under the constitution and laws of Louisiana; and although the showing here is that one-half of that same stock is owned by the Electric Securities Company, and forms the basis of its standing before this court as a stockholder; and although there is an affidavit on file, made by a former officer of the company, showing that at the time the Electric Securities Company acquired the stock he knew it was watered, and this affidavit is not contradicted, yet I am disposed to consider that, notwithstanding the stock may have been illegally issued, still the Electric Securities Company may be able to show that it is a bona fide holder; and if not, then the court may find, as strongly appears on the showing now made, that the said stock was not originally illegally issued, and that it has been at all times valid stock. I may say, further, that, as a general proposition, the purchaser of stock in a corporation is not allowed to attack the acts and management of the company prior to the acquisition of his stock; otherwise, we might have a case where stock duly represented in a corporation consented to and participated in bad management and waste, and, after reaping the benefits from such transactions, could be easily passed into the hands of a subsequent purchaser, who could make his harvest by appearing and contesting the very acts and conduct which his vendor had consented to. However all this may be, for the purposes of this case I take it that the Electric Securities Company is a bona fide stockholder of the Louisiana Electric Light Company, and entitled to be heard in this case.

The matters complained of in the bill are some of them so far explained by the showing made that it is very doubtful if they ought to be made the basis for any relief at this time; but there are other transactions complained of, which are not sufficiently explained, and which leave upon my mind the impression that the directors of the Louisiana Electric Light Company have, by mismanagement, and by dealings in which some of the active directors were representing more their own individual interests than the interests of the electric light company, involved the light company in contracts, partly executed, which ought to be set aside, either as fraudulent or ultra vires. The showing also leaves the impression upon my mind that, unless the court shall interfere in behalf of the stockholders, the present board of directors may, between now and the next election of directors, further involve and entangle the light company in contracts amounting to waste and endangering the trust fund.

The relief asked by the complainant, the Electric Securities Company, is that the court shall appoint a receiver and take the entire property and its management out of the hands of the present board of directors; and, if this were the only way in which relief could be granted, it would probably be the duty of the court to grant such application. So far as the matters complained of, actually set forth in the bill as constituting the basis of mismanagement, it seems to me that full relief can be given by an injunction which shall stay the further execution of those contracts and compel the present directors to appropriate the revenues of the company to the payment of legitimate operating expenses and the liquidation of conceded floating indebtedness. Such an injunction, accompanied by a restrain

1

ing order against the making of outside contracts and financial dealing disconnected with the operation of the property, and directing the defendants to give the complainant and its agents and attorneys access to the books and papers of the electric light company, so that they can inform themselves of the past management of the same, will fully protect the Electric Securities Company as a stockholder. To go further, and in the present financial condition of the company appoint a receiver, would probably be extending the relief to such an extent as to entirely eliminate any interest the complainant may have as a stockholder; for it seems to me to be perfectly clear that, in this stage of the finances of the Louisiana Electric Light Company, the appointment of a receiver, with his usual army of retainers and his usually large expenses, accompanied by the necessary loss of credit, will, without question, render the electric light company insolvent beyond remedy, and will compel a foreclosure under the two mortgages, to the irretrievable injury of all stockholders and unsecured creditors. I understand the practice in courts of equity, in dealing with cases of this kind at the suit of a stockholder, is never to resort to the extreme remedy of taking the property out of the hands of the managers chosen and elected by the stockholders, except as a last resort, and when considered to be absolutely necessary for the preservation of the trust fund. Now, is the case presented here one of that character? I do not think so, provided the present financial difficulties can be tided over. The company has a magnificent plant, costing in the neighborhood of $2,000,000, conceded to be worth, as it stands, in the neighborhood of $1,000,000, with a paying business, which, with judicious management, even burdened with the traction contract, will produce a net revenue of over $100,000. The company has a monopoly, in fact, of the whole lighting business in the city of New Orleans. This business can be doubled, perhaps trebled, with ordinary expense, so that the net revenues of the company can be increased two or three fold. As an enterprise, so long as it can meet its fixed charges, so as to stay the hands of bondholders, it cannot be said to be insolvent. Its financial troubles at this time arise from the fact that there is a judgment against it in favor of the Bass Foundry & Machine Works, which, after long litigation in the courts, is now exigible, and under which the very life of the electric plant-the engines-can be seized and sold. This claim amounts to at least $30,000, perhaps $35,000. Although the interest due June 1, 1895, on the bonds of the company appears to have been paid, there will be due under the mortgage to the American Loan & Trust Company by July 1 a sum sufficient to redeem $15,000 of the bonds of the company. The situation is further complicated by the fact that large sums to be earned by the company in furnishing lights for the next eight months, under the contract with the city of New Orleans, have been anticipated by transfers to secure other debts and as collateral, so that no further funds can be safely borrowed upon the faith of expected revenues. If the debt due under the judgment of the Bass Foundry & Machine Works and the amount necessary for the sinking fund for the first mortgage cannot be met or provided for by the present management,

then I am inclined to the opinion that the court must intervene for the protection of the property. Of course, under these circumstances, the appointment of a receiver means that a large sum must be raised at once, and by the aid of receiver's certificates, to meet the present demands, which even the court can no longer delay. It means, in addition to this, that the large floating debt now due by the electric light company, and incurred in operating the property within the last six months, and not due to the Fort Wayne company, McDonald & Hart, must be provided for, because only upon such provision can adequate supplies be obtained for the future operation of the property. The matter of appointing a receiver, then, comes to this: Such appointment is not necessary, provided the present directors are in such a position as to satisfy the court that, under the limitations to be imposed by the court preventing them from alienating or incumbering the property, and from paying out and disposing of the revenues other than as required in due course of operating the property to carry on the business according to the charter, and in the interest of all the stockholders, and enjoining all changes of the status quo in connection with the matters specifically charged in complainant's bill, they can provide for the $15,000 necessary for the sinking fund under the first mortgage, and stay or otherwise provide for the judgment in favor of the Bass Foundry & Machine Works until after the next regular election of directors. If they can so satisfy the court, no receiver will be appointed, but an injunction will issue. If they cannot so satisfy the court, a receiver will be appointed. In either case, the court does not relinquish its control of the property, and probably will not, if the present bill is maintained, until after the next election for directors.

As to the controversy presented by the New Orleans Traction Company, all that need be said is that, so far as relief is herein granted by injunction to the securities company the same necessarily inures to the benefit of the traction company as a stockholder. Whether any relief can be hereafter granted the traction company as a bondholder depends on the course the case may take, and probably upon due intervention by the trustee for all the consolidated first mortgage bonds.

GRAY et al. v. QUICKSILVER MIN. CO.

(Circuit Court, N. D. California. June 24, 1895.)

1. ADMINISTRATOR'S SALE-PURCHASE BY ADMINISTRATOR'S EMPLOYER. Defendant, a creditor of an intestate estate, and hence entitled to name an administrator thereof (Prob. Act Cal. § 52), procured the appointment of one of its employés as administrator, and indirectly became purchaser at the administrator's sale. Held, that such employé could properly act as administrator, and that, though defendant paid the expenses of administration, it did not become administrator within the California laws prohibiting an administrator from purchasing directly or indirectly the estate he represents.

2. SAME EVIDENCE OF FRAUD.

An employé of defendant, at its request, was appointed administrator of an estate of which it was a creditor, consisting of an interest in mining property. Such interest was of uncertain value, and was disputed by

claimants under the same title as decedent, and by defendant claiming under an adverse title. It was appraised at $11,100, and sold for $27,755 to an officer of defendant, and, through a nominal purchaser, conveyed to defendant. Letters written by such officer pending administration showed the desire to avoid publicity, and hasten sale and confirmation thereof before his bid could be raised, and stated that the price paid by defendant was low. Held that, though the circumstances of the administration and sale challenged inquiry, they did not amount to fraud.

3. LIMITATION OF ACTIONS-ADMINISTRATOR'S SALE.

The statute requiring a suit to recover land sold at an administrator's sale to be brought within three years does not apply when there is no person who can bring suit.

Bill by Jane M. Gray and others against the Quicksilver Mining Company for a decree declaring defendant to be a trustee for plaintiffs of certain mining property.

Pierson & Mitchell, for complainants.

Wm. Matthews and E. J. Pringle, for respondent.

MCKENNA, Circuit Judge (orally). This is an action to declare defendant trustee of the plaintiffs, or the estate of their intestate, of certain mines and minerals situate on the Rancho De Los Capitancillos (what is known as the "Almaden Mine"). Both plaintiffs and defendant claim from the Mexican government, through a grant by. the latter to one Justo Larios, which grant was patented by the United States in the name of Charles Fossatt, by patent dated February 3, 1865. The patent to the mines and minerals became separated from the title to the land, or was attempted to be separated, by Grove C. Cook, grantee of Justo Larios, calling himself "allodial owner" of the rancho, by conveying by deed dated April 1, 1848, to plaintiffs' intestate, John B. Gray, and one Knowles Taylor, in the proportions of two-fifths and three-fifths, respectively, "together [to quote deed] with the right of way, water, grazing for cattle; also land sufficient for establishing smelting works, building houses, and all other purposes necessary for the secure and profitable carrying on of the aforementioned mines."

A trust was declared and created in this property by an instrument dated March 21, 1850, in which it was recited, after setting out certain conveyances, as follows:

"And whereas, other parties or persons than the beforenamed Knowles Taylor and John B. Gray have interest in said purchases, and it being desirable and proper to work said lands, mines, minerals, and ores, and prosecute the business connected therewith; and whereas, the title to said lands, mines, minerals, ores, rights, privileges, interests, and benefits, and their appurtenances, is now standing in the name of said Knowles Taylor and John B. Gray, in the following proportions, to wit, three-fifths part in the name of said Knowles Taylor, and two-fifths part in the name of the said John B. Gray; and it being desirable that each party in interest and ownership should have now this written declaration and conveyance of his interest, or portion in said lands, mines, minerals, ores, rights, privileges, interests, benefits, and the appurtenances of every kind pertaining thereto: Now, know all men by these presents, that we, the said Knowles Taylor and Eliza L., his wife, and the said John Bowie Gray and Jane M., his wife, for and in consideration of the premises and of the sum of one dollar to each of us paid by the parties thereto of the second part, at and before the ensealing and delivery of these presents, the receipt whereof we and each of us hereby acknowledge, and in further con

sideration of the payment heretofore made by each of the said parties of the second part of their respective relative proportion of the purchase money of said property, mines, minerals, ores, et cetera, and of all expenses incident thereto, have granted, bargained, sold, conveyed, and transferred, and by these presents do grant, bargain, sell, assign, convey, and transfer, unto the said Robert J. Walker, Knowles Taylor, and John Bowie Gray, trustees, as hereinafter mentioned, all and singular the aforedescribed lands, mines, minerals, ores, rights, privileges, interests, benefits, and the appurtenances of every kind which pertain thereto, and by the recited indentures or conveyances aforesaid were conveyed and transferred to the said Knowles Taylor and John B. Gray, together with all the estate, right of dower, title, interest. property, claim, and demand whatsoever of the said Knowles Taylor and Eliza L., his wife, and the said John Bowie Gray and Jane M., his wife, as well at law as in equity, of, in, and to, and out of the same, and every part thereof, from and after the date hereof, and by this indenture, and for the purposes and uses as hereinafter set forth and declared, to be held and possessed by the said Robert J. Walker, Knowles Taylor, and John B. Gray, as associate trustees, their heirs and the survivor of them, his heirs and assigns, forever, as joint tenants, and not as tenants in common, upon the special trust and confidence, however, and for no other purpose than is herein set forth and declared. * * * It is further agreed that with a view to ascertain results and settle controversies, if any should arise, no one of the parties interested will, within any period of two years from this date, sell any portion of his interest in said property, mines, minerals, et cetera, to any person not a party to this agreement. The estate, rights, privileges, benefits, and property of the said parties as hereinbefore set forth and granted, or hereafter shall be obtained, shall be and remain vested in the said trustees and their successors, their heirs and assigns, in joint tenancy as aforesaid, but subject to the control and direction of the parties by a vote of not less than two-thirds of the whole number of shares in the affirmative, with the rights of the said twothirds of the whole number of shares, by the vote in the affirmative of filling any vacancy or vacancies that may occur in the board of said trustees by resignation, death, or otherwise, and to alter these trusts. The objects, designs, and business of the said parties shall be the proper management and administration of the said estate, property, mines, minerals, ores, rights, privileges, benefits, and all other matters and things relating and appertaining thereto, so as to make the said lands and mines active and productive, that the parties may receive the best possible benefit and profit annually therefrom. The whole affair and business of the said parties herein shall be directed and governed, prosecuted and managed, by the said trustees, or by a majority of them, their successors, their heirs and assigns. And the said trustees, or a majority of them, are hereby authorized and empowered to appoint such agent or agents in the management of the business, and to fix the compensation of such agent or agents, as they shall think proper."

In January, 1853, Taylor died, leaving Walker and Gray surviving; and on June 2, 1861, Gray died in New York, intestate, leaving plaintiffs as his only heirs at law. Walker is also dead. Prior to his death, he conveyed his individual interest under the trust deed, that is, his interest separate from that as trustee,-and the defendant became the owner of it. The defendant also claims to be the successor to the title and interest of Forbes, Baron & Co., the old Almaden Company, and the evidence seems to establish that the latter occupied and exclusively worked the mines for years, in hostility to the Laurencel & Eldridge title, under which plaintiffs claim. On the 10th of October, 1863, Christopher E. Hawley presented a petition to the probate court of the county of Santa Clara, setting forth the death of John Bowie Gray; the fact that the names, ages, and residences of the heirs were unknown to him; that the deceased died intestate, owning in fee at the time of his