Barrie v. United Railways Co.

REYNOLDS, P. J.

This is the second appeal in this case, the first having been taken by plaintiff, and the action in this court reported 125 Mo. App. 96 . In the present appeal, as in the former, it was heard before two of the judges of this court, one of the judges not sitting. It was reversed and remanded, with the concurrence of both judges, for error in the admission of a tabulated statement of assets received and liabilities assumed by the defendant, generally hereafter referred to as Railways or United Railways Company, from the St. Louis' Transit Company, generally hereafter referred to as the Transit Company, and for failure to set out evidence as to the value of a certain leasehold, surrendered by the last-named company to the defendant. On the second trial there was evidence covering both of these, and the case is now here on appeal by defendant. It might be a sufficient statement of the facts in the case to refer to the statement prepared by Judge Bland, who has in- the meantime retired from the bench by reason of the expiry of his term, as the evidence on the second trial was practically the same as that introduced when the case was first tried, with the additions above noted, but it will probably be more satisfactory to here make a connected statement, referring, however, to the one in 125 Mo. App. for points in evidence there developed but not specifically covered by this statement.

A corporation known as the Central Traction Company was incorporated on the fifth of March, 1898, under the laws of this State. Its capitalization was $100,000, divided into 1000 shares of the par value of $100 each. The purposes for which the corporation was formed, as stated in its articles of association, were “to construct or acquire by purchase, lease or otherwise, and to maintain and operate by any and all kinds of motive power, street railways for public use in the conveyance of persons and property in the city of St. Louis, and in the county of St. Louis, State of Missouri.”

*564 By Ordinance No. 19352, the city of St. Louis authorized the Central Traction Company to construct, operate and maintain a single or double-track passenger railroad over, along and across certain streets, etc., in that city and to operate its road by electric power, “and to run over the tracks of other roads, and to acquire and convey by lease, purchase or sale its own property and franchises or the property and franchises of other street railway companies in the city of St. Louis, and to operate the same.” The franchise wa$ granted for a period of fifty years from the date of its passage. It was passed April 12, 1898. It does not appear that the Central Traction Company ever operated or constructed any line under that name.

On the second day of March, 1899, a corporation under the name of the St. Louis Transit Company was formed with a capital stock of $3,000, divided into thirty shares of the par value of $100 each.

By an ordinance of the city of St. Louis, approved March 20, 1899, certain street railways named in it, their successors and assigns, were authorized to sell, lease or convey, “if found desirable, their property, rights, privileges and franchises now owned and held or herein granted, respectively, to any of the said companies named in this section, or to the St. Louis Transit Company, its successors and assigns.” The title of this ordinance and the first and third sections of it are set out in the opinion of Judge Goode, in the case of Moorshead v. United Railways Co., 119 Mo. App., commencing at page 550, and it is not necessary to repeat that here nor to transcribe any other portions of that ordinance.

It does not appear that the Transit Company ever owned or built any line in its own right — whatever it built being under the lease before and hereafter referred to.

On the tenth day of July, 1899, the Central Traction Company filed an affidavit in the office of the Sec *565 retary of this State, changing its name to United Eailways Company of St. Louis, and afterwards, on the sixteenth day of September, 1899, United Eailways increased its capital stock from $100,000 to $45,000,000, divided into $20,000,000, or 200,000 shares of preferred cumulative 5 per cent stock, and $25,000,000 or 250,000 shares of common stock; and on the twentieth day of September, 1899, under its new name of United Eailways Company of St. Louis, by unanimous vote of its stockholder determined “to increase the bonded indebtedness of said company from nothing to $45,000,-000, . . . and to issue $45,000,000 par value, of first general mortgage 4 per cent gold bonds of said company, and to secure .the same by a mortgage upon all the property, real, personal and mixed, including all rights, franchises and privileges of whatever kind and nature now owned and possessed and- which might be hereafter acquired” by United Eailways. Of the authorized issue of $45,000,000 of bonds, it was provided in this indenture that $3,000,000 thereof were to be reserved for the acquisition of the St. Louis & Suburban and St. Louis .& Meramec Eiver Eailroad Company and their subordinate railroad companies, and for the purpose of talcing up the bonds of said two roads, both of them commonly known as the Suburban System, and not acquired by the United Eailways until after November 1,1904.

- On the twenty-first of September, 1899, the Transit Company increased its capital stock from $3,000 to $20,000,000.

Prior to the thirtieth day of September, 1899, the United Eailways had acquired by purchase or otherwise, under the authority of Ordinance No. 19352, approximately 300, or to be more exact, 293.48 miles of street railway in the city of St. Louis, being all the lines of street railway in the city of St. Louis, except what was known as the Suburban System. It never operated any lines in or under its own name — save pos *566 sibly for a few days prior to this September.30th, but the various lines of which it had acquired control were operated under their own offices and boards. These lines so controlled or acquired by the United Railways are enumerated and described in an indenture of date October 1, 1904, between it and the Mercantile Trust Company, to be hereafter referred to.

On September 30, 1899, a contract of lease was entered into between the United Railways and the Transit Company, under and by which the United Railways leased to the Transit Company all of its owned and controlled lines for a term running from the first day of October, 1899, until the first day of April, 1939, and under this contract of lease, the United Railways turned over to the Transit Company not only all of its railways then constructed, owned or operated, or which might thereafter be constructed, owned or operated by it, but also “all its right, title and interest in and to all its property, real, persona] and mixed now held by it as owner or otherwise, with all franchises of every sort and kind to it now belonging, or which it may hereafter acquire as fully as it now holds or owns or may acquire the same, together with all income derived from any bonds or stock now owned by the United Railways or which may be hereafter acquired by it,” excepting from the demise, its franchise to be a corporation, and excepting any other right, privilege or franchise, “which is or may be necessary to preserve the corporate existence or organization of the United Railways under its charter.” The term specified in the lease is forty years, and under its provisions the Transit Company had possession and operated all the lines of street railway in the city of St. Louis, as well as in the county of St. Louis, which had before then belonged to or been controlled by the United Railways Company. This lease is set out in full in the dissenting opinion of Judge Bland, at pages 605 to 616, in the case of Moorshead v. United Railways Company, *567 119 Mo. App. A summary of it will also be found at page 553, of the same volume in the same case, and at pages 100 and following, in the case of Barrie v. United Railways Company, 125 Mo. App., where this case is reported when formerly before this court. It is not considered necessary, therefore, to burthen this statement now with a further recital of the provisions of the lease. The lease is signed in the name of the United Railways Company of St. Louis, by Edwards Whitaker, its then president, its seal attested by James Adkins, as secretary ; and it is signed in the name of the St. Louis Transit Company by Murray Carleton, as its president, and its seal attested by Albert H. Bauer, as secretary.

At the time of the execution of the lease, and under its provisions, the United Railways Company turned over to the Transit Company everything that it had, including all cash on hand, amounting to about $413,000. There was also turned over to the Transit Company, stock, sometimes stated at 172,643 shares, then again at 172,613 shares, of United Railways common stock, in exchange for a like number of shares of the Transit Company stock. Whether, in following the testimony, we use the one number or the other, the same stock is always meant. Along with these shares of the United Railways common, which were turned over to the Transit Company, there was also paid over to it by a syndicate, of which Brown Brothers & Company were the managers, $11 per share in cash on the 172,613 shares of United Railways common, amounting to $1,898,743. Apparently this money, paid by Brown Brothers & Company, came from the stockholders of the United Railways Company, although its origin is not very clear. At all events, the Transit Company started out in business on September 30, 1899, with $1,898,743 cash, received as a bonus on its stock, also with about $413,000 cash, received from the United Railways Company, the 172,613 shares common stock of the United Railways Company turned over to it by that company in exchange *568 for a like number of shares of its own stock, as well as with this leasehold, which carried with it all the rolling-stock, buildings, equipment, supplies and property of every kind that had been turned over to it by the United Bailways Company, the mileage of the system at that time comprising 293.48 miles. Along with the right to operate, went the right to collect and receive all fares, tolls and revenue resulting from the operation of the system. The lease carried a fixed rental of $5 per annum per share, payable to the United Bailways, upon all the preferred stock of United Bailways Company, “now outstanding or which may hereafter be issued by” United Bailways Company “with the consent of Transit Company,” payable quarterly, first payment to be made April 10, 1900. The Transit Company was to make repairs, additions, etc., at its own expense, on approval of United Bailways. Between that date, that is to say, September, 1899, and October 31, 1904, the Transit Company increased the mileage by the addition of about twenty-four miles; had bought or built two hundred cars, built additional terminals, a sub-station, a powerhouse and a large building at Vandeventer and Park avenues, in St. Louis, all of which were paid for by the Transit Company out of its own resources and- for which it was in turn, in part, reimbursed under the terms of the lease by bonds and stocks of the United Bailways at par, regardless of the market value of these securities, the lease requiring the Transit. Company to accept these bonds and stock at par for all disbursements and expenditures made by it for improvements and betterments, and had accumulated $614,015.25, as well as $105,380, set aside for matured bonds and coupons. All the revenues accruing to the Transit Company during this period, with the exception of between three and four hundred thousand dollars, received from the sale of some outside real estate, sold with the consent of the United Bailways, came to the Transit Company from its tolls, its receipts *569 of fares. It appears from a circular iu evidence, issued in the latter part of 1904, and in which was embodied a letter from Mr. Car letón, then president of the United Railways and also of the Transit Company, as well as from other evidence in the case, that in October, 1904, the physical condition of the track and equipment of the road was excellent and that it was in such generally good condition at-that time that no important additions Avere likely to be made or required to the plant for several years to come, and that its track and equipment could be maintained out of its earnings for several years to come with little if any recourse to capital expenditures, the balance sheet of November 1, 1904, showing a surplus over all current and accrued liabilities, of $683,259.66, of which $288,714.47 was represented by material and supplies on hand, leaving in actual cash a surplus of $344,545.19. As stated in this circular, the gross earnings and other income of the system for 1902 were $6,452,218.90; its operating expenses - and taxes $3,976,721.32. Its gross earnings and other income for 1903 were $7,295,847.38; its operating expenses and taxes for the same year $4,513,514.57; and for the year 1904, its gross earnings and other income were estimated at $9,810,150, and its operating expenses and taxes at $5,591,785. These figures for 1904 are estimates for the months of November and December. According to Mr. Carleton, the gross earnings for the ten months were about $9,269,667. According to an exhibit in evidence, produced by defendant — the balance sheet of the St. Louis Transit Company, of date September 30, 1904 — under the heading of “Profit and Loss,” the loss for the year ending December 31, 1903, is carried at $511,249.99. The profit for the current year, 1904, down to December 30th, is stated at $766,812.86. The fixed charges for these three years were $2,386,080 per annum.

In the spring of 1900, about March, a strike occurred on the street railways of the city then operated *570 by the Transit Company, which entailed a heavy loss to the Transit Company. The president, Mr. Carleton, testifying as a witness, put the loss at about $1,000,000. The auditor of the company, as also Mr. Edwards Whitaker, who had been president of the Transit Company down to the time that Mr. Carleton took hold in 1899, placed it at between $1,700,000 and $1,800,000. Along in the fall of 1901, the Transit Company having exhausted its cash assets with which it started in business and having made extensive improvements and having gone through the stress of the strike, was in need of ready money with which to carry on and operate the road. This indebtedness, so contracted in making improvements, betterments and additions to the property, as required by the terms of the lease, amounted in the fall of 1901 to approximately $6,000,000. Accordingly, on the thirtieth of November, 1901, it determined to and authorized an issue of $6,000,000 of what are called collateral trust notes, securing the same by pledge of stocks and bonds of the United Railways Company which Transit Company had acquired under the lease. Five million, seven hundred and seventy-six thousand dollars of these collateral trust notes so secured were issued. These collateral trust notes were to mature on the first of November, 1901, and appear to have been held by the Mercantile Trust Company. Judge H. S. Priest, who is now and had been the general counsel of the company from some time in 1899, and down to November 1, 1901, a member of the board testified that the occasion for the execution of this indenture of November 30, 1901, was to make up for the losses entailed by the strike of 1900, and because the earnings realized had not come up to the amount .that had been anticipated “at the time of the consolidation of the companies,” evidently meaning at the time of the execution of the lease of September 30, 1899. To quote from Judge Priest, he said: “The Transit Company had sustained a very heavy loss by reason of the strike. *571 in addition to that, the earnings of the property had not reached the amount anticipated at the time the properties were consolidated. In addition to that still, there was a large floating indebtedness accumulated in the operation of the property, and by reason of the improvements and betterments and acquisitions made by the Transit Company as it was required to do under the lease.” After stating that the bonds and preferred stock of the United Railways Company were pledged as collateral for these $6,000,000 of collateral notes, Judge Priest testified: “Those bonds and preferred stock the Transit Company had received in payment for betterments which it had made upon the leased property under the terms, of the lease. In making those betterments and such expenditures as were required under the lease, the Transit Company unfortunately was compelled to pay in. cash. Securities which it had contracted to receive under the lease from the United Railways Company for making the improvements could not be sold upon the market for anything approximating par. . . . So that you see the Transit Company was losing money under the terms of that lease by paying out cash for these improvements and taking securities which it could not dispose of in the market; and hence, in order to not sustain directly that loss at the present time, and hoping that the property would so develop and the securities so enhance that it would get approximately par for them, it preferred to borrow the money on it. Of course, they were bringing in interest, and it was paying out interest, and that was the occasion for that collateral trust.” Judge Priest added that the United Railways Board, “instead of paying in the common stock of the United Railways Company, or in the preferred stock, paid, as far as it could in order to minimize the loss in assets of the Transit Company, its very best securities; hence it paid first in the 4 per cent mortgage bonds, which brought the highest price upon the market and were the best investment securities, *572 and after they were exhausted it paid in the next best, the 5 per cent preferred stock, and when that was exhausted, of course, it would have to pay only — and that was its only reserve — in the common .stock issued at its treasury. In addition to this mode of raising money,” Judge Priest adds, “the Transit Company needed money very badly, and its directors, as well as the directors of the United Railways Company, the two Boards being substantially the same, recognized the disadvantageous situation of the Transit Company, and under the lease that it was paying at par and getting in securities far below par, and they were desirous of minimizing the loss to the Transit Company as far as lay in the power of the United Railways Company in making these improvements.” As one way of raising money, therefore, in addition to the execution of this collateral trust mortgage, it was suggested that real estate owned by the United Railways, but unused for corporate purposes, be sold and the cash réalized from that sale be paid into the Transit Company for betterments and improvements as far as it would go. That sale was made and the money turned over to the Transit Company, amounting to something like $400,000. It must be borne in mind that this indenture of November, 1901, pledged certain stocks and bonds but did not pledge the leasehold, and it was executed by the Transit Company alone, the United Railways Company not joining in the indenture.

Still laboring under its financial stress and looking around for a plan by which the company could successfully operate, the St. Louis Transit Company later determined to issue $20,000,000 of twenty-year 5 per cent improvement and refunding bonds. Accordingly, on the seventeenth of June, 1903, it executed its indenture of that date in which it is recited, among other things, that “at the instance and for the benefit of the United Railways Company of St. Louis, as well as for its own advantage, and pursuant to the obligations of the said *573 covenant” (meaning the lease of September 30, 1899), “Transit Company has expended in money, for additions, acquisitions, improvements and betterments to, for and upon the demised property, the sum of eight million, three hundred and thirteen thousand, five hundred dollars ($8,313,500), and has received in payment thereof the following bonds and preferred shares of the stock at par, of the said United Eailways Company of St. Louis, pursuant to • the aforesaid agreement, viz.:

“ 4,851 United Eailways Company of St.

Louis Four per cent bonds........$4,851,000.00

“34,625 Shares United Eailways Company of St. Louis Five per cent preferred stock.......................... 3,462,500.00.”

Following a description of the bonds and stocks which had been put up as security for the collateral trust notes, under the indenture of November 30, 1901, and reciting the desire to save them from a sale, the indenture of the seventeenth of June, 1903, further sets out that the United Eailways Company of St. Louis, lessor as aforesaid, and under the terms of. said lease, “has requested Transit Company to make further large additions, acquisitions, improvements and betterments to, for and upon the said demised premises,” for which United Eailways has no other means, except as hereinafter mentioned, of recompensing Transit Company than the loan of its credit; “and, whereas’, Transit Company is advised that such proposed additions, acquisitions, improvements and betterments will greatly enhance the value of its leasehold; and, whereas, it is desirable that Transit Company should refund and consolidate all of its indebtedness into one series of bonds, payable as hereinafter provided; and, whereas, said United Eailways Company of St. Louis has agreed, in consideration of Transit Company undertaking to make the additions, acquisitions, improvements and betterments as aforesaid, to guarantee the payment of the principal and *574 interest of the bonds as hereinafter provided and authorized,” therefore, the indenture recites, that acting pursuant to the resolution of its stockholders and authorized by law so to do, the Transit Company had determined to make and issue from time to time its certain bonds to the extent of $20,000,000, each for the sum of $1,000, principal and interest payable in gold coin, to bear date April 1, 1903, payable April 1, 1923, interest payable semiannually. The form of the bond is set out, and, indorsed on the bonds, is the guarantee of the United Railways Company of St. Louis. It is further recited that for the security of these bonds and interest thereon, Transit Company has resolved to, and it does, “grant, bargain, sell, assign, transfer and deliver” unto the Mercantile Trust Company, as trustee in the indenture, its successors and assigns, $2,877,000 par value of the 4 per cent general mortgage gold bonds of the United Railways Company of St. Louis, with the coupons due July 1,1903, and subsequent coupons attached; also $5,324,700 par value of the 5 per cent cumulative preferred stock of the United Railways Company of St. Louis; also $17,261,300 of the common stock of the United Railways Company of St. Louis. “And does hereby further lease, demise and sublet unto the said Trust Company, its successors and assigns, all and singular the lands, tenements, rights, railroad, assessments and property of every kind, nature and description, comprised in or expressed to be demised by the hereinbefore recited indenture of lease by and between the United Railways Company of St. Louis and Transit Company, dated September 30, 1899, for the term of years expiring April 1, 1939, for the residue of the said term thereof, except the last day thereof,” in trust to the Mercantile Trust Company as security for the contemplated issue of $20,000,000 of bonds.

Explaining the necessity for the execution of this indenture of June 17, 1903, Judge Priest testified:44The directory of the Transit Company realized that they *575 must anticipate, some time in advance, current and maturing obligations of the Transit Company, and to provide available resources for making the necessary improvements and adding the-required betterments to the leased property, the six million of collateral trust notes would mature in three years after their issue; that is, mature on November 1, 1904. The current obligations had been increasing, as well as obligations of the Transit Company occasioned by making betterments and improvements. So, at that time, there was planned this scheme of a refunding and improvement mortgage, to provide not only for the payment of such liabilities of the Transit Company as should mature in the near and a little more remote future, but to finance the institution for eight or ten years to come, and then put it in such a position that it would need no further fiinancing. ... Of course, (said Judge Priest) that plan had been under consideration for some months before it was brought out, but it was finally settled upon and action taken which resulted in the making of this mortgage to secure this proposed issue of twenty millions of bonds.” At the time the mortgage was issued (he says) it contemplated the issue at that time of not more than $8,000,000.00 of bonds and none over this amount w7ere ever sold or passed from the control of the Transit Company. The refunding and improvement bonds, as they were called, secured-by this indenture of June 17, 1903, were the bonds of the Transit Company alone, the liability of the United Railways being that of guarantor thereof. The United Railways did not join in the execution of the indenture.

While it was contemplated, by this plan, to take up the $5,776,000 collateral trust notes held by the Mercantile Trust Company, with these improvement and refunding bonds, that apparently could not be done. Accordingly, after averring the failure of the plan and the inability of the Transit Company to raise further funds to meet the collateral trust notes then nearly due, *576 as well as other obligations, it is averred in the answer that an arrangement or agreement was made and entered into “with Brown Brothers & Company, Syndicate Managers,” by what is called the “Tripartite Agreement.” This agreement is set ont in full in the answer and was introduced in evidence in the case. It is of date September 27, 1904, was executed by the United Railways Company, the Transit Company and Brown Brothers & Company. The name of the United Railways Company is signed by C. H. Spencer, vice-president, its seal attested by James Adkins, secretary. The name of the St. Louis Transit Company is signed by Murray Carleton, its president, its seal attested by James Adkins, its. secretary, and it is also signed by “Brown Brothers & Company, Syndicate Managers.” It recites the lease of September 30, 1899, and that under it the Transit Company “has contracted the following note and bonded indebtedness, namely(a) $5,776,000 par value three years 5 per cent collateral trust notes, due November 1, 1904 (secured by indenture of Nov. 1, 1901); $2,877,000, par value, United Railways 4 per cent general mortgage bonds (secured by mortgage of September 20, 1899); $4,893,500, par value, United Railways 5 per cent preferred stock, (b) $8,000,000, 5 per cent twenty-year gold bonds of a total authorized issue of $20,000,000, secured by the indenture of trust of June 17, 1903. It recited (c) “Transit Company has a further specific indebtedness, as shown upon August 31,1904, of $1,665,155.17, but which it is estimated the surplus earnings of 1904 will reduce to ,$935,000.”

It is then recited that the Transit Company is unable to meet the indebtedness of $5,776,000, or to pay the $935,000 shortly thereafter to mature, “except by the sale of the collaterals deposited under the two above recited agreements with the' Mercantile Trust Company of St. Louis,” and that these collaterals cannot be disposed of without procuring a release thereof from the aforesaid pledges, and from the right of substitution *577 which the United Railways Company has by reason of the terms of its guarantee and the trust instrument under which said collaterals are pledged; that in order to procure a release of the securities and pay the indebtedness it (the Transit Company) proposes to make an issue of 5 per cent twenty year gold bonds, to he called improvement bonds, in the aggregate amount of $10,-000,000, and to obtain the guarantee of Railways Company thereon, secured by a mortgage of the Railways Company upon all of its property, only subject to the lien of the mortgages already existing. The Transit Company and United Railways Company thereupon agree: First; that whenever requested by the Railways Company so to do, the Transit Company will surrender to the Railways Company by proper instrument of conveyance of release, “all and singular the property demised by the aforesaid lease of September 30, 1899, and deliver, assign and transfer to Raihvays Company, upon such request, the immediate possession of all the said demised property, and all cash, hills receivable or other credits then owned or held by it, for and upon the considerations and conditions hereinafter named; provided, only that Railways Company, at the time of said request, shall release and fully acquit Transit Company from all liability which then has or may thereafter accrue to Railways Company under or by virtue of any of the terms or covenants of said lease.” Second; that Transit Company further agrees that it will cause the $8,000,000 of refunding and improvement bonds of the authorized issue of $20,000,000, of its refunding and improvement bonds, to be cancelled, and the indenture of June 17, 1903, securing them and pledging certain stocks and bonds, to be released and discharged, and will cause the holders of these $8,000,000 of bonds to agree to exchange the same at par for a like amount at par of its proposed improvement bonds to he guaranteed, as hereinbefore stated, by the United Railways Company. *578 Third; that it will enter into an agreement with the Syndicate (meaning by “Syndicate,” the unknown and undisclosed parties, who, under the name of Brown Brothers & Company, a copartnership of the City of New York, acted under the name of Syndicate Managers) for the sale of all bonds and stock deposited with the Mercantile Trust Company, under the agreements of November 30, 1901, and June 17, 1903, together with the $2,000,000 of the proposed improvement bonds which remain after the exchange of $8,000,-000 thereof for the $8,000,000 of the outstanding refunding and improvement bonds, and that in and by such sale to the Syndicate, the Transit Company shall provide that $7,000,000 of preferred stock of the United Railways Company shall be deposited for the use and benefit of the United Railways Company upon terms and subject to restrictions subsequently to be agreed upon and stated in the agreement. . Fourth; that the United Railways Company, by consent of the legal majority of its stockholders, shall guarantee the proposed issue of $10,000,000 of improvement bonds, “and to secure its said guarantee' thereof by deed of trust or mortgage upon all of its property, subject only to the mortgage liens already existing thereon.”

Under the second article the Transit Company, agrees with the Syndicate to assign and transfer to it $2,000,000 of its proposed improvement bonds, at eighty-five cents on the dollar, and $8,227,000, par value, of the preferred stock of the United Railways Company of St. Louis, and $2,870,000, par value, of the 4 per cent general mortgage bonds of the United Railways Company, and $17,261,000, par value, of the common stock of the United Railways Company of St. Louis, “for and in consideration of the sum of $5,300,000.” That is to say the Transit Company is to sell and transfer to the Syndicate the above enumerated securities for a sum aggregating $7,000,000, out of which sum of $7,000,000, the sum of $6,711,000, “shall be paid at the time, upon *579 the terms and conditions, and for the nse and purposes specified in a contract between tbe Mercantile Trust Company as trustee, and Transit Company, bearing date September 9, 1904.” (This was to take up tbe $5,776,-000 collateral trust notes held by tbe Mercantile, and release the securities put up with the Trust Company as collateral to the collateral trust notes.) The remainder of the $7,000,000, that is to say, $289,000, to be paid upon tbe order of Transit Company or its president, the Syndicate agreeing to pay for the bonds and stocks tbe amount so specified, and agreeing to cause $7,000,000 of the preferred stock of the United Railways Company, “so to be acquired by it, to be deposited with a trustee, for the use and benefit of United Railways Company, upon the terms and covenants hereinafter made between Syndicate and Railways Company.”

Tbe third article provides that the United Railways Company and Syndicate agree, that in consideration of the purchase by the Syndicate of the stocks and bonds agreed upon between the Transit Company and Syndicate, and the agreement to deposit with the National Bank of Commerce in St. Louis, as trustee, for the use and benefit of tbe United Railways Company, preferred shares of stock of United Railways Company, aggregating the total par value of $7,000,000, and the agreement of the Syndicate to offer to procure for the United Railways Company shares of stock of the Transit Company, that the Railways Company agrees to sell, for the consideration aforesaid and other considerations, and to issue to the Syndicate, the $7,652,500, par per share, of the unissued shares of common stock of the United Railways Company. United Railways Company further agrees, whenever requested by Syndicate, to demand of the Transit Company the surrender of the leasehold and the demised property leased under the lease of September 30, 1899, and immediately upon such surrender to enter into and upon the premises and the operation of the property, “and coincident there *580 with, as between it and Transit Company, to assume the payment of the $10,000,000 of proposed improvement bonds, guaranteed as herein provided, by Railways Company, and all debts then contracted for labor, materials or supplies rendered or furnished to Transit Company.” The Syndicate upon its part agrees that it will purchase the bonds and stocks agreed to be sold and deposit them, of the aggregate value of $7,000,000, as before referred to, with the National Bank of Commerce, as trustee, for the use and benefit of the United Railways Company, the stock, or any part thereof, so deposited with the trustee, to be sold for the use and benefit of the United Railways Company by the trustee, whenever requested by the United Railways, at such price, and upon such terms as the United Railways may direct. Paragraph d of the third article of this tripartite agreement provides that the Syndicate will offer to the shareholders of the Transit Company, until the eighteenth of October, 1904, “voting trust certificates, issued under and by virtue of such a voting trust agreement as Syndicate may organize and make,” representing two shares of common stock of Railways for five shares of the Transit stock, provided the shareholders of the Transit Company shall deposit their stock under terms and conditions prescribed by the Syndicate for the purpose of such exchange, and, upon the basis aforesaid, with the National Bank of Commerce in St. Louis, as agent for the Syndicate, on or before said eighteenth day of October, 1904, “and such Transit shares as shall be so exchanged shall be and become the property of Railways Company and be transferred to its treasury. All shares of Railways Company’s common stock not so exchanged for Transit stock within said period shall be and remain thereafter the property of Syndicate. Syndicate, however, of its own volition, but without any obligation so to do, may thereafter continue to exchange said stock upon said basis, and should it do so, whatever shares of Transit Company stock Syndicate acquires by such *581 exchange shall become the property of Railways Company.”

The concluding article (4), of the tripartite agreement, sets out that the agreement contained in it is conditioned upon the authorization by the shareholders of the Transit Company of an issue of bonds aggregating $10,000,000, to be given at a meeting of the shareholders called for October 19, 1904, and the authority of the shareholders of the United Railways Company to guarantee the said issue of bonds of the Transit Company and to make a mortgage to secure said guarantee, to be given at a meeting of the United Railways Company’s stockholders called for October 20, 1904. A special meeting of the stockholders of the Transit Company was accordingly held October 19, 1904, on a notice signed by seven of the eleven directors, it being stated in the notice that the object of the meeting was “for considering and voting upon a proposition then and there to be submitted to cancel an issue of $20,000,-000, of refunding and improvement bonds, guaranteed by the United Railways Company of St. Louis, authorized on the twenty-third of May, 1903, and to issue in lieu and instead thereof bonds to be guaranteed by the United Railways Company of St. Louis, in an amount not exceeding the total sum of $12,500,000, and to consider and determine such other or further matters as the said shareholders then and there assembled may deem expedient.or wise in relation to its bonded or note indebtedness.” This is all that is set out in the call, no mention being specifically made of a proposed surrender of the leasehold. At this meeting a resolution embodying the proposed tripartite agreement, of date September 27, 1904, was introduced and submitted to the stockholders and on motion adopted. The report of the'inspectors shows that this was all that was voted on, and it shows that 162,175 shares of stock were voted in favor of the resolution and no shares against it. Of the shares voted in favor of the resolution, 155,127 were *582 voted by Brown Brothers & Company, as proxies for the owners, and .6794 were voted by Murray Carleton, as proxy for the owners represented by him. The remaining 254 shares were voted personally by the owners of them. Mr. Murray Carleton, president of the company, was chairman of the meeting; Mr. James Adkins, secretary of the company, was the secretary, and the motion for the adoption of the tripartite agreement was made by Judge EÉ. S. Priest, a stockholder, director and the general counsel of the company. The total outstanding stock of the St. Louis Transit Company, on October 18, 1904, was 172,643 shares, and of the 155,127 shares voted by Brown Brothers and Company, 89,811 shares appear as owned by Brown Brothers & Company individually, which is considerably more than half of the total voted and more than half of the total stock outstanding. Brown Brothers & Company voted 65,316 shares in addition to their own, on proxies held by them.

The vote and the proceedings at the special meeting of the stockholders of the United Railways Company, which appears to have been held October 20, 1904, are not in evidence in detail, nor is the call for that meeting in evidence, but a list of the stockholders of that company as of date October 20, 1904, is in evidence. By that it appears that Brown Brothers & Company were on October 20, the owners of 3959 shares of the common stock of the United Railways Company. Whether they voted them at the meeting is not in evidence. It is in evidence, however, that the 82,232 shares of preferred stock in the United Railways Company, as well as-the 172,613 shares common in the United Railways, all of which were then owned by the Transit Company, but, through the mortgage of June 17, 1903, under pledge in the hands of the Mercantile Trust Company, were voted at the stockholders meeting in favor of the proposition, by Mr. Murray Carleton, as proxy of the Transit, for the adoption of the tripartite agree *583 ment, by order and authority of the board of directors of the last named company. That is to say, out of a possible 450,000 shares common and preferred of the United Railways, 254,845 shares were voted by Mr. Murray Carleton, the president of. both companies, he being at the time interested in the syndicate and one of the voting trustees provided for by the tripartite agreement, in favor of the adoption of the tripartite agreement. That is considerably more than half of the total authorized capitalization of the company, excluding any stock held by Brown Brothers & Company, or by the gentlemen who were then directors in both companies. There is no evidence in the record, however, to show what stock, other than that voted by Mr. Carleton, was represented or voted at the meeting of the stockholders of the United Railways held on the twentieth of October, 1904, the testimony being confined to the voting of these 254,845 shares of stock owned by the Transit Company by Mr. Carleton.

As will be remembered, the last article (Article 4)-of the tripartite agreement, calls for the execution of an instrument by the United Railways Company, guaranteeing the |10,000,000 of bonds to be issued. That appears to have been done by a mortgage of date October 1, 1904. This mortgage was objected to by counsel for plaintiff, when offered in evidence, on various grounds, among them being that the Transit Company had absolutely no power, at this meeting of stockholders of United Railways, nor did its officers or a proxy for it have any power to vote the shares of stock of the United Railways Company which were at that time owned by the Transit Company and hypothecated by it. The objection was overruled and the instrument admitted in evidence. This mortgage,' while bearing date October 1, 1904, was not acknowledged by Mr. Carleton, as president of the United Railways Company, until October 25, 1904, and it was acknowledged on the part *584 of the Mercantile Trust Company, the trustee named, on October 27, 1904. It was recorded October 28, 1904.

Referring then to this indenture of date October 1, 1904, but acknowledged on behalf of United Railways Company, as before noted, on October 25, 1904, it is stated in it that the Transit Company, being the lessee of the United Railways Company, under the lease of the thirtieth of September, 1899, has heretofore author- ■ ized and executed a series of bonds, aggregating $20,-000,000, called refunding and improvement twenty-year 5 per cent gold bonds, bearing date the first of April, 1903, secured by trust indenture of June 16, 1903, and that the United Railways Company, for the consideration and upon the terms mentioned in that indenture, had agreed to and has guaranteed the series of bonds by written guarantee, indorsed thereon, and that $8,-000,000 of said series of bonds have been issued and sold and are now outstanding, and that Transit Company finds it impracticable, except at a great loss to it and the United-Railways Company, as guarantor, to sell and dispose of the remainder of the bonds for the uses and purposes and in accordance with the conditions and terms of the agreement and indenture of trust, and that the Transit Company has therefore determined to take up and cancel all of said bonds which have been issued and sold and are now outstanding and to cancel the remainder of the bonds and to issue in lieu thereof its bonds, to be called improvement bonds, aggregating the sum of $10,000,000, of the denomination of $1,000 each, bearing date of the'first day of October, 1904, payable October 1, 1924, with semiannual interest at 5 per cent, payable the first days of April and October succeeding, the bonds indorsed with the guarantee of the United Railways Company; and it is recited that the Transit Company “has agreed with the holders of the said $8,000,000 of refunding and improvement bonds outstanding to exchange therefor, at par, $8,000,000 of its improvement bonds, and has determined to sell *585 the remainder, to-wit, |2,000,000 thereof, for cash, for the purpose of paying off and discharging certain collateral notes hearing date November 1,1901, and maturing November 1, 1904, and secured by a collateral trust agreement of the said Transit Company to the Mercantile Trust Company;” that for the consideration named in the indenture of trust of June 17, 1908, Transit Company had requested the Railways Company to guarantee the improvement bonds and to secure its guarantee thereof by an indenture and deed of trust upon all its property, “subject only to its general mortgage bearing date twentieth of September, 1899, . . . and, Whereas, for the considerations aforesaid, and other valuable considerations, it is to the interest of Railways Company to guarantee said bonds and to secure'the same by a mortgage as aforesaid upon all of its property,” that, therefore, acting on the authority and vote of its stockholders, taken on October 20, 1904, and by resolution of its board of directors, the United Railways had resolved to guarantee the payment of the principal and interest of the Transit Company’s Improvement Bonds, and to secure its guarantee, according to the tenor of said bonds, had resolved to grant, bargain, sell, convey, assign, transfer and set over the property specifically described -thereafter; that for that purpose it pledged and mortgaged to the Mercantile Trust Company, “all and singular the entire lines of railways, estates, rights, properties, real and personal, privileges and franchises of Railways Company, whether now held or hereafter acquired, the same being all the railways of said Railways Company, situate, lying and being in the city of St. Louis and in the county of St. Louis, in the State of Missouri, and including the systems of railways of said Railways Company, more, particularly described as followsIt then describes what were known as the lines of the Lindell Railways Company; of Missouri Railroad Company; of Union Depot Railroad Company; of Jefferson Avenue Railroad Com- *586 party; of Citizens Railway Company, of Cass Avenne and Fair Grounds Railway Company; of Southern Electric Railroad Company; of Clayton and Forest Park Railway; of St. Louis, Clayton and Creve Cpeur Lake Railroad Company, of Midland Street Railway Company; of St. Louis Cross County Railroad Company ; of St. Louis County Street Railroad Company, of St. Louis Railroad Company; of Baden and St. Louis Railroad Company; of Southwestern Railway Company; of St. Louis Traction Company (formerly Peoples’ Railway); of Kingshighway Railroad Company. Thus the United Railways Company covers, by this indenture, the franchise and all the property of the railway and fixtures and appurtenances and all additions or improvements made thereto, which were in the lease to the Transit Company. It also covers all the capital stock of the various lines, including all stocks and bonds of other railroad companies “now owned by Railways Company, or which may be hereafter acquired.” Also all leaseholds and rights under leases now owned, or hereafter acquired, all corporate or other rights, privileges and franchises are included; all of this, however, subject to an indenture of mortgage dated twentieth of September, 1899, between the United Railways Company and the St. Louis Trust Company. The mortgages antecedent thereto, given by the subsidiary lines before named, and as therein recited, are also included. It is further provided in this indenture that the bonds to be secured under it shall be executed by the St. Louis Transit Company, with the executed guarantee of the United Railways thereon; that $8,000,000 of them are to be used, as beforé stated, for retiring $8,000,000 of outstanding refunding and improvement bonds of the Transit Company, and the remaining $2,000,000 to be sold for the purpose of paying off, in part, the collateral trust notes of the St. Louis Transit Company. It is provided, that until default is made in the payment of the interest or principal of the bonds, the United *587 Railways shall retain actual possession of the premises and property mortgaged. It will be noted that no reference whatever is made in this indenture to the fact that at the date of the instrument and at the date of the acknowledgment of it by the president of the United Railways, the Transit Company was in possession of all of these roads, under the lease of September 30, 1899. It is also to be noted that the United Railways did not join in executing the indenture of June 17, 1903, securing the $20,000,000 of bonds therein described; it was executed by the Transit Company alone, the United Railways merely indorsing the bonds as guarantor, while in this indenture of October 1, 1904, the bonds were those of the Transit Company, signed and executed by it, the guaranty was indorsed on them by the United Railways Company, and the trust indenture securing the bonds was executed by the United Railways Company alone.

On a question which arose at the trial as to the liability of the United Railways under this mortgage of October 1, 1904, and as to what change in that respect was effected by this as against its liability as a guarantor on the bonds secured by the mortgage of June 17, 1903, the point being made by counsel for plaintiff that the liability of the United Railways had been increased only by $2,000,000, under the mortgage and guarantee of October 1, 1904, Judge Priest being examined as a witness claimed that the liability of the United Railways “was increased to the extent of ten millions of dollars in certain contingencies. It-was not the principal obligor in the eight million dollars of Refunding and Improvement Bonds. ... It was subordinate.” He explained that the equity which the Transit Company had in the bonds and stocks, as well as its leasehold, was pledged by the indenture of June 17, 1903, and that later — that is under the indenture of date October 1, 1904 — the liability and guaranty of the United Railways became more special, hence he claimed *588 that if the United Railways paid off the twenty-year Improvement Bonds, it was entitled to hold the bonds against all the property of the Transit Company.

Reference is also made in the tripartite contract to a voting trust, formed or to be formed under the direction of Brown Brothers & Company, in which the voting power of the common stock of the United Railways Company common stock, acquired under the tripartite agreement, was to be lodged. This agreement was made on the first of November, 1904, between Brown Brothers & Company, as syndicate managers, on the one part, and F. S. Smithers, Anson W. Hard, Murray Carleton, James Campbell, J. C. Van Blarcom, Eugene Delano and James Brown, designated as “voting trustees,” on the other. By this agreement, the certificates of common stock of the United Railways Company were transferred to these voting trustees, who issued “participating certificates,” transferable on the books of the voting trustees, in lieu of the stock certificates of the United Railways Company, to those who participated, and by this voting trust agreement, the power to vote all of this stock, so put into the voting trust, was to remain in the voting trustees for a term extending to the first of November, 1909. The purpose of this voting trust, as stated in the instrument creating it, is the “desire to provide for a continuous and efficient financial and business policy for the best advantage of all persons interested therein.”

Testifying as to the occasion for the tripartite agreement, Mr. Celia, who had been a director of the Transit Company for several years, and was such at the date of the execution of this agreement, said that the object of the “reorganization” of the company, as he called it, in 1904, meaning by that, the turning over of possession by the Transit Company to the United Railways Company, was with the view of providing sufficient funds to prevent the United Railways Company becoming financially embarrassed when it took over the *589 operation of the road; if the Transit Company could not dispose of its bonds, the United Eailways Company could. Mr. Carleton testified that he had tried all through the summer and fall of 1904 to sell the securities and provide money with which to carry on the property, particularly to raise money to meet the collateral trust notes which matured November 30, 1904, but failing in that, it became necessary to adopt some new measures to finance the property and he stated, that by the financial plan adopted under the tripartite agreement, the capitalization of the Transit Company was cut down from $20,000,000 to $8,000,000 on paper, that is to say holders of $20,000,000 of stock in the Transit Company if there was that much out, took $8,000,000 of stock in the United Eailways Company in exchange for it; that the Transit Company had no assets outside of the collateral deposited to secure the loans; that it had pledged all it had; had put up everything it had under the mortgage of 1903, and that while under that mortgage, an issue of $20,000,000 of improvement and refunding bonds was authorized, in point of fact, it had been able to sell or negotiate only $8,-000,000 of these bonds, although the whole issue was guaranteed by the United Eailways. By the tripartite agreement, said Mr. Carleton, the financial affairs of the Transit, its securities, “went into strong hands,” and to that cause he, as well as other witnesses attributed the very rapid rise in the market values of the stocks and bonds of both companies which is shown to have taken place about and immediately after November, 1904.

Eeferring again to the testimony of Judge Priest— and we refer to his testimony particularly, not only because he was the general counsel of both companies, and, until November, 1904, a director in each of them, and thoroughly conversant with their affairs, but because, as a witness called by the defendant in this case, he has stated the situation not only at considerable *590 length, hut very clearly — referring then to and quoting from his testimony, he testifies that the directors— meaning, undoubtedly, the gentlemen who composed the common directory of both companies, but acting particularly in their capacity of directors of the Transit Company — had been working on the plan that finally crystallized in the tripartite agreement, for eight or ten months. “They had explored different avenues to find a means of escape, for the relief of these securities” (that is the securities of both companies, all of them practically then being hypothecated and under pledge) “and they finally adopted one which they thought could be carried out, and then they called a convention of the shareholders to ratify and approve it; . . . Well, of course, the directors of the Transit Company, or the United Eailways Company being the same substantially as the directors of the Transit Company, realized the situation, but because of that situation, and because of the distress of the Transit Company, the directors of the United Eailways Company did not feel that they were empowered by the stockholders of the United Eailways Company to give away its property to somebody else.” Brown Brothers & Company he testifies, following out suggestions and plans originated by the' directors of the company here, had procured a New York syndicate to underwrite the whole plan and had then presented it to the directors of the two companies and after the conference with the directors in St. Louis, in which the plan was submitted by Brown Brothers & Company to them, it was agreed to by the directors, whereupon as he, Judge Priest testifies, he wrote the., tripartite agreement, and that agreement sets out the whole transaction as authorized and approved by the stockholders of both companies and agreed upon by Brown Brothers & Company, as syndicate managers, and it was carried out in all respects as written. Asked why the United Railways Company itself did not make the exchange of stock between the two companies, in *591 stead of doing it through Brown Brothers & Company, as provided for in the tripartite agreement, Judge Priest said that it was because it was thought that the United Railways Company could do better in this way through the Syndicate; that the Syndicate would be more liable to acquire the stock for the use contemplated by the agreement. He further testified that one of the underlying motives in the execution of the tripartite agreement was that the Transit Company “was met with this condition; it had a large number of creditors. It was interested in paying those creditors in full if it could. And I thought it was its duty to use to the best advantage all of the securities in its possession, and to discharge as far as it could all of its obligations. Now, if it stood without action and allowed these collateral trust notes to be foreclosed and the property sold. . . . then that would affect those securities, they would depreciate far below what they were then, and would affect the securities in the hands of every individual that had them, securities either of the United Railways Company or of the Transit Company, and would entail an absolutely useless and cruel loss upon every individual in the city of St. Louis that owned any of those securities.”

Brown Brothers & Company, designated in the tripartite agreement as “Syndicate Managers,” were partners, engaged in business as Bankers and Brokers of New York City and were heavy stockholders, largely interested, in the stock of the Transit as well as of the United Railways Company. In point of fact the testimony in the case tends to show that from the beginning of the consolidation of the street railway lines in that city, the moving and controlling spirit in the matter was this firm of Brown Brothers & Company, one of the partners, Mr. James Brown, representing them here in this city in the transactions, and, according to the testimony of Mr. Adkins, who was the secretary of both the Transit and United Railways Companies practically *592 from the beginning, Brown Brothers & Company managed the syndicate which acquired all of the railway.lines in the city of St. Louis, excepting the Suburban. Judge Priest had been their attorney before he became the attorney for either of the corporations and it appears in the evidence that his professional engagement with Brown Brothers & Company originally brought him into the position of general counsel for the two companies. In the perfection and consummation of the tripartite agreement Brown Brothers & Company, under the title of “Syndicate Managers,” that firm largely interested, however, in its own right, in the stocks and bonds of both companies, actually and practically acted as the agent of both companies in the transaction, and as above noted, it was through them that the $11 per share on the 172,613 shares of the United Railways Company stock, which was turned over to the Transit, Company under the lease, was paid into the Transit Company’s treasury. Under the tripartite agreement, Brown Brothers & Company, as managers of the syndicate, received 15,000 shares of the common stock of the United Railways Company for managing and inaugurating and carrying out the tripartite agreement. Mr. Carleton testified that it was through this same syndicate that the various properties which went into the United Railways was originally purchased. The Brown Brothers & Company syndicate at first held and controlled the United Railways stock, and a Maryland syndicate held the Transit Company’s stock. Mr. Carleton also testified that while he was interested in both syndicates, he does not think that Brown Brothers & Company were interested in the Maryland syndicate. The Maryland syndicate held control of certain lines before what is referred to by the witness, as “the consolidation,” apparently meaning the lease by the United Railways to the Transit Company, took place. Brown Brothers & Company syndicate he testifies ultimately had acquired control of all of the lines Avhich Avent into the United *593 Railways and which were leased by the United Railways to the Transit Company. Mr. Carleton testifies that after the purchase of these various properties by these several syndicates (that is the Maryland syndicate and Brown Brothers & Company syndicate) “they were operated as independent companies, separate organizations, until such time as everything was accomplished for the consolidation, and about that time this lease was entered into with the Transit Company, and then it took them over and became the operating company. Now, there might have been an interval in there of a little while that the United Railways Company, before it turned over this property to the Transit Company, under the lease, may have operated it for a few days, I don’t recall just how that interim was filled in.” If the United Railways did operate any of the .lines, Mr. Carleton said, he didn’t recall it. He became president of the Transit Company about April, 1901, although he had been president prior to that for a short time during its organization, and he continued as president of both companies until. March, 1905, and for the same period of time was also president of the United Railways. There were eleven members of each board, that is of the Transit and of the United Railways, and they were made up of the same individuals, except that Mr. Celia was a member of the board of the Transit and not' of the United Railways; Mr. Conrados was a member of the board of the United Railways and not of the Transit Company, and Mr. Paul Brown, who had been a member of the board of the United Railways, resigned sometime in 1904, and his place was not filled. Judge Priest was a member of both boards until October 31, 1904; when he resigned. Mr. Christopher Smithers succeeded him. As before remarked, Judge Priest, speaking of the adoption of the tripartite contract and of the conference between the officers and directors concerning it, spoke of the two boards as identical. Mr, Carle *594 ton, M'r. Adkins and Mr. Henry testified to the same effect, all of them testifying substantially that from the' time the ownership of the various roads passed over to the United Railways, even covering the. time of the trial of this case, the two boards were practically identical. When the boards had meetings, they do not even appear to have met as separate organizations; they met in the same room, and all the witnesses refer to each board acting on the same information and in the same line as the other, by reason of the identity of membership. The only meeting of the separate organization of which there is any mention in the testimony, was the meeting by the stockholders of the Transit Company, held on the nineteenth of October, and of the United Railways, held on the twentieth of October; even these two meetings apparently being held at the same place, and as far as appears by the testimony in the case, the officers presiding at those meetings were identical in each case; they then had the same president, secretary, treasurer and counsel, and the controlling vote in each company, so far as the stockholders'are concerned, was in the same hands. Mr. McCulloch was general manager of both roads, commencing with the Transit Company in September, 1904, continuing with it until October 31, 1904, and from that date on continuing with the United Railways. During the greater part of this time he was also vice-president and a member of the board. Mr. Adkins was secretary of both companies, and - Mr. Henry treasurer during the whole period covered by the ownership of the United Railways in 1899; the general offices of the two companies were on Vandeventer avenue; their down town offices in the Security Building in the same rooms. The members of the voting trust created under the tripartite agreement, who were also represented on the board of directors of the two companies, were Murray Carleton, James Campbell, Brown Brothers & Company, through James Brown, and Eugene Delano, that *595 is to say at least four out of the seven voting trustees, possibly more, although that is not clear.

To return to acts following the execution of the tripartite agreement of October 27, 1904, by the officers of the two companies and by Brown Brothers & Company, two papers were executed: First, a letter in the name of the United Railways Company of St. Louis, by Murray Carleton, its president, to the St. Louis Transit Company, which letter is of date and tenor following:

“St. Louis, Mo., October 26, 1904.

“To the St. Louis Transit Company,

“St. Louis, Mo.

“Gentlemen: Pursuant to the terms of the first paragraph, Article 1, of the Tripartite Agreement made on September 27th, 1904, between you, the undersigned, and Brown Brothers & Company, as Syndicate, you are hereby requested to surrender to the undersigned, by proper instruments or conveyance of release, all and singular, the property demised by the lease of September 30th,-1899, to you by the undersigned, and to deliver, assign and transfer to the undersigned, the immediate possession of all of said demised property, and all cash, bills receivable, and other credits then owned or held by it, for and upon the consideration and conditions named in said contract.

“Respectfully,

“United Railways Company of St. Louis,

(Signed.) “By Murray Carleton, Pt.”

Whereupon, a deed of date October 29, 1904, signed by the St. Louis Transit Company, by Murray Carleton, president, to which was affixed the seal of the St. Louis Transit Company, attested by James Adkins, its secretary, was executed, as follows:

“Whereas, in pursuance of a resolution of the stockholders of the United Railways Company of St. Louis, *596 passed and adopted at a meeting of its shareholders, convened and assembled in pursuance of and in accordance with the statutes of the State of Missouri and the by-laws of the said United Railways Company of St. Louis, on the 20th day of September, 1899, the said United Railways Company of St. Louis did on September 30th, 1899, make, execute and deliver to the St. Louis Transit Company a certain contract and indenture of lease dated September 30th, 1899, wherein and whereby the said United Railways Company of St. Louis leased to said St. Louis Transit Company all of its property as therein specified and described, and upon the covenants and conditions therein contained for a term of years ending on the first day of April, 1939, and whereas in pursuance of a resolution of the shareholders of the St. Louis Transit Company passed and adopted at a meeting of its shareholders convened and assembled in pursuance of and in accordance with the Statutes of the State of Missouri, and the by-laws of said St. Louis Transit Company on September 20th, 1899, the said St. Louis Transit Company on September 30th, 1899, accepted said lease upon the covenants and agreements therein provided by it to be kept and performed; and whereas on the 27th day of September, 1904, the said St. Louis Transit Company, the said United Railways Company of St. Louis and Brown Brothers and Company (a co-partnership of the City of New York) as Syndicate Managers, entered into a contract whereby it was provided upon the terms and for the consideration therein expressed that the said St. Louis Transit Company would whenever thereto requested by the said United Railways Company of St. Louis surrender the lease-hold and demised property leased to it by and under the indenture of lease dated September 30th, 1899, to said United Railways Company of St. Louis and whereas the said St. Louis Transit Company by resolutions of its shareholders passed on October 19th, 1904, and the United Railways Com *597 pany of St. Lonis by resolutions of its shareholders passed on October 20th, 1904, at meetings respectively held on those respective dates (which meetings were respectively convened and assembled in pursuance of and in accordance with the Statutes of Missouri and the respective by-laws of said Companies) did each ratify, approve and confirm said contract of September 27th, 1904, and

“Whereas, the said United Railways Company of St. Louis has demanded of the said St. Louis Transit Company the surrender of said lease and the property demised thereunder, in accordance with the terms and provisions of said contract of September 27th, 1904, the said St. Louis Transit Company being lawfully authorized so to do by vote of its shareholders, as well as by the direction of its Board of Directors doth in pursuance of the premises and in consideration that the said United Railways Company of St. Louis does release and fully acquit said St. Louis Transit Company from all liability which now has accrued or may hereafter accrue to said United Railways Company of St. Louis under or by virtue of any of the terms, conditions or covenants of said lease, and in further consideration of the payment of five dollars (the receipt of which is hereby acknowledged) Surrender, Remise, Release and Forever Quitclaim unto the said United Railways Company of St. Louis, the said lease dated September 30th, 1899, and all property, rights and privileges demised and leased thereby, together with all rights thereunder accruing to the lessee therein, so as to re-invest the said United Railways Company of St. Louis with its former estate in said premises and every right granted by said lease, as fully as if said lease had never been entered into; it being distinctly understood and agreed that it is the clear intention of the parties hereto to cancel said lease and of the St. Louis Transit Company to relinquish every right acquired or to be acquired thereunder and to vest the property fully in the United Railways *598 Company of St. Louis unincumbered by said lease and its use in every part of its part of said property unimpaired by anything contained in or connected with said lease; and the United Railways Company of St. Louis by the acceptance of the surrender of said lease hereby made releases and fully acquits said St. Louis Transit Company from all liability which now has accrued or may hereafter accrue to said United Railways Company of St. Louis, under or by virtue of any of the terms, conditions or covenants of said lease.

“In Witness Whereof, the said St. Louis Transit Company has caused its corporate name to be hereto subscribed by its president and attested by its secretary and its corporate seal to be hereto affixed this 29th day of October, A. D. 1904.

“St. Louis Transit Company,

“Attest: James Adkins, Secretary.

“By Murray Carleton,, President.

Copy of Seal.

St. Louis Transit Company

St. Louis, Mo.

Seal.

Both these papers were objected to by plaintiff when offered, for the reason, among others, that the controlling interest in the Transit was held and owned by United Railways at the time of the attempted surrender and there were therefore no parties competent to enter into a legal or valid contract.

Neither in the tripartite agreement nor in the demand for the' surrender of the lease, which the United Railways .made upon the Transit Company, is there any suggestion that there had been any default upon the part of the Transit Company in observance of the terms of the lease. In point of fact, an exhibit of assets and liabilities of the Transit Company — balance sheet of date September 30, 1904, — introduced in evidence by the defendant, shows that on that date United Railways *599 owed Transit Company $958,886.16', in securities at par for amounts expended for construction, betterments and improvements, and that on that date the Transit Company owed the United Railways Company $249,790 on rentals. The balance sheet of October 31, 1904, also in evidence, shows that in the intervening thirty days Transit Company had paid up all of the rental except $54,096.66. The demand for the surrender was based solely on the provisions set out in the tripartite agreement. Accordingly the syndicate required the United Railways to make the demand, the United Railways made the demand, and the Transit Company complied with the demand by surrendering possession of everything that it had, including not only all stocks and bonds of the United Railways which had before then been paid to it and accepted by it at par for improvements and betterments upon the property but also all material and supplies on hand, 172,613 shares of its own stock, bills and accounts receivable, credits of all kinds, and $614,015.25 cash, this cash being outside of and exclusive of $105,380, which Transit Company had on deposit for payment of matured bonds and coupons, which last item of cash it also turned over. The release of the securities pledged with the Mercantile Trust Co', was also affected.

Touching the relative value of the liabilities assumed and assets turned over from the one corporation to the other on the surrender of the lease by the Transit to the United Railways, and as to the solvency of the Transit Company, there is a vast amount of testimony. The transcript before us covers 807 pages, much of it devoted to questions of value. We will not go into it in detail further than necessary.

Mr. Henry, the auditor, testified, and in this he was corroborated by the president, that in the valuations which had been placed upon the assets and liabilities at the time of turning over from one company to the other, on October 31, 1904, as those valuations appeared *600 on the books and balance sheets in evidence, nobody had fixed any value on the property that was taken over. That is to say, there was no appraisement ever made of the property by any one, as far as he knew. The valuations that appeared in the statement of assets turned over, he said, were those appearing or placed upon the books of the company in carrying out its accounts in the usual way.

The testimony of Mr. Carleton was to the effect that no estimate or appraisement of values was gone into by the officers or directors of the two companies; that they were and had been the same persons, practically, during the whole of the' year 1904, and before then, and that the bankers who underwrote the scheme adopted and set out in the tripartite agreement were the ones to be satisfied as to values, and he presumes they were or they would not have gone into it.

At this present trial an exhibit, showing liabilities assumed and assets turned over to the United Eailways Company, on October 31, 1904, which was introduced in evidence when this case was first tried, and which will be found at pages 112 and 113, in 125 Mo. App. (Barrie v. United Railways Company) was again offered. We will not reproduce it here, referring to it as there copied, calling attention, however, to the fact that there is a typographical error in it on page 113. The capital stock of Louisiana Purchase Exposition Company is carried at $210,000. It should be $2,100. It was chiefly on account of the admission of this tabulated statement, without proper identification of it, that this court reversed and remanded the cause. It was identified by the books of account at this second trial and is now before us, having been offered by defendant and.admitted in evidence, in connection with the books and oral testimony concerning it. The learned trial judge, in his opinion handed down at the time of the decision of the case, states concerning it, that “while this statement purports to be taken from the *601 books, when considered in the light of the testimony in this case, it is incorrect.” Taking up the first entry on the liabilities side, “$10,000,000, St. Louis Transit Company’s Improvement Twenty-year 5 per cent gold bonds, guaranteed by the United Railways Company,” the trial judge held that this item should be credited with $2,000,000, the remainder of this issue of bonds left over after providing $8,000,000 for exchange of a like amount of outstanding bonds issued under the trust indenture of June 17, 1903. As this conclusion is very strenuously contested by appellant, we will refer to it when we state our own conclusions. The learned trial judge also finds that there was omitted from the list of assets turned over 172,613 shares, approximately, of Transit Company stock, par value $100 per share, taken over by the United Railways, and which went into its treasury, and in this finding he is supported by testimony, the testimony however being that this stock was worth, approximately, ten cents on the dollar, or $1,726,130. He therefore added it to the assets. -He also finds that this balance sheet omits from assets received, any valuation of the unexpired term of the surrendered leasehold, and he valued that. Testimony as to the value of this unexpired term was introduced at this second trial, thus supplying data for the lack of which at the former trial, this court — judges concurring. —also reversed and remanded the case. The testimony as to the value of this leasehold was very wide apart, as given by the witnesses. Mr. Carleton, Mr. Celia and Mr. Henry, possibly others, testified that in their opinion it was absolutely valueless, one or more of them saying that instead of being an asset of any value, it was a positive burthen. To the contrary, witnesses, produced on the part of the plaintiff, held by the trial court to be qualified to testify as to its value, valued it at between three and five millions of dollars; one of them put the valuation at $4,900,000, basing his valuation on its earning capacity, as to which there was *602 evidence tending to show that it was about $633,259.66 per annum. All of the witnesses who were examined on this proposition concurred in saying that a leasehold for1 long term of years is always to be considered as nonproductive of profits for the first years, those years absorbing all profits as well as additional money, in, necessary improvements and betterments, to put the leased property up to a full earning capacity, and that profits were not to be expected to flow in until the succeeding years. Witnesses for the defendant based their opinion as to the lease being valueless upon the proposition that the Transit Company, the owner of the leasehold, was in such financial stress that it had exhausted its resources and was utterly unable to carry on the operations of the road. As between these two views the trial judge valued the leasehold at $4,000,000.

As touching the condition of the property when taken over by the United Railways Companv in November, 1904, Mr. Carleton, its president, in a letter of date November 14, 1904, in which, answering an inquiry as to the physical condition of the property of the United Railways Company, “and its financial condition under the readjustment of the capitalization of the Transit Company and the United Railways Company,” wrote as follows:

“The St. Louis Transit Company, during 1902 and 1903, and the early part of 1904, expended large sums of money for betterments, construction and equipment, to prepare itself to carry effectively and economically the largely increased traffic incident to the Louisiana Purchase Exposition:

“The above important expenditures inure entirely to the benefit of the United Railways Company. I am, therefore, of the opinion, notwithstanding the increased service required of it, that the condition of the track and equipment is good. The company’s power plants have been fully maintained, and a detailed report, now being prepared, will, I think, show that no important *603 additions need to be made to these plants for several years to come. I believe, also-, that the company can maintain its-track and equipment out of earnings for several years to come with little, if any, recourse to capital expenditure.”

Outside of this letter of Mr. Carleton, there was testimony corroborating his statement.

There is testimony which tends to prove that on October 31, 1904, the Transit Company was technically insolvent. Its officers have unequivocally testified that it then was and for some time had been actually insolvent and utterly unable to provide means with which to carry on operations, the securities upon which it was compelled to rely for the raising of money for any extraordinary purpose, not being marketable, except at a figure far below their par value, at which figure, that is at par, it had been compelled to accept them in turn for cash outlays made by it. While circulars given out by those who were handling the securities of the United Railways Company, after it had gone into possession on surrender of the lease, show a profit each year, as we have before noted, the evidence seems to show that this profit was on paper, more the creation of expert bookkeeping than a portrayal of. an actual condition. This appears very clearly from the testimony of Mr. Henry, the auditor of the United Railways, and for all the years of its operation under the lease, also auditor of the Transit Company. Having reference to these statements before quoted, showing receipts, expenditures and fixed charges for a series of years, and which were given out by the Mercantile Trust Company, which was endeavoring to sell a million of the improvement bonds, and in which is embodied the letter of Mr. Carleton, as president, before quoted from the circular ■giving a very glowing account of the financial condition of the United Railways immediately after taking over the property, Mr. Henry states that his books, starting with the first year in which he has a complete record, *604 that is to say, 1900, indicate a loss by the Transit Company in the operation of the property of $1,694,392.02. The year 1901 showed a deficit of $525,630.00. The year 1902 showed a deficit of $268,083.49. The year 1903 showed a loss of $62,786.66. The year 1904, including the two months of operation by the United Railways showed a surplus for that year of $1,182,182.66. The year 1904 was the year of the Louisiana Purchase Exposition, and Mr. Henry testified that so far from.; the receipts that year being normal the gross earnings were a million and a half more than in 1905.

There is evidence showing beyond question, practically indeed without being controverted, thát on the thirty-first of October, 1904, there were a vast number of actions pending against the St. Louis Transit Company, in which damages were claimed for injuries connected with the operation of the road while under control of the Transit Company and that no provision whatever was made either under the tripartite agreement, or outside of that, after its execution, looking to the payment of any of these claims which might thereafter mature into judgments. Judge Priest, testifying on this matter of these pending suits and claims, said, when asked if the board of directors of the United Railways, as well as its shareholders did not know that by the transfer of the leasehold the Transit Company would be left with no tangible assets to meet any liabilities which should be placed against it after the adoption of the tripartite agreement, that while he knew, in October, 1904, that there were a great many suits of this character pending and undetermined, he saw no reason, “why if that matter was specifically mentioned, that the board of directors of the United Railways Company should take from its shareholders property which belonged to them and give to some one else who had no claim upon that property.” The testimony of Mr. Carleton was to the same effect, namely, that in arranging the. tripartite agTeement and in turning over the control of *605 the property from the Transit to the United Eailways, no discussion whatever was indulged in as to these outstanding claims which had not matured in judgments, no provision whatever was made for their payment, and that it was the intention of the hoards of both companies to eliminate them from all consideration. Mr. Carleton speaking of these claims, testified further, in effect, that as they did not know what they amounted to, it was impossible to provide for them. Judge Priest had said practically the same thing, adding that a great many of these outstanding claims were not genuine and in point of fact were fraudulent. Mr. Henry, the auditor of the company, testifying as to an account which was introduced in evidence, being a balance sheet of liabilities and assets, showing the liabilities and assets of the Transit Company, as of date September 30, 1904, in which there appeared an item among what are called “deferred liabilities,” reading “reserve fund for personal damages accrued $5,566.90,” stated that instead of reading “reserve fund for personal damages accrued,” it should more properly read, “reserve fund for personal injuries accrued;” and stated that instead of charging the specific amount paid out any given month for personal injuries, the Transit Company set up a ratio of the receipts in order to get' a more equitable distribution. In other words, he said, that is the means by which the Transit Company provided funds for paying personal injury claims. In explanation of this Mr. Henry testified: “We had arrived at a percentage which we thought would meet the direct disbursements of funds to meet the personal injuries. In the setting up of that percentage we had during the course of the operation of the St. Louis Transit Company made all payments out of this fund so set up and had this reserve left;” and he stated that this $5,566.90 was the amount left over from the sum which had been set aside to meet these judgments and payments, the point being that the company, always mindful of the fact that claims for *606 damages would always accrue, had made an average of amount required to meet such claims (for personal injuries) and taking that into consideration, had set aside annually a sum to draw on for that purpose, and this $5,566.90 was what was left of it. That is, in the operation of the road, it had always been within the thought of those managing it, that there would have to be so much expended for settlement of damage claims and. their experience had resulted in their setting apart a certain sum with which to meet that loss, and they had carried an estimated amount regularly through the accounts. Judge Priest, further testifying as to damage claims, said that the Transit Company had found that the average loss to the company from claims of this character in the City of St. Louis was smaller than that in any of the larger cities of the country. That-is to say, damage claims for personal injuries were so surely an element of expense, that their 'yearly average was capable of estimation in advance so closely that a specific amount could be and was set aside to meet them. As stated before, however, the testimony of all the witnesses was to the effect, and without contradiction or pretense to the contrary, that in the execution of the tripartite agreement, providing for liabilities to be assumed by the United Railways, that had fallen on to the Transit Company in its operation of the lease, no thought or consideration whatever was given and no provision made for the payment of unliquidated and unadjusted claims for personal injuries or damages accruing prior to the first of November, 1904. It was in evidence in the case that in the- name of the Transit Company, the United Railways Company had, after November 1', 1904, defended many suits that were brought against the Transit alone for these classes of cases, charging the amount of expenses so incurred to the Transit Company.

By referring to this balance sheet of United Railways Company, of date October 31,1904, which is found *607 .at pages 112 and 113, of 125 Mo. App., and before referred to, it will be seen that the total liabilities assumed are placed at $11,921,482.54, including the 20 year 5 per cent guaranteed bonds, carried at $10,000,000, while the assets turned ovér are placed at $10,673,618.-77, showing an excess of liabilities over assets acquired by the United Railways October 31, 1904, upon surrender of Transit Company’s lease, of $1,247,863.77.

Having reference to that balance sheet, as well as to the testimony bearing on values, the trial judge, at the conclusion of his finding in the case says:

“Restating this account with the changes indicated and placing $2,000,000 on the asset side, or reducing the liability side from $10,000,000 to $8,000,000, which is the same thing, we have the result changed to excess of assets over liabilities of $752,136.23, plus the stock of the Transit Company in the treasury of the United Railways Company, although of the $10,000,000 improvement five per cent bonds executed by the Transit Company at least $2,000,000 represented an increase of indebtedness by that amount, and the benefits inured when the property was resumed to the United Railways Company.”

That is to say he deducts $2,000,000, carried in the balance sheet as a liability of the Transit Company at $10,000,000 on account of Transit Company’s Improvement twenty-year 5 per cent gold bonds, guaranteed by the United Railways Company, as not properly chargeable to the Transit Company, and carries the liability of the Transit Company on account of those bonds at $8,000,000, instead of $10,000,000. This gives an excess of assets over liabilities of $752,136.23, to which the trial judge adds the 176,643 shares Transit stock, at ten cents on the dollar or $10 per share, making $1,726,430, giving a total-of assets received over liabilities assumed of $2,498,566.23. This is exclusive of any valuation for the leasehold. At this last trial, however, a balance sheet of the Transit Company, as of *608 date September 30, 1904, duly identified and proven by the books of account of that company, was introduced in evidence by tbe defendant. Taking up this balance sheet, we find the assets given as follows:

“2,877 United Railways first mortgage bonds,...........: ............. $ 2,852,158.72

“82,273 Shares United Railways preferred (par value $100), ..........• 7,832,708.20

“172,613 Shares United Railways common (par value $100), ............ 17,261,300.00

“Securities due from United Railways, at par value, for amounts expended for construction, betterments and improvements, .. 958,886.16

“La. Purchase Ex. Co. Stock, ... 210,000.00

“St. L. Lt.. Arty. Arm. Assn. Stock, 2,500.00

$29,117,553.08”

Carried below these items, and under the heading “Suspense Account,” but as assets, appears $2,722,568.-21, composed of “Losses sustained in sale of securities acquired under the lease of September 20, 1899, also commissions and expenses in negotiating loans to raise funds to pay for amounts expended for construction, betterments and improvements,” less “loss on sale of United Railways 4 per cent bonds used for refunding underlying liens charged to United Railways Company;” material and supplies, $296,115.27; “current assets,” $1,443,713.15, including $713,435.73, cash, and $355,450, cash on deposit to pay bond coupons; and under the heading “Deferred Assets,” there are carried $228,486.-15. This gives á total of assets on September 30, 1904, as carried on the Transit Company’s books of $33,808,-435.86. On the liabilities side of this balance sheet, the Transit Company stands charged with 172,643 shares of its own capital stock, at par value of $100 *609 amounting to $17,264,300; collateral trust notes, $5,776,000; 800 Transit Company’s refunding and improvement 5 per cent bonds $8,000,000; current liabilities $1,839,996.19; deferred liabilities $672,576.80; and under the heading “Profit and Loss,” loss December 31, 1903, $511,249.99, profit for the current year, 1904, to September 30th, $766,812.86, the difference, $255,562.87, being carried as a liability, and thereby balancing the liabilities account, $33,808,435.86, with the assets account. It will be noted that the balance sheet of the United Railways of date October 31st, purporting to give the assets turned over to it on that date by the Transit Company, carries the assets at $10,673,618.77, whereas the balance sheet of the Transit Company thirty days earlier, that is September 30th, carries what purports to be the assets of the Transit Company on that date, namely September 30, 1904, at $33,808,435.86, a difference between the two of, $23,134,817.09. A very careful examination of the testimony in the case fails to afford any explanation covering this discrepancy, or accounting for this apparent shrinkage in assets in the intervening thirty days. Very possibly there is some explanation of it, but as no attention was called to this discrepancy at the trial, we have no data before us sufficiently accurate or definite to enable us to account for it, even if it is our business to do' so; all we can do, with the statement of the facts in the case before us, showing this discrepancy between these two accounts, is to note it and the fact that the record fails to supply sufficient data by which it can be explained. A partial explanation of this discrepancy is possibly found in the wiping off of $207,900, on account of the Louisiana Purchase Exposition Company stock, that being carried in the balance sheet of September 30th, at $210,000, and in that of October 31st at $2,100, and in the elimination of $2,500 on account of stock in the St. Louis Light Artillery Armory Association, which item is ap *610 parently valueless, and it, as well as $207,900 of the Exposition stock, properly omitted. In fact the evidence tends to show that this Exposition stock, as also the Armory Association stock, could have been omitted entirely as valueless. The $2,722,568.21 suspense account is also, in all probability, properly eliminated, and what are called “deferred assets,” amounting to $228,486.15 have disappeared. Apart from these, however, we have no means of accounting for the apparent discrepancy. The $17,264,300 charged as a liability of the Transit for its own stock, on the balance sheet of that company of date September 30th, of course, was not a liability assumed by the United Railways; when that, stock went into the hands of the United Railways it became an asset at whatever it was worth.

At the time of the surrender of the lease by the Transit Company and taking over of the lines of the United Railways, plaintiff Barrie had his action pending against the Transit Company, for damages for injuries sustained by him in a collision with a street car, then operated by the Transit Company over one of the lines covered by the lease, the accident occurring on the first of February, 1900. • A judgment was rendered in his favor against the Transit Company, on the tenth day of November, 1904, in the circuit court of St. Louis county, to which court the case had been taken on change of venue from the circuit court of the city of St. Louis, where it had been brought to the June, 1900, term. Unable to realize on the execution which was issued, or to receive payment of his judgment, Barrie, then a judgment creditor, commenced this suit in the circuit court of this city on the first of January, 1905, against the United Railways Company of St. Louis. The petition sets out the matters concerning the organization of the corporation, the lease of th'e United Railways system to the Transit Company, and the subsequent surrender of that lease by the Transit Company, and the turning over to the latter of all of the assets *611 before then held and possessed by the Transit Company. After averring the judgment and that payment of it had been refused and the execution returned milla tona, and that the officers and directors of the Transit Company had admitted and proclaimed its insolvency, and that the Transit Company having conveyed all its assets, was wholly without money or assets with which to pay any debt or liability existing against it, and that it will not pay or settle with any of its creditors, of whom he avers he is one, plaintiff avers that on the thirty-first of October, 1904, the Transit Company was the owner of property of great value, consisting of an unexpired term of the leasehold described, of a vast number of cars, and of various kinds of equipment and property used in the operation of a street car system, as also of its franchise, rights, good-will and business, the exact value of all of which, plaintiff avers, is unknown to him, and that it was, on the thirty-first of October, owner and in possession of $614,015.25, in cash. He avers that the same persons were officers and directors of both the Transit and United Railways Companies and that the same agents managed both companies down to the thirty-first of October, 1904, and that at the time of the transaction thereafter mentioned, both companies were under one and the same management; that the object and purpose of the United Railways was to absorb the Transit Company by acquiring its assets and succeeding to its business, and that pursuant to that purpose the Transit Company “was merged into the United Railways,” and that on the thirty-first of October, 1904, the United Railways “did receive, absorb and take over, without paying any consideration therefor, all the assets and property of said St. Louis Transit Company, including its business and good will, and also the sum of six hundred and fourteen thousand, fifteen and twenty-five hundredths dollars in cash, and thereafter carried on, and is now carrying on and operating, said street car system and business as successor *612 to the St. Louis Transit Company.” He further avers, on information and belief, “that upon receiving said assets and in consideration thereof, the said defendant United Railways Company of St. Louis, assumed and agreed to pay all liabilities of the said St. Louis Transit Company; and plaintiff is advised that in the absence of such agreement, defendant, will, by operation of law, upon the facts aforesaid, be held to have assumed all such liabilities.” He avers that the United Railways Company has appropriated to its own use the assets and property of the value aforesaid.

The prayer is for an accounting of the assets received by the United Railways from the Transit Company and ascertainment of their value; that the amount of his debt, with interest and costs be computed and the amount so found be adjudged and decreed a claim against the United Railways which it be ordered to pay, and in event of its refusal to pay, that a receiver be appointed to take possession, administer and sell the property, under the direction of the court, and out of the proceeds, pay plaintiff his debt, interest and costs; following this is the general prayer for relief.

The answer, in its first paragraph, avers “that the facts in manner and form stated in the said petition are not true.”

In the succeeding paragraphs are set up the organization of the Transit Company, then its own organization, under the corporate name of the Central Traction Company, then the change of its name to United Railways Company of St. Louis; avers acceptance of the provisions of an act of the Legislature of this State, being chapter 155, of the Revised Statutes 1889, by the Transit Company, and also by itself; avers that prior to the thirtieth of September it had constructed and acquired by purchase, under and by virtue of the laws of the State and pursuant to the consent, license and authorization of the City of St. Louis, under Ordinance No. 19352, as hereinbefore stated, approximately four hun *613 dred miles of street railway in thé city of St. Louis, and that on the thirtieth of September, 1899, it leased all of its property to the Transit Company, and sets out the lease in full; that pursuant to the terms of the le'ase, the Transit Company entered into the possession of the demised premises and property and continued to control, manage and operate the same until on or about the thirty-first day of October, 1904; avers that the St. Louis Transit Company, in the operation of the property under the lease, contracted an indebtedness amounting, on the thirtieth of November, 1901, to approximately $6,000,000, for which it executed collateral trust notes to the amount of $5,776,000, which it secured by a written indenture of trust between it and the Mercantile Trust Company; that it afterwards determined to make an issue, aggregating $20,000,000, of twenty-year 5 per cent bonds, called refunding and improvement bonds, of date April 17, 1903, and by indenture of the seventeenth of June, 1903, between the Transit Company and the Mercantile Trust Company secured the bonds, the issue of bonds being guaranteed by it, the defendant, and that of this issue $8,000,000 were sold to the public; that the mortgage securing these bonds covered all the property of the St. Louis Transit Company, “including all of its stocks and bonds, together with a mortgage upon its leasehold interest under the lease hereinabove set forth.” It then avers that the earnings and income of the property of the St. Louis Transit Company, operated by it under the lease, did not at any time between the date of the lease and the first of November, 1904, equal the amount of fixed charges and operating expenses and obligations incurred by it under the lease, but that the operation of the property had entailed a loss upon the Transit Company of about $15,000,000; that the Transit Company, having no resources other than the bonds and stock pledged under the two indentures of trust above referred to, was unable to raise money with which to meet *614 the payment of the collateral trust notes falling due November 1, 1904, “except under and by virtue of an arrangement and agreement which it made and entered into with Brown Brothers & Company, Syndicate Managers, and this defendant.” It then sets out the trip-' artite agreement of date September 27, 1904, in full. Foli owing the tripartite agreement, the answer avers that “on the — day of October, 1904,” it requested the Transit Company to surrender by proper instrument or conveyance of release, all and singular the property demised by the lease of September 30, 1899, and the delivery to it of the demised premises and all cash bills receivable and other credits then owned or held by it, as provided in the agreement, averring that it had been requested by Brown Brothers & Company, Syndicate Managers, to make the demand. It avers that, pursuant to the demand, the Transit Company made the surrender and proper conveyance of release, “and that there upon this defendant did release and fully acquit said Transit Company from all liability which had then accrued, or might thereafter accrue to it under and by virtue of the terms of the said lease; and that this defendant did assume and undertake to pay all debts then contracted by said St. Louis Transit Company for labor, materials and supplies rendered or furnished to said St. Louis Transit Company, as is provided by the said agreement of September 27, 1904;” admits that among the assets turned over to it by the Transit Company was the cash sum of $614,015.25, and avers that the amounts assumed and paid by it under the said agreement of September 27, 1904, “exceeded in value the assets acquired by it under said agreement from the said St. Louis Transit Company, including the said sum of $614,015.25, by an amount approximating $5,000,000.”

We have set out these various mortgages and agreements and lease, so that it is unnecessary to burthen this statement with a further reference to them, other *615 than to remark that they were all in evidence and are set ont either in full or substantially in the answer.

A general denial by way of reply was filed to this answer.

The cause was tried on the equity side of the court. When called for trial, defendant filed a motion to compel plaintiff to elect, claiming that he had combined in one and the same count of his petition two separate, distinct and inconsistent causes of action, one based upon an alleged implied contract arising from the charge that the defendant received all assets and property of the St. Lofiis Transit Company, without paying any consideration therefor, the other based upon an alleged express agreement made by the defendant to pay all liabilities of the Transit Company, in consideration of the transfer to it of all of the Transit Company’s property and assets. This motion was overruled, defendant duly saving exception. We have hereinbefore set out such of the evidence as we deem material. There were numerous objections to the evidence as offered. The trial judge, however, allowed practically all evidence offered to go in, so that we have before us in a very full transcript all the evidence offered.

Along with his decree, the learned and very painstaking trial judge filed a written opinion, giving his summary of the evidence, his deductions from it, and his ultimate conclusions. It is such a thorough and exhaustive exposition of the facts and discussion of the transaction that we give it practically in its entirety, and it is as follows :

“Under the pleadings in this case it is made the onerous duty of the court from the evidence to trace and determine the effect of the relations between the two companies, namely: Transit Company and United Eailways Company, and Brown Brothers & Company, find the related questions of law and fact which have arisen and been disclosed by the testimony.

*616 “In order to properly understand how this controversy arose it is necessary to consider the formation and history of the two companies, and their financial transactions with each and with Brown Brothers & Company as Managers of a Syndicate, which seems to have intervened in their troubles.

“The first contract appearing between the Transit Company and defendant is what is familiarly known as the ‘Contract of Lease/ under which three hundred miles of the street railways of the city were turned over to the Transit Company for forty years from October 1, 1899, to April 1, 1939.”

Summarizing the lease, the learned trial judge continues :

“It is perfectly apparent from a casual examination of the provisions of the lease that it was expected that Transit Company should take off of the shoulders of the United Railways Company all public and private obligations and burdens of any nature and kind, and should assume towards it onerous obligations by way of requiring for the betterments and improvements that the Transit Company should for every dollar expended for that purpose at the request of United Railways Company, accept at face value the securities it might have in its treasury, Avithout regard to their real or market value.

“From the testimony of the officers of the two companies it is this provision of the lease which, to a very large extent, resulted in the serious embarrassment of the Transit Company. The plan adopted by these tAVO companies to operate the great system of street railways of the City of St. Louis Avas this, viz.:

“The Transit' Company having been organized with a nominal capital stock of $3,000, increased its capital stock to $20,000,000, divided into 200,000 shares of the par value of one hundred dollars each.

“The Central Traction Company, which had theretofore been organized with a capital stock of $5,000,000, *617 changed its name to that of ‘United Railways Company,'" and immediately thereafter increased its capital stock to $45,000,000, said stock being divided into $20,000,000 five per cent cumulative preferred stock and $25,000,000 common stock.

“The Legislature of the State and the city of St. Louis gave to these two companies large, unusual and extensive powers.

“With the preliminary organization of the two companies and the execution of the contract of lease, it became necessary for the Transit Company to have a large cash fund Avith which to begin the operation of the system under the terms of the lease. To accomplish this the United Railways gave to the Transit Company 172,613 shares of its common stock for a like number of shares of the stock of the Transit Company. It also gave therefor $11.00 per share and turned over all the funds it had in its treasury. So that Transit Company began the operation of the system on November 1, 1899, with approximately $2,000,000 in its treasury and also with 172,613 shares of the common stock of the United Railways in its treasury, and having no indebtedness save such as it assumed under the terms of the lease.

“It appears from the testimony that Brown Brothers & Company were largely instrumental in bringing these properties together and launching them upon this plan of operation. The $11.00 per share for the stock which the Transit Company exchanged or gave for a like number of shares of the common stock of the United Raihvays Company was provided by Brown Brothers & Company. This fund became the working capital of the Transit Company. From what source Brown Brothers & Company obtained the $11.00 per share or upon what consideration, does not appear, nor is it material, further than as showing their relations to the properties and the tAVO companies at that time.

“It is contended by plaintiff’s counsel, and I so *618 ■ find from tlie evidence, that the boards of directors of the two companies, viz.: Transit Company and United Railways Company, were substantially the same at the time of the execution of the lease, and so continued down to and after the re-transfer on October 31, 1904.

“The management of the system made extensive improvements, betterments and additions, and expended large sums of money for equipment, in order to render the system efficient in the performance of its obligations under the lease, and as well the obligations to the public. The additions, acquisitions, betterments and improvements made from time to time, and for which Transit Company was required to pay in cash out of the earnings or other sources, were large and costly, and for which, under paragraph three of Section 1, of the lease, it was entitled to be reimbursed in bonds or stocks of the United Railways Company at par.

“During the year .1900, a strike of the employees occurred, resulting in a loss to the Transit Company of between seventeen hundred and eighteen hundred thousand dollars, which, coupled with the large expenditures required for betterments and improvements under the lease, made it necessary for the company to arrange for money, part of which it had already borrowed on short time notes, and resulting in the execution to the Mercantile Trust Company, Trustee, on November 1, 1901, of what is called ‘Collateral Trust Agreement’ (defendant’s exhibit No. 1).

“By way of preamble it is recited that ‘the Transit Company has incurred an indebtedness of approximately four million dollars in making additions to, acquisitions for,- betterments and improvements in the railway leased by it from the United Railways Company of St. Louis, under and by virtue of the terms of said lease, by reason of its inability to market at their intrinsic value the general mortgage bonds and preferred stock of said United Railways Company, and which indebted *619 ness is evidenced by short time promissory notes of this ■company, secured collaterally by the bonds and shares of stock received in consideration of making said additions, acquisitions, betterments and improvements; and

“ ‘Whereas, the Transit Company deems it wise and ■desirable to fund said short time indebtedness so secured as aforesaid, and to extend the period of payment thereof three years,’ it was authorized to issue its notes in an amount not exceeding $6,000,000, and to secure the payment thereof pledged with the Mercantile Trust Company $2,877,000 par value of the four per cent gen-, •eral mortgage gold bonds of the United Railways Company, also $2,924,300 par value of the five per cent cumulative preferred stock of the United Railways Company.

“It was also provided by said ‘Collateral Trust Agreement’ that the Transit Company, anticipating that it would receive from the United Railways Company at various times thereafter large amounts in the preferred stock- of the United Railways Company, amounting in the aggregate between December 31, 1901, and December 31, 1902, to the sum of $2,348,600, and when and ns received by it from the United Railways Company, were deposited with the Trustee under the terms of the said ‘Collateral Trust Agreement.’ Under the original pledge $4,609,000 face value collateral trust notes were issued, leaving unissued of the $6,000,000 provided for the sum of $1,391,000. These last notes were to be issued when the Transit Company should receive from the United Railways Company the anticipated blocks of preferred stock amounting to 23,486 shares, or •$2,348,600 par value.

“The total amount of notes finally secured by the ‘Collateral Trust Agreement’ of 1901, was $5,776,000, and there had been pledged with the Mercantile Trust Company, Trustee, to secure the same, the following securities, viz.:

*620 “2877 1st Mortgage 4 per cent Bonds of

United RailÁvays Company at par,.... $2,877,000

“48,935 shares of Prefid Stock of United Railways Company at par, .......... 4,893,500

“Total at par, ..................$7,770,500

“At this time, June 17, 1903, Transit Company, although heavily burdened with debt, secured by this collateral trust agreement and pledge of securities owned by it, and which ivas not being reduced, was further required by United Railways Company to continue to make large expenditures for improvements, betterments, additions and equipment, and to receive therefor preferred stock of Railways Company at par, although it was never worth or marketable at par, and although $1,900,000 had been lost by the strike of the employees in 1900, and which seems to have been absorbed, yet the improvements and betterments were continued without regard to financial condition. To relieve the situation, apparently, and to provide for the maturity or retirement in advance thereof of the collateral trust notes, and to refund and consolidate all of the indebtedness of Transit Company, another instrument Avas executed by the Transit Company to the Mercantile Trust Company as trustee, called in the evidence ‘Indenture of Trust/ dated June 17, 1903, providing for an authorized issue of $20,000,000 of five per cent twenty year refunding and improvement bonds.

“The United Railways Company had requested the Transit Company to make further improvements, additions and betterments, and to reimburse the Transit Company therefor it had not sufficient securities to give and must resort to a loan of its credit, and it proposed to become guarantor of the bonds that might be issued under this ‘Indenture of Trust’ of June 17, 1903. At that time, according to the recitals of the instrument, Transit Company had expended for additions, improve *621 ments and betterments, under Section 1 of the lease, the sum of $8,813,500, and had received therefor under said lease bonds and stocks as follows:

“4851 United Railways Company’s 4 per cent bonds,........................$4,851,000

“34,625 shares United Railways Company’s preferred stock, .................... 3,462,500

“Total at par, ................$8,313,500

“It is noticeable here and by the foregoing figures that Transit Company was compelled to and did expend in cash in four years, lacking about a month, the sum of $8,313,500 for ‘additions, acquisitions, betterments and improvements’ under the lease, or quite $2,078,375 per year.

“It must be presumed in the absence of any showing to the contrary, that the property and equipment was increased in value to that extent over and above the maintenance of the property in good physical and operating condition. If we spread this expenditure over 350 miles it will amount to $5,938.21 per mile, or for the first four years of operation it will be $1,484.55 per mile per year.

“To secure the bonds which might be outstanding at any time of this authorized issue there was conveyed to the Trustee to secure the same the securities theretofore pledged with the Trust Company under the ‘Collateral Trust Agreement’ of September 30, 1901, subject to the lien thereof and other stocks and the leasehold, viz.:

“(1) 2877, 4 per cent general mortgage bonds of United Railways Company at par............................$ 2,877,000

“Subject to pledge under collateral trust agreement.

*622 “(2) 53247 shares preferred stock of United Railways Company at par, subject to pledge under collateral trust agreement, .......................... 5,324,00®

“(3) 172,613 shares common stock of United Railways Company at par,....... 17,261,30®

“(4) The leasehold. No value was placed upon leasehold.

“Total securities at par, .........$25,462,300'

“The indenture of trust also provided that $8,000,-000 of the $20,000,000 authorized issue should be issued at once, and from the proceeds thereof should be paid' the following amounts, viz.:

“(1) Directors’ Loan................$2,110,423.8®

“This loan was secured by 150j887 shares of the common stock of United Railways Company, which was to pass to Transit Company and to the Trust Company, trustee, under the ‘Indenture of Trust,’

“(2) Real Estate Notes .............. 60,000.0®

“(3) Obligations for improvements and betterments.................... 675,000.00'

“(4) Other general indebtedness ...... 150,000.0®

Total obligation at face to be retired by part of the $8,000,000 issue ....................'......$2,995,423.80

“The remainder to be applied to betterments, ete.

“It was provided by Article 1, Section 3, that between January 1, 1904, and December 31, 1905, from time to time, there should be issued and delivered an additional block of bonds to the amount of $6,056,000 par value. Prom the proceeds of this block of bonds the collateral trust notes amounting to $5,776,000 were to be paid. The remainder of this block of bonds *623 wag to be used for improvements, betterments, etc. Tbe then estimate of the cost of such additions, acquisitions, improvements and betterments during the years 1904 and 1905, was $2,280,000, and that Transit Company would receive therefor 67,590 shares of preferred stock and 16,041 shares of the common stock of the United Railways Company.

“It was further provided that in case of the purchase of any other street railway or their stock, an additional block of bonds should be issued and delivered, not to exceed the amount for such purpose of $1,700,000. The remainder of the authorized issue of $20,000,000, after the year 1905, was to be issued and delivered for improvements, betterments, etc., not exceeding $500,000 per annum. All of the securities given by the United Railways Company to Transit Company on account of improvements, betterments, etc., made under the provisions of the lease, were to pass to the Trust Company, Trustee, to be held under the ‘Indenture of Trust,’ of June 17, 1903.

“The Indenture of Trust of June 17, 1903, for the purpose of providing the method and means for refunding the indebtedness of the Transit Company, and to provide for improvements, etc., was only partially carried into effect. The only issue of bonds ever made under the Indenture of Trust of June 17, 1903, was the block of $8,000,000 in bonds to be used first in paying the directors’ loan, real estate notes, obligations for improvements and betterments, amounting to $675,000 and general indebtedness, the total amount being $2,995,-423.80, the balance of the $8,000,000 to go to betterments, etc., and the Transit Company under the lease being entitled to be reimbursed by the United Railways Company for every dollar expended for such purposes, in bonds, preferred stock and common stock at par. Whatever proportional part of this issue of $8,000,000 of bonds was used in betterments, etc., the Transit Company was entitled under the lease, to receive from the *624 United Railways Company, bonds and stock at par. If the United Railways Company had none in its treasury, or could not comply with that provision of the lease, it was under obligation to save Transit Company harmless for expenditures which it was required to make, and the benefits of which were to accrue to the United Railways Company.

“The Transit Company continued operating the street railway system, and during the summer of 1904, from the testimony it seems that when the collateral trust notes matured it would be unable to pay them, and it became incumbent upon the officers and directors to avoid the default, if possible. To this end various efforts were made by its officers, but unavailing. The United Railways Company had required it to carry on such extensions, additions, acquisitions, betterments and improvements that the United Railways Company had exhausted its ability to comply with the lease, in this; it had no more bonds or preferred stock to turn over to the Transit Company for such betterments, etc., and the ‘Indenture of Trust’ from some cause not proving efficient to that end, a refinancing scheme became necessary. The United Railways was a mere shell, with the title to the various street railways composing the- system and a small block of common stock in its treasury; but a majority of its stock was in the treasury of the Transit Company, part of its general mortgage bonds were also held by the Transit Company. It may be legally truthful, under the testimony, to say that thé Transit Company owned the United Railways Company, although the stock by which such ownership was evidenced had been pledged as collateral security with the Mercantile Trust Company, still its right to vote the same was reserved until default, and its president did vote it under resolution of its board of directors.

“The scheme finally evolved for financing the Transit Company, which resulted in its practical extinction as an operating company, and all else except *625 the right to he a corporation, is evidenced by what is called the ‘Tripartite Agreement’ between the St. Lonis Transit Company, United Railways Company and Brown Brothers & Company, dated September 27, 1904 (heretofore copied). Immediately thereafter, bnt provided for before and therein, was another instrument or deed of trust dated October 1,1904, securing guaranty of United Railways Company on Ten Million Dollars St. Louis Transit Company Improvement Bonds (defendant’s exhibit No. 8). This latter deed of trust was intended to be substituted in lieu of the Indenture of Trust of June1 17,1903, and the latter satisfied and released, which was afterwards done. In order to put the tripartite agreement into, effect it required the concurrence of the stockholders of the two companies, viz.: Transit Company and United Railways Company.

“At this time and for several years prior thereto the respective boards of directors of these two companies were the same, their officers were the same, and the Transit Company owned the United Railways, and the latter was indebted to the' Transit Company in a large sum for betterments which it was unable to pay, as provided in paragraph three of section one of the lease. The preferred stock and bonds of the United Railways Company held by the Transit Company were acquired by payment therefor at one hundred cents on the dollar, viz.: In improvements, additions and betterments, for which it expended its earnings and credit. The United Railways Company was completely exhausted, having nothing save the title to the railways, and subject’to heavy general and underlying mortgages. The United Railways was completely under the control and domination of the Transit Company.

“Transit Company owned the following shares of stock of the United Railways Company:

*626 “Common stock (shares) 172,613

“Preferred........... 82,273

“Total stock owned by Transit Company at time of tripartite agreement ...................... 254,886

“This Avas a majority of all the capital stock of the United Railways Company, which was $45,000,000, or 450,000, divided 250,000 shares common and-200,000 shares preferred stock.

“While this stock was under pledge, yet the Transit Company had the right to vote the same until default, which had not occurred, and by authority of the board it was voted by the president of the Transit Company for the tripartite agreement, and the remainder of the stock of the United Railways Company was voted by Brown Brothers & Company as proxy and by the holders of the preferred stock for themselves. The outstanding Transit Company stock was voted for the tripartite agreement by BroAvn Brothers & Company as proxy, 155,127 shares, Murray Carleton as proxy 6,794 shares, and 254 shares were voted by the holders thereof. Total voted 162,175 shares, out of a possible 194,000 shares, 6,000 shares of the common stock of Transit Company never having been issued. The Transit Company was indebted to the Mercantile Trust Company in notes amounting to $5,776,000. These were secured by pledge, under collateral trust agreement of 1901, by 2,877 four per cent mortgage bonds at par, aggregating $2,877,000, and by 48,935 shares of the preferred stock of the United Railways at par, aggregating $4,893,500. The indenture of trust executed to the Mercantile Trust Company on June 17, 1903, to refund and consolidate the indebtedness of Transit Company authorizing $20,000,000 issue of bonds, to be secured by the collateral above mentioned, subject to the lien of the collateral trust agreement, and to provide for the future improvements, etc., *627 received the guaranty of the United Railways and carried with it the pledge of the leasehold, also 172,613 shares of the common stock of the United Railways Company, then in the treasury of the Transit Company, also 33,297 shares of the preferred stock of the United Railways. Only $8,000,000 of bonds were issued under this agreement. In order to release the securities held by the Mercantile Trust Company, it became necessary to provide means to satisfy both the collateral trust notes and the lien of the $8,000,000 outstanding improvement and refunding bonds upon which United Railways was guarantor. It was necessary to provide first for this block of bonds, and to that end a new bond issue of $10,000,000 was provided for, wherein the United Railways became guarantor and mortgaged all of its property to secure the same. $8,000,000 of the bonds of this issue were to be exchanged for the $8,-000,000 issued under the indenture of trust of June 17, 1903, bond for bond, the indenture of trust satisfied and the securities released. This arrangement was an integral part of the tripartite agreement. In order to release all of the securities from all liens or pledges, it required the payment of the collateral trust notes, amounting to $5,776,000, and the $8,000,000 improvement and refunding bonds which were provided for by exchange for a like amount of the $10,000,000 issue, and left the securities and property of the Transit Company with which to pay the collateral trust notes as follows :

“2,877 First Mortgage 4 per cent Gold Bonds of United Railways at par.$ 2,877,000

“82,273 Shares preferred stock of United Railways at par ............... 8,227,300

“172,613 Shares common stock of United Railways at par ............... 17,261,300

“2,000 Improvement bonds provided for by the mortgage of $10,000,000 dated October 1, 1904, at par.... 2,000,000

*628 “The United Railways had left in its treasury unissued 76,525 shares of common stock which together with its common stock held by the Transit Company (172,613 shares) amounted to 249,138 shares, out of a total authorized issue of common stock of 250,000 shares. The preferred stock of the United Railways was in the hands of investors, except 82,273 shares which belonged to the Transit Company.

“Coming now to the method of transfer we have it thusly: The issue of $10,000,000 improvement bonds of October 1, 1904, and exchange of $8,000,000 thereof for the $8,000,000 issued under indenture of trust of June 17, 1904, which left 2,000 bonds, or $2,000,000, for disposition. The other securities were: 2,877 bonds of $1,000 each of the first mortgage 4 per cent, or at par $2,877,000; 82,273 shares of the preferred stock of the United Railways Company, at par $8,227,300, and 172,613 shares of the common stock of the United Railways at par, $17,261,300.

“For all of the foregoing bonds and stocks $7,000,000 was to be raised by Brown Brothers &' Company, syndicate managers, and paid in the following manner, viz.: The $5,776,000 collateral trust notes were to be paid, and also a specific indebtedness of $935,000, making a total of $6,711,000, leaving unexpended the sum of $289,000 which was to be paid to order of Transit Company or its president. This passed all the foregoing securities to Brown Brothers & Company as syndicate managers. In order to complete the transfer it was necessary to get in the outstanding stock of Transit*Company. All of its stock had been issued except 6,000 shares, that is, there were outstanding 194,000 shares. The United Railways Company had remaining in its treasury and unissued 76,525 shares of its common stock. This stock was passed out to Brown Brothers &' Company for the purpose of exchanging with the stockholders of the Transit Company at the ratio of two shares of United Railways common for five shares *629 of Transit- Company stock. If we calculated upon this basis of exchange these shares would obtain 192,812 shares of the Transit Company, practically all of the outstanding stock of Transit Company; but to effect this exchange Brown Brothers & Company deposited with the -Nationa] Bank of Commerce 70,000 shares of the preferred stock of the United Railways Company of the 82,273 shares Avhich they claimed to purchase from the Transit Company, thus leaving in the hands of Brown Brothers & Company as syndicate managers 12,275 shares of the preferred stock of the United Railways-Company. By the exchange as above indicated the stock of Transit Company passed into the treasury of United- ' Railways Company and remains there. By this method! Brown Brothers & Company had released to the syndicate the following securities, viz.:

“2,000 Improvement 5 per cent bonds at par .........................$ 2,000,000

“2,877 General mortgage 4 per cent bonds at par ........................ 2,877,000

“12,273 Shares of preferred stock at par. 1,227;300

“172,613 Shares common stock United Railways at par ............... 17,261,300

Total at par ..............$23,365,600

“The foregoing securities, or part of them, furnished the basis for the speculation of the syndicate under what was called Brown Brothers & Company participation ■ subscription. Upon the foregoing recited conditions all that remained to be done in order to strip the Transit Company was the transfer of cash on hand and surrender of the leasehold. The cash amounted to $614,-015.25. When the lease was surrendered and the United Railways Company assumed charge November 1, 1904, Transit Company Avas left with merely the right to exist-as a corporation. The United Railways had received5 a surrender of the leasehold having 35 years to run,, which carried all property of every description and. *630 kind that had been accumulated by the Transit Company during its operation, also $614,015.25 in cash, also $7,000,000 preferred stock in the hands of the National Bank of Commerce as trustee for its benefit, also practically all of the stock of Transit Company. Whether the $289,000, being balance of the $7,000,000 claimed to have been paid by syndicate managers for the securities owned by Transit Company, went into the treasury of the United Railways Company does not appear. It evidently did not go into the treasury of the Transit Company, and has not been accounted for except upon the theory that it went to the United Railways Company.

“The syndicate managers received after all exchanges, had been worked out 2,000 improvement 5 per cent bonds, 2,877 first general mortgage 4 per cent bonds, 12,273 shares of preferred stock of United Railways Company, and at least — if not more — 172,613 shares common stock of the United Railways Company.

“I hold that, upon the face of the tripartite agreement and the testimony explanatory of its working, as against a creditor seeking to follow the assets of the Transit Company and subject them to the payment of his debt, the syndicate managers were the agents and representatives of all the parties, and that the transaction must not only have the stamp of bona fides, but that' ample and full consideration must have passed. The fact of the purchase by Brown Brothers & Company for their syndicate of the securities required of them, under the circumstances, full and adequate consideration. The agreement so interlocks the relations of all of the parties that while it might be upheld as between them and the stockholders assenting, yet is open and subject to have every test applied at the instance of one who, although at the time did not have his demand liquidated, but shortly after did reduce his claim to judgment, and who seeks to challenge the transaction as one without adequate consideration. *631 Whether the transaction was as to the subsequent judgment creditor fraudulent in law it is not necessary to determine, as I am of opinion, and so find, that the Syndicate and the United Railways Company, with the consent of Transit Company did not give full and adequate value, as I shall now attempt to show by the testimony.

“I. Brown Brothers & Company, as managers for their Syndicate, and for the United Railways Company, claimed to purchase from Transit Company the securities held by the latter company. In fixing the value of these securities I know of no rule of law permitting other values to be placed than their market values, if they had such.' While other elements might be considered in arriving at values in any other way, the rule is too firmly established to be varied that market values are the only general and safe test. By this test we shall determine what these securities were worth according to market values. At or about the time of the signing of the tripartite agreement, and about the time of the transfer, the first general mortgage 4 per cent bonds of the United Railways Company were variously quoted upon the market by the leading and responsible firms of this city at from 82% to 84 cents of the par value. The preferred stock of the United Railways Company during the same time was quoted at from 57% to 67 cents of the par value, the latter value of the Railways preferred being quoted on October 22, 1904, at the time of ratification by the stockholders of the two companies of the tripartite agreement. The common stock of the United Railways Company was not on the market and had no market quotation, but it is in testimony that Transit Company stock was in excess of ten dollars per share, and in the exchange of five shares of Transit stock for two shares of United Railways common, some basis must have been fixed, and taking Transit stock at ten dollars per share, it would result in a valuation of twenty-five dollars pet *632 share for United Railways common, and I so find and place this value arrived at in the way indicated. This seems reasonable, for as soon as put on the market it started at 23% and went up rapidly and quickly, although strengthened by being in the right hand instead of the left.

“The 2,000 improvement 5 per cent bonds had not been on the market and were valued by the parties at 85 cents on the dollar, and I take it that is the fair value.

“The leasehold having thirty-five years to run is claimed to have been a burden and worth nothing, and there is testimony to that effect. But by keeping the operating account separate from the capital account, which latter includes all indebtedness for betterments and improvements, for which United Railways Company was paid in depreciated bonds and stocks at par, it appears by the testimony that the net earnings over leasehold charges were $633,000, and Mr. Whitaker figured upon that basis the lease to be worth nearly $5,000,000. From the testimony upon this point I find the leasehold to be fairly worth four millions of dollars.

“The cash which passed to the United Railways Company out of the treasury of Transit Company was $614,015.25. This takes no account of $289,000 which was to be paid by Syndicate managers to the order of Transit Company or its president.

“II. Recapitulating the foregoing findings and valuations we have:

“To the Syndicate represented by Brown Brothers & Company, 2,000 improvement 5 per cent bonds, $2,000,000, at 85 cents ........................$ 1,700,000.00

“2877 first geni. mort. 4 per cent bonds, $2,877,000, at 8234 .............. 2,380,617.50

*633 “82273 shares preferred stock United Rys., $8,227,300, at 57% .............. 4,740,981.62

“172,613 shares common stock United Rys., $17,261,300, at 25 cents...... 4,315,325.00

“Total for securities which passed......$13,137,024.12

First to the Syndicate Managers.

“Add to this the value of the leasehold.. 4,000,000.00

“Add also cash passed to United Rys.. 614,015.25

“Total rec’d by United Rys., and Syndicate ...........................$17,751,039.73

“Syndicate furnished ................ 7,000,000.00

“Balance in excess of amount paid...... 10,751,029.37

$17,751,039.37

“Restating the account upon other valuations, which there is testimony to sustain, but which valuations are not predicated upon market value, the following result is reached:

“2,000 Imp. 5 per cent bonds, $2,000,000, at 85 cts.........................$ 1,700,000.00

“2877 1st Geni. Mtg. 4 per cent bonds, $2,-877,000, at 75 cts................. 2,157,750.00

“82,273 shares Pref. stock, $8,227,300, at 50 cts........................... 4,113,650.00

“172,613 shares common stock, $17,261,-300, at 25 cts.................... 4,315,325.00

“Total securities which passed to Syndicate Managers .................. 12,286,725.00

“Add to this value of leasehold........ 4,000,000.00

“Add also cash passed to United Rys.. 614,015.25

“Total rec’d by .United Railways and by Syndicate ......................$16,900,740.25

“Syndicate furnished ................ 7,000,000.00

“Balance in excess of amount paid...... 9,900,740.25

$16,900,740.25

*634 “An examination of either of the foregoing statements, eliminating the leasehold, we have excess values over the $7,000,000 furnished by Syndicate under first statement of $6,751,039.37: Under the second statement we have the excess of $5,900,740.25.

“III. Again, stating the account upon market values with the syndicate managers only, and charging them with what they paid for themselves and their associates we have:

“2,000 imp. 5 per cent bonds, $2,000,000 at 85 cts.........................$ 1,700,000.00

“2877 1st mtg. 4 per cent bonds, $2,877,000 at 82% .......................... 2,380,717.50.

“12273 shares pref. stock, $1,227,300 at 57% ........................... 707,251.50

“172,613 shares of common stock, $17,261,-300, at 25 cents.................. 4,315,325.00

“Total for securities retained by syndicate for their profit.................... 103,294.00

“Syndicate furnished ................. 7,000,000.00

“Balance in excess of amount paid syndicate ............................ 2,103,294.00

$ 9,103,294.00

“IV. Stating this same account at the lowest possible figures of valuation as shown by same testimony, but not market values, we have:

“2,000 Imp. 5 per cent bonds, $2,000,000, at 85 cts.........................$ 1,700,000.00

“2,877 1st Mtg. 4 per cent bonds, $2,877,-000, at 75 cts..................... 2,157,750.00

“12,273 shares pref. stock, $1,227,300, at 50 cts........................... .613,650.00

“172,613 shares com. stk., $17,261,300, at 25 cts.' .......... 4,315,325.00

“Total for securities retained by sydct.. .$ 8,786,725.00

*635 “Syndicate furnished ................. 7,000,000.00

•“Balance in excess of amount paid...... 1,786,725.00

$ 8,786,725.00

“Stating the transaction showing what the United Railways Company received at market values, we have: “70,000 shares of its preferred stock at par,

$7,000,000, at 57% ...............$ 3,993,475.00

“This was deposited with National Bank of Commerce for use and benefit of United Railways Company. •“172,613 shares stock of Transit Company,

par, $17,261,300, at 10 cents ......$ 1,726,130.00

“This one amount may not be exactly accurate, but Mr. Carleton testified that substantially all of the stock of Transit Company was at the time in the treasury of United Railways Company.

“Reconveyance and surrender of leasehold having 35 years to run ............$ 4,000,000.00

“Cash transferred from treasury of Transit Company to treasury of United Railways Company ............... 614,015.25

“Total ....................$10,333,620.25

“If we say that United Railways assumed $8,000,-000 of the $10,000,000 improvement 5 per cent bonds, the surplus would still be $2,333,620.25.

“The only cash used, and by which the transaction is attempted to be colored into a bona fide sale, was $7,000,000 furnished through Brown Brothers & Company, syndicate managers. Upon this theory United Railways could not benefit against the creditors of the Transit Company to the extent of $6,333,620.25 or $10,-333,620.25, without being subject to be called upon to account therefor. But it is contended that United Railways Company assumed a $10,000,000 obligation of Transit Company. Did it do so? Transit Company had out under the indenture of trust of June 17, 1903, *636 upon which United Railways Company was guarantor by way of loan of its credit, $8,000,000, of which amount the United Railways had received in betterments, etc., at par $5,679,572.20 — that is $8,000,000, less directors’ loan, $2,110,423.80; real estate notes, $60,000:; other general indebtedness of Transit Company $150,000, leaving a balance of $5,679,572.20 (see Section 1, indenture of trust June 17, 1903 — defendant’s exhibit No. 2).

“So that United Railways Company when it assumed the payment of the $10,000,000 improvement mortgage under the provisions of article IY of the tripartite agreement was assuming its own debt and simply changing its form and increasing the amount by 2000 improvement five per cent bonds or by $2,000,000, which went to the syndicate at 85 cents. No such arrangement by these two companies, having the same officer, the same directors, and one the owner of a controlling interest in the stock of the other, can pass without question and be protected under the rule of bona fides. The syndicate, a majority in interest composed of stockholders of the Transit Company, the Transit Company holding a majority of all the stock of the United Railways Company, and by agreement passing to syndicate for $7,000,000, securities worth at the lowest estimate $8,786,725, surely must be held to satisfy the speculative end of the trade, and leave the United Railways Company to account to Transit Company creditors, if they elect to proceed against it, for its share of $6,333,620.25 or $10,333,620.25, depending upon whether the leasehold is valued or not.

“There is another collection of figures which it is important to examine and understand under the testimony in the cause, headed: ‘Liabilities Assumed and Assets Acquired from St. Louis Transit Co. upon Surrender of its Lease to the United Railways of St. Louis, October 31',, 1904.’

“This is the same statement which was before the *637 Court of Appeals when this case was there on appeal, and the .admission of which, over the objection of plaintiff, resulted, in part, at least, in reversal of the judgment. (Barrie v. United Railways Co., 125 Mo. App. 96, 1 . c. 112, 113.) While this statement purports to be taken from the books, when considered in the light of the testimony in this case it is incorrect, as I shall attempt to show. The first item under the head of ‘Liabilities’ we find ‘St. Louis Transit Company Improvement 20 year five per cent Gold Bonds, Guaranteed by United Railways Co. $10,000,000,’ against this item there should be a credit of $2,000,000, which was the balance of that issue of bonds after providing $8,-000,000, for exchange for a like amount of outstanding bonds under the indenture of trust of June 17, 1903. This $2,000,000 of bonds was sold to the syndicate at 85 cents on the dollar, but figuring at par, the credit should be given for $2,000,000.

“The stock of the Transit Company which went into the treasury of the United Railways, approximately $172,613 shares, should also be placed on the credit or asset side of the account. This seems to have been left off entirely.

“Restating this account with the changes indicated and placing $2,000,000, on the asset side, or reducing the liability side from $10,000,000 to $8,000,000 which is the same thing, we have the result changed to excess of assets over liabilities of $752,Í36.23,' plus the stock of the Transit Company in the treasury of the United Railways Company, although of the $10,000,000 improvement five per cent bonds executed by the Transit Company at least $2,000,000 represented an increase of indebtedness by that amount, and the benefits inured when the property was resumed to United Railways Company.

“I have made these calculations with a view of determining whether the securities of the Transit Company had been dealt with at full value by the syndicate *638 and the two companies. In view of the results and the fact that the United Railways Company and the Transit Company were in their directors and officers one company, and in view of the fact that over $4,000,000 was subscribed by Transit Company stockholders for participation in the profits of the speculation on the securities acquired by the advance of $7,000,000, in view of the fact that the syndicate managers were part and parcel of these two companies from their launching in 1899, I cannot escape the conclusion that this creditor has a clear and unquestionable right to demand and receive payment of his claim against this defendant or any one else who received the speculative benefit of this transaction. It amounted in practice and fact to the Transit Company stripping itself over night, and those who reaped its benefits, which were large, denying to-this plaintiff, because his claim had not ripened inte judgment, the right to insist that this defendant should respond to his demand.

“I am of opinion that as against a creditor subsequently obtaining a judgment against the Transit Company, by reason of the directors and officers of the two-companies being the same, and the syndicate managers having almost the same relations to the two companies and the properties, and further that a majority in amount of the subscribers to the purchase of the syndicate securities being Transit Company stockholders and officers, that a court of conscience cannot do less than hold the tripartite agreement subject to the rights of this plaintiff.

“I find the great preponderance of the testimony to be that the syndicate and the United Railways each-received property which in value largely exceeded the value paid or exchanged.

“I hold that the tripartite agreement under the testimony is subject to the rights of this plaintiff, and that each one benefiting may to that extent be called upon to respond to plaintiff’s demand.

*639 “Applying the rule that: ‘In equity the property of a corporation is regarded as held in trust for the payment of its debts, and creditors may pursue it into the hands of all persons except those of bona fide purchasers,’ the United Railways was in no sense a bona fide purchaser, the syndicate managed by Brown Brothers & Company was in no sense a bona fide purchaser, so as to escape all accounting to creditors or to act as a bona fide conduit in passing shares of preferred stock of the United Railways to the National Bank of Commerce as trustee for its benefit. The syndicate cannot shield the United Railways by having passed out to it 76,525 shares of common stock, exchanging two for five with Transit stockholders, and then passing the Transit Company stock into the treasury of the United Railways. The United Railways cannot shield itself under the rule of bona fides in receiving $614,015.25 cash from the treasury of Transit Company.

“While it was perfectly lawful and competent for the syndicate and the stockholders and officers of these two companies to make the exchange, as shown, yet it must be subject to provision being made for creditors existing and those who might thereafter liquidate their demands or have the good faith and adequacy of consideration assailed.

“Upon the foregoing findings I am led without doubt or misgiving to the conclusion, and so find, that defendant should pay the demand of plaintiff. Judgment will be that plaintiff have and recover of the defendant the full amount of this judgment to this date with costs.”

So holding, a decree was entered in favor of plaintiff, that he recover of defendant United Railways Company the sum of $1,362.61, together with costs of suit.

A motion for new trial was duly filed, as also motion in arrest of judgment, both of which were overruled and defendant, duly saving exception, has brought the case here on appeal.

*640 REYNOLDS, P. J.

(after stating the facts). — I. It is urged by counsel for defendant that the plaintiff’s petition sets out causes of action which are inconsistent and irreconcilable; that plaintiff seeks to recover, on the one- hand, because, as he alleges, the United Railways Company had taken all the Transit Company’s assets without paying anything for them, and on the other hand, as plaintiff further alleges in the same count, because the United Railways Company, for a consideration, had agreed to pay the Transit Company’s debts. Hence, defendant contends, that as the proof of one of these positions necessarily disproved the other, its motion to compel plaintiff to elect should have been sustained. We cannot accede to this contention. This is a suit by a creditor to reach assets and to charge against those assets a judgment which plaintiff obtained against the company in whose hands- the assets formerly were. The plain meaning of the averments in the petition'is, that no adequate consideration was paid by the United Railways Company for the assets which it took over from the Transit Company. Whether the consideration was adequate or whether no consideration whatever was paid, is an immaterial distinction in this case. In either event, the right of the creditor attaches.

Defendant cites in support of its motion to elect, the case of Jordan v. Transit Company, 202 Mo. 418 , at page 426. In the same case, however, and at pages 426, 427, the court says: “Where two causes of action that may, by authority of the statute (Sec. 593, R. S. 1899), be united in one petition, each in a separate count, are improperly blended in one count the defect is reached by a motion to require the plaintiff to elect one and to strike out the other.” After citing many cases, the court then says: “The rule laid down in those cases is that when a defendant pleads to the merits he waives all mere informality and irregularity in the petition and can thereafter object to it only on the ground *641 that it states no cause of action or that the court has no jurisdiction of it.”

In the case at bar, the motion to elect was interposed after the case was called for trial and after an answer to the merits had been interposed and issue taken on that by a reply. The motion came too late, feven if properly made. In our view of the case, however, it was properly overruled on the merits.

II. Another error assigned by the defendant is to the action of the court in admitting, over the objection of defendant, a paper which purported to set out an agreement between Brown Brothers & Company, as syndicate managers, and F. S. Smithers and others. This is the same agreement that we have referred to, in the statement of the case, by which the voting trust was created, and which provided for participation by the stockholders of the two companies in the reorganization of the finances of the companies under the tripartite agreement. Defendant cites in support of its contention that the introduction of this matter is material and prejudicial error, the decision of this court in Barrie v. United Railways Company, 125 Mo. App. 1 . c. 121. The point of the contention evidently is that it is there held that a case in equity will be reversed for the admission of incompetent testimony. We do not understand that decision to go to that extent. The crucial fact to be proven when this case was then before this court, as it is now, was the relative value of the assets taken over to the liabilities assumed, and this court, required to pass on that fact, held that it could not do so by considering an unauthenticated schedule, which was all the testimony in the case offered by defendant on that fact, and that schedule having been improperly admitted, left no testimony whatever covering relative values. Hence — in part — the reversal, the court saying of that schedule, that it was “the baldest hearsay.” *642 The exhibit here objected to is a document shown by the evidence to have been submitted to all of the parties in interest in the two companies, the stockholders and bondholders thereof, and signed by the voting trustees, the syndicate managers, and others. It was an agreement called for in the tripartite agreement, was provided for by that instrument and was properly admitted as showing one of the very important, and a very material, step in the transaction, it was a paper throwing light upon the whole matter. In objecting to this exhibit, counsel urge that “it can be very easily seen that the dealings between Brown Brothers & Company and various other individuals, concerning the disposition of the subject-matter of their purchase, must be wholly irrelevant and immaterial.” We cannot concede this. Brown Brothers & Company were the financial agents of both companies, among the original promoters of the plan by which these street railroad lines were consolidated under one holding. In the plans which culminated in the tripartite agreement, they were chief factors, interested not only individually but as representatives of a large majority of the stockholders. Their vote alone, as proxies and as individuals at the meeting of the stockholders of the Transit Company on September 19, 1904, was sufficient to carry the resolution adopting the tripartite agreement: they were not only the agents of both companies and of a majority of the stockholders in promoting and adopting the plan, but after its adoption they were the conduit through and by means of which the plan was carried out. It is impossible to separate them from this whole transaction. The president of the two companies, testifying as a witness, said that Brown Brothers & Company were the syndicate managers, and speaking of the acts of the voting trustees, of whom he was one, he said: “We acted all the time under the direction of the syndicate managers.” There was no error in admitting this exhibit.

*643 III. Error is further assigned to the admission of three exhibits referred to as plaintiff’s exhibits “S,” “U” and “V.” Exhibit “S” is the paper which contained the letter of Mr. Murray Carleton, president of the United Railways Company at the time, of date November 14, 1904. It was shown to have been extensively circulated by the parties undertaking the negotiation and sale of the securities after the property was turned over to the United Railways. Exhibit “U” contains an affidavit of a witness in this case, the affidavit attached as an exhibit in another case, and what purports to be a memorandum of the readjustment of the capital and finances of the St. Louis Transit Company and a financial history of the two companies. Exhibit “V” is a copy of a telegram from Mr. Campbell to BroAvn Brothers & Company, on the strength of Avhich, it seems, some enlargement was made of those entitled to the participation in the benefits of the tripartite agreement. The objection urged in the brief of counsel is, that these papers “had to do with matters arising subsequent to the consummation of the transaction betAveen the United Railways Company and The Transit Company;” and it is urged by counsel that “what may have been done with the assets of the Transit Company, which did not come to the United Railways Company, is of no moment under the issues raised by the pleadings in this lawsuit. By the admission of such evidence as this, no elucida; tion or clarification of the record was obtained, but, on the contrary, the tendency was to divert the mind of the court from the controlling features of the controversy, and that the trial judge was influenced materially by these exhibits is distinctly reflected in his opinion.” We cannot agree with counsel on any of these propositions. What AVás done with the assets of the Transit Company which did not come to the United Railways Company is of very great consequence, under the issues raised by the pleadings and tried in this case. The very thing that the court was endeavoring to do and that it *644 was bound to do was to trace the assets of the debtor company, and these exhibits were admitted as throwing some light on that matter. Whether or not the very learned and careful trial judge was influenced or prejudiced by this testimony unduiy or at all, is not for our consideration. This is a suit in equity. We have, as we are compelled to do, examined all the testimony for ourselves. While giving all due consideration to the conclusion reached by the trial judge, we have arrived at our own conclusion on our own consideration of the evidence. When we have thought his conclusion or his comments serviceable to an understanding of his view of the case, we have freely used them, without adopting them further than stated by us. We may also add that in a case of this character, in which the appellate court is bound to act on its own view of the evidence, the wisest and safest course is for the trial court to admit all evidence offered, not obviously irrelevant, or tending merely to burden the record, rather than to risk a reversal because of the exclusion of testimony which the appellate court may deem relevant and material. We find no reversible error in the admission of these exhibits. It is due counsel for defendant, however, to say, that we do not attach any importance to either exhibit “U” or exhibit “V.” This disposes of the first, fourth, fifth, sixth and seventh assignments of error made by the defendant.

IY. As the second point of argument, counsel for defendant maintain that “Plaintiff cannot recover because he has failed to prove that the defendant took the assets of the Transit Company without any or adequate consideration.” Herein lies one of the real and substantial points in controversy.

(a) Is plaintiff debarred from recovery because he has failed to prove that the defendant took the assets of the Transit Company without any or adequate consideration? Counsel argue that nothing is better *645 settled, under the rules of pleading and practice which prevail in this State, than that a party must recover upon the cause of action pleaded and upon no other. There is no room for controversy over this proposition.

Counsel then state that fraud is not pleaded in the case at bar, and that there is no issue of fraud in the case which could be raised by inference from the pleadings. If counsel mean by this, that there is no actual fraud averred, this is true. Counsel, however, have apparently lost sight of the distinction between pleading fraud in fact and pleading what is termed “constructive fraud.” When the former is relied on, the acts done must be set out, and, the intent being material, it must be averred that they were done fraudulently, or with intent to cheat and defraud — as for example — in an action for fraud and deceit. The- acts set out may be fair on their face. The intent with which done may be fraudulent. But when the right

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