presumptively, therefore, no such case may be found. Aside from this, corporations are purely the creatures of statutory law, created, controlled, and terminated by law. To my mind, the state, in the exercise of its legislative power, untrammeled by constitutional inhibition, may grant, withdraw, or refuse to corporations created by it the power of consolidation upon such terms and conditions and under such restrictions and limitations as it may see fit. In this case, as has been seen, the state has unqualifiedly and without limitation granted the power of consolidation to any two corporations whose objects and business are in general of the same nature, as were the objects and business of the Edison and Union Companies, the consolidation of which is here challenged. This act was in effect at the time the complainant. became a stockholder in the Edison Company. He therefore purchased his shares with full knowledge of the fact that the company might lawfully do that of which he now complains, to wit, consolidate with any other corporation of the state whose objects and business were of the same general nature. Such consolidation he could not, in the first instance, have prevented, had he so desired, and he cannot now be heard to challenge the legality of a consolidation perfected in accordance with the terms and conditions imposed by the act. Nugent v. The Supervisors, 19 Wall. 241, 22 L. Ed. 83; Town of East Lincoln v. Davenport, 94 U. S. 801, 24 L. Ed. 322; County of Scotland v. Thomas, 94 U. S. 682, 24 L. Ed. 219; Wilson v. Salamanca, 99 U. S. 499, 25 L. Ed. 330; Empire v. Darlington, 101 U. S. 87, 25 L. Ed. 878; Menasha v. Hazard, 102 U. S. 81, 26 L. Ed. 83; Harter v. Kernochan, 103 U. S. 562, 26 L. Ed. 411; County of Tipton v. Locomotive Works, 103 U. S. 523, 26 L. Ed. 340; New Buffalo v. Iron Company, 105 U. S. 73, 26 L. Ed. 1024.

While unnecessary to a decision of the question now presented, it may well be doubted whether, in a case where there is apparent legislative power conferring the right of consolidation, as there is here, and a consolidation in compliance with such legislative power has been effected, and the consolidated company becomes a de facto, if not a de jure, corporation, the complainant, a stockholder in one of the constituent companies, would have any standing in court to question the validity of the consolidation. The right to so do would seem from the authorities to reside rather in the state through its proper law officers. Toledo, St. L. & K. C. R. Co. v. Continental Trust Company, 95 Fed. 497, 36 C. C. A. 155.

The power to consolidate under the act in question being upheld, and the consolidation proceedings being by the bill conceded to be in accordance with the conditions and provisions of the act, it only remains to determine the legal effect of such consolidation upon the constituent companies. The solution of this question, of course, must depend upon the act itself. Was the effect of the consolidation the extinguishment of the consolidating corporations and the formation thereby of a new corporation possessed of all the property, rights, and franchises of the constituent companies, or did the constituent companies remain in existence? The act provides:

"Any two corporations now existing under general or special laws, or which may be hereafter created, whose objects and business are in general of the

same nature, may amalgamate, unite and consolidate said corporations and form one consolidated corporation, holding and enjoying all the rights, privileges, power, franchises and property belonging to each, and under such corporate name as they may adopt or agree upon."

Pardee, Circuit Judge, delivering the opinion in New Orleans Gas Light Company v. Louisiana Light, etc., Company, 4 Woods (U. S.) 90, 11 Fed. 277, says:

"Where the consolidation act authorizes two corporations to consolidate and form one consolidated corporation, holding and enjoying all the rights, etc.. belonging to the constituent corporations, the old corporations are dissolved and a new corporation is created."

In Keokuk & Western Railroad v. Missouri, 152 U. S. 301, 14 Sup. Ct. 592, 38 L. Ed. 450, Mr. Justice Brown, delivering the opinion of the court, construing a former act of this state in many respects similar to that under consideration, says:

"Looking at the act in question in this case, we find that by section 1 any Missouri railroad company whose track should connect with the road of an adjoining state was authorized to make and enter into an agreement with such connecting company for the consolidation of the stock of the respective companies whose tracks should be so connected, making one company of the two, whose stock should be so consolidated upon such terms, conditions, and stipulations as might be mutually agreed between them; that by section 2 'such consolidation shall not be made, unless the terms and provisions thereof shall be approved by a majority of the stock, or the holders of a majority of the capital stock in each of said companies whose stock shall be consolidated'; that by section 3 the board of directors were authorized to adopt by resolution a new corporate name for the consolidated company, and call in the certificates of stock then outstanding in each company, and exchange them for stock in the new company; and providing that a copy of the consolidation agreement and the name adopted for the new company 'shall be filed with the Secretary of State, and shall be conclusive evidence of such consolidation, and of the corporate name of the consolidated company.' It is difficult to see how the Legislature could provide more clearly for the extinguishment of the prior companies and the formation of a new one than by providing that the two companies shall become one, that new certificates of stock shall be issued in exchange for the stock of the constituent companies, and that the consolidation agreement shall be recorded with the Secretary of State as the charter of the new company. In our opinion, this was the effect of the act in question."

It was clearly the legislative intent that a consolidation under the terms of the act in question should result in the extinguishment of the old and the creation of a new corporate life. It is not apparent in what manner such consolidation would in any way contravene the provisions of the anti-trust laws of the state.

From what has been said, it must follow as a necessary sequence, in so far as the bill seeks relief in disaffirmance and avoidance of the consolidation made and the rehabilitation of the Edison Company, the bill is without equity. The life of the Edison Company having been extinguished by the consolidation made, no relief can be granted through complainant on behalf of or against that corporation or its former board of directors.

Of what rights in law or equity complainant is possessed against the Consolidated Union Company by reason of its assumption of his contract relations with the extinguished Edison Company it becomes unnecessary and improper to here determine, for that the granting of

such relief would be utterly inconsistent with the entire frame and scope of the bill as now presented. Such relief, when granted, must be based upon and in recognition of the validity of the consolidation here challenged and the extinguishment of the Edison Company, through whom relief is now sought by complainant, whereas the averments of the present bill are diametrically opposed to the conclusion reached as to the validity and effect of the consolidation and formation of the Consolidated Union Company.

It follows the demurrers must be sustained, and the bill dismissed. It is so ordered.

MANNING v. BERDAN et al.

(Circuit Court, D. New Jersey. February 15, 1905.)

1. EQUITY JURISDICTION-ADEQUATE REMEDY AT LAW-SUIT FOR CANCELLATION OF NOTE.

A federal court of equity has jurisdiction of a suit for the cancellation of a promissory note alleged to have been obtained from complainant by fraud, the remedy at law not being plain, adequate, and complete.

2. CORPORATIONS-FRAUD OF PROMOTERS-BASIS FOR EQUITABLE RELIEF.

False and fraudulent representations made in a prospectus issued by the promoters of a corporation respecting the value of property which was to be transferred by them to the corporation when organized, afford ground for equitable relief against the corporation in behalf of one who subscribed for its stock in reliance on such representations.

[Ed. Note. For cases in point, see vol. 12, Cent. Dig. Corporations, §§ 244-265.

Acts of corporators and promoters, see note to Yeiser v. United States Board & Paper Co., 46 C. C. A. 576.]

In Equity. On application for preliminary injunction.

William P. Chapman, Jr., and Robert H. McCarter, for complain

ant.

John W. Harding, for defendants.

LANNING, District Judge. A motion has heretofore been made in this cause by the defendant the W. K. Niver Coal Company to dismiss the bill of complaint for want of jurisdiction. The motion was denied. See opinion (C. C.) 132 Fed. 382. The cause now comes before the court on an application by the complainant for an injunction to restrain the further prosecution of an action at law, and has been heard on the bill of complaint, with the affidavits thereto annexed and the answering affidavits. It appears that William N. Berdan instituted an action at law in the Supreme Court of the state of New Jersey against Henry S. Manning to recover the sum of $51,250 upon a promissory note given by Manning to the order of the W. K. Niver Coal Company. The action was removed to this court. The parties in it are William N. Berdan, plaintiff, and Henry S. Manning, defendant. The parties in this suit are Henry S. Manning, complainant, and William N. Berdan and the W. K. Niver Coal Company, defendants. The objects of the bill are to secure an injunction to stay the action at law, to com

pel the surrender of the note of the complainant for cancellation. and to secure a discovery in aid of the relief sought. The substance of the complaint is that William K. Niver and John B. McDonald, copartners in the mining business, caused the W. K. Niver Coal Company to be organized as a corporation under the laws of the state of Pennsylvania for the purpose of conveying to the corporation the property and business of the copartnership, and to the end that the corporation might acquire certain other mining properties; that the corporation and Niver and McDonald issued a prospectus concerning the affairs of the corporation, containing fraudulent overvaluations of the copartnership property, and other fraudulent misrepresentations of material facts; that the authorized capital stock of the corporation was $2,000,000, and that it had provided for an issue of $1,000,000 of its mortgage bonds; that the most of the stock and a large part of the bonds were issued to Niver and McDonald as a consideration for their copartnership property and business on a basis of enormously inflated values of that property and business; that the facts which would show these inflated values were concealed in the prospectus and by the corporation and its promoters and agents; that, relying on the prospectus and the statements of one R. A. C. Smith, who was authorized to act for the corporation and whose statements the complainant declares to have been false, the complainant was induced to sign a contract for the purchase of $50,000 of the mortgage bonds and 250 shares of the corporation's capital stock, and to give therefor his promissory notes for $50,000, which were subsequently renewed by a single note for $51,250, being the amount of the original notes with interest, and being the note which the complainant now seeks to have surrendered and canceled; that the complainant had no knowledge of the alleged misrepresentations and concealments when he gave the last note; and that on discovery of the facts he promptly rescinded the contract, tendered to the corporation the 250 shares of the capital stock which he had received (no bonds ever having been delivered to him), and demanded the surrender to him of the promissory note.

The first objection made by the defendants to the granting of the injunction is that the complainant has an adequate defense to the action at law. In urging this objection, the attention of the court has been directed to section 723 of the Revised Statutes [U. S. Comp. St. 1901, p. 583]. This section provides that "suits in equity shall not be sustained in either of the courts of the United States in any case where a plain, adequate and complete remedy may be had at law." The primary object of the bill, however, is to secure a surrender of the note and its cancellation. Section 723 does not alter the rule that was in force prior to 1789, when it was first enacted, concerning the power of a court of equity to assume jurisdiction in a case triable at law. In Boyce v. Grundy, 3 Pet. 215, 7 L. Ed. 655, the court said concerning this section that:

"It is merely declaratory, making no alteration whatever in the rules of equity on the subject of legal remedy. It is not enough that there is a remedy

at law. It must be plain and adequate, or, in other words, as practical and efficient to the ends of justice and its prompt administration as the remedy in equity."

In Jones v. Bolles, 9 Wall. 364, 19 L. Ed. 734, it appears that Bolles, on behalf of himself and all other stockholders of the Mineral Point Mining Company, filed his bill of complaint against Jones and the mining company for an injunction to restrain Jones. from suing for, claiming, or demanding against the mining company the purchase money of a certain tract of mining land which he had conveyed to the mining company. The matter set forth in the bill as a ground for the relief prayed for was a charge of misrepresentation, concealment, and fraud on the part of Jones, he being an agent of the mining company, whereby he induced Bolles to purchase for himself and others capital stock of the mining company. Jones answered the bill, denying the principal charges in it. The Circuit Court for the District of Wisconsin enjoined Jones from bringing any action at law against the mining company, directed him to execute a release, and declared the agreement entered into between him and the mining company, which he had concealed from Bolles, to be void. On the appeal Mr. Justice Bradley said:

"It is objected that a court of equity has no jurisdiction of the case because the law affords a complete remedy in damages. This objection is groundless. Equity has always had jurisdiction of fraud, misrepresentation, and conceal. ment; and it does not depend on discovery. But in this case a court of law could not give adequate relief. The agreement complained of is perpetual in its nature, and the only effectual relief against it, where the keeping of it on foot is a fraud against parties, is the annulment of it. This cannot be decreed by a court of law, but can by a court of equity."

In Metler's Administrators v. Metler, 18 N. J. Eq. 270, the complainant filed a bill praying for a perpetual injunction to restrain an action at law upon a promissory note which had been given without consideration, and for a surrender and cancellation of the note. The defendants demurred to the bill, and set up as a defense that the complainants had an adequate remedy at law. But the chancellor held that in such a case the remedy at law was not complete, and that the promissory note, which appeared to be valid on its face, might, in case of a discontinuance of or nonsuit in the action at law, be held until the evidence of its being without consideration should be lost, when a suit on it brought against the maker or his representatives might be successful. "In such case," said the chancellor, "the jurisdiction of courts of equity to order. the security to be given up to be canceled is now well established. There has been some diversity of opinion and decision on this point, and more in cases when the instrument asked to be canceled is at law void on its face; but even then the weight of authority is in favor of it. In cases where the instrument is on its face valid, and especially if negotiable, the jurisdiction of the court is founded upon principle adopted among other cases in bills quia timet, and is now settled by authority." The decree of the chancellor was affirmed by the New Jersey court of last resort. See 19 N. J. Eq. 457.

135 F.-11