would get every dollar they could, and " share with her to the last cent." (Finding4i). The Southern Pacific Railroad was finished to the Colo- rado river, at Yuma, in September, 1877. Mr. Hopkins has always been opposed to building the road east of the Colorado, and for that reason the work of construction stopped at that point. After the death of Mr. Hopkins, which occurred on March 29, 1878, Mrs. Hopkins was very unwilling, in fact, was probably unable before the dis- tribution of the estate, which was in process of admini- stration, to furnish any money, and for that reason opposed the W. D. Co. engaging in any new schemes. As stated before, that company was, at the time, heavily indebted to various parties, and its assets consisted of unmarketable stocks and bonds. After the death of Mr. Hopkins the surviving associates concluded that they would build the road east. The organization of a new construction com- pany had been agreed upon during General Col ton's life- time, and but a short time before his death the Southern Pacific of Arizona was incorporated, and he became a mem- ber thereof, with 30,000 shares of the capital stock in his name. The associates had lost the aid and encouragement of both Mr. Hopkins and General Colton, in whose execu- tive ability and good judgment they had unlimited confi- dence. On May 5, 1879, the Supreme Court of the United States affirmed the validity of the Thurman Act, which took from the defendants 25 per cent, of the net earnings of the Central Pacific to .secure the Government. At that time the Central Pacific was apparently the source —41 of all income and credit to the defendants. The debt of the Central Pacific was over $100,000,000. The affirmance of the validity of this Act threw the associates, especially Mr. Colton, in great despondency. He declared that the construction plant should be sold, and that no more road should be built until they had money laid up in bank. He declaimed bitterly against the communistic tendency of the times. It was a year of remarkable political ex- citment. There was a general business depression all over the countr>-, and, hi fact, the whole commercial world, for a year or more preceding the time of these negotiations. In the midst of these negotiations there was in session in this State a Constitutional Convention, which formulated and promulgated the Constitution ratified in May, 1879. Into this Constitution there were incorporated many new and novel features, especially those relating to the taxation of railroad property and the fixing of freights and fares. The outlook for the parties was very dark. Of course, it is easy to say, in the light of subsequent circumstances, that their fears as to the evil effects of the provisions of the new Constitution were largel)' groundless, but there was a real panic in railroad aftairs at that time. True, confidence was soon restored and their fears have not been realized. It certainly is not the fault of these defendants that they became despondent during that period, or that the tran.s- actions, unfortunately for this plaintiff, were consummated during such gloomy times. It was impossible for them to discontinue their operations without utter disaster to all their enterprises. Their road was built several hundred miles into a des.sert. To make it useful at all it was nec- essary to connect it with the Eastern system of railroads. There was actual danger of active competition. To make the road a success this competition had to be headed off. The value of the assets of the W. D. Co. depended almost entirely upon the completion of the road which had been projected. It is important, we think, that these facts .should be remembered in determining the fairness of the trans- action between the parties. It is the misfortune of the plaintiff that she had not the means or disposition to accept and act upon the proposition made by the defendants to continue on with them in their operations. It is an impor- tant fact to remember, too, that the demand for the rescis- —42— siou of the compromise agreement came from the plaintift over two years after the execution of the contract, and at a time when the gloom and depression had given way to an active "boom'' in railroad business — a time when there was a most unprecedented demand for railroad securities, owing to which the defendants found themselves in a most prosperous condition. The Court below evidently con- sidered the matter of delay in bringing this action an important factor, especially as the plaintiff had success- fully forced a settlement upon the defendants — at a time when many of their securities had no market value, when they were all subject to great fluctuation, and when the question of the solvency or insolvency of their con- cerns depended solely upon the market value of such secu- rities — and had deliberately entered into the settlement with full means of information, and upon full advice of many competent friends. The failure of plaintiff to inform herself as to the facts upon which she relied, and to proceed to rescind the contract, until the property had, under for- tuitous circumstances, become immensely enhanced in value, is an important circumstance to be considered. (Nicholson vs. Janeway, i6 N. J. Eq., 285; ^Murray vs. Elston, 24 Id., 310; Twin Lick Oil Company vs. IMarbury, 91 U. S., 587; Kitchen vs. St. L. K. & R. W. Co., 69 Mo., 224). Mrs, Colton was determined to get out of the enterprises without waiting and taking her chances on creating a mar- ket. Her one-ninth of the indebtedness due from the W, D. Co. to Stanford, Huntington, Crocker and the estate of Hopkins, amounted to over $800,000, If defendants had desired to take any advantage of plaintiff their opportu- nities were unbounded. If they had simply refused to pay her any money, what would have become of her? They had a perfect right to refuse to buy her out or furnish her with money with which to meet her outside obligations. The estate was indebted to defendants to the extent of three-quarters of a million of dollars, and was pres.sed with claims amounting to over $175,000. These claims could not have been met if defendants had not supplied plaintiff with money to pay them. They paid a note of Colton to Michael Reese which alone amounted to over $75,000, From October, 1878, to the time of the settlement plaintiff —48- had been allowed to draw about $175,000 for her own use, and to pay off the debts of the estate. The situation of the plaintiff at that time is best expressed in her own lan- guage. In a letter to Mr. Hunt, dated JMay 8, 1879, ^^^ says: " Now, I have managed wonderfully well. Tlie rail- road people agreed to let me draw for my household expenses, * ^^ ^^' I have paid a note, bearing interest at 8 per cent, of $25,000. I have paid a note on call (no interest) in Europe of $9,000. I have paid $18,000 on a call note bearing 8 per cent; a note of $25,000, held by the National Gold Bank, of whom David was a Director. I held 100 shares of this bank stock, and I sold it for 85 cents to the bank, so I still owe them $7,000, which I am paying them interest on. They have treated me very nicely, but I wish to pay them as soon as possible. Then there were about three thousand dollars of bills coming in, owing on our country place for labor and lumber for improvements, other immediate obligations of a sacred nature of about three thousand dollars. Now we have cut down at every turn and corner. * * * They have once or twice asked if I was making invest- ments, and the last time they drew they declined to allow me any more until we had made a .settlement. This set- tlement I am anxious to make and am waiting their moves. Now you will see that I am not idle. I have had a hard struggle. I have lain awake nights wondering how I was going to pay a note coming due. I do not believe the railroad people will settle squarely with me. I am afraid I shall have trouble." (Pp. 9,141-43.) " I talk business with no one except ni)- lawyer. I have had a sale of thoroughbred stock from the farm. I ha\e sold the carriages and horses, except just such as we posi- tively needed; I will send you a catalogue. While I have no business experience, I am learning that I have good judgment in many things, and when I depend upon myself I do far better than when I depend on others." (P. 9,- 145.) As stated before, the defendants were under no obligations to purchase from the plaintiff". All parties were in great distress. Plaintiff was in" need of money; so were the defendants. If defendants had desired to take an unfair advantage of Mrs. Col ton, all that was necessary -44- to accomplish their aim was the enforcement of their claims against the estate. No purchaser other than de- fendants for the securities in which the estate was inter- ested could be found. Defendants were not to blame for that circumstance. If plaintiff had been put to a forced sale and defendants had seen fit to take advantage of their position, and had purchased the interest of the estate at even nominal figures, could plaintifi^ have complained, except from a moral standpoint ? Mr. Tevis was a man of great wealth, familiar with railroad matters, and the affairs of the companies in which the parties were inter- ested. Defendants' statements as to values were mere matters of opinion, and they were so understood by every- body concerned. Mr. Wilson and Mr. Tevis were as com- petent to judge as to the value of the securities as were the defendants. The defendants did not deny that the stocks would be worth more in the future; they expressly so declared. They had confidence in their own ability and the eventual success of their enterprises, but plaintiff had no confidence in them or their schemes. It is the misfortune of the plaintiff — not the fault of defendants — that the prospect of success was so poor. We must be careful not to judge a transaction of this kind in the light of subsequent events. There is a natural inclination to do so. It must be remembered, too, that Mrs. Colton was not destitute of coercive power. Mr. Tevis told defendants they could not afford to have litigation with plaintiff — the widow of their old associate; that it would be prejudicial to themselves as individuals and to all their enterprises; that she would have the sympathies of the public, etc. Staggering as they were under heavy burdens, litigation meant disaster. Their securities would be injured, and the expense of a protracted trial such as would follow a full investigation into the affairs of the company would seriously cripple them. Concessions had to be made on both sides or ruin would fall upon both. Concessions were made, and they were honestly and fairly made. All parties acted upon tlieir best information as to the amount and character of the property in controversy, and accord- ing to their best judgment as to the value thereof. Mr. Colton had undertaken to carrv a burden which was be- -45- yondhis strength, and for Mrs. Colton to attempt to carry it was a proposition which was entirely discarded as an impossibility before the negotiations began. The inability of plaintiff to go on was as embarrassing to defendants as it was to her. By the terms of the compromise plaintiff was released from corporate liabilities amounting to mil- lions of dollars. How can unfairness or inadequacy be predicated upon such conduct and such facts ? The statement of the cir- cumstances is sufficient, /we think, to demonstrate the truth and justice of the finding of the Court that defen- dants were guilty of neither threats, concealments, nor un- due exercise of a superior position and power, but that the negotiations which culminated in the contract Exhibit F were fair, just and equal. Other points are made by appellant which we do not deem necessary to consider at length. It is said that the findings do not cover the issues, that the Court adopted an erroneous theory as to the relation of the parties — tried the case on one theory and decided it on another ; drew erroneous conclusions of law from the facts found, proved and admitted ; found conclusions of law where facts should have been stated ; that the evidence is insufficient to justify the findings of the Court in certain particulars — the most important of which are, the evidence shows, that INIr. Wil- son was not an independent adviser ; that Mr. Tevis was not possessed of information in regard to the affairs of the corporations to enable him to give reliable advice ; that plaintiff would not have entered into the contract had she known the truth as to the stock ; that many of the items set forth in that portion of Exhibit D after the heading therein, "General D. D. Colton in account with the West- ern Development Company," were true or correct, and that Mr. Wilson was not informed how the account had been made up, or that the defendants had no personal knowledge of the correctness thereof. Many of these points were not referred to on the argu- ment, and most of them are apparently abandoned by at least a majority of appellant's counsel in this Court. Nevertheless, we have given careful attention to each and all of the points made in all the briefs. Some of those — 4H- last referred to are involved in the qnestions we have con- sidered at length in this opinion ; the others, we think, are without merit. The judgment and the order denying a new trial are affirmed. Paterson, J. We concur : McFarland, J., Sharpstein, J., Works, J., Beatty, C.J. Fox, J., not having heard the argument, and Thornton, J., deeming himself disqualified, did not participate in the decision. m to m '^i m m '.mil man ^ 3 1 58 00216 8853 m m TMi m m M I V 'I'-r'.i '^"irmw"'^-'^