Opinion
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Appeal from the District Court, Fourteenth Judicial District, Nevada County.
This was an action to recover possession of the Miners' Ditch, the Poorman's Ditch, the extension of the Poorman's Ditch, the Grizzly Ditch and its branches, the undivided two fifths of the Eureka Lake Water Company's Ditch, the undivided two fifths of the Gray Diggings Mining Claims, the undivided two fifths of the Lewis Mining Claims, the undivided two fifths of the Isembeck & Co.'s Mining Claims, the undivided two fifths of the Eureka Lake Water Company's saw mill, and the land whereon the same stands, together with all and singular the appurtenances to the above named and specified property belonging.
The complaint was in the usual form, alleging ownership of and possession of the property by the plaintiff on the 3d day of January, 1863, and its ouster by the defendants on the same day. The defendants, in the tenth subdivision of their answer, set up the following as an equitable defense:
" And for a tenth further and separate answer to the said several causes of action in the said amended complaint mentioned, and as a ground for the equitable interposition of the Court, this defendant avers and shows as follows:
" That on the 14th day of May, 1859, the plaintiff, the Miners' Ditch Company, was, and for some time prior thereto had been, a corporation duly organized and existing under the laws of this State, and the owner and possessed of the several ditches and parcels of property mentioned and described in the first, second, third, and fourth counts of plaintiff's amended complaint.
" That at the same time another corporation, duly organized and existing under the laws of this State, and styled the Eureka Lake Company, owned and possessed certain other ditch property in said County of Nevada, which said ditches were constructed and used for the purpose of conveying and selling water for mining and other purposes, in said County of Nevada and its vicinity.
" That the said Miners' Ditch Company and the said Eureka Lake Company were rival companies, selling water in the same market.
" That a large portion of the stock in each of said corporations was held and owned by persons who were stockholders in both of said corporations.
" That at some time in the month of May, 1859, and prior to the 14th day of said month, at a meeting of the Board of Trustees of the Eureka Lake Company, regularly called and held for the purpose, it was unanimously resolved and determined, by a vote of the said Board of Trustees, that the President of said corporation, on its behalf, be and he thereby was authorized and directed to propose to the Miners' Ditch Company that the several properties of and belonging to the said several corporations be consolidated, and the said corporations united in one, upon certain specified terms.
" That afterwards, on the 14th day of May, 1859, a meeting of the stockholders of the said Miners' Ditch Company, called for the purpose of receiving and considering the proposition of the Eureka Lake Company to consolidate and unite the several properties and companies, as hereinbefore set forth, was held at its usual place of business, at which meeting the President of the Eureka Lake Company, in pursuance of the authority so given to him as aforesaid, did attend, and on behalf of the said Eureka Lake Company, proposed to said Miners' Ditch Company to unite and consolidate the several companies and properties as aforesaid. That, thereupon, the said proposition was accepted, and the stockholders of the said Miners' Ditch Company, by a resolution duly passed, authorized and empowered the Directors of said company to make the necessary arrangements for and to perfect the union and consolidation of the said companies as aforesaid.
" That at said several meetings of the stockholders and Board of Trustees of the Eureka Lake Company and of the stockholders of the Miners' Ditch Company, it was agreed and determined by vote, for the purpose of carrying into effect the agreement between said corporations for the union and consolidation thereof, and until the final consolidation and union thereof could be perfected, the Directors of said several corporations should, as a joint Board, temporarily receive and have and hold possession and control of the entire property of said corporations, and jointly conduct the business thereof for and on behalf of such consolidated companies, and until the said consolidated company could be formed, and that such consolidated companies should share the profits and losses of such consolidated properties.
" That soon after the said last named date, viz.: on or about the 29th of June, 1859, the said joint Board of Directors so formed as aforesaid, and pursuant to said agreement, received from said several corporations the possession of all of said property, and took and entered into possession of the same, for and on behalf of said consolidated company, and conducted and managed the same according to the terms of said agreements, on behalf of said consolidated company, and under the name and style of the Eureka Lake and Miners' Ditch Company, until the formation of the company styled the Eureka Lake Water Company, as hereinafter set forth.
" That during the time the said joint properties were in possession of and under the control of the said joint Board, divers large sums of money, arising from the receipts of the said joint properties were expended in the repairs and improvements of the properties formerly belonging to the said Miners' Ditch Company, and described in the first, second, third, and fourth counts of said amended complaint.
" That afterwards, and on or about the month of September, 1860, a meeting of the stockholders of the said Miners' Ditch Company was held at the usual place of business of said company, at which meeting the union and consolidation of said corporations was ratified and confirmed, and by a resolution duly passed it was agreed and determined that, for the purpose of more fully carrying into effect the said union and consolidation, the Directors of said Miners' Ditch Company were authorized, empowered and directed to unite with the Directors of the Eureka Lake Company, in the organization of a corporation to be called and styled the Eureka Lake Water Company, and which corporation, when organized, should be the successor in interest of the said Miners' Ditch Company, the said Eureka Lake Company, and the joint company--the Eureka Lake and Miners' Ditch Company; and the said Directors of said Miners' Ditch Company were further authorized and empowered to convey to the said Eureka Lake Water Company, when formed, the entire property then lately owned by the said Miners' Ditch Company, upon the consideration that the said Eureka Lake Company should, in like manner, convey to said Eureka Lake Water Company the property then formerly owned by it; and it was then and there further agreed that the stock of such new corporation, the Eureka Lake Water Company, should be issued to the stockholders of said Eureka Lake Company and the Miners' Ditch Company, in the proportions agreed upon.
" That at or about the same time as last aforesaid, at a meeting of the stockholders of the Eureka Lake Company, similar resolutions to those so passed at the meeting of the stockholders of the Miners' Ditch Company were passed, and the Directors fully authorized to make the necessary conveyances and documents, and to enter into the necessary arrangements for carrying into effect the objects of such resolutions.
" That afterwards, and on or about the 17th day of October, 1860, the Directors of the said several corporations, as such joint Board as aforesaid, duly organized a corporation in the said County of Nevada, under the general laws of this State, and under the name and style of the Eureka Lake Water Company.
" That afterwards, and on or about the 25th day of October, 1860, the Eureka Lake Company, by its Directors thereto duly authorized, conveyed, transferred, and delivered to the said Eureka Lake Water Company full and complete possession of all the property theretofore owned by it; and on or about the 29th day of October, 1860, the said Miners' Ditch Company, by its Directors thereto authorized, in like manner conveyed by deed executed under the corporate seal of said company, and duly transferred and delivered to the said Eureka Lake Water Company, full and complete possession of all of the property formerly owned by it, including the property described in the first, second, third, and fourth counts of said amended complaint.
" That immediately thereupon the said joint Board, so holding possession as aforesaid under the name of the Eureka Lake and Miners' Ditch Company, under the agreements aforesaid, for the benefit of the consolidated company, so to be formed under such agreements as aforesaid, gave up and delivered to the said Eureka Lake Water Company, the corporation so formed under the various agreements aforesaid, full and complete possession of all the joint properties so held by them as aforesaid.
" That thereupon the said Eureka Lake Water Company entered into possession of all of said joint properties, including all of the ditches, mining claims, and premises described in the said amended complaint, as the successor in interest of the said Eureka Lake Company, the Miners' Ditch Company, and of the said joint Board of Eureka Lake and Miners' Ditch Company, and from thence hitherto until the time hereinafter set forth continued to hold the possession of the same, and to use and enjoy the same as such successor in interest.
" That upon such organization of the Eureka Lake Water Company, and such transfers as aforesaid, stock of said company was duly issued to the various stockholders of the Miners' Ditch Company and the Eureka Lake Company in the proportions theretofore agreed upon.
" That after the Eureka Lake Water Company received possession of the various properties as hereinbefore set forth, and previous to the 3d day of January, 1863, it expended large sums of money in purchase of ditches and water rights, and the construction of flumes, ditches, and reservoirs, and other valuable and permanent improvements upon the same, amounting in all to between four hundred thousand dollars, and five hundred thousand dollars, which improvements greatly enhanced the value of such properties.
" That it so expended in improvements upon the property described in the first, second, third, and fourth counts of said amended complaint, at least forty thousand dollars. That it constructed and completed the ditch described in the fifth count of said complaint at a cost of over thirty thousand dollars, and purchased the mining claims and property described in the sixth, seventh, eighth, and ninth counts thereof.
" That at the time of the transfer of possession as aforesaid, and of the conveyance aforesaid, the said Miners' Ditch Company was indebted in large sums of money to various parties, a portion of which indebtedness was secured by mortgages upon said property formerly belonging to said company.
" That in the year 1862 said mortgages were foreclosed, and the mortgaged property ordered to be sold for the satisfaction thereof, and that said property was advertised for sale pursuant to said order.
" That the said Eureka Lake Water Company was then largely in debt, and had no means wherewith to satisfy said mortgages and prevent the sale of said property, and borrowed of this defendant and of the defendant Powers (then partners in business under the firm name of Marks & Co.) the sum of about ninety thousand dollars, which was applied in payment and satisfaction of a portion of said mortgages, and the accrued interest and costs. That prior to the date of this loan the said Eureka Lake Water Company were indebted to this defendant and said defendant Powers in other large sums of money, which were borrowed of them and used for the benefit of the entire property, including the property formerly owned by the Miners' Ditch Company, with the full knowledge and assent of the Miners' Ditch Company, and its stockholders and members.
" That on the 7th day of April, 1862, and prior to the foreclosure of the said mortgages of the Miners' Ditch Company, the said Eureka Lake Water Company was indebted to this defendant and defendant Powers in the sum of one hundred thousand dollars, for moneys before that time loaned to the Eureka Lake Water Company, and then remaining unpaid; and on said last mentioned day applied to said defendants for the further loan of one hundred thousand dollars, to be used for the purpose of paying off the mortgages upon the property formerly owned by the said Miners' Ditch Company, then in process of foreclosure as aforesaid, and for the further purpose of paying off certain other liens and incumbrances existing against the entire property of said Eureka Lake Water Company.
" That at the date last aforesaid the said Eureka Lake Water Company executed and delivered to this defendant, and his then partner, the defendant Powers, a mortgage upon the entire property of said company, including the property described in the amended complaint, to secure payment of the sum of one hundred thousand dollars, theretofore advanced and loaned as aforesaid, and also to secure payment of such other and further sums, not to exceed in the aggregate the further sum of one hundred thousand dollars, as the said defendant and Powers should thereafter, at the request of said company, advance and loan to it; and at the same time, and in said mortgage, covenanted with this defendant and Powers that they should have and receive the net proceeds of all of said property, to be applied in payment of said mortgage debt until the same should be fully paid.
" That thereafter, and prior to the 3d day of January, 1863, this defendant and Powers, at the request of said Eureka Lake Water Company, advanced and loaned to it the additional sum of one hundred thousand dollars, as provided for in said mortgage.
" That at the date last aforesaid, the said Eureka Lake Water Company, having failed to make any payments whatever on account of said mortgage debt, by an instrument in writing, under the seal of said corporation, transferred to this defendant and defendant Powers all of said mortgaged property, and delivered to them the possession thereof, and authorized them to keep, manage, and control the same, and apply the net proceeds thereof in payment of said mortgage debt, until the same, and the interest accruing thereon, should be fully paid.
" That immediately thereupon this defendant and defendant Powers took and entered into the possession of all of said property, and retained possession thereof under said agreement, and kept an accurate account of the proceeds thereof, until the 5th day of February, 1865, at which last mentioned date they, the said defendants, became the owners by purchase of all said property.
" That this defendant and defendant Powers so entered into possession of said property as aforesaid, as the successors in interest of the said Eureka Lake Water Company, the Eureka Lake Company, the Miners' Ditch Company, and the said joint Board, or Eureka Lake and Miners' Ditch Company, and held and possessed the same, as such successors in interest, until the time next hereinafter mentioned.
" That on the 1st day of September, 1865, this defendant purchased of the defendant Geo. C. Powers all interest (being the undivided one half) which he held and owned in said property, so acquired as aforesaid, and all his right, title, and interest, possession, claim, and demand therein.
" That ever since the time last aforesaid this defendant has been in possession of all of said property, claiming title thereto as the successor in interest of the said defendant Powers, and of the Eureka Lake Water Company, the Eureka Lake Company, the Miners' Ditch Company, and the said joint Board or Eureka Lake and Miners' Ditch Company, and at the time of the commencement of this suit was so in possession as such successor.
" That during all the time said property has been held and possessed by this defendant, either alone or in copartnership with said defendant Powers, the net proceeds thereof have amounted to but little more than the interest accruing upon the principal of said mortgage debt.
" That the property and lands upon which the said several ditches, in said complaint described, are constructed and built, and also upon which the mining claims and mill site, in said complaint set forth, are situated, are the public lands of the United States of America, the fee in the same never having been granted to any one, or passed out of the said United States.
" That the said ditches, mining claims, mill site, and property, in said complaint mentioned and described, being held by possessory title, the same passes by delivery of possession, and this defendant is in possession of all of said ditches, mining claims, and property by successive delivery of possession from the said Miners' Ditch Company.
" That during the entire period of the transactions above set forth, from the date of the several meetings of the Miners' Ditch Company and of the Eureka Lake Company, in May, 1859, until the commencement of this action, the Miners' Ditch Company, and all and every one of the Directors, members and stockholders have had actual knowledge and notice of all, each, and every one of the transactions hereinbefore set forth; that said Directors, members, and stockholders received the stock of the said Eureka Lake Water Company, and have acted as stockholders of such last named company at stockholders' meetings, and as such stockholders have had the benefit of the large sums of money advanced and loaned by this defendant and defendant Powers, as aforesaid, and of the improvements and additions to the property as aforesaid; and during all that time neither the said Miners' Ditch Company, nor its Directors, members, or stockholders, or any or either of them, or any one of them, have ever objected to or made any question of the validity of any one of the transactions aforesaid; but, on the contrary, have always during all that time assented to and recognized the same and acquiesced therein, and during all of said time, as aforesaid, they have each and every one of them, well knowing that said Eureka Lake Water Company and its successors held and possessed said property, claiming title thereto, have recognized such title, and acquiesced in the ownership and possession thereof.
" That the said Eureka Lake Water Company, and its successors, and those from in under whom they claim, have, ever since the month of May, 1859, been in possession of the ditches, mining claims, and premises in said amended complaint mentioned and described, and of every part and parcel thereof, claiming title thereto, and have had the peaceable, quiet, and undisturbed possession thereof, free and clear from any claim, right, or title by the said Miners' Ditch Company, or any of its Directors, members, or stockholders, or of any person or persons whatever.
" And the defendant says that the said plaintiff, although now enjoying the full benefit of all the transactions aforesaid, and claiming the right to enjoy said benefit, now pretends and claims that all of said transactions, as hereinbefore set forth, are and were illegal and void, and passed no title, or any right of possession of, in, or to the property formerly belonging to said Miners' Ditch Company, either to said joint Board or Eureka Lake and Miners' Ditch Company, or to the Eureka Lake Water Company, and seeks by this action to set aside the same, and to deprive this defendant, who has acted in good faith all throughout said transactions, of his just, legal, and equitable rights in the premises, and to oust him from the possession of all of said property; all of which said pretences and claims, this defendant charges, are in bad faith, and against the solemn acts of the said plaintiff, long acquiesced in, and are contrary to equity and good conscience.
" Wherefore, this defendant prays that upon the full hearing of this cause, and upon a full consideration of the facts and premises, this Honorable Court will, by its order and decree, declare the various transactions hereinbefore in the tenth separate defense of this defendant set forth, valid, and legal, and binding upon the said Miners's Ditch Company, and each and every one of its Directors, members, and stockholders. That by said order and decree the title of this defendant to all and every the said ditches, mining claims, and premises in said amended complaint described, may be declared to be a good and valid title in law and equity, as against the said Miners' Ditch Company, and each and every one of its stockholders and members, and any person or persons claiming by, through, or under it. That by said order and decree it may be declared that the plaintiff has not any right, title, interest, or estate whatever in or to the said ditches, mining claims, and premises aforesaid, or any part thereof, and that all claims or pretenses of said plaintiff to the same, or to any part thereof, is wholly unjust, invalid, and unfounded, either in law or equity; and that the plaintiff may be adjudged to be forever barred of and from all right, title, interest, claim, or estate in said premises, and every part thereof. That by said order and decree the said plaintiff may be ordered and adjudged to make, execute, and deliver to this defendant such deed or deeds of conveyance, or other instruments which shall to this Court, on a full investigation and consideration of the case, appear necessary to perfect and quiet the said defendant's title to said ditches, mining claims, and premises, as against said plaintiff, and all persons claiming by, through, or under it.
" And this defendant prays for such other and further relief, decree or decrees, as to this Honorable Court shall seem meet and right in the premises, and as equity and good conscience shall require."
The issues raised by this equitable defense were first tried, and the Court found the following facts:
" First--Plaintiff, the Miners' Ditch Company, is, and since a time prior to the year A. D. 1859 has been, a corporation duly organized and existing under the general incorporation laws of this State, its object being the building and maintaining water ditches and the sale of water in said Nevada County.
" Second--In May, 1859, the plaintiff owned and was in possession of all that portion of the premises mentioned in the complaint, and described therein as the 'Miners' Ditch,' the 'Poorman's Ditch,' and the 'Grizzly Ditches.'
" Third--At the same time, viz: May, 1859, there was another corporation duly organized and existing, called the 'Eureka Lake Company,' which owned ditches and water rights in said county, and in the immediate vicinity of those of plaintiff, both companies supplying the same markets.
" Fourth--The property and business of these two companies being similar, and a number of persons being members and stockholders in both, in the Spring of 1859 the incorporators began to talk about a union of the property and business of the two companies; and after considerable discussion it was finally agreed in the month of May, 1859, by both corporations, viz: the plaintiff and the Eureka Lake Company, that the property of the two corporations should be thrown together and managed in common, and should be owned in the proportion of two shares to the Miners' Ditch Company and three shares to the Eureka Lake Company. Certain improvements were to be made by each corporation on its own original property, and each was to pay its own debts then existing.
" Fifth--Under this agreement the two companies commenced acting together on the 29th of June, 1859. At that time all the property of both corporations was put into the possession of common agents of both, who had full control and management of the property and business down to the Fall of 1860. Business was done in the name of the Eureka Lake and Miners' Ditch Companies. During this time large amounts of money were expended in improving the common property, and the premises described in the complaint as the 'Extension of Poorman's Ditch,' 'Extension of Grizzly Ditch,' 'Gray Diggings,' and 'Lewis' Ground,' were acquired.
" Sixth--This plan of conducting the business of the two companies, under the joint name of both, was only intended to be temporary; and during the year 1860 the members of the two corporations began to discuss the project of organizing a new corporation, to which the property of the old ones should be conveyed. To perfect this arrangement there was a meeting of the stockholders of the Eureka Lake Company, held in pursuance of a notice duly published in a public newspaper of said county, on the 3d day of September, 1860, at which it was resolved that a new corporation, to be called the Eureka Lake Water Company, should be formed, and that the Eureka Lake Company would convey to it all its property, upon conditions that the Miners' Ditch Company would do the same, and that stock of the new corporation would be credited to the stockholders of the two old companies in the proportions agreed upon. The Trustees were authorized to make the conveyance. The new corporation was to be organized by the stockholders of the two old ones.
" Seventh--There was also a regular annual meeting of the stockholders of the Miners' Ditch Company, on the second Saturday of September, 1860, that being the time prescribed by the by-laws of the company for the regular meeting of the stockholders. The meeting adjourned for two weeks. At or about the time to which this meeting had adjourned, there was a meeting of either the stockholders or the Trustees, or both. The testimony does not show clearly the exact character of this meeting--that is, whether it was of the stockholders or Trustees; but it is clear that there was a meeting of either one or the other, or both. At this meeting a resolution was passed authorizing the Trustees to convey the property of the Miners' Ditch Company to the new corporation to be formed, viz: the Eureka Lake Water Company.
" Eighth--On or about the 29th of October, 1860, a deed bearing that date was executed by the Trustees of the Miners' Ditch Company to the Eureka Lake Water Company, conveying all the property of the former to the latter, including the property described in the complaint, except the Malakoff Ravine and the Eureka Lake sawmill, which were acquired afterwards by the Eureka Lake Water Company. This deed purports upon its face to be the deed of the Miners' Ditch Company, as a corporation, has the corporate seal annexed, and is signed, as Trustees, and duly acknowledged by James B. Henry, Geo. C. Powers, James Cregan, Geo. Fellows, and Robert McKerrow, who were at the time the Trustees of the corporation. The deed was duly recorded in the Recorder's office of said county (Book Nine, p. 189,) on the 11th day of November, 1861, and is hereby made part of these findings.
" Ninth--About this time the members of the Eureka Lake Company were advised by counsel that its incorporation had never been legally perfected, and that a valid deed could be made only by the members in their individual capacity; and such a deed was made on the 25th of October, 1860, by the stockholders of the Eureka Lake Company to the Eureka Lake Water Company, which purported to convey all the property of the former to the latter. This deed was recorded November 11th, 1861, in Book Nine of Deeds, page one hundred and ninety-one, records of Nevada County.
" Tenth--On the 14th of November, 1860, the Eureka Lake Water Company, having been duly organized as a corporation under the general laws of this State, took possession of all the property of the Miners' Ditch Company and the Eureka Lake Company, conveyed or attempted to be conveyed by said two deeds, and from that time to January, 1863, had full possession and control of the same, claiming it as its own under said deeds, and no one interfering with or disputing its title or possession.
" Eleventh--Immediately after the organization of the Eureka Lake Water Company, stock books were opened and stock was issued to the members of the two old companies in the proportions agreed.
" Twelfth--After the Eureka Lake Water Company took possession it expended large sums of money in improving the property and paying off liens thereon.
" Thirteenth--The Eureka Lake Water Company, in 1862, executed to the defendants, Zellerbach and Powers, a mortgage on all its property, including that described in the complaint, to secure the payment of the sum of two hundred thousand dollars. This was for money advanced and to be advanced; and the whole sum of two hundred thousand dollars was advanced before January, 1863. The mortgage provides that the defendants might receive and apply the profits and income of the property to the satisfaction of the mortgage debt; and on the 3d of January, 1863, the Eureka Lake Water Company gave full possession and control of all the property to Zellerbach and Powers for that purpose. Zellerbach and Powers held full and uninterrupted possession under the arrangement until the 5th day of February, 1865, at which time they acquired all the right and title of the Eureka Lake Water Company to the property, by virtue of a Sheriff's deed made on an execution sale under a judgment recovered against said company by one--Martin. On the 5th of September, 1865, the defendant Powers by deed conveyed to defendant Zellerbach all his interest (being one half) in the premises. Down to September 5th, 1865, Zellerbach and Powers, and from that time to the present Zellerbach alone, have been in continuous possession of all the premises, holding under and as successors to the Eureka Lake Water Company; and that said mortgage has not been paid, nor have the rents and profits of the property been sufficient to satisfy the same.
" Fourteenth--The Eureka Lake Water Company made large improvements on the property formerly held by the Miners' Ditch Company, and described in the complaint, amounting in value to at least fifty thousand dollars.
" Fifteenth--It also paid mortgages on said property, which had been created by the Miners' Ditch Company, amounting to at least ninety thousand dollars.
" Sixteenth--It also expended other large sums of money in general improvements of and additions to the whole property acquired from the two old corporations, and paid off large liens and mortgages which had been created by the Eureka Lake Company on the property formerly owned by that corporation.
" Seventeenth--It does not appear affirmatively that the Trustees of the Miners' Ditch Company, in corporate body assembled, formally authorized the execution of the deed to the Eureka Lake Water Company, or that it was executed at a formal meeting of the Board of Trustees. It was executed, however, by the three Trustees, Henry, Powers, and Cregan, at one and the same time, and while they were together and in the presence of each other. The other two Trustees, Geo. Fellows and Robert McKerrow, signed it separately and at another time.
" Eighteenth--The by-laws of the corporation (the Miners' Ditch Company) do not contain any provisions about the meetings of the Trustees; and it does not appear how they were called or held, or in what manner they usually transacted their business.
" Nineteenth--The certificate of incorporation of the Miners' Ditch Company contains the following statement of the objects and purposes of the company:
" 'The object for which the said company is formed is to direct the waters running in the bed of the Middle Yuba, at or near a point one thousand six hundred yards above the Forks, and by means of a canal or canals, to be constructed by said company, to carry said water along the ridge on the south side of said Middle Yuba, and supply the miners of Snow Point, Orleans, Moore's and Woolsey's Flats, and other places along said ridge, with water, and employ said water for mining, manufacturing, and mechanical purposes.'
" Twentieth--From the date of the deed in October, 1860, the Trustees of the Miners' Ditch Company did not meet again as a Board until October, 1865, and during that time did not pretend to do any business, or to set up any claim to or control of the property described in the complaint; and it had knowledge that the Eureka Lake Water Company, and afterwards Zellerbach and Powers, had possession of the property, and claimed ownership of the same under the said deed from the Miners' Ditch Company.
" Twenty-first--All the premises described in the complaint, as well as the other property claimed by defendant, and also various other ditches owned by other companies, are situated on the ridge which divides the waters of the Middle and South Forks of the Yuba River; nearly all the stockholders of the Miners' Ditch Company lived on said ridge at the time of the transfer of the property to the Eureka Lake Water Company; the sale and transfer were public and notorious events; and I find that a majority of the stockholders had actual notice of the transaction, and that all are chargeable with such notice. No objection was made to the asserted title of the Eureka Lake Water Company, or its possession, by the Miners' Ditch Company or by any one of its Trustees or agents, until the Fall of 1865--a short time before this suit was commenced.
" Twenty-second--All the property described in the complaint is situated on the public domain of the United States, and is held by possessory title alone.
" Twenty-third--Counsel for plaintiff insists that I shall find categorically, as a fact, whether or not the property described in the deed of October, 1860, was essential to the business and existence of the Miners' Ditch Company. Complying with this request, I find that it was not. I look upon this question, however, as scarcely one of pure fact, and I prefer finding the real facts upon the point. They are these: After the company had sold all its property, of course it could not have done any more business in the matter of mining or selling water without acquiring another water right and ditch, by purchase or by location and construction. It might have purchased other ditches and water rights in the same vicinity; it might, also, have located another water right in the same stream to which its original ditch was constructed, and might have built a new ditch. It could have thus obtained a supply of water in the wet season, but not in the dry season; and the project of building a new ditch would probably not have been profitable.
" [Quite a number of objections to the introduction of testimony were made during the progress of the trial, which, by consent, were taken under advisement, to be decided at the final determination of the case. The objections of plaintiff to the evidence offered to show that the union of the business of the two corporations was advantageous, are sustained. The other objections are overruled. I cannot at present remember each of them, but they all refer to mere preliminary matters; that is, to the so called consolidation of 1859, and to other matters occurring before the deed of October, 1860; whereas the real rights of the parties, as is stated in the 'opinion' hereto annexed, depend upon the said deed and the subsequent conduct of the parties.]
" From the foregoing facts I find, as a conclusion of law, that the Miners' Ditch Company has ratified, adopted, and made its own the deed of October 29th, 1860, above referred to, purporting to convey its said property to the Eureka Lake Water Company, and cannot be heard to dispute it; and that defendant Zellerbach is entitled to the affirmative relief prayed for in his answer. Let judgment be rendered in accordance with his said prayer."
The following judgment was rendered:
" This cause came on regularly for trial, the parties hereto appearing by their respective counsel. A trial by jury having been expressly waived, the cause was tried before the Court sitting without a jury. Whereupon witnesses on the part of plaintiff and defendant were duly sworn and examined; and the evidence being closed, the cause was submitted to the Court for consideration and decision; and after due deliberation thereon the Court delivers its findings and decision in writing, which is filed, and orders that judgment be entered in accordance therewith.
" Wherefore, by reason of the law and findings aforesaid, it is adjudged and decreed that the title of the defendant, Marks Zellerbach, to all and every the ditches, mining claims, and premises in the amended complaint in this action described, is a good and valid title in law and equity as against the plaintiff, the Miners' Ditch Company, and all and every one of its stockholders and members, and any person or persons claiming by, through, or under it.
" And it is further adjudged and decreed that the plaintiff, the Miners' Ditch Company, has not any right, title, interest, or estate whatever in or to the said ditches, mining claims, or premises, or any part thereof, and that all claims or pretenses of said plaintiff to the same are wholly unjust, invalid, and unfounded, either in law or equity.
" It is further ordered, adjudged, and decreed that the plaintiff, and all persons claiming under it, be forever barred of and from all right, title, and interest, claim, and estate in said premises, and every part thereof.
" And it is further ordered that said defendant, Marks Zellerbach, have and recover of and from said plaintiff his costs in this behalf expended, amounting to the sum of--."
The plaintiff appealed.
COUNSEL:
The consolidation of the Miners' Ditch Company and Eureka Lake Company, by a mutual transfer and sale of their respective ditches and water rights to the Eureka LakeWater Company, in consideration of shares therein issued to the stockholders of the two former companies, in the proportion of two fifths to three fifths, was ultra vires, and therefore void.
To determine whether the Miners' Ditch Company had the power to sell all its property, we must resort to the statute, and not to the common law. The latter is neither the source nor measure of the powers of the corporation. To say that by the common law a corporation has the power to sell its property, that it may exist without property, that the only restriction on the power to sell is that it cannot touch the franchises of the company, is to say nothing affecting the questions involved in the case. This is a statutory corporation; and the clear modern doctrine is, that it has no power except that which the statute directly or by fair implication gives. (Perrine v. Chesapeake and Del. Canal Co., 9 How. 184. See, also, Wallace v. Mayor of San Jose, 29 Cal. 186: Zottman v. San Francisco, 20 Cal. 102, 109; Branham v. Mayor, etc., of San Jose, 24 Cal. 604; Bank of Augusta v. Earle, 13 Pet. 587; City of Oakland v. Carpentier, 13 Cal. 545; Head v. The Providence Insurance Co., 2 Cranch, 127; Bank of U.S. v. Dandridge, 12 Wheat, 64; Dartmouth College v. Woodward, 4 Wheat. 636.)
To decide, therefore, whether the deed in question was within corporate power, we must look to plaintiff's charter alone. The certificate of incorporation states the purposes of the company as follows:
" The object for which the said company is formed is to direct the waters running in the bed of the Middle Yuba, at or near a point one thousand six hundred yards above the Forks, and by means of a canal or canals, to be constructed by the south side of said Middle Yuba, and supply the miners of Snow Point, Orleans, Moore's and Woolsey's Flats, and other places along said ridge with water, and employ said water for mining, manufacturing, and mechanical purposes."
The statute (1 Hittell, Art. 933) says the certificate shall state " the object for which the company shall be formed, the amount of its capital stock," etc.; and (Art. 935) that, after the certificate is filed and the corporation thereby created, it shall have power " to purchase, hold, sell, and convey such real and personal estate as the purposes of the corporation shall require; " and (Art. 944) that " it shall not be lawful for the Trustees to make any dividend except from the surplus profits arising from the business of the corporation, nor to divide, withdraw, or in any way pay to the stockholders, or any of them, any part of the capital stock of the company; nor to reduce the capital stock, unless in the manner prescribed in this Act."
This being so, it is a matter of law and not of fact whether a corporate act be within the purposes of the corporation. We say, as matter of law on the papers, that this sale is beyond the purposes and objects of the corporation, because it is suicide. How could the company supply the localities named with water from the Yuba when it had stripped itself of all the means of so doing, and received nothing in return? This sale was a transfer of the corporate powers of the plaintiff, for the ditch and water right are a part of the franchise. All sales of corporate property, to be valid, must be to effect the purposes of the corporation, and where a sale destroys instead of carrying out these purposes, it is ultra vires and void. We cite the leading cases in support of the principles contended for by appellant: Abbott v. American Hard Rubber Co., 33 Barb. 578, 593; Bissell v. M. S. & N. I. R. Co., 22 N.Y. 281--opinion of Selden; Pearce v. Madison & I. R. Co., 21 How. 441; York and Md. Line R. Co. v. Winans, 17 How. 30; Dodge v. Woolsey, 18 How. 341, 343; Hood v. New York and N.H. R. Co., 22 Conn. 502; Penn. Del. and Md. Steam Nav. Co. v. Dandridge, 8 Gill. & J. 318, 319; Abbot v. Baltimore and Rapp'k S. P. Co., 1 Md. Ch. 542; Coe v. Columbus and P. and I. R. R. Co., 10 Ohio St. 377, 378, 390, 402, 403; Ohio and M. R. R. Co. v. I. R. R. Co., 5 Am. Law Register, N. S., 7733--October, 1866; Clark v. City of Des Moines, Am. Law Register for January, 1867, and note; Robbins v. Clay, 33 Me. 132; Kean v. Johnson, 1 Stockton Ch. 401; Bank of Commerce v. Bank of Brest, Harrington's Ch., Mich., 401; New Orleans, J. and G. N. R. Co. v. Harris, 27 Miss. 517, 541; Brady v. The Mayor, 2 Bosw. 185, 187; Brady v. The Mayor, 20 N.Y. 319; Ward v. Sea Ins. Co., 7 Paige, 297; Johnson v. Brush, Barb. Ch. 237, 240, 241; New York and Sharon Bank v. Fulton Bank, 7 Wend. 412; Life and Fire Ins. Co. v. Mechanics' Ins. Co., 7 Wend. 35; Madison, W. and M. P. R. Co. v. Watertown and P. R. Co., 7 Wis. 59; Steevens v. Rutland and B. R. Co., 29 Vt. 545; Hodges v. City of Buffalo, 2 Denio, 113; McCullough v. Moss, 5 Denio, 578; McSpedon v. Mayor of New York, 7 Bosw. 601, 610; Zottman v. San Francisco, 20 Cal. 102, 109; Wallace v. Mayor of San Jose, 29 Cal. 186, 188; Branham v. Mayor of San Jose, 24 Cal. 604; East Anglian R. Co. v. Eastern Counties Railway Co., 7 E. L. & E. 505; Beman v. Rufford, 6 E. L. & E. 106; Winch v. Birkenhead and Lancaster R. Co., 13 E. L. & E., 506; MacGregor v. Official Manager of Deal and Dover R. R. Co., 16 E. L. & E. 180; Coleman v. Eastern Counties Railway, 10 Beav. 1--approved in 24 How. 443; Great Northern R. Co. v. Eastern Counties R. Co., 12 E. L. & E. 224; Munt v. Shrewsbury and Chester R. Co., 3 E. L. & E. 144; Angell & Ames on Corp., Secs. 391, 393; Redfield on Railways, 418; Pierce on American Railroad Law, 397, 404, 511, 513.
The foregoing present an unbroken line of authority to these points:
First--That corporations are the mere creatures of the statute, and can hold or sell property only for the purposes for which they were created.
Second--Thatpecuniary benefit constitutes no element in solving the question whether a given act be within the purposes of the charter; that, in such cases, the question is one of power and public policy.
Third--That any corporate act which adds to the powers of the corporation, or transfers the exercise of those powers to another, is void, even though such addition or transfer increase the public and private benefits of the corporation.
Fourth--That a sale of all the property of a ditch corporation, including its water right, and a cessation of business, per se, destroy the capacity of the corporation to carry out the purposes of its creation; and such sale is therefore void, and the fact that the corporation may still have a technical existence is immaterial.
Fifth--That the sale in this case, consisting in a transfer of the entire property of plaintiff to a new corporation, with different capital stock, issued to the stockholders of plaintiff on a new basis, amounts to an increase or diminution of the stock of plaintiff, and to a dividend thereof and a distribution of its property, in direct violation of the charter, and is therefore void.
The sale in question being ultra vires and void, the corporation is not estopped to set up its nullity. (Hood v. The New York and New Haven R. Co., 22 Conn. 508; Green v. Seymour 3 Sandf. Ch. 292; Ohio and Michigan Railroad Co., v. I. and C. Railroad Co., Am. Law Register, October, 1866, p. 739; 8 Gill & Johns. 318; 1 Md. Ch. 542; 7 Wis. 59; 3 Barb. Ch. 241; 7 E. L. & E. 508; Clark v. City of Des Moines, Am. Law Register, January, 1867, p. 150.)
The idea has been sometimes erroneously thrown out that the Government only can take advantage of these void acts of corporations. The point is here: The charter cannot be forfeited for these, which are acts ultra vires, except by the States; but the law pronounces the acts void whenever called to the attention of the Court. The forfeiture is an additional penalty.
The deed of October 29th, 1860, was void, because not authorized by the Board of Trustees met as a Board. (1 Hittell, Art. 938; Gashwiler v. Willis, 33 Cal. 11; Conro v. Port Henry Iron Co., 12 Barb. 62, 63; 4 Johns. Ch. 597; Ross v. Crocket, 14 La. Ann. 811; Angell & Ames on Corp. Secs. 232, 279.)
J. B. Harmon, for Appellant.
Joseph P. Hoge, A. C. Niles, and D. Belden, for Respondents.
We contend that the corporation, plaintiff in this case, is not in a condition to raise the question attempted to be raised. It is estopped to deny the validity of the deed of 1860, or to go behind its execution and deny the authority of the Trustees executing it, upon some supposed failure to comply with preliminary formalities. (Curtiss v. Leavitt, 15 N.Y. 47.) If the power could have been exercised under any given state of facts, and it has been exercised, third persons dealing with the corporation have a right to suppose that the given state of facts existed, and then the whole doctrine of acquiescence and ratification is directly applicable. This is the doctrine of all the authorities. If the act is within the corporate powers, then, however irregularly performed, it may be cured by acquiescence of the corporation. (Bank of the United States v. Dandridge, 12 Wheat. 64; Bank of Columbia v. Patterson's Administrator, 7 Cranch, 299; Bank of Northern Liberty v. Cresson, 12 Sergt. & R. 313; Proprietors of Canal Bridge v. Gordon, 1 Pick. 296; Danforth v. Schoharie Turnpike Co., 12 Johns 227; Randall v. Van Vechten, 19 Jones, 59; Mott v. Hicks, 1 Cow. 513; Dunn v. St. Andrew's Church, 14 Johns. 117; Zabriskie v. The Cleaveland, Columbus and Cincinnati R. R. Co., 23 How. U.S. 281; Knox County v. Aspinwall, 21 How. U.S. 545; Bissell et al. v. City of Jeffersonville, 24 How. 287; Gelpecke v. City of Dubuque, 1 Wallace, 203, 223; Van Hostrup v. Madison City, 1 Wallace, 297; Meyer v. City of Muscatine, 1 Wallace, 393.) The case of Hoyt v. Thompson, 19 N.Y. 207, is a very elaborate decision, and fully sustains the views we take. (See, also, Bulkeley v. The Derby Fishing Co., 2 Conn. 252; Hoyt v. Shelden, 3 Bosw. 294; Miller et al. v. Rutland and Washington R. R. Co., 36 Vt. 452; Degroff v. American Linen Thread Co., 21 N.Y. 127; Parish v. Wheeler, 22 N.Y. 502--Comstock's opinion; Bargate v. Shortridge, 31 Eng. Law & Eq. 51--opinion of Lord St. Leonard; Gordon v. Preston, 1 Watts, 387; and Chapman & Harkness v. Mad River, etc., R. R. Co., 6 Ohio St. 119.)
But the main argument of the counsel for the plaintiff is based upon the proposition that the sale and conveyance of the Miners' Ditch Company was absolutely void on its face--beyond the corporatepower--" ultra vires in the extreme sense." That is to say, the proposition is that a corporation in this State cannot sell its entire property under any circumstances. The particular consideration of the sale is of no consequence, as the objection strikes at the power itself. It does not exist. The whole power of the corporation is incapable of effecting the object. No stockholder complains. The case shows that they have received the consideration of the sale, and are satisfied. Indeed, it is not perceived why the objection now under consideration would not be equally valid, equally fatal, notwithstanding every stockholder, without exception, had approved of the sale, united in it, and done everything necessary to lend it sanction. It is a question of power in the corporate body. How can the unanimous consent of every branch of the body, of every person connected with or interested in the corporation, import into the body a power which its incorporating Act denies it? And yet those who contend for this doctrine of inability to sell always admit that it can be done by the unanimous consent of the stockholders. In truth, it is because the power exists, and, if suffered to be exercised, would convey the property, that Courts of equity are so often appealed to to prevent its exercise; and the cases cited are generally of that character. Relief is sought against the improper and fraudulent exercise of an existing and essential power by the preventive action of Courts of chancery.
Every corporation, as such, has the capacity to take and grant property, and to contract obligations, in the same manner as an individual. But the general powers incident to a body corporate, at common law, are restricted by the nature and object of the institution of each. So that, at common law, the restriction of the powers of the corporation to the objects and purposes of the institution existed, which the counsel supposes was introduced only by statutory provision. (Berry v. Merchants' Exchange Co., 1 Sandf. Ch. 288, 295; Bank of Northern Liberty v. Cresson, 12 Sergt. & R. 313.)
The power of a corporation to sell is co-extensive with its power to purchase; or rather, whatever it owns or can own it can dispose of, being itself the judge in each instance as to the circumstances and inducements under which it will exercise the power, and being responsible only to its stockholdersfor the bona fides of its action, and to the State when it violates its chartered privileges. As to all third persons acting in good faith, its power of disposition is of necessity unlimited. (2 Kent's Com., 11th Ed., 327, 328; 1 Kyd, 108; Barry v. Merchants' Exchange Co., 1 Sandf. Ch. 293; The Mayor, etc., of Colchester v. Lowton, 1 Ves. & Bea. 226, 237, 240, 244; Pierce v. Emery, 32 N.H. 503; Treadwell v. Salisbury Manufacturing Co., 7 Gray, 404; Binney's Case, 2 Bland, 142; 1 Vesey, Belt's Sup., 226.) The same principles are maintained in the cases of Sargent v. Webster, 13 Met., Mass., 497; Hodges v. New England Screw Co. et al., 1 R.I. 312; The Banks v. Poitiaux, 3 Randolph, 136; and Lauman v. The Lebanon Valley R. R. Co., 30 Penn. St. 42.
The whole question has been repeatedly decided in cases of deeds of trust. (Dana v. The Bank of the United States, 5 Watts & S. 243; The State of Maryland v. President and Directors of the Bank of Maryland et al., 6 Gill & Johns. 205; Union Bank of Tennessee v. Ellicott et al., 6 Gill & Johns. 363; Lord v. The Governor and Co. of Copper Miners, 22 Eng. Ch. 739; and Gordon v. Preston, 1 Watts, 386.)
In this case the corporation, plaintiff, seeks to avoid its own deliberate act upon the plea that it exceeded its corporate powers; that it was guilty of a misuser of its franchise by overworking its unquestionable power to sell. We respectfully submit that it is not competent for the corporation itself to raise this objection. It cannot be permitted to impeach its own acts in this way. The corporation cannot take advantage of its wrong. It is estopped by its own acts. If this sale be a misuser of its franchise, it is a cause of forfeiture; and it is settled that a cause of forfeiture can be taken advantage of by the Government alone, and in a proceeding instituted for the purpose. (Leazure v. Hillegast, 7 Sergt. & Rawle, 312; Baird v. Bank of Washington, 11 Sergt. & Rawle, 418; Goundie v. Northampton Water Co., 7 Barr, Penn. St. 239; Banks v. Poitiaux, 3 Randolph, 136; Silver Lake Bank v. North, 4 Johns. Ch. 370; Barrow v. Nashville and Charlotte Turnpike Co., 9 Humphreys, 304; Fleckner v. The Bank of the United States, 8 Wheat., 5 U.S. Cond., 463, 464.)
JUDGES: Sawyers, C. J.
OPINION
SAWYERS, Judge
By the Court, Sawyer, C. J., on petition for rehearing:
Defendant, Zellerbach, is the only one interested in the property in dispute. In rendering the decision in this case, we proceeded upon the idea that he did not appear in the record to have any knowledge of the purpose of the Miner's Ditch Company in its conveyance to the Eureka Lake Water Company, to distribute the stock of the latter company received as the consideration of the conveyance, to the stockholders of the former, which is the fact in the case, if any there is, that renders the transaction between those corporations illegal. Our attention is now called to a fact not before brought to our notice by counsel, and overlooked when the opinion was written, that in the answer of Zellerbach stating the loan of money, through which the title was ultimately acquired by him, it is averred that the Eureka Lake Water Company " borrowed of this defendant and the defendant Powers (then partners in business under the firm of Marks & Co.) the sum," etc. It also appears in the findings that one George C. Powers signed, as Trustee, the conveyance of the Miners' Ditch Company to the Eureka Lake Water Company, and it is claimed that, as this is the same name as that of defendant Powers, it must be presumed that the Powers who signed the deed and who advanced the money as the partner of Zellerbach is the same person; that notice to one of the partners is notice to all, and that it therefore appears in the record that Zellerbach did have notice. Conceding this to be so, for the purposes of the decision, it becomes necessary to determine the point whether, upon that hypothesis, the Miners' Ditch Company stands in a position to avail itself of the illegality of its contract to distribute its capital stock to the stockholders of the corporation, by conveying its property and distributing the stock of another corporation received in payment, in the mode and under the circumstances stated in our former opinion, to its stockholders. And we are of the opinion that it does not. The act of sale and conveyance was not wholly beyond the power of the corporation to perform. It had full power to sell and convey its property. It is provided that it shall not be lawful for the Trustees to divide or withdraw any portion of the capital stock. The corporation having power to sell and convey its property, but it being made unlawful for the Trustees to divide the capital stock, the corporation stood upon the same footing in respect to such conveyance as any natural person with reference to a contract, which he has the power to make, but which is made unlawful upon some principle of public policy adopted by the law making power. In this case the contract was wholly executed. There was nothing of an executory character left on either side. The conveyance was fully made by the Miner's Ditch Company to the Eureka Lake Water Company, and the grantee put completely in possession, and remained for years in such possession with the knowledge and acquiescence of both the corporation and its stockholders. While so in possession, it executed its mortgage to Zellerbach and Powers, for the large sums of money advanced by them, and put them in possession, and this mortgage was subsequently foreclosed, and under the judgment of the Court the property was sold and purchased in by them, and the defendant, having now acquired the entire title, is in possession. Large portions of the money advanced went in satisfaction of debts due from the Miner's Ditch Company. At all events, the defendant was in possession under his conveyance, and the contracts were all fully executed on both sides, each having received and enjoyed the consideration. There was nothing of an executory character left. It is not sought by either party in this action to recover on any branch of an executory contract--the usual form in which questions in such cases are presented. The question is which party, in fact, has the title as the case now stands, and, as between those parties, it is clearly in the defendant. We know of no instance in which the grantor has been able to recover at law when the contract has been fully executed, as in this case. A fortiori, he would not be entitled to relief in equity. But in the worst view that can be taken for the defendant the maxim applied in suits on illegal executory contracts, in parit delicto potior est conditio possidentis, or defendentis, would apply, and justify an affirmance of the judgment. But the defendant is in a better position than if sued, on an executory contract. (See Schermerhorn v. Salmon, 14 N.Y. 141.) The contract is fully executed on both sides, and the transaction closed between them. The case of Inhabitants of Worcester v. Eaton, 11 Mass. 368, is precisely in point. The only difference is, in that case the grantor in the illegal deed is a natural person, and here it is a corporation. But with reference to the inherent power of the two persons to make a conveyance of the property conveyed, the parties stand on the same footing. The vice in both conveyances, if any there be, is that the contract is illegal for similar reasons. The principle is, therefore, the same. The consideration of the conveyance in the case cited was a composition of a felony. Yet the contract being fully executed, it was held to pass the title, and could not be avoided, so as to authorize a recovery by the grantor, or, which is the same thing, by the subsequent grantee of the grantor, and this, when an entry had been made for the very purpose of avoiding the deed. The case is in point, and we know of none to the contrary; besides, we believe it to be sound.
The plaintiff, however, claims the benefit of the maxim, because the defendant sets up the facts and prays affirmative relief. But we think the defendant, and not the plaintiff, is the party entitled to the benefit in this case. The defendant is in possession, and has been in possession for many years, with the acquiescence both of plaintiff and the stockholders, who have received and long enjoyed the consideration for the conveyance. The plaintiff brings the action to recover possession of the property conveyed. The defendants, to defeat a recovery, although it is unnecessary, set up the facts in their answer, as a defense, and the Court finds the facts in favor of the defendants, and holds upon the facts, as stated and found, that defendant has a title both in law and equity, and so adjudges. And this is undoubtedly so. The facts constitute a legal, as well as an equitable defense, and there is no necessity whatever for any equitable or affirmative relief. It was only necessary, upon the facts alleged and found, to enter a judgment that plaintiff take nothing by his action. This is not the exact form of the judgment, but it is substantially that, and is no more extensive in its operation, as to the matters adjudged, than it would be in that form. Technically, it might just as well be in that form, and as a plea of res adjudicata in another suit, it would cover the same issues. In effect, the relief is no more as it is than the ordinary judgment against plaintiff in an action for possession. In form, however, it adjudges the title to be in Zellerbach, and that, as between the parties, the plaintiff has no title. That is to say, the judgment simply adjudges what the present state of the title under the executed agreement, as between the parties, really is. It goes no further. It grants no active relief. It gives nothing on any executory promise. It does not change the position of the parties. It only determines what that position is, and leaves them in it. What before existed in fact and in law is simply adjudged to exist. It is now res adjudicata, and not open to further dispute. And this the Court would have determined as the basis of the judgment, although it would not have so expressed it in terms in the judgment, had the judgment been that the plaintiff take nothing by his action. But under the issues upon which such a judgment would have been entered, and the judgment in pursuance thereof, the same matters would have been res adjudicata, as under the present form of the judgment. In substance, then, the parties are left in the same condition in which the suit found them, as to their rights. We will look to the substance of the thing done, and not to the form, especially in a case like this, where it is clearly manifest that an outrageous injustice would be perpetrated upon the defendant, as between the parties to this action, if, under ordinary circumstances, they could be compelled to surrender this property to the plaintiff without a return of the vast sums of money they have advanced to obtain it, and in a case, also, where it is quite apparent that none of the parties to the original transaction in fact meditated any wrong. We have no idea that any of the parties at the time of the original conveyance supposed for a moment that they were performing any illegal act.