the investment of capital in the reorganiza- | rights, and this by reason of the fact that the tion and rehabilitation of the road, and there-bondholders in purchasing the property upon the members were confronted with a through their committee had become the real new situation fraught with danger to the owners of it, holding title (saving for the interests which they represented. The indebt-trusteeship in the committee) in the awkward edness to the Union Trust Company, to which and unmanageable condition of ownership in reference has been made, which was secured common. As such owners, the property being by the Underwriter's Agreement, by the pledge impressed with a public duty, it was incumof the bonds and by a deed of trust covering bent on them to see that by its operation it perall the purchased properties, fell due on Sep- formed the purpose of its existence. It was tember 17th. The trust company had posi- useless for the committee to attempt to contively declined to grant further extensions vey in severalty to each bondholder his proof time. There was urgent need of work up- portionate share of the title. The simple, on the road itself to prevent damage from direct, expeditious, and only practicable the approaching winter storms and to keep course open to them was that which they it up even to its imperfect condition of serv- adopted-that of organizing a corporation, ice. Indebtedness for necessary equipment capitalized for the exact amount of the bondhad been incurred by the committee. The un-holders' securities, and conveying to each derwriters had announced that if they should stockholder in the form of stock the proporbe compelled to pay the trust company under their agreement they would immediately foreclose the lien which they had upon the properties of the road. A sale under this lien foreclosure would have swept away all the bondholders' rights without equity of redemption. From the date of the purchase the road had been operated by the committee, and the members of the committee had incurred personal responsibility and liability there for. The situation, as summed up by defendant Moore of the committee, was this:

"We simply were up against it; with the underwriters withdrawing; the bank not only not lending us more money, but notifying us to pay; we had no money, and our condition was desperate."

tionate interest which he had in the properties. Thus was effectuated a legal and convenient means by which the bondholders themselves could operate the properties, or dispose of them, as they saw fit. In this connection the court found:

"That if said committee had conveyed to each bondholder who had deposited his bonds with said committee, and which said bonds had been used in effecting the purchase of said properties, an undivided proportionate interest in the properties so acquired, the properties themselves would have been unmanageable, their value would have been destroyed, the franchises purchased by said committee could not have been availed of, and the interest of all said bondholders in said properties would have been entirely lost and destroyed; that it would have been impossible to have borrowed money for Union Trust Company of San Francisco would their operation or improvement; and that the have proceeded, as it at that time threatened to do to sell said properties, and to thus shut out and absolutely foreclose the rights of said bondholders in and to the said properties. That it was a fact that, unless money had been secured to pay said indebtedness to it, or assurances given to Union Trust Company of San Francisco that said indebtedness would be paid, said Union Trust Company would have sold, and that it then threatened to sell, unless said payment was made, all said properties, and the rights of those who had deposited their bonds with said committee, in and to the said properties, would have been destroyed and rendered valueless. That said sale would not have been made subject to any redemption."

Something had to be done, and the committee then proceeded with the organization of the Ocean Shore Railroad Company, the defendant in this suit. It was capitalized for $5,000,000, divided into 50,000 shares of the par value of $100 each. The committee conveyed all the property of the old railway company to the new corporation, receiving in return the agreement of the new corporation to issue its stock to those whom the committee might name. The committee directed the issuance of this stock to the old bondholders in amounts identical with the face value of their bond holdings. This was in December, 1911. On December 29th the committee executed a power of attorney to J. W. Crosby, authorizing him on behalf of the depositing bondholders to accept the shares of stock in the new corporation which were apportioned to these bondholders. Before doing this, in November, the committee passed a reso lution declaring that it had found the plan of November 3d to be impracticable and that it was the sense of the committee that it "should proceed to effect the most practicable and expeditious reorganization at the present time." The organization which we have last outlined is the organization which the mem- Again, the committee had failed and was bers of the committee insist was not only the still confronted with the danger of foreclomost practicable and expeditious reorganiza- sure by the Union Trust Company or by tion, but absolutely the only reorganiza- the underwriters, and on January 18, 1912, tion which would preserve the bondholders' the new corporation levied an assessment of

There was pressing need for the payment of some of the indebtedness above mentioned. To meet this, a bond issue of the new corporation of $700,000 was authorized. It was hoped that the old bondholders themselves would take up this issue. The necessity of raising this money was explained to them, as was also the whole plan of reorganization. The old bondholders would not subscribe for the new bonds. The most earnest efforts of the committee succeeded in securing the wholly inadequate subscription of $280,000.

$10 per share upon its stock. The assessment became delinquent on February 26, 1912. The sale day was March 18, 1912. Meetings of the depositing bondholders were held from time to time, when all of these matters were fully discussed and all the difficulties laid before them. Such meetings were held on December 1, 1911; February 23, 1912; and March 12, 1912. At none of these meetings did any bondholder raise any objection to this reorganization. Discussion was had as to the practicability of raising the money by a new bond issue substituted for the assessment. Discussion was had as to whether the assessment might not be reduced to $5 per share. The minutes declare that "the sense of the meeting was practically unanimous that the assessment should stand."

On March 16, 1912, two days before the sale day of the delinquent stock of the new corporation, this action was brought; the principal contention of plaintiffs being, as heretofore outlined, that the agreement of July 29th is to be construed with the approved proposed plan of November 3d, and that the duties of the committee were therefore limited to an effort to put the plan of November 3d in operation, that the trust so declared became fixed and irrevocable, and if for any reason the trust could not be performed it became the duty of the trustees either to surrender their trust to the bondholders, or go into a court of equity and obtain their discharge.

whose bonds aggregate $117,400 face value, never deposited their bonds at all, and therefore can by no possibility have any rights in this litigation. Thus bondowners of but $272,900 face value of the bonds may be heard to complain. Of this amount $224,400 face value of the bonds were deposited under the signed agreement of July 29th before November 3, 1910, and therefore before the November 3d agreement came into existence. But $48,500 of these bonds were deposited after November 3d, and of these the owners of $27,500 worth accepted stock in the new railroad corporation defendant, and thus ratified the committee's acts and that reorganization. And there is no word of evidence disclosing that the bondholders to the small amount who deposited their bonds after November 3d, and who in doing so signed and signed only the agreement of July 29th, ever knew of the existence of the proposed plan of November 3d. And, finally, it is but proper to add that, while appellants contend that the result of the committee's abandonment of the plan of November 3d and of the reorganization actually effected by the committee was to work a fraud upon them, this fraud is in its nature a resultant rather than a designed fraud. The members of the committee were for the most part bondholders and stockholders. They were nien of business prominence and financial standing. They gave their time without compensation and worked with unflagging zeal to bring about a happy solution of the business complications put under their charge. In the plan which they finally adopted and effectuated they entered and shared upon precisely the same terms as did all of the other bondholders. Their good faith is unquestionable, and indeed by the appellants is unquestioned. The dispute between the litigants thus arises wholly out of different constructions put upon the committee's pow

ers.

We are now nearly, but not quite, in a position to discuss this main contention. Certain matters preliminary to the main consideration must first be treated and disposed of. At the outset, it is to be noted that the only rights involved in this case are the rights of the plaintiff bondholders, who alone are concerned in this litigation. Thus, assuming for the moment that appellants' construction of the written instrument is the true one, we are here in no way concerned [1] Thus we come again to the principal with the rights of the stockholders or gener- question in the case-the construction of al or preferred creditors under the agree- those powers as between the complaining ment of November 3d. If that agreement be bondholders and their committee. No quesa contract for their benefit (Civ. Code, § tion arises, nor can arise, over the right of 1559), no one of them here appears to en- assenting bondholders to confer upon such reforce his rights. The same is true of repre- organization committee substantially unlimsentations made by the committee to certain ited powers with unlimited discretion in the bondholders, which representations, it is as- exercise of them. The bondholder "may go serted, confirm the agreement of November further and agree in advance that his bonds 3d and make it irrevocable. If this be true, shall be subjected to any plan of reorgani it did so only so far as those particular bond- zation which the committee may adopt." holders are concerned, and no one of these Colonial Trust Co. v. Wallace (C. C.) 183 Fed. bondholders is here complaining. As to these 897. This is precisely what was done by the plaintiffs, not parties to, and, so far as the declaration of July 29th, which constituted record is concerned, not even aware of, any the one and sole written authority to the of these stipulations, the representations or committee signed by the bondholders themagreements were res inter alios acta. Still selves. Appellants contend that the agree further it is to be pointed out that touch- ment of July 29th must be construed with the ing these plaintiffs and appellants themselves approval of the proposed plan of November they are the owners of bonds aggregating 3d, and to the doing of this there cannot be $404,000 face value. Four of the appellants, the slightest objection. But when appellants

seek by their construction of the two agree- | raise the money which is required." Shaw ments read together to have it said that the v. Railroad Co., 100 U. S. 612, 25 L. Ed. 757. trust imposed in the committee became fixed, See, also, White v. Wood, 13 N. Y. Supp. 631; 1 inelastic, and unchangeable, they do violence Gates v. Boston & N. Y. Airline Ry. Co., 53 to the language as well as to the spirit ex- Conn. 333, 5 Atl. 695; Somerset Ry. v. Pierce, pressed in the agreement of July 29th. That 88 Me. 86, 33 Atl. 773. The cases cited and agreement was drawn, as appears from the relied upon by appellants are quite unimface of it and from the evidence touching its peachable in logic and law, but they are cases execution, with the design to confer upon the which deal with the rights of creditors when committee plenary powers, the bondholders the bondholders and stockholders have comrecognizing the magnitude of the difficulties, bined upon a reorganization to the excluand being more than willing to trust to the sion of the creditors, or where the bondholdbusiness ability and good faith of the mem- ers have agreed upon a plan of reorganizabers of the committee. Taking the two in- tion which defines the powers of the bondstruments together, what do they not mean? holders' committee and under which alone They do not mean, as appellants contend, that committee can act, or, finally, where that all of the important provisions of the the reorganization agreement is to be formuagreement of July 29th touching the commit-lated thereafter, with a reserved right to the tee's rights and powers have been stricken depositing bondholders to withdraw from the out and eliminated, and that the committee was thus limited to the single effort of endeavoring to carry out the agreement of November 3d. Reading the two agreements together and fairly construing them, they amounted, at least, so far as these bondholders plaintiffs are concerned, to nothing more than an agreement upon the part of the committee that it would first use its best endeavors to see whether an organization could be effected upon the plans and lines laid down in the November 3d agreement, with such departures therefrom as might be necessary to the accomplishment of this end; but that, failing of ability to do this thing, there was still in reserve their broad powers to effectuate any other organization which in their judgment seemed to be best and for the best interest of the bondholders.

So the learned judge of the lower court construed this agreement, and in so construing it we think he was wholly right. There ceases to be, therefore, the slightest occasion for the review of the authorities, which, nevertheless, have been duly considered by this court. This is not the case of an agreement between bondholders and stockholders to the attempted exclusion of the rights of creditors who must be recognized if the stockholders are to be recognized. The bondholders have the unquestioned right, without regard to any of the equities of the stockholders or creditors, to foreclose their lien and bid in the properties. Miller v. Dodge, 28 Misc. Rep. 640, 59 N. Y. Supp. 1074; Farmers' Loan & Trust Co. v. G. B. & M. Railroad Co. (C. C.) 6 Fed. 110. Moreover, as we have said before, neither the stockholders nor the creditors are here complaining. Nor yet is a reorganization whereby the old bondholders become the stockholders of the new railroad at all unusual. Indeed, it is declared by the Supreme Court of the United States to be the best way of effecting such reorganization, "that is to say, reorganize the enterprise on the basis of existing mortgages as stock, or something which is equivalent, and by a new

agreement and take back their bonds, if within a limited time after the submission of the plan they are dissatisfied with it. None of those cases touches the situation here presented, where the matter of the reorganization was wholly intrusted to the judgment of the committee.

[2] What has been said concludes our review of the principal case. One further matter, however, remains to be considered. Clara E. L. Folger was a party to the amended complaint, which alleged ownership by her of bonds of the face value of $76,000. Mrs. Folger had not deposited any bonds or signed any agreement. They were deposited by her husband, who is not a party to this proceeding, and the agreement of July 29th was signed by him. It was asserted that on August 28, 1912, Mrs. Folger purchased at the pledgee's sale 500 bonds which had been held in pledge by the Wells Fargo Nevada National Bank of San Francisco. bonds had been deposited with the committee by that bank pursuant to the agreement of July 29th and to a special agreement entered into between the bank and the committee. During the trial Mrs. Folger asked leave to amend and set up the purchase of these bonds. At the conclusion of the trial the court denied the motion. Mrs. Folger's proposed amendment did not allege that the 500 bonds referred to had ever been deposited by the bank or by Mrs. Folger with the committee. This in itself justified the court's refusal in permitting the amendment.

These

[3] But, moreover, if it be contended that Mrs. Folger in purchasing at the pledgee's sale acquired the alleged rights growing out of a special agreement of the committee with the bank, then it is manifest that the cause of action upon which Mrs. Folger relies is not the cause of action set forth by the plaintiffs, and that Mrs. Folger's sole redress would be by her own independent action; that she is not "a party similarly situated"

1 Reported in full in the New York Supplement; reported as a memorandum decision without opin

with the other plaintiffs, within the meaning of section 382 of the Code of Civil Procedure. The leave to amend was therefore properly denied.

The judgment appealed from is affirmed.

We concur: ANGELLOTTI, C. J.; SHAW, J.; MELVIN, J.; SLOSS, J.; LAWLOR, J.

SALTER v. IVES et al. (Supreme Court of California. 1. FRAUDS, STATUTE OF

OF AGENT.

(L. A. 3620.) Jan. 31, 1916.) 116-AUTHORITY

MELVIN, J. Plaintiff sued to quiet title to certain property in the city of Los Angeles. Defendant Ives answered, asserting that he had obtained a lease of the property from one Toombs who, as he alleged, was du ly authorized to make such contract by the plaintiff. Ives also by cross-complaint sought specific performance of this alleged lease. The court sustained a demurrer to the amended answer and cross-complaint of Ives, and upon his failure to amend further, judgment was entered by default. From that judgment defendant and cross-complainant appeals.

In view of Civ. Code, §§ 1624, 2309, and Code Civ. Proc. §§ 1971, 1973, which provide The only question involved in this appeal that the leasing of real property for a period is whether or not Toombs was authorized to of more than one year must be by a conveyance execute a lease for the property. The writ or instrument in writing subscribed by the owner or by his lawful agent authorized in writing on which appellant depends was signed ing, the written authorization from the owner, by Mrs. Salter. The opening paragraph was to be sufficient to permit the agent to enter into as follows: a binding contract of lease, must express within its terms the intention of the owner to confer upon the agent complete authority to do so. [Ed. Note.-For other cases, see Frauds, Statute of, Cent. Dig. §§ 251-260; Dec. Dig. 116.]

"April 26th, 1912. "Mr. F. L. Toombs, 620 S. Hill St., Los Angeles, Cal.-Dear Sir: We hereby authorize you to negotiate a lease on the south fifty feet of lot eight, Ord's survey, block twenty-five, Los Angeles, state of California, on the following terms, to wit."

Then follow the terms including the con

The mere employment by the owner of an agent to sell or lease his property is usually in-struction of a building, the amount of rent, sufficient as a grant of power to execute a binding conveyance or lease.

Agent, Cent. Dig. §§ 278-293, 353-359, 367; [Ed. Note.-For other cases, see Principal and Dec. Dig. 103.]

3. CONTRACTS 169 - CONSTRUCTION TRINSIC CIRCUMSTANCES.

Ex

In view of Civ. Code, §§ 1625, 1637-1639, which provide that when a contract has been reduced to writing the intention of the parties is to be ascertained from the writing alone, if possible, "surrounding circumstances" are to be considered only where the terms of a contract are such as to make the intention of the parties uncertain.

[Ed. Note.-For other cases, see Contracts, Cent. Dig. & 752; Dec. Dig. 169.] 4. PRINCIPAL AND AGENT 100-AUTHORITY TO MAKE LEASE "NEGOTIATE."

The words "we hereby authorize you to negotiate a lease," do not authorize the agent to execute a lease in the name of the owner, but merely empowers him to procure a tenant for the property.

the duration of the lease, etc. The concluding said lease, I hereby agree, that in case you ing portion of the contract is as follows: "In consideration of your efforts in negotiator others associated with you, shall secure a tenant on the above-named terms, you or your assigns shall be entitled to a commission of $6,000 which I agree to pay out of the first year's rental. If the first year's rental be payable in advance, then the commission shall be payable immediately in cash. If, however, the rental, according to the terms of the lease shall be payable monthly, then I agree to pay the commission at the rate of $500 per month. It is strictly understood that this is not an exclusive contract. This contract is good for six months and only six months.

"[Signed] Mrs. A. M. Salter."

[1] The appellant cheerfully concedes at the outset (as indeed he must) that the written authorization from the owner, in order that it may be sufficient to permit the agent to enter into a binding contract of lease must 368-express within its terms the intention of the owner to confer upon the agent complete authority so to do. Sections 1624 and 2309, Civ. Code; sections 1971 and 1973, Code Civ.

[Ed. Note.-For other cases, see Principal and Agent, Cent. Dig. §§ 262-273, 345, 364, 373; Dec. Dig. 100.

For other definitions, see Words and Phrases, First and Second Series, Negotiate.] Department 2. Appeal from Superior Court, Los Angeles County; Frank R. Willis, Judge.

Proc.

[2] It is also conceded that the mere employment by the owner of an agent to sell or Action by Amanda M. Salter against Fred lease his real property will usually be held inF. Ives (sued herein as Fred S. Ives) and oth-sufficient as a grant of power to execute a ers, in which the defendant named interposed Linding conveyance or lease. That these cona cross-complaint. Judgment for the plaintiff, and defendant named appeals. Af

firmed.

Tracy Chatfield Becker, of Los Angeles (Herbert J. Goudge, of Los Angeles, of counsel), for appellant. Karl E. Steinhauer, Willis I. Morrison, and Hunsaker & Britt, all of Los Angeles, for respondent.

cessions embody the law on the subject there can be no doubt. Speaking of the power of an agent to sell or lease realty, the District in the opinion in Church v. Collins, 18 Cal. Court of Appeal used the following language App. 748, 124 Pac. 552:

the language used in conferring it should be so "If such authority is intended to be conferred, clear, distinct, and certain in its meaning to

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

that end as to leave no room for doubting that gotiate a sale" of certain property. This such is its purpose." court used this language:

See, also, Duffy v. Hobson, 40 Cal. 244, 6 Am. Rep. 617; Armstrong v. Lowe, 76 Cal. 617, 18 Pac. 758; Grant v. Ede, 85 Cal. 419, 24 Pac. 890, 20 Am. St. Rep. 237; Stemler v. Bass, 153 Cal. 791, 96 Pac. 809.

Appellant's contentions are, in brief, first, that the language of the contract, particularly the expression "we hereby authorize you to negotiate a lease," confers on the agent the power to enter into a contract of lease on behalf of his principal; and, second, that the pleading of surrounding circumstances such as Mrs. Salter's intention to leave the State and her absence from California during nearly all of the period of six months limited by the terms of the contract of agency, as well as the fact that she was anxious to lease the premises in question, compel the interpretation of that agreement which he wishes us to give to it.

[3] There is no force in his second point

"The brokers were simply authorized to neTheir contract was completed gotiate a sale. and their commissions earned when they produced a purchaser within the five days, ready, willing, and able to purchase upon the terms stated in the contract of employment."

In Lindley v. Keim, 54 N. J. Eq. 423, 34 Atl. 1073, the court adopted this language of Mr. Vice Chancellor Pitney (now a Justice of the Supreme Court of the United States): "The mere employment of an ordinary real estate broker to effect a sale of a parcel of land, even though the price and terms be prescribed, does not amount to giving present authority to such broker to conclude a binding contract for the same. Moreover, such authority the principal and broker in that connection of is not usually to be inferred from the use by the terms 'for sale' or 'to sell' and the like. Those words in that connection usually mean no more than to negotiate a sale by finding a purchaser upon satisfactory terms."

The term "negotiate" in an agreement to mean "conversation in arranging the terms somewhat similar to this has been construed of a contract" (Northrop v. Diggs, 128 Mo. APp. 223, 106 S. W. 1123), and in the state of Washington it has been held that one empowered by a writing "to make and negotiate a sale" of real property may neither give an effective deed nor execute a contract for a deed to one desiring to purchase the land (Carstens v. McReavy, 1 Wash. 361, 25 Pac. 471).

because "surrounding circumstances" are only considered when the terms of a contract are such as to make the intention of the parties to it uncertain. Civ. Code, §§ 1625, 1637, 1638, and 1639. If we adopt respondent's view that there is no uncertainty, then the surrounding circumstances are not pertinent (Hawley v. Brumagim, 33 Cal. 398; Pierce v. Merrill, 128 Cal. 472, 61 Pac. 64, 79 Am. St. Rep. 56); and if we concede the existence of ambiguity or uncertainty, the agreement [4] The contract upon which defendant must be ineffective because of the rule an- and cross-complainant seeks to build his case nounced in such cases as Church v. Collins, is clearly an ordinary agreement empowersupra, that the language itself must be freeing an agent to procure a tenant and engagfrom doubt. Unless, therefore, the power to ing to compensate him in the event of his It is absolutely lacking in authorexecute a lease was clearly conferred by success. plaintiff by the terms of the agreement it-ization to consummate a lease in the name of the owner. self upon Toombs, the judgment in this case must be affirmed.

That the power to lease was not conferred upon the agent we are certain. Appellant's counsel argue learnedly that there is a vast difference between the expressions "to negotiate a lease" and "to negotiate for a lease"; that if the contract had been one merely employing Toombs to procure a tenant for the premises, the latter expression would have been used; and that the verb "to negotiate" means "to bargain," "to arrange for a sale," "to transfer for a valuable consideration." Conceding that the word "negotiate" may in some connections be construed to involve the sale or transfer of some property right, we are furnished with no authority holding that in eontracts for the sale or renting of real estate it has ever been so interpreted. In Oullahan v. Baldwin, 100 Cal. 651, at page 655, 35 Pac. 310, at page 312, the contract under consideration was one by which the brokers were authorized "to ne

Neither Rutenberg v. Main, 47 Cal. 213, nor Bacon v. Davis, 9 Cal. App. 83, 98 Pac. 71, is in conflict with anything contained in this In the former, as was said of it opinion. in Stemler v. Bass, supra:

"It clearly appeared that it was intended by the owner to clothe the agent with authority to do generally whatever was necessary to make the proposed sale binding upon the principal."

And in the latter, as the court said in Church v. Collins, supra:

"The agreement in that case expressly and specifically conferred upon the agent 'the exclusive right to sell for me, in my name and receipt for deposit thereon' the land described in said agreement."

In the contract here under review there was not even an exclusive agency and there was no authorization for the doing of anything in the name of the owner of the prop

erty.

The judgment is affirmed.

We concur: HENSHAW, J.; LORIGAN, J.