their failure so to do. On June 27th the secretary, in response to their inquiries whether a cash deposit of $5000 could be substituted in lieu of the $25,000 bond, replied that he did not see how the terms could be modified. "In my estimation the board would not be willing to consider the matter of a cash bond of smaller amount which would serve in lieu of the proposed surety bond." Rosenthal became alarmed and was anxious to be quit of what he had come to regard as a bad and dangerous venture. Upon Sullivan's failure or refusal to advance funds further telegraphic correspondence was opened with him by his San Francisco associates. They first wired him to the effect that they could sell out all of their rights for $25,000 and would he accept. They followed this by another telegram on June 24th in this language: "Party reduces offer to ten thousand. Are you still willing to invest seventy-five to end this thing if we can get time on balance or shall we sell? Wire." Upon the same day they followed this despatch with the following: "Party refuses to buy at any price. Will forfeit deposit unless you come through as agreed with seventy-five thousand. Wire." The refusal of Sullivan to advance money, the attitude of the board of education in demanding the $25,000 surety bond, the inability of the associates up to that time successfully to finance their venture, the payments of the monthly rent which were inevitably to be made if the lease was once entered into and the liability to loss, all worked to determine Rosenthal to draw out of the venture. Stewart, still sanguine and of less financial responsibility, was willing to go ahead and "take a chance". Rosenthal thereupon agreed with Stewart to sell to the latter his and Sullivan's interest for $1000, and to wait for the remainder of the $3333 which each had put into the venture upon what was regarded as the remote contingency that Stewart might meet with success in the enterprise and be able out of its proceeds thus further to reimburse them. On July 1, 1908, therefore, the following telegram signed by Rosenthal and Stewart was sent to Sullivan in Alaska: "Cannot make bond. Board will forfeit deposit today. Stewart offers to pay one month's rent, take all our rights, and try to save all or part of our deposit; shall we accept? Answer immediately." No reply came to this until July 6th, when Sullivan wired as follows to Rosenthal personally: "Accept any proposition that has any of our money." The telegram to Sullivan of July 1st was in all essentials true. They could not give the bond because Rosenthal would not do it, and without Rosenthal, Stewart was helpless. The board had declared its intention to forfeit the deposit. Later in the day, however, the board notified the Wise Realty Company that it agreed to a modification of the conditions of the lease as requested, namely, it would accept a $5000 cash deposit in lieu of the $25,000 undertaking. Sullivan in Alaska was not notified of this change in the situation and upon the failure of his associates so to notify him fraud is predicated. This fraud, however, is charged against Stewart and not against Rosenthal. Yet it is to be remembered that while the legal obligations of fair play and disclosure were

imposed upon all three of the associates by virtue of their relationship, yet that the personal obligations of friendship and fidelity existed between Sullivan and Rosenthal and not between Sullivan and Stewart. Sullivan and Rosenthal were trusted friends. Sullivan and Stewart were mere acquaintances engaged for purposes of profit in this single venture. Moreover, it is to be remembered that it is to his friend Rosenthal and not to the two associates who had signed the telegram to him of July 1st that Sullivan makes reply. In that reply he authorizes Rosenthal to accept any proposition that will return to him any of the money he has invested.

It here becomes necessary to digress for a moment and review the story of these transactions as they were carried out through the instrumentality of the corporations, the equitable ownership of the stock in both of which, as has been pointed out, was in the three associates, the corporations themselves being but convenient mediums for the transaction of their business. The Wise Realty Company executed the lease and in turn assigned it to the Lincoln Realty Company with its right to the $10,000 deposit. Three shares of the Lincoln Realty Company had been issued standing in the names, one share to each, of the three associates. The Lincoln Realty Company in consideration of the assignment to it by the Wise Realty Company of the lease, undertook to fulfill all its terms and covenants and to release the Wise Realty Company from all responsibility and liability under the lease, and further to deliver to the Wise Realty Company 1000 shares of the Lincoln Realty Company's stock.

All this was done. Nominally by the corporations, in fact, however, by Stewart, to whom, prior to July 15th and after the receipt of Sullivan's telegram of July 6th, Rosenthal had sold all of his and Sullivan's interest, wiring Sullivan to that effect on July 15th, saying: "Corporation sold lease and deposit for one thousand dollars. What shall I do with your share?", and receiving in reply this answer: "Metson represents us and has authority to collect our share of recovered deposit."

Because of the ostensible corporate ownership the form which the transactions took was the following: The Wise Realty Company sold its thousand shares of the Lincoln Realty Company's stock to Williams for $1000, Williams being admittedly the dummy representative of Stewart and the transaction taking this form to avoid the direct sale of this stock of the corporation to one who was a director in both. The $1000 was paid to the Wise Realty Company and the stock was delivered to Williams who immediately assigned it to Stewart. Thus, of the 1003 issued shares of stock of the Lincoln Realty Company Williams acquired by this transaction 1000 shares, Rosenthal's 1 share and Sullivan's 1 share to the extent that Rosenthal was authorized to represent Sullivan in making the sale. Stewart interviewed Mr. Metson, who was Sullivan's attorney at law, and Mr. Bernard, who, to a limited extent, was Mr. Sullivan's attorney in fact, and sought the physical indorsement and delivery to himself of the one share of the Lincoln Realty Company stock standing in

Sullivan's name upon the representation that he had purchased it with the Rosenthal interest in the manner above indicated. Mr. Metson refused to make this delivery unless Mr. Sullivan was paid the full amount which he had invested.

While, as has been said, no direct information was conveyed to Sullivan of the fact that the lease was modified, substituting a $5,000 cash deposit for the $25,000 undertaking, Sullivan in Alaska was not unaware that something of this kind must have been done for he testifies that when he sent the telegram of July 6th above quoted authorizing Rosenthal to accept any proposition "he realized that if the deposit bond was not forfeited then the lease had been duly executed and the bond given or time for doing these things had been obtained, or some substitute for the bond had been arranged."

The subsequent acts of Stewart here require brief presentation. He had purchased the Rosenthal interest and over this there is not the slightest controversy. He believed that he had also purchased the Sullivan interest. He had left $5,000 of the $10,000 deposit as the cash deposit called for by the lease. He used the rest of the money with other money which he borrowed in payment of installments of rent as they came due, and he energetically endeavored to enlist upon satisfactory terms capital to aid him in his enterprise. He was unsuccessful in so doing. Finally, in September he received an offer for the outright purchase of the lease. Again, because of the corporate character of the ostensible ownership of the lease, that ownership being represented by the 1003 shares of the Lincoln Realty Company, the purchase was to take the form of a sale by Stewart with good title of this 1003 shares of stock. The purchase price was about $120,000. The net profit of Stewart, reduced by expenditures and obligations, was the difference between $120,000 and $35,000. An examination of the records of the corporations cast doubt upon the validity of the purchase by Stewart of the Sullivan share of stock, which doubt was increased by the fact that Stewart could not physically deliver possession of the stock. The associates who contemplated this purchase from Stewart declared that they would withhold $20,000 to meet any possible demand of Sullivan until Stewart could establish clear title to the Sullivan interest. These associates are the other defendants in this case. Mr. Stewart then went to Mr. Metson and Mr. Bernard and paid them in full the amount of their demand in behalf of Sullivan, the $3333.33 which he had invested with interest thereon. This was on October 5th. Upon the next day, Sullivan, who had returned from Alaska, ratified in writing the sale and transfer and assignment of his interest so made and having received in full the amount of his demand, relinquished any claim to any share of the $1,000 paid nominally by Williams, but actually by Stewart to the Wise Realty Company. This ratification by Sullivan was made in the presence of and after a conversation with Stewart, in which conversation Stewart did tell Sullivan that he was disposing of all his (Stewart's) interest in the venture, that the burden was greater than he could carry, but did not tell Sullivan what price

he was receiving for his interest. The second element of fraud is predicated upon Stewart's secrecy in this regard and is, of course, based upon the contention that the relationship of associates or partners with the consequent duty of full disclosure still existed between the parties.

It is because of this asserted continuing relationship and be cause of the notice of Sullivan's interest which it is charged was brought home to the other defendants that they in turn are charged as having purchased the stock with knowledge and with thus becoming trustees ex maleficio for Sullivan.

The trial court took the view and made findings in accordance therewith that the sale by Sullivan of his interest was authorized by his telegram of July 6th, was effectuated by Rosenthal under the power conferred by that telegram and was accepted by Sullivan in his telegraphic answer to Rosenthal's telegram to him of July 15th. If the findings covering this matter are supported that is the end of this controversy, for with the consummation of that sale the relationship of associates or partners between Sullivan and Stewart immediately ceased and Stewart was perfectly justi fied in dealing thereafter with Sullivan at arm's length.

Some of the attacks made upon these findings are in their nature indirect. Thus, the validity of all of these corporate transactions is assailed upon various grounds as for a failure to comply with the by-laws in calling the meetings, the failure to notify Sullivan, who was in Alaska, as the by-laws required, the partici pation by Rosenthal as director in the transactions after he had sold out to Stewart and thus stripped himself of his actual ownership of the stock of the Wise Realty Company and the Lincoln Realty Company, and the sale by the Wise Realty Company of all its property consisting of the 1000 shares of the stock of the Lincoln Realty Company without ratification by the stockholders. Mistakes and misrepresentations in the minutes of the meetings are also charged as having been incorporated therein with fraudulent design, though they could not have deceived Sullivan, who was in Alaska, and knew nothing of them. The complete answer to all of these matters is found in the familiar principle that equity will look through form to substance, and so looking, it is beyond controversy that these corporations were but the mere instrumentalities through which the associates acted. If the transactions between the associates themselves were fair, then, as there are no rights of independent and non-participating stockholders involved, the corporate irregu larities, however serious, mean nothing. If it were necessary equity indeed would compel the corporations themselves so to adjust, remodel and reform their transactions as to give them a legal validity commensurate with their equitable validity.

For these reasons no force attaches to these corporate irregu larities as between the associates themselves. If, in other words, Sullivan did authorize Rosenthal to sell his interest and Rosenthal did do this thing, that the mere mechanism of the sale creaked, groaned, was faulty or even broke down would not impair the essential validity of the sale itself nor the fair dealing

of the parties as between themselves. Only when third persons such as the other defendant undertook to buy the corporate stock would any substantial interest in the irregularities of the corporate transactions arise and these irregularities become im portant; and it was against these irregularities, as we have seen, that these associates undertook to protect themselves by withholding $20,000 to meet the possible claims and demands of Sullivan. When Stewart produced to them the indorsed stock with Sullivan's ratification of the transaction then they concluded their purchase from Stewart and paid him the full amount of money.

[1] We may now at last come to the consideration of the vital issue in this case. Are the court's findings to the effect that Sullivan was not defrauded by Stewart and did not rely upon the statement in the telegram of July 1st that the deposit would be forfeited, supported by the evidence. That Sullivan in authoriz. ing the sale of his interest did not rely upon this statement (which the associates believed was true when made) is manifest from his own testimony above quoted. Moreover, his answering telegram of July 6th is not an acceptance of the Stewart offer embodied in the telegram of July 1st, but to the contrary is a personal telegram to his friend Rosenthal authorizing the latter to sell his interest under "any proposition that has any of our money". It was thus a broad authority to Rosenthal to sell. Rosenthal sold, knowing all of the essential facts. The court so finds. He sold his own interest upon the same terms, $500 cash and the balance of the amount of money he had invested payable in the event that Stewart should be able to make a sufficient profit out of the venture. If it be a fraud at all it is Rosenthal's fraud in selling out Sullivan, yet Rosenthal sold out Sullivan's interest upon the same terms as he sold his own and promptly notified Sullivan by personal wire that he had done so, in response to which Sullivan notified Rosenthal that Mr. Metson had authority to collect his share of the proceeds of the sale.

In view of this record it may not be said that the findings of the court declaring that in July Sullivan had fully and fairly parted with his interest in the venture are not supported, and this vital fact being absolutely determinative of the controversy renders unnecessary the consideration of any other issues or arguments in the case.

The judgment and order appealed from are therefore affirmed. HENSHAW, J.

We concur:

ANGELLOTTI, C. J.

MELVIN, J.

SHAW, J.

SLOSS, J.

LORIGAN, J.